20180126Avista to Staff_DR_208(H1) Attachment B.PDF

Ontario
AFFILIATE RELATIONSHIPS CODE
FOR
ELECTRICITY DISTRIBUTORS AND
TRANSMITTERS
ONTARIO ENERGY BOARD
Revised May 16, 2008
(Originally issued on April 1, 1999)
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1. GENERAL AND ADMINISTRATIVE PROVISIONS
1.1 Purpose of this Code
This Code sets out rules that govern the conduct of utilities as that conduct relates to
their respective affiliates, with the objective of:
a) protecting ratepayers from harm that may arise as a result of dealings
between a utility and its affiliate;
b) preventing a utility from cross-subsidizing affiliate activities;
c) protecting the confidentiality of information collected by a utility in the course
of provision of utility services;
d) ensuring there is no preferential access to utility services;
e) preventing a utility from acting in a manner that provides an unfair business
advantage to an affiliate that is an energy service provider; and
f) preventing customer confusion that may arise from the relationship between a
utility and its affiliate.
1.2 Definitions
In this Code:
"Act" means the Ontario Energy Board Act, 1998;
"affiliate", with respect to a corporation, has the same meaning as in the Business
Corporations Act (Ontario);
"Affiliate Contract" means any contract between a utility and an affiliate, and includes a
Services Agreement;
"agent" means a person acting on behalf of a utility and includes persons contracted to
provide services to a utility;
"Board" means the Ontario Energy Board;
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"Code" means this Affiliate Relationships Code for Electricity Distributors and
Transmitters;
"confidential information" means information the utility has obtained relating to a specific
smart sub-metering provider, wholesaler, consumer, retailer or generator in the process
of providing current or prospective utility service;
"direct costs" means costs that can reasonably be identified with a specific unit of
product or service or with a specific operation or cost centre;
"distribute" means to convey electricity at voltages of 50 kilovolts or less;
"distribution system" means a system for distributing electricity, and includes any
structures, equipment or other things used for that purpose;
"distributor" means a person who owns or operates a distribution system;
"energy service provider" means a person, other than a utility or a shareholder of a
utility that is a municipal corporation or the provincial government, involved in the supply
of electricity or gas or related activities, including: retailing of electricity; marketing of
natural gas; generation of electricity; energy management services; conservation or
demand management programs; street lighting services; sentinel lighting services;
metering (including smart sub-metering that is the subject of the Smart Sub-Metering
Code and wholesale metering); billing other than solely for the delivery and supply of
electricity or natural gas or for sewer or water services; and appliance (including water
heater) sales, service and rentals;
"fully-allocated cost" means the sum of direct costs plus a proportional share of indirect
costs;
"indirect costs" means costs that cannot be identified with a specific unit of product or
service or with a specific operation or cost centre, and include but are not limited to
overhead costs, administrative and general expenses, and taxes;
"information services" means computer systems, services, databases and persons
knowledgeable about the utility's information technology systems;
"licence" means a licence issued under Part V of the Act;
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"market price" means the price reached in an open and unrestricted market between
informed and prudent parties, acting at arm's length and under no compulsion to act;
"rate" means a rate, charge or other consideration and includes a penalty for late
payment;
"Rate Order" means an order of the Board that is in force at the relevant time which,
among other things, regulates distribution and transmission rates to be charged by a
utility;
"Services Agreement" means an agreement between a utility and its affiliate for the
purpose of subsection 2.2 of this Code;
"shared corporate services" means business functions that provide shared strategic
management and policy support to the corporate group of which the utility is a member,
relating to legal, regulatory, procurement services, building or real estate support
services, information management services, information technology services, corporate
administration, finance, tax, treasury, pensions, risk management, audit services,
corporate planning, human resources, health and safety, communications, investor
relations, trustee, or public affairs;
"smart sub-metering provider" has the meaning given to it in the Smart Sub-metering
Code;
"system planning information" means information pertaining to (i) the planning of a
distribution system, including distribution system development or reinforcement plans,
equipment acquisitions and work management plans, or (ii) the planning of systems
involved in work management or of systems involved in the provision of customer
service, including billing systems and call centre operations;
"transmission system" means a system for transmitting electricity , and includes any
wires, structures, transformers, equipment or other things used for that purpose;
"transmit" means to convey electricity at voltages of more than 50 kilovolts;
"transmitter" means a person who owns or operates a transmission system;
"utility" means an electricity transmitter or electricity distributor that is licensed under
Part V of the Act;
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"utility asset" means tangible or intangible property included in the utility's rate base;
"utility revenue" means, in relation to a distributor, its distribution revenue and, in
relation to a transmitter, its transmission revenue; and
"utility services" means the services provided by a utility for which a rate or charge has
been approved by the Board, and includes a distributor's obligation to sell electricity
pursuant to section 29 of the Electricity Act, 1998.
