I am bewildered by Roger Rondeau’s latest screed against the Yukon Utilities Board. I served on the board until October of last year, but I am not speaking for the board. What follows is my opinion.
In calling for the board to “protect ratepayers” or resign, Mr. Rondeau demonstrates once again that he has learned little about the regulation of electricity in all of his long time at the Utilities Consumers’ Group.
After all this time, he still does not understand the basics of rate of return regulation. He still does not understand the role of the utilities board or the constraints under which it operates. While he is well intentioned, he still does not understand how to be an effective intervenor in utility proceedings or an effective advocate in general.
Mr. Rondeau’s complaint is that the utilities are earning “too much” and should give their excess earnings back to ratepayers. Under the forward-looking rate setting that our regulatory regime requires, there are two ways for a utility to earn more than it forecasts during the rate setting exercise. It can control its costs or it can sell more power than forecasted.
Like it or not, these outcomes are OK in this regulatory regime and the utility is allowed to keep the extra earnings. On the other hand, if costs rise or sales are low, the utility sucks it up.
It is true that utilities rarely lose under this arrangement. This is because they make the forecasts and have a natural tendency to do so conservatively. Regulators like YUB and intervenors like UCG have a limited ability to test, challenge and get changes to the utility forecasts. The regulator cannot arbitrarily adjust forecasts without evidence that the forecasts are somehow unreasonable.
Mr. Rondeau’s second misunderstanding is in thinking that the utility board’s role is to “protect ratepayers.” In fact, the utility board’s primary role is to balance the interests of several classes of ratepayers with those of the utilities.
Its powers to act are set by the Public Utilities Act, constrained by various orders-in-council issued by the government over the years, and guided by standards of natural law followed by tribunals in Canada. The board is not free to do whatever Mr. Rondeau thinks is right.
These are lessons that Mr. Rondeau will have to learn if he is to be an effective intervenor in the current environment. If his beef is that the current environment is unfair to his constituency, then he should work to change it. That is political work and well outside the utility board’s role.
It is important to have a group, like UCG, to advocate for residential ratepayers. It is unfortunate that UCG is not as effective as it could be at this advocacy, thanks to its leadership.
Issuing report cards on subjects he does not understand and hectoring the board to take actions it cannot, accomplishes nothing. If anyone is to resign, perhaps it should be Mr. Rondeau.