Revenue Requirement
In this decision, the AUC denied the City of Red Deer (“Red Deer”) ‘s requested revenue requirement for the years 2018-2020 with respect to property taxes and the full-time equivalent (“FTE”) vacancy rate.
The AUC found that Red Deer failed to justify its 2018 property tax forecast. Notwithstanding Red Deer’s submission that no form of vacancy rate was attributed to its FTEs over the test periods, the AUC determined that Red Deer did have a history of periods where vacant positions existed.
The AUC directed Red Deer to respond to all directions in this decision by way of a compliance filing and reconcile the following deferral accounts:
(a) return on equity;
(b) direct-assign capital;
(c) hearing cost reserve; and
(d) self-insurance reserve.
In its application, Red Deer requested approval of its forecast revenue requirements in the amounts of $4.866 million for 2018, $5.118 million for 2019 and $5.288 million for 2020; and to recover the approved revenue requirements in a transmission tariff from the Alberta Electric System Operator (“AESO”).
Inflation
The AUC found the inflation rate of two percent for union and non-union employees, materials, contractor, and general-other was reasonable. The AUC approved Red Deer’s inflation rate of two percent.
Property Taxes
The AUC found that Red Deer failed to justify its 2018 property tax forecast. The AUC directed Red Deer to revise its 2018 forecast property tax to reflect its actual 2018 property tax paid.
With respect to 2019 and 2020, the AUC found that Red Deer’s forecast property tax increases of six percent each year was reasonable. The AUC directed Red Deer to revise its forecast property taxes in its compliance filing to reflect an increase of six percent applied to the 2018 actual property tax paid, and an additional increase of six percent applied to the revised 2019 forecast property tax, for each of 2019 and 2020, respectively.
The AUC found that the increase in actual property tax was the result of actual rate base additions in the amounts of $17 million and $2 million for the years 2016 and 2017, respectively. This influenced the assessed value of the assets subject to property taxes.
Full-Time Equivalents and Vacancy Rates
The AUC found that an application of vacancy rate was warranted and directed Red Deer to revise its vacancy rate to 1.0 percent for the years 2018-2020 in its compliance filing.
