Decision D FortisAlberta Inc.

Transcription

1 Decision D Light-Emitting Diode Lighting Conversion Maintenance Multiplier Filing January 30, 2018

2 Alberta Utilities Commission Decision D Light-Emitting Diode Lighting Conversion Maintenance Multiplier Filing for a Further 57 Communities in 2018 Proceeding January 30, 2018 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 Discussion of issues... 3 Appendix 1 Proceeding participants... 9 Appendix 2 Summary of Commission directions Appendix 3 List of 57 communities to which the LED lighting conversion maintenance multiplier of 1.09 will apply... 11

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5 Alberta Utilities Commission Calgary, Alberta Light-Emitting Diode Lighting Conversion Maintenance Multiplier Filing for a Further Decision D Communities in 2018 Proceeding Introduction 1. On November 6, 2017, filed its light-emitting diode (LED) lighting conversion maintenance multiplier tariff mechanism. It sought the Alberta Utilities Commission s acknowledgement of, and approval for, the application of its LED lighting conversion maintenance multiplier of 1.09 for a further 57 communities in Fortis provided a list of the affected communities as an attachment to the application, 2 also listed in Appendix 3 to this decision. 2. The Commission issued notice of the application on November 7, 2017, asking interested parties who may be affected by this application to register their concerns or support for the application to the Commission by November 21, Notice of the application was posted on the Commission s website and delivered to all parties subscribing to the global notifications in the Commission s efiling System. The Commission did not receive any statements of intent (SIPs) to participate. 3. The Commission observed that none of the 57 communities received notice of the application through the efiling System and decided to issue an updated notice of the application on November 23, 2017, with an extended deadline for parties to register their concerns or support for the application by December 12, Given that Fortis had pre-established communication channels with the 57 communities, the Commission directed Fortis to forward the updated notice of application to the communities by November 28, 2017, and provide confirmation of having done so to the Commission in writing within two business days of that deadline. 4. On November 28, 2017, Fortis filed a letter confirming that the updated notice of application was forwarded to all 57 communities via on November 24, The Commission did not receive any SIPs. 5. Upon reviewing the filing, the Commission determined that it required further information to render a decision and issued information requests (IRs), to which Fortis responded on December 12, Exhibit X0002, application, paragraph 1. 2 Exhibit X0002, application, paragraphs 11 and 28; Exhibit X0003, Appendix A-1 list of municipalities acknowledgement letters. 3 Exhibit X0011, Fortis confirmation letter to AUC. Decision D (January 30, 2018) 1

6 6. The Commission has reviewed this filing as a basic written proceeding, as outlined in Commission Bulletin , 4 and considers the record for this proceeding to have closed on December 12, In reaching the determinations set out in this decision, the Commission has considered all relevant materials comprising the record of this proceeding, as well as related information and decisions. 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 this matter. 2 Background 8. In Decision , 5 the Alberta Energy and Utilities Board (board), the Commission s predecessor, approved the inclusion of a maintenance multiplier mechanism in Fortis distribution tariff. The mechanism is included in the currently approved rate sheet for Rate 31 (street lighting service) and is applied to the distribution component charges ($/fixture-day) for a relevant customer s street lighting fixtures The maintenance multiplier was approved by the board to enable external lighting customers who desired a higher than usual level of service to receive that service, provided the costs incurred to provide the higher level of service were paid for by the customer making the request. The initial multiplier was set to a default value of 1.0 with a different multiplier to be calculated and applied to each customer request In Decision , the board directed Fortis as follows: The Board directs [Fortis], upon preliminary agreement with a customer requesting maintenance or operation levels above the standard service level, to prepare an analysis and multiplier calculation which examines the specific and direct costs of providing that service. The Board directs [Fortis] to confer with customers requesting the higher service levels upon completion of their multiplier calculation, provide information regarding the cost of the higher service level, and confirm customer acceptance. If the customer agrees with the multiplier proposal, the information should be filed with the Board for information purposes. Preparation of the detailed analysis should ensure other customers will not subsidize the customer with the special request. This analysis should also ensure the customer with the special request will not be double charged by way of the multiplier as they are already entitled to the standard level of service through their current rates. 8 4 Bulletin , Performance standards for processing rate-related applications, March 26, Decision :, 2006/2007 Distribution Tariff Phase II and Other Matters, Proceeding 15136, Application , October 16, Exhibit X0002, application, paragraphs Decision , Section 9.3.1, pages Decision , Section 9.3.1, page Decision D (January 30, 2018)

