previously written about a decision of the Ontario Energy Board in which
the Board approved the revenue requirements of an electricity
transmitter, B2M Limited Partnership, for the five years from 2016
to 2020. One of the issues considered by the Board in the decision
was the appropriate treatment of start-up costs for B2M.
B2M is substantially owned by a subsidiary of Hydro One Inc. and
by Saugeen Ojibway Finance Corporation and was created to acquire a
section of an electricity transmission line between the Bruce
Nuclear Generation Complex and the Milton Switching Station from
Hydro One Networks Inc. B2M proposed to recover $7.7 million of
transaction and startup costs in equal annual amounts over each of
the four years from 2016 to 2019. These costs were incurred from
2012 to 2014.
The Board said that the proposed recovery, starting in 2016, of
costs incurred between 2012 and 2014 would not constitute
retroactive ratemaking, but that it would raise a potential issue
of retrospective ratemaking. Retrospective ratemaking, the Board
said, is ostensibly prospective in that it sets rates only for the
future, but involves future rates designed to meet not only future
costs, but also past costs.
The Saugeen Ojibway Finance Corporation had been given advance
tax rulings indicating that it would receive net profit from B2M
without paying income taxes. The Board found that the tax benefits
from the ownership structure of B2M would benefit the same
ratepayers who, under B2M's proposal, would pay the transaction
costs required to create that ownership structure. While concern
about retrospective ratemaking arises when there may be a mismatch
between revenues and expenses, no mismatch would occur because the
payors of the transaction costs would be the beneficiaries of the
tax treatment afforded to the Saugeen Ojibway Finance
The Board went on to make clear its expectation that, in similar
future transactions, better cost tracking and control measures will
be put in place and that experience in structuring such a
transaction will result in lower startup costs.
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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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