Rates – Performance-Based Regulation
In this decision, the AUC considered the 2021 annual performance-based regulation (“PBR”) rate adjustment filing from ENMAX Power Corporation (“ENMAX”). The AUC approved the 2021 distribution service rates and corresponding rate schedules and the distribution access service (“DAS”) adjustment rider in the amount of $2.47 million. The AUC approved the distribution tariff terms and conditions (“T&Cs”) on an interim basis pending completion of Proceeding 25861, and ENMAX’s 2018 going-in rates and 2018 K-bar were approved as final.
Background
The PBR framework approved in Decision 20414-D01-2016 (Errata) provides a rate-setting mechanism based on a formula that adjusts rates annually by means of an indexing mechanism that tracks the rate of inflation (“I”) that is relevant to the prices of inputs the utilities use, less a productivity offset (“X”).
In Decision 20414-D01-2016 (Errata), the AUC approved the continuation of certain PBR rate adjustments to enable the recovery of specific costs where certain criteria have been satisfied. These include an adjustment for certain flow-through costs that should be recovered from, or refunded to, customers directly (“Y factors”), and an adjustment to account for the effect of exogenous and material events for which the distribution utility has no other reasonable cost recovery or refund mechanism within the PBR plan (“Z factor”).
In Decision 24875-D01-2019 ENMAX’s 2020 PBR rates had been approved on an interim basis in accordance with the framework established by the AUC in Decision 20414-D01-2016 (Errata).
PBR Rate Adjustments
2021 PBR Indices and Annual Adjustments
The 2020 PBR plan for ENMAX provided a rate-setting mechanism based on a formula that adjusted rates annually through an indexing mechanism plus specifically approved adjustments.
(a) I-X index
ENMAX calculated its 2021 I-X index to be 2.12 percent. The AUC approved the 2021 I factor and the resulting I-X index.
(b) Y and Z factor materiality threshold
ENMAX calculated a Y and Z materiality threshold of $1.91 million in 2021. The AUC approved the threshold.
(c) Y factor
ENMAX applied for a Y factor amount of $1.95 million, inclusive of carrying costs. The applied-for Y factor amount was approved as filed.
(d) Z factor
ENMAX did not apply for any Z factor adjustments in 2021.
(e) Q Value
The AUC approved the applied-for 2021 Q value of -3.66 percent.
(f) K-bar factor
The AUC approved ENMAX’s 2021 K-bar of $35.12 million. The 2021 K-bar was made subject to a further true-up for the 2021 actual approved cost of debt.
(g) K factor
At the time of this filing, ENMAX had two Type 1 capital placeholders, approved in Decisions 23892-D01-2019 and 24875-D01-2019, for the cost recovery of 90 percent of the management-approved internal 2019 and 2020 forecasts of capital additions in the amounts of $18.81 million and $6.38 million, respectively. These costs were associated with relocation of ENMAX’s infrastructure pursuant to The City of Calgary’s Green Line Light Rail Transit (“LRT”) Project. The correspondingly approved incremental revenue requirement figures were $1.02 million for 2019 and $1.25 million for 2020.
ENMAX applied for approval of a 2021 revenue requirement of $1.78 million. This would represent 90 percent of the total 2021 revenue requirement of $1.97 million associated with the Green Line LRT Project.
The AUC accepted ENMAX’s 2021 revenue requirement forecast in the amount of $1.97 million. By a disposition letter in Proceeding 25765, ENMAX had been granted a request to combine its 2019 and 2020 true-up applications into a single application to be filed in Q2 2021, which would consider the eligibility of this project for Type 1 capital treatment and the related true-up of actual costs. The AUC considered that the amount approved in this proceeding could also form part of the AUC’s review of ENMAX’s upcoming true-up application. ENMAX was directed to provide the detailed analysis of its total 2019 and 2020 capital additions of $18.81 million and the associated 2021 revenue requirement amount of $1.97 million as part of that application.
