Consultation Session on OPG s Next Application

Transcription

1 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Consultation Session on OPG s Next Application February 8, 2016

2 Agenda Feb. 8 Topic Presenter 8:30-9:00 Arrival and Continental Breakfast 9:00-9:10 Welcome and Introductions 9:10-9:20 Keynote Speaker 9:20-9:25 Agenda and Facilitation 9:25-9:40 Application Overview 9:40-10:20 Regulatory Methodology Overview - Nuclear 10:20-10:45 Break 10:45-11:15 Regulatory Methodology Overview - Hydroelectric 11:15-12:00 Additional Discussion 12:00-1:00 Lunch 1:00-1:30 Key Topic #1 Darlington Refurbishment 1:30-2:00 Key Topic #2 Pickering Life Extension 2:00-2:30 Stakeholder Issues / Discussion / Wrap Up 2:30 Adjourn Andrew Barrett VP, Regulatory Affairs Chris Ginther SVP Legal, Ethics and Compliance Jeffrey Lyash President and CEO Steve Klein OPTIMUS SBR Colin Anderson Director, Ontario Regulatory Affairs Colin Anderson Director, Ontario Regulatory Affairs Randy Pugh Director, Ontario Regulatory Affairs Steve Klein OPTIMUS SBR Gary Rose VP, Planning and Project Controls, Nuclear Projects John Blazanin VP, Strategy and Support Steve Klein OPTIMUS SBR 2

3 Facilitator s Opening Remarks Introductions: Facilitator, Steve Klein and Optimus SBR support team Meeting Facilities Safety and Security Review Note-taking Process Room Configuration / Session Approach 3

4 Session Protocol Mobile phones / Smartphones / PDAs Off or Silenced If necessary, step out of the room to take or make a phone call WiFi access -- Guest_33, no passcode required; select, open browser and accept the terms and conditions No electronic recordings of session proceedings Avoid side discussions while others speaking All questions are good ones All comments are appreciated Everyone will have a chance to be heard Facilitator will moderate session as necessary Materials and notes will be posted on the Ontario Power Generation website at: 4

5 Going Forward Materials and notes will be posted on the Ontario Power Generation website at: Questions? 5

6 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Consultation Session on OPG s Next Application Colin Anderson Director, Ontario Regulatory Affairs Application Overview February 8, 2016

7 Outline Background and Context General Regulatory Approach Going Forward 2

8 Background and Context OPG is planning on filing its next Application to the OEB for new payment amounts for its prescribed Hydroelectric and Nuclear assets in 2016 for the rate period. Expected term for both Nuclear and Hydroelectric is 5 years. Planned filing in April Planning to propose a Rate Smoothing mechanism to address the Nuclear rate impacts, as per O. Reg. 53/05. OPG plans to rebase the Hydroelectric Rates in This Application will respond to OEB direction on special studies, including nuclear and hydroelectric benchmarking, IRM-related studies, compensation and staffing and corporate support benchmarking. 3

9 General Regulatory Approach OPG s Application will employ different regulatory methodologies for Nuclear and Hydroelectric. A multi-year Cost of Service (CoS) methodology (with certain Custom Incentive Regulation elements) will be used for the Nuclear Payment Amounts. OPG plans to include information on costs, benchmarking and productivity improvements. An Incentive Regulation Mechanism (IRM) will be used for the Hydroelectric Payment Amounts. Consistent with price cap index approach. There are more detailed presentations on both Nuclear and Hydroelectric following this Overview. 4

10 Going Forward We plan to have other stakeholder sessions prior to filing the Application. File the Application in April Other presentations will follow today with additional information on some specific topics of interest. Enjoy the Day! 5

11 Questions? 6

12 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Colin Anderson Director, Ontario Regulatory Affairs Consultation Session on OPG s Next Application Regulatory Methodology - Nuclear February 8, 2016

13 Outline Background and Context General Regulatory Approach Key Subjects of Interest Discussion 2

14 Background and Context OPG s Nuclear Application will be on a Cost of Service basis, with certain elements of IR. Consistent with OEB consultation (EB ) Consistent with the OEB s letter of February 17, 2015 Term will be 5 years It considers key elements from the Renewed Regulatory Framework for Electricity Distributors (RRFE): Covers a 5 year period Benchmarking information Productivity information A Nuclear Rate Smoothing mechanism will be proposed to address Nuclear rate impacts, as per O. Reg. 53/05. 3

