The Ontario Energy Board yesterday issued a Decision with Reasons approving rate adjustments to 2007 distribution rates to cover costs incurred by Canadian Niagara Power Inc. - Fort Erie (Fort Erie), Canadian Niagara Power Inc. - Port Colborne (Port Colborne), Peterborough Distribution Inc. (Peterborough), and Lakeland Power Distribution Ltd. (Lakeland) from severe storms in 2006 which inflicted significant damage to their respective distribution systems.

In the board's 2006 Report of the Board on Cost of Capital and 2nd Generation Incentive Regulation for Ontario's Electricity Distributors, the board recognized contingencies needed to be built into the regulatory regime to provide the flexibility to recognise extraordinary events, like changes to tax rules or natural disasters, outside the control of distributor management.

The four utilities applied for the rate adjustments in their 2007 Distribution Rate applications in early 2007. In April 2007, the board issued decisions for each applicant, establishing new interim distribution rates that only reflected the board's incentive regulation adjustment mechanism, pending a more detailed review of the applicants' storm damage claims.

The board reviewed the issues related to the storm damage claims in a combined oral hearing. The claims included costs to replace poles, overhead distribution lines and other distribution devices as well as smaller hardware; billings from third party line crews, contractors, other distributors and forestry workers who assisted in the restoration, recovery and clean-up efforts; and internal overtime labour and material costs. The board approved a claim of approximately $1.6 million for Fort Erie, $243,000 for Port Colborne, $374,000 for Peterborough and $211,000 for Lakeland, plus interest.

In making its Decision, the board considered whether the claims satisfied the three criteria of causation, materiality and prudence.

All four utilities will recover their approved amounts by way of rate riders effective Sept. 1, 2007. The board has directed the four utilities to submit revised rate riders reflecting the decision within 10 days. Rate riders for Port Colborne, Peterborough and Lakeland will be in effect until August 31, 2008. When Fort Erie submits its revised rate riders, it will indicate if it plans to recover the approved amount over 12 months, or over 24 months as proposed in its mitigation plan submitted to the board in its original application.

The Ontario Energy Board regulates the province's electricity and natural gas sectors in the public interest. It envisions a viable and efficient energy sector with informed consumers served by responsive regulatory processes that are effective, fair and transparent.