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EMCOR Utility (2035570 Alberta Ltd.) Interim Rates for Supply and Distribution of Potable Water, AUC Decision 28055-D01-2023

Link to Decision Summarized

Water – Rates

Application

EMCOR Utility (2035570 Alberta Ltd.) (“EMCOR”) requested approval of certain items related to its potable water service. It requested approval of: the terms and conditions (“T&Cs”) of service, including rate schedules; depreciation rates; interim refundable rates for supply and distribution of water, effective March 1, 2023; and final rates for the supply and distribution of water, effective March 1, 2023, to February 29, 2028 (the “Test Period”). This was EMCOR’s first water rates application filed with the AUC since EMCOR did not have prior AUC approval for the water rates it charged its customers.

Decision

In this decision, the AUC decided two issues, specifically, its jurisdiction over EMCOR and the approval of interim potable water rates, including their effective date. The AUC found that it has jurisdiction over EMCOR as an owner of a public utility that provides potable water service to its customers. The AUC approved the existing water rates as interim, effective June 7, 2023 but denied the application from EMCOR for an increase of the existing rates on an interim basis.

Pertinent Issues

AUC Jurisdiction

The AUC examined the definitions of “owner of a public utility” and “public utility” in the Public Utilities Act and concluded that there is sufficient evidence that EMCOR operates, manages or controls “a system, works, plant, equipment or service” for the delivery or furnishing of potable water directly to customers. The AUC found that EMCOR’s potable water facilities are a “public utility” and was satisfied that EMCOR is an “owner of a public utility” for purposes of the Public Utilities Act, making it subject to the AUC’s regulation.

Interim Rates

In addition to requesting its current rates be approved on an interim basis, EMCOR also requested an increase of those rates.  EMCOR stated that it has operated the water distribution system since 2018 and that it has had the same rates for that service since 2020. EMCOR proposed a five percent increase to account for higher inflation and an increase in its cost of operations since 2020.

The AUC stated that interim rate orders are generally used to mitigate against rate shock and to ensure the financial integrity of a utility while an application to establish final rates is before the AUC. An interim rates order essentially allows all parties to preserve rates at an approved level while the AUC hears from the applicant and all parties on what the final rates should be. An interim rates order allows for appropriate adjustments once the final rates are determined and protects both, the utility and its customers.

As this was EMCOR’s first rate application with the AUC, none of the costs that underpin the current rates had been examined by the AUC. The AUC has not previously found that the current rates charged are just and reasonable. In its application, EMCOR did not indicate what these cost increases have been, and it did not submit that the interim rate increase was required to preserve the financial integrity of the water utility system or to avoid undue financial hardship. EMCOR also did not suggest that its ability to continue providing safe and reliable service would be compromised without the interim rates increase.

In relation to the effective date, the AUC found that the effective date for the interim rates was June 7, 2023, rather than March 1, 2023, the date proposed by EMCOR, to avoid retroactive rate making and to maintain certainty for both, the utility and its customers, regarding the rates paid for utility services. The AUC considered June 7, 2023, as the reasonable effective date for interim rates since the earliest date EMCOR’s customers reasonably had knowledge that the rates may change was April 20, 2023, the date the AUC issued notice for this proceeding.

The AUC denied the requested increase and approved the current rates as interim rates on a refundable basis, with the process schedule for setting the final rates to follow.

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