Rates – Transmission – Rider T
In this decision, the AUC approved the 2020 transmission service charge rider (“Rider T”) rates for ATCO Gas, a division of ATCO Gas and Pipelines Ltd., effective March 1, 2020, on a final basis. The approved Rider T rates are as follows:
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low-use customers: $0.762 per gigajoule (GJ)
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mid-use customers: $0.696 per GJ
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high-use customers: $0.210 per day of GJ demand
Background
ATCO Gas flows through the rates charged by the transmission service provider, NOVA Gas Transmission Ltd. (“NGTL”), to customers. Rider T is the service charge used to collect forecast transmission costs and to refund or collect any differences between the prior year’s forecast and actuals. ATCO Gas forecasts its transmission expense based on NGTL’s rates and charges applied to the contract demand quantity (“CDQ”). Any difference between what ATCO Gas collects through Rider T based on its forecast and what it ultimately pays to NGTL based on actuals is recorded in a deferral account and refunded to, or recovered from, customers as part of a subsequent Rider T.
On April 24, 2019, NGTL received approval from the CER, formerly the National Energy Board, for its final 2019 rates, tolls and charges for the Alberta natural gas transmission system. Effective May 1, 2019, the NGTL interim FT-D3 rate decreased to $6.58 per GJ/month from $6.80 per GJ/month. The NGTL abandonment surcharge remained at $0.29 per GJ/month through June 30, 2019, then decreased to $0.21 per GJ/month. Effective January 1, 2020, the NGTL interim FT-D3 rate increased to $7.1410 per GJ/month from $6.58 per GJ/month. The NGTL abandonment surcharge simultaneously decreased to $0.20 per GJ/month from $0.21 per GJ/month.
On January 17, 2020, ATCO Gas filed the application requesting approval for new Rider T rates to be effective on March 1, 2020. ATCO Gas requested approval for new Rider T rates to account for changes in the NGTL interim FT-D3 rate and abandonment surcharge, as detailed above.
Discussion of Issues
In Decision 2014-062, the AUC approved the implementation of a province-wide Rider T rate to replace the previous practice of maintaining separate Rider T rates for ATCO Gas’s north and south service territories. Cross-subsidization issues between ATCO Gas’s north and south service territories were considered in Decision 2014-06214 and have been addressed by the AUC in subsequent Rider T decisions.
ATCO Gas noted that the subsidy between typical residential customers in the north and south that results from applying a province-wide rate does not exceed $4.16 annually. ATCO Gas further explained that, under separate rates for north and south, a typical residential (low-use) customer in the north using 80 GJ between March and December would see a $1.04 increase in their annual bill, while a typical residential (low-use) customer in the south would see a $1.12 decrease in their annual bill.
ATCO Gas stated that the differences identified between the province-wide amounts and the separate north and south amounts result from two factors: billing determinants and CDQ. ATCO Gas explained that these factors are unique to each service area, and ATCO Gas is not able to change the billing determinants or contract requirements to minimize the differences in rates.
AUC Findings
The AUC found that for the purposes of this decision, this level of cross-subsidization is not significant enough to justify having separate rates for north and south, consistent with the AUC’s acceptance of similar minimal cross-subsidization in prior decisions approving ATCO Gas’s Rider T.
The AUC directed ATCO Gas to continue to track its Rider T cross-subsidization between north and south customers and to continue to provide, in its next Rider T application, the information on cross-subsidization.
Rider T Methodology and Rate Design
The AUC noted that there has been no change in the methodology that ATCO Gas uses to determine Rider T in the current application. The AUC found that the use of coincident peak demand (“CPD”) to allocate transmission costs is a long-standing AUC-approved practice. While the Consumers’ Coalition of Alberta (“CCA”) had raised concerns about ATCO’s methodology, in its evidence, the CCA had not provided an alternate methodology or provided any evidence that the current methodology is inadequate. The AUC was satisfied with the methodology that ATCO Gas used in the current proceeding, which is consistent with previous Rider T decisions concerning the cost allocation between rate groups and the use of CPD to allocate transmission costs.