15 Amendment to O. Reg. 53/05 In late 2015, an amendment was made to O. Reg. 53/05. Deals with Darlington Refurbishment Project and the need for rate smoothing Sets out the requirement for a deferral account to capture differences between the Board approved revenue requirement and the revenue requirement used to set the nuclear rates Prescribes the interest rate that the account balance shall earn Prescribes the timing for recovery of the account balance Establishes the need for the project in light of the LTEP 4

16 Regulatory Constructs OPG s Application considers elements set out in the RRFE. OPG plans to provide 5 years of data using an exhibit structure similar to that used in previous applications OPG s Business Plan will form the basis for its application: 2017/2018 data will be directly from the Business Plan data was gathered at the same time as the Business Plan and on a consistent basis OPG plans to file Nuclear benchmarking consistent with what was done in EB OPG plans to file information on productivity improvements Specific initiatives Stretch Factor (see next slide) 5

17 Regulatory Constructs (cont d) OPG s Application structure will be similar to its previous applications, but with some improvements. Approach to Rate Base and in-service additions is planned to be consistent with OPG s prior Applications Capital information is planned to be consistent with OPG s prior Applications OM&A information is planned to be consistent with OPG s prior Applications, with the addition of a stretch factor Stretch factor represents an up-front sharing of as yet unidentified future productivity gains OPG plans to apply the stretch factor to nuclear base OM&A costs in years 2-5 that are considered more amenable to productivity gains Stretch factor quantum will be linked to benchmarking results Nuclear Liabilities and non-energy revenues will be consistent with OPG s prior Applications D+V Accounts are planned to be cleared as part of this Application 6 OPG intends to propose a mid-term review for production, and possibly D+V account clearance

18 Key Subjects of Interest There will likely be a number of subjects of interest in the Nuclear Application, three of which are as follows. Darlington Refurbishment Project (DRP) The Province has established the need pursuant to the amended O. Reg. 53/05 Government announcement of January 11, 2016 approves OPG s decision to proceed Unit 2 (and associated common costs) will close to rate base in the test period Approvals sought will include OM&A and in-service capital amounts Pickering Extended Operations OPG is planning to operate 6 Pickering units until 2022 and 4 until 2024 Government announcement of January 11, 2016 approves this decision benefit of $400M - $600M for customers Increased OM&A costs during test period Production impacts during test period Approvals sought will include OM&A to extend operations Nuclear Rate Smoothing O. Reg. 53/05 amendment sets out the basis of the rate smoothing approach Essentially, OPG will create a deferral account and will make entries to that account that defer recovery of revenue until a later date to smooth the impact of DRP on rates Carrying cost will apply as set out in regulation Approvals sought will include annual revenue requirement and rates 7

19 Cumulative Account Balance ($Bn) $/MWhr Nuclear Rate Smoothing Illustrative Rates OPG Nuclear Unconstrained Rate Production (MWhr) Illustrative Account Balance

20 Rate Smoothing Example The following example indicates how rate smoothing will work Board Approved Rate Increase Smoothed Rate (2016 Rate = $50/MWh) Board Approved Production Revenue Amount from the Smoothed Rate Board Approved Revenue Requirement Amount entered in Deferral Account Balance in Deferral Account (excluding interest) 10% 10% 10% 10% 10% $1.1x$50 = $55/MWh $1.1x$55 =$60.5/MWh $1.1x$60.50 =$66.55/MWh $1.1x$66.55 =$73.20/MWh $1.1x$73.20 =$80.52/MWh 20 TWh 25 TWh 20 TWh 25 TWh 30 TWh $1100M $1512M $1331M $1830M $2416M $2000M $2000M $2000M $4000M $3000M $900M $488M $669M $2170M $584M $900M $1388M $2057M $4227M $4811M 9

21 Questions and Discussion 10

22 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Consultation Session on OPG s Next Application Regulatory Methodology - Hydroelectric Randy Pugh Director, Ontario Regulatory Affairs February 8, 2016

23 Outline Background and Context Regulatory Approach Proposal Summary I-Factor Proposal Total Factor Productivity Study Questions and Discussion 2

24 Background and Context OPG s Hydroelectric Application will be on an Incentive Regulation basis OPG s approach is consistent with the OEB Consultation (EB ) and the OEB s letter of February 12, OPG reviewed incentive regulation options approved by the OEB, in particular the options defined in the RRFE. OPG determined the default option (Price Cap Index Approach) was the most appropriate. OPG considered the differences between generators and distributors in the application of the Price Cap Index. Cost structure is the main difference, which is addressed in OPG s proposal. 3

