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ENMAX Energy Corporation 2019-2022 Energy Price-Setting Plan Compliance Filing, AUC Decision 25537-D01-2020

Link to Decision Summarized

Rates – Energy Price-Setting Plan


In this decision, the AUC considered a compliance filing from ENMAX Energy Corporation (“EEC”) for its 2019-2022 regulated rate option (“RRO”) energy price-setting plan (“EPSP”). The EPSP utilizes a competitive auction methodology for procuring energy and for establishing the energy charge to be paid by its RRO customers. The AUC approved the 2019-2022 EPSP but required EEC to file revisions to its EPSP, with all schedules and appendixes to the EPSP.

Background

On July 15, 2019, EEC filed an application with the AUC requesting approval of its 2019-2022 EPSP. On March 19, 2020, the AUC issued Decision 24721-D01-2020, which determined that the proposed auction design satisfied the requirements set out in the Regulated Rate Option Regulation, but it found that certain components of EEC’s 2019-2022 EPSP would require a compliance filing. Eleven directions were issued in the decision, with nine directions relating to EEC’s compliance filing. Direction 8 solely related to future EPSP applications and was not included in the AUC’s findings in this decision.

Non-Routine and New Issues

Non-routine elements in EEC’s 2019-2022 EPSP compliance filing included a URICA Energy Management Corp.’s (“URICA”) proposal for auction monitoring that would be undertaken for EEC, ICE NGX Canada Inc. (“NGX”) auction software and platform development costs, and NGX auction hosting service fees.

Auction Monitoring (Direction 2)

The AUC directed EEC to submit a proposal for an auction monitoring report and process. EEC retained URICA Energy Management Corp. (“URICA”) to prepare a proposal, which EEC included as Appendix 6 to its application. EEC added that this direction appeared to align with an information request (“IR”) from the Utilities Consumer Advocate (“UCA”) and that URICA’s proposal was accordingly guided by the information requested in that IR. EEC advised that the cost of URICA providing this service is $3,750 per month, which EEC proposed to recover through its energy charges.

Given the expected costs for the auction monitoring process proposed by EEC through the use of URICA, the AUC found that the services went beyond what is reasonably necessary to provide auction monitoring that would be beneficial to the AUC and ratepayers. This was particularly apparent for certain URICA services, such as URICA’s participant commentary on a current auction or commentary on notable news items prior to or on the day of the auction. The AUC considered the UCA’s list of items for auction monitoring, with the exception of item (iii) (the number of bidders with a financial position and the number of bidders with a physical position) to be reasonable, but noted that EEC’s proposal for analyses and expertise that would be provided by URICA went beyond this list.

Upon further consideration, the AUC concluded that it is not necessary for EEC to report its auction statistics each month. The AUC considered that it is sufficient for EEC to report on auction statistics only for delivery months where there are concerns with the competitiveness of any auctions, including but not limited to, any auctions that fail the competitiveness assessments. Any reports to the AUC must be filed in conjunction with that delivery month’s energy charge filing and must include the following: the number of confirmed suppliers and bidders; competitive assessment results; the results of the specific auctions being reported; and whether there were any cancelled or contingency auctions for the delivery month. The information is intended to inform the AUC on the status of the operation of the auctions and energy procurement under the 2019-2022 EPSP and is not intended to disturb any reporting that may be required by the Market Surveillance Administrator under its mandate and duties specified in the Alberta Utilities Commission Act.

Auction Development and Hosting (AUC Direction 3)

The AUC directed EEC to provide an estimate of the auction development and deployment costs and lead time in a compliance filing. In response to the AUC’s direction, EEC negotiated a one-time charge of $500,000 with NGX for developing the auction software to be recovered over 12 months. This one-time development charge did not include the cost of any future modifications to the auction software. The specific terms of this charge were included in the Professional Services Agreement (“PSA”) filed on the confidential record.

In an IR to EEC, the AUC referred to an EPCOR Energy Alberta GP Inc. (“EPCOR”) post-disposition document filed on July 20, 2018, in connection with Proceeding 22357 regarding EPCOR’s 2018-2021 EPSP, where EPCOR indicated that NGX’s cost to develop the software for the descending clock auctions was capped at a maximum of $250,000.

