New report argues regulators should focus on maximizing economic value, not public interest
CALGARY — Regulators such as the National Energy Board have been hurt by poorly defined mandates and conflicting goals, which has led to “mounting public and judicial attack,” says a new study that argues those agencies should focus on economic efficiency.
In a report Monday, the C.D. Howe Institute says regulators including the NEB and the Canadian Radio-television and Telecommunications Commission (CRTC) are subject to “withering commentary, hostility, disbelief and even disobedience” because those agencies are given nearly impossible tasks.
University of Calgary economics professor Jeffrey Church argues in the report that regulators should not make public interest determinations, but decisions based solely on what is most economically efficient or, in other words, what maximizes value for the country.
“Too many governments provide regulators with a vague mandate to act in the public interest, or multiple, often conflicting objectives,” Church said. The result is regulators who have “far too much latitude to be influenced by lobbying, profit seeking and political influence.”
Switching a regulator’s mandate to focus on maximizing value, he said, would help minimize lobbying. “The reason we typically gave these decisions to regulators is because politicians could be lobbied,” he said in an interview.
His report said that regulatory agencies aren’t appropriate places to consider environmental goals or land rights, which should be determined by legislators.
“I attribute the turmoil around regulation – both its institutions, processes and decisions – to a fundamental misunderstanding of the rationale for regulation and, hence, a failure to define, or correctly identify, the objectives of regulation,” Church wrote.
As examples of that turmoil, the study cites pipeline protests and sharp criticism of CRTC decisions. Environmental groups in B.C. have promised civil disobedience if Kinder Morgan Canada sanctions its proposed Trans Mountain pipeline expansion between Alberta and the West Coast.
The federal Liberal government has formed a panel to review and “modernize” the NEB after saying the regulator had lost the public’s trust in their election campaign.
Church hopes the panel considers his report on economic efficiency, which he said would mean regulatory decisions are based on what society values most.
Asked how a regulator could account for pollution or environmental impacts, Church said that legislation such as the national price on carbon would allow regulators like the NEB and utilities regulators to include environmental impacts in its decision making.
His report also cites examples where a regulator would need to take into account the side-effects of development. “If, for example, the presence of high-voltage transmission lines reduces property values, then an efficiency mandate requires the regulator to take that loss into account in determining the social costs of those lines,” he wrote.