25 Proposal Summary (Part 1) RRFE Plan Parameters Base Rate RRFE Price Cap Index Approach (4 th Generation IR) Determined in a forward test year cost of service review. OPG s Proposed methodology Same forward test year cost of service review. Form Price cap index Same Coverage Comprehensive (i.e., capital and OM&A) Same Annual Adjustment Mechanism Role of Benchmarking Sharing of Benefits Inflation: Composite Index. Distribution Industry weighted Labour Index (Ontario AWE) and Non-Labour index (GDP-IPI-FDD). X Factor: Peer group X-factors comprised of: 1) Distribution industry TFP growth potential and (2) a Stretch Factor. To assess reasonableness of cost forecasts and to assign a stretch factor. Stretch factor: 0% to 0.6% based on distributor cost benchmarking study. Inflation: Same. Generation Industry weighted Labour Index (Ontario AWE) and Non-Labour Index (GDP-IPI-FDD). X Factor: Same. Peer group X-factors comprised of: 1) Generation Industry TFP growth potential and (2) a Stretch Factor. Same Same. OPG s hydroelectric benchmarking result is around industry median, suggesting a 0.3% stretch factor. 4

26 Proposal Summary (Part 2) RRFE Plan Parameters RRFE Price Cap Index Approach (4 th Generation IR) OPG s Proposed Methodology Term 5 years (rebasing plus 4 years) Same Incremental Capital Module Treatment of Unforeseen Events On application Policy as per EB Report of the Board on 3 rd Generation IR for Electric LDCs. Same Same. OPG-specific materiality threshold D&V Accounts Status Quo Same. New Cost of Capital Account Performance Reporting and Monitoring Additional Plan Parameters A regulatory review may be initiated if a distributor s annual reports show performance outside of the +/- 300 basis points earnings dead band or if performance erodes to unacceptable measures. N/A Same Cost of Capital: OEB s annual published ROE rate will apply to approved common equity ratio. 5

27 I-Factor Proposal Background: The I factor is intended to reflect inflation trends for the different cost categories. Typical cost categories are: capital and OM&A (labour and non-labour). A composite index is composed of sub-indices for key inputs which reflect the different inflation trends for each cost category. The RRFE and 4 th Generation IRM: The OEB has moved to a composite index based on two sub-indices: Average Weekly Earnings (AWE): Applied to OM&A labour cost category. Canadian Gross Domestic Product Implicit Price Index Final Domestic Demand (GDP-IPI-FDD): Applied to capital cost and OM&A non-labour cost categories. Composite index value determined using distribution industry weighting of sub-indices as OEB determined it was a more reasonable representation for the industry as a whole. OPG s Proposal: Apply the same OEB approved sub-indices in the same manner to the same cost categories The generation industry has a higher capital cost component. Composite index value will reflect the relative cost s for the generation industry using cost share information reflected in the hydroelectric generation industry TFP study. AWE and GDP-IPI-FDD index values was used by the OEB to set 2.1% I-Factor for distributors for Applying generation industry weights to those index values results in a 2% I-Factor for OPG. 6

28 Total Factor Productivity Study Summary of Hydroelectric TFP Study Approach by London Economics Int. (LEI): Historical productivity growth rate trends for the firm and its peers over the long term. Represents total quantity of verifiable/measurable core output(s) of a firm relative to the quantity of all material inputs to production; TFP focuses on quantities, not costs. LEI chose an Index methodology/technique whereby quantities of inputs and outputs are converted into index values. LEI stated that the index approach is most widely used for regulatory purposes due to its transparency, relative simplicity and the OEB s familiarity. Output chosen is production (MWhs) based on TFP studies for generation and OPG s payment structure (paid for net generation). Input is capital (capacity in MW represents productive capacity of assets) and O&M (deflated by input price sub-indices to convert annual expenses to effective quantities). LEI s Hydroelectric Industry TFP Study Results filed with the OEB (December 2014): Approximately negative 1% using 2 methods (average growth and trend regression). Negative TFP trend is expected for a mature hydroelectric business: 1. Output levels should be on average stable over time (given generator design). 2. Capital inputs are largely constant (once a hydroelectric plant is put into service). 3. OM&A likely increases over time in order to maintain the assets operational capability. 7

29 Questions and Discussion? 8

30 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Consultation Session on OPG s Next Application Darlington Refurbishment Project February 8, 2016 Gary Rose Vice President, Planning and Project Controls

31 Darlington Nuclear: A Top Performing Plant In-service early 1990 s, providing over twenty years of clean, reliable power. 4 units, 3,524 MW net output. 20% of Ontario s demand. Power for two million homes. Newest OPG nuclear plant; benefits from earlier designs and lessons learned. Recognized for excellent performance. Plant condition and required scope of work well known. Strong community support. 2

