O. Reg. 53/05: PAYMENTS UNDER SECTION 78.1 OF THE ACT

Ontario Energy Board Act, 1998
Loi de 1998 sur la Commission de l’énergie de l’Ontario

ONTARIO REGULATION 53/05

Payments under Section 78.1 of the Act

Historical version for the period November 27, 2015 to December 31, 2015.

Last amendment: O. Reg. 353/15.

This Regulation is made in English only.

Definition

0.1 (1) In this Regulation,

“approved reference plan” means a reference plan, as defined in the Ontario Nuclear Funds Agreement, that has been approved by Her Majesty the Queen in right of Ontario in accordance with that agreement;

Note: On January 1, 2016, subsection 0.1 (1) of the Regulation is amended by adding the following definitions: (See: O. Reg. 353/15, s. 1)

“Darlington Refurbishment Project” means the work undertaken by Ontario Power Generation Inc. in respect of the refurbishment, in whole or in part, of some or all of the generating units of the Darlington Nuclear Generating Station;

“deferral period” means the period beginning on January 1, 2017, and ending when the Darlington Refurbishment Project ends;

“nuclear decommissioning liability” means the liability of Ontario Power Generation Inc. for decommissioning its nuclear generation facilities and the management of its nuclear waste and used fuel;

Note: On January 1, 2016, subsection 0.1 (1) of the Regulation is amended by adding the following definition: (See: O. Reg. 353/15, s. 1)

“nuclear facilities” means the nuclear generation facilities prescribed in paragraphs 3, 4 and 5 of section 2;

“Ontario Nuclear Funds Agreement” means the agreement entered into as of April 1, 1999 by Her Majesty the Queen in right of Ontario, Ontario Power Generation Inc. and certain subsidiaries of Ontario Power Generation Inc., including any amendments to the agreement.  O. Reg. 23/07, s. 1.

(2) For the purposes of this Regulation, the output of a generation facility shall be measured at the facility’s delivery points, as determined in accordance with the market rules. O. Reg. 312/13. s. 1.

Prescribed generator

1. Ontario Power Generation Inc. is prescribed as a generator for the purposes of section 78.1 of the Act.  O. Reg. 53/05, s. 1.

Prescribed generation facilities

2. The following generation facilities of Ontario Power Generation Inc. are prescribed for the purposes of section 78.1 of the Act:

1. The following hydroelectric generating stations located in The Regional Municipality of Niagara:

i. Sir Adam Beck I.

ii. Sir Adam Beck II.

iii. Sir Adam Beck Pump Generating Station.

iv. De Cew Falls I.

v. De Cew Falls II.

2. The R. H. Saunders hydroelectric generating station on the St. Lawrence River.

3. Pickering A Nuclear Generating Station.

4. Pickering B Nuclear Generating Station.

5. Darlington Nuclear Generating Station.

6. As of July 1, 2014, the generation facilities of Ontario Power Generation Inc. that are set out in the Schedule.  O. Reg. 53/05, s. 2; O. Reg. 23/07, s. 2; O. Reg. 312/13, s. 2.

Prescribed date for s. 78.1 (2) of the Act

3. April 1, 2008 is prescribed for the purposes of subsection 78.1 (2) of the Act.  O. Reg. 53/05, s. 3.

4. Revoked: O. Reg. 312/13, s. 3.

Deferral and variance accounts

5. (1) Ontario Power Generation Inc. shall establish a variance account in connection with section 78.1 of the Act that records capital and non-capital costs incurred and revenues earned or foregone on or after April 1, 2005 due to deviations from the forecasts as set out in the document titled “Forecast Information (as of Q3/2004) for Facilities Prescribed under Ontario Regulation 53/05” posted and available on the Ontario Energy Board website, that are associated with,

(a) differences in hydroelectric electricity production due to differences between forecast and actual water conditions;

(b) unforeseen changes to nuclear regulatory requirements or unforeseen technological changes which directly affect the nuclear generation facilities, excluding revenue requirement impacts described in subsections 5.1 (1) and 5.2 (1);

(c) changes to revenues for ancillary services from the generation facilities prescribed under section 2;

(d) acts of God, including severe weather events; and

(e) transmission outages and transmission restrictions that are not otherwise compensated for through congestion management settlement credits under the market rules.  O. Reg. 23/07, s. 3.