7 11. The current proceeding is the fourth time Fortis has proposed to use the LED maintenance multiplier. In Decision D , 9 Decision D and Decision D , 11 the Commission considered Fortis first three proposals to use the maintenance multiplier. In all three decisions, the Commission determined that the directions issued to Fortis by the board in Decision were still applicable to Fortis approved tariff and found that Fortis had complied with each of the directions Discussion of issues 12. In its filing for this proceeding, Fortis stated that an additional 57 communities (listed in Appendix 3 to this decision) have requested an LED lighting conversion in 2018 under the maintenance multiplier mechanism Fortis provided customer acknowledgement letters as an attachment to the application, demonstrating that Fortis provided information regarding the higher cost of the service, the maintenance multiplier calculation itself, and the conditions under which the calculation and associated charges to the customer requesting the higher service level can change Fortis calculated the LED lighting conversion maintenance multiplier to be 1.09 under the Rate 31 distribution charge to be applied until it is modified by subsequent Commission approval. 15 This multiplier adjusts the approved distribution charges, corresponding to the standard level of service, to account for incremental costs (net of any savings) associated with the higher service level resulting from LED lighting conversion. These net incremental costs reflect the estimated revenue requirement, on an average annualized per-fixture basis, composed of: (a) (b) (c) total LED installation costs; cost of LED removal, based on useful life; and maintenance savings due to the reduced need for street light patrols to identify and replace high pressure sodium (HPS) fixtures that are no longer working, and the avoidance of capital costs related to the re-lamping of the old HPS fixtures Fortis noted that it held constant its cost assumptions for the incremental distribution capital cost and maintenance cost savings with estimates in its original cost analysis provided in 9 Decision D :, Light-Emitting Diode Lighting Conversion Maintenance Multiplier, Proceeding 21512, June 15, Decision D :, Light-Emitting Diode Lighting Conversion Maintenance Multiplier for the City of St. Albert, Proceeding 21754, August 11, Decision D :, Light-Emitting Diode Lighting Conversion Maintenance Multiplier for a Further 130 Municipalities in 2017, Proceeding 22381, March 31, Decision D , page 3; Decision D , pages 3-4; Decision D , pages Exhibit X0002, application, paragraph Exhibit X0002, application, paragraphs 27-28; Exhibit X0004, Appendix A-1 to A-57, Municipality acknowledgement letters (signature pages only); Exhibit X0005, Appendix B, Pro-forma municipality acknowledgement letter. 15 Exhibit X0002, application, paragraphs 11, Exhibit X0002, application, paragraphs Decision D (January 30, 2018) 3

8 the 2016 customer consultations and filings and completed on an average annualized per-fixture basis, assuming that an estimated 79,720 fixtures would be converted to LED lighting technology over a period of three to five years. Fortis maintained that, because the LED lighting conversion is still in the early stages of deployment, it is reasonable for these assumptions to be held constant In an IR, the Commission observed that in calculating the multiplier, Fortis assumed a useful service life of 25 years and a cost of removal equal to 15 per cent of the LED installation cost. The Commission asked Fortis to explain the basis for these assumptions. In response, Fortis stated that the 25-year service life assumption is based on the manufacturer s specification for the LED fixtures, and its assumption regarding a 15 per cent cost of LED fixture removal is based on the application of depreciation parameters approved in Decision Fortis further explained: (b) Depreciation is incorporated in the calculation used to determine the $38.44 capital cost per fixture-year amount. FortisAlberta s average per fixture cost is intended to recover depreciation and return for all fixtures based on the simplifying assumption that they were all installed at the beginning of the first year of the program. As the Company confirmed in Proceeding 21512, Rate 31 HPS fixtures will be converted to LED technology in the near term. (d) the effects of depreciation are incorporated in the calculation of the 1.09 maintenance multiplier. The same multiplier is applied to all LED fixtures regardless of whether they were installed in 2016, 2017, or Adjustment of the multiplier to specifically account for accumulated depreciation of fixtures installed to date is unlikely to materially affect its size. The reasons for this include 1) the short time frame involved; 2) the limited overall precision of the calculation, which determines the multiplier to two decimal places; and 3) the fact that the multiplier is subsequently applied to an average Rate 31 fixture charge, which incorporates all fixtures on the FortisAlberta system In its response to a Commission IR, Fortis provided a further breakdown of its calculation of the LED lighting conversion maintenance multiplier of 1.09, 21 and indicated that on January 1, 2016, Fortis established a new default lighting standard designating LED lighting technology for all new lighting installations. The LED conversion program is also approaching full deployment. Consequently, Fortis expects to complete further cost analysis in its upcoming Phase II distribution tariff application (DTA) to determine the ongoing suitability of the multiplier approach Exhibit X0002, application, paragraph Decision :, Application for Approval of a Negotiated Settlement Agreement in respect of 2012 Phase I Distribution Tariff Application, Proceeding 1147, Application , April 18, Exhibit X0015, FAI-AUC-2017DEC05-001(c). 20 Exhibit X0015, FAI-AUC-2017DEC05-001(b), (d). 21 Exhibit X0014, Attachment FAI-AUC-2017DEC Exhibit X0015, FAI-AUC-2017DEC05-001(i). 4 Decision D (January 30, 2018)

