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Capital Power Corporation Complaint Application Regarding FortisAlberta Inc. Strathmore Area Interconnection Issues, AUC Decision 26510-D01-2022

Link to Decision Summarized

Distribution-Connected Generation – Interconnection Costs

In this decision, the AUC dismissed the complaint from Capital Power Corporation (“Capital Power”) against FortisAlberta Inc. (“FortisAB”) regarding charges to interconnect Capital Power’s Strathmore Solar Generation Project (“Strathmore Project”) with FortisAB’s electric distribution system.

Background

Due to increased load on an AltaLink Management Ltd. (“AML”) transmission line from additional generation in the area, an underbuilt distribution line owned and operated by FortisAB is expected to experience clearance violations with the transmission line. As part of its interconnection process, FortisAB charged Capital Power $1.33 million in interconnection charges for work to relocate portions of the underbuilt distribution line. In its complaint, Capital Power argued that under FortisAB’s Customer Terms and Conditions of Service for Electric Distribution Service (“T&Cs”), it is not appropriate for FortisAB to collect the underbuilt costs from Capital Power.

The Strathmore Project is a 40.5-megawatt (“MW”) solar generation power plant that will interconnect with FortisAB’s distribution system through two distribution lines. These distribution lines connect to AML’s Strathmore 151S Substation.

FortisAB’s T&Cs require a distribution-connected generation (“DG”) customer, such as Capital Power, to pay certain interconnection costs, including the work FortisAB and, in this case, AML has to do to connect the project. The amount paid by Capital Power to FortisAB is not in dispute. In addition to the interconnection costs, FortisAB levied $1.33 million in underbuilt costs against Capital Power. Capital Power disputes the appropriateness of these costs.

The Strathmore 151S Substation connects to the Chestermere 419S Substation through AML’s Transmission Line 765L. At various segments along this transmission line, FortisAB has distribution lines that are underbuilt on the transmission line. The AML transmission line’s capacity is currently limited as a result of the separation between it and these underbuilt distribution lines. When loading on the transmission line increases, the temperature of its conductors likewise increases, causing the conductors to sag more. This reduces the clearance between the transmission and distribution conductors. The clearances that must be maintained between transmission and distribution conductors are dictated and governed by the Alberta Electric Utility Code.

Interconnection of some DG projects require that the Alberta Electric System Operator’s (“AESO”) Behind the Fence process be initiated to assess and address any modifications or upgrades required to the transmission system to interconnect the project. As part of this process, the AESO determined that the connection of additional generation in the Strathmore planning area may cause the loading of transmission line 765L to exceed its present ratings.

While the obligation to increase the transmission line’s rating falls on AML, FortisAB and AML determined that the optimal solution to increase the rating of Transmission Line 765L would be to relocate the underbuilt distribution lines off of the transmission line. It is these costs to remove and relocate the distribution lines that are disputed by Capital Power in its application.

Necessity of Relocation and Cost Determination

It is the AESO’s obligation to plan the transmission system and to direct its safe, reliable and economical operation. The AESO may issue transmission system-related functional specifications that detail the technical specifications for the design, construction, development and commissioning of any generation project.

The AESO informed AML that additional generation connecting in the Strathmore/Blackie planning area had exceeded the 40-MW threshold and that the rating of Transmission Line 765L needed to be increased.

FortisAB and the AESO use different criteria to determine the allocation of the costs that result from exceeding the rating of a transmission line because of the connection of planned additional generation. Under the AESO’s criteria, it was a project owned by Elemental Energy Inc. (“Elemental Energy”) that resulted in the exceedance of the threshold. Under FortisAB’s criteria, Elemental Energy secured its position before Capital Power, as a result of which, FortisAB chose to allocate the costs for the relocation to Capital Power.

FortisAB considered that the $1.33 million underbuilt costs qualify as interconnection costs under its T&Cs and that Capital Power is responsible for paying the entirety of the underbuilt costs due to its position in FortisAB’s DG queue.

Summary of Complaint and Procedural Background

The primary argument brought by Capital Power in its complaint was that the underbuilt costs did not qualify as “interconnection charges” under FortisAB’s T&Cs. Capital Power accordingly sought an order directing FortisAB to retract the quotation package and invoice it had presented to Capital Power for the underbuilt costs, and a refund for the underbuilt costs Capital Power paid, along with interest.

