The Ontario Distribution Sector Review Panel (ODSRP) has released its highly anticipated report on the status and future of the Province’s distribution sector. Established in April of this year, the ODSRP’s was asked by the provincial government to make recommendations to improve efficiencies in the sector with the aim of reducing the financial cost of electricity distribution for electricity consumers. The three person panel was composed of David McFadden, Floyd Laughren and Murray Elston, as chair.
The Report contains the following six recommendations to improve the distribution sector:
- LDC Consolidation: The 73 currently existing Local Distribution Companies (LDCs) should be consolidated into 8 to 12 large regional distributors (RDs).
- No sale of Hydro One assets: In order to give effect to LDC consolidation, Hydro One should be directed to lead and engage in merger talks with the appropriate utilities with a view to create new RDs with contiguous boundaries. There should be no “across-the-board” sale of Hydro One assets.
- Transition Advisor: The Ontario government should appoint a Transition Advisor to oversee LDC consolidation.
- Transition cost recovery: LDCs’ that voluntarily submit a new license application to the Ontario Energy Board (OEB) within a proposed merger period should recover their reasonable transaction costs, including third-party facilitation cots.
- Cost Savings: Any cost savings realized by the consolidation should be re-invested into the newly formed RDs in order to strengthen the distribution system post-consolidation.
- Governance: The membership of Boards of RDs should have at least 2/3rds independent directors. Also, current prohibitions on municipal governments making loans to LDCs should be removed. Finally, affiliates currently owned by LDCs should not be included in any consolidation.
Stay tuned to this blog for further analysis of the Report and its recommendations.