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Alberta Electric System Operator Compliance with Decision 25848-D01-2020, AUC Decision 26215-D01-2021

Link to Decision Summarized

Review and Variance – Compliance Filing

In this decision, the AUC approved the application from the Alberta Electric System Operator (“AESO”) for approval of its compliance filing to Decision 25848-D01-2020 (the “Decision”), the Stage 2 review and variance of the 2018 Independent System Operator (“ISO”) tariff for the adjusted metering practice and substation fraction methodology.

The AUC addressed issues related to the Scope of the Stage 2 review and variance and ultimately found that the AESO had complied with applicable compliance directions from the Decision. The AUC also made findings related to FortisAlberta Inc.’s (“Fortis”)’s compliance with an AUC direction from the Decision and provided additional directions related to the recalculation of construction contribution decisions, with additional reporting requirements for all four regulated distribution facility owners (“DFOs”).

Process Steps and Background

The Decision reflected the AUC’s determinations regarding a Stage 2 review and variance (“R&V”) of certain aspects of Decision 22942-D02-2019, the AESO’s 2018 ISO tariff. In Proceeding 25848, the Stage 2 panel considered submissions in respect of the application of the AESO’s substation fraction (“SSF”) methodology, which was unchanged in the 2018 ISO tariff application, as well as a new proposal of the AESO to implement an adjusted metering practice (“AMP”) that had been approved in Decision 22942-D02-2019.

Compliance Filing Directions

Direction 1 – Tariff Amendments for Implementation of Substation Fraction of One

In the Decision, the AUC found that the Rate Supply Transmission Service (“STS”) portion of the construction contribution applied to connection projects initiated by DFOs serving new distributed-connection generation (“DCG”) projects would be set to zero, rather than on the basis of the SSF formula as currently defined in the AESO’s Consolidated Authoritative Document Glossary (“Glossary”). The AUC had issued Direction 1:

28. The Stage 2 panel directs the AESO to file its compliance filing to this decision by January 11, 2021, with the necessary tariff amendments to implement the SSF=1 proposal.

The AESO prepared a revision to its definition of substation fraction as an update to its Glossary, and proposed revisions to subsection 4.5(5) of the ISO tariff terms and conditions (“T&Cs”). The AESO noted that the revisions would remove the requirement to deem costs related to a DFO’s Rate STS capacity to be “supply-related costs”, and instead, costs related to a DFO’s Rate STS capacity are deemed to be zero. With these amendments, no costs associated with Rate STS would be used to determine the DFO’s construction contribution.

The AUC found that the proposed amendments were reasonable and approved them as filed.

Directions 8, 9, and 10 – Revised Tariff Language for Implementation of AMP

The AESO proposed changes to subsections 3.2(2), 3.6(2), and 3.6(3) of the ISO tariff T&Cs, which refer to Applying for a System Access Service or Change to an Existing System Access Service and Execution of Agreement for System Access Service, respectively. The changes referred to the implementation of the AMP and whether a market participant is obliged to contract for system access service (“SAS”) on a net or gross basis. The proposed changes to subsections 3.2(2), 3.6(2), and 3.6(3) of the ISO tariff T&Cs were approved.

The AESO’s proposed revisions to subsection 3.6(4) related to the circumstance under which a market participant may execute a System Access Service Agreement for Rate demand transmission service (“DTS”) or Rate STS at a contract capacity. The AESO indicated that the revised version of subsection 3.6(4) eliminated provisions proposed by the AESO in Proceeding 25175 that gave effect to a grandfathering approach of the AMP that was approved by the AUC in Decision 22942-D02-2019. Proceeding 25175 required revision in accordance with determinations of the Decision that the AMP should be implemented with no grandfathering provisions. The AESO was requested to clarify how the approval of the ISO tariff T&Cs changes would affect the ability of industrial complexes to continue to be billed for ISO tariff charges on a net rather than on a gross basis. This included scenarios where the industrial complex is not an AUC-designated industrial system, or a market participant that has received AUC approval to both self-supply load and export excess electric energy to the grid.

The AESO submitted that during Proceeding 22942, the AESO determined that net billing was inapplicable for industrial complexes that have not obtained an industrial system designation (“ISD”) under Section 4 of the Hydro and Electric Energy Act or that are not otherwise subject to an exemption in respect of the energy produced by the industrial complex. It noted as with all other provisions set out in Section 3 of its ISO tariff T&Cs, subsection 3.6(4) would only apply to existing market participants if they request a change to SAS at an existing point of delivery or supply to the transmission system.

Interveners raised concerns about the potential impact of the AMP on the continuation of net billing of industrial complexes and proposed further changes to subsection 3.6(4) to allow market participants to continue to be billed on either a net or a gross basis following changes to SAS agreements, if changes were made regarding a SAS agreement executed before January 1, 2021.

In the Decision, the AUC made clear findings that the AMP should be implemented without grandfathering. Considering these clear findings, the AUC denied amendments to subsection 3.6(4) proposed by interveners. The AUC pointed out that subsection 3.1(1) limits the operation of subsection 3.6(4) to instances where the SAS agreement is newly entered or amended. This means that market participants that have previously been able to elect to be billed on a net rather than a gross basis can continue to do so if they do not initiate SAS agreement amendments.

