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EPCOR Distribution & Transmission Inc. 2022 System Access Service Phase 2 Application, AUC Decision 26836-D01-2021

Link to Decision Summarized

Rates – AESO Tariff

In this decision, the AUC approved the application from EPCOR Distribution & Transmission Inc. (“EDTI”) to modify its 2022 system access service (“SAS”) rate design. The modification includes a monthly non-coincident peak (“NCP”) metered demand charge for several EDTI’s commercial and industrial customer rate classes.

Introduction

EDTI pays for the costs it incurs in operating its electric distribution business, as well as the costs and charges imposed on it for accessing the electric transmission system with revenue obtained from its distribution tariff. Through the distribution tariff, EDTI charges each customer class for service and terms and conditions of service.

In this Phase 2 application, EDTI, as the utility, apportions its annual revenue requirement approved in Phase 1 among its customers. Generally, Phase 2 is broken up into two steps. First, the utility allocates the costs to various customer rate classes. Then it uses those cost allocations to inform how to design customers’ rates.

EDTI confirmed that its proposal to include an NCP demand charge would not change the total revenue it collects.

Discussion of Issues

Why Should an NCP Demand Charge be Included in EDTI’s Rate Design?

EDTI applied to include the NCP demand charge to address inequity resulting from the individual tariffs of the Alberta Electric System Operator (“AESO”) and EDTI.

EDTI submitted that the proposed rate design is more equitable as customers with low NCP demand in a given month will experience lower charges. This is consistent with the corresponding lower AESO demand transmission service (“DTS”) bulk system costs. Customers with higher NCP demand in a given month will experience higher charges consistent with higher corresponding AESO DTS bulk system costs.

The AUC determined that the proposed changes to the SAS rate design contribute to aligning EDTI’s rate design for the transmission costs portion of its distribution tariff with the AESO’s rate design. This contributed to passing on the AESO’s intended price signals accurately to the end-use customers.

How Will the Customers be Impacted by an NCP Demand Charge?

EDTI explained that for months when a customer’s NCP demand equals its billing demand, its SAS charges will increase slightly under the new rate structure. On the other hand, in months where a customer’s NCP demand is low compared to its billing demand, its SAS charges will decrease under the new rate structure. If a customer’s peak demand varies from month to month, their bills during months of low demand will decrease.

An analysis of bill impacts submitted by EDTI indicated that the bill impacts that most customers would likely experience are between +2.5 and -2.5 percent. The AUC determined that these impacts would be acceptable. The AUC noted that some customers would likely experience bill decreases of more than 10 percent. However, as EDTI’s proposed rate design was found to create more equitable rates overall, the AUC found these exceptions to be acceptable.

When Should this Change be Implemented

At the time of this application, the AUC was still reviewing a proposal from the AESO to update its bulk and regional tariff rate design in Proceeding 26911. The result of Proceeding 26911 could provide a change in the AESO’s rates which could impact EDTI’s SAS rate design further.

EDTI explained that it chose to move forward with this application despite the effects of Proceeding 26911 for several reasons. This included an attempt to reduce potential rate shock for customers that are being transferred to EDTI’s rates because of a change in service provider after the City of Edmonton’s annexation of land and the subsequent transfer of service territory. EDTI also explained that it had been working on filing this application based on directions to include an NCP demand charge in the rate design made to FortisAlberta Inc. by the AUC in Decision 2014-018 but paused during the AESO’s consultations on its bulk and regional tariff rate design. When EDTI learned that the AESO’s preferred tariff structure continued to include a coincident peak demand charge, EDTI resumed preparing its application to adjust its own rate design.

The AUC noted that pending Proceeding 26911, EDTI’s SAS rate design might need to be reassessed to ensure its alignment with the AESO tariff. However, EDTI’s proposed timing to implement the rate design changes strikes a balance between addressing the immediate bill impacts resulting from annexation, improving alignment with the current AESO tariff, and being mindful of instability in customer bills that might occur if the AESO’s bulk and regional tariff design is adjusted as currently proposed.

The AUC approved EDTI’s applied-for changes to the SAS rate design but has determined a compliance filing is necessary for EDTI to incorporate the most recent available information in its calculated SAS rates. In its annual performance-based regulation rate adjustment filing, EDTI applied for its SAS rates that will be effective on January 1, 2022. On November 18, 2021, EDTI updated those SAS rates to reflect the DTS rates and Balancing Pool consumer allocation rider applied for by the AESO. The SAS rates applied for in this proceeding, which EDTI proposed to be effective April 1, 2022, did not incorporate these updates. EDTI was directed to submit a compliance filing containing updated SAS rates, supporting calculations, and EDTI’s standard bill impact analysis, on or before February 15, 2022.

EDTI was also directed to review how its billing minimums are set for its capacity charge for each rate class and to propose changes as necessary in its next Phase 2 application.

Order

The AUC approved the application and ordered EDTI to file a compliance filing to its 2022 SAS Phase 2 application by February 15, 2022.

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