At the request of the Minister of Energy, in 2004 the Ontario Energy Board (OEB) developed an electricity price plan, referred to as the Regulated Price Plan (RPP), which provides stable and predictable electricity pricing, encourages conservation and ensures the price low volume consumers pay for electricity more accurately reflects the price paid to generators. The OEB is responsible for overseeing all aspects of the RPP, including setting RPP electricity prices. The RPP has been in place since 2005.
Per the Minister’s request and prior to the introduction of the Fair Hydro Plan (FHP), the OEB established RPP electricity prices. These RPP prices were set on May 1 and November 1 of each year, based on the principle of “supply cost recovery”. This approach required the OEB to set electricity prices at a level that would enable full recovery of all costs incurred to deliver the forecast amount of power over the forecast period (i.e., that the forecasted costs of electricity supply would be equal to the revenue generated through its sale). As prices were based on a forecast, the RPP price-setting process was also used to true-up for any over- or under-collections from prior periods. The process employed by the OEB to establish these prices is described in the OEB issued RPP Manual (https://www.oeb.ca/oeb/_Documents/EB-2004-0205/RPP_Manual.pdf).
The methodology described in the RPP Manual is robust. From a supply perspective, it directs that detailed information on the supply costs of Ontario's generators and assumptions about how generators choose to participate in Ontario's wholesale electricity market be used to inform price. Further, the RPP manual instructs that forecasts of RPP supply costs must reflect the terms and conditions of applicable IESO supply and demand management contracts, consider the Global Adjustment (GA) charges of both Class A and Class B consumers and incorporate the expected output and costs of Non-Utility Generation (NUG) suppliers under contract with Ontario Electricity Financial Corporation (OEFC). Inherently, fuel prices and operating costs are also critical inputs into the RPP supply cost forecast.
Forecasts of total RPP electricity demand and a detailed load profile for RPP-eligible consumers are the major demand-side forecast requirements that must be considered when developing RPP prices.
On June 1, 2017, the FHP was introduced. Amongst other objectives, the FHP anticipates achieving the following over the next four-year period:
- Lowering the electricity bills of FHP-eligible consumers by 25% starting July 1, 2017; and,
- Holding any increases in the electricity bills of FHP-eligible consumers to the price of inflation over the period in which the FHP is in effect (as described below).
FHP legislation prescribes how RPP prices are to be set over the July 1, 2017 - April 30, 2018 period. The FHP is anticipated to be in effect for four years and the OEB will be guided by related legislation during future FHP price setting processes. Current FHP regulation does not yet specify how post April 30, 2018 RPP prices will be set. Further information on the FHP is available through the following link: https://www.ontario.ca/page/ontarios-fair-hydro-plan.
The objective of this RFP is to secure a specialized consulting services firm to assist the OEB with meeting the following of its legislative mandates:
- Adhering to the guidance provided through the RPP Manual, develop the RPP Price Report.
- Produce the Wholesale Electricity Market Price Forecast Report. Amongst other objectives, this report supports development of the RPP Price Report.
- Support RPP and/or RPP Pilot related analysis as may be requested by the OEB.
As a result of the FHP, the OEB’s requirement to establish semi-annual RPP prices has been suspended and replaced with the need to establish RPP prices on an annual basis. Further, the FHP introduced the need for the OEB to set what is referred to as the Global Adjustment (GA) Modifier. The GA Modifier is designed to provide customers that are eligible for the RPP but have chosen to enter into a contract with an energy retailer or market-based pricing with a level of benefit that corresponds with the benefit being provided through reduced RPP prices.
Full details are provided in the RFP document which is available only through MERX at www.merx.com or 1-800-964-6379, MERX reference number 0000074261.