In a decision released in early December, the Ontario Energy Board approved the IESO’s proposed 2016 revenue requirement and expenditures but not its proposed IESO usage fee. The Board recommended the IESO reduce the charge applicable to exports primarily because exporters and their customers do not benefit from many of the IESO’s services. A final order was released on December 29 approving the IESO’s revised fee application. It confirmed that effective January 1, 2017, there will be two separate usage fees for the IESO: a fee of $1.1636/MWh for domestic customers and another fee of $0.9603/MWh for export customers.
The OEB did not approve the IESO’s proposal to charge a single usage fee to both domestic customers and exporters. The Board noted that the single fee would have represented “an increase for export customers of about 41% (from the current $0.803/MWh IESO fee – the OPA did not charge a fee to exporters) and a decrease for domestic customers of about 9% (from the current $1.242/MWh for the combined IESO and OPA fees).”
There were some overall savings for consumers in the new fees. The Board said, “The agreed upon revenue requirement of $182.1 million is approximately 4% lower than the combined 2014 revenue requirements of the IESO ($129.9 million) and the OPA ($60.3 million). As noted in the settlement proposal, the merger has resulted in efficiencies including a leaner workforce (35 fewer employees) and less office space.”
The Board also noted that, the “post-merger IESO continues to do some work that was formerly done by the OPA and that exclusively benefits domestic customers. The result is that the costs of servicing domestic customers are greater than the costs of servicing export customers. It is only logical that export customers pay less than domestic customers. ... The administrative convenience does not justify imposing a 41% rate increase and a 119% cost-allocation ratio on exporters.” The proceeding relied on the results of a cost allocation study prepared by the Elenchus consulting group, comparing the degree to which proposed rates would cover the cost of serving each of the two groups of customers, domestic customers and export customers.
The usage fee of $1.1636/MWh to domestic customers will be applied to each market participant’s allocated quantity of energy withdrawn (AQEW) from the IESO-controlled grid plus the embedded generation volumes reported by each LDC to the IESO on a monthly basis. The usage fee of $0.9603/MWh to export customers will be applied to each market participant’s scheduled quantity of energy withdrawn (SQEW). In its earlier decision, the Board recommended that the IESO submit a revised proposal to recover its approved revenue requirement “through two separate usage fees, one for domestic customers and one for export customers,” and that, each usage fee “represent a revenue-to-cost ratio of 100%, based on the Elenchus cost allocation evidence.”
For further information readers may visit the OEB’s website and view the Decision and Order (EB-2015-0275) document.