Electricity – Rates
Application
In this general tariff application (“GTA”) TransAlta Corporation (“TransAlta”), in its capacity as manager of the TransAlta Generation Partnership, applied for approval of its 2022-2023 revenue requirement for its transmission services.
Decision
The AUC approved all requests in TransAlta’s application.
Pertinent Issues
The following matters of the GTA were contentious during the proceeding:
- TransAlta’s 2022 and 2023 escalation rates for non-union salary, contractor and general inflation;
- The placeholders for TransAlta’s operations and maintenance (“O&M”) agreement with AltaLink Management Ltd. (“AltaLink”); and
- TransAlta’s costs for its First Nations Advisory Committee (“FNAC”).
2022 and 2023 Escalation Rates
TransAlta requested approval of non-union salary, contractor and general inflation escalation rates of 2.5 per cent for 2022 and 3.5 per cent for 2023.
TransAlta explained that it arrived at its applied-for rates through a review of the most recent escalation forecasts for the consumer price index, general inflation and non-union escalation rates. TransAlta also reviewed the non-union escalation rates for other transmission facility owners (“TFOs”) in Alberta during the 2022-2023 test period. TransAlta explained that its non-union and contractor forecasts conform to the arithmetic average of the current applied-for TFO escalation rates and that the escalation rates have been conservatively applied to 2022, relative to the Alberta Weekly Earnings (AWE) dashboard, which shows an AWE of 3.2 per cent from October 2021 to October 2022. Despite the economic consensus forecasts showing a considerable spike in inflation in 2022, TransAlta applied a reduction of 400 basis points to bring its proposed escalation rate in line with the other TFOs’ requested inflation.
The AUC noted that it considered previous approvals for escalation rates and forward-looking information concerning inflation. It acknowledged that previously approved escalation rates may not include new information that may impact the escalation rates and was persuaded by TransAlta’s evidence that there has been an increase in inflation. The AUC noted that TransAlta’s forecast was lower than the recently applied-for average for the other TFOs and determined that the rates applied-for by TransAlta were reasonable.
O&M Placeholders Agreement with AltaLink
TransAlta explained that AltaLink applied for forecast revenue requirement offsets, which anticipated a termination of the O&M agreement with TransAlta on April 29, 2022, as part of its 2022-2023 GTA. In Decision 27168-D01-2022, the AUC granted an interim order directing AltaLink to perform its obligations set out in the O&M agreement. TransAlta requested placeholder treatment of its forecast costs under the O&M agreement for the 2022-2023 test period in its current application. AltaLink and TransAlta had an upcoming arbitration to deal with the O&M issue.
TransAlta clarified that its 2022 and 2023 forecasts of the O&M fee related to the AltaLink O&M agreement were based on the 2021 actual fee of $0.57 million invoiced by AltaLink, which was escalated by 2.5 per cent for 2022, for a forecast of $0.58 million and escalated by 3.5 per cent for 2023, for a forecast of $0.6 million. TransAlta stated that it has undertaken a number of contingency measures to preserve the provision of safe and reliable services to its transmission customers in the event AltaLink ceases to provide O&M services.
The AUC was cognizant of the uncertainty regarding the O&M agreement between TransAlta and AML. The AUC noted its expectation that if a new O&M agreement is signed, there would be a period in which TransAlta could transition its O&M services either to a third party or perform the services internally. The AUC expected, however, that TransAlta made and will continue to make sufficient inquiries of potential third-party providers of O&M services, including developing the operational logistics to provide such services internally and seek approval of a new model promptly following the arbitral decision. On this basis, the AUC approved the requested 2022-2023 applied-for costs for services provided under the current AltaLink O&M agreement as a placeholder subject to a true-up in a future application.
First Nations Advisory Committee Costs
TransAlta forecast $40,000 to cover the cost of the venue, meals and accommodation for FNAC meetings. TransAlta noted that these meetings had been cancelled in 2020 and 2021 due to the COVID-19 pandemic restrictions and that meetings could not be arranged in 2022 due to scheduling restrictions. TransAlta indicated that in-person meetings were the best way to continue to build relationships, share work plans and activities on First Nations lands, and gather input, listen to and understand FNAC members’ concerns.
The AUC accepted TransAlta’s explanation for the costs and noted that it considers in-person meetings to be an important part of continued relationship building, an effective way to share work plans and activities on First Nations lands and to gather input, listen, and understand FNAC members’ concerns, especially considering that meetings have not occurred in the past three years. Given the importance of these meetings and the reasonableness of the costs, the AUC approved the forecast as filed.
