Defining and Measuring Performance of Electricity Transmitters and Distributors

The OEB has issued a letter regarding the implementation of a public safety measure for the 2014 Scorecard. The OEB is amending section 2.1.19 (d) of the Electricity Reporting & Record Keeping Requirements (RRR) to include the definitions for the public safety measure and performance targets.

• Letter

The electricity distributors’ final 2013 scorecards are now accessible for review and sign off in e-Filing Services of the Board website. In addition, Board staff has prepared relevant questions and answers to assist distributors with their review and sign off of the scorecard.

• Letter
• Question and Answers

The Board has issued a billing accuracy scorecard measure for all licensed electricity distributors, as well as a performance target for the new measure to be effective on October 1, 2014. The first reporting period of the measure (October to December 2014) will be due on April 30, 2015.

• Letter

The Board issued its Report of the Board on Performance Measurement for Electricity Distributors: A Scorecard Approach. The Report sets out the Board’s policies on the measures that will be used by the Board to assess a distributor’s effectiveness and improvement in customer focus, operational effectiveness, public policy responsiveness, and financial performance to the benefit of existing and future customers. The form and implementation of a performance monitoring tool – a Scorecard – is also addressed in the Report.

• Cover Letter
• Report of the Board

The Board issued its Report of the Board on Rate setting Parameters and Benchmarking under the Renewed Regulatory Framework for Ontario’s Electricity Distributors. This report sets out the Board’s policies and approaches to the rate adjustment parameters for incentive rate setting for electricity distributors and the benchmarking of electricity distributor total cost performance. The Report also includes the Board’s determination on rate adjustment parameter values for 2014 incentive rate setting.  The Board has also released a report prepared by Board staff’s expert consultant, Dr. Lawrence Kaufmann and his team at Pacific Economics Group Research, LLC, entitled “Empirical Research in Support of Incentive Rate-Setting: Final Report to the Ontario Energy Board”. This report is referenced in the Board’s report.

• Cover Letter
• Report of the Board (as corrected on December 4, 2013)
  • Memorandum (Dec 20-13)

The Board has posted additional electricity distributor data to support the empirical analysis.

• Refer to the October 10, 2013 update in the "Electricity distributor data to support empirical analysis" section above

The Board received the following written comments from stakeholders in relation to its draft Report of the Board:

• Association of Major Power Consumers in Ontario 
• Coalition of Large Distributors
• Cornerstone Hydro Electric Concepts Association
• Electricity Distributors Association
• Energy Probe
• Entegrus Powerlines
• Hydro One Networks Inc.
• Power Workers’ Union
• Vulnerable Energy Consumers Coalition

Board staff posted the transcript and presentations from the September 11, 2013 Stakeholder Conference.

• Transcript
• Presentations:
  • Interaction of Inflation, TFP, Stretch and ICM - School Energy Coalition, Jay Shepherd
  • Objectives, Legacies, and Imperatives regarding the OEB’s Proposed IR - Power Workers’ Union, Dr. Frank Cronin
    • Presentation with the names of the distributors (update posted Sep 23-13)
  • Response to the Draft Report of the Board - The Coalition of Large Distributors (Enersource Hydro Mississauga Inc., Horizon Utilities Corporation, Hydro Ottawa Limited, PowerStream Inc., Toronto Hydro-Electric System Limited and Veridian Connections Inc.), Steve Fenrick, Power System Engineering, Inc.
  • 4th Generation Incentive Regulation of Ontario’s Electricity Distributors - Electricity Distributors Association, Prof. Adonis Yatchew
  • Comparison of Benchmarking Results - Pacific Economics Group Research, LLC, Dr. Lawrence Kaufmann

The Board issued a draft Report of the Board on Empirical Research to Support Incentive Rate-setting for Ontario’s Electricity Distributors. This report sets out the Board’s proposed policies and approaches to the rate adjustment parameters for incentive rate setting for electricity distributors and the benchmarking of electricity distributor total cost performance. The Board has also released a report prepared by Board staff’s expert consultant, Dr. Lawrence Kaufmann of Pacific Economics Group Research, LLC, entitled “Empirical Research in Support of Incentive Rate-Setting:  2012 Update”. This report is referenced in the Board’s draft report.

• Cover Letter
• Draft Report of the Board

The Board received the following written comments from stakeholders regarding the empirical formula for the next generation of incentive rate-setting.

