Changes Coming to Electricity Rate Design for Ontario's Commercial and Industrial Consumers

The OEB has kicked off a consultation process that will likely result in commercial and industrial electricity consumers paying higher fixed charges for distribution service. This follows a similar process that was undertaken for residential consumers, as discussed in a previous post.

The OEB's May 28, 2015 letter indicates that it plans to initiate the development of new distribution rates for commercial and industrial electricity consumers. The OEB points to changes in the nature of the distribution service that such consumers will receive in the future, and suggests that this drives a need to change the way that distribution rates are set. Whereas distributors have historically provided a delivery route for commercial and industrial consumers, the expectation is that in the future the distributors will also provide a "service platform" that may include balancing, storage and redistributing of power from consumers who are connected to the distribution system. The growth in activities such as distributed generation and storage will reduce the distribution throughput. However, commercial and industrial electricity consumers will still require a reliable distribution system that meets their peak requirements.

The specific concern is that current rate design will not provide distributors with adequate and stable revenue in the face of declining distribution load. We expect that the solution will be a new rate design approach that creates a higher level of fixed charges that will apply to all commercial and industrial consumers, regardless of their actual consumption.

To assist in the determination of the proper approach, the OEB has asked stakeholders to consider and address a number of questions. The OEB plans to hold stakeholder meetings to discuss these questions, and other items of interest. Specifics of these meetings will be provided "in due course". Subsequently, a Board Staff Report will be prepared and presented to the OEB.