ENMAX Energy Corporation

Transcription

1 Decision D Energy Price Setting Plan Compliance Filing October 30, 2017

2 Alberta Utilities Commission Decision D Energy Price Setting Plan Compliance Filing Proceeding October 30, 2017 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 Costs of the RRO trader Direction Physical separation of the RRO trader Direction Code of Conduct Regulation Section 17 Direction EPSP definitions and organization directions 8, 21, 27, Other issues related to EPSP definitions and organization Previous Commission directions on EPSP procurement directions 2, 5, 6, and Previous Commission directions on the energy rate calculation directions 1, 22, and Previous Commission directions on the monthly energy rate filings directions 4, and Affidavit of Mr. Fulton Direction Confidentiality Term of the EPSP Order Appendix 1 Proceeding participants Appendix 2 Summary of Commission directions Appendix 3 EEC EPSP with Commission comments Decision D (October 30, 2017) i

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5 Alberta Utilities Commission Calgary, Alberta Decision D Energy Price Setting Plan Compliance Filing Proceeding Introduction 1. On March 31, 2017, (EEC) filed an application with the Alberta Utilities Commission requesting approval of its regulated rate option (RRO) energy price setting plan (EPSP) compliance filing (the application). This application was filed in response to the Commission s determinations and directions in Decision D The Commission issued a notice of application on April 4, 2017, inviting parties who wished to intervene in this proceeding to submit a statement of intent to participate (SIP) by the participation closing deadline of April 18, The Commission received SIPs from the Consumers Coalition of Alberta (CCA), the Office of the Utilities Consumer Advocate (UCA) and the Market Surveillance Administrator. 3. The Commission established a written process for this proceeding, including two rounds of public and confidential information requests (IRs), written argument and written reply argument. 4. On April 25, 2017, the Commission issued a letter in which it directed EEC to file its EPSP as a separate, stand-alone document, as directed in paragraph 586 of Decision D EEC filed the requested documents on May 8, Written reply argument was received on August 1, The Commission considers that the close of record for this proceeding is August 1, Background 6. Prior to EEC s application in Proceeding 20448, EEC submitted a proposed EPSP for as part of the Commission-initiated generic proceeding on the regulated rate tariff (Proceeding 2941). As part of its decision on Proceeding 2941, the Commission denied the EPSP that EEC proposed in that proceeding, with the exception of the reasonable return component. Decision 2941-D , 2 stated: 781. The Commission considers that EEC s proposals for procurement and the setting of the BEC [base energy charge] comprise the majority of EEC s EPSP, primarily because the BEC is the single largest component of the monthly energy charge. The Commission finds that the proposed EPSP submitted by EEC cannot be approved as filed. While the reasonable return is a component of EEC s proposed EPSP, it is 1 Decision D :, Energy Price Setting Plan, Proceeding 20448, January 30, Decision 2941-D : Direct Energy Regulated Services, and EPCOR Energy Alberta GP Inc., Regulated Rate Tariff and Energy Price Setting Plans Generic Proceeding: Part B Final Decision, Proceeding 2941, Application , March 10, Decision D (October 30, 2017) 1

6 Energy Price Setting Plan Compliance Filing essentially a standalone component and it does not affect the procurement methodology or the setting of the BEC. Therefore, the Commission s denial of the entirety of EEC s proposed EPSP applies to all aspects of that proposed EPSP, with the exception of the reasonable return. 7. The Commission, in Decision 2941-D , also directed EEC to submit a new EPSP proposal. 3 EEC submitted its new EPSP proposal in Proceeding In Decision D , the Commission approved a number of aspects of EEC s EPSP and ordered EEC to file a compliance filing by no later than February 28, After receiving an extension of the deadline, EEC filed its compliance filing in this proceeding. 8. In reaching the determinations set out within this decision, the Commission has considered all relevant materials comprising the record of this proceeding, including the evidence, argument and reply argument, provided by each party. 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 Costs of the RRO trader Direction 9 9. At paragraph of Decision D , the Commission issued the following direction with respect to the costs of the RRO trader: 271. Accordingly, the Commission rejects EEC s proposal for an annual cost to be included for the dedicated trader and backup trader. For the above reasons, the Commission finds that it is unable to make a determination as to what proportion of the costs associated with the dedicated trader and backup trader should be allocated to EEC s RRO customers. Accordingly, the Commission directs EEC to provide a proposal for the costs of a dedicated trader, as part of its compliance filing to this decision, that includes evidentiary support, including evidence on the performance and costs of actual EEC traders and any information on relevant market rates for trading services, in order to demonstrate that the proposed cost for the dedicated trader position is reasonable for the services to be provided to the RRO. 10. EEC included its proposal for determining the cost of the RRO trader in Appendix D of the application. In calculating the cost for the RRO trader, EEC established a starting point for the proposal, which was the fully loaded average compensation for all of EEC s traders. Next EEC estimated the amount of time the RRO trader is likely to spend on RRO-related activities in two categories: (1) RRO bidding and administration, and (2) market analysis and fundamentals. EEC based the estimate for RRO bidding and administration on a review of the time stamps for all flat and peak RRO trades from December 19, 2011 to January 11, EEC estimated the market analysis and fundamentals time based on discussions with EEC s vice president of trading and origination. EEC also added an increment to account for the increased complexity of procurement under the new EPSP. 5 3 Decision 2941-D , paragraph Direction 9. 5 Exhibit X0001, Appendix D, PDF page Decision D (October 30, 2017)

7 Energy Price Setting Plan Compliance Filing 11. This analysis resulted in EEC s proposed RRO trader costs of $175,100 per year, which EEC proposed be escalated by an annual inflation rate of 2.1 per cent based on the Calgary Consumer Price Index In response to a UCA IR, EEC explained that market analysis and fundamentals includes analysis of outages, tie line activity, weather, wind, supply demand, derates and other matters that have the potential to affect prices. 8 EEC argued that these activities are required to trade effectively for both the RRO and the unregulated business, and if a portion of the costs is not allocated to the RRO, EEC s unregulated business will be unfairly subsidizing the RRO EEC supported its use of the fully loaded average compensation of its traders by noting that the RRO trader must still use the skills and experience of a trader and also that the procurement process is complex With respect to the Commission s direction that EEC s proposal include information on relevant market rates for trading services, EEC stated that it does not have information on the cost of third-party trading services. EEC added that such information would not be useful because the Commission approved the use of a trader provided by EEC Wholesale Trading and EEC s proposal uses the actual cost of such a trader. 11 Views of the parties 15. The UCA submitted that EEC s proposed percentage of the RRO trader costs to allocate to the RRO is unreasonable and inconsistent with EEC s own evidence that the RRO trader would act as an order taker and has an inherent incentive to transact at the first available opportunity. 12 The UCA submitted that EEC s use of RRO trade time stamps from December 19, 2011 to January 11, 2017 to determine the average amount of time spent on direct RRO bidding and administration was absent any discussion of the changes to the RRO trader s role compared to the current EPSP. These changes include the removal of incentives for the trader, acting as an order taker, and the incentive to transact at the first available opportunity, as a result of the proposed daily target price mechanism. 16. Given EEC s admission with respect to the RRO trader s incentive to transact at the first opportunity, the UCA submitted that EEC s suggestion that the RRO trader will spend two hours per day performing fundamental analysis of the power market appears disingenuous. The UCA 6 7 Exhibit X0001, Appendix D, PDF page Exhibit X0045, response to EEC-CCA-2017MAY24-006(f). 9 Exhibit X0051, EEC argument, paragraph Exhibit X0051, EEC argument, paragraph Exhibit X0051, EEC argument, paragraph Decision D , paragraphs 159 and 408. Decision D (October 30, 2017) 3

8 Energy Price Setting Plan Compliance Filing submitted that EEC is relabelling idle time, as referenced by EEC in Proceeding 20448, as market analysis and fundamentals EEC replied that the UCA is mischaracterizing EEC s evidence from Proceeding EEC s references to idle time in that proceeding were related to using a dedicated, full time RRO trader In response to a UCA IR, asking why the RRO trader, as an order taker, will be required to carry out market analysis, EEC responded that order taker characterizes the mechanistic nature of EEC s EPSP. EEC stated that the RRO trader has full discretion to determine how best to procure volumes for the RRO. In addition, the procurement process is complex, it requires professional knowledge, and there are benefits that flow to the RRO as a result of the trader s over-the-counter (OTC) trading relationships The UCA referred to this response as problematic, and stated that the response casts considerable doubt on EEC s proposed allocation of the RRO trader costs. The UCA submitted that, in the absence of an incentive to ride the market down, as acknowledged by EEC in Proceeding 20448, 16 the RRO trader truly is a passive order taker and is not concerned with market trends, weather patterns, potential outages and other factors when trading for the RRO. Accordingly, the UCA submitted that there is no support for the suggestion the RRO trader will be engaging in extensive market analysis as part of his or her RRO duties. The UCA added that those duties are of more benefit when trading for EEC Wholesale Trading, where traders are encouraged to speculate on market movements to obtain advantageous prices. The UCA submitted further that there is nothing to suggest that EEC has properly accounted for the benefit of these activities to EEC Wholesale Trading The CCA also argued that functions such as market analysis are not needed for a trader whose primary function is that of an order taker, and that customers should not pay for these services. Accordingly, the CCA recommended that only 50 per cent of the average compensation of a regular full-time EEC trader be approved EEC replied that this starting point is unreasonable and arbitrary. The RRO trader cannot carry out unregulated duties while acting as the RRO trader and, therefore, the only reasonable way to allocate the cost of the RRO trader is based on the relative time spent on both activities In reply argument, EEC submitted that analyzing market trends, building OTC trading relationships, and analyzing weather patterns, potential outages and other factors that may affect the market are all required to trade for the RRO. Therefore, if a portion of the costs associated with those activities is not allocated to the RRO, EEC s unregulated business will be unfairly subsidizing the RRO Exhibit X0053, UCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0046, response to EEC-UCA-2017MAY24-003(d). 16 Exhibit X0239, response to EEC-CCA-2016JUN03-025(e). 17 Exhibit X0053, UCA reply argument, paragraph Exhibit X0054, CCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0069, EEC reply argument, paragraph 9. 4 Decision D (October 30, 2017)

9 Energy Price Setting Plan Compliance Filing 23. The UCA objected to EEC basing the RRO trader s costs on the average compensation for EEC s traders based on the distinction, put forth by Mr. Beblow in Proceeding 20448, between a hedger and a trader. According to Mr. Beblow, a trader takes on risk to generate profit while a hedger executes transactions to reduce risk. 21 The UCA submitted that a hedger requires considerably less skill than a trader and, therefore, EEC s proposed allocation of the RRO trader costs is unreasonable EEC replied that, even if the UCA were correct that the RRO procurement role is that of a hedger, rather than a trader, the Commission has approved the use of an EEC trader and EEC employs traders, not hedgers. Since the RRO trader is being provided by EEC, the actual cost to EEC is the best starting point for determining the cost to be borne by the RRO The UCA submitted that EEC had declined to provide any information on relevant market rates for trading services, as directed by the Commission in paragraph 271 of Decision D In response to a UCA IR on this subject, EEC stated that the ENMAX group of companies reviews its non-union salaries annually and sets that compensation based on third party advice and compensation surveys, which are used to establish market medians for various positions. For this reason, EEC stated that its RRO trader compensation proposal incorporates market information regarding compensation for similar positions EEC added that it does not have information on market rates for trading services and that it did not interpret the Commission s direction as requiring EEC to seek out that information, but instead to only provide it if EEC had it The UCA submitted that given the nature of the RRO trader as an order taker, any minimal amount of market analysis should be completed during the time estimated for RRO bidding and administration. 26 According to the UCA, this reduction would result in RRO trader costs allocated to the RRO of. 27 The UCA noted that it presented evidence recommending a number of $58,200 per year in Proceeding While the Commission rejected this evidence due to a lack of evidentiary support, the UCA submitted that EEC declined to provide any quantifiable information on the market rate for traders and therefore submitted that the only fair approach is to take the midpoint of these two values, which is With respect to the increased complexity and need to procure up to eight products concurrently as a result of moving to 120-day procurement, the CCA stated that it does not object to the amount of time estimated, until EEC is able to provide evidence based on a log of the time spent by the RRO trader on RRO activities. However, the CCA submitted that EEC should be directed to provide the AUC with a log of the RRO trader s time for the first three months under the EPSP. If the log indicates that EEC s estimate is too high, the CCA 21 Proceeding 20448, oral hearing Transcript, Volume 5, page Exhibit X0053, UCA argument, paragraph Exhibit X0069, EEC replay argument, paragraph Exhibit X0046, response to EEC-UCA-2017MAY24-003(f). 25 Exhibit X0069, EEC reply argument, paragraph Exhibit X0053, UCA argument, paragraph Exhibit X0053, UCA argument, paragraph 52 and Decision D (October 30, 2017) 5

