General Tariff Application – Electricity Transmission
On May 12, 2017, TransAlta Corporation, as Manager of the TransAlta Generation Partnership (“TransAlta”), filed an application with the Commission requesting approval of its 2015-2016 General Tariff Application (“GTA”) (the “2015-2016 GTA” or “Application”).
In the Application, TransAlta requested the AUC approve:
(a) a revenue requirement of $4.79 million for 2015;
(b) revenue requirement of $6.14 million for 2016
(c) transmission facility owner (TFO) terms and conditions of service (T&Cs) for 2015 and 2016; and
(d) reconciliation of certain deferral accounts proposed by TransAlta.
In this decision, the AUC approved the Application, subject to certain adjustments and directions summarized below.
Background
TransAlta’s transmission facilities consist of the transmission assets owned by TransAlta and located on First Nations Lands, and of subsequent investments in these assets and others, all on First Nations’ Lands (the “Withheld Assets”).
TransAlta, together with AltaLink via the Operating and Maintenance (“O&M”) Agreement, maintains and operates the Withheld Assets. With a small administrative and operations team, TransAlta provides overall control and direction to AltaLink who, as TransAlta’s sole contractor, performs the day-to-day operating and capital maintenance, as well as any Alberta Electric System Operator (“AESO”) direct assigned capital projects.
Operating, Maintenance, and Administrative Costs
The AUC approved, as filed, TransAlta’s applied for Direct Operation and Maintenance Costs, based on finding the following expenses to be reasonable:
With the exception of miscellaneous general expenses (highlighted below), the AUC found to be reasonable the following administrative and general expense items in the amounts applied-for by TransAlta:
With respect to the First Nations advisory committee (“FNAC”) expenses, the AUC approved the amounts as filed based on the following findings:
(a) FNAC meetings helped to improve the relationship between TransAlta and the First Nations, as well as help TransAlta achieve its public utility mandate; and
(b) These expenses were reasonable.
Considering community building sponsorships
The AUC found that support expenditures, like the community-building sponsorship program and the community investment initiative of TransAlta, can foster goodwill among the community. Developing goodwill and relationship building with a community may assist the utility in obtaining community support in carrying out the utility’s operations. However, the AUC noted that it has consistently denied recovery of these types of expenditures from ratepayers for a number of reasons, including:
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Ratepayers may not desire to support the same organizations that utility management or shareholders would support. Ratepayers have the right to choose to support whichever worthy causes they choose through their own donation dollars and should not be expected to provide the funds to support the causes that the utility has chosen; and
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The sponsorships or donations do not demonstrate a direct benefit related to the provision of utility service.
The AUC found that donations can be considered as payments made by the shareholder to support the goodwill of the utility.
The AUC acknowledged it can be in the public interest to respect, honour and to accommodate rights of the Indigenous peoples of Canada where appropriate. In some circumstances, community support expenditures by a utility may be aligned with the public interest, depending on the impact of the utility’s operations on these rights and the nature of the support provided. In such circumstances, the inclusion of community support expenditures in revenue requirement and rates may be justified.
However, in this case, the AUC found that TransAlta failed to establish that the proposed community support expenditures were in the public interest in light of the activities being carried out by the utility in the relevant Indigenous communities and the impact of TransAlta’s operations on the rights of the people in these communities. Accordingly, the AUC followed its previous well-established practice of denying community building sponsorship costs. The AUC directed TransAlta to remove all costs associated with donations or sponsorships from the 2015 and 2016 revenue requirement forecasts.
Transmission Rate Base
Additions to rate base
The AUC approved the following rate base additions:
(a) TransAlta’s applied-for actual capital maintenance expenditures and associated rate base additions;
(b) TransAlta’s forecasted capital additions for the purposes of determining TransAlta’s revenue requirement in the test period.
Working Capital
The AUC found to be reasonable TransAlta’s proposal to adopt working capital ratios approved for AltaLink in respect of the 2015-2016 test period, given TransAlta’s small size and closely integrated operations with AltaLink.
The AUC found that:
(a) TransAlta’s necessary working capital calculations were accurate; and
(b) TransAlta’s working capital ratios and lead lag data match those in AltaLink’s third compliance filing for its GTA.
Deferral Accounts
The AUC approved the following deferral account reconciliations for the years 2013 and 2014:
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capital deferral account reconciliation for directly assigned capital projects;
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operating deferral account reconciliation for property taxes and payments in lieu of property taxes; and
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operating deferral account reconciliation for actual tower payments versus approved placeholders.