• AMPCO
• Consumers Council of Canada
• Cornerstone Hydro-Electric Co-operative
• Coalition of Large Distributors
• Canadian Manufacturers and Exporters
• CND Hydro
• CNPI
• Electricity Distributors Association (update to the June 14, 2013 Report)
• Energy Probe
• Entegrus
• Enwin
• FFPC
• FRPO
• Hydro One
• PWU
• SEC
• Toronto Hydro Electric System Ltd.
• VECC
• Whitby Hydro

Board staff has posted the responses to staff’s clarifying questions on the empirical research carried out for the Electricity Distributors’ Association by Prof. Adonis Yatchew of The University of Toronto .

• Responses to staff’s clarifying questions
• S-Plus code – Confidentiality Agreement

Board staff posted a document containing supplemental material prepared by Pacific Economics Group Research (“PEG”) in response to participants’ requests at the May 27 – 28, 2013 Stakeholder Conference for supplementary empirical analyses. Specifically, PEG was asked to (1) estimate TFP growth for the Ontario electricity distribution industry using an average of each distributor’s estimated TFP growth over the 2002-2011 period; and (2) re-estimate the econometric model used to benchmark distributors’ cost performance using a measure of total cost that excluded the LV charges that embedded distributors pay to host distributors. 

• Supplemental PEG Document

Board staff has posted Working Papers for the empirical research carried out for The Coalition of Large Distributors by Mr. Steve Fenrick, M.S., Leader, Benchmarking & Economic Studies, Power System Engineering Inc. (PSE):

• benchmarking dataset;
• results of the unit cost benchmarking model; and
• the calculation for our recommended inflation factor.

Notes:

Regarding the benchmarking dataset, PSE began with PEG’s version 2 dataset and then highlighted in green where they either inserted a new column or changed the data in any way. This should help stakeholders sort through any changes PSE made to the PEG version 2 dataset. PSE updated their model using the new Version 2 dataset and also modified it to being a log-log model per Dr. Kaufmann’s and Prof. Yatchew’s suggestion during the Stakeholder Conference. 

The inflation factor spreadsheet contains the calculations that Mr. Fenrick presented on during the Stakeholder Conference. Given the different cost definitions and datasets, he has used a 60% weight on capital and a 40% weight on OM&A (split 70% labour, 30% non-labour). This should be fairly close to the final weights. However, when the final weights are decided upon they can easily be inserted into the calculation and it will have a minimal effect on the growth rate.

The Board issued a letter to stakeholders that includes: an update on the timeline for filing expert reports and written comments; a list of questions for written comments; and a process for stakeholders that have questions on the expert reports.

• Letter

Board staff has posted material for the May 27 – 28 stakeholder conference.

• Draft Agenda
• Presentations
  • Empirical Research in Support of Incentive Rate Setting in Ontario, Dr. Lawrence Kaufmann, Pacific Economics Group Research, LLC
  • Electricity Distributors’ Association, Prof. Adonis Yatchew, The University of Toronto 
  • The Coalition of Large Distributors

Board staff posted the transcript and presentation from the May 16, 2013 question and answer session on the PEG Report.

• Transcript
• PEG Presentation

The Board has posted additional electricity distributor data to support planned empirical analysis.

• Refer to the March 21, 2013 update in the "Electricity distributor data to support empirical analysis" section above

Board staff has posted two presentations for the March 1st Webinar on business conditions.

• Board Staff Presentation
• Pacific Economics Group Presentation 
• Audio recording (posted on March 4, 2013):
  • Part 1 (.mp3, 7MB)
  • Part 2 (.mp3, 6MB)

The Board has posted additional electricity distributor data to support planned empirical analysis.

• Refer to the February 20, 2013 update in the "Electricity distributor data to support empirical analysis" section above

Board staff has posted a draft agenda for the January 10, 2013 stakeholder meeting.

• Draft Agenda

Staff has also posted Dr. Kaufmann’s presentation on his “Concept Paper on Empirical Analysis and Benchmarking To Be Used in the Renewed Regulatory Framework for Electricity”

• Dr. Kaufmann’s Presentation

The Board has posted a Staff Discussion Paper and supporting report prepared by staff’s expert consultant.

• Staff Discussion Paper
• “Defining, Measuring and Evaluating the Performance of Ontario Electricity Networks: A Concept Paper” prepared by Pacific Economics Group Research, LLC