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October 31, 2012 Webcast

Renewed Regulatory Framework for Electricity Distributors - Q&A

The audio portion of the meeting will be delivered via phone. To access

the conference line call:

Toll: +1 (416) 406-1280 or

Toll free: +1 (866) 832-4446

Access number: 2812741

During the webcast, please submit questions by clicking on the ‘Chat’ icon at the top of your screen.

Renewed Regulatory Framework for Electricity DistributorsImplementation of the Board’s PoliciesOctober 31, 2012 Webcast

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Overview of Webcast

• Purpose of today’s session:– To give stakeholders an opportunity to ask Board staff clarifying questions so as to

help better inform understanding of the new framework and participation in the consultations scheduled throughout the fall and winter.

• Agenda:– For each topic, staff will briefly discuss planned consultations and respond to your

questions:1. Performance Measurement & Continuous Improvement;

2. Distribution Network Investment Planning;

3. Regional Infrastructure Planning;

4. Development of the Smart Grid; and

5. Electricity Distribution Rate Setting.

• All materials related to these consultations, including working groups, will be posted on the Board’s web site at www.ontarioenergyboard.ca as they become available.

Please submit your questions at any time during the presentation by clicking on the ‘Chat’ icon at the top of your screen.

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Summary of all planned consultation activities

Target

Infrastructure investment planning The outcome based framework Electricity distribution rate-setting

Distribution Investment Smart Grid Regional Performance

Benchmarking & Rate Adjustment Indices

2012

October

Working groups (WG) established Working group (WG) established

Web-cast on Report & next steps

November Staff proposal issued

Working group meetings Data issued

Staff proposal issued Consultant paper issued

December WG meetings WG Reports issued Stakeholder meeting

WG meetings

2013

January Supplementary report issued

WG meetings

Data validation due

Staff proposal issued

WG meetings

February

WG meetings Proposed TSC/DSC amendments issued

WG meetings

Consolidated capital planning filing requirements issued

March Staff Report issued Consultant report issued

April TSC/DSC amended Stakeholder meeting Stakeholder conference

May Written comments due

June Supplemental Report of the Board & Consultant final report issued (incl. rate adjustment indices & filing guidelines)

July Proposed RRR amendments issued Stretch factors assigned

Performance Measurement & Continuous ImprovementImplementation of the Board’s PoliciesOctober 31, 2012 Webcast

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Performance - Planned consultation activities

• Guided by the Board’s principles for performance measurement (p. 59 in Report)

• Proposals will provide a springboard for discussions and focus the work on the matters to be addressed (pp. 63-65 in Report):

– assessing performance outcomes;– effective planning & implementation;– regulatory reporting (including scorecard); and– benchmarking (including total cost benchmarking, inflation, and productivity).

• A broad stakeholder meeting will be held to inform and generate ideas prior to convening the working group.

• Working group analysis will detail issues and review and evaluate proposals.

• The group’s work will be documented and will form part of a Staff Report.

• Broad stakeholder consultation events followed by written comments will inform the Board’s determinations.

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Performance - Future consultation

• Existing regulatory mechanisms will be maintained/refined.

• Additional regulatory mechanisms may be necessary, and further consultation planned in due course on: – the establishment of an “efficiency carry-over” mechanism;– development of incentives to:

• reward superior performance;• encourage innovation;• encourage asset optimization; and

– potential consequences for inferior performance.

• The development of these regulatory mechanisms will be aligned with the standards and measures referred to above.

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Performance – summary of planned consultation activities

Target

The outcome based framework

Electricity distribution rate-setting Performance

Benchmarking & Rate Adjustment Indices

2012

October Working group established

November Data issued

Staff proposal issued Consultant paper issued

December Stakeholder meeting

Working group meetings

2013

January Working group meetings Data validation due

February Working group meetings

March Staff Report issued Consultant report issued

April Stakeholder meeting Stakeholder conference

May Written comments due

June Supplemental Report of the Board & Consultant final report issued (incl. rate adjustment indices & filing guidelines)

July Proposed RRR amendments issued Stretch factors assigned

Distribution Network Investment Planning

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Distribution network investment planning – implementation tasks

• Implementing the Board’s conclusions on matters related to distribution network investment planning requires identifying and developing:

– the types and characteristics of distributor planning information needed to reflect an integrated, longer term planning approach;

– the planning-related information on asset management and investment planning practices that best enables robust regulatory assessment; and

– the qualitative and quantitative information that best supports and justifies investment proposals in order to facilitate the Board’s assessment.

