Capital Tracker Compliance Filing
This decision provides the AUC’s determination of the EPCOR Distribution & Transmission Inc. (“EPCOR” or “EDTI”) compliance with the AUC’s directions issued in Decisions 23571-D01-20191 and 23571-D02-2019. The AUC found that EPCOR complied with the AUC’s directions and approved EPCOR’s 2017 K factor adjustment, as filed. Further, the AUC approved EPCOR’s request to implement Rate Rider DJ effective April 1, 2020, to June 30, 2020, to collect from customers the 2017 K factor true-up adjustment of $2.23 million, and associated carrying charges of $0.21 million.
Compliance with AUC directions
In Decision 23571-D01-2019, the AUC issued eight directions, and in Decision 23571-D02-2019, the AUC issued three directions.
Three of the directions in Decisions 23571-D01-2019 (directions 1 and 2) and 23571-D02-2019 (Direction 1) required EPCOR to make adjustments to its 2017 capital additions for individual programs or projects that were denied capital tracker treatment. These three directions are summarized below.
In paragraph 292 of Decision 23571-D01-2019, Direction 1, EPCOR was directed to remove $1.93 million in capital additions related to the purchase of previously rented vehicles and recalculate the K factor associated with the Vehicles – Growth and Life Cycle Replacement Program.
In paragraph 317 of Decision 23571-D01-2019, Direction 2, EPCOR was directed to remove $1.22 million in capital additions associated with the Replacement of Aerial Ground Rods and Underground Distribution Equipment Ground Grids Project.
Direction 1 in Decision 23571-D02-2019, directed EPCOR to remove $550,000 in capital additions associated with developing the METSCO Framework and Models and to recalculate the K factor for the five capital tracker project categories, with respect to which EPCOR had used the METSCO Framework and Models as a key component of its asset management and capital planning process.
The AUC also directed EPCOR to revise its accounting test for 2017 based on directions as set out in the previous sections of both decisions and reassess whether the capital tracker programs or projects included in the 2017 true-up satisfy the accounting test requirement of Criterion 1. Further, the AUC directed EPCOR to reassess whether its programs or projects included in the 2017 true-up satisfy the two-tiered materiality test requirement of Criterion 3.
EPCOR confirmed that it had complied with the directions, and recalculated its actual K factor for 2017. EPCOR subsequently confirmed that all capital tracker projects and programs applied for in this proceeding, except for the Replacement of Aerial Ground Rods and Underground Distribution Equipment Ground Grids Project, satisfied the accounting test requirement of Criterion 1 and satisfied the two-tiered materiality test requirement of Criterion 3.
The AUC found that EPCOR complied with these Commission directions.
In Direction 3 of Decision 23571-D01-2019, the AUC issued the following direction with respect to EPCOR’s embedded cost-of-debt:
For all of these reasons, the Commission concludes that FortisAlberta, FortisBC, Nova Scotia Power and EUI are relevant comparators for EPCOR’s 2017 embedded cost-of-debt calculations. As such, the Commission directs EPCOR to recalculate its 2017 embedded cost of debt using the average of these companies’ credit risk premiums. As part of its compliance filing to this decision, the Commission also directs EPCOR to refile its recalculated 2017 WACC [weighted average cost of capital] based on these revisions.
The AUC reviewed EPCOR’s revised 2017 embedded cost-of-debt and WACC calculations and found that EPCOR had complied with the AUC direction. Further, the AUC accepted that the revised 2017 WACC was not materially different from the 2017 WACC applied for in Proceeding 23571, and no adjustments were necessary to account for the revised 2017 WACC rate.
In Direction 7 of Decision 23571-D01-2019, the AUC issued the following direction with respect to EPCOR’s 2017 K factor true-up and collection:
The Commission directs EPCOR to file its proposal to true up the difference between its applied-for 2017 capital tracker true-up costs, approved to be collected in Decision 23896-D01-2018 (Errata), and the 2017 actual K factor as part of the compliance filing to this decision. The effective date and the duration of the proposed collection period for EPCOR’s proposal should be commensurate with the Commission’s process timelines set out in Bulletin 2015-09 and take into account the effect on customer bills.
The AUC reviewed EPCOR’s calculations and found them reasonable and in accordance with Rule 023 requirements. The 2017 K factor true-up amount of $2.23 million, and the carrying charges of $0.21 million were approved for collection under Rider DJ effective April 1, 2020, to June 30, 2020.