In a regulatory response to rising electricity costs in Ontario, the Ontario Energy Board (OEB) has announced its intention to "renew" its framework for electricity regulation. Through three initiatives focused on cost, the OEB will address impending substantial investment in transmission and distribution networks to maintain reliability and connect new renewable generation facilitated under the provincial government's "green energy" policies. Through these three initiatives the OEB intends to "consider how to manage the pace of... bill increases for consumers". All three of these initiatives will directly affect the province's electricity distribution utilities (and, of course, consumers).
First, the OEB will look at how investments should be planned and prioritized in reference to "total" costs, including both network costs and the costs of the generation facilities being connected. Under the rubric of its new "outcomes" drive focus, the OEB will consider ways to assess the combined cost impact of current and impending electricity infrastructure (generation and wires) development, and perhaps how to coordinate and prioritize such development on a regional basis. Second, the OEB will refresh its rate increase mitigation policy, looking at ways to reduce cost impacts on consumers. This will likely mean considering models for collection in rates of funds in anticipation of project commencement rather than waiting until a project is in service. This advance collection approach was used by the OEB for smart meters and for Hydro One's recently reviewed "green energy plan". Third, the OEB will consider how it might build investment performance standards as wells as investment efficiency measures and incentives into the distribution work plans that it will be reviewing and approving going forward.
Pending completion of this regulatory framework review, the OEB will extend the current electricity distributor incentive regulation plans until the new program is completed, so that the outcomes of the review process can inform the design of the next generation distributor incentive regulation plan.
As this regulatory program unfolds, an interesting tension might well arise between the OEB’s traditional approach to letting prices reflect current costs, consistent with the basis of economic regulation as a substitute for markets to inform consumers and drive optimal investments, on the one hand, and the consumer protection responsibilities driving a more "engineered" approach to delivered electricity costs on the other hand. While not necessarily inconsistent, the two approaches may take some thought to properly harmonize.