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Alberta Electric System Operator – 2018 Independent System Operator Tariff (AUC Decision 22942-D02-2019)

Link to decision summarized

ISO Tariff


In this decision, the AUC considered whether to approve an application (the “Application”) from the Alberta Electric System Operator (“AESO”) regarding its 2018 Independent System Operator (“ISO”) tariff. The AUC directed the AESO to refile the Application in January 2020.

Legislative Scheme

Section 119(4) of the Electric Utilities Act requires the AESO to prepare a tariff and to apply to the AUC for approval of this tariff. The tariff is composed of two elements: (i) costs and expenses; and (ii) the proposed allocation of costs and expenses to rate classes (rate design).

Point of Delivery (“POD”) Cost Function

The POD cost function is used (i) to classify costs for the POD charge in Rate Demand Transmission Service (“DTS”); and (ii) to establish investment levels for the construction contribution policy in section 8 of the proposed ISO tariff.

The AESO considered four options for the data and variables included in the POD cost function estimation. Subsequently, in the AESO rebuttal evidence, the list of options was expanded to include five further options. The nine options were:


Table 2 POD cost function.PNG

The AUC found that there were difficulties associated with many of the options, including option #4a which, if not for issues with the conversion from installed capacity to contract capacity, would otherwise be the AUC’s preferred option. The AUC  therefore found that the AESO should continue with the status quo, as reflected in option #2, based on contract capacity but excluding the zero megawatt (“MW”) upgrade projects.

Rates

Power Factor Deficiency Charge

The AUC was not satisfied that the AESO sufficiently justified its proposed increase in the charge from $400 per Market Value Added (“MVA”) to $1,200 per MVA. Given these concerns, the AESO’s proposed change to the existing power factor deficiency charge to $1,200 per MVA from $400 per MVA was denied. The AUC directed the AESO to either provide further support for its calculation of the $1,200 per MVA charge in the compliance filing to this decision or its next comprehensive general tariff application.

Rate Supply Transmission Service (“STS”) – Changes in Generating Unit Owner’s Contribution (“GUOC”) Rate Levels

The AESO proposed changes to the capacity that is used to calculate a GUOC and the method used to calculate the GUOC rate. The AESO proposed to calculate a GUOC, as follows:

(a)      maximum capability of a new generating unit if only the generating unit is being added at a site; or

(b)      maximum capability of a new generating unit less the minimum capacity of new load being added at the same time at the same site, or is proposed to be added within 12-months of the added generation.

No objections to the AESO’s proposed changes to the capacity used to calculate a GUOC, the method used to calculate the GUOC rate, or the AESO’s proposed GUOC rate were submitted. The AUC approved the AESO’s proposed method to calculate the GUOC rate, and the AESO’s GUOC rates.

Terms and Conditions

AESO Discretion to Make Contract Capacity Adjustments

The changes to the terms and conditions included discretion for the AESO to adjust existing contract capacities in the event they differ materially from actual flows to or from the transmission system (subsection 5.2(2)). Subject to directions set out in this decision, the AUC approved subsection 5.2(2).

ISO Preferred Alternative if Construction of Transmission Facilities Required

Under the AESO’s proposed subsection 3.4(1), where the construction of transmission facilities is required for a connection project, the ISO must determine how to respond to the system access service request, and select the AESO’s preferred connection alternative taking into account certain relevant factors. The AUC found that additional review of the provision may be of value once the AESO has had an opportunity to apply subsection 3.4(1). Accordingly, the AUC directed the AESO to work with market participants to address any concerns.

Requirement for Market Participants to Provide Specific Information in System Access Service Requests (“SASRs”)

The AESO proposed revisions to subsection 3.2(2) of the current ISO tariff to require market participants to provide, in a SASR, specific information that the AESO will reply upon to plan a connection. The AUC found the AESO’s proposal would add certainty to the AESO’s transmission system planning process and provide increased clarity to market participants regarding the status of their proposed projects. However, the AUC noted that additional review of the provision may be of value once the AESO has had an opportunity to apply subsection 3.2(2). Accordingly, the AUC directed the AESO to work with market participants to address any concerns.

