Rates- Intergenerational Equity
In this decision, the AUC approved the application filed by ENMAX Power Corporation (“EPC”) for its 2021 interim transmission facility owner (“TFO”) tariff, effective January 1, 2021. The AUC approved the interim TFO tariff in the amount of $105.15 million. The 2021 interim TFO tariff would be collected by way of a monthly rate of $8.76 million.
Application
EPC’s 2019 tariff of $96.59 million was approved by the AUC. EPC had filed for its 2021-2022 transmission general tariff (”GTA”), requesting a forecast 2021 revenue requirement of $110.86 million, but did not expect a decision to be given until the third quarter of 2021. EPC noted that with the continuation of the existing 2019 TFO tariff throughout 2021, a revenue shortfall of $14.27 million would occur.
To collect the 2021 interim tariff, EPC proposed to collect a monthly tariff of $8.76 million, effective January 1, 2021.
With regards to quantum and need factors, EPC submitted that the potential transmission revenue shortfall of $14.27 million was both probable and material, and if left unaddressed would cause financial hardship to EPC due to increased borrowing and decreased cash flow. Further, collecting only 60 per cent of the forecast increase related to the 2021 forecast revenue requirement would, in EPC’s submission, adequately account for any potentially contentious or settled elements of the 2021-2022 GTA.
With respect to various public interest factors, EPC submitted that the 2021 interim tariff would promote rate stability and ease the effect of rate shock by reducing the increase that would otherwise result from the future implementation of a final 2021 tariff, decrease the quantum of an eventual true-up and provide for a more gradual and stable transition of its transmission tariff. Further, if a 2021 interim tariff was not approved, in EPC’s submission, intergenerational equity could not be maintained because there is a substantial risk that customers’ rates for the test period would not reflect the costs associated with that period. EPC asserted that while carrying costs could mitigate the financial hardship on EPC resulting from the revenue shortfall, carrying costs could not address the issues of rate shock or rate stabilization. EPC further noted that such carrying costs could compound the intergenerational inequity by increasing the amounts that must be recovered in future tariffs.
Findings
The AUC accepted EPC’s submission that by collecting 60 per cent of the identified revenue shortfall, EPC would avoid the need for increased borrowing, and would therefore avoid financial hardship because of the material revenue shortfall between its existing 2020 tariff of $96.59 million and its forecast 2021 revenue requirement of $110.86 million.
As final rates for EPC are not likely to be in place before the fourth quarter of 2021, the AUC found the need for an interim adjustment to have been demonstrated.
The AUC found the public interest factors to be satisfied. The AUC agreed that the collection of a portion of any rate increase resulting from EPC’s final 2021 tariff, would promote rate stability through a gradual rate increase. The AUC also agreed that the interim adjustment would help to maintain intergenerational equity and provide appropriate price signals to customers.
The AUC found that, while carrying costs would address part of the impact of the proposed revenue shortfall on EPC, carrying costs would not address the issue of rate stability, ease any potential rate shock, provide appropriate price signals to customers or address concerns for intergenerational equity.
The AUC approved EPC’s requested 2021 interim TFO tariff as filed, to be effective January 1, 2021.
