Please note that a paper…

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July 24, 2017

Mr. Joshua McCann
Senior Policy Analyst
Inter-Governmental Policy Branch
Ministry of Infrastructure
Mowat Block, 5th Floor
900 Bay Street Toronto, ON
M7A 1C2

Dear Mr. McCann,

Re: EBR Registry Number 013-0551

The Electricity Distributors Association (EDA) represents the voice of Ontario’s local electricity distribution sector, which safely and reliably delivers power to millions of homes, businesses and public institutions. The distribution sector as a whole employs 10,000 people directly, holds $19 billion in assets, and makes hundreds of millions of dollars annually in direct contributions to both municipal and provincial revenues. The EDA appreciates the opportunity to comment on the Policy Proposal Notice concerning proposed municipal assets management planning regulation (EBR Registry Number 013-0551). Summary The EDA proposes that the definition of “Infrastructure Assets” be altered to clarify that tangible electricity distribution assets are not included which is consistent with the definition found in the Infrastructure for Jobs and Prosperity Act, 2015. An example of a possible alternate definition is: “Infrastructure Assets” are: tangible capital assets that are directly owned by a municipality or are tangible assets owned by affiliate(s) of a municipality where the financial statements of the affiliate are consolidated with the financial statements of the municipality, and may include green infrastructure assets as part of these assets, but do not include either tangible capital assets managed by a joint municipal water board or tangible capital assets that are part of a distribution system that is owned and operated by an electricity distributor licensed by the Ontario Energy Board. The EDA proposes this definition:

• To avoid a duplication of documentation;

• To avoid conflicting outcomes; and

• Because Ontario’s Local Distribution Companies (LDCs) are subject to appropriate governance. As mentioned, the EDA points out that the proposed definition of “Infrastructure Assets” above is consistent with the Infrastructure for Jobs and Prosperity Act, 2015’s definition of “Infrastructure”. The 2/4 EDA acknowledges that clear, unambiguous and consistent definitions are necessary and will be pleased to work with the Ministry of Infrastructure to appropriately clarify the proposed regulation’s definition of “Infrastructure Assets”. Background Ontario’s electricity distributors must connect customers pursuant to legislation and subordinate legislation, specifically the Electricity Act, 1998, the Ontario Energy Board Act, 1998 and the OEB’s Distribution System Code. LDCs have decades of experience deploying and managing assets with long service lives (typically between 40 and 60 years) that are expected to serve customers on an ongoing basis. It is important to recognize that distribution infrastructure, strictly speaking, does not include generation assets that Ontario’s LDCs are permitted to own and operate. Electricity distribution infrastructure technology is dedicated to supplying electricity to customers – it cannot be repurposed and does not give rise to either secondary products or by-products. It functions independently of all other municipal infrastructure. The only overlap between electricity distribution infrastructure and other municipal infrastructure is through the joint use of rights of way or road allowances. Co-ordinating the joint use of rights of way and road allowances is a well understood process that is administered effectively and efficiently. Ontario’s LDCs are natural monopolies, with respect to the provision of distribution service, and are regulated by the OEB. Regulation is provided pursuant to the OEB’s licensing powers, which also binds the licensee to adhere to OEB authorized Codes, and through the OEB’s rate making powers. In addition, Ontario’s electricity distributors are subject to supervision by the Electrical Safety Authority, and several provincial ministries (e.g., Ministry of Energy, Ministry of Labour, Ministry of Finance). Avoiding Duplication Ontario’s electricity distributors are required to file DSPs with the OEB at least every 5 years. DSPs substantively resemble the Asset Management Plans (AMP) that municipalities are required to file pursuant to the Infrastructure for Jobs and Prosperity Act, 2015. A review of the OEB’s Chapter 5 Filing Requirements shows that DSPs achieve many of the outcomes and fulfill many of the purposes of AMPs:

• Document strategic management;

• Document life cycle management;

• Address ongoing monitoring and continuous improvement opportunities;

• Document ongoing operating and maintenance costs;

• Document condition and ongoing ability to continue to serve;

• Assess risk (e.g., due to exogenous factors such as weather, changing energy policy);

