Proposed Amendment to O. Reg. 53/05 (Payments under Section 78.1 of the Act), made under the Ontario Energy Board Act, 1998
Regulation - LGIC
Bill or Act:
Ontario Energy Board Act, 1998
Summary of Proposal:
The Ontario Energy Board (OEB) approves the rates Ontario Power Generation (OPG) receives for the electricity generated from its regulated facilities, which include the Darlington and Pickering Nuclear Generating Stations and 54 hydroelectric generating stations across Ontario.
The rates are established in accordance with s.78.1 of the Ontario Energy Board Act, 1998 and Ontario Regulation 53/05 (Payments Under Section 78.1 of the Act). The rates allow OPG to recover OEB-approved costs over a given rate-setting period.
In 2020, OPG is expected to file an application with the OEB to set its nuclear and hydroelectric rates for the 2022-2026 period.
This five-year period is expected to include the shutdown of Pickering Nuclear Generating Station, which is expected to occur in the 2024-2025 period. The closure of the station would lead to one-time costs for OPG including employee severance and transition (e.g., retraining and redeployment).
The Ministry of Energy, Northern Development and Mines is proposing to amend Ontario Regulation 53/05 to provide certainty for electricity rate payers, reduce the regulatory costs of the application and enhance regulatory efficiency.
The amendments would:
1. Set OPG's hydroelectric rate for 2022-26 at the 2021 rate. The rate is estimated to be $43.79/MWh but is anticipated to be set by the OEB in late 2020.
2. Require OPG to establish a deferral account where it would track incurred costs associated with the shutdown of Pickering Nuclear Generating Station. OPG would be required to seek OEB approval to recover those costs from electricity rates in a rate-setting period after the 2022-2026 period. OPG would only be able to collect incurred costs that are approved by the OEB through a prudency review.
The proposed amendments would help provide for stable hydroelectric rates over the next five years, providing value to electricity customers. Setting the hydroelectric rate in regulation would lead to regulatory savings for OPG that could be passed on to customers.
Creating a deferral account for costs associated with the shutdown of Pickering Nuclear Generating Station would allow OPG to track the costs as they are incurred. Projected costs that have not yet crystalized would not be included in OPG's 2022-2026 nuclear revenue requirement. At this time, these costs are uncertain and based on assumptions which may change as OPG implements its plan to close Pickering Nuclear Generating Station. The OEB would review all incurred costs as part of a robust and transparent prudency review for recovery in a future rate period (i.e., after Pickering Nuclear Generating Station is shut down).
Analysis of Regulatory Impact:
Making these changes in regulation would reduce the scope and cost of OPG's 2022-26 rate application. This would create cost savings for OPG that could be passed on to electricity customers. This would allow OPG, the OEB and interested parties to focus on other parts of OPG's application.
No other businesses are impacted by the proposal.
March 23, 2020
Comments Due Date:
June 22, 2020
77 Grenville Street, 6th Floor
Toronto, ON M7A 2C1
Extended to June 22.