Schedule 3-1: Tier 1 Adjustments
This form is to be used for all Tier 1 adjustments, except for non-routine/unusual and CDM adjustments, for which Schedules 3-2 and 3-4 should be used.
1. Standard Distribution Expense Adjustments
This table must be completed for the three standard distribution expense adjustments, outlined below:
2005 Actual (1) / 2004 Actual (2) / Adjustment (3)(1) – (2)
OEB Annual Assessment and Other Fees Paid to Energy Regulators* / 39,495 / 5,231 / 34,263
Pensions / 66,519 / 63.791 / 2,729
Insurance / 9,834 / 6,000 / 3,438
OEB Annual Assessment for 2004 is $20,893 however the calculated incremental amount as per Board directions has been moved to GL 1508. Therefore, GL 5655 balance for the 2004 actual is $5,231. The OEB Annual Assessment for 2005 is 36,555 plus the ESA fees paid in 2005 in the amount of $4,936 for a total of $41,491. From this amount we have deducted $1,996 because the 2004 amount was recorded in GL 5665.
As Orangeville Hydro is a member of OMERS, pension costs have been estimated to the end of 2005 and we have adjusted $2,729 distribution expenses. Costs recorded in GL 5645 are the post employment expense amount as per CICA based on actuarial calculations. Pension costs are distributed throughout GLs and not recorded in GL 5645.
Total Insurance costs have increased $3,438 in 2005 and we have adjusted accordingly. The amounts shown in this section only represent property insurance and do not include liability and vehicle insurance. This is indicated in the EDR model sheet ADJ 3 where only account 5635 property insurance is indicated. The 2004 and 2005 amounts are our actual insurance premiums.
We are applying for Low Voltage charges of $171,561 based on the spreadsheet we received from the OEB on July 25, 2005 to employ into the regulatory asset model. The spreadsheet indicated that the total amount from January 1, 2004 to March 31, 2006 is $400,308. We have divided this amount by 28 months, multiplied by 12 months to calculate the post May 2006 LV charges as per Section C of the Handbook.
Schedule 3-2: Tier 1 Non-routine/unusual Adjustments
This form is to be used for Tier 1 Adjustments that are non-routine/unusual adjustments.
If the applicant is not making any such adjustments, a statement to that effect should be made in this Schedule.
Non-routine/unusual Adjustments
There are no adjustments to the rate base. Any retirements are expected to be replaced and there are no non-routine or unusual adjustments that exceed our materiality threshold. We have determined that there are no events subject to such an adjustment.
There are no adjustments to distribution expenses that are unusual or non-routine that exceed our materiality threshold.
Upon reviewing Orangeville Hydro’s expenses in 2004 we found one circumstance that may appear unusual. In 2004 we acquired the assistance of a human resources professional to assist us in employee relations and teamwork, assisting board of directors with management performance expectations and goals. The total cost in 2004 was $13,902. This is expected to be sustained in subsequent years as Orangeville Hydro manages the operations with a small staff and we do not have the luxury of employing a full-time staff member that possesses the expertise in this area to help in employees enrich themselves and aid the board of directors with their decision making. We determined from this analysis that we will be maintaining this program for the employees and the expense is not unusual.
Schedule 3-4: Conservation and Demand Management adjustments
Incremental CDM expenditures above the amounts outlined in the approved CDM Plan have not been included in the 2006 rate application. While in full support of CDM Orangeville Hydro has chosen to gain further expertise in the implementation of successful programs prior to making application for additional approvals. This experience will better position us to include incremental CDM expenditures, as appropriate, in future applications.
Orangeville Hydro has included $185,000 in the Tier 1 adjustments for rate base related expenditures for third tranche CDM spending. We have made no capital expenditures in 2004. Amortization for the above amount is calculated amounting to $7,400.
Schedule 4-1: Capital Expenditures
An applicant must file detailed information on its 2004 capital expenditures in the following format. For any projects exceeding the materiality threshold, a detailed summary of the project should be attached to this form, outlining key information about it. This would include its purpose, its cost, its timing, and other information that the applicant believes would be relevant to the Board and other interested parties.
Project $(000) Amount In-Service Date
Intangible Plant
Distribution Plant
· land and land rights 892 2004
· buildings, fixtures, and
leasehold improvements 151,152 2003/04
meter points (see next page)
· distribution equipment (see next page) 578,036 2004
· meters 33,758 2004
General Plant
· land and land rights
· buildings, fixtures, and
leasehold improvements 14,058 2004
· equipment (non-IT) 7,549 2004
· IT equipment
o billing systems
o SCADA systems
o GIS/CIS systems
o hardware/software 70,916 2004
o other
· load management controls
· other –Vehicles 64,840 2004
Communication Equip 1,088 2004
Other Capital Assets
· property under capital leases
· electric plant purchased or sold
· other (specify)
Total Capital Expenditures 922,290
Summary of Distribution Projects
Meter Points
Project: Install meter points on all 3 feeders
Purpose: 2 new meters installed at transformer stations due to expired meters and new meter on new feeder coming into Orangeville
Cost: $151,152
Completion: 12-02-2004 – Note meter points recorded in GL 1820 not 1860
Poles, Towers, Overhead Conduit
Project: New poles for conversion on Second St
Purpose: System improvement, reliability, replace old poles, convert to 27,000 kV.
