SUMMARY OF BOARD DIRECTIVES AND UNDERTAKINGS FROM PREVIOUS PROCEEDINGS

Transcription

1 Filed: September, 006 EB Page of 7 SUMMARY OF BOARD DIRECTIVES AND UNDERTAKINGS FROM PREVIOUS PROCEEDINGS This exhibit identifies chronologically, in Tables through below, Board directives to Hydro One from previous proceedings -- the transitional Rate Decision for Hydro One s Business (RP ), Hydro One s Cost Allocation and Rate Design (RP ), the Board s Phase One Policy Decision respecting revisions to the System Code (RP-00-00), and the Board s Decisions regarding Hydro One s Ottawa Lines Upgrade (RP /EB-00-00) and the Niagara Reinforcement Project (EB ). 6 7 In addition, due to elements which are common to both of Hydro One s and Distribution businesses, certain directives and undertakings arising from the reviews of Hydro One s unbundled Distribution rates for 000 (RP /EB ) and Distribution rates for 006 (RP /EB ) are also considered applicable to Hydro One s Business. These accordingly, are provided in Tables 6 and Each table also indicates the Exhibit number in this Application in which Hydro One s evidence responds to the Board directives or the response itself. Table Board Directives from Proceeding RP Asset Assignment Asset Condition Assessment The Board expects OHSC to file evidence concerning the appropriateness of the asset assignment in OHSC s next rate application. The Board expects future applications from OHSC will provide more detailed asset condition studies and supporting analyses which justify that the capital included in its proposed cost of service is the most appropriate course of action with respect to ratepayer interests. Exhibit D, Tab, Schedule Exhibit D, Tab,

2 Filed: September, 006 EB Page of 7 (v) (vi) (vii) (viii) (ix) Lead-Lag Study Materials and Supplies Amounts Work Prioritization Corporate Cost Allocation Methodology Overhead Cost Allocation Depreciation Study Working Group with Board Staff While the Board will accept the balance sheet approach at this time subject to the adjustments set forth, it expects OHSC to develop a lead-lag study in preparation for its next rates hearing. OHSC is directed to track the Materials and Supplies accounts with a view to providing monthly balances as part of its next application for rates to adequately reflect the usage of these working capital components throughout the year. In the Board s view, OHSC needs to prioritize its OM&A programs so that it carries out those programs deemed to be most critical to the reliable operation of the transmission system. The Board expects OHSC to provide more substantial support for its Corporate Services costs and allocation methodology. This would include detailed support of the overhead costs, historical data and work papers detailing projected costs for the rate period. In addition, industry approved and commonly implemented drivers should be developed using historical measures. The Board believes that OHSC should adopt a consistent approach to allocating overhead costs to distribution and transmission in order to ensure that customers of transmission and distribution pay a fair share of the costs associated with the services received by these respective business units. Therefore, in subsequent applications, the Board expects the Company to adopt a consistent allocation methodology to be used by NAM [Network Asset Management] and Network Services. OHSC should also be prepared, in the next rate application, to provide the rationale and justification for the approach selected. The Board expects OHSC to provide an independent depreciation study similar to those which are performed by the natural gas utilities, which will address, among other things, those items set out at paragraph 7.. of the Board s HR 9 Report to the Minister. The Board s findings on various aspects of OHSC s application reflect its concerns with the inadequate support and analysis of the transmission and distribution cost submissions provided by OHSC. To resolve these concerns prior to any future transmission or distribution rate applications, the Board requires OHSC to form a working group with Board Staff to develop appropriate filing requirements in advance of the OHSC s next comprehensive rate application. Once the Board has accepted the working group s report on the filing requirements and a schedule for OHSC to meet these requirements, the Board expects future applications to meet these requirements. Exhibit D, Tab, Schedule Exhibit D, Tab, Schedule 6 Tab, Schedule (It should be noted that Networks Services is no longer an active company). Tab 6, Schedules Board Staff Consulted and Stakeholder Consultation included discussion of rate filing Tab 6,

3 Filed: September, 006 EB Page of 7 Table Board Directives from Proceeding RP Cost Allocation Definition of Line Pool The Board expects the Company to identify any changes that it wishes to make to its cost allocation methodology as approved by the Board in this Decision. [At the next cost allocation review] the Board expects OHNC to reconsider the definition of the line connection pool and either propose a modified definition, or be prepared to provide satisfactory reasons if it proposes to continue with the current definition. Exhibit G, Tab, Exhibit G, Tab, ; (v) Customer Buy-out of Existing Assets Definition of a Customer Treatment of New Load Investment The Board expects OHNC to clarify its policy in this regard to report at its next cost allocation / rate design proceeding. The Board therefore directs OHNC to adopt its preferred long term definition upon market opening. A transmission customer shall be defined as being connected directly to the transmission system. It is therefore important that OHNC adopt a costing policy for connections that represents fully allocated costing. Once the guidelines regarding load connection investments are prepared in a form consistent with the System Code, the Board expects OHNC to make them available to load customers on request. Second, there should be a target date established by OHNC for the elimination of the OHNC-provided option. Third, OHNC should take steps to encourage competition. Hydro One complies with the revised System Code, issued July, 00 This definition has been used in current rate schedules; assumed throughout this Application. Tab, Hydro One complies with the revised System Code, issued July, 00

