Electricity – Discriminatory Service
This decision provided the reasons for the AUC’s dismissal of the complaint filed by Melcor Developments Ltd., Highview Communities Inc., and Sunset Properties Inc. (the “Melcor Entities”) in Decision 26649-D01-2022. The Melcor Entities filed a complaint relating to changing design standards and associated costs imposed by FortisAlberta Inc. (“FortisAB”) to design and install underground electrical distribution systems for residential developments.
Introduction and Procedural Background
The Melcor Entities had entered into an agreement under which the Melcor Entities were responsible for managing the design, construction, and installation of electrical facilities within a subdivision’s boundaries to certain minimum design standards mandated by FortisAB. Once the distribution system was completed and energized, FortisAB would take over ownership of the system. FortisAB would complete all work outside the subdivision’s boundaries to provide electric service to the development.
As part of the process to initiate services for new developments, FortisAB requires residential developers to sign an Underground Electrical Distribution System (“UEDS”) Services Agreement and a quotation letter and pay any required customer contribution.
On June 30, 2021, the Melcor Entities filed a complaint application with the AUC. The Melcor Entities requested relief from the AUC as issues had arisen concerning the construction of electrical distribution systems to service lands owned by the Melcor Entities in FortisAB’s service area.
The Melcor Entities sought an order from the AUC declaring that their payments to FortisAB for the cost to install and construct electrical distribution facilities in three developments, namely, Lanark Landing, Phase 1C (“Lanark”); Sunset Ridge, Phase 22B (“Sunset”); and Cobblestone Creek, Phase 2, be interim and subject to adjustment based on the outcome of the complaint. The AUC granted interim relief in August 2021.
Issues and AUC Findings
The Melcor Entities submitted that FortisAB had breached its obligations under the Electric Utilities Act (“EUA”) to provide distribution service that is not unduly discriminatory. The complaint alleged that the required design standards applicable to the subject developments identified in FortisAB’s agreements and quotation letters were contrary to the EUA. In applying the standards, FortisAB was acting in a manner that is unjust, unreasonable, unduly preferential, arbitrarily or unjustly discriminatory, or inconsistent with or in contravention of law.
Were the Design Standards Imposed in a Manner Inconsistent with a Proper Application of the AUC-Approved T&Cs?
The investment levels for residential services are established in FortisAB’s Customer Terms and Conditions of Electric Distribution Service (“T&Cs”), which the AUC approves.
The Melcor Entities acknowledged that the T&Cs do not deal with how FortisAB may implement changes to the minimum design standards for new service connections; however, they submitted that the T&Cs do address the maximum investment that Fortis will make in new service connections. The Melcor Entities acknowledged that the changes to FortisAB’s maximum investment levels (“MILs”) are outside the scope of the current proceeding. The Melcor Entities however argued that FortisAB’s unilateral implementation of the standards for constructing new service connections upset the balance between what an individual customer pays upfront versus what all customers will pay through ongoing rates. The Melcor Entities argued that this was because FortisAB changed the standards, increasing the upfront costs to developers, before considering a change in investment policy. In the Melcor Entities’ view, the standards were therefore imposed in a manner inconsistent with a proper application of the T&Cs.
The AUC was not persuaded that a change in design standards without a corresponding change in MILs is inconsistent with a proper application of the T&Cs. The Melcor Entities have failed to demonstrate that the T&Cs restrict, or otherwise limit, FortisAB’s discretion with respect to the implementation of the design standards. The Melcor Entities further did not demonstrate that FortisAB was required to change its MILs concurrently with its design standards. Accordingly, the AUC found that the design standards applicable to the subject developments have not been imposed in a manner inconsistent with the proper application of the T&Cs.
Did the Design Standards Result in Unduly Discriminatory Electric Distribution Service and Cost?
In finding that FortisAB’s design standards did not result in unduly discriminatory electric distribution service and cost, the AUC considered whether FortisAB’s treatment of the Lanark and Sunset developments differed from other developments in the service area regarding the design standards and costs imposed on developers.
The fundamental issue was whether there was a rationale or logic and evidence to justify the differential charges between customers.
FortisAB updated its UEDS Manual on January 1, 2020, to reflect the criteria for requiring 200 amp service and specify additional options for ongoing approvals of 100 amp service. FortisAB based the requirement on the size of the residence. An exception from the requirement to install the 200 amp service was included if a load calculation sheet for the planned home is provided to prove that 100 amp service will be adequate.
The Melcor Entities argued that the standards lead to unduly discriminatory electric distribution service and cost and that the exceptions are unduly preferential to builders/developers. The Melcor Entities supported their position with the argument that the application of the 200 amp requirement appears to depend in large part on the FortisAB representative responsible for the design review. Further, as a developer and not a developer/builder, the Melcor Entities stated that they do not have information available at the subdivision stage to provide load calculations and, therefore, cannot take advantage of FortisAB’s alternatives to its 200 amp requirement.
The AUC noted that, as the Melcor Entities confirmed, the lots in question are of sufficient size to trigger FortisAB’s requirement for 200 amp service. Further, the AUC referred to Information Request responses provided by FortisAB that indicated that it imposed the 200 amp standard on other developers in the FortisAB service area.
The Melcor Entities’ complaint also related to the imposition by FortisAB of a requirement to install cable in conduit under paved alleys instead of by direct burial, while the initial development designs contemplated direct burial in alleys. Based on the evidence provided in the proceeding indicating that conduit was required for cables installed in paved lanes in other developments, the AUC was not satisfied that the conduit design s
tandard resulted in unduly discriminatory electric distribution service and cost. Further, the standard had been in effect for 18 years, and the Melcor Entities have complied with the conduit design standard in previous developments, as imposed by FortisAB.
Were FortisAB’s Design Standards Implemented in a Manner That is Unjust, Unreasonable, Unduly Preferential, Arbitrary or Unjustly Discriminatory or Inconsistent With or in Contravention of Law?
The AUC determined that FortisAB informed affected parties of the 200 amp and conduit requirements well before signing any agreements. Based on notifications and information provided to developers, technicians, design consultants, and construction crews, the AUC was satisfied that FortisAB’s 200 amp and conduit requirements were transparent and not implemented in a manner that is arbitrarily or unjustly discriminatory.
Regarding the conduit requirement, the Melcor Entities relied on the interpretation of the design standards of other utilities related to the need for conduits under paved alleys. The AUC found that FortisAB did not implement design standards in a manner that is unduly preferential to other developers and arbitrary or unjustly discriminatory to the Melcor Entities. Further, the Melcor Entities did not provide any evidence demonstrating that the challenged design standards are inconsistent with or in contravention of the law.
The AUC found that FortisAB’s implementation of design standards did not breach its obligations under the EUA to provide electric distribution service that is not unduly discriminatory. The AUC further found that FortisAB did not act in a manner that is unjust, unreasonable, unduly preferential, arbitrarily or unjustly discriminatory, or inconsistent with or in contravention of law when imposing the design standards.