Decision D ATCO Electric Ltd. Amounts to be Paid Into and Out of Balancing Pool for Chinchaga Power Plant Sale

Transcription

1 Decision D Amounts to be Paid Into and Out of Balancing Pool for Chinchaga Power Plant Sale December 20, 2016

2 Alberta Utilities Commission Decision D Proceeding December 20, 2016 Published by the: Alberta Utilities Commission Fifth Avenue Place, Fourth Floor, 425 First Street S.W. Calgary, Alberta T2P 3L8 Telephone: Fax: Website:

3 Contents 1 Introduction Background The application Remaining net book value of generating units Commission findings Order... 8 Appendix 1 Proceeding participants... 9 Appendix 2 Summary of Commission directions Decision D (December 20, 2016) i

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5 Alberta Utilities Commission Calgary, Alberta Amounts to be Paid Into and Out of Balancing Pool for Decision D Chinchaga Power Plant Sale Proceeding Introduction 1. On July 20, 2016, the distribution division of filed an application with the Alberta Utilities Commission requesting approval of the amounts to be paid into and out of the Balancing Pool related to the Chinchaga Power Plant sale, which is comprised of three isolated generating units, pursuant to Section 23 of the Isolated Generating Units and Customer Choice Regulation (the Regulation), AR 165/2003 (the application). 2. On July 21, 2016, the Commission issued a notice of application inviting parties who wished to intervene in this proceeding to submit a statement of intent to participate (SIP) to the Commission by the participation closing deadline of August 4, On August 3, 2016, the Commission received a SIP from Regulatory Advocates of Alberta (RAA). 3. By letter dated August 9, 2016, the Commission requested further information from RAA pertaining to the customers or groups it represents. The Commission directed RAA to file its submissions by August 16, The Commission also indicated that it wanted to afford ATCO Electric an opportunity to submit comments on the RAA SIP and submissions. ATCO Electric was directed to file its comments by August 19, Both RAA and ATCO Electric filed their respective submissions by the specified deadlines. 4. By way of a ruling issued on September 12, 2016, the Commission denied RAA s request for standing in the proceeding. The Commisison found that RAA had not demonstrated a basis for its intervention, a linkage or connection between the subject matter of this proceeding and its customers, and how its customers might be directly and adversely impacted by a decision on the application. 5. On September 15, 2016, the Commission issued information requests (IRs) to ATCO Electric to clarify certain information contained in the application. After a deadline extension request by ATCO Electric, the Commission received ATCO Electric s IR responses on September 29, On November 23, 2016, the Commission issued a second round of IRs to ATCO Electric, seeking further clarification of ATCO Electric s request to recover the remaining net book value of the Chinchaga Power Plant assets from the Balancing Pool. ATCO Electric provided its responses to the second round of IRs on November 30, The Commission considers the close of record for this proceeding to be November 30, Decision D (December 20, 2016) 1