Following an application filed by Capital Power with its complaint, the AUC had issued an order indicating that any payment to FortisAB of the underbuilt costs at issue is to be made interim and subject to adjustment on the final determination.

Issues

Underbuilt Costs Qualify as “Interconnection Charges” Under FortisAB T&Cs

The AUC noted that its role in a complaint proceeding regarding T&Cs is limited to ensuring that the T&Cs are being interpreted and applied in accordance with the principles of statutory interpretation. The AUC confirmed that it viewed the T&Cs between a public utility and its customers as “legally imposed regulations that bind the utility to provide a service at just and reasonable rates to all who require and demand them”.

The AUC determined that Section 12.6.1 – Interconnection Charges requires interpretation. The AUC further considered the definitions set out in the T&Cs. Capital Power submitted that the underbuilt costs are not “interconnection charges” because they are not charges that would allow the DG customer to make use of the electric distribution system, as is required by Section 12.6.1. Capital Power argued that the costs are, on the contrary, required to relieve a long-standing transmission constraint.

The AUC disagreed and found that, on a plain reading, the scope of “interconnection charges” is inclusive of all incremental interconnection costs that would allow the DG customer to make use of the electric distribution system. In the case of this complaint, the AUC agreed with FortisAB that use of the electric distribution system is inextricably linked with access to the transmission system. Further, contrary to the arguments from Capital Power, the AUC determined that underbuilt costs fit within the definition of interconnection facilities, as these include “all modifications required for interconnection which may include, without limitation, poles, lines, substations, service leads, and protective and metering equipment.”

The AUC found that the requirement to remove the underbuilt distribution line and the associated underbuilt costs are contemplated within the language of FortisAB’s T&Cs. For that reason, the underbuilt costs qualify as interconnection charges.

FortisAB’s DG Queue Practices Determine the Allocation of the Underbuilt Costs

FortisAB determined Capital Power’s cost responsibility for the underbuilt costs in accordance with its DG queue practices. To manage DG applications for interconnection, FortisAB employs the DG queue process. The DG queue is used to guide the allocation of upgrade costs in circumstances where the capability of existing infrastructure to accommodate the interconnection of DG projects at their specific requirements has been or will be used by earlier queue entrants. The process is based on a “first come, first served” model.

Capital Power argued that FortisAB’s DG queue practices arbitrarily assign the costs of a system upgrade to a certain project even though the energization of that project may not ultimately drive the requirement for the upgrade. At the same time, a project that secured its position in the DG queue earlier may avoid any cost responsibility for an upgrade more properly attributable to it. Capital Power argued that the AESO’s project inclusion criteria to allocate and assign the costs for the underbuilt work would best reflect cost causation and avoid undue and arbitrary discrimination.

The AUC determined that FortisAB is entitled to rely on its DG queue to allocate the underbuilt costs in this case. The AUC based this on the determination that T&Cs approved by the AUC reasonably entitle FortisAB to charge the underbuilt costs to Capital Power under the same provisions that give FortisAB the discretion and authority to determine such costs. Further, the DG queue practices are based on a “first come, first served” basis. Accordingly, the DG proponent secures its position in the DG queue once high-level study fees are paid. Following further submissions by FortisAB, the AUC concluded that any costs required to interconnect that arise after a DG proponent has paid its high-level study fees must be borne by the subsequent DG proponent.

The AUC accepted that FortisAB’s DG queue practices are not unduly or arbitrarily discriminatory in the sense that they are available to and known by all DG proponents and therefore contain an element of transparency.

The AUC noted that it might be useful for future projects if FortisAB incorporated into its practices a mechanism that specifically contemplates the potential sharing of information and any interconnection costs amongst DG proponents proposing to interconnect in the same area within a similar timeframe, where the benefits associated with any such costs will be enjoyed by parties other than the specific party that triggers them.

Order

The AUC dismissed the complaint filed by Capital Power, and the underbuilt costs and any necessary adjustments are to be paid by Capital Power to FortisAB on a final basis.

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