Date Published:
April 2005

L’Encyclopédie de l’histoire du Québec / The Quebec History Encyclopedia

Public Utilities in Canada

[This text was published in 1948; for the full citation, see the end of the document.]

Public Utilities. The term public utility has broadly the same connotation in Canada as in Great Britain and the United States: it is applied to an industry which provides the public in a given area with what are considered necessary services, and has, either through a relatively large initial investment or other conditions, the traits of a natural monopoly - traits which from early times in Great Britain and the United States inevitably tended to bring it within some special form of public control, judicial or administrative. The actual agencies of such control in Canada have been patterned upon those in the older states of the English-speaking world, of which the most important are the specific terms of a franchise, the supervision of rates and service by a public utility commission, and public ownership and operation. Significantly, public ownership and operation as instruments of control are more widely developed in Canada than in the neighbouring United States .

The public utilities of Canada can best be classified and described according as they come under federal, provincial, or municipal jurisdiction. Important utilities within the ambit of federal regulation are the great transcontinental railways and such lines as are declared by Act of parliament to be in "the general interests of Canada", the telegraph companies, two of which are subsidiaries of the railways, radio broadcasting, telephones operating in more than one province, postal service, and those canals that are considered part of the national waterways. Some of these utilities are not merely regulated by, but are under the ownership and operation of, the government. Such are the canals, the Canadian National Railway, operated by a board of directors responsible to the government, and the Canadian National Telegraphs, operated with the Canadian National Railway. In radio broadcasting the federal government owns only a limited number of stations, but the Canadian Broadcasting Corporation, established in 1936 in partial imitation of the British Broadcasting Corporation, is empowered to provide programmes for all the populated areas of Canada, to regulate the programmes and advertising on the air, to prohibit the establishment of privately owned stations, and to pursue the policy of extending the number of public stations. The logical objective of the Broadcasting Act of 1936 is a publicly owned monopoly in radio broadcasting. The postal service, following British and American example, is administered as a department of government.

The outstanding institution designed to regulate federal utilities is the Board of Railway Commissioners, which bears a name that inadequately illustrates its varied and extensive functions. It was established first in 1903 to exercise a control over the rates and service on national railways, it being discovered at the time that non-competitive rates were exorbitant as compared with competitive rates and that the railways had freely exercised their privilege to change rafes without notice, to the inconvenience and distress of shippers. The Board of Railway Commissioners was devised as a permanent means of hearing and investigating grievances as to rates. The Board originally consisted of three members appointed for ten years by the governor-general-in-council. In 1908 the number was increased to six. Judicial decisions and amendments to the original Act have greatly enlarged the powers of the commission, and its functions are now partly executive and partly judicial. It may issue mandatory and restraining orders; and in its investigations it can, like a superior court, insist upon the production of necessary documents and the attendance of witnesses. Only standard or maximum rates require the approval of the Board before they are applied. Changes in competitive rates may be applied by the railways without approval provided that they have been advertised, but in case of special grievances all changes in rates can be brought before the Board. Its sanction must also be obtained to the location and construction of new lines, or branch lines, and to all regulations concerning safety and convenience in operation. Unlike, however, its American counterpart, the Interstate Commerce Commission, it has no control over railway financing and the issue of railway securities. Doubtless the crucial dependence of Canada upon foreign capital restrained the federal government from providing the Board with this power. Appeals may be taken from the Board to the governor-general-in-council, or in questions of law and jurisdiction to the Supreme Court of Canada, but appeals allowed by these authorities are few. The regulative powers of the Board have been extended beyond railway rates to those of telephone, telegraph, and express companies which conduct an interprovincial business; for example, the Bell Telephone Company of Ontario and Quebec comes under its regulation. It has also jurisdiction over the price paid for water power, leased from the crown for the ,development of electrical energy.

Public ownership over federal utilities is more widely developed in Canada than in the United States, a fact which is due less to the wider prevalence of a socialist ideology than to peculiar exigencies in the development of the state and the economy. The essential task in the building of a federation in 1867 and the succeeding years was the more thorough consolidation of the separated portions of British North America through effective means of transport. Hence federal governments constructed such railways as the Intercolonial, and through land grants and bond guarantees assisted private companies in extending their lines to the West. The policy once begun was difficult to discontinue at the point where it became extravagant, mainly because of the political pressure of outlying regions solicitous for railway service and the scarcely less influential, although more secret, pressure of railway contractors. As a result the federal government by 1914 was heavily committed in support of the major lines, except the Canadian Pacific, and, when these lines felt the financial strain in the war and post-war period, the government had little alternative but to assume ownership and operation. Similarly public construction of canals was due to the fact that private corporations could not attempt to improve the vast and valuable waterway of the St. Lawrence which made possible the opening and exploitation of the West. Federal enterprise in such utilities was, therefore, in its origin a basic condition for the expansion of population and social life throughout the Dominion.

