Hi Kathi,

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I hope you had a nice break.

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Myself and Rajvinder Sabharwal, an accountant in our team, spoke with Salman with regards to your request for a deferral account related to monthly billing in your absence. He felt that it was best to connect with you upon your return.

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Reviewing what you have filed, we will require more evidence. Â In your application you state that you exceed the materiality and indicate that this estimation is made starting in January 1, 2017. We have some concerns with the figure you have calculated. For example, the effective date would be the approval date of the accounting order. Additionally, your estimate of incremental costs should be net of the savings (e.g. lower bad debt expense, impact of improved cash flows on amounts collected for working capital, expansion of e-billings) that Burlington Hydro would realize. All of the above-noted benefits would impact the materiality of the amount.

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Please note that the April 15, 2015 Notice of Amendment of a Code: Amendments to the Distribution System Code which mandated the implementation of monthly billing by December 31, 2016. In that Notice of Amendment, it is stated:

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With respect to the costs associated with the transition to monthly billing, the OEB notes that distributors can apply for a deferral account with evidence demonstrating that such an account would meet the eligibility requirements. The eligibility requirements are described in section 2.12.7 of the OEB’s Filing Requirements for Electricity Distribution Rate Applications. Any deferral account would generally be for incremental administration costs. Prudently incurred capital expenditures would be included in rate base at the next cost of service application.

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The OEB also notes that, in addition to costs, there are likely to be benefits realized through moving to monthly billing for customers as noted by the OEB in the April 15, 2015 Amendment to the DSC:

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The OEB acknowledges that there is the potential for incremental costs to be incurred by distributors with the implementation of the amendment to the DSC associated with monthly billing. There are also potential benefits that can mitigate these costs. There may be ways for distributors to improve collection costs and bad debts as a result of issuing more frequent and lower bills. The impact of improved cash flow will be assessed as part of the OEB’s review of its policy on working capital allowance. Distributors should explore other opportunities for cost savings such as the expansion of e-billing, where appropriate.

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Could you please provide some additional information to us:

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1.   Evidence on transition-related expenses incurred to date or forecast to be incurred until your next COS. Any initial evidence filed in support of an accounting order application should at a minimum address the criteria of Causation, Materiality and Prudence as documented in the Filling Requirements and how the benefits discussed in the DSC have been considered.

2.   Evidence on incremental ongoing-related expenses incurred to date or forecast to be incurred to the December 31, 2017 (given your next COS is in 2018). Any initial evidence filed in support of an accounting order application should at a minimum address the criteria of Causation, Materiality and Prudence as documented in the Filing Requirements and how the benefits discussed in the DCS have been considered.

3.   The manner in which the applicant proposes to dispose of the account at the appropriate time.

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Please let me know if you have any questions and we can arrange a call.

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Kind regards,

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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