Routing of Transmission Facilities – Increased Costs
In this decision, the AUC denied the applications by AltaLink Management Ltd. (“AltaLink”) and ATCO Electric Ltd. (“AE”) to construct and operate their proposed transmission facilities, as it did not have adequate information to assess the routes before it and other viable route options were not properly assessed.
Introduction
The AUC already approved the need for this project as part of the Provost to Edgerton and Nilrem to Vermilion Transmission Development. In this decision, the AUC had to consider whether it is in the public interest to approve the transmission facilities currently before it, having regard to their social, economic and environmental effects.
AltaLink and AE each applied to construct and operate a single-circuit, 240-kilovolt (“kV”) transmission line, which would be initially energized at 138 kV and 144 kV, respectively. AltaLink’s portion, designated as Transmission Line 333L, was approximately 75 to 80 kilometers long, from the existing Nilrem 574S Substation to the service territory boundary with AE. AE’s portion, designated as Transmission Line 7L333, was approximately 13 kilometers long, from the proposed Drury 2007S Substation to the service territory boundary with AltaLink. Both transmission facility owners (“TFOs”) also filed applications to interconnect the two transmission lines.
A number of landowners near the proposed development intervened in the proceeding. The Consumers’ Coalition of Alberta (“CCA”) intervened to address cost-related matters that may affect ratepayers.
Inability to Properly Assess Routing
The AUC undertook an extensive assessment of the applications and proceeding materials in an attempt to determine the lowest impact routes. The number of variants, along with the number of ways that the segments can be combined, resulted in many different overall routes that the AUC could potentially approve. To narrow this down, the AUC first considered the local variants, often segments within segments, in an attempt to determine which would have lower impacts before it moved on to considering larger segments. This was an iterative process. The AUC also conducted a holistic analysis to assess the impacts of overall combined routes, taking into account that the interrelated nature of adjacent segments meant they could not be considered in isolation.
Ultimately, because of the flawed nature of the applicants’ routing process and the discrepancies in the cost information provided, the AUC could not select a route based on the information before it. The AUC noted that it was aware that denying these applications was not without its own impacts. The need for this project has been approved, including dates by which the project should be in service. Denying the applications was likely to result in delays to the in-service date that in turn has the potential to negatively affect generators intending to connect in the area and load that will continue to be served by an area transmission system that does not meet the AESO reliability standards. Denying the applications also means that some interveners may have to go through this process again. In spite of these drawbacks, the AUC decided that it had no other option but to deny the applications as it was of the view that to do anything else would run counter to the public interest and would erode the public’s trust in the regulatory process.
Lack of Coordination Between AltaLink and AE Resulted in Incomplete or Improper Consideration of Routing Options
The AUC held that the applicants’ routes are not independent of each other and must be considered together. By considering its routes independently of AE, AltaLink may have identified a route with the lowest impacts within its service territory but one that must connect to a higher-impact route in AE’s service territory. A route that would have higher impacts may exist within AltaLink’s service territory but would nevertheless result in a lower overall impact route because it connects to a lower impact route in AE’s service territory. It appeared to the AUC that this scenario had arisen in this proceeding, and in particular, that the applicants failed to understand and appreciate the overall costs of certain routes properly.
AltaLink and AE Failed to Provide Complete and Accurate Information for Assessment of Overall Routes
The applicants’ decision to not conduct an overall route assessment and only consider routing within their respective service territories meant that there was not one place where the AUC could look to see the metrics of an overall route. While the AUC attempted to piece together the available evidence to determine which route combinations could be approved, it could not do so. The lack of complete and accurate information, particularly the cost estimates, rendered it impossible for the AUC to assess the routing options before it properly.
While the AUC appreciated that it could be inefficient to prepare detailed cost estimates for every route combination, it must have accurate cost information to assess which routes are in the public interest properly. The AUC noted that not only did it require multiple rounds of information requests to obtain segment-by-segment costs from AltaLink, the information the AUC ultimately received underestimated the cost differences between certain routes by a margin of 40 percent. It was therefore difficult for the AUC to rely on any of AltaLink’s segment cost estimates given this level of discrepancy. The AUC noted its expectation that AltaLink, and all applicants, will take measures to ensure that they provide more accurate segment cost estimates in the future.
