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ATCO Electric Ltd. – 2019 Distribution Tariff Phase II Application, AUC Decision 24747-D01-2020

Link to Decision Summarized

Rates – Distribution


Decision Summary

In this decision, the AUC addressed the 2019 distribution tariff Phase II application filed by ATCO Electric Ltd. (“ATCO Electric”). For the reasons set out in this decision, the AUC approved:

  • The methodology and allocation of transmission system access service costs as filed;

  • The methodology and allocation of distribution service costs, including the classification ratios as applied for; the brushing study, subject to the correction of an error made in the brushing costs allocator; the account services and public information costs study; and the wholesale billing study, subject to an update of IT costs;

  • The methodology used to allocate Rural Electrification Association (“REA”) acquisition costs;

  • The 2017 billing determinant forecast to establish the rates for each rate class and the methodology proposed to adjust rates through to the applicable year of implementation;

  • The proposed changes to revenue-to-cost ratios, as filed;

  • Rate structures for existing rates, as filed;

  • The proposed changes to existing price schedules;

  • The new Time-of-Use Residential service rate D13, the new Small Technology rate D22 and the new Electric Vehicle (EV) Fast-Charging Service rate D23, except for a minor revision to the D22 price schedule;

  • Proposed terms and conditions (“T&Cs”) of service, except for certain sections in the customer T&Cs related to exit costs, easements and rejection of an application for service; and

  • A no-notice proceeding process for maintenance multiplier applications.

The AUC denied the new Low-Use Residential service rate D12. The AUC also determined that ATCO Electric does not need to continue to improve its feeder analysis. Finally, the AUC rejected arguments from the Alberta Federation of Rural Electrification Association (“AFREA”) that utility asset disposition (“UAD”) issues were triggered by the application.

Overview of ATCO Electric’s Application

In its application, ATCO Electric provided a distribution 2017 cost of service study (“COSS”) and corresponding tariff design, based on cost data prior to 2018 (“2017 Data”) as instructed in previous AUC decisions. It also provided a COSS and corresponding rate design for transmission access payments, also in accordance with previously approved methodologies.

Cost of Service Studies

The AUC noted that ATCO Electric’s distribution tariff is composed of three components: a transmission component, a distribution component and a service component. Each of these cost components is allocated to rate classes separately based on distinct transmission and distribution cost drivers and characteristics.

Transmission System Access Service Costs

The AUC reviewed the transmission 2017 COSS schedules and load research study provided in the application and found them consistent with the methodology approved in previous ATCO Electric Phase II decisions. The AUC approved ATCO Electric’s methodology and allocation of transmission system access service (“SAS”) costs, as filed.

Distribution Cost of Service Studies

ATCO Electric submitted that the distribution cost allocation methodology used in this application was the same methodology used in its previous Phase II applications. As part of the application, ATCO Electric updated its distribution cost of service studies, including its classification factors study, brushing study, account services and public information study and wholesale billing study.

The AUC approved the classification ratios as applied for, including the poles, towers and fixtures customer classification ratio of 55 percent.

With the exception of an error made by ATCO Electric in the brushing costs allocator, the AUC found that the update to the brushing study followed the currently approved methodology, reasonably derived the cost allocators for ATCO Electric’s rate classes. Accordingly, the study was approved.

The AUC approved the account services and public information costs study, as filed. The AUC also approved the wholesale billing study, subject to adjustments required due to ongoing proceedings.

Feeder Analysis

A feeder analysis is an alternative to the traditional COSS methodology that consists of allocating costs to customers based on infrastructure information related to the distribution system. The basic methodology of the feeder analysis involves line length data captured for each customer on a specific point of delivery (“POD”) feeder for a sample of POD feeders. The data quantifies the amount of line length that is attributable to each customer and the amount of line length that is shared by the various customers residing on a POD feeder.

ATCO Electric stated that it has more confidence in its currently approved traditional COSS methodology and, therefore, will not be pursuing the implementation of a feeder analysis. Although the AUC acknowledged that a feeder analysis might be superior to a traditional COSS, it noted the concerns of ATCO Electric regarding the costs that would be incurred to improve the results of its feeder analysis.

As part of the Distribution System Inquiry and any related proceedings arising from the inquiry, the AUC expected that alternative Phase II approaches and the associated costs will be explored. Therefore, the AUC considered it premature to direct ATCO Electric to pursue its feeder analysis at this time.

Load Forecast

Based on its review and assessment of ATCO Electric’s load forecast methodology, the AUC found the methodology and resulting 2017 forecast billing determinants reasonable.

Rate Design

Revenue-to-cost Ratios

ATCO Electric proposed to increase the revenue-to-cost ratio for the customer (fixed) component of most of its rates to recognize the fixed nature of its costs and move towards collecting revenue based on cost causation through a fixed fee.

The AUC observed that the proposed changes to revenue-to-cost ratios were generally within three percent of those approved in the last Phase II decision and agreed with ATCO Electric that gradual changes to its revenue-to-cost ratios are required to mitigate potential rate shock from an intra-class perspective. The AUC approved the changes to ATCO Electric’s revenue-to-cost ratios, as filed.

