OEB Initiates Consultation into Regulatory Treatment of Pension Costs

Regulated utilities in Ontario can expect that more attention may be paid to their pension costs in future rate-setting proceedings.

The OEB's May 14, 2015 Notice states that it is convening a consultation to look at how pension and other post-employment benefits (OPEBs) costs are treated for regulatory purposes. The objectives of the consultation are to develop standard principles to guide the OEB review of pension and OPEBs costs, and to establish regulatory mechanisms for cost recovery that can be applied consistently across the gas and electricity sectors. The OEB has provided a list of questions to be answered by interested parties by June 26, 2015. The Notice indicates that this written question and answer process constitutes the "initial steps in the consultation." No detail is provided about next steps.

The Notice shows that the OEB wants to move towards a standard treatment of pension and OPEBs costs for all of the utilities that the OEB regulates. Among other things, the OEB seeks to ensure that these costs are comparable and benchmarked between utilities. Whether and how this can be accomplished remains to be seen. Standardization will be challenging among a diverse group of utilities, some of whom use different accounting standards (IFRS, US GAAP, ASPE) and many of whom have long-standing pension and benefit arrangements with their employees.