PBR Rates – Rate Shock Mitigation
Background
On December 23, 2016, the AUC issued Decision 21980-D01-2016 with respect to Fortis Alberta Inc.’s (“Fortis”) 2017 annual performance based regulation (“PBR”) rates. To address potential rate shock concerns, the AUC also approved a rate shock mitigation strategy in that decision, whereby Fortis’ PBR-related rates would be maintained at the 2016 levels for residential customers. The Commission considered the bill impacts for the remaining rate classes to be acceptable without mitigation.
To allow Fortis to collect the same amount of distribution revenue in the 2017 calendar year as would have otherwise been collected had the proposed PBR rate increases been implemented on January 1, 2017, the AUC allowed Fortis to apply for an additional rate change effective April 1, 2017, for Fortis’ residential customers.
Application
Fortis calculated its 2017 PBR rates effective April 1, 2017, using the approved PBR formula components and added a true-up factor to recover the full 12 calendar months of revenue over nine months.
Fortis’ applications stated that the resulting PBR rate proposed by Fortis to be in effect April 1, 2017, increased by 3.0 per cent for typical residential customers from March to April 2017.
AUC Findings and Decision
The AUC noted that in past decisions, it has generally considered 10 per cent to be the threshold potentially indicative of rate shock.
The AUC observed that Fortis’ estimated bill impacts of 3.0 percent did not include the effect of the quarterly AESO DTS deferral account rider also effective April 1, 2017 (the “Q2 AESO DA Rider”).
However, the AUC found that the total bill impact for a typical residential customer remained below 10 percent, even with the inclusion of the Q2 AESO DA Rider. The AUC found that the impact to residential customers falls within a reasonable range and is unlikely to result in rate shock.
Accordingly, the AUC approved Fortis’ 2017 PBR rates as filed, effective April 1, 2017.
