Project Background
Hydro One Networks, a rate-regulated electricity utility has filed a Custom IR rate application for setting distribution rates for a five-year term for 2018-2022. With rates for 2018 set through a traditional cost of service approach, rates would be adjusted, for the most part, formulaically for 2019-2022. Hydro One Networks has retained an external economic consultant to prepare studies of Hydro One’s and the Ontario electricity distribution sector’s Total Factor Productivity (TFP), as well as an overall cost benchmarking study. There are other benchmarking studies also filed, on capital and operating programs (i.e., pole replacement, vegetation management, IT costs, sub-station refurbishment) and compensation.
External expert advice is required to aid OEB staff in reviewing the evidence of Hydro One and its external consultants, and to identify and test strengths and weaknesses. Econometric analysis of the studies is primary, but it is also desired that the consultant can provide evidence on how the results of the studies reflect Hydro One’s ability to achieve the desired outcomes to the benefit of ratepayers. The retained consultant may have to file expert evidence and to be a witness in the hearing, in addition to working along with staff.
Objectives
1. Review the TFP and Cost Benchmarking studies prepared by Power Systems Engineering (PSE)
2. Review other Benchmarking studies filed on capital and operating costs, and for compensation.
3. Identify strengths and weaknesses of filed studies and on how these align with each other and with Hydro One’s proposed Custom IR plan.
4. Prepare interrogatories, along with OEB staff to test the filed evidence.
5. If necessary and as decided by OEB staff, prepare and file a critique of all benchmarking studies, or develop and file a critique of the program-based studies along with an alternative study for the total cost benchmarking analysis to rebut or augment the evidence filed. For purposes of the budget, proponents may assume the second scenario (i.e. a critique of the program-based benchmarking studies and the development of an alternate total cost benchmarking study using the filed PSE study as a starting point).
6. Prepare and file a critique of the TFP studies (both the sector and the Hydro One-specific study) to rebut or augment the evidence filed.
7. Participate in the proceeding. This may involve participation in a technical conference or appearing as a witness at an oral hearing.
Full details are provided in the RFP document which is available only through MERX at www.merx.com or 1-800-964-6379, MERX reference number 0000063758.