(2) The calculation of revenues earned or foregone due to changes in electricity production associated with clauses (1) (a), (b), (d) and (e) shall be based on the following prices:

1. $33.00 per megawatt hour from hydroelectric generation facilities prescribed in paragraphs 1 and 2 of section 2.

2. $49.50 per megawatt hour from nuclear generation facilities prescribed in paragraphs 3, 4 and 5 of section 2.  O. Reg. 23/07, s. 3.

(3) Ontario Power Generation Inc. shall record simple interest on the monthly opening balance of the account at an annual rate of 6 per cent applied to the monthly opening balance in the account, compounded annually.  O. Reg. 23/07, s. 3.

(4) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records non-capital costs incurred on or after January 1, 2005 that are associated with the planned return to service of all units at the Pickering A Nuclear Generating Station, including those units which the board of directors of Ontario Power Generation Inc. has determined should be placed in safe storage.  O. Reg. 23/07, s. 3.

(5) For the purposes of subsection (4), the non-capital costs include, but are not restricted to,

(a) construction costs, assessment costs, pre-engineering costs, project completion costs and demobilization costs; and

(b) interest costs, recorded as simple interest on the monthly opening balance of the account at an annual rate of 6 per cent applied to the monthly opening balance in the account, compounded annually.  O. Reg. 23/07, s. 3.

5.1 Revoked: O. Reg. 312/13, s. 3.

Nuclear liability deferral account

5.2 (1) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records, on and after the effective date of the Board’s first order under 78.1 of the Act, the revenue requirement impact of changes in its total nuclear decommissioning liability between,

(a) the liability arising from the approved reference plan incorporated into the Board’s most recent order under section 78.1 of the Act; and

(b) the liability arising from the current approved reference plan.  O. Reg. 23/07, s. 3.

(2) Ontario Power Generation Inc. shall record interest on the balance of the account as the Board may direct.  O. Reg. 23/07, s. 3.

5.3 Revoked: O. Reg. 312/13, s. 3.

Nuclear development variance account

5.4 (1) Ontario Power Generation Inc. shall establish a variance account in connection with section 78.1 of the Act that records, on and after the effective date of the Board’s first order under section 78.1 of the Act, differences between actual non-capital costs incurred and firm financial commitments made and the amount included in payments made under that section for planning and preparation for the development of proposed new nuclear generation facilities.  O. Reg. 27/08, s. 1.

(2) Ontario Power Generation Inc. shall record interest on the balance of the account as the Board may direct.  O. Reg. 27/08, s. 1.

Note: On January 1, 2016, the Regulation is amended by adding the following section: (See: O. Reg. 353/15, s. 2)

Darlington refurbishment rate smoothing deferral account

5.5 (1) Ontario Power Generation Inc. shall establish a deferral account in connection with section 78.1 of the Act that records, on and after the commencement of the deferral period, the difference between,

(a) the revenue requirement amount approved by the Board that, but for subparagraph 12 i of subsection 6 (2) of this Regulation, would have been used in connection with determining the payments to be made under section 78.1 of the Act each year during the deferral period in respect of the nuclear facilities; and

(b) the portion of the revenue requirement amount referred to in clause (a) that is used in connection with determining the payments made under section 78.1 of the Act, after determining, under subparagraph 12 i of subsection 6 (2) of this Regulation, the amount of the revenue requirement to be deferred for that year in respect of the nuclear facilities. O. Reg. 353/15, s. 2.

(2) Ontario Power Generation Inc. shall record interest on the balance of the account at a long-term debt rate reflecting Ontario Power Generation Inc.’s cost of long-term borrowing that is determined or approved by the Board from time to time, compounded annually. O. Reg. 353/15, s. 2.

Rules governing determination of payment amounts by Board

6. (1) Subject to subsection (2), the Board may establish the form, methodology, assumptions and calculations used in making an order that determines payment amounts for the purpose of section 78.1 of the Act.  O. Reg. 53/05, s. 6 (1).

