Compliance Filing – Rates
In this decision, the AUC found that AltaLink Management Ltd. (“AML”) had complied with the AUC’s directions issued in Decision 24681-D01-2020 and Decision 25369-D01-2020. The AUC further approved carrying costs on 2017 deferral account adjustments and 2017 cancelled projects costs, as filed. The AUC found that AML’s direct assigned capital deferral account (“DACDA”) application support costs were not all prudently incurred.
Introduction and Background
AML filed a compliance filing application pursuant to the AUC’s order in Decision 24681-D01-2020. AML requested approval of its compliance with directions from Decision 24681-D01-2020 regarding AML’s 2016-2018 DACDA reconciliation. The application also provided AML’s responses to directions from Decision 25369-D01-2020 regarding the Edmonton Region Project DACDA reconciliation. The AUC found:
AltaLink complied with directions 1 and 2 from Decision 25369-D01-2020;
AltaLink complied with directions 4, 5, 6 and 7 from Decision 24681-D01-2020;
AltaLink’s DACDA application support costs (internal labour costs used to prepare and support AltaLink’s 2016-2018 DACDA reconciliation application) of $2,400,829 were not all prudently incurred. The AUC approved all of AltaLink’s applied-for Proceeding 25369 DACDA application support costs, but applied a disallowance totalling approximately $200,000 in respect of a portion of AltaLink’s Proceeding 24681 DACDA application support costs; and
carrying costs on 2017 deferral account adjustments and 2017 cancelled projects costs, pursuant to Rule 023: Rules Respecting Payment of Interest, were approved as filed.
The Consumers’ Coalition of Alberta (“CCA”) participated in this proceeding and expressed concerns with the magnitude of AML’s DACDA application support costs. The AUC determined allowed information requests (“IRs”) to test the reasonableness of AML’s DACDA application support costs.
Compliance with Directions from Decision 25369-D01-2020 and 24681-D01-2020
Directions 1 and 2 of Decision 25369-D01-2020, 5 to 7 of Decision 24681-D01-2020
The AUC has reviewed the application and all applicable attachments and was satisfied that the AML complied with the directions. The directions related to
reduction of legal and related costs for negotiating and concluding a Cooperation Agreement (Directions 1 and 2 of Decision 25369-D01-2020); and
reduction of total requested cumulative capital additions for the Medicine Hat Project and the Hazelwood Project to December 31, 2018, of $186,682,308 by 2.5 per cent and $67,801,980 by 1.5 per cent, respectively (directions 5 to 7 of 24681-D01-2020).
Direction 4 of Decision 24681-D01-2020: AML’s DACDA Support Costs
In Decision 24681-D01-2020, the AUC found that while AML’s DACDA application support costs could be capitalized, AML had not quantified those costs on the record of that proceeding. Accordingly, in Direction 4 of Decision 24681-D01-2020, AML was directed to provide the quantum, as well as a brief explanation of the nature, of those costs in its compliance filing application.
The AUC agreed with submissions from the CCA that costs claimed for implied full-time equivalents were excessive. The AUC further took issue with the reasonableness and prudency of documentation filed by AML in support of its 2016-2018 DACDA application and with the magnitude of DACDA support costs, specifically costs associated with AML’s enhanced filing approach for DACDA applications. Previous to this proceeding, the support costs associated with making filings under the enhanced approach were not known until this current proceeding.
Given the information that was available in this proceeding, the AUC determined that the value of the enhanced filing approach, first suggested by AML itself, is not commensurate with the quantum of DACDA support costs incurred by ratepayers in order for AML to affect such filings. The AUC found that a disallowance of the directly charged Proceeding 24681 DACDA application support costs incurred by AML prior to July 2019 was necessary. Accordingly, AML was directed to reduce the amount of $1,311,050, incurred prior to 2019, by 15 per cent, or by $196,658. The AUC approved the $230,527 directly charged Proceeding 24681 DACDA application support costs, incurred in July 2019, as reasonable.
AML was directed to quantify DACDA support costs of Proceeding 24681 that were included in the capital addition amounts for which AML sought approval in its 2019 DACDA application and to justify these costs. AML indicated that its DACDA application for the year 2020 would not include any projects with a cost above its threshold of $25 million, applied to submit documents under the enhanced filing approach. The AUC was reluctant to set out new filing requirements for future DACDAs within this compliance filing decision. However, should AML wish to propose specific amendments to its filing requirements prior to filing any future DACDA application, the AUC would consider such a request.
Carrying Costs – Deferral Account Adjustments and Cancelled Project Costs
AML sought to recover carrying costs on its 2017 deferral account adjustments and 2017 cancelled project costs under Rule 023. Issues arose regarding the requirement of AML to seek approval of an estimate for carrying costs under Section 3(3) of Rule 023. However, the AUC noted that AML would not have been aware of the AUC’s direction requiring compliance with Section (3)3 until after filing its 2016-2018 deferral account reconciliation application. The AUC approved the carrying costs on 2017 deferral account adjustments and 2017 cancelled project costs requested by AML.
Regarding Section 3(2)(e): Rule 023 interest rate, the AUC referred to its findings in Decision 24375-D01-2020. Consistent with that decision, AML was advised that, if it requested carrying costs on cancelled project costs in the future, the AUC, when determining whether the request is reasonable, will take into consideration AML’s efforts to settle the cancelled project costs at the earliest reasonable opportunity.
As part of the compliance filing to Decision 25913-D01-2021, the next general tariff application, or in another future application that AML finds appropriate, AML was directed to refile its 2016-2018 deferral account reconciliation application to reflect findings and directions of this decision.