Canada: LDCs Now

Last Updated: December 13 2011
Article by Bernadette Corpuz

Most Read Contributor in Canada, September 2016

For more than a decade one would be hard pressed to find a slow period in the distribution sector. As we near the end of 2011, the pace continues with several key reports released in the month of November alone. The Electricity Distributors Association issued a review outlining its vision for the sector. The Ontario Energy Board (OEB) issued five discussion papers on a renewed regulatory framework with accompanying consultant reports. And additional procedural orders and sub-issues continue in the application launched by the Canadian Distributed Antenna Systems Coalition for access to electricity distributors' poles.


On November 1, 2011, the Electricity Distributors Association (EDA) released its proposed vision of Ontario's electricity sector, entitled Electricity is the Answer: The EDA's Road Map for Delivering Ontario's Electric Future (the EDA Report).

The EDA Report offers 10 recommendations geared towards evolving the sector and achieving a basket of regulatory and utility objectives.

Historical Context

The EDA Report sets the backdrop for its recommendations with a succinct historical context of Ontario's electricity sector. The history in a nutshell – the old Ontario Hydro was divided into separate companies by function, regulatory treatment has been migrating from cost of service to incentive regulation and the ubiquitous Green Energy and Economy Act, 2009 was passed.

Sector Challenges

As succinctly, the EDA Report describes the challenges now facing the wires sector:

  • Aging infrastructure is driving an immediate need for refurbishment or replacement;
  • New and emerging technologies, including a smart grid and meters and electric vehicles will require ongoing resource commitments;
  • Conservation and demand management targets established by the Ontario Energy Board (OEB) for each local distribution company (LDC);
  • Distributed generation continues to increase in prevalence posing continued integration challenges;
  • Costs associated with electricity are expected to increase by almost 50% in the next five years and by 100% in the longer term;
  • Regulation and Government policy initiatives have created both uncertainty and additional burden; and
  • Shareholder objectives are overarching requirements of which LDCs must be cognizant.

Guiding Principles

Eight guiding principles shaped the recommendations ultimately put forward by the EDA:

  1. Service and reliability levels must meet customer expectations;
  2. Mergers and acquisitions should be voluntary wherever possible, and should serve the interests of customers and shareholders;
  3. The internal structure of distribution companies should be determined by individual utilities to the extent possible;
  4. Wires utilities should be run on a commercial basis and accorded a full opportunity to earn commercial rates of return;
  5. The implementation of technologically-based changes and innovations should be achieved through a consultative process and through incentive mechanisms to the extent possible;
  6. Regulation that is free of political interference should be a commonly held objective; and
  7. Correct and transparent price signals should be implemented wherever possible.

Most in the sector would agree with most of the EDA's guiding principles. Most would also agree with the description of the sector's challenges. But all of this agreement does not always translate into agreement on the tangible end result or on the path to get there. Herein a source of controversy and passion that engulfs the electricity file with increasing regularity.

The Recommendations

The EDA's recommendations, described below, reflect the EDA's guiding principles. The recommendations also closely track regulatory and utility objectives proposed for the sector by the EDA.

  1. The relationship between the Provincial Government, the electricity industry and its regulatory agencies should be reviewed. The EDA Report proposes that an arms-length relationship is best suited to promoting the most effective decision-making within the industry, long-term efficiencies and a more predictable policy, regulatory and investment environment.
  2. Major restructuring of transmission and distribution is not warranted. An evolutionary approach characterized by increased flexibility, well designed incentives, consensual change and low transition costs is the preferred model.
  3. Regulatory restrictions which limit utilities from finding cost savings through expanded economies of scope should be relaxed to the extent possible.
  4. Utilities should continue to seek improved efficiencies through improved economies of scope and through mutually beneficial consolidations which may yield additional scale and contiguity economies.
  5. A merger of the IESO and OPA or rationalization of their respective activities should be considered.
  6. Regulation of the wires portion of the electricity industry should be reviewed. Utilities should have the option of seeking multi-year capital approvals. Consideration should also be given to streamlining the regulatory process where possible and providing utilities with broader regulatory options including expedited reviews.
  7. Utilities should be given greater opportunities to design and develop their own conservation and demand management programs, eventually assuming primary responsibility for these functions. Program fund administration and research should remain with a centralized agency such as the OPA or its successor.
  8. An accurate understanding of customer response to increasingly sophisticated technology can be of great value. Further studies and analyses of advanced metering technologies and appropriate rate designs should be conducted.
  9. Utilities should continue expanding their functional capabilities to accommodate new and emerging technologies such as smart-grid systems and distributed generation. Implementation of these technologies should be achieved on a cost-effective basis as determined by individual utilities and the regulator. Incentive based approaches should be implemented where possible.
  10. The essentiality of electricity to the economy and to society mandates the continuation of the record of excellent service and reliability. This will require continuing investment in the wires networks.