The AUC was also concerned with the magnitude of the cost variances between the different variants for AltaLink and AE. Based on the figures provided to the AUC, it appeared as if AltaLink’s costs are more than three times those of AE’s to build the same length of transmission line. The AUC noted that AltaLink and AE proposed different transmission structures and conductors for transmission lines only exacerbated the difficulty in comparing routes. AltaLink’s proposal to predominantly use steel monopole structures and AE’s proposal to use wooden H-frame structures may contribute to these differences. The AUC held that despite the considerable time spent on the topic, the AUC never received a satisfactory answer for why the TFOs arrived at different solutions. The AUC noted its expectation that should AltaLink and AE’s cost estimates continue to have significant variances for similar length routes when they re-apply, they will clearly outline the reasons for the differences.
Without relying on the cost estimates or assuming that the TFOs’ estimates are comparable, the AUC found that it could not discharge its mandate to determine which routes are in the public interest.
Failure to Iteratively Assess Routes
The applications were initially placed in abeyance due to what the AUC considered a material deficiency and to allow routing alternatives to be finalized. The AUC considers it prudent for applicants to continue to consult with parties even after the application is filed and recognizes that application amendments may arise in an attempt to mitigate parties’ concerns or as a result of new information. The AUC, however, noted that in this matter, it appears as if the applicants knowingly filed applications they knew were incomplete or subject to change. The AUC questioned whether time pressure to move the project forward resulted in the applicants cutting short the iterative routing process and finalizing routes prematurely. The AUC noted that it is incumbent upon applicants to ensure that they consider all available options through a robust routing process.
Assignment of Project to Both TFOs Resulted in Increased Costs
The AUC was of the view that not only did the assignment of the project to two TFOs and the lack of coordination result in issues with routing, it also resulted in unnecessary costs. While the AESO is responsible for determining who is eligible to apply for transmission facilities based on the TFOs’ service territories under Section 24 of Transmission Regulation, that section nonetheless gives the AESO the discretion to assign projects to a TFO other than on the basis of geographic areas.
While the AUC understands that generally speaking, there are merits to having TFOs construct and operate facilities within their respective service territories (for instance, they may have existing relationships with landowners that would make consulting easier or more efficient), it is not convinced that the benefits outweighed the costs in this instance. The AUC emphasized that where a transmission line is assigned to multiple TFOs, the TFOs must strive to coordinate to reduce the costs and impacts of the project. It is not convinced that AltaLink and AE successfully did so in this instance, and this failure to properly coordinate may result in the AUC deeming costs to be improper or imprudent at a later date.
Other Concerns
Schedule Management and Cost-benefit of Major Decisions
The CCA submitted, and the AUC agreed that the AESO and the TFOs must proactively and continuously manage the project in-service date to avoid construction in time frames when unnecessary costs will be incurred and meeting an in-service date provides little or no benefit. The AESO and TFOs’ responsibility to proactively manage their schedules is particularly critical in light of the denial of these applications.
The CCA submitted that a cost-benefit analysis should be conducted of any key decisions relating to the proposed facility additions to ensure proposed project designs and associated expenditures will add adequate and optimized value to ratepayers. The AUC agreed, however, the AUC did not propose to prescribe requirements on the type and timeline for a cost-benefit analysis. The TFOs stated that they conduct cost-benefit analyses and the AUC noted its expectation that they will continue to do so and be able to justify decisions based on those analyses in future applications.
Finally, the CCA stated that the schedules and cost estimates provided by the TFOs in their applications did not provide sufficient detail. Inadequate schedules pose the potential for unforeseen delays and additional costs; inadequate cost estimates further pose a greater risk of being inaccurate. The TFOs provided more in-depth schedules in response to CCA information requests. The AUC found this additional detail to be useful and the TFOs should endeavor to provide more detailed schedules in future facility applications.
Decision
The AUC found that it was not in the public interest to approve the applications as filed. The AUC found that the applicants’ routing process was flawed and that there were discrepancies in the cost estimates provided that could not be resolved. The AUC was, therefore, unable to properly weigh the impacts of the various route options to conclude that it was in the public interest to approve any of the routes before it, having regard to the routes’ social, economic and environmental effects.
Given the approved need for this project, AltaLink and AE were directed to re-apply for the transmission facilities.
