In its 2010 Hydro One transmission rate decision, the Ontario Energy Board (Board) increased from $1/MWh to $2/MWh the Export Transmission Service (ETS) rate that was put in place as a "placeholder rate" at market opening and that has remained unchanged since then. The Board, however, directed that "a genuinely comprehensive study be undertaken [by the IESO] to identify a range of proposed rates and the pros and cons associated with each proposed rate in time for [Hydro One's] next transmission rate application". Over the past year, the IESO, with input from stakeholders, has been administering an ETS study. Recently, the IESO announced that the study was complete and had been delivered to Hydro One to be filed as part of its upcoming transmission rates case.

The ETS study identifies five export tariff options ― broadly representing the range of views expressed by stakeholders with respect to how export transmission costs should be allocated ― and assesses the options against generally accepted rate-making principles (consistency with neighbouring markets, simplicity, fairness and efficiency). The study also assesses the impact of the various options on Ontario consumers, Ontario producers and the IESO-market, as well as the impact on import/export levels, total bill price, export tariff revenue, production costs, carbon emissions and frequency and duration of surplus baseload generation (SBG). The five options considered in the study are:

  • status quo - $2/MWh; 
  • unilateral elimination of tariff in Ontario – i.e. $0/MWh; 
  • increase in ETS tariff to the current "equivalent average network charge" of $5.80/MWh; 
  • tiered rate of $5.80/MWh on-peak and $0/MWh off-peak; and 
  • tiered rate of $3.50/MWh on-peak and $1/MWh off-peak.

It will be interesting to see how this matter unfolds in Hydro One's rate case. It was a contentious issue in Hydro One's last rates case which pitted generators/marketers against consumer groups and which highlighted divergent views on the purpose for which the transmission system was built (and therefore how costs should be allocated) and how exports should be treated in light of Ontario's hybrid market and increased incidences of SBG. 

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