Enbridge and Union File to Clear Amounts for 2011 through One-Time Adjustments

May 2012

• Each year the gas utilities apply to the Ontario Energy Board for approval to dispose of amounts from the prior calendar year related to OEB-approved cost and revenue deferral accounts as well as any earnings sharing arising from the operation of each utility's incentive rate mechanism.
• Enbridge Gas Distribution and Union Gas have each filed an application with the OEB requesting approval to dispose of balances for 2011 in certain deferral accounts and earnings sharing amounts for 2011. For all of its customers, Enbridge is proposing a one-time adjustment on bills for October 2012. Union is proposing a one-time adjustment on October 2012 bills for its larger volume customers.
• For some customers, the adjustment will be a credit and for others a charge.

Enbridge Gas Distribution and Union Gas have each filed an application with the Ontario Energy Board requesting approval to dispose of balances for 2011 in certain deferral accounts and earnings sharing amounts for 2011. For all of its customers, Enbridge is proposing a one-time adjustment on bills for October 2012. Union is proposing a one-time adjustment on October 2012 bills for its contract customers. For its general service customers, Union is requesting that an amount be included in the Price Adjustment line on bills for a six-month period.

Background

Each year the gas utilities apply to the OEB for approval to dispose of amounts from the prior calendar year related to OEB-approved cost and revenue deferral accounts as well as any earnings sharing arising from the operation of each utility's incentive rate mechanism.

The Ontario Energy Board Act, 1998 requires that if a gas distributor has deferral or variance accounts that are not related to the gas commodity then at least every 12 months, the OEB is to make a determination on whether and how the amounts recorded in the accounts are to be reflected in rates. The OEB is also required to consider the appropriate number of billing periods over which the amount is to be divided in order to mitigate the impact on customers. The annual filing for disposition does not cover deferred amounts related to the gas commodity. These are dealt with through the quarterly rate adjustment mechanism.

Deferral account balances can be either a charge or a credit to customers depending on the nature of the account and the activity during the year under review. The deferred amounts capture the difference between forecast and actual revenues or costs. The types of costs or revenues that are subject to deferral account treatment must be approved by the OEB before the account can even be implemented.

Once the disposition application is filed, the OEB establishes a schedule for the review of the submission. This procedural schedule provides intervenors in the case with an opportunity to ask questions about the material filed. Typically, the OEB also sets some time for the utility and intervenors to try to reach an agreement on the issues. Any unresolved issues are heard in a formal hearing before the OEB. The last step in the process is the OEB's release of its decision on the application. The decision provides approvals for the amounts to be disposed of and how and when the amounts are to be cleared to the utilities' customers.

Enbridge's Application

Enbridge filed its application on May 11, 2012 and is proposing that the disposition be accomplished by a one-time adjustment on bills for October 2012 for all of its customers. This timing would coincide with Enbridge's quarterly rate adjustment for changes in natural gas prices. A procedural schedule from the OEB is pending.

The net 2011 amount proposed for disposition by Enbridge, including forecast interest to the end of September 2012, is a credit of about $9.645 million. However, since the basis for allocating the amount in each account to the various rate groups can vary depending on the type of account and whether the customer within the rate group is a system supply, Western T-service or Ontario T-service customer, some customers will see a charge and others a refund. The one-time amount will be calculated by taking the appropriate unit rate and multiplying it by the customer's actual consumption volumes for the 2011 calendar year. The unit rates that Enbridge is proposing to use are set out in the following table for certain of Enbridge's bundled rate groups. Brackets denote a refund.

Union's Application

Union filed its application on April 13, 2012. Union is proposing that for its general service customers (Rate 01, Rate 10, M1 and M2), the clearance be accomplished by including an amount in the relevant Price Adjustment line on bills for the period October 1, 2012 to March 31, 2013. For all other customers (Union's contract customers), the proposal is a one-time adjustment on October 2012 bills. Like Enbridge, this timing would coincide with Union's routine quarterly rate adjustment for changes in the price of the commodity.

The OEB has issued a first procedural schedule for the review of Union's filing, with a second one expected once the first few steps in the process have been completed. Intervenors had until May 25 to submit written questions, with Union's responses due June 8. Intervenors then have until June 15 to let the OEB know if they intend to file evidence.

In addition to covering the clearing of 2011 deferral account balances and 2011 earnings sharing, Union's proposed adjustments include the rate impacts stemming from an OEB-approved agreement between Union and intervenors in another proceeding. The agreement concerned the treatment of the difference between the demand-side management (DSM) budgets included in 2012 rates and the final DSM budgets for 2012.

The net amount being disposed of through Union's proposed adjustments is a credit of $3.426 million, including interest to the end of December 2011. However, some customers will see a charge and others a refund since the basis for allocating the amounts to be cleared can vary by rate group depending on the nature of the account. The one-time amounts for contract customers will be calculated by taking the appropriate unit rate and multiplying it by the customer's actual consumption volumes for the 2011 calendar year. The unit rates that Union is proposing to use for certain of its contract rate groups are set out in the following table. Brackets denote a refund.

For the M5, M7 and T1 rate groups, the main driver for the one-time charge are DSM-related costs, including actual 2011 DSM costs being higher than those built into rates.

Rate 20 bundled transportation customers will also have a credit adjustment for transportation. The proposed unit rate is (2.6912) ¢/m3, to be applied to annual contract demand volumes for 2011. For Union's general services, the unit rates to be included in the appropriate Price Adjustment for the October 2012 to March 2013 period are as follows, in ¢/m3: Rate 01 - (0.3514) for delivery and (0.6093) for transportation; Rate 10 - (1.7259) for delivery and (0.5705) for transportation; M1 - (0.0756) for delivery and (0.0072) for commodity if applicable; and M2 - 0.1246 for delivery and (0.0072) for commodity. These rates for general service customers will be applied to their consumption volumes over the six-month period.

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