• Document financial management (e.g., budgeting, eligibility for financial contributions). The Chapter 5 Filing Requirements are available here. Attachment A demonstrates the consistency between DSPs and the AMPs that are the subject of the proposed regulation. The DSP is filed publicly and all interested parties have the opportunity to review and comment on it. The most notable differences are that the OEB reviews the DSP, and that the DSP deals with a 5-year prospective period versus the 10-year prospective period that applies to AMPs. The EDA notes that the 5-year time frame is appropriate in light of the pace of technological innovation in electrical infrastructure that is in development. DSPs are prepared by or under the direction of management and executive teams 3/4 that have experienced changing government policy, changing regulatory policy, technological change and customer concerns over bill amounts – and who incorporate these factors into their DSPs. The OEB uses well established public processes when deciding applications, conducting consultations, or forming policy. One of those processes is known as the intervenor process. It is the process through which the OEB recognizes and engages the parties whose interests may be affected by an application. The EDA observes that the OEB’s public processing of a DSP and a municipality’s participation as an intervenor is the appropriate engagement of a municipality in the review of a distributor’s DSP that overcomes the duplication of review processes. The EDA concludes that DSPs and AMPs are overwhelmingly similar, and that where differences exist they are necessary to appropriately reflect circumstances specific to electricity. The EDA submits that requiring AMPs to include consideration of electricity distribution infrastructure will needlessly duplicate the DSPs filed with the OEB. Avoiding Conflicting Outcomes The EDA points out that Ontario’s electricity distributors employ qualified staff and management who are led by well qualified executive teams and appropriately governed by Boards of Directors. Collectively, these individuals play a role in asset planning and management, and in the ongoing provision of safe and reliable service. Augmenting this is the OEB’s scrutiny of electricity distributors capital management through rate applications, the submission of DSPs and pursuant to applications for orders authorizing Leave to Construct. As noted, the OEB is an independent regulator with the specialized knowledge required to decide the applications filed with it. The EDA is concerned that under the proposed policy there will be duplicate supervision of capital investment and asset management. It will be provided by the OEB, pursuant to its legislated objectives, and by municipal councils, pursuant to their review and approval of AMPs. The OEB and municipal councils have differing perspectives, interests and affected stakeholders. For example, whereas the OEB’s purview is province wide, a municipal council’s purview is geographically constrained. For these reasons, there is a tangible risk that the decisions reached by each of them will conflict. The EDA notes that the majority of Ontario’s electricity distributors provide service in more than one municipality. Consider how the proposed definition of “Infrastructure Asset” as set out in the draft regulation could operate in the case of an LDC that provides distribution service in two municipalities, identified as A and B. Each municipality would be required to prepare its own AMP. Municipality A’s AMP could be consistent with the distributor’s DSP while Municipality B’s AMP could differ. If the LDC revises its DSP to align with each municipality’s AMP it could result in the undesirable public policy outcome of similarly situated electricity distribution customers experiencing different levels of distribution service depending only on whether they are situated in Municipality A or Municipality B. The other electricity distributors who provide service in a single municipality could also experience unacceptable outcomes. Consider a scenario where the OEB has approved a DSP that a municipal council subsequently declines to incorporate into its AMP, in whole or in part. In this situation, additional resources will need to be deployed and expended to resolve the conflict, which creates inefficiencies. The more undesirable implication is that an aspect of the provision of service would be delayed, potentially to the detriment or harm of an existing or potential customer. 4/4 For these reasons the EDA proposes that the definition of “Infrastructure Asset” be amended to remove the potential for conflicting outcomes. Governance of Ontario’s Electricity Distributors The EDA notes that Ontario’s LDCs are incorporated pursuant to Ontario’s Business Corporations Act and are appropriately governed by their individual Board of Directors. The Board of Directors of each distributor is to be composed of individuals with the appropriate experience and professional skills to support them in overseeing the strategic direction of the distributor. As is described elsewhere, the OEB regulates the rates that Ontario’s electricity distributors’ charge and the monopoly services they provide. There are no gaps or deficiencies in the governance of LDCs. Hence, there is no compelling argument to support involving municipalities in the review and decision making of distributors DSP. Policy Alignment The EDA points out that the “Provincial Policy Alignment” portion of the regulatory posting omitted reference to the Burden Reduction Act, 2017. The EDA’s review of the Burden Reduction Reporting Act, 2014 identified that the proposed regulation will, in fact, increase burden. The EDA further notes that excluding electricity distribution infrastructure from municipalities’ AMPs will achieve conceptual parity with the treatment accorded assets under the management of joint municipal water boards. For the reasons given above the EDA proposes that the definition of “Infrastructure Asset” be amended to exclude consideration of tangible electricity distribution infrastructure. Thank you for the opportunity to contribute to this initiative. If you have any questions or comments on these submissions please refer them to Kathi Farmer, Senior Regulatory Affairs Advisor at kfarmer@eda-on.ca or at 905.265.5333. Sincerely J. Rangooni Vice President, Policy & Government Affairs Att. Electricity Distributors Association Comments on Proposed Municipal Asset Management Planning Regulation Filed: July 24, 2017 EBR Registry Number 013-0551 Attachment A Page 1 of 2 Comparing the Proposed Municipal Asset Management Planning Regulation with The OEB’s Chapter 5 Filing Requirements Purpose and Desired Outcomes Municipal Asset Management Planning Regulation – Proposed OEB’s Chapter 5 Filing Requirements -Current Purpose Implement best practices Optimize investment Achieve value for money Standardize planning requirements Systematic approach Rely on consistent data Standardize information filed with OEB in support of system management Address asset sustainability Asset sustainability evaluated based on asset life cycle management, asset risk Desired Outcomes Adoption of strategic asset management policies Adoption of a systematic approach to plan, prioritize and optimize system assets Promotion of best practices Serve customers’ needs in a cost-effective manner through cost control; deliver value for money Link asset planning with budgeting, operations, maintenance Pacing and prioritizing capital investments to cost effectively serve customers Standardize planning activities Required Information Municipal Asset Management Planning Regulation – Proposed OEB’s Chapter 5 Filing Requirements

