Regulatory Efficiency: A Must for Electricity Infrastructure Renewal
We at the Canadian Electricity Association have publicly raised, many times, that our electricity sector faces a complex challenge over the next two decades. In order to meet Canada’s increasing demands for electricity, we must invest in electricity infrastructure. That means renewing, replacing and adding to the generating stations and power lines that power the economy.
According to the Conference Board of Canada, we must invest almost $300 billion, or about $15 billion per year, if we are to maintain reliability, make our power supply even cleaner, and adopt advanced technologies.
It’s also essential that electricity remain not only affordable for consumers, but a competitive advantage for Canada. Right now, Canada is in the enviable position of having average power rates that are below those of most countries. This helps drive our economic development, and allows our communities to prosper.
If we are to successfully renew our electricity system, however, we must improve our ability to make timely decisions on what, where and how to improve the system. It comes down to improving our decision-making structure by increasing regulatory efficiency.
Governments have a legitimate and important role to play in overseeing the electricity system. They set the rules by which the electricity sector and other sectors operate. This helps to ensure that there is compliance with environmental protection laws and regulations, consumer protection, and public and worker safety.
The key is to ensure these laws and regulations are as efficient as possible. Why? Because it has a major bearing on the affordability of the electricity we produce and distribute to customers and on the reliability of our system.
Electricity infrastructure projects are subject to many pieces of legislation and regulation, at both the federal and provincial levels. Various agencies and departments have different mandates and jurisdictional obligations. Sometimes regulations can be overly complex and duplicate what is required elsewhere. This sometimes results in a lengthy approval process.
Regulatory duplication and inefficiency have been cited by various experts in business and government as a greater impediment to infrastructure renewal than other issues such as fiscal constraints.
For example, at an event co-sponsored by Canada 2020 and the Canadian Electricity Association in Ottawa in recent months, former Deputy Prime Minister and Minister of Finance, John Manley, now head of the Council of Canadian Chief Executives, noted the plethora of government levels and departments involved in regulation. This increases regulatory costs and complexities, he said, while encouraging inefficiency and slowing approvals.
At the same event, TD Bank Senior Vice President and Chief Economist, Craig Alexander, stated that major projects now need at least 10 years for approvals and construction, greatly increasing risks for proponents. In particular, he characterized the current costs of long regulatory approvals as enormous for our society.
The electricity sector needs a clearer and more predictable regulatory and policy environment if it is to achieve success in accomplishing the infrastructure renewal needed between now and 2030. “Success” can be defined as affordability, continued high levels of supply reliability, and an electricity system in which 90 per cent of our electricity generation emits no greenhouse gases.
What must governments do to increase the efficiency of regulation?
Years ago, the federal government established the Major Projects Management Office. MPMO is committed to reducing the current average regulatory review for major resource projects from four years to two. This is a step in the right direction. So is the review of the Canadian Environmental Assessment Act (CEAA). Stakeholders such as the Canadian Electricity Association and the Canadian Hydropower Association made formal comments before a House of Commons Committee hearing on improving regulatory efficiency under CEAA.
At the CEAA hearings, the Canadian Electricity Association recommended that the environmental assessment process be guided by the “one project, one assessment” principle, with the assessment being led by the best-placed jurisdiction. This would lead to avoiding duplication between the federal and provincial environmental assessment process through equivalency agreements. The CEAA would only be triggered where it can bring added value, and the focus would be on the key issues.
We also advocated that there must be greater consistency between assessments and authorizations; that timelines must be improved; and that assessments consider both the benefits of a project along with environmental impacts – in effect, adopting more of a sustainable development approach to evaluation.
Canada has an on-going challenge with respect to renewing its electricity infrastructure for the 21st century. We must continue to have affordable, reliable, and clean power for our homes, businesses and industries.
Greater regulatory efficiency is a prerequisite if Canada is to achieve its prudent and crucial electricity goals.
Jim Burpee is President and Chief Executive Officer of the Canadian Electricity Association.
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