Who Regulates the Regulators?

Some of us tend to be deeply suspicious of government regulatory frameworks. There’s generally a non-zero chance they’ll fail to solve the problems they’re targeting and a 100 percent chance they’ll impose expensive restrictions on the free execution of business and life.

But some regulations are always going to be necessary. I, for one, am happy knowing the work of electricians, plumbers, and natural gas appliance installers is monitored for safety and durability standards. And I don’t mind paying a bit more to have an inspector come round to approve the work I’ve contracted.

Well, at least I think such inspections protect me. The 2020 Auditor General of Ontario’s report on the province’s Electrical Safety Authority (ESA) suggests that things might not be so simple.

First off, though, we’ll need a sense of the regulatory sector’s scope. Here’s a list of Ontario’s key agencies and, where it’s not obvious, their mandates:

• Financial Services Regulatory Authority of Ontario (FSRA) - oversees financial services sectors, including credit unions, caisses populaires, insurance, loan and trust corporations, mortgage brokerages, and pension plans

• Ontario Securities Commission (OSC) - governs Ontario’s capital markets

• Home Construction Regulatory Authority (HCRA) - ensures compliance with the Ontario Building Code and consumer protection standards

• Alcohol and Gaming Commission of Ontario (AGCO) - regulates alcohol, gaming, horse racing, and cannabis retail sectors

• Ontario Energy Board (OEB) - oversees the province’s electricity and natural gas sectors, including setting rates, licensing energy providers, and protecting consumers

• College of Physicians and Surgeons of Ontario (CPSO)

• Ontario College of Pharmacists (OCP)

• Electrical Safety Authority (ESA) - oversees electrical safety, including licensing electrical contractors and ensuring compliance with the Ontario Electrical Safety Code

• Technical Standards and Safety Authority (TSSA) - responsible for safety in areas such as amusement devices, boilers, pressure vessels, elevators, fuels, and upholstered furniture (which is a very strange combination)

For the most part, federal agencies don’t have nearly the direct impact on our day-to-day health and safety, so they’re less relevant to this discussion. Nevertheless, here are some examples:

• Canadian Radio-television and Telecommunications Commission (CRTC)

• Canadian Nuclear Safety Commission (CNSC)

• Competition Bureau Canada

• Canadian Transportation Agency (CTA)

• Financial Consumer Agency of Canada (FCAC)

• Office of the Superintendent of Financial Institutions (OSFI)

• Canada Energy Regulator (CER)

Now let’s get back to that 2020 Auditor General of Ontario report. The ESA itself was established under the 1998 Electricity Act. It’s the province’s legal administrative authority responsible for reducing electrical safety risks through inspections, certifications, and enforcement. The ESA is completely funded through the inspection fees it charges home and business owners and contractors.

According to their 2024 Corporate Report, the ESA earned $126.9 million in revenues (including $48.6 million from residential wiring inspections) while spending most of their budget on labor-related costs ($104.6 million). The average compensation for their 31 executive and senior management positions was $212,903 - which is more or less within range of expected industry standards.

But a close look at their operations led the Auditor General to some damning conclusions. Among other problems, ESA failed to:

• Satisfactorily explain why, between 2014 and 2018, 133,000 certificates were issued for mandated inspections that never happened - even though, according to ESA policy - those were installations that required inspection

• “Promptly follow up on about 3,500 installations found to be unsafe when inspected”

• Implement 22 out of the 54 distribution-company-oversight-related recommendations from a 2018 consultant report

• Provide sufficient guidance for callers requesting critical safety information

ESA was also criticized for not doing enough to police the sale and use of uncertified electrical products or the widespread existence of illegal electrical installations. Technically, those aren’t the ESA’s fault but, according to their legal mandate, such infractions certainly are their responsibility.

The existence of that 2020 report is encouraging. Government oversight seems to be working. The problem is that it’s not at all clear the recommendations were fully implemented.

18 months later (in April 2022), Ontario’s Standing Committee on Public Accounts met to discuss progress made addressing the report’s concerns. They were told that deliverables for just 25 percent of the recommendations were complete. A page on the ESA website (dated May 2023) self-reported that 45 “response efforts” were complete and another five were “on track”. That seems to have been the last official communication on the topic.

But what about those 133,000 uninspected installations mentioned in the Auditor General’s report - of which 51,000 were categorized as “complex”?¹ What, as electrical contractor Viktor Khroustalev has been asking for years, should be done for people living in those uninspected homes and businesses? Can anyone guarantee the safety of their wiring?

If you're concerned about those uninspected installations or know a victim of an electrical accident or fire, Viktor Khroustalev provides more information at this link.

According to Statistics Canada, electrical distribution equipment failure or malfunction was the source of 551 residential fires in 2021, of which 38 were attributed to design or installation deficiency. People’s lives are at stake.

And that’s just the ESA - one agency in one province. Has anyone looked into all the others? There’s a lot of money involved here, complicated by conflicted incentives.

1. This is not to ignore the owners of the 45,000 “simple” jobs that, according to the report, were unnecessarily inspected during those years are just out a few bucks.