Rates – Performance-Based Regulation
The AUC announced that it will initiate Proceeding 27388 to establish the parameters of the performance-based regulation (“PBR”) plans that will start in 2024 (“PBR3”) for Alberta distribution facility owners (“DFOs”). The PBR plans apply to ATCO Electric Ltd., FortisAlberta Inc., ENMAX Power Corporation, and EPCOR Distribution & Transmission Inc.; and to two natural gas DFOs: ATCO Gas and Pipelines Ltd. and Apex Utilities Inc. To aid in establishing the scope of the proceeding, the AUC scheduled a roundtable with interested parties in September 2022.
In Decision 26356-D01-2021, the AUC evaluated the performance of the 2013-2017 and 2018-2022 terms of PBR and found that, on balance, PBR has achieved many of the objectives set out in the founding principles established by the AUC. The AUC determined that a third PBR term commencing in 2024, following a one-year cost-of-service rebasing year in 2023, is in the public interest if it incorporates certain improvements discussed in this bulletin.
The AUC indicated that it wishes to build on the information obtained in the evaluation of PBR proceeding that resulted in Decision 26356-D01-2021. In that decision, the AUC generally agreed with parties that PBR3 should be more reflective of ongoing economic conditions (for both the utilities and their customers) and ensure the cost efficiencies gained through PBR are shared amongst customers and the regulated companies. The AUC also expressed interest in making PBR3 simpler as compared to the previous plans in furtherance of the principle that a PBR plan should be easy to understand, implement and administer, with the overall aim of reducing regulatory burden over time.
The AUC highlighted the need to review the following parameters to determine if modifications are necessary:
Any capital funding provisions, including the need for funding to keep pace with new trends affecting the grid.
Ensuring that the inflation measure (“I factor”) reflects the inflationary pressures expected during the PBR term.
Consideration of the need to update a productivity offset (“X factor”).
Consideration of introducing a mechanism to share earnings.
The AUC also intends to examine whether it should continue to regulate gas and electric DFOs under two different PBR plans or whether they can be regulated under the same type of PBR plan.