6 2 Background 8. On June 16, 2014, the Commission issued Decommission Approval U , 1 authorizing the decommissioning of the Chinchaga Power Plant located at LSD W6M in the Keg River area. The time to complete the decommissioning of this plant was extended twice by the Commission at the request of ATCO Electric. DA , 2 approved a time extention to December 31, 2015, and Decision D , 3 approved a time extension to June 30, The Chinchaga Power Plant was decommissioned on March 16, As part of the decommissioning of the Chinchaga Power Plant, ATCO Electric decided to sell the isolated generating units CUL 255, CUL 432 and CUL 404 (the generating units), which comprise the plant, in accordance with sections 26(1) and 26(2) of the Regulation. 10. On April 24, 2015, ATCO Electric filed an application with the Commission pursuant to Section 18 of the Regulation, requesting approval of the sale offering for the generating units. On June 29, 2015, the Commission issued Decision D , 4 authorizing ATCO Electric to proceed with the sale offering for the generating units in accordance with the proposal filed. 11. On December 1, 2015, ATCO Electric filed an application with the Commission requesting approval of the sale bid received for the generating units, pursuant to Section 21 of the Regulation. The Commission approved the application in Decision D , 5 issued on January 27, In its decision, the Commission directed ATCO Electric to file an application with the Commission for approval of amounts or costs to be paid to or by the Balancing Pool once the sale was completed. 12. In reaching the determinations set out within this decision, the Commission has considered all relevant materials comprising the record of the referenced proceedings relating to the decommissioning and sale of the generating units, including Proceeding 20381, Proceeding 21113, and this proceeding, Proceeding Accordingly, references in this decision to specific parts of the record are intended to assist the reader in understanding the Commission s reasoning relating to a particular matter and should not be taken as an indication that the Commission did not consider all relevant portions of the record with respect to that matter. 3 The application 13. In the application, ATCO Electric requested Commission approval for amounts to be paid into and out of the Balancing Pool related to the sale of the isolated generating units, pursuant to Section 23 of the Regulation, which states: Decommission Approval U : Appendix 1 to Decision :, Decommission Chinchaga Power Plant, Proceeding 3262, Application , June 16, DA :, Decommission Chinchaga Power Plant, Proceeding 3567, Application , December 16, Decision D :, Decommission Chinchaga Power Plant, Proceeding 21120, Application A02, December 11, Decision D :, Approval of Sale Offering for Chinchaga Power Plant, Proceeding 20381, June 29, Decision D :, Approval of Sale Bid for Chinchaga Power Plant, Proceeding 21113, January 27, Decision D (December 20, 2016)

7 23 Before any amounts or costs are paid to or by the Balancing Pool under sections 20 or 22, the Commission must approve the amounts or costs. 14. Section 22(1) of the Regulation states: 22(1) On completing the sale of an isolated generating unit, the owner (a) (b) must pay to the Balancing Pool the proceeds from the sale of the generating unit, is entitled to receive from the Balancing Pool (i) (ii) the net book value of the generating unit, as determined by the Commission, and the reasonable costs of selling the generating unit, and (c) must notify the Commission that the generating unit sold and identify the generating unit. 15. Sections 22 and 23 of the Regulation are located in Part 2 of the Regulation and are applicable to ATCO Electric s sale of the generating units by virtue of Section 26 of the Regulation, which states: Decreased load 26(1) Where an isolated generating unit is no longer required to provide electric energy as a result of an isolated community or industrial area requiring less electric energy or being connected to the interconnected electric system, the owner of the generating unit must decide whether to sell the generating unit. (2) If the owner decides to sell the generating unit, Part 2 applies. 16. ATCO Electric indicated that the total proceeds of the sale of the generating units were $17,200 and requested Commission approval to pay this amount into the Balancing Pool, pursuant to Section 22(1)(a) of the Regulation. 17. In addition, ATCO Electric requested Commission approval for the payment by the Balancing Pool to ATCO Electric of the remaining net book value of the assets in the amount of $546,361.78, pursuant to Section 22(1)(b)(i) of the Regulation. 18. Finally, ATCO Electric requested Commission approval, pursuant to Section 22(1)(b)(ii) of the Regulation, for the payment by the Balancing Pool to ATCO Electric of $3,001.50, related to the advertising costs associated with the selling of the generating units. 3.1 Remaining net book value of generating units 19. As indicated above, ATCO Electric requested Commission approval to recover from the Balancing Pool the remaining net book value of the generating units in the amount of $546,361.78, pursuant to Section 22(1)(b)(i) of the Regulation. Decision D (December 20, 2016) 3

