Decision 23245-D01-2018 Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities April 27, 2018
Alberta Utilities Commission Decision 23245-D01-2018 Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities Proceeding 23245 April 27, 2018 Published by Alberta Utilities Commission Eau Claire Tower, 1400, 600 Third Avenue S.W. Calgary, Alberta T2P 0G5 Telephone: 403-592-8845 Fax: 403-592-4406 Website: www.auc.ab.ca
Contents 1 Introduction... 1 2 Commission findings... 2 2.1 Consumers Coalition of Alberta... 2 2.2 Allocation of the CCA s costs... 5 3 Order... 6 ii Decision 23245-D01-2018 (April 27, 2018)
Alberta Utilities Commission Calgary, Alberta Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities Decision 23245-D01-2018 Proceeding 23245 1 Introduction 1. In this decision, the Alberta Utilities Commission considers an application (the costs claim application) by the Consumers Coalition of Alberta (CCA) for approval and payment of its costs of participation in Proceeding 22394 1 (the original proceeding). The following table sets out the costs claimed and the amounts awarded: Claimant Total Fees Claimed Total Disbursements Claimed Total GST Claimed Total Amount Claimed Total Fees Awarded Total Disbursements Awarded Total GST Awarded Total Amount Awarded CCA Wachowich & Company $89,670.00 $5,943.00 $4,780.65 $100,393.65 $67,252.50 $5,943.00 $ 3,659.78 $76,855.28 Regulatory Services Inc. $144,990.00 $0.00 $7,249.50 $152,239.50 $108,742.50 $0.00 $ 5,437.13 $ 114,179.63 Total $234,660.00 $5,943.00 $12,030.15 $252,633.15 $175,995.00 $5,943.00 $9,096.91 $191,034.91 2. The Commission has awarded the applicant costs in an amount less than the amount claimed for the reasons set out below. 3. The original proceeding was convened by the Commission to consider the notional 2017 revenue requirement and 2018 K-bar amount to be used for rebasing purposes, as a basis for setting the going-in rates in a subsequent compliance proceeding for the 2018-2022 performance-based regulation plans for Alberta electric and gas distribution. The original proceeding included information requests (IRs), IR responses, written evidence, an oral hearing, argument and reply argument. The Commission issued Decision 22394-D01-2018 2 on February 5, 2018. 4. On December 8, 2017, the Commission issued a letter stating that interveners eligible to claim costs should have their claims filed within 30 days of November 27, 2017. 5. The CCA submitted its costs claim application on January 5, 2018. The costs claim application was filed eight days outside the timeframe specified in the Commission s correspondence dated December 8, 2017. 3 1 Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities First Compliance Filing. 2 Decision 22394-D01-2018: Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities, February 5, 2018. 3 In its December 8, 2017 correspondence, the Commission addressed a request from the City of Calgary with respect to the close of record in Proceeding 22394. The Commission clarified that for the purposes of Decision 23245-D01-2018 (April 27, 2018) 1
6. Costs not received within the specified timeframe may be rejected without further process. The Commission has used its discretion in this case to accept the late filing for the reasons set out below. The Commission assigned Proceeding 23245 and Application 23245- A001 to the costs claim application. 7. No comments were filed with respect to the costs claim application and the Commission considers the close of record for this proceeding to be February 7, 2018, the deadline for filing comments. 2 Commission findings 8. The Commission s authority to award costs for participation in a utility rates proceeding is found in Section 21 of the Alberta Utilities Commission Act. When considering a claim for costs for a utility rates proceeding, the Commission is also guided by the factors set out in Section 11 of Rule 022: Rules on Costs in Utility Rate Proceedings (Rule 022). Section 11.1 of Rule 022 provides that the Commission may award costs to an eligible participant if the Commission is of the opinion that: (a) the costs are reasonable and directly and necessarily related to the hearing or other proceeding, and (b) the eligible participant acted responsibly in the hearing or other proceeding and contributed to a better understanding of the issues before the Commission. Section 11.2 of Rule 022 enumerates a number of factors the Commission may consider in determining the amount of any cost award, including whether the eligible participant failed to comply with a direction of the Commission, including a direction on the filing of evidence (11.2(e)), submitted evidence and argument on issues that were not relevant (11.2(f)) and engaged in conduct that unnecessarily lengthened the duration of the hearing or other proceeding or resulted in unnecessary costs to the applicant or other participants (11.2(h)). 9. The applicable provisions in Rule 022 are permissive in nature and shall be exercised by the Commission, using its judgment, based on the circumstances before it in each case. Appendix A of Rule 022 prescribes a Scale of Costs applicable to all costs claimed. 