Hi Anna,

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Please see below the answers (in red) to your questions. Let me know if you require anything further.

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Andrew Belsito, CPA, CMA

Rates and Regulatory Affairs Officer

PUC Services Inc.

Tel (705) 759-3009

HYPERLINK "mailto:andrew.belsito@ssmpuc.com"andrew.belsito@ssmpuc.com

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From: Anna King [mailto:Anna.King@ontarioenergyboard.ca]
Sent: Tuesday, January 31, 2017 3:09 PM
To: Andrew Belsito
Subject: RE: PUC Distribution Inc. - OEB File No. EB-2016-0102 - Follow up questions

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Hi Andrew,

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With regards to the interrogatories, we have some follow up questions:

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1)   The OEB approved SME rates effective May 1, 2013, allowing the Smart Metering Entity charge to be levied and collected by the Smart Metering Entity from all Distributors identified in the Board’s annual Yearbook of Electricity Distributors using a rate of $0.788 per month for each Residential and General Service <50kW customer of each distributor. The first invoice for the smart meter entity charges were billed by the IESO to distributors on the April 2013 physical invoice issued in May. Distributors therefore prepaid the IESO for the SME charge. In addition, based on accrual accounting, distributors would also accrue sales amounts monthly starting May 2013 for any amounts at the end of each month which remained unbilled.

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a.    Please explain how you record amounts paid and the timing of such SME payments from monthly IESO invoices.

PUC records and pays the IESO invoice (including the SME charge) in the month that we receive it. The invoice is for the prior month’s consumption (i.e. April’s invoice is recorded and paid in the month of May). In looking at an entire year, we record 12 IESO invoices (12 SME charges).Â

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b.    Does PUC Distribution accrue costs from the IESO each month? Please describe what is being accrued.

PUC does accrue costs from the IESO each month. The accrual includes typical IESO charges (e.g. SME, Network Service Charge, Rural Rate Settlement Charge, OPA Charge, etc.), other IESO charges (e.g.10-minute spinning Market Reserve Hourly Uplift, Net Energy Market Settlement Uplift, etc.), and cost of energy. Please see attached our accrual timing schedule.Â

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c.    Does PUC Distribution accrue unbilled revenues from customers each month? Please describe what is being accrued.

PUC does accrue unbilled revenues from customers each month. The unbilled revenue accrual includes Smart Meter Entity Charge, Distribution Charges, Network Transmission Charges, Regulatory Charges, as well as cost of energy.

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2)Â Â Â PUC Distribution has indicated that the IESO has under invoiced it for the Global Adjustment Charge (charge type 148) for the months of June, July and August of 2015.Â

“…As a result, PUC has calculated its Cost of Power (COP) expense for 2015 to be understated by $2,451,989, effectively increasing the credit balance in account 1588 by the same amount. PUC will have a correcting entry in 2016 to record this additional COP expense, which will effectively debit account 1588 for $2,451,989. Given that these amounts will balance out between rate years, PUC proposes removing $2,451,989 from the disposition of the credit balance in account 1588 as at Dec. 31, 2015. After consideration of recalculated carrying charge amounts, this change will result in disposition of a credit balance of $2,594,372 in account 1588 versus the credit balance of $5,084,683 as filed.”

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a.    Please provide the details of the cause of the under invoicing of the Global Adjustment Charge by the IESO. Please providing supporting evidence of this billing issue.

The kWh’s associated with PUC’s embedded generation under the IESO’s Renewable Energy Standard Offer Program were not included in the IESO invoicing for the months of June, July and August 2015 . Due to this, the IESO did not charge PUC for those kWh’s in the Global Adjustment charge which caused us to be unbilled by $2,451,989 in 2015.Â

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b.    Why isn’t PUC Distribution proposing to make an adjustment to the RSVA Global Adjustment account, given that the IESO under invoiced it for the Global Adjustment Charge; but rather, PUC Distribution is proposing to adjust the RSVA Power account instead?

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The Global Adjustment charges on the monthly IESO Settlement Invoices are initially recorded in the Cost of Power  expense account.

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Global Adjustment expense for Non-RPP consumers is calculated based on the kWh’s billed to Non-RPP consumers and is transferred to the Global Adjustment sub-account.

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The RSVA Global Adjustment variance account only records the net difference between the Global Adjustment revenue amounts billed to Non-RPP consumers and the calculated Global Adjustment expense for Non-RPP consumers.

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The remaining Global Adjustment expense flows to the RSVA Power account. Therefore, the under invoicing of Global Adjustment described in Part A above is reflected in the RSVA Power account.

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c.    The unadjusted RSVA Power account balance was ($5,084,683) and after the adjustment the balance was ($2,594,372). The balance of this account is significant. Please explain the reason why there is such a large balance in this account.

The residual balance in the RSVA Power account is due to differences between the Global Adjustment 2nd rate, used to settle with the IESO, and the Global Adjustment final rate invoiced by the IESO. In addition, the balance reflects settlement variances between the energy rates billed to customers and the energy rates invoiced by IESO.

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If you could further clarify these issues, it would be much appreciated.

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Many thanks,

Anna

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From: Andrew Belsito [mailto:andrew.belsito@ssmpuc.com]
Sent: January-25-17 3:53 PM
To: Anna King
Subject: RE: PUC Distribution Inc. - OEB File No. EB-2016-0102 - Follow up questions

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Hi Anna,

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Thanks for taking our call earlier to clarify these questions below.Â

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If you require anything further from us or have any more questions, just let me know.

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Thanks!

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Andrew Belsito, CPA, CMA

Rates and Regulatory Affairs Officer

PUC Services Inc.

Tel (705) 759-3009

HYPERLINK "mailto:andrew.belsito@ssmpuc.com"andrew.belsito@ssmpuc.com

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From: Anna King [mailto:Anna.King@ontarioenergyboard.ca]
Sent: Wednesday, January 25, 2017 12:42 PM
To: Andrew Belsito
Subject: PUC Distribution Inc. - OEB File No. EB-2016-0102 - Follow up questions

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Hi Andrew,

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Reviewing your responses to the interrogatories, I have a few more questions. Would it be possible to come back to me by this Friday with your responses?

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Ø It is not clear to me why you are accruing the smart metering charge. Could you please clarify the arrangement you have with the IESO? It is my understanding that what you bill and pay to the IESO should balance every month and as a result this would not be an issue.

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Ø Could you please clarify if this issue has been resolved with the IESO, has the adjustment already been made with the IESO? If it as not, then there is a risk that there could be retroactive rate making if the model is filed as is.

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Many thanks,

Anna

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Anna King

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Analyst, Rates

Incentive Rate-setting and Accounting

Applications Division

P: (416) 440-8108

E: Anna.King@ontarioenergyboard.ca

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