32 Current Status of Project On January 11, 2016, the Province announced that Ontario is moving forward with OPG s refurbishment of the four-unit Darlington GS. OPG has now transitioned the Darlington Refurbishment Project from the Definition to the Execution phase. In the 5-year Definition Phase, OPG performed front end planning activities to gain confidence in the cost and schedule estimate for the 4-unit refurbishment. Obtained all regulatory approvals; Completed scoping and selected contract partners to deliver the scope; Completed design engineering for all modifications; Setup mock-ups to test tooling and cycle times in order to inform the schedule; Established and integrated schedule and full cost estimate; Established the owner s organization and oversight program for the project. 3

33 OPG s Role OPG has ultimate accountability for the safe delivery of the project on time, on budget, and to the required level of quality. OPG is responsible to: Execute the project management role for the refurbishment program. This includes daily management of the integrated safety, cost, schedule, and quality objectives for each project and mitigation of their associated risks. Perform as the design authority for all refurbishment projects, ensuring nuclear safety standards and requirements are met throughout the development, integration, and implementation of multiple vendor designs. Perform design and construction oversight of vendor deliverables, ensuring quality and value for money in the execution of their duties. Perform the contract management function to ensure both OPG and its vendor partners are performing duties in line with defined accountabilities. Ensure safe and efficient integration with the operating units during the execution of the refurbishment project. Interface, communicate, and coordinate with internal and external stakeholders such as the Canadian Nuclear Safety Commission. 4

34 Refurbishment Scope and Vendor Partners Project Vendor Partners High Level Scope Facilities and Infrastructure and Safety Improvement Projects ES Fox, Black & McDonald, SNC Lavalin/Aecon JV Installation of required infrastructure to facilitate refurbishment and extended operations including the completion of regulatory safety improvement scope. Re-tube & Feeder Replacement Turbine Generators Steam Generators Defueling & Fuel Handling Balance of Plant SNC Lavalin/Aecon JV GE Power (Alstom), SNC Lavalin/Aecon JV BWXT, SNC Lavalin (Candu Energy) GE Hitachi, ES Fox ES Fox, Areva, B&W and others Installation of the training reactor mock-up and replacement of reactor tubes and feeders. Inspections, repairs and/or replacements of turbine and generator components and auxiliaries, including control system on certain units. Primary and Secondary Side Cleaning of heat exchangers. Defuel the core and replace/ refurbish and replace select fuelling systems and components. Repair or replace select valves, piping, and systems to accommodate new life expectancy of station. 5

35 4-unit Cost Estimate Build-up The 4-unit cost estimate to complete the refurbishment is $12.8 Billion Forecast Spend to - Date (at Dec 2015) External Vendor Bundle Cost F&IP SIO Execution Oversight & Project Support Ops & Maintenance Insurance Canadian Nuclear Safety Commission (CNSC) Costs Contingency Inflation Interest Total Project Estimate Forecast (Dec 2015) Estimate - to - Complete (ETC) Contingency Inflation Interest 6

36 Schedule and Release Strategy The schedule assumes the first unit outage will commence in Oct with each unit lasting 37 to 40 months. Funding for each unit will be released in phases a 5b Oct 2016 Feb 2020 Unit 2 6a 6b 7a Unit 3 Feb b Unit 1 June a 8b June 2023 Feb 2023 Aug 2024 Unit 4 Mar 2026 Today Start Unit reaches fuel channel end of life - 235,000 Effective Full Power Hours (EFPH) End # Funding Release Number 7

37 In-Service Schedule 2016 Application is aligned with the 4-Unit Cost Estimate (Release Quality Estimate) & Business Case Summary (Q4 2015). Total in-service for DRP, in the 5-year period, is $4.9B including $4.8B in 2020 for the in-service of Unit 2. Early In-Service projects have immediate benefit to station (used or useful). These include: Facilities & Infrastructure projects/ Safety Improvement Opportunities. Core program early in-service amounts. Any variances from OEB approved amounts will be addressed through the Capacity Refurbishment Variance Account. Additionally, there are a total of $127M in OM&A costs in the 5- year period. 8

38 V A L U E S SAFETY I N T E G R I T Y E X C E L L E N C E P E O P L E A N D C I T I Z E N S H I P Consultation Session on OPG s Next Application John Blazanin Vice President, Strategy & Support Pickering Extended Operations February 8, 2016

39 Pickering Nuclear One of the world s largest nuclear generation stations Pickering units 1-4 in-service ( ) Pickering units 5-8 in-service ( ) Pickering Units 2 and 3 have been permanently shut-down and placed in safe storage Currently 6 operating units provide 3,094 MW in net capacity, Approx 14% of Ontario s electricity Enough to serve a city of approximately 1.5 million 2