(2) The following rules apply to the making of an order by the Board that determines payment amounts for the purpose of section 78.1 of the Act:

1. The Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the variance account established under subsection 5 (1) over a period not to exceed three years, to the extent that the Board is satisfied that,

i. the revenues recorded in the account were earned or foregone and the costs were prudently incurred, and

ii. the revenues and costs are accurately recorded in the account.

2. In setting payment amounts for the assets prescribed under section 2, the Board shall not adopt any methodologies, assumptions or calculations that are based upon the contracting for all or any portion of the output of those assets.

3. The Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the deferral account established under subsection 5 (4).  The Board shall authorize recovery of the balance on a straight line basis over a period not to exceed 15 years.

4. The Board shall ensure that Ontario Power Generation Inc. recovers capital and non-capital costs, and firm financial commitments incurred to increase the output of, refurbish or add operating capacity to a generation facility referred to in section 2, including, but not limited to, assessment costs and pre-engineering costs and commitments,

Note: On January 1, 2016, paragraph 4 of subsection 6 (2) of the Regulation is amended by striking out the portion before subparagraph i and substituting the following: (See: O. Reg. 353/15, s. 3 (1))

4. The Board shall ensure that Ontario Power Generation Inc. recovers capital and non-capital costs and firm financial commitments incurred in respect of the Darlington Refurbishment Project or incurred to increase the output of, refurbish or add operating capacity to a generation facility referred to in section 2, including, but not limited to, assessment costs and pre-engineering costs and commitments,

i. if the costs and financial commitments were within the project budgets approved for that purpose by the board of directors of Ontario Power Generation Inc. before the making of the Board’s first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., or

ii. if the costs and financial commitments were not approved by the board of directors of Ontario Power Generation Inc. before the making of the Board’s first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., if the Board is satisfied that the costs were prudently incurred and that the financial commitments were prudently made.

4.1 The Board shall ensure that Ontario Power Generation Inc. recovers the costs incurred and firm financial commitments made in the course of planning and preparation for the development of proposed new nuclear generation facilities, to the extent the Board is satisfied that,

i. the costs were prudently incurred, and 

ii. the financial commitments were prudently made.

5. In making its first order under section 78.1 of the Act in respect of Ontario Power Generation Inc., the Board shall accept the amounts for the following matters as set out in Ontario Power Generation Inc.’s most recently audited financial statements that were approved by the board of directors of Ontario Power Generation Inc. before the effective date of that order:

i. Ontario Power Generation Inc.’s assets and liabilities, other than the variance account referred to in subsection 5 (1), which shall be determined in accordance with paragraph 1.

ii. Ontario Power Generation Inc.’s revenues earned with respect to any lease of the Bruce Nuclear Generating Stations.

iii. Ontario Power Generation Inc.’s costs with respect to the Bruce Nuclear Generating Stations.

6. Without limiting the generality of paragraph 5, that paragraph applies to values relating to,

i. capital cost allowances,

ii. the revenue requirement impact of accounting and tax policy decisions, and

iii. capital and non-capital costs and firm financial commitments to increase the output of, refurbish or add operating capacity to a generation facility referred to in section 2.

7. The Board shall ensure that the balance recorded in the deferral account established under subsection 5.2 (1) is recovered on a straight line basis over a period not to exceed three years, to the extent that the Board is satisfied that revenue requirement impacts are accurately recorded in the account, based on the following items, as reflected in the audited financial statements approved by the board of directors of Ontario Power Generation Inc.,

i. return on rate base,

ii. depreciation expense,

iii. income and capital taxes, and

iv. fuel expense.

7.1 The Board shall ensure the balance recorded in the variance account established under subsection 5.4 (1) is recovered on a straight line basis over a period not to exceed three years, to the extent the Board is satisfied that,

i. the costs were prudently incurred, and 

ii. the financial commitments were prudently made.

8. The Board shall ensure that Ontario Power Generation Inc. recovers the revenue requirement impact of its nuclear decommissioning liability arising from the current approved reference plan.

9. The Board shall ensure that Ontario Power Generation Inc. recovers all the costs it incurs with respect to the Bruce Nuclear Generating Stations.