Cost: $54,852
Completion: Job took 2 months and was completed June/04
Project: New poles- MS #2 New Feeder
Purpose: Construction of additional feeder, system improvement
Cost: $41,596
Completion: Job took 2 months and was completed Oct/04
Project: 3 0 Kabar Unit –Riddell-New Tie Montgomery Village
Purpose: Provide loob feed, tie in Montgomery subdivision
Cost: $27,750
Completion: Job took X months and was completed Mar/04
Project: PH Nineten Subdivision
Purpose: Record plant energized new subdivision
Cost: $99,947
Completion: Energized Jul/04
Project: New Service - No Frills
Purpose:
Cost: $25,569
Completion: Energized Jul/04
IT Expenditures
Project: Advanced Utility Systems Billing Software Upgrades
Purpose: Modifications, changes to rate system to meet tiered pricing requirements, updates to EBT system/ new collections module
Cost: $32,344
Completion: Over the course of the year to meet the requirements of EBT Standards, Tiered Pricing, etc.
Schedule 5-1: Weighted Debt Cost
Size of Utility / Small / Small / Medium-Small / Medium-Large / LargeDeemed Debt Rate
prior to 2000 / actual rate / actual rate / actual rate / actual rate / actual rate
2000 to 2005 / 7.25% / 7.25% / 7.00% / 6.90% / 6.80%
2006 / 6.25% / 6.25% / 6.00% / 5.90% / 5.80%
No. / Description / Debt Holder / Is the Debt Holder Affiliated with the LDC?
(Y/N) / Date of Issuance of Debt
(Date) / Principal
($) / Term
(Years) / Actual Rate
(%) / Debt Rate Used for Weighted Debt Rate Cost
1 / Long Term Debt / Scotiabank / N / Jul-02 / $8,500,000 / 10 / 5.77% / 5.77%
Total / $8,500,000
Weighted Average Debt Cost / 5.77% / 5.77%
Schedule 5-2: Actual Capital Structure of the Distributor
Schedule 5-2 / Actual Capital Structure of the DistributorLine / Particulars
($000) / (%) / Deemed Structure (from 3-2) / Cost Rate
(1) / Long Term Debt / 8,500,000 / 41.2%
(2) / Unfunded Short Term Debt / 2,907,163 / 14.2%
(3) / Total Debt / (3) = (1) + (2) / 11,432,163 / 55.4% / 50.0%
(4) / Preferred Shares / 0.0%
(5) / Common Equity / 9,189,640 / 44.6%
(6) / Total Equity / (6) = (4) + (5) / 9,189,640 / 44.6% / 50.0%
(7) / Total Rate Base / (6) = (3) + (6) / 20621803.000 / 100.0%
Absolute difference between actual and size-related deemed debt ratio: / 5.4%
Unfunded short term debt is calculated as follows:
Current liabilities 3,447,950
Less Short Term Debt - 600,000
Less Current Portion CD -25,000
Plus Employee Benefits 84,213
Total 2,907,163
Schedule 6-1: Insurance Expense
Comprehensive Liability thru MEARIE
Excess Liability / $6,361.20 / $7,873.20 / $8,402.40 / $8,402.40
Comprehensive Liability / $18,006.84 / $20,085.84 / $17,669.88 / $21,322.44
Directors / $2,539.08 / $2,851.20 / $2,488.32 / $3,035.88
Property & Vehicles thru F. Cowan Ins
Boiler & Machinery / $698.76 / $868.32 / 954.72 / $1,021.68
Property / 6973.56 / $10,523.52 / 12899.52 / $11,200.68
Excess Liability Auto / $154.50 / $153.00 / $256.54 / $306.00
Auto / $6,207.81 / $7,184.78 / $9,707.11 / $10,330.00
Casualty / $1,065.96 / $1,433.16 / $1,433.16 / $1,630.80
Schedule 6-2: Bad Debt Expense
Orangeville Hydro does is not recovering any unusual 2004 bad debt expenses.
We have filed the information for the years 2002, 2003 and 2004, segregated by customer class in the 2006 EDR Model under tab “Adj 5 (Specific Dist. Expenses)”.