10 Energy Price Setting Plan Compliance Filing submitted that EEC should be required to use the average actual hours spent by the RRO trader for the remaining months of the EPSP in its monthly rate calculations EEC opposed this suggestion because its allocation is based on the best information available at the time of its application and is supported by reasonable analysis. EEC submitted that its allocation should be approved for the full remaining term of the EPSP. 30 Commission findings 30. EEC s forecast costs for the RRO trader and a backup trader are based on the fully loaded average compensation for all of EEC s traders. In calculating the trader compensation attributed to the RRO, EEC added costs for a backup trader to cover vacation, flex days and sick days. The resulting total was multiplied by the proportion of time that EEC estimated the RRO trader, or the backup trader, would spend on RRO activities each day, resulting in a forecast annual cost of $175,100. The estimated time spent on RRO duties includes time for RRO bidding and administration, market analysis and fundamentals, and an additional increment to account for the additional complexity of moving to 120-day procurement. 31. The Commission agrees with EEC that carrying out market analysis and fundamentals are an important part of the RRO trader s work, particularly with respect to building relationships for OTC trades. The use of EEC s trader and back-up trader for the RRO was thoroughly tested in Proceeding While the price and volumes will be determined by the RRO operations group of EEC, the trader will have to use discretion on days when trades are required, and will have to determine when to execute a trade for procuring energy for the RRO. The Commission would expect that some time would be required for carrying out market analysis to effectively trade for the RRO, as this activity would be expected to increase the trader s ability to determine when to lift offers on the NGX. The Commission agrees with EEC that whether this is an activity that a hedger rather than a trader would undertake is moot because the use of an EEC trader for the activities related to the RRO was approved in Decision D , and EEC s traders undertake these functions. Although further information on relevant market rates for trading services would have been helpful as a means to verify the proposed forecast costs, the Commisison finds that there is sufficient evidence on the record of this proceeding, given the anlaysis provided by EEC. Accordingly, the Commission denies the UCA s proposal to disallow any costs associated with market analysis and fundamentals. 32. The Commission accepts EEC s use of historical trade stamps to determine the amount of time needed for the RRO trader to conduct RRO bidding and administration and finds that the estimate for this time is reasonable. The Commission also acknowledges that the transition to 120-day procurement will increase the complexity of RRO trading and finds the increment proposed by EEC to be reasonable. For these reasons, and based on the Commission s findings above with respect to market analysis and fundamentals, the Commission approves EEC s proposed allocation of the trader s time to the RRO. 33. The Commission further finds that the proposal put forth by the CCA to reduce the fully loaded average compensation by 50 per cent is not supported by the evidence on the record. Even if the RRO trader is an order taker, the CCA has not provided any evidence to show that it would be reasonable to reduce the average compensation by 50 per cent to account for this type 29 Exhibit X0054, CCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Decision D (October 30, 2017)

11 Energy Price Setting Plan Compliance Filing of role in procuring energy for the RRO. Accordingly, the Commission denies the CCA s proposal to reduce the average trader compensation by 50 per cent. 34. As noted above, the Commission approved the use of an EEC trader in Decision D For that reason, and based on the findings above, the Commission finds that the fully loaded average compensation of EEC s traders is a reasonable starting point for determination of the trader costs to be allocated to the RRO. 35. With respect to the UCA s proposal to set the trader costs allocated to the RRO at the midpoint of: (1) EEC s proposal with costs for market analysis and fundamentals removed and (2) the UCA s proposal that was denied in Decision D , the Commission finds that this proposal is also not supported by further evidence in this proceeding. There is no basis on which to adopt the UCA s proposal from Proceeding as a benchmark with which to calculate a midpoint salary for EEC s trader and backup trader. Accordingly, the Commission denies the UCA s proposal to set the trader costs, allocated to the RRO, at the midpoint of the two proposals listed above. 36. For the above reasons, the Commission finds that EEC s proposed costs for the RRO trader are reasonable. 37. The Commission continues to be of the view that, as directed in Decision D , EEC must provide the RRO trader s log of time spent on RRO activities as part of its next EPSP application. With respect to the CCA s request that EEC be directed to provide its log of the RRO trader s time spent on RRO activities, after three months of EPSP operation, so that the costs can be adjusted accordingly, the Commission finds that such a requirement would be unduly burdensome on EEC, the Commission and other parties, and would unnecessarily hinder regulatory efficiency. 38. The Commission also agrees with EEC that, if the proposed RRO costs are found to be reasonable, they should be approved for the term of the EPSP. Accordingly, the RRO trader costs proposed by EEC are approved for the term of this EPSP. 4 Physical separation of the RRO trader Direction At paragraph of Decision D , the Commission issued the following direction with respect to physical separation of the RRO trader: 234. With regard to the concerns raised by the CCA regarding EEC s proposal for physical separation of the dedicated trader, there is insufficient evidence on the record of this proceeding to determine that changes to the layout of EEC s trading floor are necessary to provide additional protection against the disclosure of information by the dedicated trader. The Commission does not have the evidence before it to determine the optimal layout of a trading floor but considers that EEC must ensure that there are sufficient physical safeguards and computer data safeguards in place to avoid disclosure of trading information between the RRO and the competitive arm of EEC. However, the Commission reminds EEC that effective compliance plans and practices are required by the codes and ongoing review should be undertaken by EEC to ensure that no trading information is improperly disclosed. The Commission directs EEC to provide a report, as part of its compliance filing to this decision, on the alternatives and related costs of moving the dedicated 31 Direction 3. Decision D (October 30, 2017) 7

12 Energy Price Setting Plan Compliance Filing trader to a separate area of the floor or constructing a separate, secure office to be used by the dedicated trader when procuring for the RRO to ensure that additional safeguards are in place. 40. EEC included its response to this direction as Appendix B to its application. To support its analysis of the options for physical separation of the RRO trader, EEC provided the following map of its existing trading floor: Source: Exhibit X0001, Appendix B, PDF page EEC stated that the RRO trader currently sits in station 2505A and that one option would be to place the RRO trading desk between the printer in 2505G and station 2505J, which is occupied by a support employee. The RRO trader would be in a cubicle with four-foot high walls, which is the standard configuration at ENMAX Place, and the workstation would be configured such that the computer screen would not face the open section of the cubicle and would be covered by a privacy screen. 32 Upon completion of RRO duties, the RRO trader would relocate to his or her normal workstation with the other traders. EEC estimated the cost of this option at $2, Exhibit X0051, EEC argument, paragraph Exhibit X0044, response to EEC-AUC-2017MAY24-001(c). 8 Decision D (October 30, 2017)

13 Energy Price Setting Plan Compliance Filing 42. EEC also proposed to institute a written policy requiring non-rro traders to use an alternative printer while the RRO trader s cubicle is occupied EEC submitted that it is not viable to construct a separate office within the constraints of the space occupied by the trading floor because ENMAX Place was designed as an open concept work space with heating, ventilation and air condition (HVAC) and sound mitigation systems configured for that purpose. According to EEC, creating a fully enclosed RRO trading office would have an adverse effect on both of those systems. 35 EEC submitted further that a cubicle would provide adequate physical separation given the measures in place to limit the RRO-related information to which the RRO trader has access and the administrative measures in place to ensure that information is not misused EEC currently manages both the RRO and competitive trading portfolios with one NGX account. In order to further separate RRO and non-rro trading activities, EEC proposed to establish a separate NGX account for the RRO trader, which would cost an additional $2,500 per month. EEC also stated that this would allow the direct billing of the Alberta Electric System Operator (AESO) and NGX costs to the RRO trading account, eliminating the need to allocate these costs between the RRO and EEC s competitive businesses. Views of the parties 45. The UCA supported EEC s proposal to establish a separate NGX account for the RRO trader but also stated that it should not have been the case previously that all EEC traders could see all bids posted through the single NGX account. The UCA referenced EEC s statement from Proceeding that EEC Wholesale Trading has no better information than any other trader that would enable it to decipher RRO trader bids. 37 The UCA noted that when asked by the CCA if EEC has separate accounts with the NGX for its RRO and unregulated trading activities, EEC responded: Each trader has his own logon and book with ICE (NGX) and Wholesale Trading has separate clearing accounts with NGX Clearing. Any RRO posting on the NGX will be posted to the RRO NGX Clearing The UCA argued that EEC s response leaves the impression that EEC s unregulated traders would not be able to differentiate bids posted by the RRO trader and vice versa. 47. The UCA submitted that a single NGX account for all EEC traders gives the RRO trader clear visibility into EEC Wholesale Trading bids, and vice versa. This gives the traders access to pertinent information that is not available to other market participants, inconsistent with the principles of fair, efficient and open competition, and should immediately cease. Accordingly, the UCA requested that the Commission direct EEC to establish a separate trading account for the RRO trader Exhibit X0051, EEC argument, paragraph Exhibit X0051, EEC argument, paragraph Exhibit X0051, EEC argument, paragraph Exhibit X0239, response to EEC-CCA-2016JUN03-022(n). 38 Exhibit X0239, response to EEC-CCA-2016JUN03-022(o). 39 Exhibit X0053, UCA argument, paragraph 14. Decision D (October 30, 2017) 9

14 Energy Price Setting Plan Compliance Filing 48. EEC replied it has a single NGX account, 40 and that each EEC trader has his own account logon and book The UCA asked a similar IR of EEC with respect to Canax accounts and EEC responded: Not confirmed and EEC does not believe that it is necessary for EEC to create a separate account on the Canax trading platform for the RRO. Each trader currently has one Canax account. EEC is not opposed to the idea of having multiple Canax accounts to deal with different trades. However, there will be additional costs (approximately $X) that must be borne by EEC RRO ratepayers if a decision is made to add additional Canax accounts that are not needed for EEC purposes The UCA stated that it did not fully understand EEC s response but submitted that, if EEC manages its trading portfolios with a single Canax account, such that all bids and offers are visible to all EEC traders, then this practice must also cease based on the same rationale discussed above for EEC s NGX trades EEC added, in reply argument, that $X was a placeholder used during drafting of the IR response and should have been deleted as there is no cost to establish additional Canax accounts EEC further argued that establishing a separate Canax account for the RRO may allow the Canax broker to determine whether the RRO trader is making an RRO trade or an unregulated trade, which would go against the UCA s apparent goal of masking RRO trades. Nevertheless, EEC submitted that it is not opposed to having a separate Canax account for the RRO and that there is no additional cost to do so The CCA submitted that it is necessary to have a separate NGX account for the RRO business to ensure that confidential RRO information is not shared with EEC s unregulated business The UCA submitted that EEC is overstating the difficulty and cost of providing physical separation for the RRO trader. The UCA noted that in this compliance filing, EEC stated that it did not investigate the benefits and costs of creating a fully enclosed RRO trading office because of adverse effects on the HVAC and sound mitigation systems. However, in Proceeding 20448, EEC indicated that this solution was not practical from a cost perspective and that it would make it more difficult to retain an RRO trader who would be required to work in an isolated setting The UCA questioned EEC s assertion that an enclosed RRO trading office would adversely affect the building s systems and further stated the following: EEC s proposal simply relocates the RRO Trader from one corner of the trading floor to the other. The UCA struggles to accept that this is the best permanent solution to 40 Confidential EEC reply argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0046, response to EEC-UCA-2017MAY24-001(d). 43 Exhibit X0053, UCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0054, CCA argument, paragraph Exhibit X0239, response to EEC-CCA-2016JUN03-022(d). 10 Decision D (October 30, 2017)

15 Energy Price Setting Plan Compliance Filing provide adequate physical separation of the RRO Trader. While it may provide some temporary comfort, it is not a permanent fix In response to a CCA IR asking EEC to reconfigure the floor plan so that the RRO trader desk is separated from other traders by vacant desks, EEC responded that efficiency in floor planning is part of EEC s processes and that it would not create a situation where workable floor space is left empty. 49 The UCA noted that the floor plan provided by EEC already includes vacant floor space and recommended that EEC reconfigure its floor plan as suggested by the CCA. Alternatively, the UCA suggested that another option would be to place the RRO trader amongst traders trading in different products or terms, such as real-time traders or gas traders The UCA also noted that, in response to an IR, EEC indicated that the trading floor manager or supervisor sits south of 2505A, outside of the trading floor area. 51 The UCA argued that it is not clear why the RRO trader could not also be located away from the trading floor while performing RRO duties With respect to EEC s estimated $2,800 cost of constructing a cubicle for the RRO trader, the UCA argued that recovery of these additional costs appears duplicative and unreasonable, and should be denied. The UCA noted that EEC s filing shows that the RRO trader already has a desk (2505A) that is separate from his or her normal workstation (2505C) and the UCA stated that presumably the RRO trader s existing workstation already has all the furniture and technology required, which could be relocated to the proposed RRO workstation. 53 The UCA submitted that EEC has not demonstrated that it fully explored or considered the options available to it to achieve physical separation. As such, the UCA recommended that the Commission issue clear directions to EEC in its next EPSP to engage in a complete consideration of the available options for achieving physical separation of the RRO trader. 59. EEC responded to the UCA by stating that its proposal requires construction of a second workstation for the RRO trader, whereas the current RRO trader only has a single workstation The CCA argued that EEC s proposal to construct an RRO trading desk between 2505G and 2505J ignores the Commission s direction with respect to ensuring there are sufficient physical safeguards and computer data safeguards to avoid disclosing trading information between the RRO and competitive arms of EEC. Further, it does nothing to address the Commission s direction that EEC provide alternatives and related costs of moving the RRO trader to a separate area or a separate, secure office The CCA expressed concern with locating the RRO trading desk next to the printer used by all traders. If the RRO trader is away from the desk, another trader could potentially enter the open, unsecured RRO trader s desk and have access or visibility to RRO information. 48 Exhibit X0051, UCA argument, paragraph Exhibit X0045, response to EEC-CCA-2017MAY24-003(d). 50 Exhibit X0051, UCA argument, paragraph Exhibit X0045, response to EEC-CCA-2017MAY24-003(a). 52 Exhibit X0051, UCA argument, paragraph Exhibit X0051, UCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0054, CCA argument, paragraph 23. Decision D (October 30, 2017) 11

