Author: Guy Holburn and Kerry Lui
Date: June 2010
Background and Policy Context
As governments around the world have sought to improve the operational performance of electric utility sectors, and also to encourage private investment in utility infrastructure, a policy debate has emerged on the best practices for regulating both privately-owned and state-owned electric utilities. A central element of this debate concerns optimal governance practices, including (a) governance arrangements for regulatory agencies and (b) governance structures for state-owned utilities or crown corporations. Regulatory governance consists of the role and powers of regulatory agencies, and their relationships with ministries, parliaments and courts who oversee them – i.e. how regulatory policies are made and by whom. Utility governance consists of the structure of relationships between state-owned utilities and government shareholders, and the respective roles of utility boards of directors, executive officers and government ministers. Alternative structures differ in their relative balance between political control of utilities and operational independence.
While policy attention often focuses on specific regulatory policies – such as incentive pricing schemes, technology choices, allowed rates of return and so forth, research suggests that governance issues have as much of an influence on utility operations and performance as do regulatory policies. A comprehensive public policy approach to utility sector reform thus requires an integrated assessment of regulatory policies and regulatory governance regimes.
In this paper we provide a preliminary assessment of the state of regulatory and utility governance structures in three Canadian provinces, Ontario, Alberta and British Columbia. Although these policy issues have received considerable attention internationally, there has been relatively little research conducted within Canada, so this represents the first step towards a more comprehensive assessment and policy debate. The purpose is not to recommend specific policy reforms but rather to establish a factual basis and some analytical perspectives for informed discussions.