40 Life Extension Decision Process OPG explored options to extend Pickering in conjunction with the Ministry and the Independent Electricity System Operator (IESO). Preliminary technical assessments showed that Pickering can be safely operated to The proposed option has 6 Pickering nuclear units operating until 2022 and 4 Pickering nuclear units operating until The IESO completed a system impact assessment of ongoing Pickering operation. IESO found that OPG s proposal provides a significant benefit for Ontario s electricity system and customers. On January 11, 2016, the Province publicly announced its approval of OPG s plans to pursue operating the Pickering Nuclear Generating Station to Plans to extend Pickering s life will also require approval from the Canadian Nuclear Safety Commission (CNSC). A formal licence application will be submitted to the CNSC in

41 Pickering Life Extension Preliminary assessments have been undertaken that demonstrate Pickering Life Extension is safe, technically feasible and has significant economic benefits. Estimated incremental expenditures of approximately $300M between 2016 and 2020 would be required to enable Pickering Life Extension. The investment in Pickering will provide about 62 TWh of net incremental output. A funding release of $52M was approved by OPG s Board of Directors to progress the necessary work; Finalize Technical Feasibility studies Complete Periodic Safety Review Complete Component Condition Assessments Submit the CNSC licence application Execute additional outage inspections and maintenance activities in

42 Benefits of Life Extension Extending the Life of Pickering provides benefits that include; Approximately 62 TWh of additional clean, reliable energy supply during the Darlington and initial Bruce refurbishments. Savings of $400M - $600M for customers compared to more expensive alternatives. Avoidance of approximately 18 million tonnes of greenhouse gas emissions. Sustained economic activity in the community. Deferral of cost impacts of Pickering shutdown from 2020 to 2022/24. 5

43 Conclusion Preliminary technical and economic assessments have been undertaken that demonstrate Pickering Life Extension is safe, technically feasible and has significant economic benefits. The proposed option has 6 Pickering nuclear units operating until 2022 and 4 Pickering nuclear units operating until OPG is confident that the new end of life dates can be achieved safely. IESO found that OPG s proposal provides a significant benefit for Ontario s electricity system and customers. The incremental investment of approximately $300M will provide about 62 TWh of clean, reliable energy during nuclear refurbishments. OPG will seek approval from CNSC for Pickering Life Extension through the next licence application process (submission in 2017). OPG will submit a 5 year OEB rate application based on Pickering Life Extension. 6

44 Ontario Energy Board Act, 1998 Loi de 1998 sur la Commission de l énergie de l Ontario ONTARIO REGULATION 53/05 PAYMENTS UNDER SECTION 78.1 OF THE ACT Consolidation Period: From November 27, 2015 to the e-laws currency date. Last amendment: O. Reg. 353/15. This Regulation is made in English only. Definition 0.1 (1) In this Regulation, approved reference plan means a reference plan, as defined in the Ontario Nuclear Funds Agreement, that has been approved by Her Majesty the Queen in right of Ontario in accordance with that agreement; Note: On January 1, 2016, subsection 0.1 (1) of the Regulation is amended by adding the following definitions: (See: O. Reg. 353/15, s. 1) Darlington Refurbishment Project means the work undertaken by Ontario Power Generation Inc. in respect of the refurbishment, in whole or in part, of some or all of the generating units of the Darlington Nuclear Generating Station; deferral period means the period beginning on January 1, 2017, and ending when the Darlington Refurbishment Project ends; nuclear decommissioning liability means the liability of Ontario Power Generation Inc. for decommissioning its nuclear generation facilities and the management of its nuclear waste and used fuel; Note: On January 1, 2016, subsection 0.1 (1) of the Regulation is amended by adding the following definition: (See: O. Reg. 353/15, s. 1) nuclear facilities means the nuclear generation facilities prescribed in paragraphs 3, 4 and 5 of section 2; Ontario Nuclear Funds Agreement means the agreement entered into as of April 1, 1999 by Her Majesty the Queen in right of Ontario, Ontario Power Generation Inc. and certain subsidiaries of Ontario Power Generation Inc., including any amendments to the agreement. O. Reg. 23/07, s. 1. (2) For the purposes of this Regulation, the output of a generation facility shall be measured at the facility s delivery points, as determined in accordance with the market rules. O. Reg. 312/13. s. 1. Prescribed generator 1. Ontario Power Generation Inc. is prescribed as a generator for the purposes of section 78.1 of the Act. O. Reg. 53/05, s. 1. Prescribed generation facilities 2. The following generation facilities of Ontario Power Generation Inc. are prescribed for the purposes of section 78.1 of the Act: 1. The following hydroelectric generating stations located in The Regional Municipality of Niagara: i. Sir Adam Beck I. ii. Sir Adam Beck II. iii. Sir Adam Beck Pump Generating Station. iv. De Cew Falls I. v. De Cew Falls II. 2. The R. H. Saunders hydroelectric generating station on the St. Lawrence River. 3. Pickering A Nuclear Generating Station. 4. Pickering B Nuclear Generating Station. 5. Darlington Nuclear Generating Station. 1