9 18. In Decision D and Decision D , the Commission considered Fortis first two proposals to use the maintenance multiplier and acknowledged and accepted the LED lighting conversion maintenance multiplier of In Decision D , the Commission acknowledged and accepted the downward adjustment for the LED lighting conversion maintenance multiplier from 1.10 to The new lower value of 1.09 arose because the unchanged net incremental costs represented a smaller percentage of the approved Rate 31 distribution charge which increased by 6.5 per cent Fortis indicated that the revised LED lighting conversion maintenance multiplier of 1.09 proposed for the 57 communities is the same value that was accepted in Decision D Fortis explained that this is because the 2018 interim performance-based regulation (PBR) rates are a continuation of the 2017 PBR rates, as directed by the Commission, 27 and that the calculation of the LED lighting conversion maintenance multiplier for 2018 is identical to that accepted by the Commission in Decision D Fortis estimated the 2018 total bill impact for a typical LED lighting conversion maintenance multiplier customer, with 100-watt HPS fixtures converted to LED fixtures, to be approximately 1.8 per cent lower. It explained that although the LED conversion customers will experience a nine per cent increase in their distribution component charges due to the lighting conversion maintenance multiplier, these customers are expected to experience a reduction in their retail energy and transmission system access charges (generally calculated based on the energy consumption) because LED fixtures and drivers consume substantially less energy than HPS lamps and ballasts In Decision , the board directed Fortis: to report on the level of administrative burden and effectiveness of the maintenance multiplier process, at the time of the next DTA. The Board is interested in reviewing how the process has worked, and directs Fortis to provide information on the maintenance multipliers in use at the time of the next DTA where the use of the maintenance multiplier will be reviewed as to its continued appropriateness Fortis confirmed that it will respond to this direction in its next Phase II DTA Decision D , paragraphs 8 and 16; Decision D , paragraphs 12 and Decision D :, 2017 Annual Performance-Based Regulation Rate Adjustment Filing, Proceeding 21980, December 23, Decision D , paragraphs 13 and Exhibit X0002, application, paragraph Proceeding 22394, Exhibit X0398, AUC letter, October 12, 2017, paragraph 3: the Commission has determined that, effective January 1, 2018, each of the utilities will continue with its approved 2017 annual PBR rates on an interim basis until and unless otherwise approved by the Commission. 28 Decision D , paragraph Exhibit X0002, application, paragraphs Exhibit X0002, application, paragraph Decision , Section 9.3.1, page Exhibit X0002, application, paragraph 30. Decision D (January 30, 2018) 5

