reported last year, regulated utilities in Ontario can expect
changes to the reporting and recoverability in rates of their
pension costs. The Ontario Energy Board's previously announced consultation to look at
how pension and other post-employment benefits (OPEBs) costs are
treated for regulatory purposes will be the subject of a
Stakeholder Forum on July 19, 2016. Presumably, the OEB will update
relevant regulatory rules and instruments after that time.
As set out in the OEB letter announcing the July 2016
Stakeholder Forum, "[t]he objectives of the consultation are
to develop standard principles to guide the OEB's review of
pension and OPEB costs in the future, to establish specific
information requirements for applications, and to consider
appropriate regulatory mechanisms for cost recovery which could be
applied consistently across the gas and electricity sectors for
rate-regulated entities." These objectives are consistent with
the OEB's initial May 2015 Notice in this consultation, which
suggested that the OEB wants to move towards a standard treatment
of pension and OPEBs costs for all of the utilities that the OEB
regulates. Among other things, it appears that the OEB seeks to
ensure that these costs are comparable and benchmarked between
utilities. Whether and how this can be accomplished remains to be
seen. Standardization will be challenging among a diverse group of
utilities, some of whom use different accounting standards (IFRS,
US GAAP, ASPE) and many of whom have long-standing pension and
benefit arrangements with their employees.
This topic has attracted widespread interest from stakeholders
– more than 25 parties have applied to participate in the
consultation, including utilities, ratepayer groups and at least
one out-of-province observer. In response to the OEB's
invitation in the initial May 2015 Notice, 16 of these parties filed
submissions addressing a list of questions – copies of the
submissions can be found here. Since the time that this consultation
was convened, the OEB retained an outside expert (KPMG) to identify
issues that are relevant to the consideration of the appropriate
ratemaking treatment for pension and OPEB costs. The OEB has now
published a May 2016 KPMG Report to the OEB on Pension and Other
Post-Employment Benefit Costs. Among the key overview comments
found in that report are that a "one-size fits all
approach" may not work and that it may be appropriate for
larger utilities to move away from accrual accounting for pension
and OPEB costs. A proposed alternative is a "Modified Funding
Contribution method," which is closer to simply including
"cash costs" in rates, but which allows for some
flexibility. The KPMG Report, along with stakeholder
submissions, will be presented and discussed at the July 2016
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In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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