Open Letter to Marion Horne, minister of justice, re reform of the Public Utilities Act/Yukon Utilities Board:
The Utilities Consumers’ Group submitted two complaints to the Yukon Utilities Board requesting investigations into Yukon Electrical’s excess return (profits) for 2009 and Yukon Electrical/Yukon Energy reaping surplus profits from the sale of secondary power for the 2009 test year, for which rate hearings were previously held.
These rate hearings cost ratepayers of electricity a combined amount of approximately $1 million.
In these rate cases, much time and expense were spent to set a revenue requirement, cost of capital (return) on cost of debt (money borrowed from parent companies) and rate of return (on the amount of equity the utilities own) for each of the companies.
The board denied both applications by the consumers’ group, posting regulatory principles as reasons.
In the first rate case, Yukon Electrical was granted a 5.823 per cent cost of debt return and a 8.9 per cent return on equity for the 2009 test year through Board Order 2009-2.
In Yukon Electrical’s 2009 annual filing to the board, it reports earnings with a cost of debt of 6.73 per cent and a cost of equity of 11.5 per cent. This amounts to well over $500,000 of earnings above what the board ordered.
In other words, Yukon Electrical charged electrical consumers for forecasted operation and maintenance costs and then did not spend this money, or they earned more money from sales of power to customers than they forecasted.
It is called gaming and they do it well.
As a reason for denial of this UCG claim, the board states, and I qoute, “One reason for the prospective approach to ratemaking is that it arguably provides the incentive for utilities to operate in an efficient manner.”
This is at a time when electrical customers throughout the Yukon have experienced some of the most outages of power in our electrical history.
So let me see if I understand this principle correctly: give Yukon Electric incentive to cut costs on operation and maintenance, so that our services degenerate (excuse the pun) to allow their Alberta shareholders to profit more.
The second case involves the utilities lowballing the amount of power sold and the rates charged to secondary power users, and then reaping the benefits from higher sales and charges.
Approximately $800,000 were taken from the ratepayers and put into the various shareholders’ pockets for this decision.
And this board has the boldness to call these regulatory principles. Obviously, they have not heard of natural justice.
Marcus Aurelius, a Roman philosopher hundreds of years ago, wrote in his meditations that justice is natural or self-evident and does not require a statutory basis ... it is written laws of man that obstructs this justice from occurring.
Nor does it appear this board comprehends their main objective is set to protect the public interest.
So we spend $1 million through board processes to set rates for the utilities who then go forward to earn another $1.3 million with the blessing of this board.
Does this make logical sense to you, minister?
This board also costs taxpayers thousands of dollars to perform functions outside of the hearing processes and the daily operations.
I do not agree with many of the notions of David Morrison, the corporate head of Yukon Energy, but in a report he was commissioned to undertake in the NWT, he bargained ” ...one recommendation is to abolish the Public Utilities Board (PUB) as part of efforts to simplify the regulatory process.”
He added: “It took us a very short period of time to determine the regulatory process in the North is complex and very, very costly.”
He proposed to modify this process with a simple application of a regulatory formula used in British Columbia and four other provinces, thus eliminating the need for the PUB.
This formula has been used by our Yukon board for several years, but obviously (as is shown in the board’s denial of UCG’s request for investigation) not adhered to by the utilities nor adequately policed by the board.
Furthermore, Morrison submitted a utility ombudsman could deal with complaints currently handled by the PUB.
The consumers’ group agrees with this analysis, but at the same time would ask Morrison and his corporate guild to get rid of his $1-million-per-year regulatory consultants in Winnipeg.
Also, if the regulatory personnel in his bureaucracy are incompetent to do the job entitled, then they should be let go as well. This would save ratepayers another bucket full of money.
I would proudly be the utility ombudsman requesting wages of only half these costs saved.
Uh, let’s see É
that is approximately $2 million per year.
And I guarantee the public I would be the watchdog of the electrical utilities and ensure they follow the principles of natural justice.
Horne, if you had a horse that was defunct and cost you over $1 million a year to feed, would you get rid of it?
Our organization would request a timely response to our concerns.
Roger Rondeau
Utilities Consumers’ Group
Whitehorse