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ATCO Gas and Pipelines Ltd. 2020 Annual Performance-Based Regulation Rate Adjustment (AUC Decision 24880-D01-2019)

Link to Decision Summarized

Performance-Based Regulation


In this decision, the AUC considered ATCO Gas and Pipelines’ 2020 annual performance-based regulation (“PBR”) rate adjustment filing. The AUC made the following determinations:

  • the adjustments to the interim notional 2017 revenue requirement and 2018 base K-bar for the 2018-2022 PBR plans for ATCO Gas were approved. However, these amounts were to remain interim since certain placeholders remained unresolved;

  • the 2020 distribution rate schedules were approved effective January 1, 2020, on an interim basis; and

  • the customer and retailer terms and conditions for gas distribution service were approved effective January 1, 2020.

Background and Application

On September 10, 2019, ATCO Gas submitted its 2020 annual PBR rate adjustment filing to the AUC, requesting approval of its ATCO Gas North and ATCO Gas South rate schedules, as set out in its application, to be effective January 1, 2020, on an interim basis. ATCO Gas also requested approval of its customer and retailer terms and conditions (“T&Cs”) for gas distribution service, to be effective January 1, 2020.

Adjustments to the interim notional 2017 revenue requirement and 2018 base K-bar

The AUC reviewed ATCO Gas’ schedules showing the PBR formula calculations of 2020 rates and was satisfied that ATCO Gas incorporated the adjustments in the calculations of 2020 rates. However, the AUC noted that the adjustments continue to remain interim pending the finalization of all outstanding placeholders such as the AUC determinations arising from Proceedings 24609, 24188 and 24325, and other future proceedings that address the IT common matters-related adjustments and any related compliance filing(s).

The AUC also noted that it continues to be of the view that further adjustments to 2018 going-in rates should generally take place after all of the remaining placeholders have been finalized.

I factor and the resulting I-X index

The AUC reviewed ATCO Gas’ calculations of the 2020 I factor and found them to be consistent with the methodology set out in Decision 2012-237 and confirmed in Decision 20414-D01-2016 (Errata).

K-bar factor

The AUC approved ATCO Gas’ 2020 K-bar in the amount of $30.6 million. This amount  was to remain interim pending finalization of the IT common matters placeholder, all actual capital tracker amounts incurred during the 2013-2017 PBR term and any related compliance filing(s) and updated depreciation parameters. The 2020 K-bar would be subject to a further true-up for the 2020 actual approved cost of debt.

Y and Z factor materiality threshold

The AUC approved ATCO Gas’ Y and Z factor materiality threshold to be $2.059 million for ATCO Gas North, and $1.722 million for ATCO Gas South on an interim basis. As set out in Decision 20414-D01-2016 (Errata), this interim threshold amount would be finalized upon approval of the final notional 2017 revenue requirement.

Y factor

The AUC approved a 2018 efficiency carryover mechanism (“ECM”) true-up amount of a refund of $4,000, and a 2019 ECM true-up refund of $4,000. These ECM amounts will be finalized by ATCO Gas following the determination of the final notional 2017 mid-year rate base.

Regarding the remainder of the Y factor amounts applied for, the AUC determined that all of these costs were of a type that the AUC approved as Y factor treatment in Decision 20414-D01-2016 (Errata).

The Y factors were approved.

Carrying charges

The AUC reviewed the calculation of the ATCO Gas North and ATCO Gas South carrying charges and found them properly calculated and consistent with the applicable provisions of Rule 023 and Decision 2012-237.

Forecast billing determinants and Q

Based on its review and assessment of ATCO Gas’ methodology and billing determinants in this proceeding, the AUC found that the methodology and the resulting 2020 forecast billing determinants were reasonable. The 2020 forecast billing determinants were approved as filed.

The AUC also reviewed ATCO Gas’ calculation of its 2020 Q and found it to be reasonable. The AUC therefore approved ATCO Gas’ 2020 Q of 1.40 per cent and 1.35 per cent for the North and South, respectively.

The AUC directed ATCO Gas to provide Q value calculations in its future annual PBR filings.

Distribution rates

The AUC reviewed the schedules setting out the 2020 PBR rate calculations and observed that ATCO Gas calculated its 2020 rates consistent with its practices and methodologies used during the 2013-2017 PBR term and previously accepted by the AUC. The AUC accepted the general principles and methodologies utilized by ATCO Gas for calculating its 2020 PBR rates.

The AUC also reviewed the typical bill impacts in assessing the likelihood of rate shock resulting from the proposed 2020 PBR rates. The AUC observed that the month-over-month increases to customer bills were not expected to exceed 10 per cent for all rate classes.

The rates were approved on an interim basis. The AUC noted that the 2020 rates would remain interim until the remaining placeholders and the issue of anomalies in relation to the utility’s going-in rates have been addressed by the AUC.

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