8 20. In Proceeding 20381, the Consumers Coalition of Alberta (CCA) asked by way of an IR (IR ATCO-CCA-2015May26 02(c)) for ATCO Electric to provide the following information: Please provide a) the expected life of the plant at time of installation b) the year of installation c) the forecast remaining life of the plant at the last depreciation study, including either the study itself or a reference to where that study can be reviewed In its response to ATCO-CCA-2015May26 02(c), ATCO Electric indicated that Keyera Energy Partnership (Keyera), the sole customer of the Chinchaga Power Plant, would be responsible for paying the remaining net book value of the generating units: With respect to the accounting treatment of the transaction, upon termination of the contract, Keyera is responsible for paying the remaining NBV [net book value] of the assets to ATCO Electric. ATCO Electric will write-off the NBV of these assets. Once the assets are sold, the proceeds of the sale are paid to the Balancing Pool In the first round of IRs issued in this proceeding, the Commission requested ATCO Electric to provide a copy of the contract it entered into with Keyera for the provision of electric energy to Keyera s facility in the Chinchaga area (the agreement). 8 ATCO Electric filed a copy of the agreement as an attachment to IR response AE-AUC-2016SEP15-002(i). 9 Regarding payment of the net book value of the Chinchaga Power Plant, as well as expenses related to removal of the plant s assets and remediation, the agreement provides the following at Section 2.2: 2.2 Termination Subject to applicable regulations respecting a decrease in load or connection to the AIS [Alberta interconnected electric system], the Customer may terminate this Agreement upon provision of ninety (90) days' prior written notice to the Corporation. In the event of such termination, the Customer will pay to the Corporation the Net Book Value (calculated to the date of such termination) of the Generating Plant plus expenses incurred by the Corporation to remove the Generating Plant and perform Remediation of the Site, including the costs of dismantling, loading, transportation to the Corporation's receiving point and unloading, all demurrage and other costs associated with the removal of the Generating Plant or individual components in connection therewith, less the estimated salvage value. 23. In the first round of IRs, ATCO Electric confirmed that it received a written termination notice of the agreement from Keyera on August 30, In the second round of IRs issued in this proceeding, the Commission asked ATCO Electric to explain why it was seeking payment of the net book value from the Balancing Pool, rather than from Keyera, given; (i) the termination of the agreement by Keyera; (ii) Keyera s obligations under Section 2.2 of the agreement to pay ATCO Electric the net book value of the generating units upon termination of the agreement; and (iii) ATCO Electric s acknowledgment Exhibit X0007, PDF page 2. Exhibit X0010, PDF page 4. Exhibit X0013, IR response AE-AUC-2016SEP15-002(i), PDF page 1. Exhibit X0016, PDF pages Exhibit X0013, IR response AE-AUC-2016SEP15-001(b), PDF page 2. 4 Decision D (December 20, 2016)

9 of this obligation in its response to IR AE-CCA-2015MAY26-002(c). In its response, 11 ATCO Electric maintained: At the time of Proceeding ID (Application requesting approval to sell the Chinchaga units), ATCO Electric had invoiced Keyera for the remaining NBV of the Chinchaga facility. Subsequent to filing the information responses in Proceeding ID 20831, Keyera disputed the invoice, resulting in a review of the contract in light of the governing Isolated Generating Units and Customer Choice Regulation ("the Regulation"). In light of this review, ATCO Electric is not currently seeking and has not received any payment from Keyera for the NBV of the facility. The Section 2.2 termination provision in the agreement is [s]ubject to applicable regulations respecting a decrease in load or connection to the AIS, which ATCO Electric has interpreted as referring to Section 26 of the Regulation and the provisions related thereto. ATCO Electric, having elected to sell the units under Section 26 of the Regulation, is therefore subject to Part 2 of the Regulation (per Section 26(2)). Part 2 of the Regulation requires that the payment of proceeds must be paid to the Balancing Pool, and entitles ATCO Electric to receive the NBV of the generating unit and the reasonable costs of selling the generating unit from the Balancing Pool. Given that Section 26 and Part 2 of the Regulation are applicable and that Section 2.2 of agreement is "subject to" these provisions of the Regulation, ATCO Electric is of the view that the payment of any remaining NBV should also be received from the Balancing Pool consistent with Section 22(1)(b). This interpretation is also consistent with Section 12.1(b) of the agreement, which provides that the Regulation is to take precedence over any conflicting terms of agreement. 25. Section 12.1 of the agreement, which is referred to in ATCO Electric s response, provides the following: 12.1 Compliance a) This Agreement is subject to all applicable orders, rules and regulations of the Board, and any other regulatory authority having jurisdiction over the operations of the Corporation. b) In the event that any terms of this Agreement conflict with the provisions of Subsection 12.1 a), such provisions shall supersede the conflicting terms of this Agreement and shall govern. 26. The Commission also asked ATCO Electric to explain why the subject to applicable regulations respecting a decrease in load or connection to the AIS provision in Section 2.2 of the agreement applied to Keyera s net book value payment obligation as opposed to the ability of Keyera to provide notice of termination, and why the provision in Section 22(1)(b)(i) of the Regulation is applicable where the utility has entered into an agreement where the customer has agreed to pay the remaining net book value. In its response, ATCO Electric submitted: ATCO Electric's interpretation of Section 2.2 of the agreement is that the phrase "subject to applicable regulations respecting a decrease in load or connection to the AIS" is not applicable only to Keyera's ability to provide notice of termination. This is because where 11 Exhibit X0022, PDF page 5. Decision D (December 20, 2016) 5