45 6. As of July 1, 2014, the generation facilities of Ontario Power Generation Inc. that are set out in the Schedule. O. Reg. 53/05, s. 2; O. Reg. 23/07, s. 2; O. Reg. 312/13, s. 2. Prescribed date for s (2) of the Act 3. April 1, 2008 is prescribed for the purposes of subsection 78.1 (2) of the Act. O. Reg. 53/05, s REVOKED: O. Reg. 312/13, s. 3. Deferral and variance accounts 5. (1) Ontario Power Generation Inc. shall establish a variance account in connection with section 78.1 of the Act that records capital and non-capital costs incurred and revenues earned or foregone on or after April 1, 2005 due to deviations from the forecasts as set out in the document titled Forecast Information (as of Q3/2004) for Facilities Prescribed under Ontario Regulation 53/05 posted and available on the Ontario Energy Board website, that are associated with, (a) differences in hydroelectric electricity production due to differences between forecast and actual water conditions; (b) unforeseen changes to nuclear regulatory requirements or unforeseen technological changes which directly affect the nuclear generation facilities, excluding revenue requirement impacts described in subsections 5.1 (1) and 5.2 (1); (c) changes to revenues for ancillary services from the generation facilities prescribed under section 2; (d) acts of God, including severe weather events; and (e) transmission outages and transmission restrictions that are not otherwise compensated for through congestion management settlement credits under the market rules. O. Reg. 23/07, s. 3. (2) The calculation of revenues earned or foregone due to changes in electricity production associated with clauses (1) (a), (b), (d) and (e) shall be based on the following prices: 1. $33.00 per megawatt hour from hydroelectric generation facilities prescribed in paragraphs 1 and 2 of section $49.50 per megawatt hour from nuclear generation facilities prescribed in paragraphs 3, 4 and 5 of section 2. O. Reg. 23/07, s. 3. (3) Ontario Power Generation Inc. shall record simple interest on the monthly opening balance of the account at an annual rate of 6 per cent applied to the monthly opening balance in the account, compounded annually. O. Reg. 23/07, s. 3. (4) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records non-capital costs incurred on or after January 1, 2005 that are associated with the planned return to service of all units at the Pickering A Nuclear Generating Station, including those units which the board of directors of Ontario Power Generation Inc. has determined should be placed in safe storage. O. Reg. 23/07, s. 3. (5) For the purposes of subsection (4), the non-capital costs include, but are not restricted to, (a) construction costs, assessment costs, pre-engineering costs, project completion costs and demobilization costs; and (b) interest costs, recorded as simple interest on the monthly opening balance of the account at an annual rate of 6 per cent applied to the monthly opening balance in the account, compounded annually. O. Reg. 23/07, s REVOKED: O. Reg. 312/13, s. 3. Nuclear liability deferral account 5.2 (1) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records, on and after the effective date of the Board s first order under 78.1 of the Act, the revenue requirement impact of changes in its total nuclear decommissioning liability between, (a) the liability arising from the approved reference plan incorporated into the Board s most recent order under section 78.1 of the Act; and (b) the liability arising from the current approved reference plan. O. Reg. 23/07, s. 3. (2) Ontario Power Generation Inc. shall record interest on the balance of the account as the Board may direct. O. Reg. 23/07, s REVOKED: O. Reg. 312/13, s. 3. Nuclear development variance account 5.4 (1) Ontario Power Generation Inc. shall establish a variance account in connection with section 78.1 of the Act that records, on and after the effective date of the Board s first order under section 78.1 of the Act, differences between actual non-capital costs incurred and firm financial commitments made and the amount included in payments made under that section for planning and preparation for the development of proposed new nuclear generation facilities. O. Reg. 27/08, s. 1. 2

