February 24, 2017
At a time of increasing energy costs and significant technological and policy change, more effective representation of consumer interests in regulatory and policy decision-making is warranted, argues the latest report from Mowat Energy’s On the Grid series.
Both regulatory and policy decisions affect energy – electricity and natural gas – consumers. But a mechanism to support consumer representation currently exists only in regulatory decision-making by the Ontario Energy Board.
The report recommends establishing in Ontario an Energy Consumer Advocate Office. This office would be independent of government, and would be empowered to represent the consumer interest in both regulatory and policy decision-making processes that could affect energy prices and service adequacy, reliability and quality. Such an institution, concludes the report, would play an important role in controlling rising energy costs and smoothing the introduction of new technologies and policies, while also increasing the transparency of the energy system and the trust energy consumers have in government processes that affect them.
The prospect of significant changes in the province’s energy sector provides the occasion for a consideration of the representation of consumer interests in that sector.
Consumers already face the certainty of increasing costs for electricity, largely as a result of initiatives beyond their control. These costs may be further increased by the province’s Climate Change Action Plan (“CCAP”), and in particular its cap and trade program. The increasing availability of distributed energy resources (“DERs”) offers consumers the opportunity to control their use of electricity, and therefore their overall energy costs. The implementation of DER will also have a material impact on the allocation of costs among ratepayer classes. How the implementation of DER is managed by the provincial government, its regulators, and the local electricity distribution utilities (“LDCs”), will have major impacts on consumers’ access to and the costs they pay for energy.1 LDCs, and their municipal owners, are addressing questions about the structure and direction of the electricity distribution business. How those questions are answered, and by whom, will have a material impact on the interests of consumers.
Given their impact, it is perhaps self-evident that consumer interests should be represented in the decisions affecting the nature and pace of the changes. Energy is an essential commodity, providing light and heat to consumers, and for the functioning of the economy on which consumers depend. Provincial governments, past and present, have invariably maintained that their decisions on energy issues are either driven by a concern for the interests of consumers or have a minimal effect on the prices paid by consumers for energy. That is the position with respect to all decisions which directly affect the rates which consumers pay for, in particular, electricity. The most recent example of that is the government’s decision to rebate the equivalent of the provincial portion of the GST on electricity bills. Ontario’s position is also reflected in policy decisions about what the government maintains are the long-term interests of consumers, for example, the province’s CCAP.
We will begin with an overview of the energy sector, examining how, and by whom, decisions are made and how information about those decisions is provided to consumers. We will then set out the principles which we believe should inform consumer representation, together with a description of the matters which we believe consumer representation should cover. We examine the existing mechanism for consumer representation, the cost award system for Ontario Energy Board (“OEB”) proceedings. We then examine a recent proposal from the OEB for changes in that system. We examine alternative models for the representation of consumer interests, particularly those involving an Energy Consumer Advocate. We conclude by suggesting that what is required is a legislatively-authorized office for the representation of consumers’ interests in the energy sector.
Mowat Energy’s On the Grid series provides a platform for original thinking about the future of the energy sector in Ontario. The series includes contributions from Mowat Energy, as well as articles or case commentaries authored by interested experts.To the On the Grid page
Robert B. Warren
February 24, 2017
- For a discussion of the impact of DER on the distribution sector, and in particular its variable impact on consumers, see “Paul Sommerville, Richard Carlson and Petar Prazic, “Emerging Energy Trends: Regulatory Responses to Ontario’s Energy Future” (Toronto: Mowat Centre, 2016), https://munkschool.utoronto.ca/mowatcentre/wp-content/uploads/publications/141_emerging_energy_trends.pdf. [↩]