Electricity- Rates
Application
ENMAX Energy Corporation (“EEC”), as a regulated rate option (“RRO”) provider, applied for approval of its 2023-2024 energy price setting plan (“EPSP”).
Decision
The AUC determined that the application from EEC was satisfactory but did not approve certain aspects of the 2023-2024 EPSP as applied for.
Applicable Legislation
AUC Rule 001: Rules of Practice – ss 30, 76(1)(e).
Regulated Rate Option Regulation, Alta Reg 262/2005.
Pertinent Issues
At the time of its application, EEC was operating under its approved 2019-2022 EPSP which adopted two new processes for determining the RRO rate. The new processes are a descending clock auction and an alternative commodity risk compensation (“CRC”) calculation.
The AUC approved a change to EEC’s letter of credit (“LOC”) rate but required EEC to update the proposed wording to include clarification of when updates to the LOC rate will occur. The LOC rate is used as an input in calculating the monthly Alberta Electric System Operator (“AESO”) collateral costs and the monthly natural Gas Exchange (“NGX”) collateral costs, as described in the 2023-2024 EPSP. The AUC denied the recommendation from the Utilities Consumer Advocate (“UCA”) that any changes to the LOC rate are filed with the AUC for approval of part of EEC’s monthly energy rate filings, along with support for any changes. The AUC determined that this step would be unnecessary and inefficient.
The AUC denied the request from EEC to change the method for calculating and reporting the monthly NGX collateral costs in the illustrative energy charge workbook. The approved illustrative energy charge workbook includes two inputs for the calculation of the NGX collateral costs: the posted collateral amount and the LOC rate. The product of these two inputs is divided by 12 to calculate the forecast monthly NGX collateral costs.
EEC proposed to add a line item described as “prior month adjustment” to the illustrative energy charge workbook and to use the corresponding amount as another input in calculating the forecast monthly NGX collateral costs. The AUC denied the request as the use of the term “prior month adjustment” implies a true-up for activities from a previous month. Amounts for the current month’s forecast that include differences in costs between the previous month’s actual and forecast costs are not permitted under the Regulated Rate Option Regulation. The AUC found that the prior month adjustment is not required as a specific line item, because any changes in the posted collateral amount during the forecast month can be incorporated into the forecast posted collateral amount, with the resulting forecast being a daily average balance.
The UCA submitted that the net CRC collected by EEC effectively represents a profit, and if it is included in the energy return margin calculation, EEC is effectively receiving a return on what already represents a profit component. Accordingly, the UCA suggested that the net CRC be removed from the energy revenues included in the calculation of EEC’s energy return margin. The AUC determined that including the net CRC in the calculation of the return margin would not be fair to customers. The inclusion would result in a commodity profit component being included in the return margin when a positive amount was already earned for commodity risk.
The CRC is a legislated requirement under the Regulated Rate Option Regulation that is meant to provide financial compensation for the risk that an RRO provider faces due to uncertainties associated with the quantity of energy to be supplied or the price at which the energy is procured. When calculating the energy return margin, the CRC is included in the energy revenues upon which EEC’s return markup is applied. The AUC accepted the recommendation from the UCA to remove the net CRC from the energy revenues upon which EEC’s return markup is applied.
