Rate Design – Terms and Conditions
In this decision, the AUC addressed the 2019 Distribution Tariff Phase II application filed by ENMAX Power Corporation (“ENMAX”). For the reasons set out in this decision, the AUC approved:
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The cost allocation study, with the exception of the methodology of classification and allocation of primary tap (“Primary Tap”) costs, and the assumptions and use of physical asset data, as filed;
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The methodology and allocation of transmission system access service as filed;
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The requested rebalancing of all rate class distribution access service (“DAS”) revenue-to-cost ratios as filed; and
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The proposed rate design and fixture forecasting methodology as applied for.
The AUC denied ENMAX’s proposed increase of the fixed percentage of its DAS rate for the residential (D100) and small commercial (D200) rate classes.
Overview of ENMAX’s Application
ENMAX requested approval of its proposed distribution and transmission tariffs and terms and conditions of service (“T&Cs”), supported by a full cost-of-service study (“COSS”) and corresponding rate design.
Statements of intent to participate were received from the Office of the Utilities Consumer Advocate, the Consumers’ Coalition of Alberta, AltaLink Management Ltd., the Canadian West Ski Areas Association (CWSAA), the Canadian Solar Industries Association, and Matthew Jones (representing Macdonald Communities Limited (“MCL”).
Cost Allocation Study
The submitted cost allocation study included the steps of functionalization, classification and allocation, and attributed ENMAX’s total revenue requirement to each of its rate classes. The submitted cost allocation study used the same methodology approved by the AUC in Decision 2010-151. ENMAX noted there were two exceptions to this:
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Accounting methodology: ENMAX adopted the AUC’s Uniform System of Accounts and modified its accounting systems in 2010; and
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Classification of Primary Taps: ENMAX previously classified Primary Taps as a combination of fixed and variable costs. In this application, ENMAX classified Primary Tap costs as 100 percent fixed costs, also referred to as site- or customer-related costs.
The cost allocation study classified approximately two-thirds of the distribution revenue requirement as site related and one-third as demand related.
Findings
The AUC approved the cost allocation study as filed, with certain exceptions.
(a) Classification of Primary Tap costs
ENMAX proposed to change the classification of Primary Tap costs from the ratio approved in its 2008-2016 Phase II application to 100 percent site related costs. To classify Primary Tap costs, ENMAX considered how the overall project cost may change if the peak demand increased. It concluded that it would not. Primary Tap stays relatively constant for a wide range of transformer capacities. Primary Tap costs were classified as 100 percent site related.
To allocate Primary Tap costs, ENMAX developed typical tap costs for residential, commercial and single-phase overhead taps, as well as for single-phase and three-phase underground taps. The cost of this configuration was then divided by 20 to determine the Primary Tap cost for each single-phase overhead transformer. ENMAX used these estimates to allocate Primary Tap costs based on the number of transformers of each type and size allocated to each rate class.
The AUC noted that in ENMAX’s 2008-2016 Phase II application, ENMAX classified and allocated Primary Tap costs using a methodology similar to the one in this application; however, it determined in that cost allocation study that a portion of the costs for three-phase underground taps varied with the size of the associated transformer. This resulted in some Primary Tap costs being classified as demand related.
The AUC found it unclear how the cost allocation study concluded that first attributing cost to rate classes would lead to the demand component of classification no longer being a factor. The AUC was concerned that the analysis ENMAX completed provide the necessary information needed to properly classify Primary Tap costs and assess whether there are correlations between Primary Tap costs and customer demand.
The AUC approved the classification of Primary Tap costs as 100 percent site related as it was a small change from the previous ratio and was determined based on an updated analysis that was used to determine the previous ratio. The AUC directed ENMAX to complete an analysis that includes consideration of Primary Tap costs on a per customer basis in its next Phase II application.
Assumption and the Use of Physical Asset Data
ENMAX was directed to provide an analysis of whether the calculation of any of its allocators would result in increased utilization of actual asset and electrical connectivity data from its databases. ENMAX was directed to adopt all updated allocation methods that are found through this analysis to provide more accurate allocations in a cost-effective manner in its next Phase II application.