The principal utilities under provincial jurisdiction are hydro and other electric power, telephone systems within the province, provincial railways, steam or electric, and the new and important forms of motorized transport. Of these -hydro-electric power, owing to its decisive influence in Canadian industry, is undoubtedly the most important, and the consistent trend within the twentieth century has been to subject it more directly to public control, resulting in extensive public ownership and operation. In this development Ontario has taken the lead. At the beginning of the twentieth century the government of this province was content to grant franchises to private companies for the development of power from the Niagara and other rivers. But partly under the influence of British immigrants indoctrinated with the ideas of municipal socialism then current in Great Britain , an opinion favourable to public ownership quickly developed, especially in Toronto and the urban areas of western Ontario. As early as February, 1903, the civic council of Toronto recorded that "the time is certainly here, if it has not been here long ago, when public utilities of this nature should be owned and operated by the government of the province, or by the municipalities". The Ontario Hydro-Electric System had its birth in 1906 as a result of the vigorous drive of these urban municipalities for the public transmission of power. The Commission established in 1906 was engaged merely in transmitting power at cost to such municipalities as desired it, but, under the persistent pressure of the munitions industry for more and cheaper power in the period of the Great War, it began to generate as well as to transmit, and definitely set out to achieve a monopoly of the hydro-electric industry in southern Ontario. Such a development was inevitable, not simply because of natural ambition in the commissioners, but because in this industry genuine economies were to be effected in the linking together of all productive units in a highly co-ordinated system. Over this integrated system some control is exercised by the municipalities, which have commissions to administer the local distributive plants, although there is an effective supervision of the financing, rate-making, and management of these local bodies by the auditors employed by the provincial commission. The provincial government has an ultimately vital direction over the entire hydro-electric system in that it guarantees the loans for works of expansion and is represented on the commission of three by at least one, and sometimes two members of the cabinet. Thus the Ontario Hydro-Electric System is not as free from actual and potential political interference as the statutory corporations in Australia, or such organizations in Great Britain as the Port of London authority and the Central Electricity Board.

Under the impressive influence of the Ontario Hydro-Electric System, commissions have been established in other provinces, with varying powers of regulation over the private companies and usually with the authority to transmit power, or to generate it for transmission to municipalities. Quebec was tardy in exercising control of the hydro-electric utility, but in 1935 it established a commission of three members with jurisdiction over the production, transmission, and distribution of electricity with the purpose of extending the use of electrical energy to the greatest possible number of citizens. The commission has the important task of coordinating the power industry throughout the province. In Nova Scotia there is not merely a public power commission engaged in generation and distribution, but also a board of public utility commissioners authorized to supervise electrical and other utilities, excepting the enterprises under the power commission, and to restrict profit to no more than eight per cent. upon real investment. Such specific limitation of profit is not the practice elsewhere in Canada , but in all the provinces there are utility commissions which attempt to. control rates with obviously indirect effects on profit.

Apart from electric power, the telephone as a significant utility is regulated in all the provinces, and in Manitoba, Saskatchewan, and Alberta is mainly owned and operated by the provincial governments. Companies whose activity extends beyond the boundary of a given province, like the Bell Telephone, which serves the major part of Ontario and Quebec, are regulated in service and rates by the Board of Railway Commissioners in Ottawa. Private provincial companies, such as those in the Maritimes, are similarly controlled by the public utility commissions of these provinces. On the prairie are publicly owned and operated telephones, where the crucial problem is that of insuring the efficiency of management and not merely the protection of consumers from the exploitation of a monopolist. Public ownership of telephones was established in this region because the private companies were accused of being slow in satisfying the demand of the farmers for rural service, and it has suffered at times from the popular pressure for extravagant extension of lines; notably during the period of the Roblin government in Manitoba and the Stewart government in Alberta. Moreover, at the outset, the methods of accounting were not above reproach, and administration was bedevilled by the more indefensible forms of political pressure. But the three western provinces have learned from experience. Of late years the administration of the telephones has improved, and their financial record has become respectable.

Municipal utilities are subject to diverse forms of control, which are influenced by both British and American example. In the major urban utilities, such as water, gas, electric light, power, and street railway service, public ownership and operation have been steadily on the increase since the beginning of the twentieth century. Water-works especially are now generally under public management. In the urban areas of Ontario and the western provinces street railway service also tends to be publicly managed. Where public ownership exists, the organs of management are varied, and the following, are common types: (1) a small commission appointed or elected to manage the specific utility in question, such as the Toronto Transportation Commission, which operates the street railway and public buses of Toronto; (2) a general utility commission which operates all the utilities within the municipality, and is held responsible for its management to the municipal government; (3) a committee of aldermen which manages the utilities directly. Where the utilities are privately owned and operated, public control is exercised through the terms of a franchise and the regulative powers of provincial utility commissions. The controversy continues as to the respective merits of private and public ownership, and Canadian experience can render no decisive conclusion because the quality of management in both public and private enterprises varies greatly. In the case of the publicly owned and operated municipal utilities, it has commonly been difficult to judge the efficiency of administration, owing partly to the fact that in contrast to the private companies the enterprises are exempt from certain forms of taxation. The lack of tradition in the maintenance of an expert civil service has clearly injured public ownership and operation in Canada , because too often it has resulted in the appointment of "ward-heelers" to positions which should be occupied only by thoroughly-trained men. But whatever the defects in public ownership and operation, the trend of development has been inexorably towards this type of management, and consistent improvement has been noticeable in the quality of the services.

Source  : W. Stewart Wallace, ed., The Encyclopedia of Canada, Vol. V, Toronto, University Associates of Canada, 1948, 401p., pp. 176-179.