Regulated Rate Tariff – Revenue Deficiency
EPCOR Energy Alberta GP Inc. (“EEA”) applied for an interim regulated rate tariff (“RRT”) to be effective January 1, 2015.
EEA submitted that the continuation of the interim 2014 RRT rates into 2015 would result in an accumulated forecast revenue deficiency of approximately $8.69 million by June 2015, amounting to 19 percent of EEA’s 2015 forecast RRT non-energy revenue requirement of $45.19 million. This revenue deficiency was later revised in reply argument by EEA to 14.6 percent.
EEA proposed to collect 75 percent of the forecast revenue deficiency between the 2014 interim and 2015 forecast RRT rates over a five-month period, beginning on February 1, 2015.
The Utilities Consumer Advocate (“UCA”) argued against the proposed interim rates, taking the position that EEA had not satisfied the quantum and need factors established in Decision 2005-099. In particular, the UCA argued that the financial hardship was overstated by EEA, and that the UCA’s calculation of forecast revenue deficiency of $3.3 million would not cause EEA any financial hardship.
The AUC held that the UCA’s calculations were incorrect, that the shortfall of 14.6 percent for the first six months of 2015 was material, and that further revenue deficiencies were probable. The AUC also noted that EEA had removed potentially contentious items from the calculation of its interim rates, supporting the quantum and need factors.
Therefore, the AUC held that an interim rate increase was necessary, since the revenue deficiency would have some financial impact on EEA, and that reducing these impacts may reduce potential intergenerational inequity and rate shock to consumers.
In noting EEA’s request to recover 75 percent of the revenue deficiency, the AUC also noted its past practice of only approving the recovery of 50 percent of forecast revenue deficiency. The AUC held that the difference in the amounts to be collected over the six month period, whether for 75 or 50 percent of the revenue deficiency, would be relatively small. Accordingly, the AUC approved 50 percent of the applied for rate increase.
The AUC ordered EEA to file an interim price schedule, consistent with the findings in this decision by January 27, 2015.