- Current Goals Municipality’s goals Link asset management to corporate goals Process documentation link asset management plan to municipal budget, long term financial plan Document the Capital Expenditure Planning process including links to asset management, investment drivers (e.g., resolving system constraints), setting investment priorities, phasing investment over time (and recognizing impact on OM&A) Asset Management information Asset information broken down by asset type Asset Register: configuration, deployment conditions, vintage Electricity Distributors Association Comments on Proposed Municipal Asset Management Planning Regulation Filed: July 24, 2017 EBR Registry Number 013-0551 Attachment A Page 2 of 2 Asset Condition to be assessed as ongoing ability to serve the community, technical assessment Asset Condition Assessment including, expected ability to continually serve customers; Asset constraint/utilization (including failure data by asset, ranking assets based on failure data) Risks and vulnerabilities Risk assessment Service Levels Services provided, associated levels Access to distribution, provision of service (e.g., reliability, quality levels) Continuous Improvement Addressed in the context of the ongoing adoption of best practices Link actual system performance data to target, address discrepancies Financial Document linkage between Asset Management Plan and municipal budget, long term financial plan, Tangible Capital Asset policy Justify proposed investments, address allocation of capital, prioritizing and pacing investment over time; Demonstrate ongoing ability to serve customers appropriately Include capital expenditures, contributions, reserves, debt servicing costs Financial issues are dealt with in Rate Rebasing application Customer Engagement Opportunity for municipal residents and other interested parties to provide input into the plan Customers are to be consulted with prior to the distributor finalizing the plan Co-ordination or alignment Between inter-related assets, neighbouring municipalities, jointly-owned municipal bodies Across technologies, with regional partners, with transmitters and/or generators Process Municipal Asset Management Planning Regulation

- Proposed OEB Chapter 5 Filing Requirements

- Current Term 10 years 5 years Update frequency Annually At least every 5 years Prepared by Municipality Electricity Distributor Reviewed by The inhabitants of the municipality; municipality’s engineer; executive lead of the municipality The distributor’s customers, the OEB, interested parties Approved by Municipal council OEB Public engagement Plan to be posted on municipality’s website; paper copies available upon request DSP is filed publicly, can be probed and tested by interested parties; paper copies can be provided

[Original Comment ID: 210304]