OEB Issues Decision on Union Gas Limited

    TORONTO, July 31 /CNW/ - Today the Ontario Energy Board (the Board)
issued a Decision related to a combined proceeding involving a multi-year
incentive rate (IR) mechanism to determine rates for the regulated
distribution, transmission and storage of natural gas for Union Gas Limited
(Union) and Enbridge Gas Distribution Inc. (Enbridge), effective January 1,
    The Board previously approved a Settlement Agreement reached by the
parties on most of the issues for Union's IR mechanism. This Decision
addresses three matters pertaining to Union which were not settled. They are:

    -   Whether a series of tax reductions applicable to Union during the
        Incentive Regulation plan should be passed on to rate payers through
        a "Z Factor" adjustment,

    -   Whether an adjustment to Union's 2007 base rates should be made for
        tax rate changes effective in 2007 but which were not reflected in
        the cost forecast underpinning the applied-for rates, and

    -   Whether the costs associated with the company's risk management
        activities should continue to be recovered from ratepayers.

    In its Decision the Board determined the fair solution is to treat 50% of
the tax reductions as a Z factor and so will be passed on to ratepayers. This
conclusion recognizes that while tax changes flow through the inflation
factor, the process is subject to some significant lags. The Board also
determined that 50% of the impact during the IR period arising from the 2007
tax reductions should be subject to Z Factor treatment. The Board noted it is
appropriate for these tax reductions to be treated in a manner consistent with
treatment afforded tax changes which are implemented during the term of the IR
    With regard to risk management, the Board disallowed the recovery of the
program's associated costs on the basis that the program's net benefits are
not material. The Board directed Union to record the costs currently embedded
in rates in a deferral account for future disposition. The appropriate
adjustments to distribution rates will be considered at the time of Union's
next rate rebasing.

    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 website 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: Paul Crawford, Ontario Energy Board, (416)

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