16 Energy Price Setting Plan Compliance Filing Furthermore, other employees using the printer would be able hear the RRO trader s discussions The CCA also submitted that the proposal to have the RRO trader sit at the end of an aisle has merit in principle and suggested that relocating the RRO trading desk to 2505N would place it at the end of the aisle, away from the printer area and removed from the other trading desks. The CCA also agreed that EEC should require its non-rro traders to use the alternative printer, as proposed by EEC The CCA submitted that EEC s proposed four-foot high cubicle walls will not result in sufficient physical and computer data safeguards to avoid disclosure of RRO information. The CCA submitted that it is not clear how the HVAC and sound mitigation systems would be compromised by six-foot walls or a secure office with floor to ceiling walls. According to the CCA, the fact that EEC operates in an open-concept trading floor structure is an irrelevant consideration. The CCA submitted that EEC has an obligation to operate its RRO business with sufficient safeguards to avoid disclosure of RRO trading information and that EEC s desires for an open-concept trading floor should not trump these obligations The CCA also submitted that EEC s proposal did not address the Commission s direction that EEC provide a report on the alternatives and related costs of moving the RRO trader to a separate area or separate, secure office. According to the CCA, a cubicle with four-foot walls is not secure, nor under lock and key. Given these concerns and the relatively immaterial additional cost of $1,222 to construct six-foot walls, 59 the CCA submitted that EEC should be directed to construct a floor-to-ceiling fully enclosed office, specifically designated for the RRO trader to conduct RRO business only. Furthermore, the CCA submitted that this office should be located at the end of the aisle in the currently vacant 2505N EEC replied that the CCA s position is unreasonable because it implicitly assumes that EEC s unregulated traders have a desire to discover what the RRO trader is doing and will breach their code of conduct obligations and risk dismissal. EEC further noted that the existing EPSP includes an RRO trader supplied by EEC. EEC also noted that station 2505N is at the end of an aisle and is, therefore, likely to have more foot traffic passing the RRO trader than EEC s proposed location In reply argument, the UCA submitted that it supports the CCA s proposal to relocate the RRO trader to 2505N, along with EEC s other proposals, as a temporary fix to the concerns with respect to dual roles. However, the UCA did not support the construction of a fully enclosed office due to the time remaining under the proposed EPSP. The UCA also agreed that construction of six-foot cubicle walls is unnecessary given the other measures proposed by EEC With respect to EEC s argument that the disclosure or use of any RRO-related information will be strictly prohibited (with serious consequences for any breach, including 56 Exhibit X0054, CCA argument, paragraph Exhibit X0054, CCA argument, paragraph Exhibit X0054, CCA argument, paragraph Exhibit X0044, response to EEC-AUC-2017MAY24-001(c). 60 Exhibit X0054, CCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph Exhibit X0070, UCA reply argument, paragraphs Decision D (October 30, 2017)

17 Energy Price Setting Plan Compliance Filing verbal and written warnings, suspension or dismissal) 63 the CCA questioned the effectiveness of these measures if the RRO trader knows that any infraction will only result in a verbal warning, while potentially increasing his or her performance bonus. 64 The CCA submitted that one breach is one too many and that the first such breach should immediately result in suspension or termination of employment, and should be reported immediately to the Commission. This report should include a description of the breach, the quantum of additional costs to the RRO and sanctions imposed on the RRO trader; e.g., suspension or termination. 65 Commission findings 68. The Commission agrees with the CCA and the UCA that placing the RRO trader s cubicle in workstation 2505N is preferable to EEC s proposed location because it is away from the printer in 2505G. The Commission finds that this would result in a lesser likelihood of inadvertent disclosure from the access to the printing in Room 2505G. However, the Commission agrees with the UCA that construction of six-foot cubicle walls or a fully enclosed office is unnecessary, given the other measures proposed by EEC. EEC s proposal for a cubicle with four-foot high walls and that the RRO trader s computer would be facing away from the cubicle opening with a privacy screen is acceptable. This provides greater privacy for the trader when conducting trades on behalf of the RRO. 69. As proposed by EEC, the Commission directs EEC to implement a written policy to ensure that the printer used by the RRO trader is not accessible to other traders during the time the trader is performing the duties for the RRO. This will add an additional safeguard to avoid disclosure of RRO trading information. 70. With respect to the costs of constructing the second trading cubicle for the RRO trader, the Commission accepts EEC s statement that the RRO trader currently carries out both RRO and non-rro trading in the same cubicle and, therefore, construction of a new cubicle is reasonable. Accordingly, the Commission approves the costs proposed by EEC for the costs of constructing the RRO trading cubicle and workstation space. The Commission does not consider these costs duplicative because the RRO trading cubicle and workspace are to be used only for RRO trading. Accordingly, the Commission directs EEC to construct a second cubicle in workstation located at 2505N on the map provided by EEC. 71. Both the UCA and the CCA supported EEC s proposal to further separate RRO and non- RRO trading activities by establishing a separate NGX account for the RRO trader. The Commission agrees that it is best to have separate accounts and supports the additional access separation. Furthermore, as noted by EEC, the ability to bill AESO and NGX costs as a regulatory cost directly to the RRO trading account will also eliminate the need to allocate these costs between EEC s RRO and competitive businesses. Accordingly, the Commission approves EEC s proposal to establish a separate NGX account for the RRO trader. 72. With respect to separate Canax accounts, the Commission notes that, while EEC did not oppose establishing a separate account, it also stated that separate Canax accounts could allow the broker to determine whether the trade is for the RRO or for EEC s competitive business. Given the limited evidence on the record of this proceeding pertaining to this topic, the 63 Exhibit X0051, EEC argument, paragraph Confidential CCA reply argument, paragraph Exhibit X0071, CCA reply argument, paragraph 13. Decision D (October 30, 2017) 13

18 Energy Price Setting Plan Compliance Filing Commission finds that it is in the best interest of RRO consumers to maintain as much separation of RRO and non-rro traders as practical and, therefore, the Commission directs EEC to establish a separate Canax account for the RRO trader, which is at no additional cost to customers. 5 Code of Conduct Regulation Section 17 Direction Section 17 of the Code of Conduct Regulation, as it applies to EEC as a regulated rate supplier and an affiliate electricity retailer, states: (2) A regulated rate supplier and an affiliated provider of the regulated rate supplier shall not make arrangements that create an unfair competitive advantage for the regulated rate supplier or the affiliated provider. (4) An entity, including a rural electrification association, that carries on both the business of a regulated rate supplier and the business of a retailer shall not make an internal arrangement that creates an unfair competitive advantage for itself as a regulated rate supplier or retailer. (5) A distributor or regulated rate supplier and an affiliated provider of the distributor or regulated rate supplier may make arrangements to create cost efficiencies in their operations if, in the opinion of the Commission, the arrangements do not create an unfair competitive advantage for the regulated rate supplier or the affiliated provider. (6) An entity referred to in subsection (3) or (4) may make internal arrangements to create cost efficiencies in its operations if, in the opinion of the Commission, the arrangements do not create an unfair competitive advantage for the entity as a regulated rate supplier or retailer. 74. Section 23(4)(b) defines when an arrangement is deemed to be an arrangement that creates an unfair competitive advantage for entities carrying on more than one business: (4) For the purposes of section 17(4), an internal arrangement under which an entity that carries on both the business of a regulated rate supplier and the business of a retailer records or allocates between those businesses (b) the economic benefits or costs of regulated energy services it provides in carrying on business as a regulated rate supplier and retail energy services it provides in carrying on business as a retailer so that the economic benefits or costs attributable to those respective businesses is not accurately reflected is deemed to an arrangement that creates an unfair competitive advantage for the entity as a regulated rate supplier or retailer. 14 Decision D (October 30, 2017)

19 Energy Price Setting Plan Compliance Filing 75. In Decision D , the Commission approved EEC s proposal to use an RRO trader supplied by EEC Wholesale Trading. However, the Commission also issued the following direction, 66 requiring EEC to file an application under Section 17 of the Code of Conduct Regulation related to EEC s RRO trader arrangements: 249. As mentioned above, the dedicated trader was not considered in Decision D , and EEC has not yet filed a separate Section 17 application with the Commission as contemplated by paragraph 48 of that decision, regarding internal arrangements that create cost efficiencies and demonstrating those arrangements do not create an unfair competitive advantage. Further, as this matter was not specifically addressed in Decision D or this proceeding, the Commission directs EEC to file a Section 17 application related to its dedicated trader arrangements as part of its compliance filing to this decision. This will allow EEC an opportunity to address specifically EEC s positive obligations regarding the dedicated trader given the provisions set out in the Code of Conduct, and will allow EEC to take into consideration the Commission s findings in this decision in its Section 17 application regarding the use of a dedicated trader. 67 [footnote removed] 76. EEC included its Section 17 application as Appendix K to its application. In the application, EEC requested that the Commission find that EEC s proposal to use an RRO trader supplied by EEC Wholesale Trading does not create an unfair advantage for EEC. 77. EEC explained that it and ENMAX Power Corporation (EPC), which owns and operates an electric distribution system, are wholly owned subsidiaries of ENMAX Corporation. EPC appointed EEC as the RRO provider for EPC s service territory and provides management services to the RRO through the RRO Operations Group. 78. EEC is a regulated rate supplier, as that term is defined in the Regulated Rate Option Regulation and also carries on unregulated competitive businesses, making it both a retailer and an affiliated provider, as those terms are defined in the Regulated Rate Option Regulation. EEC Wholesale Trading is a business unit within EEC that employs electricity traders EEC submitted that the costs of the RRO trader will be fairly and reasonably allocated between the regulated rate supplier and the retailer, and that the administrative controls that EEC proposes will prevent the misuse of RRO-related information. 69 EEC stated that these measures are two-fold: first, the RRO-related information that the RRO trader has access to is strictly limited to the minimum required to carry out RRO trading duties and, second, the disclosure of any RRO-related information will be strictly prohibited, with serious consequences for breach of this prohibition Specifically, EEC stated that the steps it will take to limit the information available to the RRO trader are as set out below: 66 Direction Decision D , paragraph Exhibit X0001, Appendix K, paragraphs Exhibit X0001, Appendix K, paragraph Exhibit X0001, Appendix K, paragraph 18. Decision D (October 30, 2017) 15

20 Energy Price Setting Plan Compliance Filing The RRO Trader: (a) will not have any access whatever to customer information, as that term is defined in the Regulation; (b) will not know how either the Daily Target Volume or the Daily Target Price (both as defined in the EPSP) are determined; (c) will not have access to the forecasts that are used to determine the Daily Target Volume; (d) will not know whether procurement is ahead of schedule, on schedule or behind schedule; (e) will not know the circumstances in which the backstop mechanism is engaged; (f) will not know if the backstop mechanism is engaged; and (g) will not know how the backstop mechanism functions EEC stated that even though the RRO trader will know the daily target price and volume, the usefulness of this information is temporally limited. Furthermore, EEC stated that the RRO trader will act as an order taker because the RRO operations group will perform forecasting, set the daily target price and volume, and will provide those targets to the RRO trader The administrative controls proposed to ensure that no RRO related information is misused include: (a) (b) (c) (d) (e) The RRO trader is not permitted to undertake any activities for EEC s competitive business on any day unless the RRO trading obligations have been fulfilled or it has been determined that no RRO trades can be made that day, and the RRO trader cannot return to RRO activities in a day after transitioning to competitive duties. The RRO trader will be physically separate from the other EEC Wholesale Trading traders to the extent practicable, meaning that the RRO trader will be at the end of the aisle and the RRO trader s computer will have a privacy screen. The RRO trader will not be permitted to have any communication with other EEC Wholesale Trading traders until the RRO trader has fulfilled the RRO trading obligations or it has been determined that there will be no RRO trades for the day. The RRO trader will be subject to the EPSP code of conduct, included as Appendix G to the EPSP, and will be required to sign an EPSP procurement conduct agreement, included as Appendix G.1 to the EPSP. Both the code of conduct and the agreement are the same as those used under the current EPSP. The RRO trader must undergo code of conduct training each year and take an online course. 71 Exhibit X0001, Appendix K, paragraph Exhibit X0001, Appendix K, paragraph Decision D (October 30, 2017)

