Rates – Transmission Service Charge
In this decision, the AUC approved the 2021 transmission service charge rider (Rider T) rates for ATCO Gas, a division of ATCO Gas and Pipelines Ltd. Effective May 1, 2021, the approved Rider T rates are:
low-use customers: $1.125 per gigajoule (“GJ”);
mid-use customers: $1.106 per GJ;
high-use customers: $0.259 per day of GJ demand; and
alternative technology and appliance delivery service (“ATA”) customers: $1.125 per GJ.
ATCO Gas flows the rates charged by the transmission service provider through to its customers. The transmission service provider is NOVA Gas Transmission Ltd. (“NGTL”). Rider T is the service charge used to collect forecast transmission costs and to refund or collect any differences between the prior year’s forecast and actual costs.
As of the AUC’s approval in Decision 22328-D01-2017, ATCO Gas has added an extra step in calculating the Rider T amount. In this step, a rate group’s prior year overcollection or undercollection is refunded to, or collected from, the rate group that generated the imbalance. ATCO Gas used this approved methodology to calculate Rider T in this application.
The AUC approved the current ATCO Gas Rider T rates for 2020 in Decision 25646-D01-2020. On November 26, 2020, NGTL received approval from the CER for 2021 interim rates, tolls and charges for the Alberta system. Effective January 1, 2021, the NGTL interim FT-D3 rate increased from $8.00/GJ per month to $9.27/GJ per month. The NGTL abandonment surcharge decreased from $0.20/GJ per month to $0.19/GJ per month. ATCO Gas requested approval for new Rider T rates to account for changes in the NGTL interim FT-D3 rate.
Discussion of Issues
Cross-Subsidization Between North and South Customers
Cross-subsidization issues following the implementation of a province-wide Rider T rate were discussed by the AUC in previous decisions. As part of these discussions, the AUC had required ATCO Gas to discuss what measures it took to minimize cross-subsidization between north and south customers and to provide analyses to assist the AUC to assess whether the province-wide implementation of a Rider T rate had resulted in substantial cross-subsidization between north and south customers.
ATCO Gas indicated that the primary contributor to cross-subsidization in the 2021 Rider T rate related to the over or under-recovery of Rider T revenue in 2020 in the south and north, respectively. More specifically, ATCO Gas identified that the cross-subsidization in the Low-Use rate is primarily due to an undercollection of Low-Use Rider T revenue in the north and an overcollection of Low-Use Rider T revenue in the south in 2020. The forecast versus actual Rider T revenue differences in the north and south were in opposite directions, and when these differences were combined, there was a higher rate in the north and a lower rate in the south. This resulted in more cross-subsidization.
For the Low-Use rate group, the January-February 2021 data showed an overcollection in the north and an undercollection in the south. However, ATCO Gas submitted that there was an overall undercollection of Rider T revenue in both the north and south in 2021. 2021 data showed a lower degree of cross-subsidization. If ATCO Gas excluded the true-ups of over- or undercollected amounts in 2020, the level of cross-subsidization was within the range that had been historically seen. ATCO Gas provided a revised version of the cross-subsidization analysis, which excluded the 2020 over- or undercollection. This analysis concluded that a residential customer in the north would see a $2.40 increase in their annual bill (as compared to the bill based on the province-wide Rider T rate), and a typical residential customer in the south would see a $2.46 decrease in their annual bill.
ATCO Gas submitted that continuing to use a province-wide rate was still in the public interest. A province-wide rate simplified the rate design process, and ATCO Gas noted that the NGTL rate paid by ATCO Gas was the same for both north and south service. Absent the one-time factors related to the 2020 forecast, the level of cross-subsidization continued to remain low and within the historical range seen since the province-wide rate methodology was adopted in 2014.
The AUC found the analysis and rationale for the high cross-subsidization levels provided by ATCO Gas to be reasonable. Data prior to 2020 does not show cross-subsidization levels significant enough to justify separate rates for north and south. The AUC considered the data concerning 2020 to be an outlier. The AUC noted it would continue to monitor the level of cross-subsidization in future Rider T applications and will continue to consider the need for separate north and south rates. For the time being, and given that the January and February 2021 data show the same minimal cross-subsidization trend as years prior to 2020, the AUC accepted the continued use of province-wide Rider T rates.
ATCO Gas was directed to track its Rider T cross-subsidization between north and south customers. The AUC also directed that, if in ATCO Gas’s next Rider T application the subsidy between a typical residential customer in the north and south exceeds the $4.16 annual amount approved in Decision 21248-D01-2016, ATCO Gas is to provide a detailed analysis of factors that contributed to the level of cross-subsidization, using the same analysis completed for this application.
Rider T Rates and Bill Impacts
ATCO Gas stated that the total annual charges for residential customers in the north service territory that utilizes 115 GJ annually would see an increase to $839 from $825. A similar residential customer in the south service territory would see an increase to $799 from $785. ATCO Gas stated that the applied-for 2020 Rider T rate changes are reasonable and would not result in undue rate shock compared to existing distribution rates.
The AUC was satisfied that ATCO Gas had provided accurate and detailed calculations in the application and that ATCO Gas had used the correct billing determinants. The AUC noted that the updated 2021 Rider T leads to an increase in rates for the Low-Use, the Mid-Use and the High-Use Rate groups. Considering the flow-through nature of Rider T charges, the fact that they are relatively low, and the fact that the greatest estimated bill change is 3.5 per cent, the AUC found that the estimated rate impact of the proposed Rider T, to be implemented May 1, 2021 is reasonable for all rate classes.
Effective May 1, 2021, the AUC approved, for Low-Use customers, Mid-Use customers, High-Use customers and ATA customers, rates of $1.125 per gigajoule (“GJ”), $1.106 per GJ, $0.259 per day of GJ demand and $1.125 per GJ, respectively.