Electricity – Rates
Application
ENMAX Energy Corporation (“EEC”) applied for approval of its 2022-2023 non-energy regulated rate option (“RRO”) tariff true-up.
Decision
The AUC approved, in part, the application from EEC. The AUC denied EEC’s request to collect carrying charges on the true-up amounts. The AUC approved a rate rider of $0.1231 per day for residential customers and $0.1113 per day for commercial customers to recover the outstanding balance from EEC’s RRO customers. The rate rider is effective from September 1, 2023, to February 29, 2024.
Pertinent Issues
The AUC prefers to approve rates on a final, prospective basis, which allows customers to know the final rates they will pay for any billing period before the start of the billing period. Once final rates are approved, they are not subject to any future revision or true-up because of a general prohibition against retroactive ratemaking. When the AUC approves interim rates, those interim rates stay in place until final rates are approved. After the interim rate period ends, an application is made to true-up the interim rates to the final rates for the interim period. In the true-up of interim rates, the applicant calculates the difference between (i) the revenues that it would have collected if final rates had been in place for the interim rate period; and (ii) the actual revenues collected for the same period using the approved interim rates that were in place.
The interim rate period for this application from January 1, 2022, to May 30, 2023, comprised of two time periods during which the interim rates were different. The first period was January 1, 2022, to December 31, 2022 (the “2022 Period”). The second period was January 1, 2023, to May 30, 2023 (the “2023 Period”). According to the AUC, under Rule 023: Rules Respecting Payment of Interest (“Rule 023”), an award of carrying costs is discretionary. While the AUC considered that carrying costs on adjustments from interim to final approved rates are normally excluded from recovery, Rule 023 sets out requirements that must be met to be eligible for the payment of interest.
The AUC viewed the requirements set out in Rule 023 to be minimum requirements and held that it may consider other relevant factors in deciding whether to exercise its discretion to award carrying charges under Rule 023. When assessing the period for which a balance is outstanding, the AUC considered the time between approval of interim and final rates to be relevant. According to the AUC, this interpretation is consistent with previous AUC decisions considering this issue, albeit under the previous version of Rule 023. For unknown reasons, the AUC decided the carrying charges issue pursuant to the previous version of Rule 023, which is not in force any longer, instead of relying on the relevant provisions of Rule 023 currently in force.
For the 2022 Period, the AUC determined that the lag in obtaining final rates was largely related to EEC’s choice to delay its application for final administration charges until almost a year had passed since interim rates took effect. The AUC was of the view that any carrying cost awards should take into consideration the effort of the utility to file its request reasonably promptly in order to mitigate these costs. The AUC held that there was no explanation provided by EEC concerning the lag in time in applying for final 2022 administrative charges even though the AUC did not raise this issue with EEC and did not request justification from EEC for the lag in time. Accordingly, the AUC was not persuaded that carrying charges were prudently incurred and, therefore, the AUC denied recovery of carrying charges for 2022.
Regarding the 2023 Period, the AUC considered that there was a six-month lag between the approval of interim and final rates. Therefore, the balance was outstanding for less than 12 months and the AUC did not find that EEC has met the eligibility criteria under s 3(2)(a) of Rule 023. Accordingly, the AUC also denied recovery of carrying charges for 2023.
