OEB Releases Decisions on 2008 Electricity Distribution Rate Applications



    TORONTO, March 13 /CNW/ - Today the Ontario Energy Board (the Board)
issued its Decisions regarding 2008 electricity distribution rate applications
for the following utilities:

    
    -  Ottawa River Power Corporation    -  Hearst Power Distribution
    -  Milton Hydro Distribution Inc.       Company Limited
    -  Orangeville Hydro Limited         -  Midland Power Utility Corporation
    -  Canadian Niagara Power Inc. -     -  Grand Valley Energy Inc.
       Eastern Ontario Power             -  Niagara Falls Hydro Inc.
    -  Centre Wellington Hydro Ltd.      -  Westario Power Inc.
    

    The distribution rates will take effect May 1, 2008 and will be reflected
in the "Delivery" line of consumers' bills. The Board has directed the
utilities listed above to submit draft rate schedules reflecting the Board's
Decisions within seven calendar days of today's date.
    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.
    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. Sixty utilities
are having their 2008 rates set using the Board's incentive regulation
guidelines. This announcement pertains to utilities having their rates set
using the incentive regulation guidelines.
    Bill impacts resulting from the decisions released today will be
announced in the coming weeks, after the Board approves and issues final 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 that 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
www.oeb.gov.on.ca.

    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, please refer to the
attached backgrounder, visit the OEB website 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.



    
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    2008 Electricity Distribution Rates Backgrounder

    Highlights:
    -  In 2006 the OEB developed a multi-year electricity distribution rate
       setting plan in which a limited number of utilities would be
       identified each year to have their rates set by way of a public cost
       of service rate review in which the utility could apply for rates
       based on their cost to deliver electricity

    -  Any other utilities applying for rates that year would have their
       rates set by way of incentive regulation guidelines

    -  Cost of Service rate reviews reflect an individual utility's cost to
       provide service to their consumers

    -  Incentive regulation rate reviews are formulaic in nature and provide
       a standard rate adjustment for inflation and productivity improvements

    -  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 by way of the Board's
       incentive regulation guidelines

    -  Most rate changes take effect May 1, 2008

    -  On average, distribution rates represent approximately 25% of bills

    Background

    Electricity distribution rates vary from utility to utility and are
reflected on the "Delivery" line of consumer bills. They are designed to cover
the costs incurred by the utilities to provide electricity services to
individual homes and businesses within their service territory. These rates
include the costs to design, build and maintain overhead and underground
distribution lines, poles, stations and local transformers, operate local
systems, read meters, customer service, emergency response as well as the
costs to deliver electricity from generating stations to local utilities along
the high-voltage transmission system. Rates also include a regulated profit.

    Distribution rates are set to recover the costs to deliver electricity,
and reflect an individual utility's cost of service. Factors that contribute
to the varied rates among utilities include age and condition of assets,
geographic terrain and distance, and population density. The proportion of
residential to commercial and industrial consumers can also account for cost
differences among utilities.

    Distribution rates do not cover:

    -  The cost to generate electricity (the electricity commodity set by the
       Board under the Regulated Price Plan) reflected in the "Electricity"
       line of consumer's electricity bills
    -  The Debt Retirement Charge (set by the Government of Ontario to pay
       down the stranded debt of Ontario Hydro)
    -  The Regulatory Charge (the costs to administer the wholesale
       electricity system and maintain the reliability of the provincial
       grid)

    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.

    2008 Process

    In 2008, 21 utilities are having their 2008 rates set by way of a cost of
service rate review. They are:

    -  Atikokan Hydro Inc.                -  Halton Hills Hydro Inc.
    -  Barrie Hydro Distribution Inc.     -  Hydro Ottawa Limited
    -  Brantford Power Inc.               -  Hydro 2000 Inc.
    -  Chapleau Public Utilities          -  Lakefront Utilities Inc.
       Corporation                        -  Oshawa PUC Networks Inc.
    -  Enersource Hydro Mississauga Inc.  -  Norfolk Power Distribution Ltd.
    -  Erie Thames Powerlines Corp.          PUC Distribution Inc.
    -  Espanola Regional Hydro            -  Rideau St. Lawrence distribution
       Distribution                          Inc.
    -  Guelph Hydro Electric Systems      -  Sioux Lookout Hydro Inc.
       Inc.                               -  Toronto Hydro
    -  Horizon Utilities Corporation      -  Electric System Limited
    -  Hydro One Networks Inc.            -  Wellington North Power Inc.

    Sixty utilities are having their 2008 rates set using the Board's
incentive regulation guidelines. They are:

