Distribution Tariff – Jurisdiction
Application
EQUS REA Ltd. (“EQUS”) and FortisAlberta Inc. (“FortisAB”) appealed the portion of AUC Decision 25916-D01-2021 regarding FortisAlberta Inc. 2022 Phase II Distribution Tariff Application (“Decision”), that addressed the costs FortisAB incurs as a result of its integrated operations with EQUS and other rural electrification associations (“REAs”).
FortisAB argued that the AUC had deprived it of its right to recover its prudent, reasonable costs. FortisAB maintained that the AUC had the authority to, and should have, approved the recovery of the contested costs under FortisAB’s tariff. EQUS agreed that the relevant portions of the Decision should be set aside but took the view that FortisAB should not include the REA-related costs in its tariff in the first place. It asserts that the tariff only covers the costs of providing “electric distribution service”, which means “the service required to transport electricity … to customers” – REAs are not customers.
EQUS, in its appeal, argued that the AUC exceeded its jurisdiction in quantifying the costs for its use of FortisAB’s system and allowing FortisAB to recover from FortisAB customers the costs that FortisAB incurs in using EQUS’ system to service FortisAB’s customers. It asserts that those costs are all properly dealt with in the integrated operation agreements (“IOA(s)”). It submitted that the AUC exceeded its authority and infringed on the authority of the arbitrator to resolve disputes arising from the IOAs, including with respect to costs.
Decision
The Alberta Court of Appeal (“ABCA”) denied the appeals.
Applicable Legislation
Electric Utilities Act, SA 2003, c E-5.1 – ss 1(1)(o), 1(1)(vv), 119, 120.
Alberta Utilities Commission Act, SA 2007, c A-37.2.
Distribution Tariff Regulation, Alta. Reg. 162/2003.
Roles, Relationships and Responsibilities Regulation, 2003, Alta. Reg. 169/2003.
Pertinent Issues
Background
In the Decision, the AUC made four key findings. First, some of FortisAB’s costs related to its distribution system should be allocated to the integrated operations with REAs. Second, those costs should be determined in the same way FortisAB allocates costs to all other users of its system. Third, FortisAB can recover the costs it incurs for the use of REAs’ systems from FortisAB’s customers. Fourth, FortisAB cannot recover the costs allocated to the use REAs make of FortisAlberta’s distribution system in serving their members from FortisAB’s customers. It can recover these costs from the REAs directly through their IOAs.
Issues in the Appeal
The ABCA identified the following issues as central to the appeal:
- Was the AUC wrong to conclude that FortisAB cannot recover the costs it incurs in allowing REAs to use FortisAB’s distribution system to serve their members from its customers?
- Was the AUC wrong to conclude that FortisAB can recover the costs that FortisAB incurs from its use of the REAs’ distribution system when the REA’s system serves its customers from FortisAB’s customers?
Decision
REAs and FortisAB have a business relationship because the Roles, Relationships and Responsibilities Regulation compels FortisAB to make its electric distribution system available to REAs and REAs to make their electric distribution system available to FortisAB. This allows for the most cost-effective method of delivering electricity to customers of an electric utility and members of a REA.
The AUC has previously held that a REA is not a “customer” under the EUA. As a result, the AUC cannot approve a tariff for REAs. EUA, s 1(1)(h) defines “customer” as follows: “a person purchasing electricity for the person’s own use”. A REA does not purchase electricity for its own use. Its members are the end users.
The AUC has the statutory obligation to identify the costs FortisAB incurs in delivering electricity to its customers. This includes the net differential between the costs FortisAB and the REAs incurred when making their distribution service system available to the other. It is appropriate to take this net differential into account because FortisAB must, in the course of operating its electric distribution business, allow REAs to utilize its electric distribution system. After the AUC identifies these costs, it must determine what portion of these costs FortisAB may pass on to its customers through a commission-approved tariff.
The ABCA held that the AUC’s decision to allow FortisAB to recover the costs FortisAB incurs to deliver electricity to FortisAB’s customers through its use of REAs’ distribution systems is eminently reasonable and just. The customers of FortisAB that benefit directly from the REAs making their distribution system available to FortisAB so that they can draw electricity from the system have no reasonable basis to support their argument that they should not pay the associated costs.
The ABCA further found that the AUC correctly determined that FortisAB cannot recover the costs FortisAB incurs when REAs use FortisAB’s distribution system to provide electricity to its members from FortisAB’s customers because there is no sound reason why FortisAB’s customers should subsidize the members of REAs.
The ABCA, therefore, refused the appeals.
