2024 Cost of Service Application
Local distribution companies (LDCs) such as InnPower, are funded by the distribution rates included in the delivery charge paid by their customers. Electricity distributors are required to file a rate application with the electricity regulator, the Ontario Energy Board (OEB), to request a change in distribution rates. This is called a Cost of Service (COS) application.
A COS is essentially a detailed business plan and budget, laying out the strategic vision for the next 5 years. The COS determines the level of spending and investments that InnPower will make, including equipment, infrastructure, maintenance, service offerings, rates customers pay and more. All costs must be presented and justified by the LDC before being reviewed by the OEB.
The staff at InnPower are busy preparing our next Cost of Service application for distribution rates effective January 1, 2024. While the COS process can be complicated and lengthy, often resulting in a document with thousands of pages; InnPower is dedicated to making it easier for customers to understand and encouraging customer feedback and involvement through the process.
Below is a breakdown of information to help inform and educate our customers including:
- InnPower and its Role in Electricity Distribution
- An Overview of InnPower Customer Bills
- InnPower’s 2024 Cost of Service Rate Application
- The Ontario Energy Board and its role in the COS Application Process
InnPower and its Role in Electricity Distribution
What is InnPower’s Role?
InnPower is in the business of electricity distribution; delivering safe, reliable, cost-efficient, and innovative electricity services to Innisfil and South Barrie. As one of the fastest growing electrical utilities in Ontario, InnPower maintains a service territory of 292 square kilometers (the same size as Mississauga). This includes over 10,000 poles, close to 1,000 kilometers of power lines and 10 distribution stations each with an incoming voltage of 44,000 volts.
How Does InnPower fit into Ontario’s Electricity Grid?
InnPower serves as the local distribution company for the Innisfil and South Barrie Area.
Initially, electricity is generated from Ontario’s nuclear, hydro, natural gas, wind, solar or bioenergy sources. Read more about Ontario’s electricity supply mix here. The electricity is then moved from the generation site at high voltages through the transmission system to large consumers and local distribution companies, like InnPower. As we receive electricity, it is converted to a lower voltage and delivered to our customers through our local distribution system of wires, poles, switches, and transformers.
Courtesy of the Ontario Ministry of Energy
What Does InnPower’s Distribution System Include?
The following table gives an overview of the assets InnPower currently manages:
|292||Sq. Km. Service Area (sq. km.) (same size as Mississauga)|
|1,201||Distribution Switches (44kV, 27.6kV and 8.32kV)|
|671||Overhead Primary Circuit Wire Length (km)|
|193||Underground Primary Circuit Wire Length (km)|
|69||Peak Power Demand (MW)|
InnPower currently provides electricity distribution services to over twenty thousand (20,000) customers in the Town of Innisfil and approximately two thousand, three hundred (2,300) hectares in the south part of the City of Barrie (South Barrie).
InnPower operates voltages of:
• forty-four thousand (44,000)
• twenty-seven thousand, six hundred (27,600)
• eight thousand, three hundred (8,300) volts
and provides customers voltages at:
• six hundred (600) volts
• three hundred and forty-seven (347)
• two hundred and forty (240)
• two hundred and eight (208)
• one hundred and twenty (120) volts
There are approximately 2,261 kilowatts (kW) of renewable energy installations connected to InnPower’s distribution system, and 500 kW of renewable energy installations connected to InnPower’s sub-transmission system under Feed-in-Tariff (FIT) and microFIT programs, all of which are solar photovoltaic projects. This includes 7 FIT projects and 141 microFIT projects.
Power is supplied to InnPower owned distribution stations (DS) from three transmission stations (TS) owned by Hydro One Networks Inc. (HONI) at 44,000 volts, namely Alliston TS, Barrie TS and Everett TS. InnPower also owns four distribution feeders that are supplied power from two HONI owned distribution stations, at 8,320 volts, namely Cookstown West DS and Thornton DS, which are supplied by the Everett TS and Alliston TS, respectively.
In addition to InnPower, who are the key contributors in Ontario that help deliver electricity to customers?
- The Government of Ontario: Provides overall energy policy and legislation.
- The Ministry of Energy (MOE): Provides specific energy policies and directives.
- The Independent Electricity System Operator (IESO): Manages the power system in real-time (supply and demand), plans for the province’s future energy needs, enables energy conservation, and designs the electricity marketplace to support sector evolution.
- The Ontario Energy Board (OEB): Protects electricity and natural gas customers, sets rates, and implements government direction (further details below)
- Ontario Power Generation (OPG): Owned by the government of Ontario, it is responsible for approximately half of the electricity generation in the province of Ontario.