The AUC stated that the $500,000 is significantly different than a similar auction development cost charged to EPCOR and stated that EEC could have submitted, on the record, a budgetary quote from NGX at the time EEC proposed a move to the descending clock auction in the original proceeding. The AUC considered that the budgetary quote on the descending clock auction development costs should have been available for review to the AUC and interveners early in the process for more full and proper consideration. Accordingly, the AUC directed EEC in all future EPSP applications for contracts for third-party service for an itemized budgetary quote for services and any other corollary services to be included with its original EPSP applications rather than waiting to provide this information in the compliance filing. The cost put forward by EEC in this compliance filing represents a material deviation from the historical costs that NGX has charged for auction development costs. The AUC noted the lack of support, itemization, or derivation of costs for the $500,000 quote, and was not satisfied with the reasons provided by EEC and NGX for the quantum of costs. For these reasons, the AUC denied EEC’s request for $500,000 in auction development costs to be recovered through the EPSP. Instead, the AUC, in its discretion, granted $250,000 to EEC, to be recovered over 12 months.

Concerning a $150,000 annual hosting fee, the AUC found merit in NGX’s explanation to provide continuous technical support and cybersecurity enhancements in order to host the descending clock auctions, and the AUC accepted that there will be reasonable costs each year to maintain cybersecurity. Further, an itemized description was provided which provides transparency. Accordingly, the AUC granted the $150,000 annual hosting fee for the term of EEC’s 2019-2022 EPSP, to be collected monthly on a pro-rata basis.

Routine Issues

Backstop Report (Direction 5)

The AUC directed EEC to update its EPSP to indicate that a backstop report will be provided to the AUC for any month in which the backstop mechanism is triggered. EEC complied with this direction.

Errors and Omissions (AUC Direction 9)

The AUC directed EEC to include in the compliance filing a consolidated list of all errors and omissions in the EPSP from Proceeding 24721 that were corrected in the compliance filing. EEC complied with this direction. EEC was required to make additional corrections as part of its revised EPSP in a post-disposition filing.

Directions 1, 4, 6, 7, 10 and 11

In paragraph 145 of Decision 24721-D01-2020, the AUC made the following direction:

145. In the scenario where EEC needs to procure an additional peak product block for a delivery month, the Commission directs EEC to exclude the procurement cost of the additional block in the base energy charge and clearly convey this in its monthly filings. The Commission views that this additional peak block should not be used in the calculation of the monthly energy charge because the monthly energy charge should be based on the price of the full-load product. The Commission also views that the additional peak product block will be treated the same as the other peak blocks and will be used to calculate the CRC [commodity risk compensation]: the procurement of the flexible peak hedging block should not affect the application of the CRC to 60 per cent of EEC’s RRO load obligation, but rather netted against the CRC gains and losses for EEC.

EEC stated that it edited Schedule F of the EPSP and the auction tab of its illustrative energy charge model to reflect this direction, which is Direction 1. The AUC found that EEC complied with this direction but also noted that this direction is an ongoing direction that applies for the term of the EPSP.

In Direction 4, the AUC directed EEC to disclose the base energy charge and CRC components separately in its energy charge model. The AUC found that EEC complied with this direction.

In Direction 6, the AUC directed EEC to amend its EPSP such that the backstop request for quotation (“RFQ”) is sent to all confirmed backstop suppliers. The AUC found that EEC complied with this direction.

In Direction 7, the AUC directed EEC to include in Schedule 2 of its Rule 005 filings the applicable pre-tax reasonable return rates in dollars per megawatt-hour. For this application, the AUC reviewed EEC’s 2019 Rule 005 filing and confirmed that EEC included its pre-tax reasonable return in dollars per megawatt-hour. EEC therefore complied with this direction, but the AUC noted that this direction is ongoing.

In Direction 10, the AUC directed EEC to submit a motion for confidential treatment of information in accordance with Bulletin 2020-05. In Direction 11, the AUC stated that it would be efficient if all of EEC’s confidential documents from Proceeding 24721 were migrated to the compliance filing record and directed EEC to provide a list of confidential documents filed in Proceeding 24721. The AUC found that EEC complied with these two directions.

Approval and Implementation of EPSP

The AUC considered the directions to EEC that require it to file a revised EPSP, with all schedules and appendixes to the EPSP as a post-disposition document on this proceeding, will not affect the essential functioning of the EPSP and implementation of the auction. Rather, certain components of EEC’s 2019-2022 EPSP require revision to conform with the AUC’s findings and the associated disallowance of certain EPSP costs, as directed in this decision. Consequently, the AUC noted that nothing precludes EEC from immediately commencing work with NGX to implement the auction and the AUC approved EEC to start implementing the auctions.

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