YUB: risks and rates

I'm surprised that Pat McMahon, in his April 18 Yukon News letter, In Defence of Roger Rondeau, finds it "very alarming" that I might publicly criticize Rondeau's effectiveness as a public advocate.

I’m surprised that Pat McMahon, in his April 18 Yukon News letter, In Defence of Roger Rondeau, finds it “very alarming” that I might publicly criticize Rondeau’s effectiveness as a public advocate, as if simply being a public advocate should somehow shield one from criticism. Those who practise public criticism with such regularity should expect to receive it occasionally.

I repeat that I am sure Rondeau has good intentions and that I agree with him that residential ratepayers need advocacy. I wish that good intentions were enough to achieve effective advocacy.

I appreciate the lessons in rate setting and simple math provided by McMahon, a long-time consultant for UCG and probably the one person most responsible for Rondeau’s knowledge of electricity regulation. McMahon is correct in noting that various rate riders and other mechanisms can also serve to increase utility revenues, typically in response to rising costs, such as fuel, that are deemed beyond the utility’s ability to control. Rate riders will also typically reduce rates and revenues if costs decrease.

These forms of riders are also used in other jurisdictions and serve to reduce the risks to the utilities. I acknowledge that the level of risk in the utility business is the subject of continuing debate. My personal opinion is that risks are typically overstated and the resulting allowable rates of return are too high.

The board, however, cannot, after a hearing, arbitrarily set rates of return or the prices used for each customer class. It must rely on the standard approaches it has adopted from other jurisdictions, the evidence provided by the utilities (and too rarely by intervenors) including expert testimony, and on the testing of that evidence through questions from intervenors and the board.

Also beyond the board’s power is the idea of implementing the earnings-sharing mechanisms used in other jurisdictions, unless they were to be brought forward by the utilities themselves. Of course, an intervenor could introduce these mechanisms as part of their own evidence, which would then be tested by the other parties. This hasn’t happened because it is beyond the resources of most intervenors.

McMahon is again correct that the rules of the Yukon’s regulatory regime are different from those elsewhere. He is surely aware that it is government that has set the rules of the game and that the board, as a quasi-judicial body, simply implements the rules. Despite what McMahon and Rondeau may think, the government does not influence the decisions of the board, except through setting the rules.

The Utilities Act has given the board limited powers. Various orders-in-council over the years have further constrained the decisions that the board can make, especially in the area of rate setting. The Yukon Utilities Board has less power to act than its counterparts in other jurisdictions, rightly or wrongly.

As I suggested in my earlier letter, it is political action that would be required to change these constraints and the rules of regulation in the Yukon. Attacks on the integrity and competence of the board will continue to be ineffective. New board members, even, no doubt, McMahon and Rondeau were they so inclined, would quickly learn the constraints of the regulatory regime and come to decisions similar to past decisions. The alternative would be to come to “creative” decisions that could be challenged and overturned in court.

I wish Rondeau and McMahon success in their efforts to improve advocacy for residential ratepayers in the Yukon.

Jody Woodland