Interim Revenue Requirement
In this decision, the AUC approved ATCO Electric Ltd.(“AEL”)’s annual interim facility owner tariff based on a continuation of its approved 2020 interim tariff in the amount of $691,900,000 ($57, 658, 333 per month) effective January 1, 2021, and continuing until otherwise directed by the AUC.
Background
AEL filed an application with the AUC, requesting interim approval of its forecast 2021 transmission facility owner (“TFO”) tariff, effective January 1, 2021. AEL requested approval of the interim tariff based on its forecast 2021 tariff of $718.8 million, resulting in an interim tariff of $59.9 million monthly.
In its 2020-2022 transmission general tariff application (“GTA”) AEL sought approval of its forecast revenue requirements for 2020, 2021 and 2022, in the annual amounts of $724.2 million, $718.8 million and $732.2 million, respectively.
As the GTA is in the record-development stage, a final 2021 tariff will not be in place before January 2021. A decision on the GTA will likely be issued in the first quarter of 2021, and AEL’s final rates will be subject to any compliance filing directed in that decision.
Findings
In evaluating interim rate applications, the AUC has consistently applied a two-part test. The first part of the test considers factors related to quantum and need, as applied to the specifics of the requested rate increase.
If all or a portion of the suggested rate increase appears warranted after a consideration of the quantum and need factors, the second part of the test is considered. This involves a consideration of certain general public interest factors to see if a rate increase is justified.
AEL proposes an interim tariff based on 100 percent of its forecast 2021 revenue shortfall, resulting in an increase of $26.9 million, on an annual basis, relative to the 2020 interim tariff approved by the AUC.
In the AUC’s view, the proposed increase in the recovery of depreciation is a contentious item in the GTA. As such, the AUC found that a significant portion of the requested interim tariff increase is related to contentious items. The AUC therefore found AEL’s forecast costs for 2021 to be insufficient to justify the proposed interim rate increase in full.
The AUC did, however, recognize that AEL has collected tariffs on an interim basis for 2018, 2019 and 2020 at levels below its respective applied-for tariffs. In the interest of promoting rate stability and easing rate shock, the AUC considers that a portion of the suggested rate increase appears warranted.
With respect to the years 2018 and 2019, the AUC noted that the amounts referenced by AEL for the currently applied-for 2018 and 2019 tariffs in the GTA are yet to be finalized. Nonetheless, based on the applied-for final tariffs, a true-up of $22.6 million for the two years combined would be expected to occur in 2021.
With respect to the year 2020, approximately $30.7 million of the requested $45.9 million 2020 interim tariff increase was related to depreciation expense.
After considering the submissions filed by AEL and the Consumers’ Coalition of Alberta, the AUC was not persuaded that approval of the requested interim rate increase, in full, is in the public interest at this time, given that determinations on the contentious items in the GTA remain uncertain. The AUC denied the requested increase and found that it is just and reasonable that AEL’s 2021 interim rates be based on a continuation of AEL’s approved 2020 interim tariff in the amount of $691.9 million. This represents 96.3 percent of the 2021 interim tariff proposed by AEL, which will assist to smooth out any potential increase in rates for 2021 and reduce potential rate shock to ratepayers at the time the 2018 to 2021 interim tariffs are trued up.
Accordingly, the AUC approves an interim monthly TFO tariff of $57,658,333 effective January 1, 2021. The interim tariff will remain in effect until the AUC approves either a new interim tariff or a final TFO tariff.
