Middlesex Power Distribution Corporation

Licence # EB-2003-00059

File # RP-2005-0020, EB-2005-0351

Tab 2

Page 1 of 3

Components of the Application

  1. Description of Middlesex Power Distribution Corporation (MPDC)

The application is being submitted from MPDC which is the regulated local distribution company (LDC) that serves three non-contiguous areas in the County of Middlesex. Further descriptionof MPDCis provided on Schedule 2-1.

  1. Corporate Structure

MPDC is the wholly owned LDC of Chatham-Kent Energy Inc through the purchase of 100% of the shares on June 30, 2005. The Ontario Energy Board approved the purchase of MPDC shares in EB-2005-0255 (Schedule 2-5). MPDC was formerly owned by the Township of Strathroy-Caradoc (96%) and The Municipality of North Middlesex (4%). An organization chart and other related information is provided on Schedule 2-2.

  1. Audited Financial Statements

The audited financial statements for 2002, 2003 and 2004 are provided as Schedule 2-3.

MPDC had a positive net income in 2004 for the first time since incorporation. MPDC was the only market participant in 2002 that did not pay the Independent Electricity Market Operator (currently the Independent Electricity System Operator) in full.

MPDC had been reviewed extensively by the OEB in 2002 and 2003 to monitor their financial position. The financial difficulties of MPDC have been documented in previous OEB rate applications (RP-2004-0066/EB-2004-0052 and RP-2005-0013/EB-2005-0048). The reasons for the financial difficulties are;

  • 1999 Net Loss

MPDC made an original rate application to the OEB, RP-2000-0244 / EB-2000-0503, for a full MARR. MPDC in 1999 had a negative return in each of the three amalgamated Municipal Electric Utilities (MEUs);

  • Strathroy PUC-$205,051
  • Mount Brydges PUC-$18,047
  • Parkhill PUC-$17,429
  • Total-$240,527

The original application claimed a positive net income for 1999 of $18,430 for MountBrydges, which was incorrect. The fact that the original rate change deemed 1999 net income to be zero and reduced the rate change significantly has caused MPDC to have severe financial troubles since incorporation.

  • Error in setting the 1999 rates due to a load transfer customer, resulting in rates being approximately $400,000 lower than required.
  • The transformer allowance was not added back into revenue prior to setting the original rates; therefore customers are receiving a credit when they did not pay for the transformer costs in the base rates.
  • The transformer allowance means that the large user class customer receives a credit on all distribution revenue; the transformer allowance is higher than the distribution revenue. Another way of describing this is MPDC is paying the customer to be connected to the system.
  1. Compliance with Licence

MPDC has contracted with Chatham-Kent Utility Services Inc. (CK US), a wholly owned subsidiary of CK E for management, financial and settlement services. MPDC is required to inform the OEB of any material changes to the services agreement, which there has not been any.

  1. Current Rate Schedules

MPDC has provided the current rate schedule in Schedule 2-4.