The AUC invited a discussion of whether industrial complexes who receive SAS through a DFO may be at risk to SAS change requests by the DFO and not by the industrial complex themselves. In response, the Consumers’ Coalition of Alberta and the AESO agreed that transmission-connected customers that did not initiate a change in their SAS agreements would not be exposed to risk arising solely from the implementation of the AMP. They also agreed that under the AMP, a distribution-connected industrial complex might be exposed to the risk of cost consequences arising from SAS changes requested by the DFO.

The AUC considered that industrial complexes that are flow-through end-use customers of a DFO should not be subject to the risk that they do not directly control arising from contract changes initiated by a DFO. It noted that risk to industrial complexes who receive SAS indirectly as a flow-through end-use customer of a DFO is a limitation of the proposed implementation of the AMP that cannot be fully addressed within the ISO tariff, as this involves the DFO tariff.

The AESO outlined how specific anticipated impacts would differ for active DFO connection projects, depending on whether the active DFO project has, or has not, executed a SAS at the time the ISO tariff provisions above come into effect. The AESO’s proposed wording of subsection 3.6(4) was approved.

The AUC found the remainder of the changes to the T&Cs were administrative in nature, and approved them.

Direction 4 and 5 Recalculation of Construction Contribution Decisions and Reporting of Disputes

In the Decision, the AUC addressed a concern that the application of the SSF formula in effect prior to that decision may have allocated costs beyond the incremental costs arising from Rate STS contract requirements for some existing DCG projects connected to substations where the DFO is the market participant. The AUC found that it should not be applied to construction contribution decisions (“CCDs”) for connection projects at DFO-contracted substations to which DCG connects. Accordingly, the AUC issued Direction 4 that required the AESO to recalculate CCDs using SSF=1 and the principles articulated in Section 3.5 of this decision and to inform affected DFOs of those recalculations.

In Direction 5, the AUC required each DFO to file a report setting out the details of all resolutions and outstanding disputes related to existing DCG projects connected to DFO-contracted substations on or before March 31, 2021. The AUC found that EPCOR Distribution & Transmission Inc., ENMAX Power Corporation, Fortis and ATCO Electric Ltd. had complied with this direction.

However, the AUC did not review CCDs that the AESO intended on revising. The AUC found it concerning because the AESO stated that its “recalculation of CCDs would confirm that there are zero supply-related costs for DFO points of delivery and supply” prior to having completed its recalculation of specific CCDs. Further, the AESO did not discuss the inputs required for the AESO’s CCD recalculation with the DFO. To facilitate needed clarification, the AUC required a “re-do” of Direction 5. The AESO was directed to complete the preparation of all required CCD recalculations and to forward such recalculated CCDs to the applicable DFO. DFOs were directed to then advise the AESO of any disputes with recalculated CCDs. DFOs are to advise any DCGs impacted by the revised CCDs. Finally, the DFOs were directed to provide an additional report on any disputes with DCG proponents that may have arisen following the communication of both the recalculation of CCDs and any resulting flow-through of supply-related costs that the DFO has determined should apply to the DCG by November 1, 2021.

Effect of the SSF=1 Approach on Historical DTS POD Charges

The AESO submitted that after recalculating historical CCDs in accordance with the SSF=1 proposal, fairness and market efficiency might require that historical Rate DTS bills be adjusted in some circumstances. The AESO also indicated that because it believes that the rebilling of Rate DTS charges may have other distribution tariff impacts, it intended to work with DFOs to determine whether rebilling Rate DTS charges is appropriate.

Considering the potential issues arising from rebilling of Rate DTS, the AESO requested that the AUC confirm that the AESO could proceed in the manner it described in the application. The AESO noted that its concern was primarily related to the potential impact of such rebilling on DFO tariffs. The AUC noted that rebilling of historical DFO POD charges was not addressed in any of the Direction 5 submissions filed by the DFOs. However, the AUC found that any potential rebilling of Rate DTS POD charge costs related to those substations that would receive SSF=1 to address historical costs back to December 1, 2015, may not be sufficiently material to warrant further examination by the AESO or the DFOs. The AUC directed the AESO to discuss with DFOs whether further examination of this matter is warranted and to include the outcome of those discussions in the AESO’s deferral account reconciliation application.

Direction 7 – Fortis Update on Response to BluEarth Complaint

In the Decision, Fortis was directed to provide details of a proposal for the disposition of its deferral account established to deal with the complaint of BluEarth Renewables Inc. considered by the AUC in Proceeding 25058. Fortis submitted that the deferral account contained a balance of $2,145,216 for a payment made to AltaLink Management Ltd. (“AML”) for Fortis’s 257S Hull DER Solar project. Fortis noted that following the receipt of a recalculated CCD for that project, it was anticipated that AML would refund this payment to Fortis, and the corresponding deferral account would be closed. The AUC determined that Fortis had complied with Direction 7.

Effective Date of Approved ISO Tariff Changes

The AUC applied a single effective date of July 1, 2021, for the revised ISO tariff based on this decision.

Direction 11 – AMP Implementation Plan and Timing of AMP Changes

In response to Direction 11, the AESO confirmed its intention to submit an implementation plan setting out the details of how to operationalize the AMP as part of its Phase 2 tariff application. Following a request from the AUC, the AESO submitted that it would be appropriate and efficient to file its AMP implementation plan in 2021, separately and before its Phase 2 tariff application in 2022. This would provide certainty to market participants regarding how the AMP would be implemented as soon as possible. The AESO was directed to file an application in respect of a proposed AMP implementation plan on or before January 1, 2022, with further amendments to incorporate AMP requirements into ISO Rule 502.10.

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