The challenges raised by the relentless pursuit of “net-zero” and “electrification” are both immense and pervasive. It is becoming increasingly apparent that meeting those challenges, in many spheres, will likely necessitate innovative approaches, rather than mere incremental modifications to established practices. This is certainly apparent with respect to the challenges emerging in energy regulation — the energy regulatory forum will be the crucible in which solutions to those challenges will be implemented.

The extent of the changes that may be required in the regulatory framework itself is seen in the restructuring being implemented under Nova Scotia’s Energy Reform (2024) Act,^[1] ushering in transformational changes for the province’s electricity system. The changes include carving out the responsibilities of the existing Nova Scotia Utilities and Review Board with respect to energy matters and assigning them to a new Energy Board established by the Energy and Regulatory Boards Act.^[2] Interestingly, the two boards will have a common Chair, while each will have its own Vice-Chair. This new regulatory framework is reviewed by David MacDougall and colleagues in “The Nova Scotia Energy Reform (2024) Act: A New Paradigm for Energy Regulation in Nova Scotia.”

The pursuit of electrification also presents challenges to identify and ameliorate potential impediments to wider adoption. In “Accelerating Electrification by Lowering its Operating Costs Through Technology — Specific Marginal Cost Pricing,” Ahmad Faruqui observes that in some North American states and provinces, “[t]he biggest barrier facing electrification is the high cost of electricity…” He argues that, under the existing paradigm, “rate design should not be technology-specific.” He proposes a new paradigm under which “marginal cost pricing would only be applied at the margin for incremental consumption associated with the installation of heat pumps for HVAC and water heating, EV chargers and other electrification technologies such as induction stoves.” This approach, he argues, could lower the cost of electrification “without triggering a redistribution of wealth among customers…”

Several articles in ERQ have discussed the challenges faced by regulators in the context of the energy transition, most recently in reviewing two significant decisions of the Ontario Energy Board and the British Columbia Utilities Commission.^[3] Those decisions raised fundamental questions about the implications of the transition for planning for the future of energy markets and the role of regulators in overseeing the transition. The discussion is ongoing. David Morton, former Chair of the British Columbia Utilities Commission, brings a further perspective in “The Energy Transition and Natural Gas: Two Regulators Speak Out.”

While much of the focus of energy regulation and the role of regulators is on the energy transition, meanwhile many of the core issues that have concerned regulators and utilities continue to arise. The role of Performance Based Regulation (PBR) is one such issue. In “AUC Decision 28300-D01-2024: What will it Mean for the Future of PBR in Alberta?,” Mark Kolesar, former Chair of the Alberta Utilities Commission, analyzes a recent decision resulting from a decision by the AUC to reopen the PBR from 2018 to 2022 of two ATCO Utilities, in accordance with a reopener provision that had originally been approved by the AUC as part of an earlier PBR. It appeared from regulatory filings that the ATCO Utilities’ achieved return on equity (ROE) in two years had exceeded the threshold specified in the reopener provision. Kolesar concludes that the decision has implications for the future of the Commission, the companies it regulates and consumers: “…it may serve to blunt the intended management efficiency incentives of PBR and sour utilities on continuing PBR regulation.”

Discourse on achieving “net-zero” — especially by 2050 — frequently lacks any real understanding of the enormity of the challenge. In the words of a White Paper published at the end of 2023 by Positive Energy at the University of Ottawa, “[it] is a daunting task, bigger and faster than any that has ever been undertaken through deliberate policy — with the exception of wartime — in Canadian history.”^[4] In “Energy Projects and Net Zero by 2050: Can we Build Enough Fast Enough?,” Michael Cleland and Monica Gattinger focus on the regulatory dimension of the broader study reported in the White Paper. Papers on specific aspects of the challenge, such as energy system planning, will follow and will be reported in ERQ as appropriate.

This issue of ERQ closes with two Case Comments. Reen Goyal comments on the Ontario Energy Board’s 2023 decision approving a Settlement Proposal filed by the Independent Electricity System Operator (IESO), including proposed revenue requirements for the years 2023, 2024 and 2025. Until recently, applications for approval of IESO’s revenue requirement was made on a single-year basis.

Nigel Bankes comments on a recent decision of the Supreme Court of Canada, confirming the Crown has a duty of diligent implementation of treaty promises that is informed not by fiduciary principles, but by the honour of the Crown.^[5] The Crown had breached that duty since (in words that Bankes suggests “will ring down through the decades”):

For well over a century, the Crown has shown itself to be a patently unreliable and untrustworthy treaty partner in relation to the augmentation promise. It has lost the moral authority to simply say “trust us”.^[6]

1. Energy Reform (2024) Act, SNS 2024, c 2.
2. Ibid at schedule A.
3. See, for example: Gordon E. Kaiser, “The Energy Transition, Stranded Assets, and Agile Regulation” (2024) 12:1 Energy Regulation Q, online: <energyregulationquarterly.ca/articles/the-energy-transition-stranded-assets-and-agile-regulation>; Mark Kolesar, “Regulatory Decision-Making in Evaluating Electrification Initiatives” (2024) 12:3 Energy Regulation Q, online: <energyregulationquarterly.ca/articles/regulatory-decision-making-in-evaluating-electrification-initiatives>.
4. University of Ottawa, “Energy Projects and Net Zero by 2050: Can we build enough fast enough?” (last visited 11 November 2024), online: <www.uottawa.ca/research-innovation/positive-energy/blog>.
5. Ontario (Attorney General) v Restoule, 2024 SCC 27.
6. Ibid at para 262.