Net Salvage Methodology
In this decision, the AUC granted a review application filed by AltaLink Management Ltd. (“AltaLink”) requesting a review and variance of determinations made in Decision 23848-D01-2020 (the “Decision”) denying a proposed change to AltaLink’s net salvage methodology (“Net Salvage Proposal”).
The AUC’s authority to review its own decisions is discretionary and is found in Section 10 of the Alberta Utilities Commission Act. That act authorizes the AUC to make rules governing its review process and the AUC established Rule 016 under that authority. Rule 016 sets out the process for considering an application for review.
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, it 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.
This decision addressed the preliminary question.
Hearing Panel Findings and Proceeding 25560
AltaLink, in Proceeding 23848, proposed to change its method for collecting net salvage costs related to the retirement of its utility assets. The majority hearing panel (“Hearing Panel”) declined to approve the net salvage proposal, finding that AltaLink’s proposed net salvage methodology, among other depreciation-related issues, could affect other parties and therefore, should be considered in an AUC initiated generic proceeding. The dissenting Hearing Panel member would have approved the net salvage proposal, and would not have instituted a generic proceeding.
The AUC initiated Proceeding 25560: Commission-Initiated Proceeding to Focus on Specific Depreciation-Related Matters, on May 14, 2020. The AUC closed the proceeding on July 8, 2020 stating, in part:
9. After reviewing the submissions from parties in the current proceeding, the Commission considers that there is no consensus that depreciation-related matters should be considered on a more generic basis. In particular, the regulated utilities maintained that intertemporal choice, intergenerational equity and depreciation-related matters including net salvage should be addressed on a case-by-case basis. This is consistent with the conclusions reached by the Commission in Bulletin 2016-16. In that bulletin, the Commission concluded that alternative approaches and rate treatments to mitigate or smooth the effect of rate or bill increases on consumers should be considered on a case-by-case basis, from time to time, in the context of comprehensive tariff applications.
10. Having considered all the submissions and the conclusions of the Commission in Bulletin 2016-16, the Commission has determined, on balance, that continuing with the current proceeding would not be an effective use of resources for the parties or for the Commission. The proceeding further appears unlikely to result in efficiency gains in considering the issues associated with depreciation and net salvage over the long run for all utilities.
11. In view of the above, the record for this proceeding is closed and this letter disposes of the current application. The Commission thanks parties for their submissions. (footnotes omitted)
View of the Parties
Views of AltaLink
AltaLink submitted that the majority Hearing Panel deferred its consideration of AltaLink’s net salvage proposal in the Decision pending the outcome of a generic Proceeding 25560, which was to focus on depreciation-related matters. In AltaLink’s view, no final decision regarding AltaLink’s net salvage proposal was made. Proceeding 25560 was closed on the basis that alternative mechanisms for customer rate relief should be considered in utility-specific tariff proceedings, and not in generic proceedings. This required the AUC to complete the majority Hearing Panel’s deferred determination regarding the proposed net salvage methodology for the 2019-2021 general tariff application period.
AltaLink argued that the closure of Proceeding 25560 constituted changed circumstances under sections 4(d)(iii) and 6(3) of Rule 016, that warrant a review and variance of the Decision. AltaLink submitted that the majority Hearing Panel deferred its determination of AltaLink’s proposed net salvage methodology pending the outcome of the generic proceeding, and that the AUC’s closure of Proceeding 25560 remits the majority Hearing Panel’s deferred determination to the AUC. AltaLink was of the view, that the closure of Proceeding 25560 must lead the AUC to materially vary or rescind the majority Hearing Panel’s findings.
Views of Interveners
The Utilities Consumer Advocate (“UCA”) and the Industrial Power Consumers Association of Alberta (“IPCAA”) shared AltaLink’s view, that the net salvage proposal was never fully addressed in proceedings 23848 or 25560, and requested that the AUC address AltaLink’s proposal.
Review Panel Findings
The Decision, which applied to the 2019-2021 test years, was issued on April 16, 2020. AltaLink’s proposal under consideration by the Hearing Panel would reduce AltaLink’s revenue requirement in the test period by as much as $88 million. This reduction could potentially result in immediate rate relief to current ratepayers.
The Review Panel directed a review of the majority Hearing Panel’s findings concerning AltaLink’s net salvage proposal.
Decision
Regarding the preliminary question, the Review Panel found there to be changed circumstances that could lead the AUC to materially vary or rescind the majority Hearing Panel’s findings regarding the net salvage methodology.
The majority Hearing Panel’s denial of the net salvage proposal resulted in the Hearing Panel making certain findings regarding AltaLink’s updated net salvage percents. These findings are set out in Section 4.5.2 of the Decision. If the review panel varied or rescinded the majority Hearing Panel findings on the net salvage proposal, then the Hearing Panel’s findings in Section 4.5.2 of the Decision may also be affected. Accordingly, depending on the review panel’s findings regarding the net salvage proposal in the second stage of the review process, the findings in Section 4.5.2 of the Decision may also be varied or rescinded.
The AUC will issue process directions for the second stage of the review process in due course.