46 (2) Ontario Power Generation Inc. shall record interest on the balance of the account as the Board may direct. O. Reg. 27/08, s. 1. Note: On January 1, 2016, the Regulation is amended by adding the following section: (See: O. Reg. 353/15, s. 2) Darlington refurbishment rate smoothing deferral account 5.5 (1) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records, on and after the commencement of the deferral period, the difference between, (a) the revenue requirement amount approved by the Board that, but for subparagraph 12 i of subsection 6 (2) of this Regulation, would have been used in connection with determining the payments to be made under section 78.1 of the Act each year during the deferral period in respect of the nuclear facilities; and (b) the portion of the revenue requirement amount referred to in clause (a) that is used in connection with determining the payments made under section 78.1 of the Act, after determining, under subparagraph 12 i of subsection 6 (2) of this Regulation, the amount of the revenue requirement to be deferred for that year in respect of the nuclear facilities. O. Reg. 353/15, s. 2. (2) Ontario Power Generation Inc. shall record interest on the balance of the account at a long-term debt rate reflecting Ontario Power Generation Inc. s cost of long-term borrowing that is determined or approved by the Board from time to time, compounded annually. O. Reg. 353/15, s. 2. Rules governing determination of payment amounts by Board 6. (1) Subject to subsection (2), the Board may establish the form, methodology, assumptions and calculations used in making an order that determines payment amounts for the purpose of section 78.1 of the Act. O. Reg. 53/05, s. 6 (1). (2) The following rules apply to the making of an order by the Board that determines payment amounts for the purpose of section 78.1 of the Act: 1. The Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the variance account established under subsection 5 (1) over a period not to exceed three years, to the extent that the Board is satisfied that, i. the revenues recorded in the account were earned or foregone and the costs were prudently incurred, and ii. the revenues and costs are accurately recorded in the account. 2. In setting payment amounts for the assets prescribed under section 2, the Board shall not adopt any methodologies, assumptions or calculations that are based upon the contracting for all or any portion of the output of those assets. 3. The Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the deferral account established under subsection 5 (4). The Board shall authorize recovery of the balance on a straight line basis over a period not to exceed 15 years. 4. The Board shall ensure that Ontario Power Generation Inc. recovers capital and non-capital costs, and firm financial commitments incurred to increase the output of, refurbish or add operating capacity to a generation facility referred to in section 2, including, but not limited to, assessment costs and pre-engineering costs and commitments, Note: On January 1, 2016, paragraph 4 of subsection 6 (2) of the Regulation is amended by striking out the portion before subparagraph i and substituting the following: (See: O. Reg. 353/15, s. 3 (1)) 4. The Board shall ensure that Ontario Power Generation Inc. recovers capital and non-capital costs and firm financial commitments incurred in respect of the Darlington Refurbishment Project or incurred to increase the output of, refurbish or add operating capacity to a generation facility referred to in section 2, including, but not limited to, assessment costs and pre-engineering costs and commitments, i. if the costs and financial commitments were within the project budgets approved for that purpose by the board of directors of Ontario Power Generation Inc. before the making of the Board s first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., or ii. if the costs and financial commitments were not approved by the board of directors of Ontario Power Generation Inc. before the making of the Board s first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., if the Board is satisfied that the costs were prudently incurred and that the financial commitments were prudently made. 4.1 The Board shall ensure that Ontario Power Generation Inc. recovers the costs incurred and firm financial commitments made in the course of planning and preparation for the development of proposed new nuclear generation facilities, to the extent the Board is satisfied that, i. the costs were prudently incurred, and ii. the financial commitments were prudently made. 3

