Implementation of the OEB Decision to eliminate the Hydro One Seasonal Rate Class

Hydro One Networks Inc.
EB-2016-0315

Hydro One Networks Inc. (Hydro One) has a customer distribution rate class known as the seasonal class. These are residential customers that receive electrical service at dwellings that they do not occupy long enough during the year to meet the requirements for the year-round residential customer distribution rate class.* The dwellings in question can include cottages, chalets and camps.

* Among other things, a customer will be in the seasonal class if they do not live in the dwelling in question for at least 4 days of the week for 8 months of the year.  Further details about the seasonal class are available from Hydro One’s website.

 

In its March 12, 2015 Decision on Hydro One’s distribution rates application, the OEB decided to eliminate the seasonal class and to move seasonal customers into one of Hydro One’s other residential customer classes based on density. The OEB’s concern was that the distribution rates charged to seasonal customers are not reflective of the cost to serve them.

The OEB was aware that eliminating the seasonal class would cause bill impacts for Hydro One’s seasonal customers, and particularly would cause bills to increase for lower-use seasonal customers. The OEB directed Hydro One to bring forward a bill mitigation** plan to address bill impacts for customers whose bills would increase by more than 10% as a result of moving to another rate class. Hydro One filed its report in August, 2015.

**Bill mitigation is a tool used by the OEB to protect consumers from having large bill increases at one time, for example by phasing in the increase over a number of years.

 

This follow-up proceeding started in late 2016 in order to consider the remaining steps for the elimination of the seasonal class. At that time, the OEB directed Hydro One to file an update to its August 2015 report, which it did December 1, 2016.

The proceeding was paused in September 2018, pending the outcome of another major Hydro One distribution rate case before the OEB. Hydro One was notified that it would need to file an updated report after the rates case decision was issued. The updated report was filed July 19, 2019.

According to Hydro One’s updated report, a little more than half of seasonal customers will see their bills go up, and a little less than half will see them go down. The report also includes a proposed alternative that would maintain the seasonal rate class.

Determining costs to serve customers

Hydro One, like all utilities, incurs costs to install and maintain the assets that are needed to provide service to all their customers. Once the revenue required to cover those costs is determined, the next step is to divide or allocate the costs among all of their different classes of customers based on what it costs to serve each class (this is referred to as "cost causality").

A key factor in determining cost causality is density. It costs less for Hydro One to provide service to their customers who live in more populated areas than it does for those who live in rural or remote areas that require more infrastructure per customer, like poles, wires and transformers, to serve them. For example, if there are 10 customers attached to a series of lines, poles and related transformers, rather than three customers, the costs are shared by more customers and therefore each customer pays less

 

Status of the Proceeding

In Procedural Order No. 3, issued September 17, 2019, the OEB determined that it would consider Hydro One’s proposal to maintain the seasonal rate class as a request to reconsider the 2015 OEB decision. Procedurally, as set out in the OEB’s Rules of Practice and Procedure, requests to reconsider earlier OEB decisions are made as a Motion to Review.

Although Hydro One did not follow the proper procedure to seek a review of the OEB’s 2015 Decision to eliminate the seasonal class, the OEB decided that it would allow Hydro One the opportunity to make its case that the Decision should be reconsidered.

On October 1, Hydro One filed additional materials in support of the motion as well as its submission on the threshold question of whether the March 2015 Decision to eliminate the seasonal rate class should be reviewed.

A separate panel established to determine the threshold question is now reviewing that aspect of Hydro One’s submission, and next steps are pending its decision.

How does the OEB consider motions to review?

The OEB has Rules of Practice and Procedure that utilities are expected to follow. In this way, all interested parties are aware of how the OEB typically deals with different procedural matters. The OEB’s Rules of Practice and Procedure reflect the OEB's goal of ensuring the most just, expeditious and efficient decisions on the merits of every proceeding before the OEB.

  • Under the OEB’s Rules of Practice and Procedure, a review of an earlier decision can take place in two stages. In the first stage, the OEB considers whether there is a question as to the correctness of the earlier decision. This is referred to as the "threshold question". If the answer to the "threshold question" is that there is such a question, the second stage will look at whether the earlier decision should be changed. This is referred to as a "review on the merits".

 

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