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FortisAlberta Inc. 2020 Annual Performance-Based Regulation Rate Adjustment (AUC Decision 24876-D01-2019)

Link to Decision summarized

Performance-Based Regulation

In this decision, the AUC considered FortisAlberta Inc.’s 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 and 2019 base K-bar for the 2018-2022 PBR plans for Fortis were approved. However, these amounts remain interim since certain placeholders remain unresolved;

  • the 2020 rates, options and riders schedules were approved effective January 1, 2020, on an interim basis; and

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

Background and Application

On September 13, 2019, Fortis submitted its 2020 annual PBR rate adjustment filing, requesting approval of its 2020 rates, options and rider schedules, to be effective January 1, 2020, on an interim basis. Fortis also requested approval of its customer and retailer terms and conditions (“T&Cs”) of electric distribution service, to be effective January 1, 2020.

Adjustments to the interim notional 2017 revenue requirement

The AUC approved the notional 2017 revenue requirement; however, it noted that these amounts would continue to remain interim pending the finalization of all outstanding placeholders such as the AUC determinations arising from Proceeding 24325, the AUC’s recent Decision 24281-D01-201917 and ongoing consideration of Proceeding 24932, and Decision 23961-D01-2019.

Adjustment to K-bar revenue requirement

Fortis updated its K-bar for 2018 and 2019, with 2018 K-bar lowered by $0.3 million, and 2019 K-bar increased by $1.8 million. The AUC approved the resulting 2018 and 2019 K-bar revenue, which continued to remain interim pending the finalization of all outstanding placeholders that remain the subject of ongoing proceedings or recent decisions that were not, by virtue of their timing, reflected in Fortis’ application.

I Factor and the resulting I-X index

The AUC approved the I factor of 1.36 per cent and the resulting I-X index value of 1.06 per cent for 2020.

K Factor

Fortis proposed to refund $0.027 million in K factor revenue, and the Commission approved its proposal.

K-bar Factor

The AUC approved Fortis’ 2020 K-bar in the amount of $58.4 million. This amount remains interim and may be subject to further true-up based on the outcome of the proceedings identified earlier in the decision. The 2020 K-bar will be subject to a further true-up for the 2020 actual approved cost of debt.

AESO contributions hybrid deferral account 

The AUC reviewed the schedule showing the revenue requirement associated with the AESO contribution hybrid deferral account and found that Fortis complied with the AUC’s directions from Decision 23505-D01-2018 as it relates to this proceeding. The AUC approved the resulting revenue requirement that Fortis has included in its 2020 PBR rates; however, noted that these rates would continue to remain interim.

Y and Z factor materiality threshold

The AUC established Fortis’ Z factor materiality threshold to be $4.74 million for 2020 on an interim basis. This interim threshold amount would be finalized upon approval of the final notional 2017 revenue requirement.

Y Factor

The AUC approved Y factor treatment in Decision 24405-D01-2019 for the Crows Nest Pass and Town of Fort Macleod acquisitions, and approved Y factor true-ups associated with them.

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

Forecast billing determinants and Q

The AUC approved Fortis’ proposed changes to its forecasting methodology for the exterior lighting rate class and directed Fortis to continue using this forecasting methodology for the remainder of the PBR term unless otherwise directed by the Commission. The 2020 forecast billing determinants are approved as filed.

The AUC also approved Fortis’ 2020 Q of 0.12 per cent.

System access service rates

The AUC reviewed Fortis’ calculation of its proposed transmission access cost forecast for 2020. It was based on the AESO’s 2019 Demand Transmission Service tariff update, approved by the AUC on an interim basis, effective January 1, 2019, in Decision 24036-D01-2018, and was reflective of the pool price and operating reserve percentage forecast based on Fortis’ actual monthly average from August 2018 to July 2019. The AUC therefore found Fortis’ proposed transmission access cost forecast for 2020 to be reasonable.

Fortis allocated these costs to rate classes based on previously approved methodologies and assumptions, and the AUC approved the resulting 2020 system access service rates as filed.

Distribution rates

The AUC noted that, on a total bill basis, bill impacts will be below 10 per cent; a threshold that the AUC had determined in past decisions to be indicative of possible rate shock.

The AUC also reviewed Fortis’ 2020 PBR rate calculations and found that the proposed January 1, 2020, PBR rates were calculated in accordance with the provisions of Fortis’ Commission-approved PBR plan. Accordingly, the AUC approved Fortis’ 2020 PBR rates, on an interim basis, effective January 1, 2020.

The AUC held that the 2020 rates shall 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.

LED conversion maintenance multiplier

The AUC approved the proposed change in the LED maintenance multiplier percentage from 1.09 to 1.08, effective January 1, 2020.

Rate schedule wording amendment for Option D

Fortis requested to amend the wording in Appendix E – 2020 Rates, Options and Riders Schedules, for Option D – Flat Rate Option, on an interim basis, until such time as it is reviewed in Fortis’ next Phase II application. Fortis proposed to add the following wording to Option D, “2. For new Points of Service only: Upon agreement with and at the discretion of FortisAlberta, virtual aggregation and grouping of small connected devices (which may be physically disparate) can be represented as a single Point of Service for billing and settlement purposes.”

The Commission approved the amended wording.

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