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ATCO Pipelines Decision on Preliminary Question Application for Review of Decision 26443-D01-2021 2021-2023 General Rate Application Compliance Filing, AUC Decision 26719-D01-2021

Link to Decision Summarized

R&V – Rates

In this decision, the Alberta Utilities Commission (“AUC”) denied an application by ATCO Pipelines, a division of ATCO Gas and Pipelines Ltd. (“ATCO Pipelines”), to review and vary Decision 26443-D01-2021 for the utility’s 2021-2023 general rate application (“GRA”) compliance filing (the “Compliance Decision”).

Background

In the Compliance Decision, the AUC addressed ATCO Pipeline’s compliance filing arising from directions issued in Decision 25663-D01-2021 (the “GRA Decision”), which addressed ATCO Pipeline’s revenue requirements to provide natural gas transmission service for 2021, 2022 and 2023.

In the GRA Decision, the AUC was concerned by a pattern of conservative forecasting of operating costs by ATCO Pipelines and determined that a top-down adjustment to the forecast operating costs was warranted. As part of the GRA Decision, the AUC issued Direction 10, which required a five per cent overall reduction to forecast operating costs in each of 2021, 2022 and 2023.

Further, the AUC in the GRA Decision found that reductions were required to specific operating costs. To avoid the effects of double-counting the top-down adjustment and these specific adjustments, the AUC issued Direction 11 requiring a specific calculation method.

In the Compliance Decision, the AUC was not satisfied that ATCO Pipelines had fully complied with the directions. Specifically, the AUC was not satisfied that Direction 11 was complied with as ATCO Pipelines had not removed all categories of operating costs subject to the specific adjustments before applying the top-down adjustment. The AUC determined that this resulted in a double-counting which was supposed to be avoided through Direction 11.

Based on the determinations that ATCO Pipelines improperly excluded the operating cost categories total labour costs and IT operating costs from the five per cent top-down adjustment to operating costs, the compliance panel further reduced ATCO Pipelines’ revenue requirements by $1.517 million in 2021, $1.555 million in 2022 and $1.577 million in 2023.

Issues

Was There an Error of Fact, or Mixed Fact and Law, in the Compliance Panel’s Determinations Related to Directions 10 and 11 in Respect of ATCO Pipelines’ Total Labour Costs and IT Costs?

(a)     Directions 10 and 11 and Total Labour and IT Costs

In its review application, with respect to both total labour costs and IT operating costs, ATCO Pipelines argued that the compliance panel’s determinations regarding these costs ignore the plain wording of Direction 10 and Direction 11.

ATCO Pipelines argued that because IT operating costs had been approved in the GRA Decision, the compliance panel erred in concluding that these costs should not have been removed from the top-down adjustment. It argued that the compliance panel’s findings effectively changed Direction 11 to require that ATCO Pipelines apply a five per cent reduction to its approved IT operating costs.

The AUC panel in this review proceeding noted that, for both total labour costs and IT operating costs, ATCO Pipelines disagreed with the compliance panel’s interpretation of the two directions. However, the AUC determined that ATCO Pipelines did not demonstrate that the assessment and findings in the Compliance Decision were inconsistent with the intent of the two directions. The review panel found that there was no error in the approach taken by the compliance panel.

(b)     Double-Counting of Total Labour Costs and IT Costs

ATCO Pipelines submitted that double-counting occurred because of the compliance panel’s findings with respect to both total labour costs and IT operating costs.

The review panel found that ATCO Pipelines did not provide support for the assertion that the compliance panel’s calculation, which was to remove the revenue requirement impacts of directions 12, 13 and 14 before applying the five per cent top-down adjustment, results in double-counting. Without support in the review application to demonstrate that the compliance panel made an error of fact or mixed fact and law, ATCO Pipelines’ arguments for a review fail to meet the test established in Rule 016.

The review panel found that ATCO Pipelines did not demonstrate that the hearing panel had erred in its findings in applying directions 10 and 11 to ATCO Pipelines’ total labour costs and IT operating costs, or with respect to double-counting. The request for review on these issues was denied.

Was There an Error of Fact in the Compliance Panel’s Determinations Related to Directions 10 and 11, in Respect of the Total Amount of the Reductions to ATCO Pipelines’ Forecast Operating Costs?

ATCO Pipelines argued that because the top-down adjustment would apply to a lower level of forecast operating costs, it could reasonably be expected that the level of top-down adjustment would also be lower. It concluded that the resulting reductions represent an error of fact regarding the level of adjustment to its forecast operating costs.

The review panel was not persuaded. It found that the GRA Decision did not suggest that ATCO Pipelines’ forecasted operating costs could not be reduced in a way adopted by the compliance panel. Specifically, it found no language suggesting that the total reductions contemplated should not exceed the five per cent top-down adjustment. The AUC found no error of fact in this regard in the compliance panel’s determinations.

Decision

The request for a review of the resulting reductions to ATCO Pipelines’ total labour costs and IT operating costs used in deriving ATCO Pipelines’ forecast operating costs was denied.

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