Timing of GUOC Payments

The AESO proposed that supply market participants be required to pay a GUOC within 30 days of a system access service agreement becoming effective (subsections 7.5(3) and 7.5(4)). The AUC approved subsections 7.5(3) and 7.5(4) as filed.

Classification of Connection Project

The AESO proposed several changes to its terms and conditions in how it determines the classification of a connection project as a system-related or participant-related cost.

The AUC found that the AESO’s proposed subsection 4.10 may not provide adequate discretion to the AESO to vary the application of certain aspects of its tariff contribution policy when circumstances warrant. Subsection 4.10 effectively replaced the currently approved subsection 8.10. The AUC noted that by expressly providing the AESO with broad discretion in the classification of costs as between system-related and participant-related, subsection 8.10 provides a means by which the AESO can adapt unique circumstances that may not be contemplated at the time of comprehensive ISO tariff applications. Accordingly, the AUC directed the AESO to revise its proposed subsection 4.10 at the time of refiling the Application to substantially replicate the wording in the current tariff’s subsection 8.10.

The AUC found the change from defining participant-related costs in relation to what constitutes a “contiguous connection project” as used in the existing tariff’s subsection 8.3(2) to the proposed tariff’s proposed language in subsection 4.2(2), which grants the AESO the ability to deem costs to be participant-related if the AESO considers the costs to be “necessary to accommodate a connection project,” to be reasonable.

The AESO proposed to amend or remove several provisions in the current ISO tariff’s terms and conditions that set out the framework for the classification of transmission project costs between system-related and participant-related. This includes costs regarding radial and looped facilities. The AUC found that it was within the scope of the AESO’s mandate to propose changes to the looped vs. radial classification framework adopted in Decision 2001-6.

The AESO’s proposed subsection 4.2(2)(1) addressed situations where existing system transmission facilities are reclassified to participant-related to meet the requirements of a connection project. The AUC found the proposed language in subsection 4.2(2)(1) was required to facilitate an equivalent comparison between old and new facilities. The AUC approved the AESO’s proposed subsection 4.2(2)(1).

Distribution Connected Generation (“DCG”) and AESO Adjusted Metering Practice

The AUC found that the AESO’s adjusted metering practice was consistent with applicable legislation. The AUC noted that public interest considerations raised by proponents for the promotion of renewable forms of generation should not take precedence over the need to implement the AESO’s adjusted metering practice to rectify billing determinant erosion and potential cross-subsidization of DCG by load. Additionally, concerns about the cost or complexity of implementing the adjusted metering practice should not preclude its approval.

Subject to any matter arising following the review of the potential effect of the AESO’s adjusted metering practice to be considered in the refiling Application proceeding, the AUC approved the AESO’s proposed adjusted metering practice.

AltaLink Construction Contribution Proposal

A construction contribution is the financial contribution in aid of construction (”CIAC”) in excess of the available investment by the AESO that a market participant must pay for the construction and associated costs of transmission facilities required to provide system access service. Construction contributions are intended to balance the economic effects of connecting a new customer between existing customers and the new customer.

On December 15, 2017, AltaLink filed a letter in this proceeding advising that it planned to file a proposal regarding the distribution facility owner customer contribution as part of its evidence in this proceeding. Following a consultation period, AltaLink filed its evidence on January 15, 2019.

The AUC found that the adoption of AltaLink’s contribution proposal could result in a material financial benefit to ratepayers and was therefore in the public interest. Accordingly, the AUC directed the AESO, in its refiling, to consult with AltaLink and for the AESO and AltaLink to provide a joint proposal for the implementation of AltaLink’s contribution proposal.

Order

The AUC directed the AESO to refile its 2018 ISO Tariff Application to reflect the findings, conclusions and directions in this decision after January 1, 2020 but no later than January 31, 2020.

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