September 20th, 2019

AER overhaul a dangerous game


By Lethbridge Herald Opinon on September 11, 2019.

Weaken the regulatory framework at your peril

Bill Whitelaw

President and CEO June Warren-Nickles

Energy Group

Grant Sprague and Bev Yee, Alberta deputy ministers of energy and environment respectively, are very capable senior bureaucrats. Here’s hoping they bring to bear all their skills for the review of the Alberta Energy Regulator.

They should keep in mind that the review ought not to be the witch hunt the current political framing suggests it is.

Increasingly, investors look to ensure they capitalize on energy companies that take seriously those considerations related to environment, social and governance.

That should serve as a reminder not to toss out the baby with the bathwater as the United Conservative Party seeks to erase anything vaguely associated with the thinking of the previous NDP government.

Alberta energy politics are becoming hateful and divisive. And instead of constructively and collectively understanding the complex restructuring with which it must grapple, the industry has become fractious and fragmented. So we find answers to complex issues are distilled down to naively simplistic solutions.

There are elements of the sector that simply adore a bogeyman. There’s plenty to be had if you subscribe to the UCP thesis that everything wrong in energy is someone else’s fault.

The Alberta Energy Regulator (AER) is merely the latest culprit the UCP is handing to those in the sector looking for something to hang in effigy.

Want a scapegoat for energy sector travails? The UCP has a closet full ready to trot out: other provinces, other Canadians, foreign interests, liberal politicians.

One key driving force behind the review, suggests Alberta Energy Minister Sonya Savage, is the time it takes to process an application. She points to other jurisdictions like Texas, which she argues processes things exponentially faster.

Implicit in her argument is that this is attractive to investors. To a point it may be, but the minister’s advisers would do well to get in front of her the other side of the Texas story: about investment leaving in droves and about looming environmental debacles, particularly involving water.

One thing increasingly binds investors together: an expectation that companies with which they place capital understand and respond to environment, social and governance imperatives. And they expect solid and robust regulatory frameworks within which firms operate in order to safeguard their capital.

AER is a world-class regulator. In recent times, it has introduced a broad spectrum of improved services designed precisely to solve the very problems of which it has been accused. It has been tackling red-tape challenges for years.

Two recent innovations come to mind: the OneStop process that simplifies applications dramatically and the Integrated Decision Approach, which reflects a long-range understanding of an application.

Regulatory dynamics are a two-way street. Many companies that have hacked staffing in recent years need to assess the quality of their regulatory requests. Remember: garbage in, garbage out.

Good regulators are creatures of the sector and society. So AER ought to mirror regulatory and socio-economic realities.

Has the AER’s staffing grown in recent years?

It has changed, largely in response to the increasingly complex environment in which it’s expected to function – an environment that bears little resemblance to even 15 years ago. For example, when AER was created, it took on the Environmental and Sustainable Resource Development Department functions. Yet its staffing has remained relatively flat for the last several years.

The UCP is desperate to appease certain elements of the industry. But destroying AER’s ability to balance environmental and fiscal imperatives could actually set Alberta’s recovery back dramatically.

Weaken the regulatory framework at your peril. Sloppy regulation begets sloppy industrial operation. And sloppy industrial operation begets sloppy reputation and social unrest. And the kind of capital you want driving the sector loathes sloppy reputations and the risk it brings.

For Sprague and Yee, and the interim board, this will be a delicate task. Deputy ministers must be, of course, political creatures to be effective in their roles. Here’s hoping they help their political masters guide a reasonable and rational review that keeps front and centre a regulator’s role in a robust economy.

And here’s hoping the UCP resists its political impulse to toss people and process under the nearest conveniently rolling bus.

Perhaps most important will be the stakeholder input. It ought to guide the review to stay away from the UCP temptation to bring the AER closer to political will.

Remember the great line from the Joni Mitchell song Big Yellow Taxi: “You don’t know what you got ’til it’s gone.”

Bill Whitelaw is president and CEO at JuneWarren-Nickle’s Energy Group and former publisher of The Lethbridge Herald. Distributed by Troy Media.

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One Response to “AER overhaul a dangerous game”

  1. Perhaps repeal of the Renewable Electricity Act should be higher on the priority list than overhaul of the AER?

    https://www.aeso.ca/market/renewable-electricity-program/


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