Regulations

June 28, 2022

Local electricity distribution companies (LDCs) like NOTL Hydro are highly regulated.  I know businesses like to complain about being over-regulated but, having worked in a number of industries, I can comfortably state that few industries are as heavily regulated as the electricity sector in Ontario.  This is not necessarily intended as a complaint but as a statement of fact.

Of course, NOTL Hydro is subject to all the laws and regulations of any other business.  These include criminal law, privacy laws, health and safety regulations, corporate law, labour and employment laws, municipal regulations, tax regulations and all the other laws and regulations that govern our society.

In addition, LDCs are host to a large number of rules and regulations that are specific to its industry.  Most of these exist for one simple reason:  we are a monopoly.  Many of the regulations are designed as a substitute for competition and to prevent customers being taken advantage of when they do not really have any choice in their power provider.

The underpinning of all rules and regulations is the enabling legislation.  In this case it is the Electricity Act, 1998 and the Ontario Energy Board Act, 1998.  As the date in the name implies, these were created under the Mike Harris Conservative government when the old Ontario Hydro was broken up with the intent of creating a more competitive industry.  These two acts continue to form the basis of the electricity industry in Ontario though they have been amended many times as each successive government makes their own changes.

Next are the regulatory bodies enabled by the legislation.  These include the Ontario Energy Board (OEB), the Independent Electricity System Operator (IESO) and the Electrical Safety Authority (ESA).  There are also regulatory bodies that do not exist specifically for the electricity industry but who have a subset of rules specific to the electricity industry.  This includes the Infrastructure Health & Safety Association (IHSA) with their Electrical Utility Safety Rules and Ontario One Call which regulates locates.

The OEB is the source of most of the regulations governing LDCs as that is their prime responsibility.  The complete list can be found at: https://www.oeb.ca/regulatory-rules-and-documents/rules-codes-and-requirements.  THE OEB also governs electricity transmitters and natural gas distributors.

I will attempt to summarize some of the more important OEB regulations for LDCs:

NameSummaryPages
Rules of Practice and ProcedureThese lay out how participants should interact with the OEB in various Regulatory processes.    –
Distribution System CodeThis code sets out the obligations of the LDC in providing its service.  Very detailed.  All aspects of services except those covered in the Standard Service Supply Code.  146 8 Appendices
Affiliate Relationship CodeRules to protect customer information and to prevent an LDC from somehow benefitting a related party to the detriment of its customers.    16
Retail Settlement CodeSets out how an LDC should interact with a retailer to ensure a customer is billed properly and the cash flows to the correct parties.    97
Standard Service Supply CodeSets out the rules in the provision of electricity to its customers.  Primarily to do with rates and billing.    27
Accounting ProceduresDetailed directions on accounting for activities to ensure consistency across all LDCs.    511
Reporting and record keeping requirementsDetailed requirements for the regular reporting of various information to the OEB by the LDCs.  This becomes the basis of the Scorecard and the Yearbook of Electricity Distributors which makes much of the information public.    42
Filings and applicationsDetailed directions on how to file with the OEB for permission on a number of different matters.  For LDCs one of the most critical is the Distribution Rate Handbook (151 pages) which details how to apply for new rates each year.    –

When there is this much regulation there are bound to be concerns or disagreements with some of them.  Some of the high-level challenges with regulations can include:

  • Regulations can sometimes seem to be written for the benefit of the regulator rather than the customer.  The OEB and the Ministry are both pretty good at seeking input on new or changes to regulations to avoid this but not always.  One example of this issue is the presentation of the electricity bill which is very difficult for most customers to understand.
  • Regulations create costs.  This is indisputable.  Having said that, needing a regulatory department but not a sales and marketing department is not so bad.  Some governments require that all new laws and regulations be subject to a cost/benefit analysis.  Some of the ESA regulations would benefit from a review of this sort.
  • The benefits from regulation change over time as circumstances change. Ideally, regulations should be reviewed on a periodic basis to confirm they are still needed though to expect this is not always realistic.  For example, some of the Affiliate Relationship Code were written when there was a concern that LDCs would have an unfair advantage over retailers due to their access to customer information.  This is no longer really an issue.
  • The regulations often appear to be written with the perspective of protecting customers from the worst performing LDC.  An example is the requirement to answer phone calls within 30 seconds.  The regulations only require that this be achieved 65% of the time.
  • Whether a regulation is effective and beneficial can often come down to how it is administered.  With so many regulations, every LDC is going to be offside some regulation at some point.  The key is whether customers have been affected negatively.  The enforcement of regulations must be done with that goal in mind.  NOTL Hydro once had a dispute with a regulatory auditor that bordered on the ridiculous.  The OEB requires that LDC’s provide a maximum four-hour window for appointments.  This is to prevent customers being inconvenienced by having to wait all day while giving the LDC some leeway as, depending on the other jobs, timing can be a challenge.  Where we can we try to schedule a specific time as that is preferred by the customer.  The regulatory auditor thought we should only schedule the four-hour window and not a specific time. 

There is no doubt that as a local monopoly, NOTL Hydro should be highly regulated to protect the customers.  Whether we have the right level of regulation will always be open to debate.  My only request is that as our duty is to always try to act in the best interests of the customer; so too should the regulators.

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