Regulation - LGIC
Changing Ontario Energy Board's Regulated Price Plan (RPP) Rate Setting Frequency
Regulation Number(s):
95/05
Instrument Type:
Regulation - LGIC
Bill or Act:
Ontario Energy Board Act, 1998
Summary of Decision:
On December 10, 2021, the government filed amendments to Ontario Regulation 95/05: Classes of Consumers and Determination of Rates made under the Ontario Energy Board Act, 1998 associated with the proposal to reduce the frequency of rate setting. The amendments took effect January 1, 2022.
The regulatory amendments to Ontario Regulation 95/05: Classes of Consumers and Determination of Rates were intended to reduce the frequency of Regulated Price Plan (RPP) rate setting from twice per year to once per year to provide RPP consumers greater rate stability. The amendments explicitly direct the Ontario Energy Board (OEB) to reset RPP prices once during each rate year which begins on November 1 of each calendar year, ensuring that the same rates are to remain in effect until October 31st of the following year, subject to certain limited exceptions.
The limited exceptions provided for by the regulatory amendments authorize the OEB to re-set RPP prices more frequently than once per year if the RPP variance account balance established by the Independent Electricity System Operator (IESO) exceeds a pre-determined threshold. The RPP variance account is the account that records the difference between actual RPP supply cost (i.e., the amount that IESO must pay in order to satisfy its obligations to generators in relation to the consumption by RPP consumers) and RPP revenue (i.e., the amounts distributors collect from RPP consumers based on the RPP rates in relation to the consumption by RPP consumers). The threshold level was determined in consultation with the OEB and IESO.
The regulatory amendments to Ontario Regulation 95/05: Classes of Consumers and Determination of Rates were intended to reduce the frequency of Regulated Price Plan (RPP) rate setting from twice per year to once per year to provide RPP consumers greater rate stability. The amendments explicitly direct the Ontario Energy Board (OEB) to reset RPP prices once during each rate year which begins on November 1 of each calendar year, ensuring that the same rates are to remain in effect until October 31st of the following year, subject to certain limited exceptions.
The limited exceptions provided for by the regulatory amendments authorize the OEB to re-set RPP prices more frequently than once per year if the RPP variance account balance established by the Independent Electricity System Operator (IESO) exceeds a pre-determined threshold. The RPP variance account is the account that records the difference between actual RPP supply cost (i.e., the amount that IESO must pay in order to satisfy its obligations to generators in relation to the consumption by RPP consumers) and RPP revenue (i.e., the amounts distributors collect from RPP consumers based on the RPP rates in relation to the consumption by RPP consumers). The threshold level was determined in consultation with the OEB and IESO.
Analysis of Regulatory Impact:
The regulatory amendments are expected to positively impact RPP consumers, electricity providers and regulatory agencies.
‒ RPP consumers (i.e., most households, small businesses and farms) would be impacted positively by having greater rate stability and predictability.
‒ Local Distribution Companies (LDC), who are responsible for billing RPP consumers, would be impacted to the extent that the efficiencies gained from annual rate setting result in cost savings.
‒ The OEB would be required to set rates half as often relative to the status quo and may realize savings through greater efficiencies as a result.
‒ The IESO may be impacted positively to the extent that it may require fewer resources to support LDC RPP consumer settlements.
Generally, the benefits associated with the amendments are difficult to quantify. The amendments would not result in any direct compliance costs to consumers or regulatory agencies, nor is it anticipated to result in any other costs (i.e., to the public or government).
‒ RPP consumers (i.e., most households, small businesses and farms) would be impacted positively by having greater rate stability and predictability.
‒ Local Distribution Companies (LDC), who are responsible for billing RPP consumers, would be impacted to the extent that the efficiencies gained from annual rate setting result in cost savings.
‒ The OEB would be required to set rates half as often relative to the status quo and may realize savings through greater efficiencies as a result.
