Interim Approval
In this decision the AUC considered the 2021 annual performance-based regulation (“PBR”) rate adjustment filing from Apex Utilities Inc., formerly AltaGas Utilities Inc. (“Apex” or “AUI”), and approved the following:
(a) The 2018 going-in rates and 2018 K-bar were approved as final; and
(b) The 2021 special charges, distribution service rates and the corresponding rate schedules attached to this decision were approved effective January 1, 2021.
Procedural Summary
On September 10, 2020, Apex (at that time still AUI) submitted its 2021 annual PBR rate adjustment filing to the AUC, requesting approval of its 2021 gas distribution service rates, special charges, billing determinants and corresponding rate schedules, to be effective January 1, 2021, on an interim basis.
In Decision 25608-D01-2020, the AUC denied the former AUI to utilize the Type 1 incremental capital funding mechanism for its Etzikom Lateral Project. The AUC directed the former AUI to file an adjustment to this application reflecting the denial. Apex complied with the direction by submitting an updated application on November 2, 2020.
On November 19, 2020, Apex advised the AUC that it changed its name from AltaGas Utilities Inc. to Apex Utilities Inc. On November 24, 2020, Apex filed a letter on the record of this proceeding confirming that the content of the application filed under the name AltaGas Utilities Inc. was correct for customers of the newly named Apex Utilities Inc.
Background
The PBR framework approved in Decision 20414-D01-2016 (Errata) provides a rate-setting mechanism based on a formula that adjusts rates annually by means of an indexing mechanism that tracks the rate of inflation (“I”) that is relevant to the prices of inputs the utilities use, less a productivity offset (“X”).
In Decision 20414-D01-2016 (Errata), the AUC approved the continuation of certain PBR rate adjustments to enable the recovery of specific costs where certain criteria have been satisfied. These include an adjustment for certain flow-through costs that should be recovered from, or refunded to, customers directly (“Y factors”), and an adjustment to account for the effect of exogenous and material events for which the distribution utility has no other reasonable cost recovery or refund mechanism within the PBR plan (“Z factor”).
Apex’s most recent annual rate filing dealing with 2020 PBR rates were approved on an interim basis in Decision 24883-D01-2019.
PBR Rate Adjustments
2021 PBR Indices and Annual Adjustments
The 2020 PBR plan for Apex provided a rate-setting mechanism based on a formula that adjusts revenue-per-customer annually by means of the I-X indexing mechanism plus specifically approved adjustments.
(a) I-X Index
The AUC reviewed Apex’s calculation of the 2021 I factor and found it to be consistent with the methodology set out in Decision 20414-D01-2016 (Errata). Accordingly, the 2021 I factor of 2.42 percent and the resulting I-X index of 2.12 percent were approved.
(b) Y and Z Factor Materiality Threshold
Apex calculated the Y and Z materiality threshold to be $0.54 million in 2021. The AUC approved Apex’s 2021 Y and Z factor materiality threshold.
(c) Y and Z Factors
Apex applied for a Y Factor amount of $ 1.88 million, including carrying costs. After reviewing the calculations and supporting materials the AUC found the applicable provisions of Rule 023 had been abided by and approved the applied for Y factor as filed. Apex did not apply for any Z factor adjustments in 2021.
(d) Q Value
After having found that Q was properly calculated and consistent with the approved methodology, the AUC approved the Q value of 0.38 percent as applied for.
(e) K-Bar Factor
Apex applied for the 2021 K-bar funding of $12.13 million, calculated as its 2021 required K-bar and 2019 K-bar true-up, which was approved.
(f) K Factor
In compliance with an AUC direction, Apex removed the 2020 Type 1 factor of $0.68 million, the 2019 Type 1 capital factor of 0.17 million and Type 1 capital carrying costs of $0.01 million. The 2021 capital funding amount will total $ 11.27 million.
(g) Forecast Billing Determinants
Apex submitted that the forecasted 2021 billing determinants it provided were based on the same methodology approved in Decision 24883-D01-2019. The AUC found that the applied billing methodology and the resulting 2021 forecast billing determinants were reasonable. The billing determinant was approved as applied for.
2021 PBR Rates
Distribution Rates
Regarding Apex’s special charges and standard contribution amounts set out in its 2021 special charges schedule, AUI escalated its special charges by the I-X index and rounded them to the nearest whole dollar.
Apex provided typical customer bill impact schedules reflecting the 2021 proposed rates that would go into effect on January 1, 2021. According to Apex’s calculations, these would range from -1.08 to -4.56 percent without commodity charges, but would become +8.82 percent to +24.90 percent when commodity charges had been included. Keeping the price component of the commodity charges unchanged would result in a customer bill impact of -0.54 percent to -1.98 percent.
AUC Findings
The AUC reviewed Apex’s schedules and calculations that support its 2021 PBR rates and was satisfied they were reasonable and had been accurately calculated.
In response to an AUC information request, Apex acknowledged that gas commodity charges were flow-through amounts on a bill that were driven by the natural gas market and are beyond the control of Apex or the AUC. Apex pointed to the complexity attendant to arriving at a reasonable gas price forecast and stressed that customers choosing a competitive retailer may see very different gas commodity rates than those forecast by Apex. Thus, forecast gas prices are provided as a reference point only for bill comparison purposes.
Other distribution utilities had used the same commodity rate in both years that were being compared (in this case 2020 and 2021); the actual commodity charge in the 12-month period preceding the application was most commonly used for these purposes. This method allowed for approximation of the effect of proposed distribution rate changes on a total bill basis, avoiding the issues associated with developing a reasonable forecast for the coming year. Accordingly, the AUC directed Apex, in all future rate applications, to utilize this method for doing its typical customer bill impact analysis.
The AUC approved Apex’s 2021 PBR rates on an interim basis, effective January 1, 2021.
Other Matters
Financial Reporting Requirements and Senior Officer Attestation
The AUC was satisfied that Apex had complied with the financial reporting requirements set out in Decision 20414-D01-2016 (Errata).
Finalizing the Going-In Rates and Associated 2018 Capital Factors
The AUC set the going-in rates for the 2018-2022 PBR plans based on a notional 2017 revenue requirement that was calculated using the actual pre-2017 costs, adjusted as required for anomalies. The resulting going-in rates and associated 2018 capital factors (K-bar and K factors) remained interim.
Apex’s proposed anomaly adjustment required finalization. In Decision 25422-D01-2020, the AUC found that no additional anomaly adjustments were required to account for anomalies for the purposes of calculating Apex’s going-in rates. Apex confirmed that the schedules filed as part of the 2021 annual PBR rate adjustment application included all adjustments necessary to finalize its going-in rates and associated 2018 capital factors.
The AUC was satisfied with the calculation of the adjustments and found that all related directions had been complied with. The AUC approved Apex’s 2018 going-in rates and 2018 K-bar provided in this proceeding as final.