1.3 Interpretation
Unless otherwise defined in this Code, words and phrases that have not been defined
shall have the meaning ascribed to them in the licences issued by the Board, the Act or
the Electricity Act, 1998 as the case may be. Headings are for convenience only and
shall not affect the interpretation of this Code. Words importing the singular include the
plural and vice versa. A reference to a document or a provision of a document includes
an amendment or supplement to, or a replacement of, that document or that provision of
that document.
1.4 To Whom this Code Applies
This Code applies to utilities licensed under Part V of the Act.
1.5 Hierarchy of Codes
This Code shall prevail over any other code established by the Board where there is a
conflict, subject to any specific conditions of a utility's licence.
1.6 Amendments to this Code and Determinations by the Board
1.6.1 Except where expressly stated otherwise, any amendments to this Code shall
come into force on the date on which the Board publishes the amendments by
placing them on the Board's web site after they have been made by the Board.
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1.6.2 The following amendments to this Code made by the Board on May 14, 2008
come into force on the date that is three months from the date on which the
Board publishes the amendments by placing them on the Board's web site after
they have been made by the Board:
(a) the amendment to section 1.2 deleting the definition of "fair market value";
and
(b) the amendments to section 2.3.
1.6.3 The amendments to this Code made by the Board on May 14, 2008 do not apply
to an Affiliate Contract that was in effect on September 19, 2007 until such time
as the initial term of such Affiliate Contract expires.
1.6.4 Any matter under this Code requiring a determination by the Board may be
determined without a hearing or through an oral, written or electronic hearing, at
the Board's discretion.
2. STANDARDS OF CONDUCT
2.1 Degree of Separation
2.1.1 A utility shall ensure accounting and financial separation from all affiliates and
shall maintain separate financial records and books of accounts.
2.1.2 A utility shall ensure that at least one-third of its Board of Directors is
independent from any affiliate.
2.2 Providing or Receiving Services, Resources, Products or Use of Asset
2.2.1 Where a utility provides a service, resource, product or use of asset to an affiliate
or receives a service, resource, product or use of asset from an affiliate, it shall
do so in accordance with a Services Agreement, the terms of which may be
reviewed by the Board to ensure compliance with this Code. The Services
Agreement shall include:
(a) the type, quantity and quality of service;
(b) pricing mechanisms;
(c) cost allocation mechanisms;
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(d) confidentiality arrangements;
Affiliate Relationships
Code
(e) the apportionment of risks (including risks related to under or over
provision of service); and
(f) a dispute resolution process for any disagreement arising over the terms
or implementation of the Services Agreement.
2.2.2 Where a utility shares information services with an affiliate, all confidential
information must be protected from access by the affiliate. Access to a utility's
information services shall include appropriate computer data management and
data access protocols as well as contractual provisions regarding the breach of
any access protocols. A utility shall, if required to do so by the Board, conduct a
review of the adequacy, implementation or operating effectiveness of the access
protocols and associated contractual provisions which complies with the
provisions of section 5970 of the CICA Handbook. A utility shall also conduct
such a review when the utility considers that there may have been a breach of
the access protocols or associated contractual provisions and that such review is
required to identify any corrective action that may be required to address the
matter. The utility shall comply with such directi()ns as may be given by the Board
in relation to the terms of the section 5970 review. The results of any such review
shall be made available to the Board.
2.2.3 A utility shall not share with an affiliate that is an energy service provider
employees that are directly involved in collecting, or have access to, confidential
information.
2.2.4 In the event of an emergency situation a utility may, without a Services
Agreement, provide a service, resource, product or use of asset to, or receive a
service, resource, product or use of asset from, an affiliate which is also a utility.
2.2.5 The transfer pricing rules set out in section 2.3 do not apply when a utility
provides a service, resource, product or use of asset to, or receives a service,
resources, product or use of asset from, an affiliate in an emergency situation; a
reasonable fully-allocated cost-related price shall be determined afterwards by
the parties.
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2.3 Transfer Pricing
2.3.1 Term of Contracts with Affiliates
2.3.1.1 The term of an Affiliate Contract between a utility and an affiliate shall not
exceed five years, unless otherwise approved by the Board.
2.3.2 Outsourcing to an Affiliate
2.3.2.1 If a utility intends to enter into an Affiliate Contract for the receipt of a service,
product, resource, or use of asset that it currently provides to itself, the utility
shall first undertake a business case analysis, unless the Affiliate Contract
would have an annual value of less than $100,000 or 0.1% of the utility's utility
revenue, whichever is greater. Where an Affiliate Contract has a term of more
than one year, the annual value of the Affiliate Contract shall be determined by
dividing the total value of the Affiliate Contract by the number of years in the
term.
