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Alberta Electric System Operator – Decision on Preliminary Question – Application for Review of Decision 22942-D02-2019 – 2018 Independent System Operator Tariff, AUC Decision 25086-D01-2020

Link to Decision Summarized

Review and Variance – ISO Tariff


In this decision, the AUC considered an application filed by the Alberta Direct Connect Consumers Association (“ADC”), the Dual Use Customers (“DUC”), and the Industrial Power Consumers Association of Alberta (“IPPCA”) (collectively “DUC et al.”) requesting a review and variance of specific findings in Decision 22942-D02-2019. In their application for review, the applicants alleged that the AUC made errors of law, fact or jurisdiction in the decision. The AUC denied the application.

The members of the AUC panel who authored the Alberta Electric System Operator (“AESO”) tariff decision are referred to as the “Hearing Panel” and the members of the AUC panel who considered the review application are referred to as the “Review Panel.”

Background

The Hearing Panel issued the AESO tariff decision on September 22, 2019. In the decision, the Hearing Panel:

1) accepted the AESO’s 2018 updated cost causation study (“2018 Study”);

2) denied the request of DUC et al. to extend waivers of the power factor deficiency charge to dual-use customers and granted the request of the AESO to grandfather the nine dual-use waivers that had been granted previously by the AESO; and

3) accepted the AESO’s proposed revisions to subsections 3.2(2)(f) and 3.6(4) of its 2018 ISO tariff to provide that a customer with an industrial site will be able to choose totalized metering at a substation only if approval from the AUC that permits the export of electric energy to the Alberta Interconnected Electric System (“AIES”) has been obtained.

AUC’s Review Process

The Review Panel outlined the AUC review process under Section 10 of the Alberta Utilities Commission Act. It noted that the review process has two stages. In the first stage, a review panel must decide whether there are grounds to review the original decision. This is sometimes referred to as the “preliminary question.” If the review panel decides that there are grounds to review the decision, the AUC moves to the second stage of the review process where the AUC holds a hearing or other proceeding to decide whether to confirm, vary, or rescind the original decision.

Grounds for Review and Hearing Panel Findings

DUC et al. raised three grounds in support of its review application.

(i) Cost of service study update

DUC et al. argued that the approval of the 2018 update of the cost of service study, which included an update of point of delivery (“POD”) capital addition costs, was not a mechanistic update using the same data as the 2014 Study. It claimed that the AESO applied for a cost of service study (“2018 Study”) characterized as a mechanistic update to the 2014 cost of service study, but the POD capital additions forecasts in the 2018 Study did not utilize the same data sources, methodologies and calculation as the 2014 Study. Instead, the AESO developed and applied a new and untested methodology to forecast the POD capital additions.

(ii) Power Factor Deficiency Charge Waiver

DUC et al. submitted that the denial of additional power factor waivers to existing dual-use customers results in discriminatory tariff treatment between similar customers with and without power factor waivers. It argued that this decision would result in unjust, unreasonable, and discriminatory rates because customers with a waiver at one site will pay different tariff charges compared to a site with similar load characteristics that do not have a waiver.

(iii)Totalized Metering for Industrial Customers

DUC et al. argued that the approval of subsections 3.2(2)(f) and 3.6(4) of the proposed 2018 ISO tariff was based on these changes being proposed by the AESO in its argument and not as part of its original application. It claimed that this was procedurally unfair because the utility customers were not given an opportunity to test the tariff provisions before they were approved.

Review Panel Findings

2018 Update of the 2014 Cost Causation Study

To warrant a review, the Review Panel noted that DUC et al. must demonstrate that these alleged factual errors are plainly seen or exist on a balance of probabilities and further, that the errors are material. The Review Panel found that DUC et al. had not satisfied its onus.

The Hearing Panel made the following factual determinations in its finding to approve the AESO’s 2018 updated cost causation study:

  • Consistency and avoiding a piecemeal attempt to alter the study are important considerations.

  • Refraining from applying any assumptions not used in the 2014 study and utilizing the same data sources, methodologies, and calculation should be the goal, if practical. (Emphasis added.)

  • The AESO is working with industry stakeholders as part of the Tariff Design Advisory Group to perform similar studies to those in DUC’s recommendations #5 and #6. (#6 was a recommendation that the AESO should have used the POD capital additions estimates and forecasts for every year from 2015 to 2019, as set out in an appendix to the AESO application).

  • The AESO is directed to continue the consultation process concerning the 12 CP issue, the regional tariff design, and the bulk tariff design, and to investigate and apply, if appropriate, the DUC’s recommendations 1, 5, and 6 in its consultative process.

  • The AESO is to incorporate any conclusions or recommendations from the consultation process on these matters in its next tariff application.