2002 2003 2004
Residential / 12,033 / 2,557 / 21,882GS<50 / 1,446 / 184
GS>50 / 7,819 / 5,422
Intermediate
Large Use
Street Lighting
Sentinel Lighting
Total Bad Debt / 21,298 / 8,163 / 21,882
The difference for GL 5335 in 2003 is significant due to the increase of $5,000 for our allowance for doubtful accounts in 2005.
There were no accounts that were over the materiality limit of $5,151, therefore there are no removals from the revenue requirement.
Schedule 6-3: Charitable Donations
2002 $2,459
2003 $6,144
2004 $4,779
There is no breakout of any contributions to programs that provide assistance to the distributor’s customers in paying their electricity consumption bills. At the beginning of 2004 we developed a donation policy where donations are not to exceed $5,000 each year.
Note: Charitable donations were not recorded in GL 6205 but under a sub-account of 5410. In order to rectify this, to remove the amount of $4,779 from the revenue requirement, we adjusted the amount on 2-4 Adjusted Accounting Data and entered GL 5410 as (-) $4,779 and GL 6205 as (+) $4,779. We then utilized ”Adj 5, Cell G51” and entered the amount of $4,779 as a negative. By entering the amount as negative in the adjustment, it effectively removed the amount from the revenue requirement.
Schedule 6-4: Employee Compensation
Number of employees (Full-time equivalents (FTEs)):
2002 / 2003 / 2004Executive / 5 / 5 / 4
Management
Non-unionized
Unionized / 13 / 13 / 12
Compensation – Average Yearly Base Wage ($):
2002 / 2003 / 2004Executive / 78137 / 82199 / 87641
Management
Non-unionized
Unionized / 44532 / 48939 / 51608
Compensation – Average Yearly Overtime ($):
2002 / 2003 / 2004Executive
Management
Non-unionized
Unionized / 2037 / 2088 / 1567
Compensation – Average Yearly Incentive ($):
2002 / 2003 / 2004Executive / 653 / 762 / 864
Management
Non-unionized
Unionized / 257 / 238 / 260
Compensation – Average Yearly Benefits ($):
2002 / 2003 / 2004Executive / 12422 / 14979 / 20060
Management
Non-unionized
Unionized / 4752 / 10067 / 12695
Schedule 6-5: Employee Incentive Plan Expense
The questions below must be completed where a distributor has included in its application expenses in respect of any employee incentive plan.
1) Orangeville Hydro has adopted a “Pay for Performance” compensation plan for management positions. Each position has been evaluated by an outside consultant and assigned to a salary grid. The job rate itself moves each year according to the cost of living. Incumbents can progress within their grid to the job rate of their position based on their individual performance. Exceptional 6%, Commendable 4%, Developing 2%, and Unsatisfactory 1% below the cost of living. After an incumbent reaches his or her job rate then he or she will receive the cost of living and a % of salary based on performance. This % can be to a maximum of 10%.
2) Incumbents are measured on the general targets of Safety, Customer Service Satisfaction, System Reliability, Costs / Financial Performance, and Employee Performance.
Safety
Promote a safe working environment at Orangeville Hydro and within the community. Our goal is no accidents. (Benefits both shareholders & the ratepayers)
Customer Service Satisfaction
In all activity, promote a positive impression of Orangeville Hydro within our community with our customers, contractors, developers, and other public bodies. (Benefits ratepayers)
System Reliability
Implement strategies to improve system reliability. (Benefits ratepayers)
Costs / Financial Performance
Investigate areas under your control to reduce or curtail costs or better utilize resources. Look for opportunities to increase revenue. (Benefits both shareholders and ratepayers.)
Employee Performance
Facilitate harmonious working relationships with all employees. Establish quality, working relationships with your staff. Motivate your staff to enhance their continued high performance. (Benefits shareholders.)
In addition, incumbents are given targets specific to their area of responsibility within the utility.
3) Annual Cost(s) - The total annual dollar amount of the performance compensation is the amount that exceeds the job rate. In 2004 this was $1,200.00. In 2005 only 2 executive staff are at their job rate and may qualify for a percentage incentive. The amount will be a Board of Directors decision later in the year.
Schedule 6-6: OMERS Pension Expense and Post-Retirement Benefits
An applicant whose employees are members of the Ontario Municipal Retirement System (OMERS) must provide the following information:
1. Pension
Pension / 2002 / 2003 / 2004Pension premiums / 0 / 22,292 / 63,791
Adjustments
Less: amount capitalized / 0 / 3,403 / 6,347
Amount expensed in each year / 0 / 18,889 / 57,444
2. Post-retirement benefits expense
Post Retirement Benefits / 2002 / 2003 / 2004Post-Retirement Benefits Cost / 18,521 / 21,539 / 26,765
Adjustment
Less: Amount capitalized / 0 / 0 / 0
Amount expensed in each year / 18,521 / 21,539 / 26765
3. Post-retirement benefits accounting information