11 October 31, 2012 Webcast Renewed Regulatory Framework for Electricity Distributors - Q&A The audio portion of the meeting will be delivered via phone. To access the conference line call : Toll: +1 (416) or Toll free: +1 (866) Access number: During the webcast, please submit questions by clicking on the ‘Chat’ icon at the top of your screen.

Renewed Regulatory Framework for Electricity Distributors Implementation of the Board’s Policies October 31, 2012 Webcast

33 Overview of Webcast Purpose of today’s session: –To give stakeholders an opportunity to ask Board staff clarifying questions so as to help better inform understanding of the new framework and participation in the consultations scheduled throughout the fall and winter. Agenda: –For each topic, staff will briefly discuss planned consultations and respond to your questions: 1.Performance Measurement & Continuous Improvement; 2.Distribution Network Investment Planning; 3.Regional Infrastructure Planning; 4.Development of the Smart Grid; and 5.Electricity Distribution Rate Setting. All materials related to these consultations, including working groups, will be posted on the Board’s web site at as they become available. Please submit your questions at any time during the presentation by clicking on the ‘Chat’ icon at the top of your screen.

44 Summary of all planned consultation activities

Performance Measurement & Continuous Improvement Implementation of the Board’s Policies October 31, 2012 Webcast

66 Performance - Planned consultation activities Guided by the Board’s principles for performance measurement (p. 59 in Report) Proposals will provide a springboard for discussions and focus the work on the matters to be addressed (pp in Report): –assessing performance outcomes; –effective planning & implementation; –regulatory reporting (including scorecard); and –benchmarking (including total cost benchmarking, inflation, and productivity). A broad stakeholder meeting will be held to inform and generate ideas prior to convening the working group. Working group analysis will detail issues and review and evaluate proposals. The group’s work will be documented and will form part of a Staff Report. Broad stakeholder consultation events followed by written comments will inform the Board’s determinations.

77 Performance - Future consultation Existing regulatory mechanisms will be maintained/refined. Additional regulatory mechanisms may be necessary, and further consultation planned in due course on: –the establishment of an “efficiency carry-over” mechanism; –development of incentives to: reward superior performance; encourage innovation; encourage asset optimization; and –potential consequences for inferior performance. The development of these regulatory mechanisms will be aligned with the standards and measures referred to above.

88 Performance – summary of planned consultation activities

Distribution Network Investment Planning Implementation of the Board’s Policies October 31, 2012 Webcast

10 Distribution network investment planning – implementation tasks Implementing the Board’s conclusions on matters related to distribution network investment planning requires identifying and developing: –the types and characteristics of distributor planning information needed to reflect an integrated, longer term planning approach; –the planning-related information on asset management and investment planning practices that best enables robust regulatory assessment; and –the qualitative and quantitative information that best supports and justifies investment proposals in order to facilitate the Board’s assessment.

11 Distribution network investment planning – working group scope of work advise staff on –consolidating information on ‘capital expenditures’ –enhancing and standardizing distributor asset management information –identifying and specifying appropriate investment planning information, including on how investments proposed for cost recovery have been optimized, prioritized and paced

12 Distribution network investment planning – implementation goals advice to staff will inform the next revision of the Board’s filing requirements: –consolidated and harmonized Filing Requirements on capital expenditures currently provided in: Filing Requirements for Transmission and Distribution Applications (ie. Chapter 2); and Filing Requirements: Distribution System Plans – Filing under Deemed Conditions of Licence (ie. GEA/smart grid plans). –enhanced Filing Requirements (with guidance) on information related to asset management, capital plans and investment planning

13 Distribution network investment planning - Working Group Timeline 2012 November Staff proposal for working group discussion information and guidance: asset management; consolidated capital plans Decemberworking group meetings 2013 January Staff proposal for working group discussion information and guidance: integrated planning; tools and methods working group meetings February working group meeting Filing requirements and guidance issued

