On June 12, 2015, the OEB issued a letter setting out a new policy for allocation
of street lighting costs. The implication of the new policy is
that the costs allocated to some street lighting customers will be
significantly reduced (as will their rates). The policy change
will primarily impact street lighting customers whose street lights
have a high ratio of connections to the distribution
system. Under the new policy, if street lights are generally
connected individually or in small clusters of three or less to the
distribution system, then the costs allocated will be reduced from
the current approach. There will be little impact on street
lighting customers where their street lights are connected in
series, in a sort of "daisy-chain" configuration where
there are many street lights per connection.
This new policy arises from the OEB's EB-2012-0383 review of cost allocation policy for unmetered
loads. Within that initiative, the OEB identified a concern that costs are being
over-allocated to those street lighting customers who have a
connection ratio close to 1:1 (one device per connection). The
OEB asked Navigant Consulting to investigate "the portion of
utility assets required to serve various street lighting system
configurations and related costs." The OEB also asked Navigant
to provide recommendations to update the OEB's Cost Allocation
Model, if changes were warranted.
Navigant's report has now been
posted. Navigant's main finding is that many of a
distributor's costs associated with street lighting are
relatively similar regardless of the connection
configuration. There is no basis for concluding that a
distributor's costs associated with street lighting that is
directly connected are substantially higher than the costs
associated with street lighting that uses a "daisy-chain"
type of configuration. Currently, the costs allocated to
directly connected street lighting can be almost nine times higher
than the costs allocated for street lighting that is attached in
series (daisy-chain configuration). Navigant concludes that
approach should be changed.
In its June 12thletter, the OEB set out a new policy that
adopts Navigant's findings. The OEB's new policy for
street lighting cost allocation will see a new "street
lighting adjustment factor" implemented to allocate costs for
the street lighting rate class. This approach will allocate
the costs of a distributor's primary system assets to a street
lighting customer based upon the contribution of the street
lighting system to a distributor's peak demand. The costs
of a distributor's secondary system assets will continue to be
allocated to a street lighting customer based on the number of
street light connections.
The OEB estimates that the change in cost allocation policy will
have significant impacts on street lighting customers that have a
low connection ratio. For those street lighting customers who have
three or fewer street lights per connection, there will be a 50% to
70% decrease in allocated costs under the new approach. This
will be offset by an increase in the costs allocated to other
Presumably (although this is not quantified), the rate impact on
benefitting street lighting customers will be significant. The
rate impact on residential customers is expected to be less than 1%
on a total bill impact basis.
The OEB's policy will be implemented through a
distributor's next cost of service or Custom IR
application. The OEB is currently updating its Cost Allocation
Model to incorporate this new policy.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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