21 Energy Price Setting Plan Compliance Filing (f) The RRO trader will be required to sign an attestation letter every month. The attestation letter is included as Appendix C to the EPSP EEC submitted that, as a result of these measures, the RRO trader will be aware of the serious consequences of breaching the obligation to maintain the confidentiality of all RROrelated information. EEC also submitted that these measures have been in place for several years under the current EPSP and have been effective. As such, EEC submitted that the proposed measures will reasonably ensure that no RRO-related information will be misused EEC further submitted that the proposed cost allocation methodology for RRO trading activities is based on the actual compensation paid to EEC s traders and a reasonable forecast of the amount of time the RRO trader is likely to devote to RRO activities. EEC stated that once the EPSP is in place, the RRO trader will maintain a daily log of time spent on RRO activities that will inform the proper allocation of costs in a subsequent EPSP applications. 75 Views of the parties 85. Although the Commission decided in Decision D that the protective measures proposed by EEC are generally sufficient, the UCA continued to express concerns that the dual role of the RRO trader creates an inherent conflict of interest against which it is almost impossible to protect fully. Accordingly, the UCA strongly urged the Commission to direct EEC, as part of the next EPSP or any application to extend the EPSP, to exclude any arrangements under which the RRO trader would trade for both the regulated entity and its competitive affiliate. In the alternative, the UCA submitted that the Commission should direct EEC to submit any such proposal to the Market Surveillance Administrator for review and approval as to compliance with the principles of fair, efficient and open competition, prior to proposing such an arrangement in an EPSP application EEC replied that the UCA s concerns are overstated and misplaced, and that there is no opportunity for the RRO trader to use any knowledge of the RRO or of EEC Wholesale Trading s position to advantage EEC Wholesale Trading or disadvantage the RRO In reply argument, the UCA disputed EEC s claim that the usefulness of information about the daily target price and volume is temporally limited. The UCA submitted that the marketplace, unlike the RRO trader, does not know the prices EEC paid for RRO products nor how much RRO volume EEC procured. According to the UCA, the marketplace can see trades that took place but do not know which parties executed the trade. 88. While agreeing with EEC that the self-supply mechanism is the only way for EEC to supply its RRO volumes, the UCA argued that a direct trade with EEC RRO is not the only way for EEC Wholesale Trading to benefit from confidential RRO information. If the RRO trader knows that volumes will need to be procured the next day and that the product to be procured is illiquid, the RRO trader could, after switching to competitive trading, purchase the illiquid product, potentially increasing the price the next day, which would benefit EEC in its capacity as a seller. However, despite these concerns, the UCA continues to be of the view that the RRO 73 Exhibit X0001, Appendix K, paragraphs Exhibit X0001, Appendix K, paragraphs Exhibit X0001, Appendix K, paragraph Exhibit X0053, UCA argument, paragraphs Exhibit X0069, EEC reply argument, paragraphs Decision D (October 30, 2017) 17

22 Energy Price Setting Plan Compliance Filing trader arrangement will suffice for the remainder of the EPSP, which is set to expire on April 30, If the EPSP does not expire on that date, the UCA submitted that this matter should be handled through a separate module. 78 Commission findings 89. In sections 3 and 4 above, the Commission approved EEC s proposal for the reasonable allocation of costs for the RRO trader and a modified proposal for physical separation of the RRO trader. With respect to the UCA s submissions that the trader should not be able to act on behalf of the RRO and the affiliate retailer, the Commission ruled in Decision D that the protective measures proposed by EEC are generally sufficient and provide reasonable safeguards associated with the RRO trader. 79 Section 17 of the Code of Conduct Regulation permits arrangements to create cost efficiencies, if the arrangements do not create an unfair competitive advantage for either the regulated rate provider 80 or the affiliate electricity retailer. 81 The Commission does not consider it necessary to alter its findings from Decision D on this issue. 90. In Decision D , the Commission also agreed with additional measures proposed by interveners, including the RRO trader attestation letter and restrictions on the RRO trader returning to RRO duties after switching to non-rro trading Section 17(5) of the Code of Conduct Regulation allows for a regulated rate provider and an affiliated electricity retailer to create cost efficiencies in their operations if the arrangements do not create an unfair competitive advantage. The Commission considers that EEC s Section 17 Code of Conduct Regulation application must be assessed relative to the following: (a) (b) (c) The arrangements to create operational cost efficiencies do not create an unfair competitive advantage for either the regulated rate provider or the affiliate electricity retailer. (Section 17(5)) The regulated rate provider must record or allocate the economic benefits or costs attributable to the arrangement. If the economic benefits or costs attributable to those respective businesses are not accurately reflected, it is deemed to be an arrangement that creates an unfair competitive advantage for the entity as a regulated rate supplier or retailer under Section 23(4)(b). The arrangement itself must not create an unfair competitive advantage for either the regulated rate provider or the affiliate electricity retailer. (Section 17(2) and Section 17(5)) 78 Exhibit X0070, UCA reply argument, paragraph Decision D , Section 5.1.4, for example, see paragraphs 235 and In this decision, the Commission has used the term regulated rate provider. The Code of Conduct Regulation uses the term regulated rate supplier. Regulated rate supplier is defined in Section 1(1)(o)(i) as in respect of the electricity market means a regulated rate provider. 81 In this decision, the affiliate retailer is EEC Wholesale Trading. The Code of Conduct Regulation uses the term affiliated provider or affiliated electricity retailer. Affiliated provider is defined in Section 1(1)(a)(ii), in respect of a regulated rate supplier means an affiliated electricity retailer or affiliated gas retailer of the regulated rate supplier. 82 Decision D , paragraphs Decision D (October 30, 2017)

23 Energy Price Setting Plan Compliance Filing 92. In Decision D , the Commission approved EEC s proposed use of an RRO trader, provided by EEC Wholesale Trading, in part because interveners could not demonstrate that other arrangements were more cost effective. The Commission continues to be of the view that EEC has demonstrated that using an RRO trader provided by EEC can be cost effective. 93. As approved in Section 3 of this decision, EEC has provided evidence in the current proceeding that it has allocated the forecast costs of the RRO trader in a manner that is satisfactory to the Commission for the term of this EPSP. Furthermore, the Commission s direction that EEC maintain a log of the time spent by the RRO trader on RRO activities and submit that log as part of its next EPSP application, and EEC s ongoing logs and the provision of these records to the Commission, will assist the Commission in assessing the reasonableness of the allocation of costs of the RRO trader arrangement on a go-forward basis. Therefore, EEC s demonstration of the expected cost efficiencies of the arrangement, the allocation of time and costs to the RRO, and EEC s commitment to provide a log of time spent by the RRO provider on trader activities to support the economic benefits of the RRO trader arrangement between the RRO and EEC Wholesale Trading reasonably satisfies Section 17(5) and the portion of Section 23(4)(b) that sets out the recording or allocation of the costs attributable to the RRO and EEC Wholesale Trading. 94. With respect to the unfair competitive advantage provisions of sections 17(2) and 17(5), the Commission is also of the view that EEC has sufficiently demonstrated that an unfair competitive advantage is unlikely to occur as a result of the RRO trader arrangement, due to the following safeguards: (a) (b) (c) (d) The EPSP is mechanistic in nature and the RRO trader will not be involved in setting the daily target price or daily target volume, but will act more as an order taker. The RRO trader is subject to the EPSP procurement conduct protocol and will be required to sign a procurement conduct agreement, included as Appendix G and Appendix G.1 of the EPSP, respectively. The RRO trader will sign the monthly RRO trader attestation letter to attest to the RRO trader s activities on behalf of the RRO. As approved in Section 4 of this decision, the RRO trader will be physically separated from other EEC Wholesale Trading traders and will not be permitted to have any contact with those traders until the RRO trader has fulfilled the RRO trading obligations for that day. 95. For these reasons, the Commission finds that EEC has complied with Section 17 of the Code of Conduct Regulation, with respect to the arrangements made for the RRO trader to carry out trading both for the RRO, and for EEC s unregulated retail operations. 96. The Commission reminds EEC that there remains an ongoing obligation on EEC to ensure that the provisions of the Code of Conduct Regulation are met to ensure that the arrangement does not create an unfair competitive advantage for the RRO provider or for EEC Wholesale Trading. 97. To ensure compliance with the Code of Conduct Regulation, EEC is required to maintain separate records and accounts for its regulated rate provider and affiliated electricity retailer Decision D (October 30, 2017) 19

24 Energy Price Setting Plan Compliance Filing functions 83 and these records are to be kept for at least six years. 84 Section 40 of the Code of Conduct Regulation provides additional assurance that EEC will continue to monitor its compliance with the regulation, including the provisions found in sections 17 and 23(4). Section 40 requires an auditor, to be paid for by the Commission, to conduct an audit at least once in every 36-month period during which the affiliated electricity provider provides service to customers. 98. The Commission will not restrict EEC from proposing the trader arrangement approved in this decison in its next EPSP, or an alternative market-based arrangement as suggested by the UCA. The UCA may address any issues arising from a new trader proposal in the proceeding to address EEC s next EPSP. 99. Accordingly, the Commission denies the UCA s request for the Commission to direct EEC to exclude, from its next EPSP application or any application to extend the proposed EPSP, any arrangement under which the RRO trader would trade for both the regulated entity and its unregulated affiliate In reply argument, the CCA argued that the penalties for breaching the confidentiality of RRO information should be more stringent, such that the first offense would result in suspension or dismissal, and would be reported to the Commission. Because the CCA presented this in reply argument, parties did not have an opportunity to test it and EEC did not have the opportunity to respond to it. Accordingly, the Commission cannot sufficiently assess the weight to be accorded this proposal or, for example, whether the issue should be addressed through the codes of conduct For the reasons in sections 3 and 4 and the findings in this section, EEC s RRO trader arrangement is found to conform with Section 17 of the Code of Conduct Regulation. Accordingly, the Commission approves EEC s proposed RRO trading arrangements as set out in the application and in accordance with Section 17 of the Code of Conduct Regulation. 6 EPSP definitions and organization directions 8, 21, 27, At paragraph of Decision D , the Commission directed EEC to replace the term dedicated trader with the term RRO trader. EEC stated that it updated all of the documents included in its compliance filing to reflect this direction. 87 The Commission has reviewed EEC s EPSP documentation and confirms that the term dedicated trader no longer appears in the EPSP documents. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to clarify, in its EPSP, that its two paragraphs describing the flat volume and peak volume are part of EEC s hedging strategy. EEC stated that it reflected this Commission direction in 83 Section 25 of the Code of Conduct Regulation. 84 Section 28 of the Code of Conduct Regulation. 85 EPC s Inter-Affiliate Code of Conduct, which EEC is bound by (see paragraph 226 of Decision D and the Code of Conduct Regulation). 86 Direction Exhibit X0001, application, paragraph Direction Decision D (October 30, 2017)

25 Energy Price Setting Plan Compliance Filing Section 1.0(b)(i) and (ii) of Schedule E of its EPSP. 89 The Commission notes that EEC has made this information confidential, although it was considered public information in Proceeding The Commission has reviewed Section 1.1(b)(i) and (ii) (there is no Section 1.0) of Schedule E of EEC s EPSP and EEC has not clearly indicated that these two paragraphs constitute, or are a part of, EEC s hedging strategy However, EEC also included Schedule D of its EPSP, which sets out how the hedge volumes will be determined. Schedule D, which is part of EEC s public EPSP, includes information similar to the redacted information in Section 1.1(b)(i) and (ii) of EEC s confidential procurement protocol. As this information was public in Proceeding and is publically available in Schedule D, the Commission directs EEC to include Section 1.1(b)(i) and (ii) in the public version of its EPSP, in its compliance filing to this decision. The Commission is satisfied that Schedule D clearly sets out how the hedge volumes will be determined and, therefore, finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to discontinue using the term Other Risk Compensation, or ORC, when describing any aspect of its commodity risk compensation. EEC stated that the term Other Risk Compensation has been deleted from EEC s EPSP. 91 The Commission has reviewed EEC s EPSP and confirms that the terms Other Risk Compensation and ORC have been removed from the EPSP. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to adopt certain recommendations regarding EPSP schedules and definitions, unless the recommendations did not apply to EEC or could not be implemented reasonably by EEC. EEC made most of the changes recommended, except for the load forecast illustrative model and the credit costs illustrative model. The Commission has reviewed EEC s responses to this direction and EEC has described its load forecasting methodology in Schedule C of its EPSP and has included its credit cost forecasting methodology in Appendix A of its EPSP. The Commission is satisfied that these two forecasting methodologies are described adequately and finds that the illustrative models are not necessary. Accordingly, the Commission finds that EEC has responded adequately to this direction and finds that EEC has complied with it At paragraph of Decision D , the Commission directed EEC to delete the terms flat volume and peak volume from its EPSP, and to include the term hedge volume target with an associated definition. The Commission also directed EEC to incorporate the changes recommended by Mr. Beblow, on behalf of the UCA, in Appendix 1 and Schedule A of his evidence to reflect the deletion of flat volume and peak volume, and the addition of the term hedge volume target EEC stated that this direction is reflected in Schedule A of its EPSP. 94 The Commission reviewed EEC s EPSP and confirms that the terms flat volume and peak volume and their corresponding definitions have been removed from the EPSP and Schedule A. The term hedge 89 Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Direction Exhibit X0001, application, paragraph 51. Decision D (October 30, 2017) 21