- Transmission Companies, including Hydro One: Moves electricity at high voltages from the generation site to consumers and local distribution companies.
- Local Distribution Companies (i.e., InnPower): Takes electricity from the transmission system or other local sources of generation and delivers it to consumers through the local distribution system.
InnPower Customer Bills
Historically, we know that electricity bills can be confusing and hard to understand. We want to make it easy! Electric bills can be split up into 5 main sections…
- Electricity Charges
- Delivery Charges
- Regulatory Charges
- Ontario Electricity Rebate (OER)
- Harmonized Sales Tax (HST)
For residential and small business customers, the cost of your electricity is based on usage from your smart meter readings and the Time-Of-Use or Tiered pricing. Electricity prices are set by the Ontario Energy Board (OEB).
With Time-Of-Use pricing, the price you pay depends on when you use electricity. There are three TOU price periods:
- Off-peak - when demand for electricity is lowest.
- Mid-peak - when demand for electricity is moderate.
- On-peak - when demand for electricity is generally higher.
With Tiered pricing, you can use a certain amount of electricity each month at a lower price. Once that limit (called a threshold) is exceeded, a higher price applies.
Tier 1 – up to 1,000 kWh (Nov 1 - Apr 30) and 600 kWh (May 1 – Oct 1)
Tier 2 – over 1000 kWh (Nov 1 – Apr 30) and over 600 kWh (May 1 – Oct 1)
Tier 1 – up to 750 kWh (year-round)
Tier 2 – over 750 kWh (year-round)
Please note, for customers that have signed up for a contract with an energy retailer, the price is set out in the contract. The Ontario Energy Board does not regulate this.
The funds collected by electricity pricing are not kept by InnPower, rather they flow to the IESO to purchase electricity for our customers.
TOU and Tiered commodity rates are based on the OEB’s estimates of the cost to supply electricity to homes and small businesses over a 12-month period. The price is intended to recover payments made to electricity generators. In other words, the sale of electricity should be equal to the cost of electricity, with no additional markup.
The ability to estimate the cost of supply is challenging given Ontario’s competitive electricity market. Every five minutes, the Independent Electricity System Operator (IESO) forecasts electricity demand throughout Ontario and directs generators to provide electricity required to meet that demand. It can also call on large volume users to reduce consumption.
Prices are based on a competitive process in which generators offer to supply electricity to the market. The IESO matches the offers with the forecasted demand, taking the lowest offers first.
InnPower pays the IESO the Hourly Ontario Energy Price (HOEP) for all electricity distributed in the month, which is the average of the twelve market clearing prices set every five minutes in each hour.
InnPower tracks the sale of power (recovered from customer bills) and the cost of power (paid to the IESO) to ensure the amounts are equal. Any amounts over/under collected are refunded/recovered from customers each year, which is tracked and regulated by the Ontario Energy Board.
The HOEP is only one component of the total commodity cost for electricity in Ontario. Global Adjustment is another component which covers the cost of building new electricity infrastructure, maintaining and refurbishing existing generation resources, and covers the cost of delivering conservation programs in order to ensure adequate electricity supply over the long term in the province of Ontario.
All electricity consumers have to pay a share of the Global Adjustment. The Time-of-Use and Tiered electricity prices charged by InnPower already include an estimate of the Global Adjustment.
The delivery charge portion of your bill covers the costs of delivering electricity from generating stations across Ontario, to InnPower, and then to your home. A portion of these charges are fixed and do not change from month to month. The rest are variable and increase or decrease depending on the amount of electricity that you use.
The delivery charge also includes the costs of the electricity lost when it is distributed. It is normal for a small amount of power to be consumed or lost as heat when electricity travels through powerlines and transformers. This is known as line losses.
Hydro One Delivery Charge (Transmission)
The cost of your Hydro One delivery charge is based on your electricity usage during the month (variable rate). The charges recover wholesale transmission line connection, transformation connection and network expenses. The Ontario Energy Board sets the Retail Transmission Services Rates.
These funds are not retained by InnPower, and rather flow to Hydro One Networks for its costs to construct, operate, and maintain high voltage transmission systems that provide power to InnPower’s electrical system.
InnPower Delivery Charge (Distribution)
The cost of your InnPower delivery charge is based on a monthly fixed and variable charge linked to your electricity usage. This charge recovers InnPower’s cost to construct, operate, and maintain the distribution system, as well as the cost for meter reading, billing, customer service and general operations.
The Ontario Energy Board sets the Distribution Rates through an annual rate application process. New rates come into effect yearly on January 1st.
These funds are retained by InnPower to fund the day-to-day operations and provide electricity distribution services to its customers.
