The Ontario Energy Board (OEB) continues to rapidly introduce
changes intended to facilitate implementation of the Green
Energy and the Green Economy Act (GEGEA). In May 2009, it
issued a notice to amend the Distribution System Code to
enhance the generation connection process, proposing measures aimed
at removing the backlog of generation projects in the current
queue. Earlier this month, the OEB issued a further notice to amend
the Distribution System Code in order to reduce the costs
that renewable generators pay to connect to the distribution system
(this follows on similar proposed amendments to the
Transmission System Code). Most recently, on June 10,
2009, OEB staff issued a discussion paper aimed at facilitating
investment in distribution and transmission infrastructure by
dramatically changing current cost recovery treatment.
The stated purpose of the discussion paper entitled Staff
Discussion on the Regulatory Treatment of Infrastructure Investment
for Ontario's Electricity Transmitters and Distributors
(Discussion Paper) is to fulfill the objectives of the GEGEA by
incentivizing investment in distribution and infrastructure while
ensuring that the interests of ratepayers continue to be protected.
The Discussion Paper draws heavily on FERC's Rule 679,
Promoting Transmission Investment through Pricing Reform,
by identifying a range of mechanisms for alternative cost treatment
of infrastructure investment, some or all of which could be applied
in the context of a cost of service review, a multi-year rate
adjustment mechanism or a specific rate application (or in the
course of approving distributors' or transmitters'
infrastructure investment plans as mandated by the GEGEA). The
alternative mechanisms for cost recovery identified in the
Discussion Paper include recovery of costs for abandoned
facilities, accelerated cost recovery, the inclusion of
construction work in progress (CWIP) in rate base, accelerating
depreciation and providing for incentive-based ROE.
Similarly, in accordance with FERC's view, OEB staff suggest
that beyond identifying certain investments that would be presumed
to qualify for alternative cost treatment, it is not appropriate to
be more prescriptive. Staff suggest that establishing more
prescriptive criteria would limit flexibility by pre-judging which
projects are eligible for alternative treatment and limiting the
ability of applicants to request a combination of alternative cost
mechanisms. Accordingly, staff suggest that the Board "should
exercise its discretion to allow alternative treatment on a
case-by-case basis for appropriate infrastructure investments by
electricity transmitters and distributors in a manner that
facilitates the achievement of the Government's policy
objectives as reflected in the GEGEA while protecting the interests
OEB staff have outlined 26 issues for written comment. These
issues include the appropriateness of the foregoing alternative
cost mechanisms and whether the OEB should be more prescriptive as
to which types of investments qualify for alternative treatment and
which do not. Staff have asked that written comments be filed by
July 7, 2009 and have outlined the framework for cost award
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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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