Consumer Deposit Security Policy

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1 Background On February 3, 2004 the Ontario Energy Board (OEB) amended the Distribution System Code (DSC) pertaining to Consumer Security Deposit Policies RP for the purpose of eliminating local variations in credit management practices. Local Distribution Companies (LDC s) were to comply with the revised code effective August 3, PowerStream complied with the revised code and submitted its Security Deposit Policy with the OEB on August 3, After this date Distributors must file a copy of their Conditions of Service with the OEB which must include the revised Security Deposit Policy. Purpose To comply with the Distribution System Code as it pertains to Consumer Security Deposits as compliance is a condition of license. This Policy establishes a consistent method of applying and administering Security Deposits among various customer classes as set out in the Distribution System Code while mitigating PowerStream s financial risks relating to customer billing. Regulatory References/Codes/Standards Ontario Energy Board Distribution System Code 1.0 RESIDENTIAL DEPOSITS 1.1 New Residential New residential customers not previously established within PowerStream s service territory will not be required to pay a security deposit. 1.2 Existing Residential Existing residential customers including those moving within PowerStream s service territory are required to pay a security deposit if they have not maintained a Good Payment History (GPH) as described in section Exceptions to Residential Security Deposit Requirements Residential customers will be exempt from paying a security deposit provided they maintain a Good Payment History (GPH) as defined in section COMMERCIAL DEPOSITS 2.1 Commercial Customers

2 2.1.1 All Commercial customers will be required to pay a security deposit unless they qualify for an exemption as per section Exceptions to Commercial Security Deposit Requirements PowerStream Inc. will not require a security deposit from Commercial customers; a) When the customer has achieved a Good Payment History (GPH) as defined in section 3.1. b) When a customer provides a letter from another distributor or gas distributor in Canada confirming a good payment history with that distributor for the most recent time period set out in section 3.1. The letter must be received by the due date of the request for deposit and the entity must be identified exactly as the application for service. c) A customer, other than a customer in a >5000kW demand rate class, provides a satisfactory credit check from a recognized credit rating agency, made at the customer s expense. d) From Federal, Provincial and Municipal Governments or agencies. e) From a bank as defined in the Bank Act, 1991, c.46 f) From School Boards 3.0 ADMINISTRATION & DEFINITIONS 3.1 Good Payment History (GPH) A customer is deemed to have a good payment history (GPH) unless the customer a) Has received more than one disconnection notice or, b) Has more than one cheque returned for insufficient funds or, c) Has more than one pre-authorized payment returned for insufficient funds or, d) A disconnect/collect trip has occurred The time period that makes up the GPH must be the most recent period of time and some of the time must have occurred in the past 24 months The minimum time period for a good payment history is as follows: Residential 1 Year Non-residential <50 kw demand rate class 5 Years All other non-residential rate classes 7 Years 3.2 Calculation of Security Deposit Amount

3 3.2.1 The maximum amount of security deposit, which PowerStream Inc. may require a customer to pay, is calculated in the following manner: a) Billing cycle factor x estimated bill based on the customer s average monthly load with PowerStream Inc. during the most recent 12 consecutive months within the past two years. The billing factors are; i) 1.75 for bi-monthly billed customers ii) 2.5 for monthly billed customers Where there is no established historical electricity consumption information for the service premises, the deposit will be based on a reasonable estimate using information from a like property used for similar purposes Where the customer has more than one disconnection notice in the relevant 12 month period, the highest actual or estimated monthly load for the most recent 12 consecutive months within the past two years is used for the purpose of this calculation Notwithstanding 3.2.1, when a commercial customer in any rate class other than <50kW demand rate class has a rating from a recognized credit rating agency, the maximum amount of security deposit shall be reduced in accordance with the following table: Credit Rating Allowable Reduction (Using Standard and Poor s rating terminology) AAA- and above or equivalent 100% AA-, AA, AA+ or equivalent 95% A-, from A, A+ to below AA or equivalent 85% BBB-, from BBB, BBB+ to below A or equivalent 75% Below BBB- or equivalent 0% Equivalent Ratings from other bond rating agencies would apply for the same reductions The commodity price used to calculate the security deposit in this case shall be the same as the price used by the Independent Electricity System Operator (IESO) for the purpose of determining maximum net exposures and prudential support obligations for market participants other than distributors, low-volume consumers and designated consumers PowerStream Inc. shall provide a customer with the specific reasons for requiring a security deposit. 3.3 Form of Security Deposit Payment Residential deposits will be in the form of cash, cheque or money order.

4 3.3.2 Commercial deposits will be in the form of cash, cheque, money order or an automatically renewing irrevocable letter of credit from a bank as defined in the Bank Act, 1991, c.46 at the discretion of the customer. PowerStream will not accept third party guarantees. 3.4 Payments of Security Deposits If requested, the Customer will be permitted to pay the initial security deposit in equal instalments over at least 4 months. A customer may choose to pay the security deposit over a shorter time period Electricity service is subject to collection action which may result in disconnection of service if the required deposit remains unpaid or a payment arrangement is not honoured PowerStream will accept payment of security deposits from a third party in whole or in part on behalf of the customer. 3.5 Review & Return of Security Deposit PowerStream Inc. will review every customer s security deposit at least once per calendar year to determine if the entire amount of the security deposit is to be returned based on the Good Payment History described in section A customer may, no earlier than 12 months after the payment of a security deposit or the making of a prior demand for a review, request in writing a review to determine whether the entire amount of the security deposit is to be returned Security deposits returned as part of a review will be done by crediting a customer s account or otherwise PowerStream Inc. shall promptly return any security deposit received upon closure of the customer account or when a customer changes from standard supply service (SSS) to a competitive retailer where the retailer is performing the billing function (retailer consolidated billing), subject to PowerStream s right to use the security deposit to set off other amounts owing by the customer. If the customer moves within the same service area, the deposit and any accrued interest may be transferred to the new address, subject to the next scheduled review. The security deposit shall be returned to the customer within six weeks of the closure of an account PowerStream Inc. will not pay any portion of a customer s security deposit to a competitive retailer.

5 3.5.5 Where all or part of a security deposit was paid by a third party on behalf of the customer, PowerStream shall return to the third party the amount of the security deposit paid by the third party When conducting a review, PowerStream Inc. may adjust the maximum amount of a security deposit where a customer has not yet achieved the conditions of section 3.1 of this document when: there has been a change in either a customer s billing cycle factor or average monthly load or credit rating or the deposit on file does not meet the requirements of this document When conducting a review and where PowerStream Inc. determines that the maximum amount of a security deposit is to be adjusted upward PowerStream Inc. will require the customer to pay this additional amount at the same time as the customer s next regular bill becomes due In the case of a customer in a >5000 kw demand rate class, where the customer is now in a position that it would be exempt from paying a security deposit, based on good payment history (GPH) achieved as per section 3.1: PowerStream Inc. will return 50% of the security deposit held provided the deposit on file is in accordance with the deposit requirements of this document. In a situation where a customer s current deposit is less than 50% of the maximum amount permitted under section 3.2 of this document then the deposit will not be refunded. 3.6 Interest Interest will accrue monthly on security deposits made by way of cash, cheque or money order commencing on receipt of the total deposit required. The rate will be at the Prime Business Rate as published on the Bank of Canada website less 2 percent, updated quarterly. The interest accrued shall be paid out at least once every 12 months or on return or application of the security deposit or closure of the account, whichever comes first, and will be paid by crediting the account of the customer. 3.7 Retailer Prudentials Prudential requirements from retailers will be calculated and collected as defined within section 8 of the Retail Settlement Code (Security Arrangements between Distributors and Retailers).