Capital Tracker – Filing Requirements
The AUC initiated a proceeding to review the filing requirements for capital tracker applications. This was due to varying positions from parties in the 2013 capital tracker true-up and 2014-2015 forecast capital tracker proceedings (the “Previous Proceedings”) respecting the level of information required in a capital tracker application.
Parties’ submissions in the Previous Proceedings diverged on whether companies should be required to show the accounting test calculations for:
(a) All capital addition projects or programs undertaken in a particular year; or
(b) For only those capital addition projects or programs for which the companies applied for capital tracker treatment.
In Decision 2012-237, the AUC had approved the use of capital tracker mechanisms as part of the performance based-regulation (“PBR”) plans, applying the following criteria to determine whether capital tracker treatment is warranted:
(a) The project must be outside the normal course of the company’s ongoing operations;
(b) Ordinarily, the project must be for replacement of existing capital assets, or undertaking the project must be required by an external party; and
(c) The project must have a material effect on the company’s finances.
Issues
The AUC requested submissions from AltaGas Utilities Inc. (“AltaGas”), ATCO Electric Ltd. (“ATCO Electric”), ATCO Gas and Pipelines Ltd. (“ATCO Gas”), EPCOR Distribution & Transmission Inc. (“EPCOR”) and FortisAlberta Inc. (“FAI”) (collectively, the “Companies”) on the following issues:
(a) Should the Companies be required to provide an accounting test and all assumptions in Excel format with linked and working formulas, for all capital addition projects or programs including those capital addition projects or programs for which the companies have not applied for capital tracker treatment (“Issue 1”)?
(b) Should the Companies be required to provide descriptions of the types of capital, including capital projects or programs, for which the companies have not applied for capital tracker treatment (“Issue 2”)?
(c) Are other changes required to the minimum filing requirements for capital trackers provided in Section 10.2 of Decision 2013-435 (“Issue 3”)?
Issue 1
With respect to Issue 1, the AUC held that accounting tests should only apply to capital tracker projects or programs. Therefore, the AUC held that the Companies are not required to put forward accounting test results for capital addition projects and programs that are not put forward for capital tracker treatment. The AUC also determined that the inclusion of such information was not necessary to determine whether the capital tracker projects and programs have been properly grouped.
In spite of these findings, the AUC did find that there was some merit in obtaining additional information with respect to non-capital tracker amounts to improve understanding of cost allocations between capital tracker and non-capital tracker amounts. Accordingly, the AUC directed the Companies to provide details of any new or changed cost allocation methodologies impacting the allocations of actual or forecast depreciation, tax, and overhead amounts allocated to each project or program in Excel format. This requirement was added to the minimum filing requirements for capital tracker applications.
Issue 2
With respect to Issue 2, the AUC held that a short description setting out the nature, scope and timing of non-capital tracker projects and programs would assist in understanding the groupings of capital tracker projects and programs by allowing direct comparisons between capital tracker and non-capital tracker programs. This requirement was added to the minimum filing requirements for capital tracker applications. The AUC noted that such short descriptions would not likely be onerous, and may cut down on the need for additional information requests throughout the course of future capital tracker proceedings.
Issue 3
With respect to Issue 3, the Consumers’ Coalition of Alberta (“CCA”) and the Office of the Utilities Consumer Advocate (“UCA”) submitted several proposed additions to the minimum filing requirements, arguing that none would be onerous or contrary to the intent of the minimum filing requirements. Among these changes, was a proposal by the CCA to require a company to file its overhead and tax allocation policy, a description of how the policies were applied, and calculations for all capital projects. The CCA also proposed that each company provide a reconciliation of tax, return and depreciation from the accounting test calculations to the amounts in each respective company’s general ledger.
The AUC rejected the CCA and UCA’s proposed changes to overhead, tax and depreciation information, citing its previous determinations on Issue 1, whereby it found that providing additional information had merit, but noted that such additional information, in the context of the UCA and CCA’s requests, were not required to satisfy the test for capital tracker treatment.
The CCA also requested that the inclusion of a table showing the cost of a standard project followed by the cost drivers or components for extra items would assist in assessing projects for capital tracker purposes. ATCO, FAI and EPCOR opposed the CCA’s request, noting variously that the provision of such information was either not possible due to estimation tools and methods used, or that each company’s respective approach differs to such a degree that standardization was not appropriate and would add a regulatory burden.
The AUC agreed with ATCO, FAI, and EPCOR, finding that it does not prescribe a single approach. However, the AUC noted that the onus remains on the applicant in a capital tracker proceeding to present the information in such a manner that will assist in an assessment of the prudency of actual expenditures, and the reasonableness of forecast expenditures.
The CCA also proposed that the Companies include disclosure of affiliate transactions to overhead or other services which are included in capital tracker costs. The AUC held that there was merit to separate identification of any affiliate related costs included in the actual or forecast costs of capital tracker projects or programs. The AUC ordered the Companies to include a summary of such services in its business cases filed with subsequent capital tracker applications.
ENMAX, ATCO and AltaGas took the position that clarification was necessary for multi-year programs approved for capital tracker treatment under the minimum filing requirements. Notably, ATCO argued that once AUC approval is given for a multi-year program, unless there is a significant change, a company should not be required to provide more information demonstrating the prudency or need for the program in subsequent applications. The AUC held that a clarification was necessary for multi-year projects, citing its previous determinations on the same point for multi-year projects in Decision 2014-373. This requirement was therefore clarified in the minimum filing requirements for capital tracker applications.
Decision
The AUC therefore ordered the Companies to incorporate the findings and revised minimum filing requirements as set out in this decision into their future capital tracker applications.
