Rates – ISO Tariff – Interim
In Decision 2010-606, the AUC approved the Alberta Electric System Operator (“AESO”)’s proposed methodology to complete annual tariff update filings between its major tariff applications. On January 31, 2020, the AESO filed an application (the “Application”) with the AUC seeking approval of its 2020 Independent System Operator (“ISO”) tariff update (“2020 Update”) to reflect costs and billing determinants for the 2020 calendar year. The AUC approved the 2020 Update on an interim refundable basis.
The Application
The Application consisted of formulaic updates to:
(a) the AESO’s annual revenue requirement, based on the AESO’s updated forecast costs for 2020;
(b) rate, rider and maximum investment level amounts using the rate calculation methodology approved by the AUC in Decision 22942-D02-2019; and
(c) the investment amounts first approved in Decision 22942-D02-2019.
The AESO explained that the updates proposed in the Application were consistent with the tariff update methodology approved by the AUC in Decision 2010-606.
AESO’s Annual Revenue Requirement
The AESO’s revenue requirement consisted of costs related to wires, ancillary services, transmission line losses and the AESO’s own administration, which included other industry costs and general and administrative costs.
The AESO’s 2020 forecast costs represented an increase of $15.0 million (or 0.6 percent) over the 2019 forecast costs included in the 2019 ISO tariff. The increase was the result of the following:
(a) increase in wires costs of $82.1 million (4.5 percent);
(b) decrease in ancillary services costs of $56.0 million (or -17.8 percent);
(c) decrease in losses costs of $12.6 million (or -10 percent); and
(d) increase in administrative costs of $1.4 million (or 1.4 percent).
Rate Calculations and Billing Determinants
The AESO used the rate calculation methodology approved in Decision 3473-D01-2015 using the 2018 rate calculations included in Appendix B[H]25 of the AESO 2018 ISO tariff filing as the template for the 2020 rate calculations. The AESO provided the 2020 rate calculations in tables D-1 through D-16 of Appendix D26 to this application.
The AESO indicated that the rate calculations for the 2020 rates update were based on the AESO’s forecast of billing determinants for 2020. Billing determinants changed from the 2019 forecast on which the currently approved rates were based. Consequently, the AESO’s 2020 updated rates increased 5.7 percent overall from the approved 2019 rates.
2020 Maximum Investment Levels
The 2020 Update included updated investment amounts approved in the 2018 ISO tariff application and reflected an escalation factor based on a composite of specified recent inflation indices. The AESO applied the resulting 1.0473 escalation factor to the 2018 Rate demand transmission service (“DTS”) maximum investment levels to determine the 2020 Rate DTS maximum investment levels, which resulted in an increase to the 2020 maximum investment levels.
AUC Findings
In Decision 2010-606, the AUC approved an approach that included filing comprehensive tariff applications every three years and, in conjunction with this, filing annual tariff updates. The AUC stated that it considered an annual revenue requirement and rate update may benefit customers by limiting potential misallocations that might occur if the AESO were to rely on Rider C exclusively to allocate periodic revenue and cost imbalances to its customers.
The AUC found that the AESO included the 2020 wires costs for transmission facility owners using the approach approved in Decision 2010-606, referred to in Decision 2014-242 and updated in Decision 22093-D02-2017. The AUC also recognized that the AESO’s 2020 forecast for ancillary services, losses and administrative costs included in this application have yet to be approved by the AESO board as final. The AUC noted that the AESO has proposed to file a letter to advise the Commission of AESO board approval once it has been received.
The AUC agreed with the AESO’s view that it is more appropriate and efficient for the 2020 tariff rates to be based on the rate calculations included in Appendix B[H]25 of the AESO 2018 ISO tariff filing. The AUC noted this would allow the AESO to implement the proposed 2020 tariff updates, consistent with the functionalization and classification of bulk, regional and point of delivery costs that were approved in Decision 22942-D02-2019.
The Industrial Customers noted that the AESO’s modifications to the cost of service study are part of the review and variance application filed by the Industrial Customers in Proceeding 25086. The Industrial Customers argued that the AUC should consider the issues raised in Proceeding 25086 before allowing the AESO’s proposed 2020 tariff to be implemented. The AUC rejected this suggestion. The AUC found that the functionalization and classification of bulk, regional and point of delivery costs approved in Decision 22942-D02-2019 are to be applied by the AESO unless Decision 22942-D02-2019 is varied.
The AUC approved the 2020 Update on an interim refundable basis, pending release of the AUC’s final decision in this proceeding.