2.1 Consumers Coalition of Alberta 10. The following table summarizes the CCA s costs claim: Claimant Hours Preparation Attendance Argument Fees Disbursements GST Total CCA Wachowich & Company 172.80 52.60 30.80 $89,670.00 $5,943.00 $4,780.65 $100,393.65 Regulatory Services Inc. 302.45 124.10 110.45 $144,990.00 $0.00 $7,249.50 $152,239.50 Total 475.25 176.70 141.25 $234,660.00 $5,943.00 $12,030.15 $252,633.15 calculating its performance standards under Bulletin 2015-09, the record development phase of the proceeding concluded with the filing of reply arguments on November 7, 2017, notwithstanding the subsequent process established to address a request from EPCOR Distribution and Transmission Inc. to file sur-reply. However, the Commission indicated that in light of the additional process steps associated with EPCOR s request, the Commission would extend the date by which an intervener s cost claim must be filed. The Commission directed, pursuant to Section 9(3) of Rule 022, that any claim for costs should be filed within 30 days of November 27, 2017. 2 Decision 23245-D01-2018 (April 27, 2018)
11. Although the Commission finds that the CCA generally acted responsibly in the original proceeding and contributed in some respects to the Commission s understanding of the relevant issues, the Commission is not prepared to approve the entirety of the CCA s cost claim for the reasons set out below. 12. The Commission is not satisfied that the amount of the costs claimed are reasonable in the circumstances. The total amount of fees claimed (before any disbursements or applicable G.S.T.) is $234,660.00 for the participation of 2 individuals on behalf of the CCA (Mr. Wachowich, as the CCA s legal counsel, and Mr. Thygesen, as the CCA s consultant).this includes over 250 hours charged by the CCA s legal counsel and over 500 hours charged by the CCA s consultant. 13. The CCA submitted evidence and argument on issues that were not relevant, and inconsistent with direction from the Commission regarding the scope of evidence. For example, portions of the supplemental evidence filed by the CCA in response to a request from the Commission for evidence on k-bar sought to adduce additional or surrebuttal evidence responding to the rebuttal evidence filed by the ATCO Utilities on the I factor and Q adjustment. This evidence was outside the scope of the supplemental evidence requested by the Commission. Portions of the CCA s supplemental evidence was objected to on this basis and struck by the Commission in its ruling dated September 6, 2017. 4 14. The CCA also devoted a considerable amount of time in evidence, cross-examination and argument on matters related to cost of debt and interest expense, some of which was unclear 5 and was not always clearly relevant to the proceeding. Moreover, certain of the CCA s evidence and positions on these issues appeared to reflect a misunderstanding of the application of the mid-year convention and utilities debt practices. The CCA also developed a further recommended method for calculating EPCOR s cost of debt in argument, which was not put forward in evidence. 6 As a result, portions of the CCA s evidence and argument did not contribute to a better understanding of the matters that were the subject of this application. Further, the CCA s treatment of these issues required other parties to devote resources to responding to these matters and detracted from the proceeding s focus. 15. In addition, and as discussed in the introduction to this decision, the CCA filed its cost claim application outside the timeframe permitted by Rule 022, as extended by the Commission in its correspondence in the original proceeding. 7 The CCA did not acknowledge in its application that it was being filed outside the applicable deadline, nor did it offer any explanation for the delay or request that an extension be permitted. Given that the delay is of a relatively minor nature and that the filing deadline was shortly after the Christmas holidays, the Commission has exercised its discretion to accept the costs claim application. However, the 4 Exhibit 22394-X0332 5 For example, the Commission found that it was not able to distinguish whether the CCA s recommendation to true up to the actual cost of debt was specific to the WACC to be used for calculation of base K-bar or if it applied to the WACC to be used for the notional 2017 revenue requirement as well. Decision 22394-D01-2018, at para 273. 6 Decision 22394-D01-2018, at para 335. 7 Exhibit 22394-X0426, Correspondence dated December 8, 2017, which provided: the Commission will extend by 20 days the date by which an intervener s cost claim must be filed. Accordingly, pursuant to Section 9.3(a) of Rule 022, any claim for costs should be filed within 30 days of November 27, 2017. Decision 23245-D01-2018 (April 27, 2018) 3
