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EPCOR Distribution & Transmission Inc. 2023-2025 Transmission Facility Owner General Tariff Application Negotiated Settlement Agreement and Other Matters, AUC Decision 27675-D01-2023

Link to Decision Summarized

Electricity – Rates

Application

As a transmission facility owner (“TFO”), EPCOR Distribution & Transmission Inc (“EPCOR”) recovers the costs of providing regulated electric transmission service through a transmission tariff that must be approved by the AUC. EPCOR recovers its AUC-approved tariff amounts through the Alberta Electric System Operator (“AESO”), which collects the costs of transmission services provided to Alberta ratepayers’ respective distribution facility owners and from customers directly connected to the transmission system.

EPCOR applied for approval of revenue requirements of $129.73 million for 2023, $130.31 million for 2024, and $134.11 for 2025. After filing the application, EPCOR advised the AUC that it intends to explore the possibility of reaching a negotiated settlement agreement (“NSA”). EPCOR applied for approval of the NSA.

Decision

The AUC was satisfied that the requirements of Rule 018: Rules on Negotiated Settlements were met and approved the NSA reached by EPCOR, the Utilities Consumer Advocate (“UCA”) and the Consumer’s Coalition of Alberta (“CCA”). The approved revenue requirement is as follows: $126.73 million for 2023; 126.69 million for 2024; and $130.05 million for 2025.

Applicable Legislation

Electric Utilities Act, SA 2003, c E-5.1 ss 132 and 135.

AUC Rule 018: Rules on Negotiated Settlements

AUC Rule 026: Rule regarding Regulatory Accounting Procedures Pertaining to the Implementation of the International Financial Reporting Standards

Pertinent Issues

After filing its 2023-2025 general tariff application (“GTA”), EPCOR reached an NSA with the UCA and the CCA. EPCOR requested that the AUC either approve the entire NSA or refuse it under s 135 of the Electric Utilities Act. The NSA proposed a total reduction to EPCOR’s 2023-2025 revenue requirements of $10.81 million, compared to what EPCOR had initially requested in the GTA.

Treatment of Cloud-Based Software as a Service Costs

In accordance with the NSA, EPCOR withdrew its request for approval of a deferral account for its cloud-based Software as a Service Costs (“SaaS”) costs for the 2023-2025 test period and requested that forecast cloud-based SaaS costs be treated as capital costs with a 15-year amortization period. The AUC approved the request, noting that under Rule 026: Rule Regarding Regulatory Account Procedures Pertaining to the Implementation of the IFRS, it may approve regulatory accounting treatments that deviate from International Financial Reporting Standards (“IFRS”) as long as the deviation and its impact are in the public interest.

Compliance with Commission Directions

EPCOR’s compliance with AUC directions was excluded from the NSA. The AUC found that EPCOR has complied with prior AUC directions and directed EPCOR to address the directions related to the Heartland Damper Replacement costs and the Garneau Switchgear Replacement in its next GTA.

Transmission Tariff True-up

EPCOR was providing transmission service under its 2023 interim tariff of $121.15 million, or $10.10 million monthly, approved by the AUC in Decision 27696- D01-2022.

EPCOR calculated the required January 2023 through April 2023 true-up amount as a one-time true-up charge to the AESO of $1.81 million. The 2023, 2024 and 2025 final revenue requirements of $126.58 million, $126.69 million and $130.05 million, respectively, were approved. The AUC approved monthly tariffs to be charged to the AESO of $10.55 million for May 1, 2023, to December 31, 2023; $10.56 million for January 1, 2024, to December 31, 2024; and $10.84 million for January 1, 2025, to December 31, 2025.

The AUC found that the annual tariff and monthly rates for the 2023-2025 test years, as proposed by EPCOR’s GTA NSA, correspond to the respective revenue requirements and approved them on a final basis. The AUC also approved a one-time true-up charge to the AESO of $1.81 million for the revenue shortfall resulting from the difference between EPCOR’s interim and final monthly tariffs between January 1, 2023, and April 30, 2023.

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