Regional Infrastructure Planning Implementation of the Board’s Policies October 31, 2012 Webcast

15 Regional Infrastructure Planning - Working Group Process Two working groups will be convened... 1.More structured regional infrastructure planning process  Board expects working group report to reflect: More structured approach requires assigning lead responsibility –Merit in appropriate transmitter taking lead and working with OPA to identify where CDM / DG options represent potential solutions Predetermined regions based on electrical system boundaries to form foundation for process and so LDCs understand resident regions –Board suggests IESO zones as starting point Protocols for sharing information among relevant parties LDCs expected to participate in process

16 Regional Infrastructure Planning - Working Group Process 1.More structured regional planning process (cont’d)  Key elements to be addressed in working group report: Information LDCs should be required to provide to transmitter and frequency information updated; Appropriate evaluative criteria to compare potential solutions; Circumstances under which OPA should participate; Form of broader consultation before regional plan finalized; Appropriate regional boundaries and criteria to establish them; and Other key elements working group believes should be addressed to facilitate move to more structured process

17 Regional Infrastructure Planning - Working Group Process 2.Appropriate redefinition of Line Connection assets  Working group expected to: Develop criteria for Line Connection asset redefinition purposes Identify assets that meet proposed criteria  Working group input must take into account: Function asset performs Reflect beneficiary pays principle Consider frequency Line Connections reviewed to ascertain function(s) providing for future transmission rate proceedings  Once working group completed, Board to propose amendments integrating new treatment of applicable Line Connections  Changes apply on go forward basis (only future upgrades after amendment into force) Avoids retroactive changes in cost allocation / rates Only future upgrades potential to affect regional plan execution

18 Regional Infrastructure Planning - Board Process Changes effected through code amendment process Opportunity for broad stakeholder input Proposed code amendments informed by working group reports to Board All proposed code amendments in one notice with same implementation date given interconnected nature of cost responsibility changes –Redefinition of Line Connection assets –TSC cost responsibility rule changes (i.e., Otherwise Planned and Refund Issue) Code amendment process may also address some regional planning process matters that have been identified by the working group

19 Regional Infrastructure Planning - Timelines 2012 November/ December Working Group meetings & reports 2013 FebruaryProposed Code amendments issued AprilFinal Code amendments issued June/JulyBoard expects Code amendments come into force

Development of the Smart Grid Implementation of the Board’s Policies October 31, 2012 Webcast

21 Development of the Smart Grid Board has determined: –For rate-setting, no distinction between “smart grid” and more traditional investments; and –Behind-the-meter services are a non-utility activity. All other issues to be addressed in a Supplementary Report Smart Grid Working Group to reconvene to develop appropriate regulatory documents

22 Smart Grid Working Group Smart Grid Working Group to be reconvened for meetings in November SGWG previously met six times in the Spring of 2011 –26 members representing: Distributors; Vendors; Consumer groups; and Agencies.

23 Smart Grid Working Group SGWG will be asked to advise on: –Staff proposals on content for regulatory documents e.g.; recognition of benefits Interoperability –How best to address cyber-security and privacy; and –How best to facilitate consumer access to meter data.

24 Development of the Smart Grid - Timelines 2012 November Working Group Meetings 2013 JanuarySupplementary Report of the Board February Smart Grid requirements integrated into Filing Requirements developed in Distribution Network Investment Planning process

Electricity Distribution Rate Setting Elements of Three Methods October 31, 2012 Webcast

26 Electricity Distribution Rate Setting - Planned consultation activities Board led Stakeholder Conference followed by written submissions –Issues related to the inflation and productivity adjustment mechanisms have been explored in several different consultations over the last ten years. –The Board has benefited from those consultations and has gained significant experience applying the results of those consultations. To inform the conference, new inflation, productivity and stretch factors, will be developed in consultation with stakeholders as part of the performance, benchmarking and rate adjustment indices work described previously.