26 Energy Price Setting Plan Compliance Filing volume target has been added to Schedule A. However, the terms flat volume and peak volume continue to appear in EEC s definition of the term product. Accordingly, the Commission directs EEC to remove the terms flat volume and peak volume from its definition of the term product in its compliance filing to this decision At confidential paragraph of Decision D , the Commission directed EEC to include the term procured hedge volume as part of confidential Schedule A of its EPSP. EEC stated that it included the term procured hedge volume in Schedule A. 96 The Commission has reviewed EEC s Schedule A and confirms that the term procured hedge volume is included in both the public and confidential versions. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to include, in Schedule A of its EPSP, a comprehensive definition of all terms used in the various supporting schedules to EEC s EPSP and to ensure that these definitions are comparable, where necessary, to those of the other RRO providers in Alberta, and consistent with common definitions already affirmed by the Commission. EEC stated that this direction is reflected in Schedule A of its EPSP. 98 Please see Section 7 of this decision for the Commission s findings on EEC s compliance with this direction. 7 Other issues related to EPSP definitions and organization 111. In argument, the CCA recommended a number of additional undefined terms that EEC did not include in Schedule A, including: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) AESO Pool Trading Charges Effective Tax Rate Energy Portfolio EU [Electric Utilities] Act Line Loss Factor Load Forecast Monthly Settlement Data NGX Trading Charges and Transaction Fees Non-Energy Return Margin Rate Class Total Hedge Target Volume 95 Direction Confidential application, paragraph Direction Exhibit X0001, application, paragraph Decision D (October 30, 2017)

27 Energy Price Setting Plan Compliance Filing (l) Total RRO Load (m) Target Hedge Volume (n) (o) 7x24 Hedge Volume 7x16 Hedge Volume (p) Total Target Volume Blocks In reply argument, EEC stated that it did not object to including the definitions suggested by the CCA, except for the following: (a) (b) AESO Pool Trading Charges, which EEC proposed to replace with AESO Trading Charges. Energy Portfolio, which EEC proposed to replace with RRO Portfolio. (c) EA Act, which EEC proposed to replace with Electric Utilities Act The Commission accepts EEC s proposal to replace the three terms listed above, with terms already included and defined in the EPSP The Commission has reviewed EEC s EPSP to determine whether EEC complied with the Commission s direction that EEC must ensure that all terms are defined in Schedule A. During the course of this review, the Commission discovered a number of issues in EEC s EPSP, including undefined terms; instances of multiple terms used to refer to the same concept (e.g., energy procurement process and procurement protocol); acronyms that are not spelled out or defined; terms defined in Schedule A that do not appear elsewhere; and incorrect section, schedule or appendix cross-references. The Commission is concerned with the number of errors and omissions present in the EPSP and supporting documentation, and finds that EEC has failed to comply with this Commission direction. The Commission has included Appendix 3 to this decision in which it has noted a number of issues in EEC s EPSP. The Commission directs EEC, as part of its compliance filing to this decision, to either address each of the noted issues or, if applicable, explain why the issue does not require remediation. The Commission also directs EEC to include, as part of its compliance filing to this decision, a table of concordance listing every change that it has made to its EPSP and supporting documents, the reason for the change, a reference to the location of the change in the EPSP or supporting documentation and, where applicable, a reference to the paragraph in this decision that resulted in EEC making the change. As part of its compliance filing to this decision, the Commission also directs EEC to re-letter the schedules and appendices to its EPSP sequentially. The Commission also considers that it may be necessary to hold a technical meeting after receiving EEC s second compliance filing application in order to work through any remaining issues. The Commission will make this determination following its review of EEC s compliance filing to this decision. 99 Exhibit X0054, CCA argument, paragraph Exhibit X0069, EEC reply argument, paragraph 17. Decision D (October 30, 2017) 23

28 Energy Price Setting Plan Compliance Filing 8 Previous Commission directions on EPSP procurement directions 2, 5, 6, and At paragraph of Decision D , the Commission directed EEC to add a clause to its EPSP restricting the RRO trader from returning to RRO trading on any day in which the RRO trader has transitioned to non-rro trading. EEC stated that this direction is reflected in Section 2.4(j) of Schedule E to its EPSP. 104 The Commission has reviewed EEC s new Section 2.4(j), which states that the RRO trader can only transition to unregulated activities if the daily target volume has been procured or it is determined that no RRO trades will be made that day. Section 2.4(j) also states that the RRO trader cannot return to RRO activities on any day after transitioning to non-rro trading. The Commission finds that EEC s proposed Section 2.4(j) complies with this Commission direction However, at confidential paragraph of Decision D , the Commission also issued the following direction to EEC: 401. The Commission considers that Mr. Beblow s proposed subsection (e) is consistent with EEC s previous explanation of the circumstances in which the dedicated trader can engage in unregulated trading for EEC Wholesale Trading, as discussed in Section of this decision. The Commission considers further, that formalization of this restriction within the procurement protocol adds valuable clarity to the procurement protocol. Accordingly, the Commission directs EEC to include Mr. Beblow s proposed Section 2.4(e) in the procurement protocol, as part of the compliance filing EEC stated that it reflected this direction in Section 2.4(f) of Schedule E In its review of this Commission direction and EEC s response to it, the Commission discovered that both references to Section 2.4(e) in paragraph 401 of Decision D should be references to Section 2.4(i). It is clear from paragraph 401 that the Commission is referencing a proposal related to the circumstances in which the RRO trader can engage in unregulated trading. In paragraph 395 of Decision D , the Commission quoted the following subsection (i), as proposed by Mr. Beblow in the following quote: (i) Following receipt of the Daily Target Price and Daily Target Volume from the RRO Operations Group, the Dedicated RRO Trader will only be permitted to engage in trading activity on behalf of EEC Wholesale Trading where: Direction Exhibit X0001, application, paragraph Direction Decision D (October 30, 2017)

29 Energy Price Setting Plan Compliance Filing (i) all of the respective Daily Target Volumes for the Products for that Business Day, determined in accordance with section 2.1, have been transacted; or (ii) the Daily Target Volume is set to 0MW for all Products for that Business Day EEC s new Section 2.4(f) is related to OTC trades and does not speak to the circumstances under which the RRO trader can engage in unregulated trading. Accordingly, the Commission directs EEC to amend Section 2.4 of its EPSP, as part of its compliance filing to this decision, to include the paragraphs recommended by Mr. Beblow as follows: (k) Following receipt of the Daily Target Price and Daily Target Volume from the RRO Operations Group, the RRO Trader will only be permitted to engage in trading activity on behalf of EEC Wholesale Trading when: (i) all of the respective Daily Target Volumes for the Products for that Business Day, determined in accordance with section 2.1, have been transacted; or (ii) the Daily Target Volume is set to 0MW for all Products for that Business Day At paragraph of Decision D , the Commission directed EEC to maintain a log accounting for each hour spent working for the RRO. The Commission further directed EEC to include this log in its next EPSP application, if EEC continues to propose an RRO trader in its next EPSP application. EEC reflected this direction in Section 2.4(k) of Schedule E to its EPSP. 107 The Commission has reviewed Section 2.4(k) of Schedule E, which states that the RRO trader must keep a log accounting for each hour spent working for the RRO. The Commission finds that, for the purposes of this compliance filing, EEC has complied with this direction. The Commission reminds EEC that it is still required to include this log in its next EPSP application At paragraph of Decision D , the Commission directed EEC to adopt changes to its self-supply clause, as proposed by Mr. Beblow on behalf of the UCA. EEC stated that it included those changes in Section 2.4(g) of its EPSP procurement protocol, which is set out in Schedule E to EEC s EPSP. 109 At paragraph of Decision D , the Commission also directed EEC to amend its EPSP procurement protocol to require the RRO trader to finalize any self-supply transaction within ten minutes of removing the best bid from the NGX screen. EEC reflected this direction in Section 2.4(h) of its EPSP procurement protocol, which was included as Schedule E to its EPSP The Commission has reviewed sections 2.4(g) and (h) of EEC s Schedule E and confirms that EEC made the changes directed by the Commission. Accordingly, the Commission finds that EEC has complied with these directions. 106 Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph 18. Decision D (October 30, 2017) 25

30 Energy Price Setting Plan Compliance Filing 124. At paragraph of Decision D , the Commission directed EEC to amend its EPSP procurement protocol to add the following: Prior to closing any trade or any self-supply transaction, EEC must have first reviewed both the NGX screen and the OTC market to ensure that the trade or self-supply transaction price is the lowest available at the time EEC stated that it reflected this direction in Section 2.4 (h) of its EPSP procurement protocol, which was included as Schedule E to its EPSP The Commission has reviewed Section 2.4 of EEC s Schedule E and notes that EEC made the directed change in subsection (i), rather than (h) as noted by EEC. The Commission finds that EEC has complied with this direction Direction Exhibit X0001, application, paragraph Decision D (October 30, 2017)

31 Energy Price Setting Plan Compliance Filing Previous Commission directions on the energy rate calculation directions 1, 22, and At paragraph of Decision 2941-D , the Commission directed EEC to include the gross-up provision as part of EEC s pro-forma energy rate filing. EEC included the gross-up provision in its pro-forma monthly filing, included as Appendix A of its EPSP. 126 The Commission has reviewed EEC s pro forma monthly filing and EEC has correctly implemented the gross-up provision in Schedule 2, cell D51 of the pro forma monthly filing. Therefore, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to exclude any costs associated with an NGX quantitative review as part of its EPSP. EEC stated Direction Exhibit X0001, application, Section 2.1, PDF page Direction 22. Decision D (October 30, 2017) 27

32 Energy Price Setting Plan Compliance Filing that it has not included an NGX review or the costs of such a review in its EPSP. 128 The Commission reviewed EEC s EPSP, including Schedule F (Energy Charge Applicable for each Month During the Plan Term), and confirms that EEC has not included any costs associated with an NGX review. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to adopt the Beblow method of commodity risk compensation in its EPSP. EEC stated that this direction is reflected in Schedule F of its EPSP and in Schedule 5 of EEC s pro forma monthly filing (Appendix A). 130 The Commission has reviewed Schedule 5 of EEC s Schedule A pro forma monthly filing. The Commission confirms that the formula used by EEC to calculate the variable commodity risk compensation is correct, except that it is missing the required one-month lag; e.g., the variable commodity risk compensation for January 2018 rates should be based on the commodity gains and losses, revenue rate and actual load for the months of December 2016 to November The Commission also confirms that EEC s formula to calculate the risk cycle adder is correct, but notes that it will need to be adjusted such that the risk cycle adder is recalculated annually beginning on the first month for which rates are calculated using the new EPSP. Therefore, the Commission directs EEC to adjust its commodity risk compensation formulas, in its compliance filing to this decision, such that there is a one-month lag in the calculation of the variable commodity risk compensation, as discussed above, and such that the risk cycle adder is recalculated annually beginning on the first month for which rates are calculated using the new EPSP At paragraph of Decision D , the Commission directed EEC to include the applicable AESO trading charge as part of its monthly energy charge, with an active website reference, as part of its monthly energy charge filings. EEC stated that it updated the website reference in cell E108 in Schedule 2 of Appendix A. 132 The Commission has reviewed Appendix A and confirms that cell E108 in Schedule 2 now contains an active website reference. Accordingly, the Commission finds that, for the purposes of this compliance filing, EEC has complied with this direction. The Commission reminds EEC that, in order to be in compliance with this direction from Decision D , EEC must ensure that the website reference continues to be valid each time EEC files its monthly energy rates with the Commission At paragraph of Decision D , the Commission directed EEC to provide a methodology for forecasting its monthly NGX trading and transaction fees, with supporting information. EEC stated that it included its proposed methodology in cells D101:103 in Schedule 2 of Appendix A. 134 The methodology included by EEC was to multiply the NGX trading charge by the total hedge volume. This methodology was not contested by interveners and the Commission finds that it is a reasonable method to forecast EEC s monthly NGX trading and transaction fees. Accordingly, the Commission approves EEC s methodology for forecasting monthly NGX trading and transaction fees, as included in Schedule 2 of Appendix A, and finds that EEC has complied with this Commission direction. 128 Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Decision D (October 30, 2017)