Line Loss Adjustments
The cost of the Line Loss adjustments is based on a small amount of power that is lost as it travels over the utility's power lines to your home or business. In calculating your electricity costs for the billing period, InnPower multiplies your electricity cost by an adjustment factor that accounts for those losses.
The Ontario Energy Board approves the adjustment factor used by InnPower.
Smart Meter Entity Charge (if applicable)
The Smart Metering Charge covers the costs of operating the Meter Data Management/Repository (MDM/R), which collects, manages, and stores smart metering data used to support Ontario’s local distribution companies billing processes.
The Ontario Energy Board sets the SME rate on a periodic basis. These funds are not retained by InnPower, rather flow to the IESO, as they are responsible for the implementation and operation of the province’s MDM/R.
Low Voltage Service Charge
The low voltage service charge covers the cost of connecting InnPower’s distribution system to the distribution systems of other local distribution companies. This charge is applied against your total energy in kWh.
Rate riders are temporary charges or credits that recover or refund costs for temporary matters or caused by factors outside the utility's control. These factors include, but are not limited to, the settlement of cost of power and global adjustment variances, and recovery of programs mandated by the regulator or government.
These rates are dependent on several variables and will vary year over year.
Capacity Based Recovery – Class B
The Capacity Based Recovery charge is applicable to customers that are not enrolled in the Industrial Conservation Initiative (ICI), and recovers costs associated with contracted demand response providers active in the wholesale energy market.
These rates are dependent on several variables and will vary year over year.
The Wholesale Market Service Charge (WMSC) covers costs to plan for generation, demand management and transmission in Ontario.
The Rural or Remote Electricity Rate Protection (RRRP) program is designed to provide financial assistance to eligible customers located in rural or remote areas where the costs of providing electricity service to these customers greatly exceeds the cost of providing electricity to customers located in towns and cities. All customers in the province fund this program by paying an RRRP charge.
The Standard Supply Service Charge (SSSC) is an administrative fee to cover the costs of customers purchasing electricity from the local utility. This charge is the same for all utilities in the province.
The Ontario Energy Board sets all of the regulatory rates. The WMSC and RRRP funds are not retained by InnPower, rather flow through to the IESO. The SSSC funds are retained by InnPower to fund the day-to-day operations and provide electricity distribution services to its customers.
Ontario Electricity Rebate (OER)
The Ontario government provides customers with the Ontario Electricity Rebate, which currently provides a 11.7% rebate to eligible residential customers, small businesses, farms and other customers. The rebate is automatic for most customers and appears on bills as a separate line item.
Harmonized Sales Tax (HST)
The Harmonized Sales Tax HST is 13% in Ontario.
2024 Cost-of-Service Rate Application
What is a Cost-of-Service Rate Application?
As previously mentioned, a Cost of Service application is a detailed business plan and budget in one. Within the COS, all levels of spending and investments InnPower will make must be laid out and justified; including equipment, infrastructure, maintenance, service offerings, rates customers pay, and more.
The OEB sets requirements on what documentation and information is required to be provided by the LDC. Once submitted, the COS is then reviewed by the OEB and may be approved at their discretion.
Key components of the Cost-of-Service application include:
- A Detailed Operating Budget (including comparisons and a history from the last COS application).
- A Detailed Capital Plan (including comparisons and a history from the last COS application).
- A Distribution System Plan (including the strategic vision for the system over the next five years).
- An Asset Management Plan (including how we will ensure the system is being maintained efficiently).
- A Customer Engagement Report (including how we engage with customers, encourage interactions and results of the bi-annual customer satisfaction surveys).
- Our Capital Structure (debt and equity).
- Calculation of Proposed Rates and the Impact on Customers
As noted in the section above, the COS rate application is only applicable to the Distribution portion of your bill. Once our 2024 rates are approved, they are in effect for a five-year period. After the first year, the OEB will add an adjusted inflationary factor to InnPower’s rates annually.
Why is InnPower submitting a Cost-of-Service rate application?
Under the Price Cap Incentive Rate setting method (regulated by the Ontario Energy Board), InnPower is required to “rebase” distribution rates on a five-year cycle through the Cost-of-Service rate application process.
In order to “rebase” rates, InnPower is required to submit projected costs and revenues, as well as number of customers and consumption for the year 2024 (using OEB regulated models). The OEB will use this information to determine new distribution rates, effective January 1, 2024.
InnPower last rebased in 2017, subsequently requesting Cost-of-Service application deferrals for the years 2022 and 2023. InnPower has now been directed to file a 2024 Cost-of-Service rate application by the OEB.
Who is involved in a Cost-of-Service rate application?
