Electricity – Rates
Application
Direct Energy Regulated Services (“DERS”) applied for approval of its 2023-2025 energy price setting plan (“EPSP”). DERS is a regulated rate option (“RRO”) provider and performs the electricity-regulated rate tariff functions in the service territory of ATCO Electric Ltd.
Decision
The AUC did not approve DERS’ 2023-2025 EPSP as filed. DERS was directed to make changes to its 2023-2025 EPSP and refile it. DERS was further directed to submit a compliance filing reflecting the AUC’s findings and directions.
Applicable Legislation
Electric Utilities Act, SA 2003, c E-5.1 – s 104.
Regulated Rate Option Regulation, AR 262/2005 – s 6.
AUC Rule 005: Annual Reporting Requirements of Financial and Operational Results.
Pertinent Issues
DERS submitted that the 2023-2025 EPSP is materially consistent with the previous EPSP. DERS did, however, propose changes to the confidential procurement protocol as well as other changes to the non-confidential provisions of the EPSP.
The Utilities Consumer Advocate (“UCA”) raised concerns with changes to the confidential procurement protocol of the 2023-2025 EPSP. The AUC approved two confidential changes and the following non-confidential changes as filed:
(a) clarifications of the number of “total target volume blocks” used in the calculation of the monthly energy rates in situations where the total target volume blocks have been over-procured because of changes in the load forecast;
(b) annual updates to the seasonal multipliers; and
(c) annual updates to the energy return margin in July with data from DERS’ most recent Rule 005: Annual Reporting Requirements of Financial and Operational Results filing.
Excluding the Net Commodity Risk Compensation from the Revenues on Which the Energy Return Margin Is Calculated
The UCA recommended that the net commodity risk compensation be excluded from the revenues on which the energy return margins are calculated. As part of the 2023-2025 EPSP, DERS proposed to update the after-tax energy return margin that would be in place for the January 2023 to June 2023 rate months using the revenues and load for 2021, as reported in DERS’ Rule 005 reporting for 2021. The UCA did not object to DERS’ proposal to update the after-tax energy return margins using the information for 2021 and subsequent years. However, it recommended that DERS be directed to remove its net commodity risk compensation when calculating the amounts on which the energy return margins is calculated. It submitted that the net commodity risk compensation effectively represents a profit component. If it is included in the after-tax energy return margin calculation, DERS effectively receives a return on what already represents a profit component.
The AUC approved the methodology proposed by DERS to calculate the return margin for the 2023-2025 EPSP, with the exception of the net commodity risk compensation, and approved DERS’ request to update the calculation of the return margin on an annual basis as part of the 2023-2025 EPSP, with such updates included as part of the filing of the monthly energy rates for July 2023, July 2024 and July 2025. The AUC directed DERS to remove the net commodity risk compensation, which is calculated as the difference between the commodity risk compensation and the commodity gains/(losses), from the revenues used in the DERS’ return margin calculation. The AUC noted that this would allow for a clearer separation of the net commodity risk compensation for DERS’ financial risks in providing RRO service from the return margin. DERS, as part of the compliance filing, was also directed to recalculate and submit the initial return margin to be used in the 2023-2025 EPSP by excluding the net commodity risk compensation for 2021 and including details of the recalculation.