DUC et al. argued that because the AESO’s 2018 study was not a mechanistic exercise using exactly the same data sources, methodologies, and calculations as the 2014 Study, the Hearing Panel erred in relying on these facts when it approved the AESO’s 2018 study. However, it was clear to the Review Panel that the Hearing Panel added the words “if practical” in recognition that, although a laudable goal, it may not always be possible to do so. As well, it was clear that the Hearing Panel was aware that additional data would be required since the 2014 Study was conducted.

Concerning DUC et al.’s Recommendation #6, the Review Panel noted that it was clear that the Hearing Panel was well aware of the positions of the parties and determined, in its findings, to direct the AESO to investigate and apply, if appropriate, the DUC’s Recommendation #6 in its future consultative process.

DUC et al.’s request for a review on this ground was denied.

Power Factor Deficiency Charge Waiver

The Review Panel noted that on this issue, the Hearing Panel made the following factual determinations:

  • It dismissed the claim by DUC et al. that the AESO has used incorrect billing determinants in Rate Demand Transmission Service (“DTS”).

  • The delivery of reactive power to a POD represents an obligation for the AESO, regardless of what causes the downstream requirements for reactive power and that such costs should generally be attributed to the “causer” of the reactive power requirement.

  • A DFO may address net reactive power required by introducing incentives to end-use customers or distribution connected generation (“DCG”) proponents to manage their reactive power requirements or by installing reactive power devices on the electric distribution system. Granting a waiver to DCG proponents could frustrate the DFOs’ ability to manage net reactive power requirements on their systems.

  • It would be reasonable for the AESO to continue to grandfather the waivers for these market participants indefinitely because to do otherwise would unfairly treat market participants who relied on the AESO’s prior determination to grant a waiver when making investment decisions.

The Review Panel found that the arguments made by DUC et al. in support of its review request covered ground that was already considered by the Hearing Panel and was an attempt to reargue its position that the AESO should extend waivers.

The evidence before the Hearing Panel confirmed that the AESO has not granted a waiver since 2016 and that it had recently refused to grant a waiver. Consequently, the Review Panel found that the rationale advanced by the AESO, and accepted by the Hearing Panel, to grandfather nine sites because those customers had already made decisions and were operating in reliance on past waivers was a fair distinction to be made between past and future customers.

DUC et al. also argued that waivers must be granted because the AESO could not accurately measure the power factor deficiency charge and that the Hearing Panel erred by not providing a mechanism for these measurement errors to be mitigated in the future. The Review Panel noted that it was clear on the face of the decision that the AESO did not agree with DUC et al.’s characterization of the AESO’s abilities.

Moreover, it was the AESO’s evidence that the granting of a waiver is a matter of general policy. The Review Panel noted that it was reasonable to conclude that had the AESO been unable to measure power factor deficiency charges, it is unlikely that the AESO would have declined to grant waivers when requested to do so.

DUC et al.’s request for a review on this ground was denied.

Totalized Metering for Industrial Complexes

DUC et al. submitted that in the AESO’s application, the AESO proposed terms and conditions in its proposed 2018 ISO tariff to allow a market participant to elect to be billed on either a gross or net-metered basis. It argued that the AESO supported this position throughout the evidentiary portion of the proceeding, including during the oral hearing, and that it was only in the AESO’s argument that it proposed that customers with industrial sites would be able to choose totalized metering at a substation only if approval from the AUC had been obtained. It submitted that because most industrial customers with behind-the-fence generation are net-metered, moving a new dual-use customer to gross metering is not a simple administrative change but a significant change in the tariff. DUC et al. stated that it was procedurally unfair for the Hearing Panel to accept this change to the ISO tariff because the utility customers were not allowed to test these provisions before they were approved.

The AESO confirmed that in its amended tariff application, it proposed to continue to allow totalized (or net) metering for self-supply industrial complexes, including those that have not obtained an industrial service designation (“ISD”). However, it stated that on a subsequent review of Decision 23418-D01-2019, it determined that its proposal would be inconsistent with the AUC’s findings in that decision. Therefore, to address this legal determination, the AESO indicated in argument that it would not permit totalization for self-supply industrial complexes that are not authorized to export electric energy to the AIES.

The Review Panel found that procedural fairness was afforded to DUC et al. and other proponents and that they had an opportunity to respond fully to the legal issue raised by the AESO in its argument. More specifically, the Review Panel was satisfied that DUC et al. and all parties knew or ought to have appreciated the issues attendant with totalization and the AUC’s findings in Decision 23418-D01-2019 and were given a meaningful opportunity to present their cases about the legal implications arising from that decision and its application for the ISO tariff in their reply argument submissions.

Accordingly, DUC et al.’s request for a review on this ground was denied.

The application for review was dismissed.

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