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AUC Bulletin 2019-03: Generic Proceeding to Review Rate Treatment of Distribution System Acquisition Costs Under Performance-Based Regulation

Link to decision summarized

Performance-Based Regulation

In this bulletin, the AUC announced an AUC initiated a generic proceeding (Proceeding 24405), to consider and clarify the rate treatment of amounts paid by a regulated distribution utility for the acquisition of other distribution systems or assets under the 2013-2017 and 2018-2022 performance-based regulation (“PBR”) plan frameworks.

The AUC determined that all interested parties (e.g., including municipalities owning distribution systems, rural electrification associations (“REAs”), and gas co-ops) would benefit from clarity regarding the rate treatment of these types of purchases by a distribution utility. The generic proceeding did not re-examine how the acquisition costs should be evaluated for prudency nor will it reconsider the parameters, rate adjustment mechanisms, and capital funding mechanisms established or continued by the AUC for the 2018-2022 PBR plans.

Generic Proceeding Process and Participation

The AUC requested parties’ comments with respect to the process, specifically, if the filing of evidence and a round of information requests and responses is required, or if this matter can proceed directly to argument and reply argument. Following its consideration of any submissions received, the AUC will release a confirmed issues list and a further process schedule. It is the AUC’s expectation that this approach will result in a considered and comprehensive issues list that will serve to focus the proceeding, enhance the quality of the record, and promote regulatory efficiency.

The AUC pre-registered the six distribution utilities under the 2018-2022 PBR plans, ATCO Electric, Fortis, AltaGas, ATCO Gas, ENMAX, and EPCOR, as participants in this proceeding. The AUC also pre-registered intervening parties that actively participated in proceedings 23702 and 23972; namely, the Consumers’ Coalition of Alberta and the Office of the Utilities Consumer Advocate. The AUC requested that all parties confirm their contact information for Proceeding 24405 in the AUC’s eFiling System and update it if required.

Concurrently with this bulletin, the AUC issued a notice of application inviting any other interested parties to participate. The statements of intent to participate were due March 19, 2019.

The AUC also issued as Appendix A to this bulletin a Preliminary List of Issues, summarized as follows:

(a) Under the previous PBR framework, amounts paid by a regulated distribution utility for the acquisition of an REA may be treated by way of a Y factor when the acquisition was directed by the AUC. For the purposes of funding under the previous PBR framework, should the purchase of a municipally owned electric or gas distribution system be treated differently than the purchase of an REA?

(b) For the purposes of funding under the 2018-2022 PBR plans, should the purchase of a distribution system (such as an REA or municipally owned electric or gas distribution system) be treated differently than the purchase of an REA under the previous PBR framework and should different types of distribution systems require different rate treatment?

(c) In light of the established 2018-2022 PBR plan framework and the five PBR principles,8 how should the amounts paid by a regulated distribution utility for the acquisition of an electric or gas distribution system from an REA, municipality or gas co-op be treated under that framework? In particular:

(i) Should these costs be considered for funding through a supplemental funding mechanism such as a Z factor or a Y factor?

(ii) Alternatively, should the supplemental funding mechanisms such as a Z factor or a Y factor be unavailable to a distribution utility, given the presence of the capital funding mechanism under the 2018-2022 PBR plan?

(iii) What are the rate treatment options referenced in parts (i) and (ii) above?

(d) With respect to the purchase of an REA, a specific AUC direction to the utility to acquire the subject assets is required to allow for Y factor treatment of the acquisition costs. What should the treatment be for the acquisition costs absent a Commission direction?

(e) Parties may make submissions in this proceeding with respect to “the rate treatment of the acquisition costs of the Crowsnest Pass electric distribution system in light of the service area and transfer approvals received to date.”

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