Public Utilities Board needs an overhaul

Commentary, Energy, Graham Lane, Manitoba, Regulation, Uncategorized

Despite major missteps taken by the Public Utilities Board with respect to Manitoba Hydro, the PUB is worth saving. That said, it needs a major overhaul.

The PUB is supposed to balance the interests of monopoly firms and their customers. The agency has been in operation for 100 years, many of which until recently were spent in obscurity, important mainly to the consultants, lobbyists and applicants that appear at its hearings of Manitoba Hydro, Centra Gas and MPI rate applications.

It was only in 2004 that the PUB established a website and began posting online its decisions, notices of upcoming hearings, roster of members and procedural rules. Since then, it has regularly criticized the actions and plans of the corporations that have appeared before it, issuing directives demanding more information as well as listing the risks inherent in the plans put before it by monopoly utilities. The PUB has regularly made recommendations to government, seeking extensions and other improvements to its mandate to better equip it to better act in the public interest, recommendations yet to be accepted by government.

Most recently, it adopted a more co-operative approach to the wishes of the provincial government. After years of stressing the risks abounding in Manitoba Hydro’s now $34-billion capital development plan, calling for a comprehensive review of the plan, and having issued a subpoena demanding Hydro publicly disclose its export contracts, the PUB granted Hydro an overall eight per cent rate increase without having received information it had previously demanded be put before it. It also agreed to hold a restricted review of Hydro’s development plan — a review that treats the planned construction of Bipole III as a given, a sunk cost, and withdrew its subpoena.

For the PUB to better fulfil its protector of the public interest role, what needs to happen?

Appointments to the PUB should follow a public competition, one based on the independence and qualifications of the applicants. To properly review complex plans and set rates for monopoly utilities, the PUB’s membership should include those with non-partisan expertise and industry experience.

Member appointments should be subject to an all-party review by a legislative committee, and those appointed should be provided set terms. No longer should the governing party in power be able to appoint whomever they choose, regardless of qualifications and the risk of conflicts of interest. Annually, the PUB should be subject of a review by an all-party committee of the legislature.

The PUB’s mandates need to be reviewed and amended, to make sure it has the information necessary to meet its responsibilities. As it is, the PUB’s mandates are too circumscribed, leaving it to make decisions without having the necessary information to decide wisely.

The PUB’s responsibilities are wide and important. Among them, it sets rates for Manitoba Hydro, Centra Gas, MPI and all municipal water and sewer utilities except for the City of Winnipeg. Unfortunately, its current mandate prevents the PUB from concluding on either appropriateness of Hydro’s capital expenditures or export contracts, despite those expenditures and contracts being primary drivers of consumer rates. Similar agencies in the United States review and approve contracts to import power from Manitoba Hydro, yet our PUB has no authority over Hydro entering into those contracts.

Similarly, the board is not allowed to review the full scope of MPI’s operations, although MPI works as an integrated operation. More than 90 per cent of vehicle owners buy extension insurance from MPI, but PUB has no jurisdiction to review the adequacy and fairness of those rates. In the case of its oversight of water utilities, the glaring exception of the City of Winnipeg’s utilities stands out. As a result, city council has been able to subsidize property taxes while driving up water and sewer rates year after year.

The PUB also sets the rates of privately owned monopoly utilities, advises government on payday loans, and sets the fee schedule for the cashing of government cheques. Other responsibilities extend out to include cemeteries, natural gas safety, natural gas brokers and other sundry tasks.

While board members through the years have met their responsibilities as best as they could, with flawed mandates and being appointed without competition or set terms, its recent compliance with the wishes of government has brought to the forefront concerns that need to be addressed.

If the PUB is to continue into the agency’s second century, major structural reform is needed.