NONE OF THE PUBLIC UTILITIES FACES ANY DISCIPLINE THROUGH COMPETITION AND MARKET FORCES.

over the next five years. Unfortunately for ratepayers, that admission came after the project hit an apparent “point of no return.”

In Newfoundland and Labrador, the $12.7-billion Muskrat Falls hydroelectric megaproject is now more than double the original price and its power may not be needed for more than a decade, if at all. The province’s regulator, required by law to review major capital projects to ensure they pass an economic smell test, was initially blocked from doing so by government decree. Only after a public outcry did the province allow a very limited review. The regulator called that limited review “torturous,” said it wasn’t afforded the necessary time or resources to do a proper review and, ultimately, failed to support the project. The province’s politicians responded to that criticism by calling the regulator’s work a waste of time and money.

The regulator’s concerns weren’t unfounded — the new CEO of the province’s public utility now calls the project a “boondoggle.” Electricity rates are expected to more than double over current levels when the dam starts producing power.

In B.C. the province initially blocked its regulator from reviewing the $8.8-billion Site C hydroelectric project to determine if it offered good value for money. Worse, knowing the dam would require outsized rate increases that would be politically unpalatable, the province introduced legislation that simply overruled the regulator and mandated how much it could raise rates each year. The difference between the public utility’s high costs and the low rates it was allowed to charge customers have been shunted into what are known as regulatory accounts and will be collected from future customers. Today’s low rates are simply a mirage. The province’s auditor general took the government to task for this use of accounting tricks, only to be ignored.

And in Ontario, Queen’s Park has routinely ignored — then dismantled — the regulatory system put in place to protect the public from nuclear megaprojects gone awry. Rather than ensure the $12.8-billion refurbishment of the Darlington station was subject to a public cost-benefit analysis, as was intended under the regulatory framework following the collapse of Ontario Hydro, the project was pushed through by the power of legislation and blocked from a public review by the province’s regulator.

Already facing a public backlash from rising electricity rates, the province also used the legislature to prevent its regulator from passing on the full cost of refurbishing the nuclear plant and, instead, artificially lowered rates in the near-term by kicking those costs to future ratepayers — a manoeuvre it calls “rate smoothing.”

The common theme among all of these megaprojects is that none of the public utilities pushing them faces any discipline through competition and market forces. Private companies that lack access to government guarantees or generous subsidies avoid mega-dams and nuclear projects. And unlike government utilities, their shareholders can’t use legislatures to thwart the regulatory hurdles that would ordinarily stop wildly uneconomic projects.

Public utilities and their political masters, in contrast, ultimately have no need to fuss with regulators. When the cost estimates, schedules and need for megaprojects become fantasies, politicians simply shut the regulators down and rely on taxpayers to bail them out of their poor decisions.