June 22, 2000

Energy Minister Announces Delay in Market Opening

Minister of Energy, Science & Technology, Jim Wilson, today announced that the date for market opening of the electricity industry in the province would be delayed by about six months.

Representatives on the Electricity Transition Committee heard of the delay last night, and members of the SAC group (Stakeholders Alliance for Electricity Competition & Customer Choice) were told this morning; the minister made the decision public while speaking at an energy conference in Toronto this afternoon.

The minister said the decision to delay market opening followed the advice of a consultant andinput from the Independent Electricity Market Operator, the MEA and the Ontario Energy Board.

No firm date has been set for market opening. The minister has said that the adequate time will be taken to set appropriate milestones to market opening, and has asked the Market Oversight

Committee to advise him on progress.

The ministers electronic newsletter, Power Switch, will be available next week on the MEST web site and is expected to contain more details.

June 22, 2000

Details on Bill 100, Ontario Energy Board Amendment Act, 2000

Bill 100 did not pass today and will now need to be considered by the Legislature in the fall. The OEB cannot apply the Bill until it is passed as there can be significant changes. The Bill, as drafted, has clauses for retroactive effect to June 1, 2000 on distribution rate orders made after that date, if the legislation comes into force.

MEA staff have analyzed Bill 100 and determined the legislation, if passed, would have serious impacts on the determination of rates. The Bill, as currently drafted, affects preparation for market opening. TheFirst Reading version of the bill is posted under Parliamentary Publications on Ontarios Legislative

Assembly web site (www.ontla.on.ca), and Minister Wilsons statement, media release and backgroundabout Bill 100 is available on the MEST web site (www.est.gov.on.ca). Members without Internet accesscan contact Mary Todorow at the MEA office for hard copies of the bill.

Bill 100, as currently drafted, would apply only to distribution rates charged by corporations incorporated by municipal corporations under section 142 of the Electricity Act, 1998, during the period from June 1, 2000 to February 28, 2003. The end date is coincident with the end of the first term of the OEBs

Performance-Based Regulation (PBR) over the Ontario electrical industry. The bill does not apply to privately owned LDCs or Hydro One.

If Bill 100 is approved, the OEB would not be allowed to approve an LDCs distribution rate increase application and/or must order a rebate to consumers, IF the distribution rate increase is attributable, directly or indirectly, to either:

1) Any payment obligation arising from financing arrangements, or series of financing arrangements,made concerning the initial incorporation of the LDC, or

2) The non-transfer of electricity assets to the LDC, which were originally held in a commission before incorporation. Electricity assets is a defined term in the Act and includes both real property and financial assets related to activities in generation, transmission, distribution or retailing electricity previously owned by a commission or municipal corporation. It does include proceeds from sales ofassets, but not from sale of shares.

Bill 100 also would restrict other borrowings, except those that are solely to protect the interests of consumers with respect to prices and the reliability and quality of electrical service. The implications for some business actions (e.g. such as acquiring other MEUs) is unclear.

The bill affects the OEBs authority to fix just and reasonable rates for the distribution of electricity, under section 78 of the Ontario Energy Board Act, 1998. While the legislation, as drafted, does not contain provisions to unwind past actions or arrangements with respect to the incorporation and financial structuring of municipally owned LDCs, it would effectively nullify the recovery of certain amounts through distribution rates.

If the municipality has not transferred all the distribution-related electricity assets to the LDC, then the OEB will determine if the distribution rates would have been lower and by how much  if those non-transferred assets had actually been transferred; it must then disallow the associated rate increase or mandate a rebate for such amounts previously approved.

As you know, large LDCs have filed their distribution rate applications with the OEB in accordance with the PBR rate handbook and the RUD model. It is not clear how the OEB will respond to the proposed amendment. The minister has also directed the OEB to provide a plan explaining how it will implement the previously announced directive regarding distribution rate applications. We will keep you posted with any further developments