Inclusion in Rider T of Legal Costs Related to the CER NGTL Rate Design and Services Application Proceeding
In its application, ATCO Gas included $399,576 of legal fees incurred as a result of its participation before the CER during the NGTL rate design and services application proceeding. ATCO Gas explained that its participation was required as part of the prudent management of its transmission expenses, which is consistent with its responsibility to arrange for economic delivery of adequate upstream transmission capacity in accordance with the Roles, Relationships and Responsibilities Regulation. NGTL proposed to significantly increase the FT-D3 rate and, as a result, ATCO Gas participated with the intention to reduce the proposed increase and ensure the transmission expense is just and reasonable.
AUC Findings
The AUC ruled previously that ATCO Gas’s responsibilities under the Roles, Relationships and Responsibilities Regulation can include participation in proceedings regarding NGTL rates, and the AUC was not persuaded by the CCA in this case to revisit that conclusion.
The AUC was satisfied that ATCO Gas’s intervention in this specific CER proceeding was due to NGTL’s proposal to increase the FT-D3 rate and, as a result, ATCO Gas participated with the intention to reduce the proposed increase and to ensure that the transmission expense is just and reasonable.
The AUC was not convinced, however, that the expense associated with ATCO Gas’s intervention should be recovered through Rider T. Specifically, the AUC was not persuaded that these costs should be recovered outside the revenue provided to ATCO Gas pursuant to the terms of its 2018-2022 PBR plan. In approving the 2018-2022 PBR plan, the AUC was clear that its approach was expected to expand PBR incentives to the vast majority of overall costs. Pursuant to the terms of its 2018-2022 PBR plan, ATCO Gas is provided with revenue that it spends as it determines is best to manage its obligations to provide safe and reliable service.
ATCO Gas argued that since 2016 was used to determine its O&M funding for its second-generation PBR rates, and there were no active NGTL proceedings in 2016, its PBR rates do not include legal costs for such participation. The AUC did not consider it relevant whether or not this particular expense was incurred in ATCO Gas’s lowest cost O&M year. In approving the lowest cost O&M year as the basis of the going-in rates for the 2018-2022 PBR term, the AUC understood that some costs would not be captured in the lowest cost year. The AUC recognized that under the terms of its 2018-2022 PBR plan, certain costs may be incurred by ATCO Gas that were not contemplated in the lowest O&M year, while other costs that were contemplated may not be incurred. As a result, the AUC found that the legal fees of participation in the NGTL proceeding fall under the I-X mechanism.
Concerning whether the legal charges could be recovered through a Y factor under PBR, the AUC was not convinced that these charges, on a stand-alone basis, would satisfy the criteria for a Y factor.
Considering the above, the AUC denied recovery through Rider T of ATCO Gas’s legal fees related to its participation before the CER as part of the NGTL rate design and services application proceeding. The AUC directed ATCO Gas to reflect the removal of the $399,576 of legal fees in its next Rider T application.
Rider T Rates and Bill Impacts
ATCO Gas explained that assuming an implementation date of March 1, 2020, the total annual charges for a residential (low-use) customer in the south service territory that utilizes 115 GJ annually would decrease to $696 from $712, and a similar residential customer in the north service territory would see a decrease to $736 from $752. ATCO Gas stated that the applied-for 2020 Rider T rate changes are reasonable and would not result in undue rate shock compared to existing distribution rates.
AUC Findings
The AUC found that the estimated rate impact of the March 1, 2020, Rider T is reasonable for all rate classes. The implementation of the 2020 Rider T results in rate decreases for all three rate groups, for both ATCO Gas North and ATCO Gas South.
For the reasons set out above, the Rider T rates were approved as applied for on a final basis, effective March 1, 2020.
