Project Background
The OEB's Cost Assessment Model (CAM) is based on a November 2004 report written by Navigant Consulting Ltd. ("Navigant") and stakeholder comments regarding that report.
In 2006, EES Consulting reviewed the OEB's CAM and provided a report, which concluded that no major changes were needed to the OEB's regulatory cost allocation procedures. The report found that the OEB's allocation methods were in keeping with industry best practices and generally accepted utility regulation.
The Regulation identifying payor classes to be assessed has been amended couple of times. The original Regulation in 2003 listed three classes: electricity distributors, natural gas distributors and electricity transmitters. In 2008, three classes were added: the Independent Electricity System Operator (IESO), the Ontario Power Authority (OPA) and Ontario Power Generation (OPG). In 2010, the payor classes expanded to eight to include low volume electricity retailers (retailers) and natural gas marketers (marketers).
In 2011, the model was amended to assess retailers and marketers a portion of the direct cost associated with regulating these companies. Direct costs associated with the OEB's Consumer Protection unit budget were assessed. At that time, the OEB committed to consider whether to assess the remaining direct costs and a proportionate share of indirect costs to these two payor classes.
The OEB engaged Navigant to conduct a review of this matter. It concluded that there is "no reason not to allocate indirect costs to the electricity retailers and natural gas marketers. In fact, not allocating those costs triggers cost shifting to other industry participants thus triggering a cross-subsidy."
In 2012, the OEB consulted with stakeholders with regard to whether retailers and marketers should be assessed these remaining costs. The revision to the (CAM) details reflected the OEB's decision to assess all direct and a portion of indirect costs to retailers and marketers, to be phased in over 5 years starting April 1, 2013.
In 2015, the OEB engaged MNP to review the CAM approach and model and assess its alignment with best practices and required an evaluation of the CAM allocation of S.26 costs to ensure full and fair cost recovery according to the principles of transparent cost allocation. The review concluded that MSP costs should be fully allocated to MSP; intra class allocation for Gas and Electricity Distribution should be based on number of customers; and intra class allocation for Electricity Transmission should be based on three-year average of revenue data. OPA merged with OPG in 2015.
In 2018, O. Reg. 16/08: ASSESSMENT OF EXPENSES AND EXPENDITURES was amended to include Unit Sub-meter Providers (USMP’s) as a new class of payor. The OEB decided to allocate the USMP intra-class allocation based on the number of customers for each entity.
Objectives
To ensure the OEB is allocating its Section 26 costs appropriately to the class of persons liable for OEB expenses and expenditures and is aligned with regulatory best practices.
The term of the agreement is for twelve (12) months with no extensions.
Purpose and Scope
A review is required to ensure the OEB's Cost Assessment Model (created in 2005) is aligned with the OEB's restructured operations, current environment, reflects regulatory best practices, and takes into consideration stakeholders input.
Full details are in the RFP document, which is available only through MERX at www.merx.com or 1-800-964-6379, MERX reference number 0000180333.