Price Schedules

The AUC agreed that it was reasonable to retain the existing rate structure for all of ATCO Electric’s existing rates. Accordingly, the AUC approved ATCO Electric’s rate structure, as filed, except for the proposed rate for low-use residential customers.

Allocation of REA Acquisition Costs

The AUC found the methodology used by ATCO Electric to allocate REA acquisition costs in its Phase II application was reasonable.

ATCO Electric’s SAS Rate Design

The Canada West Ski Areas Association (“CWSAA”) raised an issue with ATCO Electric’s SAS rate design specific to the incorporation of the AESO’s bulk transmission charges into ATCO Electric’s rates. The CWSAA explained that the AESO’s bulk transmission charge has no demand ratchet, while ATCO Electric applies a demand ratchet to the transmission component of its rates. The CWSAA recommended that for certain rates, ATCO Electric should be directed to flow through the AESO DTS bulk transmission charge on an unratcheted basis, consistent with the AESO DTS tariff.

Due to the potential for changes to the AESO tariff design in the near future and the concern with intra-class rate effects, the AUC denied the CWSAA proposal. In addition, the AUC noted that there might be related ongoing discussions in the Distribution System Inquiry, and any related proceedings arising from the inquiry could inform the AUC on SAS rate design specific to the incorporation of the AESO’s bulk transmission charges.

New Rate Classes – D12 – Low-Use Residential

ATCO Electric proposed a new residential rate to address the different load profiles and consumption patterns associated with low-use residential customers. ATCO Electric explained that the fixed portion of a customer’s bill is relatively high for low-use customers and, therefore, it designed the low-use residential rate with a lower fixed charge and a higher energy charge than its existing residential rate, D11.

The AUC was not convinced that a new rate for low-use customers is warranted at this time. Absent further analysis that demonstrates low-use residential customers cause lower fixed costs, the AUC found that the stratification proposed in rate D12 may not be consistent with cost causation.

D13 – Time-of-Use Residential Rate Class

ATCO Electric proposed a time-of-use residential rate that would be available to customers in the Grande Prairie region, where it plans to install approximately 2,000 Advanced Metering Infrastructure (“AMI”) meters, as a pilot program. ATCO Electric expected that the rate would help shift and reduce the overall distribution system peak, thereby increasing system stability. ATCO Electric’s Time-of-Use Residential Service rate – D13 was approved, as filed.

D22 – Small Technology Rate Class

ATCO Electric stated that the small technology rate class would be available to customers who provide technology-related services, have a monthly average demand that is less than 1 kW, and have predictable loads and end-use characteristics. This rate is designed for sites like street crossings, crosswalks, signs, cable boosters, digital carriers, Wi-Fi devices, LED signs, 5G networks, and other small technology types. The AUC approved the rate class as filed.

D23 – EV Fast-Charging Service Rate Class

ATCO Electric proposed a new rate, Price Schedule D23, for EV fast-charging service, which would be limited in availability pending any AUC approvals or directions from the Distribution System Inquiry. The AUC approved the new rate, on a pilot basis.

Distribution Bill Impact

The AUC observed that the increases and decreases to customer bills are not expected to exceed 10 percent for any of the rate classes, except for the street light rate class, D61. The AUC found that a greater than 10 percent change was reasonable for this rate class.

Incorporating the 2019 Phase II Results in Rates Under Performance-based Regulation

The AUC reviewed the schedules and calculations used to determine ATCO Electric’s proposed 2019 performance-based regulation (“PBR”) rates and found the methodology adequately reflects AUC determinations in earlier decisions. The AUC approved the methodology proposed by ATCO Electric to adjust its rates through to the applicable year of implementation.

Terms and Conditions for Electric Distribution Service

The AUC reviewed the proposed revisions to customer T&Cs and found that other than the sections regarding Payment in Lieu of Notice (“PILON”) and customer exit provisions; section 6.1, Easements; and section 4.4, Rejection of Application; the revisions provided clarity and consistency of terms in the customer T&Cs.

Other Matters

Maintenance Multiplier Process

The AUC approved a no-notice proceeding process for the maintenance multiplier application process for high-pressure sodium to LED streetlight fixture conversions submitted by ATCO Electric after April 30, 2020.

Rider E – Facilities Charge Agreements

The AUC noted that Rider E services are the result of contractual negotiations between ATCO Electric and individual customers that are subject to a customized set of pricing arrangements as well as T&Cs of service. The AUC agreed with ATCO Electric that Rider E should not form part of ATCO Electric’s AUC approved rates, and amending contractual arrangements with Rider E customers as an unregulated service should continue.

The AUC noted that it expects ATCO Electric to execute any contractual amendments to remove the remaining customer services from regulated service under Rider E by December 31, 2021.

UAD Issues Raised by AFREA

The AFREA raised two matters that it considered triggered UAD issues. The AUC rejected AFREA’s submissions that UAD issues were triggered.

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