33 Energy Price Setting Plan Compliance Filing 138. At paragraphs 562 and of Decision D , the Commission directed EEC to provide a proposal for the recovery of approved external EPSP costs, including specifics concerning the period over which any external EPSP development and regulatory costs would be recovered, and thresholds if there is a concern about potential rate shock. EEC stated that its proposal is included in cells D111:114 in Schedule 2 of Appendix A. The minimum period over which EEC proposes to recover approved external EPSP costs is three months. If the costs are between $50,000 and $100,000, they will be recovered over six months and costs greater than $100,000 will be recovered over 12 months or longer, if needed to reduce potential rate shock. 136 The Commission has reviewed Appendix 2, including the methodology in cells D111:114 and confirms that the methodology matches the description provided by EEC. The Commission considers that EEC s proposal is reasonable and will spread the costs over a sufficient period of time to ease potential rate shock. Accordingly, the Commission approves EEC s proposed methodology for the recovery of approved external EPSP development and regulatory costs and finds that EEC has complied with this direction At paragraphs 563 and of Decision D , the Commission directed EEC to exclude any costs associated with the operation of the backstop provision from the external EPSP development and regulatory costs, and to propose a new methodology to forecast and recover, as a separately identified cost, any ongoing costs for the operation of the backstop provision. EEC stated that it has not proposed a new methodology for backstop costs and, instead, has removed all reference to ongoing costs from the backstop provision. 138 The Commission acknowledges that EEC has not included any ongoing costs related to its backstop provision. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to include in its monthly energy rate calculations, a description of how the amount of collateral posted with the NGX for the RRO was calculated. The Commission also directed EEC to include support for the interest rate used in calculating the NGX collateral costs, as part of its first monthly energy rate calculation submitted under the new ESPS and in subsequent monthly filings, only if the interest rate changes. EEC stated that it included the allocation methodology for the NGX collateral costs in cells D91:94 of Schedule 2 of Appendix A. 140 In cells D91:94 of Schedule 2 in Appendix A,. The resulting product is then multiplied by the 0.75 LOC Annual Rate and divided by 12 to calculate a monthly NGX charge. EEC supported the 0.75 LOC rate in the pro forma monthly filing by stating: [f]rom EEC Treasury Dept EEC pays 0.75% in fees for any outstanding balances on all LC s. 141 The Commission has reviewed Schedule 2 of Appendix A, including the calculation of EEC s monthly NGX charge. The Commission finds that EEC has proposed a reasonable method for calculating these charges and accepts the interest rate used for these calculations. Accordingly, the Commission approves EEC s methodology for calculating the monthly NGX charges and finds that EEC has complied with this direction, for the purposes of 135 Directions 31 and Exhibit X0001, application, paragraph Directions 32 and Exhibit X0001, application, paragraphs Direction Exhibit X0001, application, paragraph Exhibit X0056, appendix A pro forma monthly filing, Schedule 2, cell G:94. Decision D (October 30, 2017) 29

34 Energy Price Setting Plan Compliance Filing this compliance filing. The Commission reminds EEC that, subject to this direction, it must continue to provide this information in its monthly energy rate filings At paragraph of Decision D , the Commission directed EEC to include a new proposal for forecasting its AESO collateral costs. EEC stated the new proposal is included in cells D79:87 of Schedule 2 of Appendix A. 143 The Commission has reviewed EEC s proposed methodology and finds that it is a reasonable methodology to forecast EEC s AESO collateral costs. Accordingly, the Commission approves this methodology and finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to indicate whether it anticipates incurring any counterparties collateral costs during the term of the EPSP and, if it does, to propose a methodology to forecast those costs. EEC indicated that it does not expect to incur these costs and removed all reference to them. 146 The Commission accepts EEC s explanation that it does not expect to incur counterparties collateral costs and confirms that EEC has removed these costs from its EPSP. Accordingly, the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to provide the total actual NGX and AESO credit costs for each month in 2015 and 2016 to help assess the overall level of NGX and AESO collateral costs. EEC stated that the actual NGX and AESO credit costs are provided confidentially in Appendix H. 148 The Commission has reviewed the actual NGX and AESO credit costs provided by EEC for 2015 and The Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to describe the allocation methodology it used to determine the RRO portion of the $25 million included in the NGX credit costs methodology in Appendix 7 of its proposed EPSP. The Commission also directed EEC to use the same methodology and to show how the NGX and AESO credit costs were allocated for each month of 2015 and EEC stated that it included confidential Appendix I to show the RRO NGX and AESO credit costs for each month of 2015 and The Commission has reviewed the 2015 and 2016 actual NGX and AESO credit costs provided in Appendix I and finds that EEC has complied with this direction. 142 Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Decision D (October 30, 2017)

35 Energy Price Setting Plan Compliance Filing 10 Previous Commission directions on the monthly energy rate filings directions 4, and At paragraph of Decision D , the Commission directed EEC to add the following sentence to its RRO trader attestation letter: During the period I carried out my RRO related obligations, I did not undertake any work for [EEC] Wholesale Trading EEC stated that it added the sentence to its RRO trader attestation letter, which was included as Appendix C to its EPSP. The Commission has reviewed the RRO trader attestation letter and confirms that EEC has added the sentence directed by the Commission. However, EEC included square brackets around the word EEC in the sentence. The square brackets were added in paragraph 235 of Decision D because the Commission was quoting Mr. Merani who omitted EEC from EEC Wholesale Trading. The Commission directs EEC to remove the square brackets from the added sentence in the RRO trader attestation letter, as part of EEC s compliance filing to this decision At paragraph of Decision D , the Commission directed EEC to provide a pro forma monthly energy rate filing that is consistent with the documents submitted by EPCOR Energy Alberta GP Inc. (EEA) in Proceeding and by Direct Energy Regulated Services (DERS) in Proceeding EEC stated that it reflected this direction in Appendix A of its EPSP. 156 The Commission has reviewed both the public and the confidential versions of the pro forma monthly filing filed by EEC and finds that the pro forma monthly filing is substantially similar to those filed by EEA and DERS, such that the Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEC to submit, as part of its compliance filing, a pro forma load forecast performance report, similar in nature to what EEA provided in Proceeding EEC stated that it included the pro forma load forecast performance report as Appendix E of its EPSP. 158 The Commission has reviewed the pro forma load forecast performance report provided by EEC as Appendix E of its EPSP. The Commission confirms that the load forecast performance report is in the same form as that provided by EEA in Proceeding Accordingly, the Commission approves EEC s pro forma load forecast performance report and directs EEC to include it in its monthly energy charge filings to the Commission. The Commission finds that EEC has complied with this direction At paragraph of Decision D , the Commission directed EEA to file an attestation letter in the form EEC provided in Proceeding 20448, signed by the manager of the RRO operations group in EPC, as part of its monthly rate filings under the new EPSP. EEC 151 Direction Decision D , paragraph Direction Proceeding 20342, EPCOR Energy Alberta GP Inc, Energy Price Setting Plan Compliance Filing. 155 Proceeding 21295, Direct Energy Regulated Services, Energy Price Setting Plan Second Compliance Filing. 156 Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction 25. Decision D (October 30, 2017) 31

36 Energy Price Setting Plan Compliance Filing stated that this direction is reflected in Appendix F to the EPSP. 160 The attestation letter provided by EEC in Appendix F is the same as the one that EEC provided in Proceeding No action was required from EEC in this proceeding with respect to this Commission direction. However, the Commission reminds EEC that this direction requires EEC to file the attestation letter as part of its monthly energy rate filings At paragraph of Decision D , the Commission directed EEC to include a separate attestation letter signed by the RRO trader as part of EEC s monthly rate filings under the new EPSP. EEC stated that this direction is reflected in Appendix C of its compliance filing. 162 No action was required of EEC in this proceeding with respect to this Commission direction. However, the Commission reminds EEC that this direction requires EEC to file the attestation letter as part of its monthly energy rate filings. 11 Affidavit of Mr. Fulton Direction At paragraph of Decision D , the Commission directed EEC to request from Mr. Fulton an affidavit providing the following: A list of any confidential documents shared (identifying the document, including its date and its author). Confirmation that no confidential documentation or other confidential information related to this proceeding, and shared through discussions between EEC and Mr. Fulton, will be disclosed by Mr. Fulton. Confirmation that Mr. Fulton will not use any of the confidential information and all evidence, transcripts, notes, working papers, calculations, analysis or other written materials based on or using the confidential information received or reviewed during the course of the proceeding, for any purpose whatsoever. Confirmation that none of the confidential documentation or discussions affect his obligations and duties under the current EPSP. Confirmation that any copies of confidential information and related materials he has in his possession related to this proceeding have been destroyed The Commission then stated: 608. Mr. Fulton s affidavit can be filed by EEC on the record of the current proceeding, and it should be filed as soon as it is practicable. If Mr. Fulton is unable to fulfill this obligation, EEC should contact the AUC immediately to indicate why an affidavit cannot be executed Exhibit X0001, application, paragraph Direction Exhibit X0001, application, paragraph Direction 44) 164 Decision D , paragraph Decision D (October 30, 2017)

37 Energy Price Setting Plan Compliance Filing 153. EEC provided Mr. Fulton s affidavit in Appendix J to its application. 165 The Commission has reviewed the affidavit provided by Mr. Fulton in Appendix J and confirms that the affidavit contains all of the items requested by the Commission in paragraph 607 of Decision D The Commission is satisfied that Mr. Fulton in his affidavit, attested to the items listed in paragraph 607 and finds that EEC has complied with this direction by supplying Mr. Fulton s affidavit to the Commission. 12 Confidentiality 154. In its April 25, 2017 ruling on EEC s confidentiality request for the current proceeding, Proceeding 22510, the Commission instructed parties who wished to receive copies of the confidential information in this proceeding to submit a confidentiality undertaking in the form included as Form RP5 in Rule 001: Rules of Practice. Under Section 7(c) of Form RP5, individuals who have a current confidentiality undertaking are required to file a statutory declaration indicating destruction of the confidential documents 30 days after a decision is issued by the Commission or the expiration of any review or appeal period As noted in the Commission s findings and directions in this decision, a second compliance filing for EEC s EPSP is required. The Commission considers that the second compliance filing is required to address the remaining issues related to the EPSP. Therefore, the Commission is exercising its discretion under Section 8(2) of the Alberta Utilities Commission Act to extend its April 25, 2017 confidentiality ruling to the upcoming second compliance proceeding to allow individuals who have signed undertakings to retain the confidential documents filed with the Commission on a confidential basis in the current proceeding. The Commission will also allow parties who have filed an undertaking in the current proceeding to retain this decision until the completion of the second compliance filing proceeding. This decision, along with any confidential materials retained subject to the April 25, 2017 confidentiality ruling, will now be required to be destroyed within 30 days of the expiry of any review or appeal period after a decision is issued by the Commission on the second compliance filing or, if applicable, within 30 days of any disposition of a review application or 30 days of a final decision disposing of an appeal In summary, any individual to the current proceeding who received copies of the confidential information and who will be participating in the second compliance filing to this decision is, therefore, permitted to retain those materials for use in the second compliance filing proceeding, which will be established to test EEC s EPSP. The Commission also confirmed that individuals who had signed a confidentiality undertaking with respect to documents subject to the April 25, 2017 confidentiality ruling, do not need to sign a new undertaking for the purposes of retaining those documents or this decision, until a new decision is issued in the second compliance filing proceeding. However, those individuals are required to file statutory declarations on the new proceeding that will be established to test EEC s EPSP second compliance filing, in accordance with the statutory declaration included in Rule 001, the April 25, 2017 ruling and the extension of confidential treatment, as set out in this decision Any party to the current proceeding who received copies of the confidential information but will not be participating in the proceeding to test EEC s EPSP second compliance 165 Exhibit X0001, application, paragraph 53. Decision D (October 30, 2017) 33

38 Energy Price Setting Plan Compliance Filing filing to this decision, must fulfill his or her obligations included in the confidentiality undertaking filed on the record of the current proceeding, by completing the Rule 001 statutory declaration in Form RP5 and filing it on the record of Proceeding Any individual who wished to obtain confidential information who has not previously executed and filed an undertaking with the Commission, pursuant to the Commission s April 25, 2017 confidentiality ruling, may file an undertaking on the proceeding that will test EEC s EPSP second compliance filing. The undertaking filed should reference the April 25, 2017 confidentiality ruling and this decision as the authorities that grant confidential treatment for relevant confidential information related to Proceeding and the subsequent information related to the Commission s April 25, 2017 ruling that will be filed in the second compliance proceeding related to EEC s EPSP. 13 Term of the EPSP 159. In Schedule A of its EPSP, EEC proposed the expiry date for the term of the EPSP as April 30, 2018, or such other date as approved by the Commission. As noted in the various Commission findings of this decision and given the fact that a second compliance filing is required for the EPSP, the Commission considers that an extension of the term of EEC s EPSP will likely be necessary to accommodate implementation of the EPSP. In the interest of regulatory efficiency, the Commission directs EEC to include, in its compliance filing to this decision, a proposal to address the term required for the implementation of its EPSP and a corresponding recommendation for an extension of the term of its EPSP beyond April 30, Decision D (October 30, 2017)

39 Energy Price Setting Plan Compliance Filing 14 Order 160. It is hereby ordered that: (1) shall file a second compliance filing to its energy price setting plan, and include as an attachment to its application a complete, stand-alone, energy price setting plan that reflects the findings, directions and conclusions in this decision, by no later than November 20, Dated on October 30, Alberta Utilities Commission (original signed by) Mark Kolesar Vice-Chair (original signed by) Henry van Egteren Commission Member (original signed by) Tracee Collins Commission Member Decision D (October 30, 2017) 35

40

41 Energy Price Setting Plan Compliance Filing Appendix 1 Proceeding participants Name of organization (abbreviation) Company name of counsel or representative (EEC) Consumers Coalition of Alberta (CCA) Market Surveillance Administrator Office of the Utilities Consumer Advocate (UCA) Reynolds, Mirth, Richards & Farmer Alberta Utilities Commission Commission panel M. Kolesar Vice-Chair H. van Egteren, Commission Member T. Collins, Commission Member Commission staff A. Sabo (Commission counsel) C. Arnot D. Mitchell C. Burt F. Tiberi Decision D (October 30, 2017) 37

