The mission of Energy Regulation Quarterly is to provide a forum for debate and discussion on issues surrounding the regulated energy industries in Canada, to create a better understanding of the issues and to identify trends. As Managing Editors of ERQ, we believe that in pursuing this purpose we should offer a variety of articles and comments that, together, are informative, analytical, forward-thinking and reflective. The contributions in this issue of ERQ reflect this approach.

William Lahey’s article on “The Contributions of Utilities Regulation to Electricity System Transformation: The Case of Nova Scotia” offers valuable insights into the indispensable role of sound regulation in implementing fundamental shifts in energy policy. Nova Scotia has occupied a somewhat unique position in Canada’s energy supply picture. As recently as 2007, 90 per cent of the province’s electricity supply came from fossil fuels, mostly coal. At the same time, the province had little interconnection with the North American electricity grid. Lahey reports that the system is now on track to meet a Renewable Energy Standard (RES) of having 40 per cent of electricity come from renewable sources by 2020. Nova Scotia is also becoming a Canadian leader in electricity system demand-side management (DSM). This transformation of the electricity system is being driven by the combined effect of environmental and electricity system legislation.

Lahey concludes that the Nova Scotia Utilities and Review Board (NSUARB) has played a “catalytic role” in bringing about this transformation. He identifies specific elements of the Nova Scotia experience that illustrate “the mundane but core attributes of effective regulators.” In addition to emphasizing the importance of the Board’s independence, he points to the crucial interaction of policy guidance from government and its implementation by the Board. His observations provide important lessons that have much wider relevance to energy regulation in Canada, particularly at a time when there is some evidence that governments are more inclined to insert themselves into roles historically reserved for regulators. In the current environment in which the energy industry and regulators face significant technological and policy change, strong regulatory leadership of the type noted by Lahey at the Nova Scotia UARB is worth noting.

Emerging challenges for the energy industry and regulators also underlie Mike Cleland’s article on “Changing Energy Systems: Implications for Regulators and Policy Makers.” Cleland reflects on the fundamental changes in energy delivery systems resulting from the combined effects of technology, environmental demands and growing concerns about system performance. These changes, he concludes, are “far from business as usual.” Indeed, we may be “on the cusp of a true energy transformation”, resulting from the convergence of several technological streams. However, the instinct of regulators, on the one hand, to confine utilities to pipes and wires and, on the other hand, the lack of understanding of the regulatory system by policy makers may combine to inhibit needed innovation. What is needed is a different sort of conversation in which the regulatory community stands back from the adversarial environment of the hearing room and in which policy makers are active participants.

One of the technological developments underlying the changes in energy delivery systems discussed in Mike Cleland’s article is combined heat and power (CHP). The policy and regulatory implications are discussed in Richard Laszlo’s article on “Combined Heat and Power in Ontario: policy tonic, regulatory headache.” Ontario’s Long Term Energy Plan claims that CHP can achieve up to 80 per cent overall efficiency by following the heat load from fossil fuels while generating electricity. Laszlo reports that the regulatory picture is clouded, as CHP expands the number and diversity of customers interested in self-generation and is potentially disruptive to the current electric utility business model. The article outlines the Ontario Energy Board’s discussion paper on options for a fixed rate design.

A key element of a leadership role on the part of energy regulators is clear communication of the reasons for their decisions. The article on “The Joy of Decision Writing”, by Mr. Justice David Brown, might appear at first to be of interest mainly to those who write decisions. In our view, however, the article should be parsed by a wider audience. Justice Brown describes what is needed by the decision-maker to write a sound regulatory tribunal decision and thereby indirectly provides guidance on how parties might present their cases.

A recurring challenge for regulators and industry in the current environment arises from the Crown’s legal duty to engage in meaningful consultations with First Nations. The duty plays a crucial role in virtually every energy resource development in Canada today, while the content and practical implications of the duty continue to evolve.  Hannah Roskey’s article summarizes Alberta’s recently-released Guidelines on Consultation with First Nations on Land and Natural Resource Management.