2.3.2.2 For the purposes of section 2.3.2.1, the business case analysis shall contain (a)
description of relevant utility needs on a per-service basis, (b) identification of
the options available internally or externally from an affiliate or third party, (c)
economic evaluation of all available options including the utility's current fully­
allocated cost (which may include a return on the utility's invested capital equal
to the approved weighted average cost of capital), (d) explanation of the
selection criteria (including any non-price factors to be taken into account), (e)
estimate of any benefits to the utility's Ontario ratepayers from outsourcing, and
(f) justification of why any separate items were bundled together when
considered for outsourcing.
2.3.3 Where a Market Exists
2.3.3.1 Where a reasonably competitive market exists for a service, product, resource
or use of asset, a utility shall pay no more than the market price when acquiring
that service, product, resource or use of asset from an affiliate.
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2.3.3.2 A fair and open competitive bidding process shall be used to establish the
market price before a utility enters into or renews an Affiliate Contract under
which the utility is acquiring a service, product, resource or use of asset from an
affiliate.
2.3.3.3 Despite section 2.3.3.2, where satisfactory benchmarking or other evidence of
market price is available, a competitive tendering or bidding process is not
required to establish the market price for a contract with an annual value of less
than $100,000 or 0.1% of the utility's utility revenue, whichever is greater.
Where an Affiliate Contract has a term of more than one year, the annual value
of the Affiliate Contract shall be determined by dividing the total value of the
Affiliate Contract by the number of years in the term.
2.3.3.4 Where the value of a proposed contract over its term exceeds $500,000 or
0.5% of the utility's utility revenue, whichever is greater, a utility shall not award
the contract to an affiliate before an independent evaluator retained by the utility
has reported to the utility on how the competing bids meet the criteria
established by the utility for the competitive bidding process.
2.3.3.5 The Board may, for the purposes of sections 2.3.3.3 and 2.3.3.4, consider more
than one Affiliate Contract to be a single Affiliate Contract where they have
been entered into for the purpose of setting the contract values at levels below
the threshold level set out in section 2.3.3.3 or 2.3.3.4.
2.3.3.6 Where a reasonably competitive market exists for a service, product, resource
or use of asset, a utility shall charge no less than the greater of (i) the market
price of the service, product, resource or use of asset and (ii) the utility's fully­
allocated cost to provide service, product, resource or use of asset, when
selling that service, product, resource or use of asset to an affiliate.
2.3.4 Where No Market Exists
2.3.4.1 Where it can be established that a reasonably competitive market does not exist
for a service, product, resource or use of asset that a utility acquires from an
affiliate, the utility shall pay no more than the affiliate's fully-allocated cost to
provide that service, product, resource or use of asset. The fully-allocated cost
may include a return on the affiliate's invested capital. The return on invested
capital shall be no higher than the utility's approved weighted average cost of
capital.
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2.3.4.2 Where a reasonably competitive market does not exist for a service, product,
resource or use of asset that a utility sells to an affiliate, the utility shall charge
no less than its fully-allocated cost to provide that service, product, resource or
use of asset. The fully-allocated cost shall include a return on the utility's
invested capital. The return on invested capital shall be no less than the utility's
approved weighted average cost of capital.
2.3.4.3 Where a utility pays a cost-based price for a service, resource, product or use of
asset that is obtained from an affiliate, the utility shall obtain from the affiliate,
from time to time as required to keep the information current, a detailed
breakdown of the affiliate's fully-allocated cost of providing the service,
resource, product or use of asset.
2.3.5 Shared Corporate Services
2.3.5.1 For shared corporate services, fully-allocated cost-based pricing (as calculated
in accordance with sections 2.3.4.1 and 2.3.4.2) may be applied between a
utility and an affiliate in lieu of applying the transfer pricing provisions of section
2.3.3.1 or section 2.3.3.6, provided that the utility complies with section 2.3.4.3.
2.3.6 Transfer of Assets
2.3.6.1 If a utility sells or transfers to an affiliate a utility asset, the price shall be the
greater of the market price and the net book value of the asset.
2.3.6.2 Before selling or transferring to an affiliate a utility asset with a net book value
that exceeds $1 00,000 or 0.1% of the utility's utility revenue, whichever is
greater, the utility shall obtain an independent assessment of its market price.
2.3.6.3 If a utility purchases or obtains the transfer of an asset from an affiliate, the
price shall be no more than the market price.
2.3.6.4 Before a utility purchases or obtains the transfer of an asset from an affiliate
with a net book value that exceeds $100,000 or 0.1% of the utility's utility
revenue, whichever is greater, the utility shall obtain an independent
assessment of its market price.
