THE Public Utilities Board (PUB) is a semi-independent tribunal that conducts regulatory oversight of designated monopolies, such as Manitoba Hydro, Manitoba Public Insurance and Centra Gas. It has been regulating "in the public interest" for 117 years.
By law the PUB, not the government, has the final word on the rates charged by the regulated monopolies. In setting rates, the PUB must consider both the financial requirements to provide services and the impacts of rate changes on customers. The establishment of the PUB was intended to take rate-setting out of the realm of partisan political competition, to allow for decisions based on public hearings, expert testimony and objective analysis, including forecasting of future conditions within different industries.
The fact government-owned Crown corporations are the main bodies regulated by the PUB creates political risks for governments, because they do not have direct control over the regulatory process and its outcomes. Most members of the public do not understand this; for them, the PUB and the Crowns are just another part of government. Therefore, they blame the government for unpopular decisions by the PUB and the impacts on the Crowns.
This creates an incentive for governments to tighten control over such so-called "arms-length" bodies, which the Pallister government has been doing in several ways. These moves also reflect the government’s single-minded determination to eliminate deficits and reduce debt.
The government claims the PUB regulatory process disrupts planning at the Crowns, as well as being too time-consuming and too expensive. For these reasons, the Pallister government proposes to take away the rate-setting authority of the PUB over Manitoba Hydro and Centra Gas through an omnibus budget-implementation bill currently before the legislature. The current Conservative majority means the bill will pass and a cabinet order providing for a 2.9 per cent rate increase will go into effect.
Earlier in the spring session of the legislature, the government presented Bill 44, the Public Utilities Ratepayer Protection and Regulatory Reform Act. After NDP resistance and a truncated session, the bill died on the order paper when prorogation for a new session occurred. Now the government has reintroduced the same legislation as Bill 35.
Bill 35 has many provisions; here, I will highlight only those that threaten the independence of the PUB and the preservation of an open regulatory process. A plausible argument can be made that PUB hearings involving multiple participants are more representative and balanced than the largely confidential policy-formulation process inside of government, which is too often driven by ideology, short-term political calculations and/or the demands of interest groups.
Under Bill 35, Hydro rates until 2024 would be set by the government, not the PUB. Thereafter, the PUB would set rates on a five-year cycle, supposedly to allow for better planning by Hydro. At present, the frequency of Hydro rate applications depends on decisions by Hydro, not by the PUB.
Also, the existing law allows for rates to be set for a three-year period, so its replacement would add only two years. In practice, citing uncontrollable factors such as turbulence in the energy environment and fluctuating water levels, Hydro has in recent years sought interim rate increases; applications that do not trigger full-scale public hearings. In short, the existing PUB process is not the main factor that disrupts Hydro planning.
Currently, the PUB collects fees from regulated entities; those fees are transferred to government and then funding is provided through the annual budget process. Fees have not been changed since 1994. In its most recent annual report, the PUB claims it is the smallest, most efficient of such tribunals in Canada, with just eight employees. Counterparts in Nova Scotia and PEI have 40 and 20 employees respectively.
With so few employees, the PUB has to hire consultants, and those costs have attracted criticism from government. Sound regulation, however, cannot be bought at wholesale prices.
Bill 35 would require that a PUB business plan, including a budget, be reviewed by the treasury board, the committee of cabinet that oversees expenditures. The PUB would also be required to predict anticipated hearing costs, including payments to consultants and intervenors who add value to the hearings.
As a practical matter, it will be exceedingly difficult for the PUB to forecast with precision the total costs of hearings on major applications.
Moving key PUB functions inside of government risks the loss of an open forum in which less-powerful groups and individuals (such as low-income individuals and the disabled communities) have been able to defend their position, often with the support of the Public Interest Law Center (PILC) and Manitoba Legal Aid. In a separate action (too involved to be covered here), the Pallister government is considering a recommendation to remove government funding to PILC and require it to depend on charitable status and private fundraising.
In debating the detailed provisions of Bill 35, the Legislature must consider the wider implications for democracy.
Paul G. Thomas is professor emeritus of political studies at the University of Manitoba.