10 Commission findings 24. The directions issued to Fortis by the board relating to the calculation and application of the maintenance multiplier are still applicable to Fortis currently approved tariff. 25. The Commission finds that Fortis has complied with each of the directions issued by the board in Decision , specifically: Fortis provided an analysis and maintenance multiplier calculation which examines the specific and direct costs of providing the LED conversion service. The customer acknowledgement letters demonstrate that Fortis provided information regarding the higher cost of the service, the maintenance multiplier calculation itself, and the conditions under which the calculation and associated charges to the customer requesting the higher service level can change. The municipal customers have accepted the conditions of service as demonstrated by the customer signature on each of the 57 acknowledgement letters. As well, the letter included a clause acknowledging that Fortis has presented all material required by the customer to make an informed decision. The Commission is satisfied by the explanation and analysis provided by Fortis that other customers will not be subsidizing the 57 communities with the special (LED) request, nor will the customer with the special request be double charged by way of the maintenance multiplier for both the special request and the standard level of service. Fortis confirmed that it will report on the level of administrative burden and effectiveness of the maintenance multiplier process at the time of the next Phase II DTA. 26. The Commission asked a number of IRs in relation to Fortis calculation of the LED lighting conversion multiplier and is satisfied with the responses. 27. Accordingly, the Commission acknowledges and accepts Fortis revised LED lighting conversion maintenance multiplier of 1.09 under its distribution tariff, to be applicable to the 57 communities listed in Appendix 3 to this decision. 28. Fortis has indicated that the LED lighting conversion program is approaching full deployment and Fortis expects to complete further cost analysis in its upcoming Phase II DTA to determine the ongoing suitability of the multiplier approach. The Commission acknowledges this and directs Fortis to complete a new cost analysis of the LED lighting conversion maintenance multiplier and its ongoing suitability at the time of the next Phase II DTA. 29. In future LED lighting conversion maintenance multiplier filings, the Commission directs Fortis to forward the notice of application issued by the Commission to the affected customers and provide written confirmation of having done so to the Commission within three business days of the issuance of the notice of application. 6 Decision D (January 30, 2018)

11 Dated on January 30, Alberta Utilities Commission (original signed by) Mark Kolesar Vice-Chair Decision D (January 30, 2018) 7

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13 Appendix 1 Proceeding participants Name of organization (abbreviation) Company name of counsel or representative (Fortis or FAI) Alberta Utilities Commission Commission panel M. Kolesar, Vice-Chair Commission staff D. Reese (Commission counsel) E. Deryabina R. Lucas Decision D (January 30, 2018) 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. Fortis has indicated that the LED lighting conversion program is approaching full deployment and Fortis expects to complete further cost analysis in its upcoming Phase II DTA to determine the ongoing suitability of the multiplier approach. The Commission acknowledges this and directs Fortis to complete a new cost analysis of the LED lighting conversion maintenance multiplier and its ongoing suitability at the time of the next Phase II DTA.... Paragraph In future LED lighting conversion maintenance multiplier filings, the Commission directs Fortis to forward the notice of application issued by the Commission to the affected customers and provide written confirmation of having done so to the Commission within three business days of the issuance of the notice of application.... Paragraph Decision D (January 30, 2018)

15 Appendix 3 List of 57 communities to which the LED lighting conversion maintenance multiplier of 1.09 will apply (return to text) Community name Community type 1 Airdrie City 2 Alexander First Nation 3 Alix Village 4 Barrhead County 5 Bentley Town 6 Birch Cove Summer Village 7 Brooks City 8 Cardston County 9 Champion Village 10 Clearwater County 11 Clyde Village 12 Cochrane Town 13 Crossfield Town 14 Cypress County 15 Enoch Cree First Nation 16 Flagstaff County 17 Foothills Municipal District 18 Foremost Village 19 Granum Town 20 Gull Lake Summer Village 21 Jarvis Bay Summer Village 22 Kikino Metis Settlement 23 Lac Ste Anne County 24 Lacombe County 25 Lethbridge County 26 Mayerthorpe Town 27 Mountain View County 28 Newell County 29 No 2 Special Areas 30 O Chiese First Nation 31 Olds Town 32 Parkland Beach Summer Village 33 Paul First Nation 34 Pincher Creek Municipal District 35 Ponoka County 36 Rimbey Town 37 Rocky Mountain House Town 38 Rockyford Village 39 Rockyview County 40 Ross Haven Summer Village Decision D (January 30, 2018) 11

16 Community name Community type 41 Samson Cree First Nation 42 Siksika First Nation 43 Standard Village 44 Stoney First Nation 45 Strathcona County 46 Strathmore Town 47 Sturgeon County 48 Sylvan Lake Town 49 Taber Municipal District 50 Thorhild County 51 Val Quentin Summer Village 52 Vulcan County 53 Warner County 54 Whitecourt Town 55 Willow Creek Municipal District 56 Woodlands County 57 Yellowhead County 12 Decision D (January 30, 2018)