TORONTO, March 17 /CNW/ - Today the Ontario Energy Board (the Board)
issued its Decision on an application by Hydro Ottawa Limited (Hydro Ottawa)
for 2008 electricity distribution rates. The rate changes will take effect
May 1, 2008.
Distribution rates are set to recover the cost to deliver electricity to
consumers and reflect an individual utility's cost of service. Utilities apply
to have their proposed rates to deliver electricity reviewed by the Board
through a public process to determine what costs can be passed on to
consumers. Distribution rates are reflected in the "Delivery" line of
In 2008, distribution rates will be set using two different
methodologies. Most utilities will have their rates set using incentive
regulation guidelines which provide a standard rate adjustment that accounts
for inflation and productivity improvements. Others will have their rates set
by way of a cost of service review, in which the utility applies for rates
based on the costs it incurs to deliver electricity.
For the rate year which starts on May 1, 2008, 21 utilities are having
their 2008 rates set by way of a cost of service rate review. 60 utilities are
having their 2008 rates set using the Board's incentive regulation guidelines.
Hydro Ottawa had its rates set by way of a cost of service review.
In its Decision, the Board accepted a settlement agreement between Hydro
Ottawa and intervenors in the case, which resulted in a reduction of
$6.0 million to the revenue requirement claimed by the utility for the 2008
rate year. The settlement included:
- Reducing Hydro Ottawa's proposed level of capital expenditures,
operations and maintenance expense and working capital allowance for
- Updating interest rates used to calculate its 2008 cost of capital,
which includes a return on equity of 8.57%,
- Increasing the forecast of customer electricity usage for 2008,
- Accepting Hydro Ottawa's retail transmission rates which reflect new
lower wholesale transmission rates and Hydro One's proposed 2008
- Updating the 2008 Payments in Lieu of Taxes calculation to account
for recent changes in tax legislation,
- Reducing revenues recovered from large user and unmetered Scattered
load classes and slightly increasing revenue recovered from
residential and street lighting classes, to bring the revenue to cost
ratios for each class within the Board's guideline ranges,
- Recovering amounts in Hydro Ottawa's deferral and variance accounts
The Board held a hearing on a small number of issues where settlement was
not achieved. The Board approved of a change in Hydro Ottawa's capitalization
policy that reduced overhead capital costs and increased its operations and
maintenance costs. The Board did not accept Hydro Ottawa's request that its
new rates commence January 1, 2008; rather the new rates will be effective May
The Board also directed Hydro Ottawa to file a draft rate order
reflecting all the directions given in this Decision including a schedule of
proposed final distribution rates for 2008.
Bill impacts resulting from the decisions released today will be
announced in the coming weeks after the utilities have submitted draft rate
order to the Board reflecting today's decision. The Board will announce the
rate impacts when it approves and issues rate orders to the utilities.
In mid-April, the Board will also announce the results of its review of
the cost of electricity supply for consumers under the Regulated Price Plan
(RPP), reflected in the "Electricity" line of the bill. The RPP price is paid
by consumers who do not have a contract with a retailer for their electricity
supply and is subject to review and adjustment, if necessary, twice a year.
Any change to the RPP price will also take effect May 1, 2008 and will also
affect total bill charges.
Starting mid-April, a table of the estimated bill impacts on residential
consumers will be available once any potential adjustments to the RPP are
determined and as specific rate orders for individual utilities are issued by
the Board. This table will be published on the Board's website
For more information please refer to the 2008 Electricity Distribution
Rates Backgrounder on the OEB website site at
The Ontario Energy Board regulates the province's electricity and natural
gas sectors in the public interest. It envisions a viable and efficient energy
sector with informed consumers served by responsive regulatory processes that
are effective, fair and transparent. For more information on the Board, please
visit our web site at www.oeb.gov.on.ca or contact the Consumer Relations
Centre at 416-314-2455 or toll-free at 1-877-632-2727.
For further information:
For further information: Vanda Wall, Ontario Energy Board, (416)