1. Density/Cost Allocation Study
April 15, 2009
Michael Roger
Manager, Distribution Pricing

2. OEB Direction OEB Decision page 31
Detailed analysis on the relationship between density and cost allocation
Whether the customer class demarcations offer the best reflection of cost causation
Consideration of alternative density weightings

3. Current Density Definition
Urban Density Zone is defined as areas containing 3,000 or more customers with a line density of at least 60 customers per kilometre. (156,000 Residential customers)
Medium Density Zone is defined as areas containing 100 or more customers with a line density of at least 15 customers per kilometre. (365,000 Residential customers)
Low Density Zone is defined as areas other than Urban or Medium Density Zone. (358,000 Residential customers)

4. Density Weighting Factors
Used to allocate Overhead Lines and Transformer related costs
Two Components:
Customer Density weighting factors (allocation of fixed costs)
Demand Density weighting factors (allocation of variable costs)
(USoA Accounts B and 4B, B and 4B,1850-2) (Exhibit H, Tab 12, Schedule 66)

5. Overhead Line Costs
Customer density weights based on number of customer by class for each feeder
Demand density weights based on energy by customer class by feeder

6. Example Feeder Km Class 1 Class 2 Class 3 Total Class 1 10 5 20 10 35
Connectivity Data
Feeder Km Class 1 Class 2 Class 3 Total Class
A: Total Customers
Allocated km
Feeder Km Class 1 km Class 2 km Class 3 km
B: Total km
C=B/A km/customer
D* Wts *
E=DxA (Check)
Wted Cust
D*= Wts 0.81x150/[ 0.81 x x x 60]=1.22
Same approach for Variable costs and for transformer costs
For class 1, the allocated 5 km for feeder # 2 is equal to 10 customers out of 40 customers connected to feeder # 2 that is 20 km in length

7. Density Weights Overhead Lines
Customer Demand
For Fixed costs For Variable costs UR R R
Seasonal
GSe
GSd
UGe
UGd
Dgen ST
St Lgt
Sen Lgt

8. Transformer Costs
Customer density weights based on NBV of transformation assets by class for each feeder
Demand density weights based on energy by customer class by feeder
Same logic as explained for line costs, substitute NBV for line length

9. Density Weights Transformers
Customer Demand
For Fixed costs For Variable costs UR R R
Seasonal
GSe
GSd
UGe
UGd
Dgen ST
St Lgt
Sen Lgt

10. Current Rate Issues
In 2010 will still be in the middle of the 4 year Harmonization plan
Continued Rate Pressure due to Smart Network and DG connections
OEB Staff Paper on proposed Rate Design

11. Question # 1
Should “customer density” be a consideration in defining customer classes?
Like other LDCs in Ontario
Based on reliability definition by OEB
Municipal Boundaries
Square kilometer
Postal code

12. Question # 2
What criteria are relevant for defining customer classes?

13. Question # 3
How should “density” be considered in allocating costs to the various classes?
Sample areas
Based on other LDCs’ costs
Replacement costs