47 5. In making its first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., the Board shall accept the amounts for the following matters as set out in Ontario Power Generation Inc. s most recently audited financial statements that were approved by the board of directors of Ontario Power Generation Inc. before the effective date of that order: i. Ontario Power Generation Inc. s assets and liabilities, other than the variance account referred to in subsection 5 (1), which shall be determined in accordance with paragraph 1. ii. Ontario Power Generation Inc. s revenues earned with respect to any lease of the Bruce Nuclear Generating Stations. iii. Ontario Power Generation Inc. s costs with respect to the Bruce Nuclear Generating Stations. 6. Without limiting the generality of paragraph 5, that paragraph applies to values relating to, i. capital cost allowances, ii. the revenue requirement impact of accounting and tax policy decisions, and iii. capital and non-capital costs and firm financial commitments to increase the output of, refurbish or add operating capacity to a generation facility referred to in section The Board shall ensure that the balance recorded in the deferral account established under subsection 5.2 (1) is recovered on a straight line basis over a period not to exceed three years, to the extent that the Board is satisfied that revenue requirement impacts are accurately recorded in the account, based on the following items, as reflected in the audited financial statements approved by the board of directors of Ontario Power Generation Inc., i. return on rate base, ii. depreciation expense, iii. income and capital taxes, and iv. fuel expense. 7.1 The Board shall ensure the balance recorded in the variance account established under subsection 5.4 (1) is recovered on a straight line basis over a period not to exceed three years, to the extent the Board is satisfied that, i. the costs were prudently incurred, and ii. the financial commitments were prudently made. 8. The Board shall ensure that Ontario Power Generation Inc. recovers the revenue requirement impact of its nuclear decommissioning liability arising from the current approved reference plan. 9. The Board shall ensure that Ontario Power Generation Inc. recovers all the costs it incurs with respect to the Bruce Nuclear Generating Stations. 10. If Ontario Power Generation Inc. s revenues earned with respect to any lease of the Bruce Nuclear Generating Stations exceed the costs Ontario Power Generation Inc. incurs with respect to those Stations, the excess shall be applied to reduce the amount of the payments required under subsection 78.1 (1) of the Act with respect to output from the nuclear generation facilities referred to in paragraphs 3, 4 and 5 of section In making its first order under section 78.1 of the Act in respect of Ontario Power Generation Inc. that is effective on or after July 1, 2014, the following rules apply: i. The order shall provide for the payment of amounts with respect to output that is generated at a generation facility referred to in paragraph 6 of section 2 during the period from July 1, 2014 to the day before the effective date of the order. ii. The Board shall accept the values for the assets and liabilities of the generation facilities referred to in paragraph 6 of section 2 as set out in Ontario Power Generation Inc. s most recently audited financial statements that were approved by the board of directors before the making of that order. This includes values relating to the income tax effects of timing differences and the revenue requirement impact of accounting and tax policy decisions reflected in those financial statements. O. Reg. 23/07, s. 4; O. Reg. 27/08, s. 2; O. Reg. 312/13, s. 4. Note: On January 1, 2016, subsection 6 (2) of the Regulation is amended by adding the following paragraph: (See: O. Reg. 353/15, s. 3 (2)) 12. For the purposes of section 78.1 of the Act, in setting payment amounts for the nuclear facilities during the deferral period, i. the Board shall determine the portion of the Board-approved revenue requirement for the nuclear facilities for each year that is to be recorded in the deferral account established under subsection 5.5 (1), with a view to making more stable the year-over-year changes in the payment amount that is used in the determination of the undeferred payments made under section 78.1 of the Act with respect to the nuclear facilities, 4

48 ii. the Board shall determine the approved revenue requirements referred to in subsection 5.5 (1) and the amount of the approved revenue requirements to be deferred under subparagraph i on a five-year basis for the first 10 years of the deferral period and, thereafter, on such periodic basis as the Board determines, iii. for greater certainty, the Board s determination of Ontario Power Generation Inc. s approved revenue requirement for the nuclear facilities shall not be restricted by the yearly changes in payment amounts in subparagraph i, iv. the Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the deferral account established under subsection 5.5 (1), and the Board shall authorize recovery of the balance on a straight line basis over a period not to exceed 10 years commencing at the end of the deferral period, and v. the Board shall accept the need for the Darlington Refurbishment Project in light of the Plan of the Ministry of Energy known as the 2013 Long-Term Energy Plan and the related policy of the Minister endorsing the need for nuclear refurbishment. 7. OMITTED (PROVIDES FOR COMING INTO FORCE OF PROVISIONS OF THIS REGULATION). O. Reg. 53/05, s Abitibi Canyon. 2. Alexander. 3. Aquasabon. 4. Arnprior. 5. Auburn. 6. Barrett Chute. 7. Big Chute. 8. Big Eddy. 9. Bingham Chute. 10. Calabogie. 11. Cameron Falls. 12. Caribou Falls. 13. Chats Falls. 14. Chenaux. 15. Coniston. 16. Crystal Falls. 17. Des Joachims. 18. Elliott Chute. 19. Eugenia Falls. 20. Frankford. 21. Hagues Reach. 22. Hanna Chute. 23. High Falls. 24. Indian Chute. 25. Kakabeka Falls. 26. Lakefield. 27. Lower Notch. 28. Manitou Falls. 29. Matabitchuan. 30. McVittie. SCHEDULE 5

49 31. Merrickville. 32. Meyersberg. 33. Mountain Chute. 34. Nipissing. 35. Otter Rapid. 36. Otto Holden. 37. Pine Portage. 38. Ragged Rapids. 39. Ranney Falls. 40. Seymour. 41. Sidney. 42. Sills Island. 43. Silver Falls. 44. South Falls. 45. Stewartville. 46. Stinson. 47. Trethewey Falls. 48. Whitedog Falls. 6