Compliance Filing – Capital Tracker Treatment of Project Expenditures
In this decision the AUC considered the ENMAX Power Corporation (“ENMAX”) application (the “Application”) regarding its compliance with the Commission’s directions issued in Decision 23102-D01-2019. The AUC found that ENMAX complied with the AUC’s directions in its Application. However, the Commission made the following determinations:
ENMAX’s actual K factor amounts related to 2015 and 2016 and the specifics (e.g., timeframe) of how the distribution access service (“DAS”) rider will be implemented will not be decided in this proceeding; instead the Commission will make its determinations in Proceeding 24875.
The PG4-A-4 Proactive Cable Replacement and PG4-A-8 Overhead Conductor Replacement project costs incurred in 2017 are not eligible for capital tracker treatment, these expenditures will not be funded through the K factor provision of the performance-based regulation (“PBR”) formula and are to be accounted for under I-X. ENMAX is directed to refile the accounting test for the PG4 Program reflecting the removal of the 2017 capital additions for the PG4-A-4 (“PG4-A-4”) and PG4-A-8 capital tracker projects (“PG4-A-8”) in its 2021 PBR annual rate adjustment filing.
On March 1, 2019, the AUC issued Decision 23102-D01-2019 (the “METSCO Decision”). In the METSCO Decision, the AUC issued four directions to ENMAX, including Direction 1, that is a summary of the AUC directions:
… ENMAX is directed to file an application with the Commission that:
Re-runs the accounting test for the PG4 Program reflecting the revised capital tracker capital additions for 2015 and 2016 for the PG4-A-4 and PG4-A-8 projects. [Direction 2]
Proposes how ENMAX plans to adjust rates based on any difference in K factor amounts that were already collected based on Decision 23355-D01-2018, and the K factor amounts calculated based on the directions in this decision. [Direction 2]
Requests approval of its 2017 actual capital additions for capital tracker treatment with respect to the PG4-A-4 and PG4-A-8 projects, given that these amounts were excluded from the negotiated settlement process in Proceeding 23694. [Direction 3]
Capital tracker true-up of ENMAX’s PG4-A-4 and PG4-A-8 capital tracker projects for 2017. Compliance with all other directions in Decision 23102-D01-2019 [Direction 3]
Direction 4 required EPC to file a compliance filing with respect to the above on or before May 27, 2019.
Direction 2: PG4-A-4 and PG4-A-8 capital tracker projects in 2015 and 2016
The two capital tracker projects, PG4-A-4 and PG4-A-8, are part of ENMAX’s larger PG4 Program, which has a focus on capital maintenance. PG4-A-4 consists of replacement or rejuvenation of pre-1989 medium voltage cross linked polyethylene underground cables and modification or relocation of facilities in light of customer or government requests. PG4-A-8 involves the replacement of small primary overhead conductors that have proven to be prone to breaking and falling to the ground.
The AUC reviewed ENMAX’s calculations of removing the 2015 and 2016 capital addition amounts for the PG4-A-4 and PG4-A-8 capital tracker projects and found them to be in compliance with Direction 2 of the METSCO Decision.
Further, the AUC considered ENMAX’s proposal to refund the K factor amounts by way of the distribution access service (“DAS”) rider to be reasonable. However, the AUC noted that at the time of this decision, this proposal was also being considered by the AUC in Proceeding 24875. Therefore, the actual K factor amounts related to 2015 and 2016 and the specifics (e.g., timeframe) of how the DAS rider would be implemented was not considered in this proceeding.
Direction 3: Capital tracker true-up of EPC’s PG4-A-4 and PG4-A-8 capital tracker projects for 2017
In the METSCO Decision the AUC directed ENMAX to apply for approval of capital tracker treatment of its 2017 actual capital expenditures for the PG4-A-4 and PG4-A-8 projects as part of the compliance filing to that decision.
In order to be eligible for capital tracker treatment, a project must meet the three criteria established in Decision 2012-237, the first of which, Criterion 1, is that the project must be outside the normal course of the company’s ongoing operations. Criterion 1 includes two sub-parts: an accounting test, and a project assessment test. The project assessment test was the only aspect of the capital tracker criteria at issue in this proceeding, since the other criteria relate to ENMAX’s negotiated settlement agreement, approved by the AUC in Decision 21508-D01-2019.
The project assessment test requires the AUC to assess whether the project is: required to provide utility service at adequate levels; and, if so, whether the scope, level and timing of the project are prudent, and whether the forecast or actual costs of the project are reasonable.
The AUC found that ENMAX had not met its burden of proof in establishing the prudence of the scope, level and timing, and the actual costs for PG4-A-8 Project in 2017. Accordingly, the AUC would not extend capital tracker treatment to EPC’s actual 2017 costs associated with PG4-A-8 Project.
The AUC ordered that ENMAX calculate the 2017 K factor true-up adjustment amount arising from this decision in its 2021 performance-based regulation annual rate adjustment filing.
The AUC noted that ENMAX’s actual K factor amounts related to 2015 and 2016 and the specifics of how the DAS rider will be implemented would not be decided in this proceeding; but in Proceeding 24875.
The AUC ordered that the PG4-A-4 and PG4-A-8 Project costs incurred in 2017 were not eligible for capital tracker treatment, and therefore these expenditures would not be funded through the K factor provision of the performance-based regulation formula and are to be accounted for under I-X.
The AUC directed ENMAX to refile the accounting test for the PG4 Program reflecting the removal of the 2017 capital additions for the PG4-A-4 and PG4-A-8 capital tracker projects in its 2021 PBR annual rate adjustment filing.