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TORONTO – May 22, 2008 - The Ontario Energy Board has rejected AMPCO’s request that it reconsider its decision to require large volume customers served by the Oshawa Public Utilities Corporation to subsidize the distribution services of other customers, including residential customers and the distributor's shareholder, the City of Oshawa. In a blow to Ontario’s beleaguered manufacturers, the Board will allow the Oshawa PUC to continue grossly over-charging its large users until at least 2010.
In its original decision (issued on March 29, 2008) the Board ordered the Oshawa PUC to adjust rates for its general service customer classes to achieve the following revenue to cost ratios:
|
Customer Class |
OEB-Approved Revenue to Cost Ratio |
|
Street Lighting (City of Oshawa) |
46 % |
|
Sentinel Lighting |
62 % |
|
Residential |
92 % |
|
General Service < 50 kW |
125 % |
|
General Service > 1,000 to 5,000kW |
257 % |
|
Large Users |
186 % |
In that decision, the Board noted: “Although the ratios for the GS > 1,000 and Large Use classes would continue to be high, the Board has concluded that an immediate move to the target ranges would result in unacceptable impacts for customers in some of the remaining classes, and some mitigation is warranted. Therefore, the rates for the two classes shall be set so that a move of 50% to the top of the Board’s target ranges will be achieved for 2008. The Board expects the Company to achieve the remaining 50% by equal increments in years 2009 and 2010 when it makes applications for rate adjustments.” In effect, the Board is allowing the utility to take three years to move to the “minimum acceptable” ratios set out in the Board’s own guidelines.
AMPCO brought its motion to ask the Board to reconsider its original decision on the grounds that—because the Ontario Energy Board Act, 1998, gives the Board the authority only to order rates which are “just and reasonable”—customers are legally entitled to a rate that reflects only the costs of serving them, and should not be compelled to underwrite subsidies for the benefit of other customers. This principle, known as the rule against undue discrimination, has been applied by courts and regulators throughout Canada and the United States for several decades. While the Board has made similarly discriminatory decisions on other distribution rate cases this year, AMPCO chose to bring its motion on the Oshawa case because the Oshawa PUC has the dubious distinction of being the worst offender among Ontario distributors, and the Board’s decision in this case didn’t even bring the ratios within the broad tolerances set out in the Board’s own Cost Allocation Report issued in November 2007.
Despite evidence that Oshawa PUC for years has been knowingly over-collecting from its few large consumers—to the tune of more than $100,000 per year in at least two cases—the Board allowed these substantial cross-subsidies to continue indefinitely, both in its original decision and in the decision issued from the bench on Friday, May 16. Notwithstanding the serious and substantive arguments brought by AMPCO, the Board asserted its wide discretion to consider any number of things it felt relevant to rate-making, at its sole discretion, identifying cost causality as only one component.
The Board has been studying how to remove distributor cross-subsidies since 2003, but stated from the bench that this project has been largely ineffective and has been unable to produce data that would allow it to set a rate for large customers that reflects the contribution of their costs to the system. The Board has apparently abandoned that project and has no plans to continue it. It will leave the remedy of this problem to distributors on a largely voluntary basis.
Following a truncated process, which required submissions from other parties by end of day Thursday, May 15, to which AMPCO was obliged to respond first thing Friday morning, May 16, the Board rendered its judgment after only scant deliberations over the lunch hour. AMPCO’s only recourse would be to seek leave from the Ontario Divisional Court to appeal this latest Board decision. Since this avenue generally is cost-prohibitive for organizations such as AMPCO, Oshawa’s large customers will have to live with this decision for the time being.
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For more information, contact:
Adam White
AMPCO President
416-260-0225
awhite@ampco.org |
