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The Saskatchewan Rate Review Panel (the Panel) is recommending confirmation of one rate increase requested by SaskPower and a lower increase for a second rate request. The government had authorized SaskPower to implement an interim rate increase of 5% effective July 1, 2016, as requested in its rate application. The Company also requested a second 5% increase to take effect January 1, 2017.

The Panel’s recommendations to the Minister include the following:

• That the 5% interim increase effective July 1, 2016 be confirmed
• That the proposed 5% increase effective January 1, 2017 be reduced to 3.5%
• That the Minister encourage SaskPower undertake a comprehensive public and stakeholderengagement process for its proposed integrated resource supply plan, to ensure full disclosure ofthe implications to future costs and rate increases.

These increases, if approved, would see the average residential customer’s monthly bill rise by $5.05 effective July 1, 2016, and a further $3.71 effective January 1, 2017. A typical urban small commercial customer will see their monthly bill increase $13.77 and $10.13 respectively, a typical urban standard customer will see their monthly bill increase $155.91 and $114.80 respectively and a typical large industrial customer will see a monthly bill increase of $19,992.11 and $14,703.50 respectively.

In its application, Sask Power stated the increases are necessary to allow the Company to update and refurbish the existing infrastructure and build new generation and distribution capacity to meet future needs. The Company’s forecasts for the next 10 years indicate annual capital expenditures of approximately $1.0 billion per year to maintain and renew the Company’s generation, transmission and distribution services. These expenditures will ensure reliable safe electrical services and expand and renew the system to include ever-increasing renewable energy sources. Capital expenditures alone account for a rate increase of approximately 3% annually.

The Panel has recommended that the second rate increase be reduced to 3.5% to soften the rate shock impact of two increases in a six month period. The public and particularly industrial users expressed great concern about being able to adjust to these two increases over such a short time period. The panel recognizes this recommendation will financially impact SaskPower and as such, it will need to find areas where they can reduce expenses or enhance other revenue sources to accommodate this smaller rate increase.

The Panel has also made recommendations to SaskPower as follows:

• That SaskPower limit the increase in Operating; Maintenance and Administration costs, on a percustomer basis, to one-half of the increase in the Saskatchewan Consumer Price index (inflation).
• That SaskPower prepare public versions of its load forecast, cost of service study, and resource planas part of future rate applications.
• That SaskPower include increased stakeholder participation in the next cost of service studymethodology.
• That SaskPower rebalance rates between customer classes and demand and energy charges basedon average unit costs in the cost of service study.

The mandate of the Panel is to review the application and provide an opinion on the fairness of the rate adjustments requested, considering the best interests of the customer, the Crown Corporation and the public. The Panel believes these recommended rates and other recommendations represent a fair balance of the interests of the affected parties. The provincial Cabinet will make the final decision on the recommendations.