The Ontario Energy Board has a new framework for the regulation of utilities. The Board’s renewed regulatory framework is a comprehensive performance-based approach to regulation that aims to better align consumer and utility interests, support the achievement of important public policy objectives and place a greater focus on delivering value. Effective rate design for revenue recovery is an important element to achieving these objectives. While the regulatory and policy environment has evolved significantly over the years, the rate design has not been altered.
The Board indicated in its Renewed Regulatory Framework for Electricity Report (“the RRFE Report”) issued October 18, 2012, that it would proceed with the review of revenue decoupling that was suspended in 2010. Revenue decoupling is a regulatory framework that seeks to break the link between a distributor’s revenue recovery and consumer consumption of energy. The Board intends to pursue a fixed rate design solution to achieve revenue decoupling. The Board believes that a fixed rate design for recovery of electricity distribution costs is the most effective rate design for ensuring that rates reflect the cost drivers for the distribution system and best responds to the current environment.
- The Board believes that when consumers1 understand what costs are being recovered in the amount they are being charged for the use of the distribution system, they are equipped to make informed choices about their use, their investments and the value of being connected.
- The Board’s regulatory framework emphasizes the need for distributors to achieve sustained productivity improvements through effective asset management and planning that will optimize investments.
- Design policy best provides predictable and stable revenues necessary to implement the distributor capital investment plans.
- The government has stated in its Long Term Energy Plan that distributors will have an increased responsibility in the delivery of conservation programs to customers to help achieve the Conservation First policy to meet future energy needs. The Board’s policy direction eliminates any disincentive to that role.
The purpose of this draft Report is to articulate the Board policy on implementing a new rate design for electricity distributors; to explain why the Board recognizes that a change to the rate design is appropriate at this time and to solicit stakeholder input on the best approach and design for moving forward.
VIEW & DOWNLOAD THE FULL REPORT: RATE DESIGN FOR ELECTRICITY DISTRIBUTORS
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