System Access Service
ENMAX is charged for system access service (“SAS”) by the AESO in accordance with the AESO DTS rate. ENMAX flows through these SAS charges to its customers in its distribution tariff. The AUC approved ENMAX’s methodology and allocation of transmission SAS costs, as filed.
Rate Design
Distribution Access Service Rates
(a) Revenue to Cost Ratios
The AUC found ENMAX’s recommendation to rebalance all rate class DAS revenue-to-cost ratios to 100 percent to be reasonable and approved ENMAX’s request as applied for.
(b) Residential (D100) and Small Commercial (D200) Rate Classes
The AUC denied ENMAX’s proposal to increase the fixed percentage of its DAS rate for the residential (D100) and small commercial (D200) rate classes to 87 percent and 88 percent, respectively. The AUC was not persuaded that ENMAX’s applied-for rate design change for D100 and D200 rates is just and reasonable. The AUC directed ENMAX in its compliance filing to recalculate its rate design for these two rate classes to maintain the current weighting between fixed and volumetric rates in its DAS rates, namely 74 percent and 76 percent site charges for D100 and D200, respectively.
(c) Medium Commercial (D300) and Large Commercial (D310 and D410) Rate Classes
The AUC found ENMAX’s proposal to adjust the rates for these rate classes, so that the fixed charge component recovers 100 percent of customer-related fixed costs and the demand charge recovers 100 percent of the demand-related costs, to reflect the cost causation rate design principle and as such is generally reasonable, subject to some reservations set out in this decision. In the interest of reflecting the important principle of setting effective price signals, the AUC directed ENMAX in its compliance filing to adjust the rate design to maintain the portion of the total DAS rates that are able to vary between billing periods.
(d) Streetlights D500
The AUC approved the proposed rate design and fixture forecasting methodology as applied for as it found the total fixture count forecast methodology to be logical and consistent with previously approved methodologies in analogous situations.
System Access Service Rates
The CWSAA raised concerns with the irregularity of updates to ENMAX’s System Access Service (“SAS”) rates. The CWSAA noted that because ENMAX had not updated its SAS rates since 2011, ENMAX’s deferral account adjustments had grown to comprise a significant component of customers’ SAS rates. The AUC shared the CWSAA’s concern about the lack of regularity in updates to ENMAX’s SAS rates. The AUC directed ENMAX to update its SAS rates to the 2020 DTS rates, and incorporate an updated pool price forecast in its compliance filing.
Rate Classes
In the context of the D100 and D200 rate classes the AUC accepted ENMAX’s proposal to retain its existing rate classes for the purposes of this application. ENMAX was directed to undertake a study to determine, based on homogeneity and any other relevant factors, if a further subdivision or stratification of the D100 and/or D200 rate classes is warranted. ENMAX was also directed to examine organizing rate classes using currently installed metering infrastructure, as well as if an AMI system was fully deployed.
Terms and Conditions for Electric Distribution Service
Concerns Raised by MCL
MCL stressed the absence of transparency in ENMAX’s cost estimate quotes for an infrastructure installation and noted ambiguity surrounding ENMAX’s contractor selection process to fulfill the installation of a facility.
The AUC directed ENMAX to outline specifics of the calculations of ENMAX’s investments for standard and non-standard residential developments in its compliance filing to this decision and, subject to AUC approval, incorporate this information into appendixes as part of the T&Cs.
The AUC directed ENMAX to propose an approach, in the compliance filing, to provide information to customers related to the contractor selection process. The AUC further directed ENMAX to provide an option for developers to contract themselves for facilities.
The AUC considered that greater transparency is owed to customers when a portion of the costs of installing new infrastructure is ultimately paid by them. Accordingly, the AUC directed ENMAX in its compliance filing to propose a method of providing greater transparency in relation to contractor costs in the bidding process.
Customer and Retailer Terms and Conditions
As part of its application, ENMAX sought approval of certain revisions to the T&Cs of its service. ENMAX informed the AUC that to improve clarity, consistency and transparency of such documentation, it had redrafted and reorganized the terms and conditions.
The AUC noted that the majority of its concerns pertaining to the customer and retailer T&Cs had been addressed. Accordingly, the AUC directed ENMAX to update its customer terms and conditions, and retailer terms and conditions, as provided in this decision and in Appendix 2 to this decision, as part of its compliance filing.