    -  Bluewater Power Distribution       -  Midland Power Utility
       Corporation                           Corporation
    -  Burlington Hydro Inc.              -  Milton Hydro Distribution Inc.
    -  Cambridge and North Dumfries       -  Newbury Power Inc.
       Hydro Inc.                         -  Niagara Falls Hydro Inc.
    -  Canadian Niagara Power Inc.        -  Niagara-on-the-Lake Hydro Inc.
       - Eastern Ontario Power            -  North Bay Hydro Distribution
    -  Canadian Niagara Power Inc.           Limited
       - Fort Erie                        -  Northern Ontario Wires Inc.
    -  Canadian Niagara Power Inc.        -  Oakville Hydro Electricity
       - Port Colborne                       Distribution Inc.
    -  Centre Wellington Hydro Ltd.       -  Orangeville Hydro Limited
    -  Chatham-Kent Hydro Inc.            -  Orillia Power Distribution
    -  Clinton Power Corp.                   Corporation
    -  COLLUS Power Corp.                 -  Ottawa River Power Corporation
    -  Cooperative Hydro Embrun Inc.      -  Parry Sound Power Corporation
    -  E.L.K. Energy Inc.                 -  Peninsula West Utilities Limited
    -  ENWIN                              -  Peterborough Dist. Inc.
    -  Essex Powerlines Corporation          - Peterborough
    -  Festival Hydro Inc.                -  Peterborough Dist. Inc.
    -  Fort Frances Power Corporation        - Lakefield
    -  Grand Valley Energy Inc.           -  Peterborough Dist. Inc.
    -  Greater Sudbury Hydro Inc.            - Asphodel - Norwood
    -  Grimsby Power Incorporated         -  Renfrew Hydro
    -  Haldimand County Hydro Inc.        -  PowerStream Inc.
    -  Hearst Power Distribution          -  St. Thomas Energy Inc.
       Company Limited                    -  Thunder Bay Hydro Electricity
    -  Hydro Hawkesbury Inc.                 Distribution Inc.
    -  Hydro One Brampton Networks Inc.   -  Tillsonburg Hydro Inc.
    -  Innisfil Hydro Distribution        -  Veridian Connections Inc.
       Systems Limited                    -  Wasaga Distribution Inc.
    -  Kenora Hydro Electric Corporation  -  Waterloo North Hydro Inc.
       Ltd.                               -  Welland Hydro-Electric System
    -  Kingston Electricity Distribution     Corp.
       Limited                            -  West Coast Huron Energy Inc.
    -  Kitchener-Wilmot Hydro Inc.        -  West Perth Power Inc.
    -  Lakeland Power Distribution Ltd.   -  Westario Power Inc.
    -  London Hydro Inc.                  -  Whitby Hydro Electric
    -  Middlesex Power Distribution          Corporation
       Corporation                        -  Woodstock Hydro Services Inc.


    At this time six utilities have not filed applications for revised 2008
distribution rates. They are:

    -  Attawapiskat Power Corp.           -  Dutton Hydro Limited
    -  Brant County Power                 -  Kashechewan Power Corporation
    -  Fort Albany Power Corporation      -  Newmarket Hydro - Tay

    The Board reviews each rate application independently.

    The rate changes for utilities undergoing cost of service reviews reflect
a number of factors including:

    -  Cost Allocation - The Board considered the revenue-to-cost ratios for
       each customer class. This addresses cross subsidization between
       customer classes so each customer class recovers in its specific
       rates, the costs that are incurred by that class so the rates fall
       within the Board's guideline ranges.
    -  Regulatory Assets (including deferral and variance accounts, and rate
       riders) - The Board reviewed the specific utility's regulatory asset
       recoveries to ensure any rate riders previously approved were still
       appropriate and if not, were adjusted to reflect the current state of
       the regulatory asset deferral and variance accounts.
    -  Retail Transmission Service Rates - The Board reviewed the utility's
       proposal for retail transmission service rates to ensure they reflect
       the reduction in the wholesale transmission rates charged to the
       utilities by Hydro One Networks, effective November 1, 2007.
    -  Cost of Capital and Capital Structure - The Board ensured the
       utility's cost of capital and capital structure was in accordance with
       the Report of the Board on Cost of Capital and 2nd Generation
       Incentive Regulation for Ontario Electricity Distributors. The Board
       also mandated that distributors use updated financial market
       statistics to set the cost of capital for the utility's revenue
       requirement in setting rates for 2008.
    -  The decrease in GST to 5% that took effect January 1, 2008 -
       Distribution utilities have already reduced the GST on customer bills
       from 6% to 5% as of January 1, 2008. Therefore this change did not
       affect the current applications for new distribution rates effective
       May 1, 2008.
    -  Tax Changes - The Board ensured that the utilities' income tax
       allowance included the most recent tax changes announced by the
       federal and provincial governments. These changes generally resulted
       in a lower tax provision reflected in the approved rates.

    The rate changes for utilities undergoing incentive regulation reviews
reflect a number of factors including:

    -  Gross Domestic Product Implicit Price Index (GDP-IPI) - The inflation
       factor used to calculate rates under the incentive regulation
       guidelines. The GDP-IPI is 2.1%
    -  Retail Transmission Service Rates - The Board reviewed the utility's
       proposal for retail transmission service rates to ensure they reflect
       reduction in the wholesale transmission rates charged to the utilities
       by Hydro One Networks, effective November 1, 2007.
    -  The treatment of smart meter activity.
    -  The decrease in GST to 5% that took effect January 1, 2008 -
       Distribution utilities have already reduced the GST on customer bills
       from 6% to 5% as of January 1, 2008. Therefore this change did not
       affect the current applications for new distribution rates effective
       May 1, 2008.
    -  Tax Changes - The Board ensured that the utilities' income tax
       allowance included the most recent tax changes announced by the
       federal and provincial governments. These changes generally resulted
       in a lower tax provision reflected in the approved rates.
    -  Rate Harmonization - the Board ensured that rate harmonization was
       reflected in applications where utilities had harmonized rates due to
       mergers and amalgamations.
    

    Four utilities undergoing incentive regulation reviews who are authorized
by government regulation to undertake smart metering activities, also asked
for incremental smart meter funding.

    Bill Impacts

    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.
    A table of the estimated bill impacts on residential consumers bills 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 www.oeb.gov.on.ca.

    For More Information

    Details on the 2008 Electricity Distribution rates are available via the
Board's Web site at www.oeb.gov.on.ca.

    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 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 further information:

For further information: Vanda Wall, Ontario Energy Board, (416)
440-8149


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