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AUC 2021 Generic Cost of Capital, AUC Decision 24110-D01-2020

Link to Decision Summarized


In this decision, the AUC set the return on equity (“ROE”) of 8.5 per cent and deemed equity ratio of 37 per cent (39 per cent for AltaGas Utilities Inc.) (collectively, the ROE and equity ratios, referred hereto as “Parameters”) for the year 2021 on a final basis. The established Parameters will apply to the following utilities:

  • AltaGas Utilities Inc. (“AltaGas”);

  • AltaLink Management Ltd. (“AltaLink”);

  • ATCO Electric Ltd. (“ATCO Utilities”);

  • ATCO Gas & Pipelines Ltd.(“ATCO Utilities”);

  • ENMAX Power Corporation (“ENMAX”);

  • EPCOR Distribution & Transmission Inc. (“EPCOR”);

  • FortisAlberta Inc. (“Fortis”);

  • KainaiLink L.P.;

  • City of Lethbridge;

  • PiikaniLink L.P;

  • The City of Red Deer; and

  • TransAlta Corporation (“TransAlta”), collectively, the “Alberta Utilities”.

The Parameters set out in this decision did not apply to EPCOR Energy Alberta GP Inc., ENMAX Energy Corporation, and Direct Energy Regulated Services because these utilities are regulated pursuant to the Electric Utilities Act, the Regulated Rate Option Regulation, and the Gas Utilities Act Default Gas Supply Regulation, respectively.

The parameters for the various investor-owned water utilities under the AUC’s jurisdiction were not determined in this proceeding. However, the determinations in this proceeding may be considered in other proceedings, should issues respecting ROE and deemed equity ratios arise for these utilities.


On December 4, 2018 the AUC initiated the 2021 Generic Cost of Capital (“GCOC”) proceeding. Subsequent to evidence having been filed, the AUC suspended the proceeding for six months on March 19, 2020. In light of the extraordinary turmoil and uncertainty in financial markets at the time on account of the COVID-19 pandemic, the AUC advised that it would review and reassess its decision every 30 to 60 days, unless circumstances changed dramatically and called for earlier action.

The AUC’s last communication with registered parties in this proceeding was on August 7, 2020. The AUC acknowledged at that time that all parties, except for the Consumers’ Coalition of Alberta, maintained their positions that the ongoing COVID-19 pandemic and related economic and financial market uncertainty/volatility continued to preclude the immediate successful resumption of the proceeding. The Commission also acknowledged parties’ requests to update their evidentiary submissions upon the eventual resumption of the proceeding.

By way of a letter dated May 26, 2020, the AUC noted the Alberta Utilities’ request to extend into 2021 for each utility, on a final basis, the currently approved ROE of 8.5 per cent and equity ratio of 37 per cent (39 per cent for AltaGas) as originally approved in Decision 22570-D01-2018. This request from the Alberta Utilities was premised on the need to ensure stability for the utilities, customers, and investors given how little time remained for the AUC to conduct the proceeding and issue a prospective decision by the end of 2020.

The AUC wished to explore practical ways of addressing the concerns raised by the utilities, including, especially, the need for certainty and stability in the current environment, despite the unsettled nature of financial markets, by allowing for final parameters to be established in advance of the test period. The AUC offered each regulated utility the ability to select one of the following options for setting its Parameters in 2021:

(1) Fully interim Parameters for 2021.

(2) Rolling final retrospective Parameters for 2021.

(3) Rolling final prospective Parameters for 2021.

(4) Fully final Parameters for 2021 determined by way of a negotiated settlement with parties.

(5) Fully final Parameters for 2021 with an ROE of 8.3 per cent.

In the same correspondence, the AUC clarified that the deemed equity ratios would mirror the treatment of the ROE under each of options 1, 2 and 3 for 2021. Under options 4 and 5, the deemed equity ratios determined in the 2018-2020 GCOC will be effective for the duration of 2021.

In response, AltaGas, Fortis, EPCOR, AltaLink, the ATCO Utilities, and ENMAX elected Option 3 – Rolling final prospective parameters for 2021. While the City of Lethbridge and the City of Red Deer opted for Option 1, they noted that if other utilities unanimously selected an option, the cities should receive the same treatment, so Option 3 was extended to those parties. TransAlta did not file a statement of intent to participate and made no election.

In conformance with an earlier GCOC decision, the AUC was of the view that “early 2021” could be an appropriate time to return to the task of determining going-forward parameters for the utilities. The AUC considered that this timing was unlikely to permit a final decision to be issued prior to the end of the third quarter of 2021. This meant that those utilities that selected rolling final prospective parameters for 2021, from a list of five options, would receive their current ROE and equity thickness parameters for the entirety of 2021 on a final basis. The scope of the future GCOC proceeding would no longer include 2021.

The AUC concluded this proceeding without further process and will commence a new GCOC proceeding to address a future period. Parties seeking to rely on evidence filed in the current proceeding may refile this evidence in the new GCOC proceeding. The AUC also granted The City of Calgary’s request for leave to file evidence. Calgary was permitted to do so concurrently with other parties. The AUC would pre-register all registered parties in this proceeding in the upcoming new GCOC proceeding and provide additional process related details in the near future.


The AUC approved a generic ROE and equity ratio for AltaGas, AltaLink and its partners PiikaniLink L.P. and KainaiLink L.P., ATCO Utilities, ENMAX, EPCOR, Fortis, the transmission operations of the City of Lethbridge, the transmission operations of The City of Red Deer, and certain electricity transmission assets of TransAlta, as being set by extending the currently approved rate for the duration of 2021.  

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