Rate - Regulated Accounting: A study of Canadian Accounting Policy Use

Rate regulation is defined as “the mechanism by which a rate regulator imposes a control over the setting of prices that can be charged for services of products” (AcSB, Sep 29, 2016, p.16). This type of accounting is generally used by government owned or private entities where an entity has a monopoly or dominant market position. The goal of rate regulation is to balance the fair return earned by an entity, with reasonable rates charged to customers based upon prudently incurred costs in industries where consumers have little or no choice of other sellers (The Accounting Standards Board, 2018). Due to major changes to Ontario's electricity generation in 2014, Ontario had the highest residential electricity costs in Canada. In March 2017, the Liberals announced the Fair Hydro Plan, the plan's intention was to relieve pressure from ratepayers by reducing rates by 25% without adding significant provincial debt. This paper answers the following question, is interference by governments in use of rate regulated accounting appropriate, or is it a misuse of the standard? We have approached our research by reviewing journal articles, research papers, exposure drafts, detailed analysis of Auditor General reports, interview with a CPA Professional, and analysis and review of financial statements.