Rates – True-up
As a transmission facility owner (“TFO”), the City of Red Deer (“Red Deer”) recovers the costs of providing regulated electric transmission service through a transmission tariff that the AUC must approve. Red Deer recovers its approved rates through the Alberta Electric System Operator (“AESO”).
In its 2021-2023 general tariff application (“GTA”), Red Deer applied for approval of a revenue requirement of approximately $5 million for 2021, $5.21 million for 2022 and $5.61 million for 2023.
The AUC found that Red Deer’s proposed revenue requirements for 2021, 2022 and 2023 will result in just and reasonable rates and approved the GTA from Red Deer as filed. The AUC also provided additional guidance for future Red Deer GTAs concerning the timing of GTA filings and the contents of Red Deer’s capital business cases.
Red Deer’s applied-for revenue requirement is comprised of actual and forecast costs, including operating costs and a return of, and a fair return on, its investment in transmission assets necessary to provide regulated electric transmission service to customers.
Red Deer filed the 2021-2023 GTA on December 15, 2022. As a result, the AUC assessed the GTA in 2023. While transmission rates have been approved on a retrospective basis in the past, the AUC noted that it prefers to approve rates on a prospective basis for TFOs in Alberta. While it did not impact Red Deer’s 2021-2023 revenue requirements, the AUC noted that the GTA should have been filed no later than the fourth quarter of 2021. Accordingly, the AUC encouraged Red Deer to file future GTAs in a timely manner to be consistent with the prospective rate-setting process for TFOs in Alberta.
Capital Business Cases
The AUC noted that additional detail in Red Deer’s capital business cases would have provided a better understanding of Red Deer’s capital expenditures. The AUC reminded Red Deer to ensure that it considers the case criteria for capital projects outlined in Alberta Energy and Utilities Board’s Decision 2000-9 and Bulletin 2006-25 in future GTA filings. In particular, the AUC encouraged Red Deer to outline: the alternatives considered; the reasons why specific alternatives were rejected and the proposed alternative was chosen, including a comparison of costs; the need for the specific project; any incremental capital and operating costs; any benefit to customer or utility service; and the expected in-service date of the proposed capital project.
Transmission Tariff True-up
Red Deer calculated the required January 2021 through March 2023 true-up amounts and the new monthly tariff effective April 1, 2023, as follows: for 2021, a refund of $274,733; for 2022, a refund of $62,505; for January 1, 2023, to March 31, 2023, a charge of $83,387; and from April 1, 2023, to December 31, 2023, a monthly charge of $467,397.
The AUC found that the annual tariff and monthly rates for the 2021-2023 test years, as proposed by Red Deer, correspond to the respective revenue requirements and approved them on a final basis. The AUC also approved a one-time refund to the AESO of $253,851 for the revenue surplus resulting from the difference between Red Deer’s interim and final monthly tariffs between January 1, 2021, and March 31, 2023.