In a decision released on December 29, 2015, the
Ontario Energy Board approved the revenue requirements of an
electricity transmitter, B2M Limited Partnership, for the five
years from 2016 to 2020.
B2M is substantially owned by a subsidiary of Hydro One Inc. and
by Saugeen Ojibway Finance Corporation. It 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 has entered into an affiliate services
agreement with Hydro One Networks for the operation and maintenance
of the line.
The issues considered by the Board in its decision fell into
three main areas: the framework of the application, operations and
maintenance costs, and the startup costs for the business.
As far as the framework of the application is concerned, the
Board found that a five-year approval of revenue requirement is
appropriate, given B2M's stable revenue forecast, lack of need
for investment over the period and the benefits of rate stability
and regulatory cost reduction. The Board also found that a
"mechanistic and transparent" annual adjustment to the
cost of capital would be fair to the utility and ratepayers from a
risk allocation perspective. The Board did not consider it
necessary to allow an annual adjustment or a deferral account to
capture potential third party pass-through cost adjustments, but
instead decided in favour of a Z-factor approach. The Z-factor
approach provides the transmitter with protection against increases
in third party pass-through costs, or unplanned capital spending,
by allowing B2M to apply to the Board for revenue relief if
unforeseen, uncontrollable and material expenses exceeding a
materiality threshold of 0.5% of revenue requirement arise during
the five-year term.
On the subject of operations and maintenance costs, the Board
noted its expectation that utilities follow a "continuous
improvement" approach to increase productivity. The Board
recognized that efficiency gains might take some time to
materialize for a startup company and imposed a $50,000 reduction
in 2018 operations and maintenance expenses, to be carried through
The Board's decision regarding B2M's transaction and
startup costs is the subject of a separate item posted
here on Energy Insider.
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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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