10 Section 26(2) of the Regulation is applicable (as is the case here), Part 2 applies and establishes a legislation process for the recovery of the NBV and payment of the sale proceeds to and from the AESO ATCO Electric also maintained that whether an agreement is in place or not with a specific customer, is not a prerequisite to determining whether or not Section 22(1)(b)(i) of the Regulation applies. Further, ATCO Electric submitted that the Commission s IRs seem to imply that only Section 22(1)(a) of the Regulation, which requires that the owner pay the proceeds of the sale to the Balancing Pool, would apply to the generating units, and not Section 22(1)(b)(i); this interpretation, in ATCO Electric s view, is not in the public interest as the lack of uniform application of the law creates regulatory and legal uncertainty. ATCO Electric further maintained: ATCO Electric is not aware of any legal authority that would permit a contractual term to supersede the obligations or entitlements under applicable legislation, with the result that some, but not all applicable legislated provisions would apply to a particular situation. In this case, the Commission's prior decisions have determined that Section 26 and Part 2 of the Regulation apply to the sale of the Chinchaga units. Therefore, in ATCO Electric's view, the Regulation governs all payments to and from the Balancing Pool. It is also consistent with Section 12.1 of the agreement, which provides that the Agreement is subject to all applicable orders, rules and regulations of the Commission, and that such orders, rules and regulations supersede over any conflicting terms of the agreement Commission findings 28. Given that the Commission has approved the sale offering for the generating units and the sale bid received for the generating units in Decision D and Decision D , respectively, and given that Section 22(1)(a) of the Regulation requires ATCO Electric to pay to the Balancing Pool the proceeds from the sale of the generating units, the Commission approves ATCO Electric s request to pay to the Balancing Pool the amount of $17,200 related to the proceeds from the sale of the generating units. 29. Upon review of the application and of ATCO Electric s IR responses in this proceeding and in Proceeding 20381, the Commission is of the view that Keyera is responsible for paying the remaining net book value of the isolated generating units pursuant to Section 2.2 of the agreement and, therefore, has determined that the net book value of the generating units to be recovered from the Balancing Pool is $ The Commission considers that the wording of Section 2.2 of the agreement clearly suggests that the parties intended for Keyera to pay the remaining net book value of the generating units in the event that it terminated the agreement. This interpretation of Section 2.2 is further reinforced by ATCO Electric s response to ATCO-CCA-2015May26 02(c), and the fact that ATCO Electric invoiced Keyera for the remaining net book value amount of the generating units. ATCO Electric submitted that Keyera disputed the invoice, resulting in the parties reviewing the contract in light of the governing Isolated Generating Units and Customer Choice Regulation. ATCO Electric submitted that as the parties reviewed the agreement, it Exhibit X0022, IR response AE-AUC-2016NOV23-001(c), PDF page 6. Exhibit X0022, IR response AE-AUC-2016NOV23-001(c), PDF page 7. 6 Decision D (December 20, 2016)

