Toronto Hydro Rate Decision Punts the Regulatory Treatment of Storage to the OEB DERs Consultation

In its December 19, 2019 decision1 in Toronto Hydro’s “Custom IR” rate application, the Ontario Energy Board (“OEB”) ruled that utilities wishing to include behind-the-meter storage in their regulated operations should seek policy changes in the OEB’s ongoing Distributed Energy Resources (DER) consultation.2 In response to a proposal by Toronto Hydro to use customer-funded behind-the-meter battery storage, the OEB held that current policies do not provide that behind-the-meter storage is a regulated utility activity. The Board stated that “the DERs consultation is the appropriate forum to consider the role of distributors for customer-specific energy storage systems and whether any regulatory policies should be amended.”3 The OEB stated that:

Toronto Hydro argued that the distinction of the meter being a demarcation point between the distribution system and the customers’ equipment is antiquated and not relevant because the technology can provide the same distribution benefits and services regardless of where it is placed relative to the meter.4

* * *

The Responding to DERs consultation is well underway, and the OEB concludes that it is the appropriate forum to consider the role of distributors for customer-specific ESS and whether any regulatory policies should be amended. Given the current policies, the OEB concludes that it is not appropriate to consider these projects distribution activities.5

The OEB rendered a similar decision in response to a proposal in by the Distributed Resource Coalition (DRC) to have the OEB consider electrified transportation DERs (EV Charging) as eligible distribution investments “where they are economic, prudent and facilitate long-term customer efficiency.”6

The DERs consultation7 is examining how the electricity sector in Ontario should respond to DERs and how utilities can embrace innovation in their operations.8 The consultation aims “to develop a more comprehensive regulatory framework that facilitates investment and operation of DERs on the basis of value to consumers and supports effective DER integration so the benefits of sector evolution can be realized.”9

In September 2019, the OEB hosted a three-day stakeholder meeting for the Responding to DERs consultation, to hear stakeholder input on “foundational questions,” such as the problems or issues to be addressed and the objectives that the consultation should aim to achieve. The OEB made clear that the objective of the stakeholder meeting was not to find solutions, but instead to discuss and identify the questions that need to be defined and addressed by the OEB in future proceedings. More than twenty parties made submissions during the stakeholder meeting.

A Facilitation Report published on the OEB website summarizes “interrelated trends and themes [that] emerged during the stakeholder meeting that reflect a general alignment on the issues and questions that need to be addressed as part of the consultation process on DERs and utility remuneration.”10

One of the noted “themes” in the Facilitation Report was the role of LDCs (local distribution companies) in DERs, specifically “what activities should distributors be permitted to be engaged in?”11 Parties have agreed that the role of LDCs (including affiliates) in competitive activities needs clarity and have proposed a number of issues to be addressed. Presumably, the issues related to these questions will determine what policies, if any, should be changed to support LDCs involvement in behind-the-meter storage activities.

Following the September 2019 stakeholder meeting, parties filed written comments.12 According to the OEB’s process letter,13 the next step is for OEB staff to provide a report describing stakeholder perspectives and setting out a proposal outlining objectives, issues, and guiding principles for the DERs consultation to proceed. OEB staff convened a session on February 20, 2020 to describe the input received from stakeholders and set out staff’s current thinking on objectives, issues and guiding principles.14 At the session, OEB staff indicated that they will place the information received before the new OEB leadership once the OEB’s transition to its new governance structure is complete. Subsequent steps for the Responding to DERs consultation will be identified after that.

* David Stevens is a partner and a member of A&B’s Energy Group. David has practised in the area of energy regulation for more than fifteen years. He advises gas and electric utilities, and other participants in Ontario’s electricity market, on a wide range of regulatory and commercial issues, and regularly appears before the Ontario Energy Board. Among other things, David has expertise in regulatory issues related to ratemaking, policy interpretation, customer protection, cost allocation and stakeholder relations. David has been recognized in The Best Lawyers in Canada in   the field of Energy Regulatory Law.

  1. OEB, Toronto Hydro-Electric System Limited Application for Electricity Distribution Rates beginning January 1, until December 31, 2024 (19 December 2019), EB-2018-0165, online: Ontario Energy Board <>.
  2.  The consultation documents can be found online: Ontario Energy Board <>.
  3. Supra note 1 at 115.
  4. Ibid.
  5. Ibid.
  6. Ibid at 121.
  7. Supra note 2.
  8. David Stevens, “OEB Taking a Refreshed Approach to Its DER and Utility Remuneration Consultation” (24 July 2019), online: Energy Insider <>.
  9. Supra note 2.
  10. StrategyCorp, Facilitation Report: September 17-19, 2019 (9 October 2019), online: Ontario Energy Board <>.
  11. Ibid at 8-9.
  12. The comments filed by stakeholders (21 in total) are available on the OEB website, online: Ontario Energy Board
  13. OEB, “Re: Utility Remuneration and  Responding  to Distributed  Energy  Resources  Board  File Numbers: EB-2018-0287 and EB-2018-0288”, online: Ontario Energy Board <>.
  14. Materials and transcript from the February 20, 2020 session can be found on the OEB website, online: Ontario Energy Board <>.

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