42 Energy Price Setting Plan Compliance Filing 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. As proposed by EEC, the Commission directs EEC to implement a written policy to ensure that the printer used by the RRO trader is not accessible to other traders during the time the trader is performing the duties for the RRO. This will add an additional safeguard to avoid disclosure of RRO trading information.... Paragraph With respect to the costs of constructing the second trading cubicle for the RRO trader, the Commission accepts EEC s statement that the RRO trader currently carries out both RRO and non-rro trading in the same cubicle and, therefore, construction of a new cubicle is reasonable. Accordingly, the Commission approves the costs proposed by EEC for the costs of constructing the RRO trading cubicle and workstation space. The Commission does not consider these costs duplicative because the RRO trading cubicle and workspace are to be used only for RRO trading. Accordingly, the Commission directs EEC to construct a second cubicle in workstation located at 2505N on the map provided by EEC.... Paragraph With respect to separate Canax accounts, the Commission notes that, while EEC did not oppose establishing a separate account, it also stated that separate Canax accounts could allow the broker to determine whether the trade is for the RRO or for EEC s competitive business. Given the limited evidence on the record of this proceeding pertaining to this topic, the Commission finds that it is in the best interest of RRO consumers to maintain as much separation of RRO and non-rro traders as practical and, therefore, the Commission directs EEC to establish a separate Canax account for the RRO trader, which is at no additional cost to customers.... Paragraph However, EEC also included Schedule D of its EPSP, which sets out how the hedge volumes will be determined. Schedule D, which is part of EEC s public EPSP, includes information similar to the redacted information in Section 1.1(b)(i) and (ii) of EEC s confidential procurement protocol. As this information was public in Proceeding and is publically available in Schedule D, the Commission directs EEC to include Section 1.1(b)(i) and (ii) in the public version of its EPSP, in its compliance filing to this decision. The Commission is satisfied that Schedule D clearly sets out how the hedge volumes will be determined and, therefore, finds that EEC has complied with this direction.... Paragraph EEC stated that this direction is reflected in Schedule A of its EPSP. The Commission reviewed EEC s EPSP and confirms that the terms flat volume and peak volume and their corresponding definitions have been removed from the EPSP and Schedule A. The term hedge volume target has been added to Schedule A. However, the terms flat volume and peak volume continue to appear in EEC s definition of the term product. Accordingly, the Commission directs EEC to remove the terms flat volume and peak volume from its definition of the term product in its compliance filing to this decision.... Paragraph Decision D (October 30, 2017)

43 Energy Price Setting Plan Compliance Filing 6. The Commission has reviewed EEC s EPSP to determine whether EEC complied with the Commission s direction that EEC must ensure that all terms are defined in Schedule A. During the course of this review, the Commission discovered a number of issues in EEC s EPSP, including undefined terms; instances of multiple terms used to refer to the same concept (e.g., energy procurement process and procurement protocol); acronyms that are not spelled out or defined; terms defined in Schedule A that do not appear elsewhere; and incorrect section, schedule or appendix cross-references. The Commission is concerned with the number of errors and omissions present in the EPSP and supporting documentation, and finds that EEC has failed to comply with this Commission direction. The Commission has included Appendix 3 to this decision in which it has noted a number of issues in EEC s EPSP. The Commission directs EEC, as part of its compliance filing to this decision, to either address each of the noted issues or, if applicable, explain why the issue does not require remediation. The Commission also directs EEC to include, as part of its compliance filing to this decision, a table of concordance listing every change that it has made to its EPSP and supporting documents, the reason for the change, a reference to the location of the change in the EPSP or supporting documentation and, where applicable, a reference to the paragraph in this decision that resulted in EEC making the change. As part of its compliance filing to this decision, the Commission also directs EEC to re-letter the schedules and appendices to its EPSP sequentially. The Commission also considers that it may be necessary to hold a technical meeting after receiving EEC s second compliance filing application in order to work through any remaining issues. The Commission will make this determination following its review of EEC s compliance filing to this decision.... Paragraph EEC s new Section 2.4(f) is related to OTC trades and does not speak to the circumstances under which the RRO trader can engage in unregulated trading. Accordingly, the Commission directs EEC to amend Section 2.4 of its EPSP, as part of its compliance filing to this decision, to include the paragraphs recommended by Mr. Beblow as follows:... Paragraph 120 (k) Following receipt of the Daily Target Price and Daily Target Volume from the RRO Operations Group, the RRO Trader will only be permitted to engage in trading activity on behalf of EEC Wholesale Trading when: (i) all of the respective Daily Target Volumes for the Products for that Business Day, determined in accordance with section 2.1, have been transacted; or (ii) the Daily Target Volume is set to 0MW for all Products for that Business Day. 8. At paragraph 545 of Decision D , the Commission directed EEC to adopt the Beblow method of commodity risk compensation in its EPSP. EEC stated that this direction is reflected in Schedule F of its EPSP and in Schedule 5 of EEC s pro forma monthly filing (Appendix A). The Commission has reviewed Schedule 5 of EEC s Schedule A pro forma monthly filing. The Commission confirms that the formula used by EEC to calculate the variable commodity risk compensation is correct, except that it is missing the required one-month lag; e.g., the variable commodity risk compensation for January 2018 rates should be based on the commodity gains and losses, revenue rate and actual load for the months of December 2016 to November The Commission also confirms that EEC s formula to calculate the risk cycle adder is correct, but notes that it Decision D (October 30, 2017) 39

44 Energy Price Setting Plan Compliance Filing will need to be adjusted such that the risk cycle adder is recalculated annually beginning on the first month for which rates are calculated using the new EPSP. Therefore, the Commission directs EEC to adjust its commodity risk compensation formulas, in its compliance filing to this decision, such that there is a one-month lag in the calculation of the variable commodity risk compensation, as discussed above, and such that the risk cycle adder is recalculated annually beginning on the first month for which rates are calculated using the new EPSP.... Paragraph EEC stated that it added the sentence to its RRO trader attestation letter, which was included as Appendix C to its EPSP. The Commission has reviewed the RRO trader attestation letter and confirms that EEC has added the sentence directed by the Commission. However, EEC included square brackets around the word EEC in the sentence. The square brackets were added in paragraph 235 of Decision D because the Commission was quoting Mr. Merani who omitted EEC from EEC Wholesale Trading. The Commission directs EEC to remove the square brackets from the added sentence in the RRO trader attestation letter, as part of EEC s compliance filing to this decision.... Paragraph At paragraph 446 of Decision D , the Commission directed EEC to submit, as part of its compliance filing, a pro forma load forecast performance report, similar in nature to what EEA provided in Proceeding EEC stated that it included the pro forma load forecast performance report as Appendix E of its EPSP. The Commission has reviewed the pro forma load forecast performance report provided by EEC as Appendix E of its EPSP. The Commission confirms that the load forecast performance report is in the same form as that provided by EEA in Proceeding Accordingly, the Commission approves EEC s pro forma load forecast performance report and directs EEC to include it in its monthly energy charge filings to the Commission. The Commission finds that EEC has complied with this direction.... Paragraph In Schedule A of its EPSP, EEC proposed the expiry date for the term of the EPSP as April 30, 2018, or such other date as approved by the Commission. As noted in the various Commission findings of this decision and given the fact that a second compliance filing is required for the EPSP, the Commission considers that an extension of the term of EEC s EPSP will likely be necessary to accommodate implementation of the EPSP. In the interest of regulatory efficiency, the Commission directs EEC to include, in its compliance filing to this decision, a proposal to address the term required for the implementation of its EPSP and a corresponding recommendation for an extension of the term of its EPSP beyond April 30, Paragraph Decision D (October 30, 2017)

45 Energy Price Setting Plan Compliance Filing Appendix 3 EEC EPSP with Commission comments (return to text) Appendix 3-EPSP with comments_red (consists of 45 pages) Decision D (October 30, 2017) 41

46 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 1 of 45 ENMAX ENERGY CORPORATION ENERGY PRICE SETTING PLAN 1. Definitions Capitalized terms used in this Energy Price Setting Plan that are not otherwise defined herein, have the meanings ascribed to them in Schedule A. 2. Implementation and Transition Procurement under this EPSP will begin on the first day of the Month following the Month in which this EPSP approved. For example, if this EPSP is approved in April 2017, then procurement under this EPSP would begin on May 1, 2017, and the first energy rate filing under the new EPSP would be submitted in late August 2017, and this filing would include the rates for September This EPSP will be fully implemented no later than the first day of the fifth Month after the Month in which this EPSP is approved. 3. Procurement Energy for the RRO will be procured in accordance with the Procurement Protocol set out in Schedules E and E.1 to this EPSP. 4. RRO Energy Charge The RRO Energy Charge applicable to each Rate Class for the term of the EPSP to be included in the EEC s RRT Price Schedules will be determined in accordance with Appendix A. The various components making up the RRO Energy Charge will be determined as follows: Commented [AUC1]: Can these be combined into Schedule E, with some information redacted in the public version? Commented [AUC2]: Undefined Commented [AUC3]: Undefined (a) Base Energy Charge. (i) (ii) (iii) Prior to the first day of the Price Setting Period for each Month, EEC will complete an initial Load Forecast for the RRO Customers for the Month. The Load Forecast will be prepared for each Month, and then updated for that Month during the Price Setting Period, as described in Schedule E and in accordance with the methodology shown in the Load Forecasting Illustrative Model in Schedule C to the EPSP. The Energy Portfolio to be acquired by EEC for each Month will be determined in accordance with Schedule E.1. Any load not procured through the Energy Procurement Process under the EPSP will be supplied in accordance with the Backstop Provision set out in Schedule E.1 to the EPSP. Commented [AUC4]: Undefined Commented [AUC5]: Undefined Commented [AUC6]: Undefined Decision D (October 30, 2017)

47 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 2 of 45 (iv) The Base Energy Charge component of the RRO Energy Charge by Rate Class for EEC s RRO Tariff for each Month over the term of the EPSP will be determined as described in Appendix A and Schedule H to the EPSP. (b) Commodity Risk Compensation Prior to the beginning of a Month, the Commodity Risk Compensation will be determined for each month as described in Schedule F to the EPSP. The Commodity Risk Compensation will consist of: (i) (ii) A monthly Variable Risk Compensation component calculated as described in Schedule 5 of Appendix A and Schedule F of the EPSP, and An annual Risk Cycle Adder component calculated as described in in Schedule 5 of Appendix A and Schedule F of the EPSP. (c) Energy and Non-Energy Return Margin The Energy and Non-Energy Return Margin will be fixed at a before-tax energy and non-energy return margin of $2.44/MWh, which shall be grossed up for taxes by applying the Effective Tax Rate Adjustment on the energy charge cost component of customer bills for the total RRO load. (d) Cost Recovery Items EEC will include in the RRO Energy Charge the additional items listed in Schedule 2 of A p p e n d i x A. These items include NGX Collateral Costs (calculated using the methodology approved in Decision 2941-D for EPCOR Energy Alberta GP inc. and illustrated in Schedule 2 of Appendix A to the EPSP), NGX Trading Charge and Transaction Fees, AESO Trading Charges and AESO Collateral Costs, External EPSP Development (as per the Methodology described in Appendix A, Schedule 2, Lines ) and Regulatory Costs, RAM charges, Uplift Charges calculated as shown in Schedule 2 of Appendix A, RRO Trader Costs and any costs associated with the physical separation of the RRO Trader as approved by the AUC. 5. Filing of RRO Energy Charge with the AUC Commented [AUC7]: Variable Risk Compensation is not defined (or described ) in Schedule 5 of Appendix A and does not appear in Schedule F. Commented [AUC8]: Risk Cycle Adder is not defined (or described ) in Schedule 5 of Appendix A and does not appear in Schedule F. Commented [AUC9]: In paragraph 206 of Decision D , the Commission approved a before tax return amount of $2.44/MWh, to which the gross up provision must be applied. Commented [AUC10]: Should these costs be included in Schedule F? In accordance with Section 12 of the RRO Regulation, EEC will file with the AUC for acknowledgement before the beginning of each Month, the RRO Energy Charge for the Month, and the supporting calculations, determined in accordance with the formulas set out in the Pro Forma Monthly Filing (Appendix A). 6. Code of Conduct Access to commercially sensitive information in connection with the EPSP by EEC and any of its employees or consultants, or by the personnel of any affiliate of EEC will be governed Decision D (October 30, 2017)