(h) Forecast Billing Determinants and Variance analysis
In Decision 23355-D02-2018, the AUC directed ENMAX to continue to provide annual and monthly forecasts of billing determinants in its future annual PBR rate adjustment filings. ENMAX indicated that its forecast was based on the same methodology approved in Decision 21508-D01-2017, and applied throughout the PBR regime. With regards to adjustments made because of the COVID-19 pandemic, ENMAX explained that in 2020 it had experienced lower than normal levels of energy consumption and demand usage for the Large Commercial Secondary – D310 (-12 percent) and Large Commercial Primary – D410 (-14.6 percent) rate classes and a higher level of energy consumption for the Residential – D100 rate class (+3.3 percent). Therefore, ENMAX adjusted forecasts for these rate classes to reflect the expected changes in energy consumption.
ENMAX reconciled forecast and actual billing determinants from 2019. There were variances larger than ± five percent for energy consumption in Medium Commercial – D300 and Street Lighting – D500 rate classes. ENMAX explained that actual commercial demand was driven lower as a result of fewer sites, with a number of customers moving to a lower rate class. Street lighting difference was attributable to fewer light fixtures, coupled with the move to light-emitting diode lights.
Based on its review and assessment of ENMAX’s methodology and billing determinants in this proceeding, the AUC found that the methodology employed and the resulting 2021 forecast billing determinants were reasonable.
2021 PBR Rates
Distribution Rates
The AUC approved ENMAX’s 2021 PBR rates effective January 1, 2021, on an interim basis, subject to finalization of ENMAX’s Phase II compliance filing currently under consideration in Proceeding 25861.
DAS Adjustment Rider
ENMAX applied for approval to include a distribution access service (“DAS”) adjustment rider to reconcile amounts related to a 2017 K factor true-up and a DAS adjustment rider true-up for 2019 and 2020.
ENMAX recalculated the accounting test based on the approved capital tracker amounts and, proposed to collect $2.24 million related to the 2017 K factor. ENMAX explained that a DAS adjustment rider true-up for 2019 and 2020 was required because of volume differences over the collection period. ENMAX’s calculations resulted in a true-up of $0.04 million for 2019 and ($0.02) million for 2020 that ENMAX included in the 2020 DAS adjustment rider. ENMAX proposed to implement the DAS rider from January 1 to March 31, 2021, and calculated the total adjustment amount to be $2.47 million, inclusive of associated carrying costs.
The AUC approved the DAS adjustment rider in the amount of $2.47 million and the implementation of the rider adjustment over the three-month period, from January 1 to March 31, 2021. The AUC directed that, in its 2022 annual PBR rate adjustment application, or its next DAS rider application, whichever came first, ENMAX explain whether its DAS adjustment rider true-up practice to account for the differences in volume was consistent with this direction.
Other Matters
Hybrid Deferral Account
In Decision 24875-D01-2019, the AUC approved ENMAX’s request to implement the treatment of its Alberta Electric System Operator (“AESO”) contribution amounts similar to the hybrid deferral account approach approved for FortisAlberta Inc. in Decision 23505-D01-2018.
Two projects resulted in a net increase in capital additions to rate base of $5.73 million in 2019, leading to a 2019 deferral account true-up refund of $0.25 million. With respect to 2020, the costs associated with the No. 162 Substation 2nd 138-25kV Transformer Addition incurred in Q1 of 2020 resulted in a net increase in capital additions to rate base of $0.11 million in 2020. This resulted in a 2020 deferral account true-up refund of $0.38 million. The total adjustment for the AESO Contribution Hybrid Deferral Account was a refund of $0.63 million, plus associated carrying costs of $0.02 million.
The AUC approved a refund of $0.63 million and directed ENMAX to reflect any forthcoming adjustments regarding these three projects as part of its 2021 annual PBR rate adjustment filing.
Terms and Conditions of Service
The AUC noted that ENMAX comprehensively revised its customer T&Cs as part of its Phase II application in Proceeding 24820. This matter was subject to finalization and the AUC’s approval in ENMAX’s Phase II compliance application, currently under review in Proceeding 25861. The AUC approved ENMAX’s customer T&Cs in this proceeding, on an interim basis.
Financial Reporting Requirements and Senior Officer Attestation
The AUC found that ENMAX had complied with the financial reporting requirements.
Finalizing the Going-In Rates and Associated 2018 Capital Factors
The AUC approved ENMAX’s 2018 going-in rates and 2018 capital factor, K-bar, calculated in this proceeding, as final.