In addition to InnPower, the following parties are involved in the Cost-of-Service rate application process:
- Customers: Our customers are important to us. It is important that we plan the future of InnPower together, making the changes our customers want to see while ensuring we continue to provide safe and reliable electricity services. InnPower seeks to continually update and gather feedback from its customers in a variety of ways such as social media, customer surveys, community events, and direct lines of communication (i.e. phone, email, etc.).
- Shareholder: The Town of Innisfil, InnPower’s only shareholder, will play a role in shaping the future of InnPower as we continue to grow and evolve within the municipality.
- Intervenors: Intervenors are individuals or groups who have our permission to actively participate in a public hearing about a utility’s application. Intervenors represent various customer groups such as low-income consumers, school boards and commercial/industrial customers. They also sometimes represent special interests such as environmental and conservation groups.
- Ontario Energy Board: The OEB is responsible for reviewing InnPower’s application, setting rates and outlining any additional directives.
When will the Cost-of Service rate application be submitted?
InnPower’s application was submitted to the OEB on May 12, 2023. A copy of the application and all other relevant documentation can be found here.
Once the rates are approved, how will InnPower use the funds from Distribution rates?
Distribution rates will cover the cost of:
- Designing, building, maintaining, repairing, and replacing overhead wires, underground wires, poles, stations, and local transformers.
- Conducting inspections and preventative maintenance.
- Responding to outages.
- Completing customer requests including electrical inspections, tree trimming, utility locates and customer moves.
- Servicing new growth and redevelopment of properties in our territory.
- Administrative duties such as billing and collecting.
- Providing exceptional customer service including responding to customer inquiries and providing assistance for low-income customers.
- Investing in innovation and technology to create efficiencies, protect customers and evolve within the industry.
What does this mean for InnPower customers?
As one of the fastest growing utilities in Ontario, InnPower is transitioning from a less dense rural utility to a denser urban utility. With growth and change, comes an exciting opportunity to shape the future of our utility as we move forward!
Based on the feedback we have received from our customers; we will be focusing on:
- Affordable cost of electricity.
- Maintaining and upgrading equipment to ensure a safe and reliable electricity supply.
- Improving electricity outage response time.
- Investing in storm hardening (physical improvements that can make utility infrastructure more resistant to weather).
- Better communication from InnPower when electricity outages occur (outage map, social media, etc.).
As we move through the rate application, updates and additional information will be communicated to our customers.
Where can I find more information?
Additional information on InnPower’s Cost-of Service Application can be found on the OEB’s website.
How can I have a say in the Cost-of-Service application?
InnPower held a Customer Engagement Survey in September 2022 on Customer Priorities, giving customers the opportunity to tell us what is most important to them and what changes they would like to see. This survey has now closed. The results of this survey are being used to ensure we make the changes customers want to see and have been reflected within InnPower’s Cost-of-Service Application.
InnPower always encourages and seeks continual feedback from customers, including on the Cost-of-Service application as it is in progress.
Please monitor our social media, website, and your bills for more information on specific ways you can be involved with the COS process. Any additional feedback or questions can be directed to email@example.com
The Ontario Energy Board and its Role
What is the Ontario Energy Board’s role?
The Ontario Energy Board (OEB) is Ontario’s independent regulator of the electricity and natural gas sectors. The OEB makes decisions and rules to ensure that consumers are treated fairly and ensures that the energy sector is reliable and sustainable. The OEB oversees how energy companies operate to ensure the public interest is served.
The OEB is responsible for the following:
- Setting the delivery rates energy utilities can charge.
- Approving major new electricity transmission lines and natural gas pipelines.
- Approving corporate changes by energy utilities.
- Establishing and enforcing the rules for energy companies operating in Ontario.
- Monitoring the wholesale electricity market and the financial and operational performance of utilities.
- Developing new energy policies and providing unbiased advice to the Ontario government.
- Licensing energy companies in the electricity sector and natural gas marketers.
- Providing information and tools to help consumers understand the rules that protect them and their responsibilities.
Why is the Ontario Energy Board involved in a rate application?
In many industries, there are several companies that compete to sell the same product or service. However, energy utilities in Ontario largely operate as a monopoly, being the sole distributor of electricity within a specified territory.
In the absence of competition, the laws, rules, and requirements that the OEB enforces act as a substitute for the economic forces that would provide the checks and balances if these utilities operated in a competitive market. In this way, regulation protects the interests of consumers.
What is the Ontario Energy Board’s process once the rate application is received?
The procedural steps that the OEB will take to review InnPower’s application are outlined in the following document:
How can I participate in the Ontario Energy Board’s public hearing on InnPower’s Cost-of-Service application?
The Ontario Energy Board has issued the Notice of Public Hearing to InnPower Corporation Customers. The notice can be found linked below.