11 ceased its attempts to recover the net book value from Keyera. The Commission finds that ATCO Electric failed to adequately justify why it agreed to review the contract instead of enforcing the terms of the agreement against Keyera. 31. Even though ATCO Electric originally attempted to recover the net book value of the generating units from Keyera, it now contends that the Subject to applicable regulations respecting a decrease in load or connection to the AIS provision in Section 2.2 of the agreement releases Keyera from its obligation to pay the net book value of the generating units in light of the provision of Section 22(1)(b)(i) of the Regulation. As a result of this provision in the Regulation, ATCO Electric now submits that the Balancing Pool, and not Keyera, must pay the remaining net book value of the generating units. The Commission finds, however, that given that Section 22(1)(b)(i) of the Regulation was already in effect when ATCO Electric and Keyera signed the agreement, the most reasonable interpretation of Section 2.2 is that the parties intended for Keyera to be responsible for payment of the net book value of the generating units despite the provision in Section 22(1)(b)(i) of the Regulation and that the subject to language only applied to the giving notice to terminate. 32. In any event, even if the Commission were to agree with ATCO Electric s interpretation of Section 2.2 of the agreement, Keyera would nevertheless be responsible for paying the net book value of the generating units as the Commission finds that Section 2.2 of the agreement is not in conflict with the provision in Section 22(1)(b)(i) of the Regulation. Section 22(1)(b)(i) reads as follows: 22(1) On completing the sale of an isolated generating unit, the owner ( ) (b)is entitled to receive from the Balancing Pool (i) the net book value of the generating unit, as determined by the Commission, and [emphasis added] 33. In circumstances such as the present, where the customer has agreed to pay ATCO Electric the entire remaining net book value of the generating unit upon giving notice to terminate, the Commission finds that this obligation is not in conflict with either Section 26 or Section 22(1)(b)(i) of the Regulation. Both sections continue to apply. However, the net book value to be paid by the Balancing Pool to ATCO Electric is determined by the Commission to be $0. As the Commission finds that the provisions of the agreement and the Regulation are not mutually exclusive, the Commission is not persuaded by ATCO Electric s argument that enforcing Keyera s contractual obligation to pay the net book value of the generating units would have the effect of permitting a contractual term to supersede the Regulation. 34. ATCO Electric also relies on Section 12.1 of the agreement in support of its submission that the Regulation should apply in the present case with the effect of releasing Keyera from its obligation to pay the remaining net book value of the generating units. 35. As previously discussed by the Commission, Keyera s obligation to pay the net book value under Section 2.2 of the agreement is consistent with the terms of the Regulation and is not in conflict with any order, rule or regulation of the Commission. Therefore, the Commission Decision D (December 20, 2016) 7

12 finds that the provision under Section 12.1 of the agreement does not support ATCO Electric s claim. 36. Accordingly, the Commission denies ATCO Electric s request to recover the remaining net book value of the isolated generating units in the amount of $546, from the Balancing Pool. Further, the Commission directs that the remaining net book value of the generating units shall not be recovered from customers. 37. ATCO Electric incurred selling costs with respect to the sale of the generating units in the amount of of $3, The Commision finds the selling costs to be reasonable. Given that Section 2.2 of the agreement does not specifically refer to selling costs as costs to be paid by Keyera upon its termination of the agreement, the Commission will allow ATCO Electric to recover this amount from the Balancing Pool. Therefore, pursuant to Section 22(1)(b)(ii) of the Regulation, the Commission approves ATCO Electric s request to recover the selling costs with respect to the sale of the generating units in the amount of of $3, from the Balancing Pool. 5 Order 38. It is hereby ordered that: (1) ATCO Electric shall pay to the Balancing Pool the total proceeds from the sale of the Chinchaga Power Plant units, in the sum of $17,200. (2) The Balancing Pool shall pay ATCO Electric the amount of $3, for recovery of ATCO Electric s selling costs related to the Chinchaga Power Plant units. Dated on December 20, Alberta Utilities Commission (original signed by) Neil Jamieson Commission Member 8 Decision D (December 20, 2016)

13 Appendix 1 Proceeding participants Name of organization Company name of counsel or representative Alberta Utilities Commission Commission panel N. Jamieson, Commission member Commission staff L. Desaulniers (Commission counsel) D. Cherniwchan Decision D (December 20, 2016) 9

14 Appendix 2 Summary of Commission directions This section is provided for the convenience of readers. In the event of any difference between the directions in this section and those in the main body of the decision, the wording in the main body of the decision shall prevail. 1. Accordingly, the Commission denies ATCO Electric s request to recover the remaining net book value of the isolated generating units in the amount of $546, from the Balancing Pool. Further, the Commission directs that the remaining net book value of the generating units shall not be recovered from customers.... Paragraph Decision D (December 20, 2016)