OEB Issues Board Report on 3rd Generation Incentive Regulation for Ontario's Electricity Distributors

    TORONTO, July 15 /CNW/ - Today the Ontario Energy Board (the Board)
issued the Report of the Board on 3rd Generation Incentive Regulation for
Ontario's Electricity Distributors (the Report). The Report sets out the
Board's policy approach to 3rd Generation Incentive Regulation (3rd Generation
IR) and includes guidelines for distributors to use in preparing electricity
rate applications.
    Incentive regulation sets rates using a measure of inflation and an
efficiency target for the distributors. This mechanism promotes efficiency
both within the distribution sector and through the regulatory process.
    The Report builds incrementally on an earlier incentive regulation plan
and is more specifically grounded in empirical analysis and accounts for
differences in distributor operations.

    In the Report, along with other matters, the Board determined:
    -   It will retain a comprehensive price cap adjustment mechanism for
        electricity distributors,
    -   The plan term will be fixed at three years following the rebasing
    -   It will use the Canada Gross Domestic Product Implicit Price Index
        for final domestic demand as the inflation factor,
    -   Productivity offsets for individual distributors will consist of an
        empirically derived industry productivity trend (productivity factor)
        and stretch factor,
    -   All distributors will be subject to the same productivity factor that
        will be set at the start of the plan and will remain fixed throughout
        the term of the plan,
    -   All distributors will be assigned to one of three groups with stretch
        factors based on their efficiency as determined through comparative
        cost analysis,
    -   There will be an incremental capital module in 3rd Generation IR to
        address concerns over the treatment of incremental capital investment
        needs that may arise during the IR term.

    The Board's report provides a framework for electricity distributors when
they apply for rate changes under the 3rd Generation IR and has no immediate
rate impact.

    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)

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