What we heard: Request for information on Canadian electricity regulation and grid modernization

Respondents highlighted the challenges utilities often face in the current regulatory landscape, specifically with proposing innovative projects to their regulators. This landscape is challenged by evolving market conditions and ongoing revolutionary system changes in the energy sector. To address this, respondents identified the need for enhanced regulatory mandates. They also identified a need for regulators to consider a broader range of variables in their decision-making processes to better account for the full suite of benefits from innovative projects.

Respondents indicated several areas that could benefit from government support, including:

• Creating regulatory sandboxes and other mechanisms and processes to enable and promote piloting and experimentation;
• Promoting research and knowledge sharing activities on regulatory innovation; and,
• Building capacity at the regulatory level to promote regulatory and procedural innovation as well as organizational change.

Respondents emphasized that inter-jurisdictional policy alignment and certainty is needed for enhanced investor confidence and long-term electricity system planning. Respondents also called for enhanced collaboration, information sharing, and knowledge development across jurisdictions.

Respondents indicated several areas that could benefit from government support, including:

• Building capacity through the establishment of interjurisdictional working groups, system planning studies, and innovation roadmaps;
• Aligning policy guidance and legislative mandates across different levels of government; and,
• Supporting the creation of guidelines on electrification pathways that are adaptable for each jurisdiction (i.e., roadmaps to decarbonization that factor innovation into technology, market, cost and resource assumptions).

Respondents highlighted that there is a potential risk of ratepayers bearing the cost risks in the early and mid-phases of the energy transition. They identified that existing market structures may not be best suited to promote a cost-effective and efficient energy system of the future. This challenge is further exacerbated by cost pressures resulting from supply chain and labour force constraints. Respondents noted that innovation is held back by existing market constructs and utility business models that are restricting the full range of capabilities and benefits from innovative solutions. More needs to be done to improve the value proposition of innovative investments so that ratepayers can start to reap the benefits.

Respondents were also concerned about Canada maintaining its competitiveness with the United States. They indicated a need for support with attracting and retaining talent to the sector as well as a need to promote customer participation and engagement through education and funding initiatives.

Respondents indicated several areas that could benefit from further government action and support. These include:

• Promoting innovation and the deployment of technologies through program funding, investment tax credits, and low interest loans;
• Expanding the scope of incentive measures to include expenditures beyond initial capital costs for assets (e.g., operations and maintenance expenditures), especially in smaller jurisdictions; and,
• Addressing knowledge gaps in research and system planning activities by funding ongoing jurisdiction-specific studies and assessments as well as equity-focused research.

Respondents called attention to the persistent technical challenges with integrating and operating new technologies on the grid. They also pointed to a lack of auxiliary infrastructure needed to enable grid modernization (e.g., telecommunication infrastructure, high-speed internet), especially in remote and northern communities. Respondents indicated a need for increased data collection to optimize grid operation and enable enhanced planning.

Respondents indicated several areas that could benefit from government action and support, including:

• Funding research, development and demonstration projects that target systems integration and operation;
• Funding for enabling infrastructure and auxiliary infrastructure, especially in remote communities; and,
• Increased standards for cybersecurity and interoperability.

Respondents said there is inequitable access to the benefits of grid modernization relating to system upgrades, new technologies, and job opportunities, exacerbated by regional cost pressures. Remote grids and energy poverty in some regions, including the North and parts of Atlantic Canada, also exacerbate the cost pressures of an energy transition on a rate base that struggles to support existing operations. Respondents also noted that there is an opportunity to improve Indigenous and community ownership of infrastructure to improve access to the benefits of grid modernization, thereby improving the return on investment and participation in grid modernization.

Respondents indicated several areas that could benefit from government action and support, including:

• Offsetting electrification costs for low-income, rural, and Indigenous communities;
• Facilitating opportunities for collaboration and sharing knowledge across regional borders; and,
• Funding capacity building for Indigenous communities from the Federal government to provide input to grid modernization activities and to participate in the energy transition.

A graphic demonstrating the breakdown of responses to the Request for Information (RFI) by organization type and by geography. At the top, it states that the RFI received 73 responses. To the right, it indicates that the RFI heard from 7 provinces and territories. Below this, it indicates the following: “Most responses came from national organizations (27), Ontario (13), Alberta (6), and New Brunswick (5)”. Below this, a list of respondents by organization type is provided alongside corresponding icons. The following distribution of responses by organization type is listed: Regulator (1), Government (3), Company (11), Interest Group (11), Industry Association (13), Utility and System Operator (15), and Individuals (16). Below this, there is an image of a map of Canada with provincial and territorial boundaries drawn in. Indicated by grey circles with white text within each province or territory, the map presents the number of responses received from various regions: British Columbia (2), Yukon (2), Alberta (6), Nunavut (2), Ontario (13), New Brunswick (5), Nova Scotia (2). Next to the map, there are two more grey circles with white text to illustrate responses received from outside specific provinces or territories: National (27), International (2).