Review and Variance – Preliminary Question
In this decision, the AUC allowed the application filed by AMAR Developments Ltd. (“AMAR”) requesting a review and variance of specific findings in AUC Decision 25591-D02-2021 (the “Decision”). On a final basis, the Decision approved rates effective March 1, 2021, including a fixed rate, variable charge, and supplemental variable charge. In varying the findings from that decision, the AUC established a variable charge of $4.951/m3 effective June 1, 2021.
Issues
In its review application, AMAR alleged the following errors:
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The calculation of over-collected amounts for May-December 2020 unfairly prejudices AMAR as the AUC used two different methodologies.
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The AUC erroneously determined that its averaging of the 2020 approved revenue requirement (and billing determinants) over 12 months was fair to both Customers and AMAR.
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The final rate of $3.495/m3 determined in the Decision to be in effect as of March 1, 2021, will result in large financial losses for AMAR during 2021.
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The AUC decisions and determinations failed to recognize that AMAR will be unable to recover these losses in subsequent years as the water distribution system will be taken over by Rocky View County at or near the end of 2021.
The review panel determined that, in brief, the issues raised by AMAR is the hearing panel assessed monthly costs based on a monthly average over the entire period of 2020, which was mismatched with the approved revenue requirement for the period from May to December 2020. This method underestimated the costs that would be incurred between May and December 2020. In its application, AMAR requested a variance of the Decision such that the same time period is used for assessing both the costs and revenue requirement in the calculation of the variable rate.
AMAR proposed a methodology that bases the calculation of overcollection on the actual revenue requirements and collected revenues from May 1, 2020, to December 31, 2020.
The interveners took issue with AMAR’s claim that it will not recover its losses in future years due to the expected transfer of its distribution system to Rocky View County later in 2021. However, the review panel agreed with AMAR that the system transfer is not relevant and noted that in Decision 25519-D02-2021, the hearing panel approved water rates for 2022 if the pipeline is delayed or Rocky View County does not assume operations prior to 2022.
Decision
Stage 1 – Is There an Error on the Face of the Decision or That Otherwise Exists on a Balance of Probabilities
The review panel determined that AMAR demonstrated that an error is obvious on the face of the Decision or otherwise exists on a balance of probabilities. The review panel determined that the method used to calculate the variable rate could lead the review panel to materially vary the findings in the Decision regarding the variable rate.
The review panel agreed with AMAR that the methodology used to determine the 2021 variable charge was incorrect. By averaging the revenue requirement over 12 months, the methodology failed to consider the higher water hauling costs during the periods of higher usage that occur in the summer and fall. The review panel agreed with AMAR that these higher costs in the summer and fall were the main driver of its interim rates approved effective July 1, 2020, in Decision 25519-D01-2020. The variable rate calculated in that Decision would have considered the seasonality of such costs, while the final rate determined in Decision 25519-D02-2021 did not. The review panel found that by averaging the 2020 revenue requirement over 12 months, AMAR could not recover the full revenue requirement from May 1, 2020, to December 31, 2020.
Stage 2 – Should the Decision be Confirmed Rescinded or Varied?
The review panel found that the 2020 revenue requirement should be based on the actual revenue requirements from May 1, 2020, to December 31, 2020, and that the Decision should be varied accordingly. The review panel found that the updated calculations provided by AMAR in its reply submission and the resulting 2021 variable charge of $4.951/m3 accurately reflect this change. The review panel approved a revised variable charge of $4.951/m3, and it varied the Decision accordingly.
