Electricity Cost Recovery - Proposed Amendments to the National Energy Board Cost Recovery Regulations

Proposed Amendments to the National Energy Board Cost Recovery Regulations

19 January 2006

NEB Cost Recovery - Information Session Agenda

• Welcome and Introduction
• Proposed Cost Recovery Concept as Approved by the Board
• New Cost Recovery Process
• Next Steps - Regulatory Process
• Adjourn at 3:30 p.m.

NEB Cost Recovery - Concept Background

• The Board regulates in the Canadian public interest within the mandate set by Parliament
• Focus on cost recovery for the Board’s overall regulatory responsibility
• Industry’s input was valuable when developing the proposed concept

NEB Cost Recovery - Concept Background

• Commodity charging approach consistent with oil and gas sector of activities
• Simple to develop and administer
• Equitable approach

NEB Cost Recovery - Concept

• Levy on newly regulated international power line companies
  • levy of 0.2% of project capital costs
• Levy on the international power line companies regulated by the NEB
  • actual energy transmitted in MW.h (international exports and imports)

NEB Cost Recovery - Concept

• Company classification and definition:
  • Small, large and border accommodation categories
  • Using existing definition with appropriate changes
• Year End Change
  • NEB cost recovery year will align with the NEB fiscal year

NEB Cost Recovery - Concept

Proposed Cost Recovery Process
Based on the NEB Concept

Levy on Newly Regulated IPLs

• Parallels greenfield fee concept in oil & gas
• Payable by IPL companies
  • not previously regulated by NEB
  • will apply to new power lines approved by the Board

Levy on Newly Regulated IPLs (continued)

• Set at 0.2% of capital cost as estimated by the Board in issuing the certificate or permit
• Applies upon approval of certificateor permit
  • invoiced after certificate or permit issued
  • payment due 90 days after invoice date

Cost Recovery from IPLs

• The electricity commodity recoverable cost pool will continue to be determined as in the past
• Pool will now be shared by IPLs instead of electricity exporters
• Measurement parameter for sharing costs among IPLs -> MW.h transmitted by each regulated IPL (international exports + imports)

Cost Recovery from IPLs (continued)

• Recoverable cost pool to be shared by large companies in the proportion that each company’s activity (MW.h transmitted - i.e. international exports + imports) is to the aggregate of activity by all large companies

Cost Recovery from IPLs (continued)

• The actual pool to be shared by large companies will be determined as follows:
  • Calculate commodity recoverable cost pool using present methodology
  • Deduct: Fees levied in the year on newly regulated IPLs
  • Deduct: Annual fixed fees charged to small companies (@ $500 per company)
  • Deduct: Border accommodations fees (if any)
  • Equals: Pool of costs to be shared by large IPLs

Cost Recovery from IPLs (continued)

• Will now require IPLs to report activity – MW.h transmitted
• For cost recovery, will require aggregate annual data:
  • forecasts of activity for current and upcoming year
  • actual activity for previous year
  • no averaging
  • transition into new process to be determined

Cost Recovery from IPLs (continued)

• Will continue process of invoicing on an estimated basis for the year
• After the year has passed, results will be audited
• Adjustments, if any, are factored into next billing cycle

Company classification

• Retain concept of company classification according to size
• Implement industry recommendation to use only 2 size-related categories
• Intermediate eliminated - leaving small and large categories
• Small companies continue to pay fixed fee - $500
• Large companies will share in cost pool

Company classification (continued)

• Small company will be defined as person transmitting less than 50,000 MW.h of power in the year
• All remaining regulated IPLs will be classified as large
• Border accommodation companies will remain, but definition will be amended to remove reference to exports

Year End Change Transition Plan

• This change will significantly reduce NEB workload
• Eliminates an entire year end closing cycle from our schedule
• Will transition by using a 3 month stub period Appropriate modifications to work calendar will be made e.g.:
  • timing of calls for actual & forecast activity information
  • timing of billing cycle
  • timing of audit

Year End Change Transition Plan

NEB Cost Recovery - Comment Period

• Written comments should be mailed or faxed to the Board by 20 February 2006
• Comments shall be addressed to the Secretary of the Board

NEB Cost Recovery - Comment Period (continued)

• The Board will consider and respond to stakeholders written comments
• Regulation drafting process should begin after the comment period is completed
• Stakeholders will have other opportunities to comment before the promulgation of the regulations

Regulation Process

Thank you!