2.3.6.5 The Board may, for the purposes of sections 2.3.6.2 and 2.3.6.4, consider more
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than one asset transaction to be a single transaction where the transactions
have been entered into for the purpose of setting the transfer prices at levels
below the threshold level set out in section 2.3.6.2 or 2.3.6.4.
2.3.7 Transfer Price Established by Law or Code
2.3. 7.1 Where a statute, a regulation, or a code established by the Board, prescribes
the amount to be charged by or to a utility in relation to the provision or receipt
of a service, product, resource or use of asset, that Act, regulation or Code shall
prevail over the requirements of sections 2.3.3 to 2.3.5 to the extent of any
inconsistency.
2.4 Financial Transactions with Affiliates
2.4.1 A utility may provide loans, guarantee the indebtedness of, or invest in the
securities of an affiliate, but shall not invest or provide guarantees or any other
form of financial support if the amount of support or investment, on an
aggregated basis over all transactions with all affiliates, would equal an amount
greater than 25 percent of the utility's total equity.
2.4.2 A utility shall ensure that any loan, investment, or other financial support provided
to an affiliate is provided on terms no more favourable than what that affiliate
would be able to obtain on its own from the capital markets and in all cases at no
more favourable terms than the utility could obtain directly for itself in capital
markets.
2.5 Equal Access to Services
2.5.1 A utility shall not endorse or support marketing activities of an affiliate which is an
energy service provider. A utility may include an affiliate as part of a listing of
alternative service providers, but the affiliate's name shall not in any way be
highlighted.
2.5.2 A utility, including its employees and agents, shall not state or imply to
consumers a preference for any affiliate who is an energy service provider.
2.5.3 A utility shall take all reasonable steps to ensure that an affiliate does not use the
utility's name, logo or other distinguishing characteristics in a manner which
would mislead consumers as to the distinction between the utility and the affiliate.
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2.5.4 A utility shall take reasonable steps to ensure that an affiliate does not imply in its
marketing material favoured treatment or preferential access to the utility's
system or utility services. If the utility becomes aware of inappropriate marketing
activity by an affiliate, it shall:
(a) immediately take reasonable steps to notify affected customers of the
violation;
(b) take necessary steps to ensure the affiliate is aware of the concern; and
(c) inform the Board in writing of such activity and the remedial measures
that were undertaken by the utility.
2.5.5 A utility shall apply all Rate Orders and rate schedules to an affiliate in the same
manner as would be applied to similarly situated non-affiliated parties.
2.5.6 Requests by an affiliate or an affiliate's customers for access to a utility's
transmission or distribution network or for utility services shall be processed and
provided by the utility in the same manner as would be processed or provided for
similarly situated non-affiliated parties.
2.6 Confidentiality of Confidential Information and Restriction on Provision of
System Planning Information
2.6.1 A utility shall not release to an affiliate confidential information relating to a smart
sub-metering provider, wholesaler, consumer, retailer or generator without the
consent of that smart sub-metering provider, wholesaler, consumer, retailer or
generator.
2.6.2 A utility shall not disclose confidential information to an affiliate without the
consent in writing of the smart sub-metering provider, wholesaler, consumer,
retailer or generator, as the case may be, except to the extent permitted by the
utility's licence or where confidential information is required to be disclosed:
(a) for billing, settlement or market operation purposes;
(b) for law enforcement purposes;
(c) for the purpose of complying with any legislative or regulatory
requirement; or
(d) for the processing of past due accounts of the smart sub-metering
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provider, wholesaler, consumer, retailer or generator, as the case may be,
which have been passed to a debt collection agency.
2.6.3 Confidential information may be disclosed where the information has been
sufficiently aggregated such that information pertaining to any individual smart
sub-metering provider, wholesaler, consumer, retailer, or generator cannot
reasonably be identified. If such information is aggregated it must be disclosed
on a non-discriminatory basis to any party requesting the information.
2.6.4 Subject to section 2.6.5, a utility shall not provide system planning information to
an affiliate that is an energy service provider.
2.6.5 A utility may provide system planning information to an affiliate that is an energy
service provider:
(a) if the system planning information is made available to non-affiliated third
parties at the same time, or has previously been made available to non­
affiliated third parties, on a non-confidential basis in substantially the same
form and on the same terms and conditions as it is made available to the
affiliate;
(b) if the system planning information is, at the time of provision to the
affiliate, publicly available in substantially the same form as it is made
available to the affiliate; or
(c) for the purposes of complying with any legislative or regulatory
requirement.
2.7 Compliance Measures
2.7.1 A utility shall be responsible for ensuring compliance with this Code and shall:
(a) perform periodic compliance reviews;
(b) communicate the Code to its employees; and
(c) monitor its employees' compliance with this Code.
End of Document
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