Final Regulatory Asset Recovery Application –
Supplemental Disclosure Certification
RP-2005-0020/EB-2005-0422, 0423, 0424, 0424
August 9, 2005
SUPPLEMENTAL DISCLOSURE CERTIFICATION
a) For this item a certification by the Chief Executive Officer has been provided under separate cover.
b) Accrual approach has been used for the RSVA accounts and Account 1571 and has been used consistently over time and among accounts for the applicable period.
c) Interest rate used is 7%, the deemed rate currently in effect, and is consistent with that stipulated in the Distribution Rate Handbook.
d) The variance between the Board approved line loss of 4.49% and actual line losses are reflected in the RSVA power (Account 1588) for year-end periods December 31st, 2002, December 31st, 2003 and December 31st, 2004.
e) The method used to calculate the balances of Account 1571 does not use the TOU COP Billed Revenue as a proxy for TOU COP Expense but rather the actual TOU COP Expense was calculated as follows:
Step 1: Segregate Cost of Power From Bundled Revenues
For the period in 2001 during which distribution charges were bundled with Cost of Power, it was necessary to calculate the portion of bundled revenues attributable to Cost of Power. This was done by segregating distribution charges on the basis of the cost allocation model specified by the Board in its rate unbundling (RUD) spreadsheet. Specifically, the following percentages of bundled revenue were deemed to be distribution related, with the balance being attributed to Cost of Power revenues:
Residential / General Service / Large UseVeridian Connections / 18.7% / 12.1% / N/A
Belleville Utilities / 14.8% / 2.7% / 3.6%
Port Hope Hydro / 14.6% / 8.51% / 3.1%
Brock Hydro / 21.6% / 17.36% / N/A
Step 2: Adjust For Opening And Closing Unbilled Revenue
Opening and closing 2001 unbilled revenue adjustments were allocated to distribution and Cost of Power revenues through the application of the cost allocation model from the original RUD spreadsheet, with adjustments to reflect subsequent distribution and wholesale Cost of Power increases, as applicable. As unbundled distribution and Cost of Power charges were in effect during 2002, no reallocation to revenue and unbilled revenue adjustments were required.
Step 3: Allocate Cost of Power To TOU Customers
Wholesale Cost of Power expenses were adjusted to reflect power purchases made on behalf of Time-Of-Use customers. The costs attributable to these purchases were determined using each customer’s monthly on-peak and off-peak consumption, and their contribution to the utility’s monthly system peak demand, all adjusted for estimated loss factors. Approved OPG rates were applied to these charge determinants.
A TOU variance was then established as the differential between this calculated TOU COP expense and the TOU COP Revenues billed.
The non-TOU COP expense was calculated as the differential between total COP expense and the calculated TOU COP expense.
Non-TOU Variance was then established as the differential between the Non-TOU COP expense and the Non-TOU COP revenue billings (calculated on an accrual basis).
At the time of calculation, Veridian considered that as the TOU variance could be calculated with a high degree of accuracy, it was equitable that it be separated from the non-TOU variance and disposition of each of the variances be allocated to the identifiable customer groups.
f) The costs in Account 1525 relate solely to the costs associated with the issuance of rebate cheques and Hydro One’s environmental costs not other costsand rebate cheques were issued on or before December 31st, 2002.
g) The amount claimed is a credit balance of $930,203 which includes Hydro One’s regulatory asset charges to embedded distributors up to April 30th, 2006. The amount claimed in our January 2004 Phase 1 filing of $1,240,410 was subsequently identified as erroneous. Updated quarterly RRR filings were provided for 2002, 2003, and 2004 in February 2005. The amount claimed on our January 2005 filing was $1,276,433 based on our December 31st, 2003 balances which included Hydro One charges to December 31st, 2003. Total regulatory assets decreased in 2004 by $2,730,437 as credit balances accumulated in RSVA accounts. In particular Transmission CN charges were over recovered by $4.0 million.
h) Customer education costs in Account 1570 are nil.
i) Transition costs claimed do not include any settlement services and do not include Electronic Business Transaction costs incurred after December 31st, 2002, as per the Board’s Decision (7.0.56 and 7.0.57 of the Decision).
j) All cost categories in the transition cost account 1570 meet the materiality criterion as outlined in the transition costs filing guidelines issued January 15th, 2003.
k) All regulatory assets claimed are allocated to the rate classes based on the findings in the Board’s Decision.
l) Transition cost amounts were reviewed by external auditors as part of Veridian Connections Inc. annual financial audits. Additionally, a separate internal review was conducted in accordance with the Board Decision.
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