OEB to Review Incremental Capital Module Policy

The Ontario Energy Board (OEB) recently announced that it will review and evaluate its Incremental Capital Module (ICM) policy. This could result in updates to how the OEB determines eligibility or applicability of ICM funding for Ontario utilities. The consultation will commence in October 2024, with outcomes expected by March 2025.

The ICM policy is designed to permit Ontario utilities to receive supplemental funding during an incentive ratemaking period for large capital expenditures that are not funded by existing rates. As explained in the consultation launch letter, the OEB’s ICM policy has evolved over time, starting with the 2014 Report of the Board - New Policy Options for the Funding of Capital Investments: The Advanced Capital Module and continuing with the 2016 Supplemental Report: New Policy Options for the Funding of Capital Investments. There have also been many OEB decisions on applications from utilities seeking ICM funding over the past 10 years.

In a recent post (OEB Provides Guidance on Consolidations With Release of Updated 2024 MAADs Handbook), we described the OEB’s review and update to its Handbook to Electricity Distributor and Transmitter Consolidations. In the course of that review, the OEB received comments from stakeholders raising questions about whether changes should be made to the ICM policy, particularly in relation to amalgamating utilities entering into a “deferred rebasing” arrangement. Those comments, as well as issues and observations encountered through utility ICM approval applications, led the OEB to convene the upcoming ICM consultation.

On the web page describing the ICM consultation, the OEB indicates that “[t]he scope of the evaluation will include policy elements such as materiality threshold calculation, ICM during a deferred rebasing period, and treatment of Operations, Maintenance and Administration expenses. Other topics may also be considered during the consultation.”

The first step in the ICM consultation will be the issuance of a proposed updated ICM report for review by stakeholders. This is scheduled for October 2024.

In November 2024, the OEB will hold a stakeholder meeting to discuss the proposed updates to the ICM policy and solicit verbal comments from stakeholders. Following the stakeholder meeting, the OEB will provide stakeholders an opportunity to file written comments on proposed updates to the ICM policy.

Finally, the OEB will issue a final updated ICM report by March 2025. That new ICM report can be expected to set out any updates to the OEB’s ICM policy, including when and how these updates will be put into effect.

We will continue to report on the IRM policy consultation as the next steps take place.