10. If Ontario Power Generation Inc.’s revenues earned with respect to any lease of the Bruce Nuclear Generating Stations exceed the costs Ontario Power Generation Inc. incurs with respect to those Stations, the excess shall be applied to reduce the amount of the payments required under subsection 78.1 (1) of the Act with respect to output from the nuclear generation facilities referred to in paragraphs 3, 4 and 5 of section 2. 

11. In making its first order under section 78.1 of the Act in respect of Ontario Power Generation Inc. that is effective on or after July 1, 2014, the following rules apply:

i. The order shall provide for the payment of amounts with respect to output that is generated at a generation facility referred to in paragraph 6 of section 2 during the period from July 1, 2014 to the day before the effective date of the order.

ii. The Board shall accept the values for the assets and liabilities of the generation facilities referred to in paragraph 6 of section 2 as set out in Ontario Power Generation Inc.’s most recently audited financial statements that were approved by the board of directors before the making of that order.  This includes values relating to the income tax effects of timing differences and the revenue requirement impact of accounting and tax policy decisions reflected in those financial statements.  O. Reg. 23/07, s. 4; O. Reg. 27/08, s. 2; O. Reg. 312/13, s. 4.

Note: On January 1, 2016, subsection 6 (2) of the Regulation is amended by adding the following paragraph: (See: O. Reg. 353/15, s. 3 (2))

12. For the purposes of section 78.1 of the Act, in setting payment amounts for the nuclear facilities during the deferral period,

i. the Board shall determine the portion of the Board-approved revenue requirement for the nuclear facilities for each year that is to be recorded in the deferral account established under subsection 5.5 (1), with a view to making more stable the year-over-year changes in the payment amount that is used in the determination of the undeferred payments made under section 78.1 of the Act with respect to the nuclear facilities,

ii. the Board shall determine the approved revenue requirements referred to in subsection 5.5 (1) and the amount of the approved revenue requirements to be deferred under subparagraph i on a five-year basis for the first 10 years of the deferral period and, thereafter, on such periodic basis as the Board determines,

iii. for greater certainty, the Board’s determination of Ontario Power Generation Inc.’s approved revenue requirement for the nuclear facilities shall not be restricted by the yearly changes in payment amounts in subparagraph i,

iv. the Board shall ensure that Ontario Power Generation Inc. recovers the balance recorded in the deferral account established under subsection 5.5 (1), and the Board shall authorize recovery of the balance on a straight line basis over a period not to exceed 10 years commencing at the end of the deferral period, and

v. the Board shall accept the need for the Darlington Refurbishment Project in light of the Plan of the Ministry of Energy known as the 2013 Long-Term Energy Plan and the related policy of the Minister endorsing the need for nuclear refurbishment.

7. Omitted (provides for coming into force of provisions of this Regulation).  O. Reg. 53/05, s. 7.

schedule

1. Abitibi Canyon.

2. Alexander.

3. Aquasabon.

4. Arnprior.

5. Auburn.

6. Barrett Chute.

7. Big Chute.

8. Big Eddy.

9. Bingham Chute.

10. Calabogie.

11. Cameron Falls.

12. Caribou Falls.

13. Chats Falls.

14. Chenaux.

15. Coniston.

16. Crystal Falls.

17. Des Joachims.

18. Elliott Chute.

19. Eugenia Falls.

20. Frankford.

21. Hagues Reach.

22. Hanna Chute.

23. High Falls.

24. Indian Chute.

25. Kakabeka Falls.

26. Lakefield.

27. Lower Notch.

28. Manitou Falls.

29. Matabitchuan.

30. McVittie.

31. Merrickville.

32. Meyersberg.

33. Mountain Chute.

34. Nipissing.

35. Otter Rapid.

36. Otto Holden.

37. Pine Portage.

38. Ragged Rapids.

39. Ranney Falls.

40. Seymour.

41. Sidney.

42. Sills Island.

43. Silver Falls.

44. South Falls.

45. Stewartville.

46. Stinson.

47. Trethewey Falls.

48. Whitedog Falls.

O. Reg. 312/13, s. 5.