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Distribution network investment planning – working group scope of work

• advise staff on– consolidating information on ‘capital expenditures’– enhancing and standardizing distributor asset

management information– identifying and specifying appropriate investment

planning information, including on how investments proposed for cost recovery have been optimized, prioritized and paced

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Distribution network investment planning – implementation goals

• advice to staff will inform the next revision of the Board’s filing requirements:– consolidated and harmonized Filing Requirements on

capital expenditures currently provided in:• Filing Requirements for Transmission and Distribution

Applications (ie. Chapter 2); and• Filing Requirements: Distribution System Plans – Filing under

Deemed Conditions of Licence (ie. GEA/smart grid plans).

– enhanced Filing Requirements (with guidance) on information related to asset management, capital plans and investment planning

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Distribution network investment planning - Working Group Timeline

2012  

November

Staff proposal for working group discussioninformation and guidance:

asset management; consolidated capital plans

December working group meetings

2013  

January

Staff proposal for working group discussioninformation and guidance:

integrated planning; tools and methods

working group meetings

Februaryworking group meeting

Filing requirements and guidance issued

Regional Infrastructure Planning

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Regional Infrastructure Planning - Working Group Process

• Two working groups will be convened. . .

1. More structured regional infrastructure planning process

Board expects working group report to reflect:• More structured approach requires assigning lead responsibility

– Merit in appropriate transmitter taking lead and working with OPA to identify where CDM / DG options represent potential solutions

• Predetermined regions based on electrical system boundaries to form foundation for process and so LDCs understand resident regions

– Board suggests IESO zones as starting point

• Protocols for sharing information among relevant parties• LDCs expected to participate in process

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Regional Infrastructure Planning - Working Group Process

1. More structured regional planning process (cont’d)

Key elements to be addressed in working group report:• Information LDCs should be required to provide to transmitter

and frequency information updated;

• Appropriate evaluative criteria to compare potential solutions;

• Circumstances under which OPA should participate;

• Form of broader consultation before regional plan finalized;

• Appropriate regional boundaries and criteria to establish them; and

• Other key elements working group believes should be addressed to facilitate move to more structured process

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Regional Infrastructure Planning - Working Group Process

2. Appropriate redefinition of Line Connection assets

Working group expected to: • Develop criteria for Line Connection asset redefinition purposes • Identify assets that meet proposed criteria

Working group input must take into account: • Function asset performs • Reflect beneficiary pays principle • Consider frequency Line Connections reviewed to ascertain function(s)

providing for future transmission rate proceedings

Once working group completed, Board to propose amendments integrating new treatment of applicable Line Connections

Changes apply on go forward basis (only future upgrades after amendment into force)

• Avoids retroactive changes in cost allocation / rates • Only future upgrades potential to affect regional plan execution

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Regional Infrastructure Planning - Board Process

• Changes effected through code amendment process

• Opportunity for broad stakeholder input

• Proposed code amendments informed by working group reports to Board

• All proposed code amendments in one notice with same

implementation date given interconnected nature of cost responsibility changes – Redefinition of Line Connection assets – TSC cost responsibility rule changes (i.e., Otherwise Planned and Refund

Issue)

• Code amendment process may also address some regional planning process matters that have been identified by the working group

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Regional Infrastructure Planning - Timelines

2012  

November/December

Working Group meetings & reports

2013  

February Proposed Code amendments issued

April Final Code amendments issued

June/July Board expects Code amendments come into force

Development of the Smart Grid

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Development of the Smart Grid

• Board has determined:– For rate-setting, no distinction between “smart grid”

and more traditional investments; and– Behind-the-meter services are a non-utility activity.

• All other issues to be addressed in a Supplementary Report

• Smart Grid Working Group to reconvene to develop appropriate regulatory documents

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Smart Grid Working Group

• Smart Grid Working Group to be reconvened for meetings in November

• SGWG previously met six times in the Spring of 2011– 26 members representing:

• Distributors;• Vendors;• Consumer groups; and • Agencies.

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Smart Grid Working Group

• SGWG will be asked to advise on:

– Staff proposals on content for regulatory documents e.g.;• recognition of benefits• Interoperability

– How best to address cyber-security and privacy; and

– How best to facilitate consumer access to meter data.

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Development of the Smart Grid - Timelines

2012  

November Working Group Meetings

2013  

January Supplementary Report of the Board

FebruarySmart Grid requirements integrated into Filing

Requirements developed in Distribution Network Investment Planning process

Electricity Distribution Rate SettingElements of Three MethodsOctober 31, 2012 Webcast

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Electricity Distribution Rate Setting - Planned consultation activities

• Board led Stakeholder Conference followed by written submissions

– Issues related to the inflation and productivity adjustment mechanisms have been explored in several different consultations over the last ten years.

– The Board has benefited from those consultations and has gained significant experience applying the results of those consultations.

• To inform the conference, new inflation, productivity and stretch factors, will be developed in consultation with stakeholders as part of the performance, benchmarking and rate adjustment indices work described previously.