The Future for Power Sector Regulation in Ontario Jan Carr Vice Chair, Ontario Energy Board APPrO Canadian Power Conference & Trade Show November 24, 2004

2 Overview Approach to Economic Regulation Major Electricity Initiatives –Regulated Price Plan (RPP) –Smart Meters –Electricity Distribution Rates (EDR) Natural Gas Forum –Gas-fired Power Generation

3 Approach to Economic Regulation GOALS Facilitate infrastructure investment Create incentives linking profit and performance Protect consumer interests TOOLS Approving expansion of infrastructure Setting utility rates Initiating consumer protection mechanisms

4 Regulated Price Plan (RPP) New mechanism to determine electricity commodity price – May 2005 RPP will reflect true cost of electricity RPP will be stable and support conservation / smart meters

5 RPP Components OPG baseload nuclear and hydro plants Existing NUG contracts New OPA procurement contracts Forecasting of IESO spot market prices

6 RPP Milestones MilestoneTarget date “Strawman” issued for comment and workshops November- December 04 Initial draft RPP code issued for comment and technical conference December 04- January 05 Final RPP code issuedFebruary 05 Implementation testing/dry runs – RPP code; amendments to LDC rates orders/licences March 05 Final testing of RPP codeApril-May 05

7 Smart Meters Implementation target is tight –800,000 customers by 2007; all customers by 2010 OEB draft implementation plan released November 9 Comments due on November 26 Key issues: –Installation priorities –Procurement –Cost –Technology

8 Electricity Distribution Rates Dealing with backlog of issues from rate freeze in –Continued recovery of transition costs –3 rd (final) installment of MARR – tied to spending on DSM Working to establish a sound basis for future incentive rates – Establishment of new revenue requirement – Initial cost allocation – Further review of revenue requirements

9 Natural Gas Forum (NGF) Technical consultations identified a number of key issues in natural gas sector Research and discussion in three areas: –Utility system supply –Storage and transportation –Rate regulation, with a focus on Performance-Based Ratemaking Forum raised issues of operational requirements of power generators

10 Issues in Gas-Fired Power Generation Increased demand on natural gas infrastructure to supply expected gas-fired power generation Issues raised in NGF: –Distribution rate structure –Storage and transportation flexibility –Contract arrangements –Infrastructure and distributor arrangements

11 Conclusion