Rates – Performance-Based Regulation
In this decision, the AUC considered the 2022 annual performance-based regulation (“PBR”) rate adjustment filing from ATCO Gas and Pipelines Ltd. (“AGP”). The AUC approved AGP’s 2019 and 2020 interim rates on a final basis and approved the 2022 distribution rates for ATCO Gas North and ATCO Gas South and the schedule of non-discretionary charges on an interim basis. The AUC also approved the calculation of AGP’s prior year depreciation adjustment Rider S recovery and the recovery of the 2021 deferred amount associated with a deferral of the 2021 distribution rates increase.
Background
The PBR framework approved in Decision 20414-D01-2016 (Errata) provides a rate-setting mechanism based on a formula that adjusts rates annually by means of an indexing mechanism that tracks the rate of inflation (“I”) that is relevant to the prices of inputs the utilities use, less a productivity offset (“X”).
In Decision 20414-D01-2016 (Errata), the AUC approved the continuation of certain PBR rate adjustments to enable the recovery of specific costs where certain criteria have been satisfied. These include an adjustment for certain flow-through costs that should be recovered from, or refunded to, customers directly (“Y factors”), and an adjustment to account for the effect of exogenous and material events for which the distribution utility has no other reasonable cost recovery or refund mechanism within the PBR plan (“Z factor”). However, in place of the capital tracker mechanism employed in previous-generation PBR plans, the AUC divided capital funding into two categories: Type 1 and Type 2 capital. For Type 1 capital, the AUC approved a modified capital tracker mechanism with narrow eligibility criteria, with the revenue requirement associated with approved amounts to be collected from ratepayers by way of a “K factor” adjustment to the annual PBR rate-setting formula. For Type 2 capital, the AUC approved a K-bar mechanism that provided an amount of capital funding for each year of the next-generation PBR plan based, in part, on capital additions made during the previous PBR term.
PBR Rate Adjustments
PBR Indices and Annual Adjustments
AGP’s 2021 PBR plan provided a rate-setting mechanism based on a formula that adjusts revenue-per-customer annually through an indexing mechanism plus specifically approved adjustments.
(a) I-X index
AGP calculated its 2022 I-X index to be 1.46 percent. The AUC review AGP’s calculations and approved the 2022 I factor of 1.76 percent, resulting in the 2022 I-X index as calculated by AGP.
(b) Y and Z factor materiality threshold
AGP calculated the Y and Z materiality threshold to be $2.13 million for 2022. The AUC approved the Y and Z factor materiality threshold as applied for.
(c) Y factor and Z factor
AGP applied for a Y factor amount of $3.6 million inclusive of carrying costs. AGP did not apply for any Z factor adjustment in 2022. The AUC approved the Y factor as filed.
(d) Q Value
The AUC was satisfied with AGP’s calculations and approved the 2022 Q value of 1.52 percent for ATCO Gas North and 1.62 percent for ATCO Gas South as applied for.
(e) K-bar factor and K factor
AGP applied for 2022 K-bar funding of $36.1 million and $34.5 million for ATCO Gas North and South, respectively. The AUC approved the 2022 K-bar funding and noted that it will be subject to a further true-up for the 2022 actual approved cost of debt. The AUC also approved AGP’s 2020 K-bar true-up refunds of $2.7 million and $2.3 million for ATCO Gas North and South, respectively, as well as the 2021 K-bar true-up refunds of $2.8 million and $2.4 million for ATCO Gas North and South, respectively.
AGP did not apply for any K factor rate adjustments for 2022.
Forecast Billing Determinants and Variance Analysis
AGP provided detailed 2022 billing determinant forecasts. AGP submitted that its forecasted 2022 billing determinants were based on the same methodology approved in Decision 25867-D01-2020. The billing determinant forecast was approved, as applied for.
2022 PBR Rates
Distribution Rates: 2022 PBR Rates Including 2021 Deferred Amount and Rider S
The AUC approved AGP’s calculations of the 2022 PBR rates. The AUC also approved AGP’s proposal to recover the 2021 deferred amount. Although the resulting bill impacts are elevated, the AUC found that AGP ensured that costs to ratepayers would be minimized. AGP’s 2022 PBR rates were approved on an interim basis, effective January 1, 2022.
Recovery of the 2021 Deferred Amount
AGP’s most recent annual rate filing was approved in Decision 25863-D01-2020 dealing with 2021 PBR rates. However, while that decision approved the calculation of AGP’s 2021 PBR distribution rates in accordance with the PBR framework, those rates were not charged to customers effective January 1, 2021. Rather, as a result of Decision 26170-D01-2020, AGP’s distribution rates were maintained at the 2020 levels. In the current application, AGP proposed to collect in 2022 the amounts associated with the 2021 distribution rate increase deferral.
AGP applied for approval to collect the entire amount deferred in 2021, following approvals as part of its 2022 PBR rates.
The AUC has reviewed AGP’s calculations for the proposed Rider S and the 2022 recovery of the 2021 deferred amount and was satisfied that AGP’s proposal was reasonable and that AGP’s calculations were reasonable as well. AGP’s calculation of its 2022 PBR rates, inclusive of the January 1 to June 30, 2022, Rider S and the recovery of the 2021 deferred amount, was approved.
Other Matters
AGP did not apply for changes to its terms and conditions of service (“T&Cs”). AGP’s customer for gas distribution service and retailer T&Cs for gas distribution service approved in Decision 26283-D01-202130 remain in effect.
The AUC was satisfied that AGP had complied with the financial reporting requirements and the AUC approved AGP’s 2019 and 2020 rates on a final basis.