Commission does consider that the late filing of the application is further support for a reduction to the costs being claimed. The Commission expects that, in future, the CCA will monitor applicable deadlines more closely, to ensure that its costs claim applications are filed on time. If a costs claim application is filed outside the applicable deadline, the CCA should request an extension in its application and include an explanation as to the cause for the delay and the basis upon which the Commission should grant the extension. The Commission may reject the entirety of any future cost claim application that is filed outside the applicable deadline, particularly if no request for an extension, and explanation for the necessity of the extension, is provided. 16. Having regard to the foregoing and the CCA s contributions to the Commission s understanding of the issues before it, the Commission has determined that it will approve 75 per cent of the legal and consulting costs claimed by the CCA. Wachowich & Company 17. The CCA was represented by Wachowich & Company in the original proceeding. The fees claimed by the CCA for the legal services provided by Mr. James Wachowich relate to reviewing the application, researching, reviewing IRs, reviewing draft evidence, preparing for and attending the oral hearing, and reviewing draft argument and reply argument. 18. While the Commission finds that that the services performed by Wachowich & Company were generally directly and necessarily related to the CCA s participation in the original proceeding, it finds, for the reasons stated above, that the fees claimed for these services are unreasonable and excessive. For the reasons articulated above, the Commission finds that a 25 per cent reduction in fees is reasonable in these circumstances. Accordingly, the Commission approves the CCA s claim for legal fees for Wachowich & Company in the amount of $67,252.50, disbursements for transcripts of $5,943.00 and GST of $3,659.78 for a total of $76,855.28. Regulatory Services Inc. 19. Regulatory Services Inc. was retained by the CCA to perform consulting services in the original proceeding. The fees claimed by the CCA for the consulting services provided by Mr. Jan Thygesen relate to reviewing the application, drafting IRs, reviewing IR responses, drafting IR responses, drafting evidence, drafting rebuttal evidence, drafting cross examination, preparing for and attending the oral hearing, drafting argument and drafting reply argument. 20. While the Commission finds that the services performed by Regulatory Services Inc. were generally directly and necessarily related to the CCA s participation in the original proceeding, it finds for the reasons stated above that the fees claimed for these services are unreasonable and excessive for the reasons articulated above. The Commission considers that a 25 per cent reduction is reasonable in the circumstances. Accordingly, the Commission approves the CCA s claim for consulting fees for Regulatory Services Inc. in the amount of $108,742.50 and GST of $5,437.13 for a total of $114,179.63. Total amount awarded 21. For the reasons provided above, the Commission approves the CCA s claim for recovery of costs in the total amount of $191,034.91. This amount is composed of legal fees of $67,252.50, consulting fees of $108,742.50, disbursements of $5,943.00 and GST of $9,096.91. 4 Decision 23245-D01-2018 (April 27, 2018)
2.2 Allocation of the CCA s costs 22. The CCA did not propose a method for allocating its costs and no submissions were provided from the utilities on the proposed allocation of costs approved for the CCA. The CCA was the only intervener eligible to claim costs under Rule 022 in respect of the original proceeding. The CCA s participation addressed matters that were applicable to all of the distribution utilities, each of whom actively participated in the original proceeding. The CCA s participation also addressed certain matters specific to each of the distribution utilities. Accordingly, the Commission has determined that each of the distribution utilities should bear a portion of the costs of the CCA s participation. 23. Consistent with past decisions of the Commission involving multiple utilities, but subject to the modifications discussed below, 25 per cent of the CCA s allowed costs will be allocated on an equal basis to each utility who actively participated in the original proceeding and 75 per cent on a proportional basis, using amounts reported by each such distribution utility for 2016 in their respective filings under Rule 005: Annual Reporting Requirements of Financial and Operational Results (Rule 005). 8 This allocation methodology was approved previously by the Commission in performance-based regulation costs decisions or generic cost of capital costs decisions, such as Decision 22082-D01-2017 9 and Decision 2012-030. 