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Hydro Ottawa's 2012 Rate Application - Letter- January 6, 2012

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Hydro Ottawa explains its 2012 rate proposal.
Download Hydro Ottawa's 2012 Rate Application - Letter- January 6, 2012

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Hydro Ottawa Holding Inc. 3025 Albion Road North, PO Box 8700 Ottawa, Ontario K1G 3S4 Tel.: (613) 738-5499 ext. 203 Fax: (613) 738-5498 bryceconrad@hydroottawa.com Société de portefeuille Hydro Ottawa inc. 3025, chemin Albion Nord, C.P. 8700 Ottawa (Ontario) K1G 3S4 Tél.: (613) 738-5499 ext. 203 Téléc. (613) 738-5498 bryceconrad@hydroottawa.com January 6, 2012 Mayor and Members of City Council City of Ottawa 110 Laurier Avenue West Ottawa, Ontario K1P 1J1 Dear Mayor and Members of Council: Re: Hydro Ottawa’s 2012 Rate Application Enclosed for your information is the press release that we will be sending out later today confirming that Hydro Ottawa has proposed rates that will result in a decrease in the total bill for a typical residential customer for 2012. As a result of the OEB’s December 28, 2011 rate decision, Hydro Ottawa’s proposed rates for 2012 include an increase of approximately 2 percent on the total bill related to its operations offset by a number of one-time adjustments. When all of these adjustments are combined, a typical residential customer consuming 800 kWh of electricity per month will see their total bill decrease after taxes and the Ontario Clean Energy Benefit by 0.94 percent or $0.98 per month in 2012. This is in keeping with my commitment to ensure that costs are held to the minimum to operate the company effectively while investing to maintain the reliability of our electricity system. Recently there have been media reports about Hydro Ottawa’s OEB process, and I would like to take this opportunity now as the process is coming to a close to explain the outcome. As you know, the OEB is an independent agency of the provincial government that regulates the province’s electricity and natural gas sectors in the public interest. In the electricity sector, the OEB approves rates for the distribution of electricity for utilities like Hydro Ottawa with the goal of protecting the interests of consumers with respect to prices while ensuring that the electrical service provided by utilities is adequate, safe and reliable. As part of this regulatory framework, Hydro Ottawa is required to file an application seeking OEB approval for any changes to its regulated rates. The OEB follows an adjudicative process when reviewing rate applications. It is a rigorous and transparent process involving significant input from stakeholder groups, including substantive responses to numerous stakeholder questions. The OEB assesses rate applications based on various factors to ensure that rates are just and reasonable. Rates must consider the needs of customers to not be charged more than is required while providing the utility with the ability to maintain and invest in the electricity system to ensure safe and reliable service to customers and allow the opportunity to earn a fair return for its shareholders. Hydro Ottawa filed an application in June 2011 for new rates effective January 1, 2012, and the OEB rendered its decision on December 28, 2011. Highlights of that decision include the following: 1) Capital Investment in 2012 The OEB recognized that Hydro Ottawa needs to invest capital on new electricity distribution infrastructure to replace older, aging equipment as well as provide service to new customers in Ottawa to ensure it is able to meet customer expectations for safe, adequate and reliable service. In doing so, the OEB substantively approved our 2012 capital investment budget of approximately $78 million. 2) Operating, Maintenance & Administration (OM&A) Costs In its decision, the OEB approved a total OM&A envelope of $61.1 million for 2012 for Hydro Ottawa and this was based on a 2.5 percent annual increase over the 2008 OEB approved amount. The OEB expects that this envelope will allow Hydro Ottawa to prioritize its business activities and implement planned projects while still affording appropriate rate increases for customers. As part of finalizing the 2012 budget, management will review all areas of operations and their costs to ensure spending is appropriate and directed to key areas while still ensuring that customers are provided with safe and reliable electrical service at an affordable cost. 3) Long Term Debt Costs The OEB adjusted the weighted average long term debt rate to 5.09 percent (from 5.39 percent) and this adjustment will reduce the costs eligible for long term debt expense recovered in rates. 4) Smart Meter Costs The costs of installing the meters vary widely by type of customer, and, as such, the OEB approved an adjustment to cost recovery based on customer class. As a result, residential customers will get a monthly rebate of $0.67 a month. The OEB decision of December 28, 2011 is a positive outcome for your hydro company. It is our belief that the decision indicates the OEB has confidence in Hydro Ottawa’s ability to operate an efficient and effective utility for its customers. It ensures there are appropriate revenues to maintain the reliability of our existing electricity distribution infrastructure and to deploy new infrastructure through our planned capital program to meet the City’s growing needs. In addition, we will execute on our plan for greater efficiencies and manage our costs including compensation in 2012 within the 2.5 percent envelope guideline. Page 2 of 4 I remain confident, subject to any unforeseen event or regulatory change, that we will be able to meet our dividend commitments to our shareholder for 2012. Should you have any questions or require additional information, please feel free to contact me at 613738-5499, extension 203 or by e-mail: bryceconrad@hydroottawa.com. We would be pleased to provide you with a detailed briefing. Any media inquiries related to this matter should be directed to media@hydroottawa.com or to our media pager at 613-221-0063. Sincerely, Bryce Conrad President and Chief Executive Officer Enclosure cc: Kent Kirkpatrick, City Manager, City of Ottawa Pierre Richard, QC, ICD.D., Chair, Board of Directors Page 3 of 4 News release - DRAFT For immediate release Hydro Ottawa residential customers to pay less in 2012 OTTAWA, January 6, 2012 — Today, Hydro Ottawa has proposed rates that will result in a decrease in the total bill for a typical residential customer for 2012 as part of its response to the Ontario Energy Board’s December 28, 2011 rate decision. If the regulator approves the rates as submitted, a typical residential customer will see a reduction of $0.98 per month in 2012 in the total bill. “Our goal is to ensure the quality of our service by investing in Ottawa’s electricity system so that it remains reliable for the future,” said Bryce Conrad, President and CEO of Hydro Ottawa. “Keeping rates affordable today while investing in tomorrow is the best way to serve our customers.” Hydro Ottawa’s proposed rates, based on the Ontario Energy Board’s decision, includes an increase of approximately 2% on the total bill related to its operations offset by a number of one-time adjustments. When all of these adjustments are combined, a typical residential customer consuming 800 kWh of electricity per month will see their total bill decrease after taxes and the Ontario Clean Energy Benefit by 0.94% or $0.98 per month. The Ontario Energy Board regulates electricity rates with the goal of protecting the interests of consumers with respect to prices while ensuring electrical service provided by utilities is adequate, safe and reliable. The rate setting process is a rigorous and transparent process open to public participation. The OEB decision of December 28, 2011 ensures there are appropriate revenues to maintain the reliability of our existing electricity distribution infrastructure and to deploy new infrastructure through our planned capital program to meet the City’s growing needs. Final Hydro Ottawa’s rates for 2012 are expected to be confirmed by the end of January. About Hydro Ottawa Hydro Ottawa Holding Inc. (Hydro Ottawa) owns and operates two subsidiary companies, Hydro Ottawa Limited and Energy Ottawa Inc. Hydro Ottawa Limited is the third largest municipally owned electrical utility in Ontario serving more than 300,000 customers in the City of Ottawa and the Village of Casselman. Energy Ottawa Inc., Ottawa’s largest producer of green power, generates renewable energy and provides commercial energy management services. – 30 – Contact: Hydro Ottawa Media Pager: (613) 221-0063 Media@hydroottawa.com Page 4 of 4
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