‒ The IESO may be impacted positively to the extent that it may require fewer resources to support LDC RPP consumer settlements.
Generally, the benefits associated with the amendments are difficult to quantify. The amendments would not result in any direct compliance costs to consumers or regulatory agencies, nor is it anticipated to result in any other costs (i.e., to the public or government).
Further Information:
A link to the amending Regulation
Proposal Number:
21-ENDM016
Posting Date:
August 18, 2021
Summary of Proposal:
In 2005, the Ontario Energy Board (OEB) was provided legislative authority to set and re-set electricity rates in accordance with the Regulations. The regulation (O. Reg. 95/05 (Classes of Consumers and Determination of Rates) prescribe the classes of electricity consumers to be covered by the Board's rate-setting activities, and include (based on consumption and demand levels), residential (including those living in condominium and multi-unit complexes, as well as co-operatives), small business and farming consumers. In due course, the OEB developed the Board's Regulated Price Plan (RPP) and RPP Manuals in order to facilitate this process.
In accordance with Ontario Regulation 95/05 (Classes of Consumers and Determination of Rates) made under the Ontario Energy Board Act, 1998, RPP rates are reviewed by the OEB in the spring and fall and are reset as required to recover the expected cost of electricity supply and conservation measures. An additional adjustment is included in RPP rates to clear the expected balance in the RPP variance account (i.e., the account that holds the difference between actual RPP supply cost and RPP revenue) over a 12-month period.
The proposed regulatory amendments would, if approved, specify that the
OEB would set RPP rates once per year. Specifically, new RPP rates would take effect each November 1st, beginning on November 1, 2021. Seasonal (i.e., summer and winter) time-of-use (TOU) hours as well as the monthly consumption threshold that applies to residential RPP customers paying tiered prices would continue to change each May 1st and November 1st.
If actual RPP supply cost were to differ significantly from forecast, the RPP variance account balance could become quite large over the course of 12- months. To address this possibility, regulatory amendments could provide the OEB the authority to set RPP prices more frequently than once per year if the variance account balance were to exceed a pre-determined threshold. This threshold would be determined in consultation with the OEB to avoid the rate volatility that could occur due to the clearing of large variance account balances.
If this regulatory amendment to O. Reg. 95/05 is approved on a timely basis, the OEB would then be expected to update its RPP Code and RPP Manual, as well as other Codes, such as the Standard Supply Service Code, that may be impacted.
In accordance with Ontario Regulation 95/05 (Classes of Consumers and Determination of Rates) made under the Ontario Energy Board Act, 1998, RPP rates are reviewed by the OEB in the spring and fall and are reset as required to recover the expected cost of electricity supply and conservation measures. An additional adjustment is included in RPP rates to clear the expected balance in the RPP variance account (i.e., the account that holds the difference between actual RPP supply cost and RPP revenue) over a 12-month period.
The proposed regulatory amendments would, if approved, specify that the
OEB would set RPP rates once per year. Specifically, new RPP rates would take effect each November 1st, beginning on November 1, 2021. Seasonal (i.e., summer and winter) time-of-use (TOU) hours as well as the monthly consumption threshold that applies to residential RPP customers paying tiered prices would continue to change each May 1st and November 1st.
If actual RPP supply cost were to differ significantly from forecast, the RPP variance account balance could become quite large over the course of 12- months. To address this possibility, regulatory amendments could provide the OEB the authority to set RPP prices more frequently than once per year if the variance account balance were to exceed a pre-determined threshold. This threshold would be determined in consultation with the OEB to avoid the rate volatility that could occur due to the clearing of large variance account balances.
If this regulatory amendment to O. Reg. 95/05 is approved on a timely basis, the OEB would then be expected to update its RPP Code and RPP Manual, as well as other Codes, such as the Standard Supply Service Code, that may be impacted.
Contact Address:
77 Grenville St, 7th floor
Effective Date:
January 1, 2022
Decision:
Approved