4 Filed: September, 006 EB Page of 7 (vi) Export and Wheeling Through Tariffs In this regard, the Board notes that the resolution of the dual function definition of network lines is critical to the full development of the competitive market for line connection facilities. The Board expects OHNC to report on these matters at its next cost allocation/rate design proceeding. The Board emphasizes the interim nature of this decision [approving a fixed charge of $/MWh], and directs OHNC to monitor and report to the Board at OHNC s next main rates case on the functioning of the EWT market and developments in interconnected jurisdictions and whether the interim tariff should be reviewed. Exhibit G, Tab, Exhibit H, ; Exhibit H, Table Board Directives from Proceeding RP Classification of Local Loops Costing of Facilities This classification issue as well as the issues outlined in Appendix B of the Facilitator s Report, should be addressed in a proceeding prior to or at the next cost allocation and rate design proceeding. The principle of costing of facilities, for the purpose of submission to a connecting load customer or a generator, should be on the same basis as the eventual cost of that facility when it enters the transmitter s rate base. Of particular concern is any tendency for the transmitter to use varying methodologies in establishing the structure of its costs. The determination of the relative weighting and constituent elements of the cost structure should be the subject of more detailed considerations. The process should result in a single consistent model to be used in all circumstances. Such a costing approach must be based on allocating the appropriate direct and indirect overheads to the facilities and will be determined in a proceeding prior to or at the next cost allocation and rate design proceeding. Exhibit G, Tab, Tab, Hydro One complies with the revised System Code, issued July, 00

5 Filed: September, 006 EB Page of Table Board Directives from Proceeding RP /EB Line Classification The classification of these assets may be reconsidered by the Board in a future proceeding. If such reclassification occurs, Hydro One should reevaluate the economics of the project, particularly the amount of contributions required from Hydro Ottawa. Table Board Directives from Proceeding EB Exhibit G, Tab, Rate Recovery of the Niagara Reinforcement Project This decision cannot be taken as a finding that the costs of the Project are appropriately recovered from ratepayers. Hydro One will have to demonstrate this when seeking to recover those costs in the future. Table 6 Undertakings from Settlement Agreement for Proceeding RP Corporate Structure Internal Organization Plans for Separation Affiliate Transactions Exhibit D, Tab, Schedule, Appendix A Directive Reference The corporate structure of the Hydro One group of companies. Tab 7, The internal organization of Networks and its various lines of business, including transmission, distribution and any non-utility or contestable activities (including the miscellaneous services and external recoverable work referred to at the evidence cited above). Any plans in respect of "separation" (from the utility company) or discontinuance (by the utility company) of any non-utility or contestable activities (including the miscellaneous services and external recoverable work referred to at the evidence cited above). A listing of transactions between Networks and its affiliates, which includes the following information: a. A list of the affiliates to which the utility provides or from which the utility procures services, or with which the utility shares Tab 7, There are no current plans for separation of services Tab 8,

6 Updated: February, 007 EB Page 6 of 7 services. Directive b. A general description of the services provided, procured or shared. A description of the methodology used to cost, set transfer prices for, or derive non-utility eliminations for any such services. Reference Tab 8, Tab, Schedule (v) Incorporation of Stakeholder Input Networks further agrees to consider suggestions provided by interested parties in respect of the presentation and content of the evidence to address the matters listed above, in an effort to ensure a proper evidentiary basis for determination of these issues. Tab 6, Table 7 Board Directives from Proceeding RP /EB Compensation Costs Benchmarking The Board expects Hydro One to identify what steps the company has taken or will take to reduce labour rates. The Board expects Hydro One to file appropriate evidence in the next main rates case to establish that none of the incentive compensation should be charged to the shareholder. The Board directs Hydro One to engage an independent party to develop a list of comparable North American companies with similar business models (transmission and/or distribution) and to report on high level comparative performance and cost information for Hydro One and these companies. In future rate cases, this information may assist with determination of areas for a more comprehensive benchmarking review. Hydro One will want to consult with intervenors regarding the scope of the study. On best effort basis, Hydro would also submit the report as part of its transmission rates application for 007. In addition, the Board directs Hydro One to engage an independent party to develop a comparison of labour rates and overtime policies amongst Hydro One, other comparative Ontario electricity distributors and other Canadian utilities as identified in the high level benchmarking study. This independent study should also be submitted as part of Hydro One s next main applications for distribution and transmission rates. Tab, Exhibit J, Tab, Schedule 9 Tab 6,

7 Updated: February,007 EB Page 7 of 7 Allocation of Common Costs The Board also considers it reasonable for the Company to employ the Rudden methodology in the pending transmission case. Allowance for Funds Used During Construction The Board, therefore directs Hydro One to recalculate the AFUDC using a rate of 6.%, which is the Company s blended long-term debt rate. Exhibit D, Tab, Table 8 Board Directive from Proceeding EB Disposition of Excess Earnings In view of the above, and in view of the Board s finding below that there shall be a 0:0 split of excess earnings between the shareholder and the ratepayers, the Board does not accept Hydro One s contributed capital proposal, but agrees that Hydro One may, if it wishes, bring this matter forward at the time of the disposition of excess earnings for 006, as an alternate method of disposition.,