The Vision: An Evolutionary Model

The EDA then considered three alternative models for the distribution segment. Presumably, the reasons for considering the models include determining the best structure from which LDCs could see its recommendations realized.

The EDA Report recommends an evolutionary model for the distribution segment of Ontario's electricity industry. The "evolutionary model" builds on the existing structure, allowing it to evolve with suitable incentives. It contemplates the occurrence of voluntary consolidations where economies might be gained, rather than mandated consolidation regardless of beneficial effect. It contrasts with the models of the status quo and of a reduced number of distribution companies.

What is quietly refreshing about the EDA Report is precisely what it is not – it is not a grand pronouncement for destabilizing change. Rather, the EDA has provided specific recommendations for a continued but gradual evolution of the sector within the existing structure of the wires industry. The EDA is by no means suggesting glacial pace. The report cautions that delaying necessary infrastructure investment for too long can lead to a greater level of investment requirement at one time. This could cause a larger than comfortable price spike, a subject increasingly on the minds of customers. And while certain of the EDA recommendations speak to change (such as consideration of the consolidation of agencies and of appropriate rate structures to effect greater differentiation in customer response), the overall objective appears to be streamlining and stability.

The evolutionary model has dual appeal in that it recognizes the need for continued development in the industry. It is not a head in the sands wish for a return to the "olden days". Nor is it an avoidance of change and the inevitable modernization (not simply refurbishment) needs of the grid. Simultaneously, it heeds the much voiced caution that repeated wholesale change in the industry causes disruption and instability, which in turn contributes to an unstable market unattractive to investors.

However, not every party with an interest in the electricity sector may agree with all of EDA's recommendations. The industry has certainly heard various groups of stakeholders call for structural changes within the wires industry, including through consolidation. Yet others would pose the view that gaining efficiencies through economies of scope, rather than economies of scale, might also result in disruptive change depending on the extent of proposed new activities (for example, certain regulatory instruments might have to be created, modified or repealed altogether).

This all said, with the tumultuousness of the past decade and the fundamental transformation expected in the coming years, it may well be that many would welcome an evolutionary approach to change whatever form that change may take.


By now, LDCs are well familiar with the suite of reports issued on November 8, 2011 by the OEB. The OEB released five staff discussion papers with accompanying consultant reports on the following subjects:

  1. Distribution Network Investment Planning, accompanied by

    • "Report on a Methodology to Estimate the Bill Impacts of Electricity Distributor Network Investment Plans" and "Bill Impact Model for Incremental Investments", each prepared by Power Advisory LLC;

  2. Regulatory Framework for Regional Planning for Electricity Infrastructure;
  3. Establishment, Implementation and Promotion of a Smart Grid in Ontario;
  4. Approaches to Mitigation for Electricity Transmitters and Distributors, accompanied by

    • "Transmission and Distribution Rate Mitigation Measures for Ontario", a report prepared by Navigant Consulting Ltd.; and

  5. Defining and Measuring the Performance of Electricity Transmitters and Distributors, accompanied by

    • "Defining, Measuring and Evaluating the Performance of Ontario Electricity Networks: A concept paper", prepared by Dr. Lawrence Kaufmann and Pacific Economics Group Research.

Work on the OEB's Renewed Regulatory Framework for Electricity continues with a two-day Information Session on the staff discussion papers and consultant reports to be held on December 8 and 9, 2011. Questions and answers posed will no doubt anticipate the stakeholder conference planned for February 2012 and ensuing invitation for written comments.

On April 25, 2011, the Canadian Distributed Antenna Systems Coalition (CANDAS) filed an application with the OEB on behalf of its member companies seeking, among other things, access to electricity distributor's poles for the purpose of attaching wireless equipment, including wireless components of distributed antenna systems. The latest twist in the proceeding lies in the issue of whether a conflict of interest or a reasonable apprehension of bias arises by having a member of the Market Surveillance Panel appear as an expert witness before the OEB. The oral hearing on this matter will begin December 12, 2011.


ONTARIO ANNOUNCES FIT REVIEW – Ontario has launched its scheduled review of the Feed-In Tariff (FIT) Program. The FIT Program, which launched in 2009, is the most comprehensive program of its kind in North America. The review will examine program rules and pricing to ensure the program remains successful and sustainable. However, more than 20,000 applications have been submitted under the FIT Program causing some speculation that price will be the key consideration. The consultation period launched on October 31 and will run until December 14, 2011. Deputy Minister Fareed Amin has been appointed to lead the review. For more information, visit

CANADA REVENUE AGENCY TAKES HARDER LINE ON UNDER-REPORTED TAXABLE BENEFITS – The Canada Revenue Agency is increasing the level of audit scrutiny on taxable benefits received by employees. While the dollar amounts on individual items for each employee may be relatively small, the aggregate amounts for all employees of a business can be quite substantial, and the CRA is becoming increasingly active in auditing businesses to ensure that all benefits enjoyed by an employee which might potentially fall within the tax net are taxed accordingly. For more information, visit

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.