TFO Tariff – Interim Revenue Requirement
ATCO Electric Ltd. (“ATCO”) applied to the AUC for approval of an interim revenue requirement of $840.5 million (or $70.04 million monthly) effective January 1, 2016. The requested revenue requirement is equivalent to 100 percent of the $214.4 million increase in ATCO’s forecasted 2016 revenue requirement over its 2015 interim revenue requirement of $626.13 million.
ATCO sought approval of the 2016 interim tariff as a result of its outstanding 2015-2017 general tariff application, filed on March 16, 2015, which sought revenue requirements of $694.3 million for 2015, $810.8 million for 2016, and $913.3 million for 2017.
ATCO cited two criteria for evaluating the need for an interim rate increase: quantum and need factors; and public interest factors.
With respect to quantum and need, ATCO submitted that its requested revenue requirement increase of $214.4 million was substantial and material, which necessitated additional funds during 2016. ATCO therefore requested 100 percent of its applied-for interim tariff, or in the alternative, 90 percent, including contested items and issues to offset the risk of a credit downgrade.
ATCO also submitted that the approval of its requested interim rate increase would allow for a gradual increase to rates, which would avoid both intergeneration equity concerns and rate shock to consumers.
The Utilities’ Consumer Advocate (“UCA”) recommended an interim tariff level equal to 50 percent of the requested increase for 2016 rates. The UCA cited Decision 20556-D01-2015 wherein the AUC held that it preferred “gradualism” in transitional rates, and therefore adopted an intermediate position between current rates and proposed final rates in a range between 50 and 75 percent of the requested increase on an interim basis.
The AUC held that it would consider the application on its own merits. In so doing, the AUC held that ATCO did not provide any indication of potential impacts an approval of 90 percent of the requested increase would have on its credit rating. Consequently, the AUC determined that it could not assess the importance of the interim rate needed for ATCO’s ability to insulate its credit metrics.
However, the AUC noted that the accumulated shortfall from interim and requested rates represented a material amount with a potential for rate shock to consumers, and therefore held that relief was warranted at 90 percent of ATCO’s proposed revenue requirement.
The AUC therefore approved ATCO’s 2016 TFO tariff on an interim basis at $63.2 million per month, effective January 1, 2016 until otherwise directed by the AUC.
