Most of my career I have been a finance guy at various businesses. As such, part of my job has always been to look for ways to reduce costs. If you have a good handle on costs then increased sales lead to increased margins and higher profits. It is therefore always a bit of a shock to see a government organization essentially congratulating themselves for fast growth in their costs; especially when these costs are paid for by the ratepayers of Ontario. In this case, I am referring to the Ontario Energy Board (OEB) and their 2025/2026 business plan. https://www.oeb.ca/about-oeb/corporate-governance-and-reports/business-plans
The business plan calls for a significant increase in headcount and costs for an organization whose costs have already gone up significantly. This is illustrated in the table below:
| Year | 2020 2021 | 2021 2022 | 2022 2023 | 2023 2024 | 2024/25 Forecast | 2025/26 Budget | 5 year % increase |
|---|---|---|---|---|---|---|---|
| Staff | 192 | 203 | 203 | 228 | 228 | 260 | 35% |
| Cost ($millions) | $44 | $50 | $55.2 | $64.7 | $58 | $70.3 | 60% |
| NOTL Hydro charge ($1000s) | $37.4 | $42.3 | $47.3 | $54.5 | $60.3 | Unknown | 61% |
The OEB has an important role to play. There are over 50 electricity transmitters and distributors (LDCs) in Ontario and they are all monopolies. There is no competitive pressure to keep their costs in control. It is up to the OEB to approve the rates that these utilities can charge and ensure they are reasonable. The OEB has been performing this role since the early 2000’s. The additional headcount at the OEB is not needed for this.
The increased headcount and budget have been put in place so the OEB can greatly expand its role beyond just regulating rates. The OEB has been creating new regulations that delve deeper into the operations of LDCs, trying to use regulations to guide LDC behavior and operational focus. This is a mistake and concern for a number of reasons:
- The biggest concern is the increased cost. The increased costs at the OEB are just the tip of the iceberg. As with all regulations, the biggest costs are with the organizations that must comply with the regulations. These increased costs end up in higher rates.
- Utilities such as NOTL Hydro pay for the OEB costs. The charges to NOTL Hydro have increased in line with the increased OEB costs. Actions speak louder than words. It is hard to have respect for a regulator who is trying to keep your costs in line if they do not manage their own costs.
- The OEB has no operational expertise. Their staff are primarily experts in rate regulation; not actually managing a utility. This inexperience shows up in many of the regulations.
- To compensate for their own lack of expertise, the OEB will hold hearings at which utilities and intervenors can participate. This is the standard process at rate hearings and allows for a modified form of negotiation by interested parties. This process does not work so well when creating regulations for a number of reasons. First, not all affected parties will participate in these hearings or be represented. They are costly in terms of time and resources. Organizations have to prioritize where they dedicate their time. Second, participants have different agendas. With rate hearings the scope is limited to rates, with regulations parties can take positions based on the needs of other aspects or objectives of their business.
If you look at the introduction the OEB provides when they are introducing new regulations, they will always reference the specific direction they have from the Ministry of Energy. The Ministry is very concerned that the full electricity sector be prepared for any changes that the expected electrification of energy might bring. They know that if costs rise too high or if there are shortages then the public will blame the Ontario government. Their concerns are understandable and, as they identify issues, they want them alleviated.
The problem is the OEB is the wrong organization to address these concerns. They are a regulator so their solution to any new challenge is to regulate. What is needed instead is consultation. The concerns the Ministry wants to address (cyber security, electricity capacity, climate change impacts, resiliency, solar installations, electric vehicles, etc.) are all operational concerns the utilities are working to address. The Ministry already has a branch in it focused on communicating with the utilities. The Ministry would be better off using this organization to get the information it needs. They could then determine if regulations are required at which point the OEB could be brought in. This will be more effective and much less costly. It is also aligned with another election promise: less regulation.