10 24. The CCA s costs will be allocated and recovered from the following distribution utilities, who actively participated in the original proceeding: AltaGas Utilities Inc. ATCO Electric Ltd. (distribution) ATCO Gas and Pipelines Ltd. ATCO Gas (distribution) EPCOR Distribution & Transmission Inc. (distribution) ENMAX Power Corporation (distribution) FortisAlberta Inc. 25. The allocation methodology previously utilized by the Commission allocated intervener costs based on approved revenue requirements as reflected in Rule 005 filings. This allocation methodology has been modified for purposes of this decision because the distribution utilities, unlike transmission utilities, do not have an approved revenue requirement under performancebased regulation. Therefore, in determining the allocations for the CCA s approved costs, the Commission has used the 2016 Rule 005 reported revenue amounts rather than revenue requirement. Further, the Commission has adjusted the 2016 Rule 005 reported revenue amounts 8 The 2016 Rule 005 reports for Alberta gas and electric distribution utilities are found on the Commission s website at: http://www.auc.ab.ca/regulatory_documents/pages/finance_and_operations.aspx under the Finance and Operations. 9 Decision 22082-D01-2017:2018-2022 Performance-Based Regulation Plans for Alberta Electric and Gas Distribution Utilities,, Proceeding 22082, February 6, 2017. 10 Decision 2012-030: 2011 Generic Cost of Capital, Cost Awards, Applications 1607747, 1607754, 1607756, 1607758, 1607760, 1607761, 1607762, 1607778, 1607784, Proceeding 1486, January 25, 2012. Decision 23245-D01-2018 (April 27, 2018) 5
to exclude transmission access charges, to ensure consistency among the reported revenue of the distribution utilities. This adjustment was required to recognize that some utilities such as ATCO Electric Ltd. (distribution) include transmission access charges in their Rule 005 reported revenue, while other utilities such as FortisAlberta Inc., exclude these charges. Using revenue amounts from Rule 005, adjusted to account for transmission access charges, will ensure that the calculation of reported revenue amounts for the distribution utilities is done on a comparable and proportionate basis for purposes of allocating intervener costs. 26. The resulting cost allocations are attached in Appendix A to this decision and provide the derivation of the amounts to be paid by each distribution utility. 3 Order 27. It is hereby ordered that: 1) AltaGas Utilities Inc. shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $12,203.37. 2) AltaGas Utilities Inc. shall record in its Deferred Regulatory Costs (Hearing) Account the approved intervener amounts of $12,203.37. 3) ATCO Electric Ltd. (distribution) shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $35,439.76. 4) ATCO Electric Ltd. (distribution) shall record in its Intervener Hearing Costs Account the approved intervener amounts of $35,439.76. 5) ATCO Gas and Pipelines Ltd. (ATCO Gas) shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $57,615.07. 6) ATCO Gas and Pipelines Ltd. (ATCO Gas) shall record in its Deferred AUC and Intervener Costs Account the approved intervener amounts of $57,615.07. 7) ENMAX Power Corporation (distribution) shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $21,354.70. 8) ENMAX Power Corporation (distribution) shall record in its Hearing Cost Reserve Account approved intervener amounts of $21,354.70. 9) EPCOR Distribution & Transmission Inc. (distribution) shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $23,085.22. 10) EPCOR Distribution & Transmission Inc. (distribution) shall record in its Hearing Costs Reserve Account approved intervener amounts of $23,085.22. 11) FortisAlberta Inc. shall pay intervener costs to the Consumers Coalition of Alberta in the amount of $41,336.80. 6 Decision 23245-D01-2018 (April 27, 2018)
12) FortisAlberta Inc. shall record in its Hearing Cost Reserve Account approved intervener amounts of $41,336.80. Dated on April 27, 2018. Alberta Utilities Commission (original signed by) Willie Grieve, QC Chair (original signed by) Neil Jamieson Commission Member Decision 23245-D01-2018 (April 27, 2018) 7
Alberta Utilities Commission Rebasing for the 2018-2022 PBR Plans for Alberta Electric and Gas Distribution Utilities First Compliance Proceeding 23245 Appendix A CCA Costs Allocation AltaGas Utilities Inc. (a) ATCO Electric Ltd. (distribution) (b) ATCO Gas and Pipelines Ltd. (c) ENMAX Power Corporation (d) EPCOR Distribution & Transmission Inc. (e) FortisAlberta Inc. (f) Total 2016 Reported Revenue Amounts ($000s) $94,920.27 $782,885.96 $969,591.00 $343,157.00 $422,452.00 $530,343.03 $3,143,349.26 Transmission Access Payments/Flow Through Expenses 2016 Rule 005 ($000s) $27,492.00 $346,243.73 $180,595.00 $130,319.00 $182,117.00 $866,766.73 Total Revenue ($000s) $67,428.27 $436,642.23 $788,996.00 $212,838.00 $240,335.00 $530,343.03 $2,276,582.53 % of Reported Revenue Amounts 2.96% 19.18% 34.66% 9.35% 10.56% 23.30% 100.00% Consumer's Coalition of Alberta 75% Costs Allocation $4,243.58 $27,479.97 $49,655.28 $13,394.91 $15,125.43 $33,377.01 $143,276.18 Consumer's Coalition of Alberta 25% Costs Allocation $7,959.79 $7,959.79 $7,959.79 $7,959.79 $7,959.79 $7,959.79 $47,758.74 Total Amount Awarded $12,203.37 $35,439.76 $57,615.07 $21,354.70 $23,085.22 $41,336.80 $191,034.92 TOTAL PAYABLE $12,203.37 $35,439.76 $57,615.07 $21,354.70 $23,085.22 $41,336.80 $191,034.92 *In paragraph 21 of Decision 23245-D01-2018, the final amount awarded is $191,034.91. The final amount in this table shows a cent difference due to rounding