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Posted in: Ratemaking | Practice & Procedure | Ontario

Apr 4, 2018

OEB Issues Its First Decision Using “Proportionate Review”

By David Stevens

On March 29, 2018, the Ontario Energy Board (OEB) issued a Decision on Scope of Review in an electricity distributor rate application that is being processed under the OEB’s new proportionate review approach. Under that approach, selected local distribution companies (LDCs) can agree to have their applications carefully reviewed by OEB staff and have their rates approved without a hearing, or through an abridged hearing process. Sioux Lookout Hydro Inc. (SLHI) is one of two LDCs whose rate applications are being processed under a pilot of the proportionate approach. In its Decision on Scope of Review, the OEB found that only a small number of issues in the SLHI rate application must proceed to hearing, and indicated that the hearing will be held in writing based on the existing record. All other items are approved as filed, subject to some modest adjustments indicated in the OEB’s Decision.

As we explained in an earlier post, the OEB intends to employ a more light-handed “proportionate review” process for LDCs who have demonstrated strong performance in relation to the OEB’s “expected outcomes” under the Renewed Regulatory Framework for Electricity Distributors (RRFE). This recognizes that where an LDC’s results (financial, operational, organizational and service) are strong, less review and oversight is required. The OEB’s “proportionate review” approach contemplates several different “streams” (levels of review), ranging from no hearing to abridged or focused hearings to full adjudication on all issues.

As noted earlier, the proportionate review framework is piloted on a limited basis in 2018, to test and evaluate the concept. The results of this testing will be reviewed in order to make improvements to the proportionate review framework. The OEB has previously indicated that it is targeting full implementation of the proportionate review framework to be available for all May 1, 2019 LDC rates applications.

The OEB’s Decision on Scope of Review in the SLHI application provides some guidance about how the OEB will process applications under the proportionate review approach:

The proportionate review approach involves an early in depth review by OEB staff of SLHI’s performance history, the current rebasing application and the alignment of proposals within the application with OEB policy. The results of staff’s review are communicated by way of a staff report to a decision maker, in this case, the Registrar. The decision-maker considers the staff review as well as the application documents to consider the appropriate process the OEB should employ to conduct its review of the proposals in the application. Where it is appropriate, a streamlined hearing of applications may be considered.

In the SLHI case, the OEB hosted a community meeting and received information from customers about their experience and concerns. OEB staff reviewed the application materials and asked follow-up questions and received written responses. Board staff then prepared a “Report to the Registrar” (the Report) on February 14, 2018. The Report set out OEB staff’s process to evaluate the application, including the use of an “Initial Triage Model” that involves (a) a historical Comprehensive Performance Assessment Model (CPAM); (b) a Quantitative Assessment of key metrics arising from the requests in the application; and (c) a Qualitative Assessment of the supporting evidence for the requests in the application. OEB staff indicates that the Initial Triage Model, which is still under development, is meant to focus attention on areas of the application which should be explored further and may require rigorous testing. In the Report, OEB staff provided a detailed summary of the key aspects of SLHI’s application, and generally endorsed SLHI’s application and found that no further discovery is needed. OEB staff identified nine discrete issues to be explored further though a hearing process. OEB staff recommended that the hearing process involve only written submissions.

The OEB Registrar issued the Decision on Scope of Review after considering all materials on the public record, including the application, the Report, the historical performance of the applicant and the written correspondence with OEB staff. For the most part, the OEB Registrar found that “the outcomes arising from SLHI’s proposals set out in its application adequately reflect the public interest, are in accordance with OEB policy, and result in just and reasonable rates for customers.”

The OEB Registrar found that five issues (rather than the nine recommended by OEB staff) should proceed to an “abridged hearing.” For the other four issues noted by OEB staff, the OEB Registrar made a determination without the need for a hearing. No party will have the opportunity to comment on these items, including the determination that SLHI’s rate hearing budget should be reduced by around 30%, to recognize that there will be less costs incurred under the abridged hearing process.

The specific nature of each issue that will proceed to hearing, including the question(s) of interest to the OEB, are explained in the Decision on Scope of Review. Under the abridged hearing process, there will be no discovery and the record will be taken as-is. OEB staff and interested parties will file written submissions, and SLHI will have a right to file a written reply. There will be no cost awards available for participation in the hearing because of the completeness of the record and the limited number and nature of issues to be addressed.

The OEB will issue a Notice of Hearing and invite interventions, and will then issue a Procedural Order establishing the steps for written argument. The specific issues that will be addressed and determined are listed in the Approved Issues List attached to the Decision on Scope of Review

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