After running a nearly $1.5 million deficit in 2017, the Utility Regulation and Competition Office, known as OfReg, increased its expenses in 2018 and will continue to do so this year.
According to the utilities regulator’s 2019 annual plan, OfReg had $4,752,007 of operating expenses in 2018 – up from $4,604,326 the year before – and will incur $5,064,583 in operating expenses this year, as well as $425,830 in capital expenses.
OfReg attributed this year’s spending increases to additional payroll costs, directors’ fees, training costs, health insurance premiums, pension contributions, and IT costs.
These increases are being partially offset by reductions in travel expenses, consultancy fees, and legal expenses. OfReg spent nearly $400,000 on travel from when the office was created in January 2017 to May 2018, but has only spent a fraction of that since then, and only has about $80,000 budgeted for travel this year.
Despite the steady increase in expenses since 2017, OfReg expects to record a nearly $200,000 operating surplus for 2018 and a nearly $1.5 million operating surplus this year.
The surpluses are largely due to more than $2 million in funding from central government, as well as a number of planned fee increases for this year.
For the telecommunications sector, OfReg wants to remove the $600,000 cap in regulatory fees – a move that would require the approval of Cabinet.
OfReg does not currently receive fees from the fuels or water sectors, so central government has had to fund those operations. However, OfReg has proposed introducing fees to be levied on Consolidated Water and the Water Authority of $570,000 and $689,000, respectively.
Central government will continue to fund OfReg’s fuels regulation branch for the foreseeable future. Legislators voted earlier this month to allocate an additional $1.3 million to fund OfReg’s fuels-regulation operations, which include safety inspections and market analysis.
Before the vote, Premier Alden McLauglin explained the fuel-regulation operations will continue to be funded by government because OfReg does not want to add taxes to the fuels sector, which would increase prices for consumers.
Legislators nearly voted down the OfReg spending. The vote was split – with seven in favour and seven against the funding – until Finance Committee chair Roy McTaggart voted in favour of the spending to break the tie. Multiple legislators voiced their displeasure that OfReg has cost millions of dollars while failing to control the price of fuel.
McLaughlin admitted at the Finance Committee hearing that OfReg has experienced “teething issues” since being consolidated from the territory’s legacy regulators in January 2017.
However, the premier said OfReg’s new CEO should be coming on board “shortly”. The new CEO should be given a chance to assess OfReg’s operations him- or herself before the regulator completely changes its strategy towards the fuels sector, he said at the time.