Call to Action: Roadmap for Regulatory Efficiency in the Electricity Sector

Federal Government

• Establish a mechanism for federal/provincial and territorial electricity policy coordination: The current federal/provincial and territorial ministerial forums on energy (Energy and Mines Ministers Conference, or EMMC) and environmental issues (Canadian Council for Ministers of the Environment, or CCME) have not been successful in driving regulator approval of innovative electricity industry projects . Thus, it is imperative that the two forums prioritize this issue at their upcoming meetings, consider creating a joint consultative mechanism to coordinate policy responses to issues of national interest, and secure provincial and territorial buy-in for subsequent directives to energy regulators . The federal government is well suited to collaborate with provinces and territories on issues such as smart-grid investments, small modular reactors, battery storage, electrification and hydrogen . Provincial and territorial directives would help electricity companies advance the policy objectives of the respective governments . • Simplify innovation-related funding: Instead of creating winners and losers through burdensome government funding application processes, identify priority issues (e .g ., energy efficiency, electrification, hydrogen), find delivery agents (e .g ., electricity companies) and allocate federal dollars based on an appropriate formula (e .g ., on a per capita/customer basis) . This would be a win-win-win proposition for government, companies and customers .

Provincial and Territorial Governments

• Issue policy directives to regulators: Go beyond traditional electricity-related statutes (e .g ., Energy Board Act) and issue timely policy directives to encourage regulatory innovation and related processes . This would allow regulators to consider innovative electricity sector projects to meet government policy objectives, support research and development efforts, enhance nimbleness and agility in the regulatory processes, and reduce time and costs associated with rate applications . • Establish non-adversarial regulatory systems: This would enhance trust and collaboration among key players, with the aim of achieving government policy priorities and providing value to customers .

Provincial and Territorial Energy Regulators

• Take a system-based approach to regulatory approvals: Consider the role of the electricity industry in meeting national decarbonization goals and allow for innovative initiatives that would help achieve broader environmental, social and economic goals . • Incentivize digital transformation: Current regulatory constructs do not incentivize investments in digitization . For instance, cloud services, because they are not bricks and mortar investments, are often not eligible for regulated rates of return; therefore, investments in these systems are not prioritized, despite such investments often offering cost-savings and efficiency benefits .

Provincial and Territorial Regulatory Pain Points

• Regulatory systems lack the nimbleness and agility needed to respond to international, national, provincial and territorial policy directions and trends . Mandates should also include broader social objectives, such as reducing carbon emissions . • The current regulatory constructs hinder consideration of innovative initiatives, with higherrisk profiles based solely on economic variables and potential cost to customers . There is a lack of appreciation for environmental and social factors associated with innovation .

• Regulators are hesitant to support research, development and demonstration projects due to the possible failure of future innovations . Like those in other sectors, electricity companies should be enabled to make regulated investments in RD&D . • Unnecessary costs are incurred (and passed on to customers) as a result of regulatory systems that actively promote adversarial proceedings, pitting electricity companies versus intervenors . • Regulatory filings by electricity companies face significant delays, and the resulting financial costs ultimately impact ratepayers . • There is a lack of recognition that the customer hierarchy of issues has changed . As much as customers care about affordability, they also value environmental, reliability and resiliency attributes, and the ability to manage their energy use . Price is just one factor in the hierarchy .