Summary of Actions Taken
The Council is currently an active participant in the Ontario Energy Board's (OEB) Proceedings and Consultation Processes. The Ontario Energy Board oversees the province's electricity and natural gas sectors through economic regulation. The mission of the OEB is to promote a viable, sustainable and efficient energy sector that serves the public interest and assists consumers to obtain reliable energy services at a reasonable cost.
With respect to electricity, the OEB sets transmission and distribution rates. It also sets the rates for the Standard Supply Service for utilities that supply electricity (commodity). The Board also licences all market participants including the Independent Electricity System Operator, generators, transmitters, distributors, and retailers.
On the natural gas side the Board regulates Ontario's natural gas utilities which are required to submit the rates they propose to charge their customers to the OEB for approval. The OEB also licences all marketers who sell natural gas to residential and small commercial customers.
The OEB carries out its mandate through formal hearing processes that can take many months to complete. In addition, the OEB undertakes consultation processes that assist it in making policy decisions. Those processes usually involve releasing draft reports for comment prior to their finalization, and holding workshops in order to facilitate stakeholder input. Finally, the Board from time to time establishes working groups to assist it in policy development and the establishment of rules and guidelines for both the electricity and natural gas sectors.
The following is a list of the recent OEB proceedings and consultation process that the Council has participated over the last year.
Hydro One Networks Inc. 2011-2012 Transmission Rates Proceeding:
Hydro One Networks Inc. - Transmission applied to the OEB for approval of its Transmission rates for the period 2011-2012. Transmission rates are to pay for the cost to deliver electricity from the generating stations to your local utility.
The Board in its Decision made a number of adjustments to the total revenue requirement that Hydro One was requesting. The Council argued for an adjustment to Hydro One's operating costs to reflect the fact that their compensation levels were significantly above comparator companies. In addition, the Council argued that Hydro One should make other operating cost reductions. The Board reduced the operating costs by 3 percent in 2011 in 4 percent in 2012.
Hydro One was requesting special accounting treatment for its Bruce-Milton Transmission line. In effect, Hydro One was requesting to recover the costs of this project prior to it being place in service. This would have had ratepayers paying for the line well before it was being used to bring electricity to the various utilities across the Province. The Board accepted the arguments advanced by the Council on this topic, as it would increase rates unnecessarily in the first 12 years that the project was in service. This was an important decision as it set a precedent ensuring that projects are not included in rates until they are up and running.
Another important win for residential consumers was the rejection by the Board of a proposal by large industrial consumers to have the rates based on a methodology where more costs would be shifted to high cost peak periods. Under that proposal residential ratepayers would have paid a more proportionate share of transmission costs. The Council opposed the proposal. The other development in this proceeding was a proposal advanced by the Council and others to increase, marginally, the rates paid by exporters of Ontario power. This proposal to increase what is called the export tariff reduces rates overall relative to keeping the tariff at the same level. The OEB adopted the Council's proposal.
Ontario Power Generation - Payment Amounts 2011-2012
The OEB regulates the revenue that Ontario Power Generation receives from its largest generating facilities, specifically the nuclear plants and large hydro-electric plants. The Council was an intervenor in this proceeding and argued for a number of changes to OPG`s allowed revenue requirement amounts. Specifically, we argued for a reduction in compensation costs, given OPG's salary levels were well above its comparators. OPG was looking for an increase in its revenue requirement of 6.2% and the Board reduced that to 1 percent. Over the two-year period the Board reduced OPG's compensation costs by $145 million. This was a significant "win" for the Council and the other ratepayer groups. As in the Hydro One case, OPG was looking to recover the costs of another large capital project, the Niagara Tunnel Project, prior to the tunnel going into service. The Board rejected this request, meaning that ratepayers will only pay for the costs of the project once it is in place and providing service.
The Council regularly intervenes in the large local electric utility rate applications. Local utilities are required to come before the OEB to have their rates "rebased" every four years. In the interim period their rates are set using a formula that allows for an increase to reflect inflation, but also has a factor for expected productivity improvements.
In the last year the Council has participated in the rate proceedings for Toronto Hydro-Electric System Inc. , Newmarket-Tay Power Distribution Limited and Horizon Utilities Inc. (Hamilton and St. Catherines).
In both the Toronto and Newmarket proceedings the Council and other ratepayer groups were able to negotiate final rates and other issues, instead of taking the applications before the Board in a contested hearing. In both of those applications the final rate levels resulted in modest rate increases, much less than the utilities were applying for. As the cases settled prior to a hearing the overall regulatory costs were reduced significantly.
In recent months the Council participated in the Horizon Utilities Inc.'s rate proceeding. Despite efforts to settle with Horizon, the full case went before the Board. The OEB is currently deliberating and a decision is expected sometime this summer.
The Council will be actively participating in other rate proceedings next Fall, once the 2012 applications are filed with the Board in late August.
The Ontario natural gas utilities are regulated by the Board and are currently under Incentive Regulation Plans, where their rates are adjusted annually through a fomulaic mechanism. Some issues are determined outside of the formula and considered through applications that have not, in recent years, been contentious. Enbridge and Union will have their rates re-based in 2012 and the Council will be participating in the Board's review of those applications.
The OEB undertakes numerous consultation processes throughout the year that consider issues including, for example, conservation and demand management policies, natural gas pricing policies, rules for connecting renewable generation, rules regarding natural gas contracting, polices regarding time-of use pricing, and the design of low-income programs for energy consumers etc. Over the past year the Council participated in the following OEB processes:
- Demand Side Management Guidelines for Natural Gas Utilities
- A Review of the Structure and Price Setting Methodology for Time-of Prices
- 2010 Natural Gas Market Review
- Implementation of Consumer Protection (Retailer-Marketer) Provisions of the Energy Consumer Protection Act, 2010
- Distribution Revenue Decoupling
- Development of the Conservation and Demand Management Code for Electricity Distributors
- Consultation Process on Energy Issues Relating to Low-Income Consumers
- The Council is currently represented on the following committees:
- Stakeholder Advisory Committee to the Board of Directors (Independent System Operator)
- Hydro One Networks, Customer Advisory Board
- Union Gas, Evaluation and Audit Committee
- Union Gas - Demand Side Management Consultative
- Enbridge Gas Distribution - Demand Side Management Consultative