The Ontario Energy Board ("OEB") released, on April 9,
2010, its decision in the application of Hydro One Networks Inc.
("HON") for approval of its distribution rates for 2010
and 2011. The decision is the first addressing the implementation
of Ontario's Green Energy Act ("GEA").
The GEA was heavily promoted by the provincial government as
evidencing its commitment to renewable energy generation. The
OEB's decision may have a significant impact on how much of
that generating capacity will actually be built.
The GEA requires electricity distribution and transmission
companies to provide the infrastructure to connect their systems to
renewable energy generation facilities. The costs of doing so are
to be recovered principally from electricity consumers. However,
before those costs can be recovered, the OEB must approve the
expenditures as prudent. The OEB has a mandate to, among other
things, protect the interests of consumers with respect to
In its application, HON proposed to spend approximately $556
million in capital expenditures in 2010 and 2011 on its green
energy plan. Eighty-four per cent of that expenditure related to
renewable generation connection.
The OEB found that it could not approve all of HON's
proposed green energy plan expenditures, chiefly because it was not
given sufficient information to allow it to find the proposed
expenditures to be prudent. The OEB allowed HON funding for some
expenditures, subject to a later review on whether those
expenditures were prudent.
The OEB in effect reserved the right to find, subsequently, that
connection expenditures were imprudent and that the costs could not
be recovered from consumers. This raises the possibility that
distribution companies may be more cautious in their approach to
green energy plan expenditures and that the overall renewable
energy plan may in the end be less ambitious than government
pronouncements originally suggested.
The OEB's decision is also significant in that it requires
HON to provide much more detail than had been the case in the past
about the factors affecting electricity prices. The OEB ordered HON
to include in its notices to its ratepayers statements that its
prices were affected by, among other factors, the costs of
implementing the GEA, by the province's new Harmonized Sales
Tax, by the province's so-called Special Purpose Fund, and by
the implementation of time-of-use rates.
The OEB's decision on the notice point addresses concerns
that many provincial government initiatives have contributed to
significant increases in electricity prices, but that the effect of
those initiatives on the price increases has been hidden from
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
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