Review and Variance – AESO Rules – Line Losses
Decision Summary
In Decision 25150-D01-2020, the AUC determined that it would hear an application filed by the Alberta Electric System Operator (“AESO”) to vary specific findings pertaining to the timing and approach for the collection and reimbursement of funds related to historical line loss charges and credits (“Settlement Findings”) in Decision 790-D06-20172 (“D06 Decision”).
In this decision, the AUC determined whether to vary the Settlement Findings in the D06 Decision, and if so, what settlement schedule should be implemented. The AUC found that the Settlement Findings in the D06 Decision should be varied from a single settlement process to a settlement process that is completed in three settlement periods.
Background
On December 3, 2019, the AESO filed an application seeking a review and variance (“R&V”) of the AUC’s order in the D06 Decision, which implemented a single settlement of Module C loss factor charges and credits. The AESO requested that the AUC vary its Settlement Findings from a single settlement approach to a pay-as-you-go approach. The AUC agreed to hear the R&V application outside of the 60-day deadline.
In this decision, the AUC panel that authored the D06 Decision is referred to as the “Hearing Panel.”
Consideration of Settlement Options
Single Settlement
The Hearing Panel’s findings in the D06 Decision directing the implementation of a single settlement approach are found in paragraphs 143 to 157 of the decision. The Hearing Panel summarized the single settlement approach as follows:
A single, net settlement approach with one net charge collected or reimbursed to market participants only after all loss factors have been calculated for the historical period (single settlement).
The Hearing Panel directed a single settlement approach principally because it would “provide parties with the opportunity to review the results for each year, before new statements of account are issued” and “be most efficient, from an administrative perspective, to wait until all years are calculated before issuing a final statement of account for the full historical period.” The Hearing Panel recognized that a single settlement approach would delay refunds longer as compared to a pay-as-you-go approach that was presented at that time and sought to mitigate the consequence of that additional delay through interest charges.
Pay-As-You-Go Settlement
In the D06 Decision, the Hearing Panel summarized the pay-as-you-go settlement approach as follows:
A pay-as-you-go settlement approach, with a charge or reimbursement made to market participants once the loss factors had been calculated for one or more years and repeated sequentially until all historical years have been settled (pay-as-you-go settlement).
In that decision, the Hearing Panel stated that it was uncertain whether a pay-as-you-go approach would result in significant variability between charges and credits as each year of the historical period was calculated and consequently, it was not prepared to direct pay-as-you-go settlement. The Hearing Panel also stated that a pay-as-you-go approach could result in the imposition of an additional administrative burden if the AESO was required to deal with payment defaults.
Alternative Settlement Options
The AUC invited comments on two alternative options that would divide financial settlement into either two or three settlement periods.
(a) Completing the settlement in three periods: three years, four years, and a final four years. (Option 1)
(b) Completing the settlement in two periods: three years and eight years. (Option 2)
AUC Findings
On December 18, 2017, the Hearing Panel issued the D06 Decision based on representations from the AESO at that time that it would take 13 months to implement loss factor charges for the historical period. The Hearing Panel directed the implementation of a single settlement process recognizing that it would result in the delay of refunds. Approximately 24 months later, the AUC received this application from the AESO indicating that “… completion of single settlement of charges and credits will require approximately 19 to 30 months instead of the 9 to13 months duration that the AESO originally estimated.”
It was noted that in the first stage of the review (Decision 25150-D01-2020), the AUC acknowledged the complexity of calculating historical loss factor charges and stated that it is in the interest of all parties that related charges be settled as soon as reasonably possible. The AUC accepted the submissions of parties that the speed of financial settlement should be the primary consideration in determining whether the D06 Decision should be varied. Notwithstanding, the AUC noted that it is also important that the AESO has sufficient time to accurately prepare the settlement calculations and that there is a timely process to resolve any disputes that may arise with the settlement calculations as they are being completed. The AUC found that the imposition of Option 1 will achieve the appropriate balance between the need to proceed as expeditiously as possible while also allowing review and conciliation of disputes as the calculations for each settlement period are completed.
The AESO submitted that if the AUC were to approve a settlement approach by early July 2020, it expected that settlement of years 2016, 2015 and 2014 would occur by September 2020. Given the time that had already elapsed and based on the AESO’s representation that calculations for the initial three years were nearly completed, the AUC found that the settlement of these first three years should occur as soon as possible.
The AUC varied the direction to the AESO in the D06 Decision, which required the implementation of a single settlement approach for the historical period with simultaneous collection and reimbursement by directing the AESO to implement three settlement periods including one of three years, and two four-year periods for the historical period with simultaneous collection and reimbursement pursuant to the ISO tariff.
