Review and Variance – Cost Allocation
In this decision, the AUC denied the application from the Alberta Federation of Rural Electrification Associations (“AFREA”) to review and vary AUC Decision 25916-D01-2021 (the “Decision”).
The Decision related to the Phase II application from FortisAlberta Inc. (”FortisAB”) in which the AFREA was an intervener. In this decision, the first stage of the two-stage review process, the AUC found that there were not sufficient grounds to review the original Decision. The review application concerned the AUC’s findings regarding the overlap of FortisAB service areas with those of certain Rural Electrification Associations (“REAs”) and FortisAB’s distribution cost allocation and rate design.
Review Panel Findings
This application was subject to the amended AUC Rule 016: Review of Commission Decisions. The updated Rule 016 no longer includes errors of law or jurisdiction in the scope of a review by the AUC. The AUC determined that the AFREA raised two grounds that are errors of law and therefore outside the scope of the AUC’s review process.
The AUC noted that the application was confusing, unclear, and inconsistent and cautioned that the burden to provide clear grounds, supporting submissions, and references to the original record to support the application for review lies with the party seeking review.
The Hearing Panel Erred in Finding that FortisAB had Historically Recovered Integration Operation Costs from its Customers
The AFREA argued that the AUC had made a factual error in paragraph 185 of the Decision by ignoring or not considering evidence including commercial arrangements made between REAs and FortisAB that, contrary to the AUC’s findings, indicated that FortisAB had historically recovered integrated operations costs from its customers, not REAs.
The AUC disagreed. It noted that a panel’s silence on specific submissions or evidence does not always indicate that the information was ignored. The AUC further referred to paragraphs in the Decision regarding the background that indicated that it had considered all evidence, even if some pieces were not discussed in the published Decision.
Further, the AUC noted that the Decision discussed prior proceedings in which the issue of FortisAB’s integrated operations costs had been considered. The AUC further referred to sections in the Decision regarding information request responses noting how FortisAB had historically accounted for contributions paid to and received from REAs. The AUC noted that those references clearly demonstrated that the panel explicitly considered evidence regarding FortisAB’s accounting of integrated operation costs in its tariff, the type of costs historically contemplated under the Integrated Operations Agreements (“IOAs”), as well as the impact of changing ownership of assets on cost allocations.
Accordingly, the AUC found that there was no evidence to suggest that the information referred to was disregarded in arriving at the Decision. The AFREA did not show that a factual error exists in paragraph 185 of the Decision on a balance of probabilities.
The Hearing Panel Erred by Failing to Address the Quantification Issue
The AFREA submitted that the hearing panel failed to address the quantification issue raised by the AFREA for the equity provided to the predecessors of FortisAB in exchange for cooperation with the building of the Alberta Interconnected Electric System (“AIES”). The AFREA argued that the hearing panel should, at minimum, have referred to negotiations and arbitration in determining if FortisAB’s applied for costs associated with integrated operations were reasonable.
The AUC was not convinced that the evidence referred to by the AFREA was ignored in the Decision. The AUC repeated that there is no requirement that a hearing panel address in its decision all the evidence that was put before it in a hearing. The AUC found that there was no evidence to suggest that information had been disregarded. The AFREA was found not to have shown that there was an error in fact or mixed fact and law by not considering the issue of quantification for the equity provided to the predecessors of FortisAB in exchange for cooperation with building the AIES. The request for review on this ground was denied.
The Hearing Panel Erred in Finding the Methodology to Determine Costs Associated with and Attributable to Integrated Operations was Reasonable
The AFREA argued that the hearing panel had erred in finding that the methodology to determine costs associated with and attributable to integrated operations with REAs was reasonable. It argued that the AUC failed to apply the facts presented by the AFREA, indicating that the IOAs provided for costs that are negotiated and paid under the terms of the IOAs in effect at the time as transmission or system access costs.
The AUC again found that there was no evidence to suggest that the information and evidence had been disregarded. The AFREA did not show that, in finding that the methodology to determine costs associated with and attributable to integrated operations with REAs was reasonable, the AUC had erred by failing to apply the facts presented by the AFREA.
The Hearing Panel Erred by Making Findings with Incomplete Information
The AFREA argued that the AUC did not have evidence from REAs regarding FortisAB’s costs associated with its integrated operations with REAs on the record of the original proceeding. The REAs provided full evidence in the negotiations and arbitrations that occur under the part of the 3R Regulation. The AFREA argued that it is an error of mixed fact and law for the hearing panel to make findings with incomplete information.
The AUC, referring to sections of the Decision, found that the panel of the Decision considered the information and evidence appropriately. The AFREA appeared to disagree with the weighting and treatment of evidence. The objective of a review and variance is not to retry an application. As the AFREA did not convince the AUC that an error of fact, law or mixed fact and law exists on a balance of probabilities, the AUC denied the application on this ground.
The Hearing Panel Erred by Classifying REAs as “End Users”
The AFREA argued that, because REAs are not the same as FortisAB’s other end users which are FortisAB’s customers, the AUC had made an error of mixed fact and law by describing REAs as “end users”. The AFREA argued that the result of this finding is that the AUC classified REAs as customers, which impacts their ability to negotiate.
The AUC noted that REAs were not described as “end users” in the Decision but were referred to as “users” of FortisAB’s system. This description was made in the section of the Decision addressing whether some portion of FortisAB’s total costs should be allocated to REAs and if the determination of costs related to REAs should follow a similar method to that of customers and rates classes.
The AUC determined that in the Decision, the objective of differentiating between “REAs” and “Fortis’s own customers” and between “REAs” and “other users”, was to distinguish between REAs and FortisAB customers.
The AFREA did not show that this argument fulfilled the requirements to justify a review.
In answering the preliminary question, the AUC found that the AFREA did not meet the requirements for a review of the Decision and the application for review was dismissed.