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Ten years after restructuring: Degraded distribution reliability and regulatory failure in Ontario

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  • Cronin, Francis J.
  • Motluk, Stephen

Abstract

Ontario’s electric distribution utilities began the 1990s with a stellar record of reliability that rivalled that of any advanced economy. While individual network reliability varied, the system customer-weighted average was exemplary and remained stable over the decade. These networks were generally thought of as “gold-plated”; they were municipally based non-profits with no debt, community-oriented and subject to a paternalistic style of regulatory oversight. Starting in 2000, electric distribution utilities underwent significant regulatory reforms including changes in: governance and ownership, regulatory oversight, horizontal and vertical integration, and retail market competition. Since that time, the inconsistent, ineffective, and perverse incentives have contributed to declining reliability and network performance. Continuously changing policies by the government have undoubtedly contributed to degradation of reliability and industry performance, and the laissez faire attitude by the regulator has abetted the deterioration. The regulator’s growing fixation on partial cost benchmarking can be expected to have incented LDCs to curtail O&M expenditures so as to improve their benchmarking score. Ontario may also be unique in that, in essence, service quality has been subject to no effective standards or penalties for a decade.

Suggested Citation

  • Cronin, Francis J. & Motluk, Stephen, 2011. "Ten years after restructuring: Degraded distribution reliability and regulatory failure in Ontario," Utilities Policy, Elsevier, vol. 19(4), pages 235-243.
  • Handle: RePEc:eee:juipol:v:19:y:2011:i:4:p:235-243
    DOI: 10.1016/j.jup.2011.07.002
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    References listed on IDEAS

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    1. Francis Cronin & Stephen Motluk, 2007. "Flawed Competition Policies: Designing ‘Markets’ with Biased Costs and Efficiency Benchmarks," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(1), pages 43-67, August.
    2. Astrid Cullmann & Christian von Hirschhausen, 2008. "From transition to competition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 335-357, April.
    3. Anna Ter-Martirosyan & John Kwoka, 2010. "Incentive regulation, service quality, and standards in U.S. electricity distribution," Journal of Regulatory Economics, Springer, vol. 38(3), pages 258-273, December.
    4. John Kwoka, 2008. "Restructuring the U.S. Electric Power Sector: A Review of Recent Studies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(3), pages 165-196, May.
    5. Francis J. CRONIN & Stephen A. MOTLUK, 2007. "Agency Costs Of Third-Party Financing And The Effects Of Regulatory Change On Utility Costs And Factor Choices," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(4), pages 537-565, December.
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    Cited by:

    1. Jonek Kowalska, Izabela, 2015. "Challenges for long-term industry restructuring in the Upper Silesian Coal Basin: What has Polish coal mining achieved and failed from a twenty-year perspective?," Resources Policy, Elsevier, vol. 44(C), pages 135-149.

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