Ontario Energy Board Releases Handbook for Utility Rate Applications
On October 13, 2016, the Ontario Energy Board released a Handbook for Utility Rate Applications. The Handbook is applicable to all rate-regulated utilities, including electricity distributors, electricity transmitters, natural gas utilities and Ontario Power Generation, and sets out the principals that the OEB will apply when reviewing rate applications.
The Handbook emerges from the OEB's experience with the Renewed Regulatory Framework for Electricity (RRFE). The RRFE was developed specifically for electricity distributors as a way of shifting rate regulation focus from costs and cost recovery to an outcomes-based approach focused on long-term value for money. The OEB previously indicated its intention to apply the RRFE more broadly. The Board will now refer to this framework as the Renewed Regulatory Framework (RRF) to reflect the transition. Going forward, all utilities are expected to file rate applications consistent with the Handbook, unless they can demonstrate a "strong rationale" for departing from it.
Utilities are still required to comply with the filing requirements for cost of service applications in addition to the Handbook. The Handbook contains specific requirements for Custom IR applications including:
- A minimum term of five years;
- Custom index for annual rate adjustment supported by empirical evidence;
- Internal and external benchmarking;
- Performance metrics informed by the scorecard for electricity distributors, but which includes performance metrics aligned to the outcomes identified in the application;
- No annual updates within the five-year term absent exceptional circumstances or the clearance of established deferral and variance accounts; and
- Proposals for one or more mechanisms to protect customers from utility earnings that become excessive (e.g. off ramps, earnings sharing, etc.).
The Handbook was issued by the OEB on a final basis. The OEB will hold a meeting on October 27, 2016 to provide an opportunity for interested stakeholders to ask OEB staff clarifying questions about the Handbook. Participants are required to register by October 20, 2016. Further registration details can be found here.