ISO Tariff
In this decision, the AUC approved the application from the Alberta Electric System Operator (“AESO”) for its 2021 update to the Independent System Operator (“ISO”) tariff.
Background
In its application, the AESO requested approval of changes to the levels, of various rates, Rider J, and Section 8 of the ISO tariff. The application included minor changes to the terms and conditions of the AESO’s 2018 ISO tariff, as updated in this application, for the year 2021.The AESO stated that its 2021 ISO tariff update application reflected an overall increase of 1.5 percent over the 2020 rates then in effect.
The AESO also made changes to the tariff to reflect the removal of the regulated generating unit connection cost charge schedule, which expired at the end of 2020, and a change to a clause in the proforma system access service contracts.
The AESO requested that the updated rates, riders and maximum investment levels proposed in its application apply on a go-forward basis only, commencing from the effective date approved by the AUC. The AESO submitted that the currently approved deferral account rider and reconciliation mechanisms continue to be used to address any variances between costs and revenues occurring prior to the approval of the applied-for rates. The AESO also indicated that it is not seeking any retroactive adjustments to the rates proposed in this application.
The AESO filed the present annual tariff update application to reflect costs and billing determinants for the 2021 calendar year, and changes resulting from the AUC’s acceptance, amongst other matters, of the 2018 Transmission Cost Causation Study update in Decision 22942-D02-2019.
Application Details
The AESO’s tariff update application consisted, in part, of formulaic updates to annual revenue requirement; rates, riders and maximum investment levels; and a 2021 escalation factor.
The AESO’s Annual Revenue Requirement
The AESO’s revenue requirement consisted of costs related to wires, ancillary services, transmission line losses, and the AESO’s own administration (which included other industry costs and general and administrative costs). A comparison of the AESO’s 2021 forecast, 2020 forecast and 2019 – 2018 recorded costs, was reproduced in the following table.
Rate Calculations and Billing Determinants
The rate calculations for the 2021 rates update are based on the AESO’s forecast of billing determinants for 2021 which are calculated using historical and year-to-date ratios between Demand Transmission Service (“DTS”) energy and each individual billing determinant.
Billing determinants changed from the 2020 forecast on which the currently approved rates were based. Consequently, the AESO’s 2021 updated rates increase 1.5 percent overall from the approved 2020 rates, including an increase of 1.6 percent to Rate DTS, and a decrease of 1.9 percent to Rate Supply Transmission Service (“STS”).
2021 Maximum Investment Levels
The application included updated investment amounts approved in the 2018 ISO tariff application that reflect an escalation factor based on a composite of specified recent inflation indices. The AESO updated the composite inflation index used for developing the point-of-delivery (POD) cost function to 2021, using additional Statistics Canada cost index values and the most recent Conference Board of Canada forecast of the Alberta Consumer Price Index (“CPI”).
The AESO applied the resulting escalation factor, 1.0641, to the 2018 Rate DTS maximum investment levels to determine the 2021 Rate DTS maximum investment levels, which resulted in an increase to the 2018 maximum investment levels.
Regulated Generating Unit Connection Costs
The AESO proposed revisions to the 2021 ISO tariff that reflect the removal of the regulated generating unit connection cost (“RGUCC”) provisions. Because the RGUCC charge component of Rate STS only applies if a regulated generating unit terminates its system access service contract with the AESO prior to the expiry of the regulated generating unit’s base life, and no regulated generating units have a base life that extends past 2020, the AESO proposed removing the RGUCC provisions in the current 2021 ISO tariff update.
Generating Unit Owner’s Contribution Rates
The generating unit owner’s contribution (“GUOC”) rates proposed by the AESO in the 2018 application were approved by the AUC in Decision 22942-D02-2019. The AESO stated that its planning and engineering studies have not identified a need to update the GUOC rates. As a result, the AESO’s proposed GUOC rates are unchanged from those approved in its 2018 application.
Findings
In Decision 2010-606, the AUC approved an approach that included filing comprehensive tariff applications every three years and, in conjunction with this, filing annual tariff updates. The AUC considered that an annual revenue requirement and rate update may benefit customers by limiting potential misallocations that might occur if the AESO were to rely on Rider C exclusively to allocate periodic revenue and cost imbalances to its customers.
The AUC was satisfied that the AESO included the 2021 wires costs for TFOs using the AUC’s approved approach
The AUC acknowledged that the AESO’s 2021 forecast for ancillary services, losses and administrative costs included in the current application have yet to be approved by the AESO board as final. The AESO proposed to file a letter to advise the AUC of AESO board approval once it has been received. The AUC directed the AESO to submit the letter confirming AESO board approval by January 31, 2021. Any differences arising between the forecast amounts included in this application and the AESO board-approved costs or the AESO’s actual costs will have to be settled through Rider C.
The AUC found that the AESO’s 2021 forecast billing determinants used in the tariff update application were reasonable given that certain billing determinants have been decreasing and impacts of the COVID-19 pandemic are expected to continue in 2021.
The AUC was also satisfied that maximum investment level amounts, calculated based on an escalation factor of 1.0641 applied to a composite of specified recent inflation indices, are consistent with the rate calculation approved methodology.
Given that no regulated generating units have a base life that extends past 2020, the AUC found that it is reasonable for the AESO to remove the RGUCC provisions in the current 2021 ISO tariff update.
For all of the above reasons, the AESO’s 2021 ISO tariff update application was approved.