48 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 3 of 45 by the EPSP Code of Conduct set out in Appendix G and the EPSP Procurement Conduct Agreement set out in Appendix G.1 to Appendix G to the EPSP. 7. Change in Law In the event of any material change in applicable law or in policies or rules having the effect of law (including regulations, ministerial orders, AUC decisions, orders, guidelines or directives, or AUC or ISO Rules), as a result of which additional material costs or benefits not provided for in the EPSP are incurred by EEC in its performance of the EPSP, a person directly and materially harmed or prejudiced by the change in the context of the operation of the EPSP may apply to the Commission for an order re-opening and modifying the EPSP to the extent required to address the change. An application made under this section must include, at a minimum, a detailed description of the change giving rise to the re-opening request, the direct and material harm or prejudice that the person believes it will suffer if the EPSP is not re-opened, and the specific modifications to the EPSP that the person requests that the Commission approve to address the change. For greater certainty, an application to re-open under this section will not be considered to be an application for review and variance and will not be subject to the requirements of AUC Rule 016 or any successor or replacement rule. Commented [AUC11]: Undefined. 8. RRO Operating Group and RRO Trader (a) EEC will pay EEC Wholesale Trading for a trader the monthly amount set out in Appendix D. (b) The Daily Target Price and the Daily Target Volume will be set by the RRO staff, who are part of the Regulated Rate Option ( RRO ) Operations Group of ENMAX Power Corporation ( EPC ). Commented [AUC12]: Undefined. Commented [AUC13]: There is no Appendix D in the EPSP. (c) The role of the RRO Trader will be to follow the instructions provided by RRO Operation Group, without regard for the unregulated portfolio. (d) The RRO Trader will be required to use privacy screens and shall have no communication pertaining to the RRO with the unregulated traders on any day for which the RRO Operations Group has set a Daily Target Volume of more than 0 MW, until he has fulfilled his RRO trading obligations or determined there would be no RRO trades for the day. (e) The RRO Trader is required to sign an EPSP Procurement Conduct Agreement (Appendix G.1) and is subject to an EPSP Procurement Conduct Protocol (Appendix G). (f) The roles and responsibilities of the RRO Operations Group and RRO trader are as follows: (i) The RRO Operations Group has overall responsibility for the RRO. Decision D (October 30, 2017)

49 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 4 of 45 (ii) (iii) Trade transactions will occur within EEC Wholesale Trading, the unregulated trading group of EEC. The RRO Trader within the unregulated Wholesale Trading group will receive the Daily Target Price and Daily Target Volume. It is the responsibility of the RRO Trader to fulfill his or her RRO obligations prior to undertaking any unregulated activities in a trading day and must be made available to provide RRO service throughout the day as required by Section 2.4 of Schedule E.1 of this EPSP. The distribution of sensitive information with respect to the RRO will be limited to those persons who must access that information in order to implement the EPSP. No market participant, including EEC Wholesale Trading, shall have access to any RRO volume forecast (initial or updated) prepared either before or during the 120 day procurement term. Commented [AUC14]: Undefined. (g) The RRO Operations group will be responsible for the following activities: (i) Preparation of all RRO volume forecasts, in accordance with Schedule E. (ii) (iii) (iv) (v) (vi) Management of the procurement portfolios, including: (A) determining of overall target volumes for each month and any revisions to target volumes as a result of interim forecasts and final forecasts; and (B) performing reasonableness tests pertaining to the RRO load forecast, using factors such as prior year comparisons, attrition analysis, and peak/base ratios. Tracking of all trades and measurement of progress of buying against schedules including determination of position in volume procurement schedule. Determination of the Daily Target Price and the Daily Target Volume. Preparation of a bid sheet for the RRO Trader for each trading day that includes a Target Price and Target Volume for each active month within the relevant 120-day procurement period (up to eight Target Prices and Target Volumes one for each of the two products (Flat and Peak) for each of the four months in the 120-day procurement period). Preparation of Monthly Summary Reports that include the following and that are confidential when completed: (A) all RRO trade transactions for the Month; and Commented [AUC15]: Undefined. Commented [AUC16]: Undefined. Commented [AUC17]: Undefined. Commented [AUC18]: Undefined. Commented [AUC19]: Undefined. Commented [AUC20]: Undefined. Commented [AUC21]: Undefined. Commented [AUC22]: Undefined. Commented [AUC23]: Undefined. Commented [AUC24]: Undefined. Decision D (October 30, 2017)

50 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 5 of 45 (vii) (viii) (ix) (B) the source and Daily Target Price for each trade; On a monthly basis, and after receipt of initial settlement data from the AESO, undertaking the following: (A) calculation of the Adaptive CRC for the most recent month for which Monthly Settlement Data is available as described in Schedule F; (B) preparation of a spreadsheet that shows the Final Forecast and the actual load for the previous Month; and (C) preparation of a forecast variance report explaining the variance between the Final Forecast and actual load for the previous Month. On an annual basis, EEC will update the Risk Cycle CRC as described in Schedule F. Preparation of end of month reports for rate calculation and submission to AUC, as required by Section 2.7 of Schedule E. Commented [AUC25]: Undefined. Commented [AUC26]: Undefined. Commented [AUC27]: Undefined. Commented [AUC28]: Undefined. Decision D (October 30, 2017)

51 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 6 of 45 Attachments Schedule A Definitions Schedule B Month Ahead Energy Price Setting Plan Process Schedule C Load Forecasting Methodology Schedule D Month Ahead Portfolio Hedge Volume Determination Methodology Schedule E Procurement Protocol Schedule E.1 - Confidential Procurement Protocol Schedule F Energy Charge Applicable for each Month During the Plan Term Schedule H Monthly Summary Report Appendix "A" Pro Forma Monthly Filing Appendix C RRO Trader Attestation Letter Appendix E Pro Forma Load Forecast Report Appendix F RRO Operations Group Manager Attestation Letter Appendix G EPSP Procurement Conduct Protocol Appendix G.1 EPSP Procurement Conduct Agreement Decision D (October 30, 2017)

52 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 7 of 45 SCHEDULE A EEC Energy Price Setting Plan CONFIDENTIAL DEFINITIONS The following terms have the meanings set out below: AESO means the Alberta Electric System Operator; AESO Collateral Costs or AESOCC means the costs incurred for posting financial security with the AESO for a Month determined in accordance with section A(ii) of Schedule F ; AESO Trading Charges or AESOTC means the current charges set by the AESO from time to time for transacting energy through the power pool; Application means EEC s application for approval of its Energy Price Setting Plan, dated March 18, 2016, as subsequently, revised, amended or refiled; AUC or Commission means the Alberta Utilities Commission; Base Energy Charge or BEC means the weighted average cost in $/MWh for all Blocks including the price of any offers that EEC has accepted under Section 4 (a) of the EPSP. Commented [A1]: Undefined. Commented [A2]: Is this cross-reference correct? Business Day means a calendar day other than a Saturday, Sunday or statutory holiday in the Province of Alberta; CCA means the Consumers Coalition of Alberta; Commented [A3]: Term is not used elsewhere. Commodity Risk Compensation or CRC has the meaning ascribed to that term in Section a (i) of Schedule F ; Consultation Parties or CPs means the CCA and the UCA; Commented [A4]: Term is not used elsewhere. Daily Target Price means the price determined in accordance with Section 2.2 of Schedule E to the EPSP; Daily Target Volume means the volume determined in accordance with section 2.1 of Schedule E to the EPSP; Decision D (October 30, 2017)

53 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 8 of 45 Delivery Month means the Month in which the prices for the procured hedges for Flat Product and Peak Product are settled by the AESO; Commented [A5]: Should this be for? EEC means, in its capacity as the regulated rate option provider appointed by ENMAX Power Corporation for the RRO; Eligible Customer has the meaning set out in the Regulation, or its replacement; Energy Charge means the price, inclusive of all adders, margins and risk compensation, which the customer pays for RRO services. Energy Return Margin or RM has the meaning ascribed to that term in Section 4 (c) of the Energy Price Setting Plan; EPC means ENMAX Power Corporation; Commented [A6]: Section 4 of the EPSP does not define the term Energy Return Margin. Energy Price Setting Plan or EPSP means the document entitled Energy Price Setting Plan and all attachments, schedules and appendices thereto including: Schedule A Definitions Schedule B Month Ahead Energy Price Setting Plan Process Schedule C Load Forecasting Methodology Schedule D Month Ahead Portfolio Hedge Volume Determination Methodology Schedule E Procurement Protocol Schedule E.1 - Confidential Procurement Protocol Schedule F Energy Charge Applicable for each Month During the Plan Term Schedule H Monthly Summary Report Appendix "A" Pro Forma Monthly Filing Appendix C RRO Trader Attestation Letter Appendix E Pro Forma Load Forecast Report Appendix F RRO Operations Group Manager Attestation Letter Appendix G EPSP Procurement Conduct Protocol Appendix G.1 EPSP Procurement Conduct Agreement submitted by EEC to the Alberta Utilities Commission, as amended from time to time, with a term ending April 30, 2018 or such other date as approved by the Alberta Utilities Commission; Decision D (October 30, 2017)

54 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 9 of 45 EPSP Code of Conduct means the rules and practices to which EEC and its affiliates will adhere while administering the EPSP as set out in Appendix G to the EPSP; Commented [A7]: Should this be EPSP Procurement Conduct Protocol? External EPSP Development and Regulatory Costs or EDR is calculated as shown in Schedule 2 of Appendix A to the EPSP; First Interim Forecast has the meaning given to it in section 1.1(a) of Schedule E to this EPSP; Final Forecast or FF has the meaning given to it in section 1.1(a) of Schedule E to this EPSP; Final Settlement means the final calculation of settlement for a settlement month as described in AUC Rule 021: Settlement System Code Rules Forecast Load or FL means the forecast RRO usage in MW by hour determined in accordance with Schedule E of the EPSP; Commented [A8]: Term is not used elsewhere. Commented [A9]: Is this cross-reference correct? Flat or Flat Product means a hedge product that notionally delivers electric energy over all hours (7x24); Hedge Volume Target means the intended level of Products to be transacted for a Delivery Month measured in MW based on the hourly exposure derived from the most recent forecast for Flat Product and Peak Product. Specific calculation of the Hedge Volume Target for Flat Product and for Peak Product is described in Section 1.1(b) of Schedule E.1 to the EPSP; Initial Forecast has the meaning set out in Section 1.1(a) of Schedule E to the EPSP; Month means the period beginning on the first day of a calendar month and ending immediately prior to the commencement of the first day of the next calendar month; MW means megawatts; MWh means megawatt hours; Net Metered Load means the consumption of electric energy for a given time period and for a specified group of consumers as estimated or measured through metering devices and does not reflect any Unaccounted for Energy and Line Losses; NGX means the online internet trading systems for electrical energy in Alberta operated by the Natural Gas Exchange, NGX Canada Inc. or any successor thereof; Decision D (October 30, 2017)

55 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 10 of 45 NGX Collateral Costs or NGXCC means the costs incurred for posting financial security with the NGX in $/MWh determined in accordance with Section 2 of Appendix A to the EPSP; Commented [A10]: Is this cross-reference correct? NGX screen means the Trading system provided by the Intercontinental Exchange for the trade of Alberta electricity contracts on behalf of NGX; OTC means over the counter transactions facilitated by a third party broker; Peak or Peak Product means a hedge product that notionally delivers electric energy over all on-peak hours, where on-peak hours means the period from 7:00 a.m. to 11:00 p.m. on each day of the year;. PILOT means the amount EEC is entitled to recover under the PILOT Regulation in respect of the Return Margin; Commented [A12]: Term is not used elsewhere. Power Pool has the meaning set out in the EUA; Price Setting Period means the period starting 120 days prior to the Delivery Month and ending five Business Days prior to the Delivery Month, inclusive; Procured Hedge Volume means the amount in MW of hedging that has been procured for a specified Delivery Month; Commented [A13]: Should this be Products? Procurement means the process conducted under the EPSP for the procurement of Products for the purpose of supplying electric energy to Eligible Customers; Product or Products means either or both of the Flat volume and the Peak volume; RAM means the retailer adjustment to market charge under the Settlement System Code, and includes any successor or replacement charge; Commented [A14]: Undefined. Commented [A15]: Undefined. Commented [A16]: Undefined. RRO means the regulated rate option that is required to be provided in ENMAX Power Corporation s electric distribution service area under subsection 103(1) of the Electric Utilities Act; RRO Customer a regulated rate customer as defined in the RRO Regulation who accepts, uses or receives Service from EEC at a Site located in the distribution service area of EEC. RRO Regulation the Regulated Rate Option Regulation, AR 262/2005, as amended, being the Regulation that governs RRO service in the Province of Alberta Commented [A17]: Undefined. Commented [A18]: Should this be EPC? Decision D (October 30, 2017)

56 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 11 of 45 RRO Site Site with respect to which an RRO Customer is the customer of record (as defined in EEC s RRO Tariff) for the Site RRO Tariff the Tariff approved from time to time by the Commission pursuant to the EU Act and RRO Regulation respecting the provision of RRO Service by the Company in the distribution service areas in which the Company provides RRO service Commented [A19]: Undefined. Regulation means the Regulated Rate Option Regulation, AR 262/2005, as amended, or any replacement regulation; RRO Operations Group means the staff within ENMAX Power Corporation who are responsible for managing the RRO on behalf of ; RRO Portfolio means, at a point in time, the portfolio of products that have been acquired under the EPSP, and whose terms have not expired at that point in time; RRO Trader means the trader responsible for procuring Products for the RRO, and includes a designated back-up trader; RRO Trader Costs mean the cost of the RRO Trader as set out in Appendix D; Commented [A21]: There is no Appendix D in the EPSP. Second Interim Forecast has the meaning given to it in Section 1.1(a) of Schedule E to the EPSP; Site a site as defined in AUC Rule 021: Settlement System Code Rules UCA means the Office of the Utilities Consumer Advocate, established as part of the Ministry of Government Services by Order in Council 433/2003; Commented [A22]: Term is not used elsewhere. Unaccounted for Energy and Line Losses or UFE & LL means, at any particular time, the most recent data provided by EPC in respect of unaccounted for electric energy and line losses, expressed as a percentage, and applied to Net Metered Load; Uplift means the payments made to resources whose commitment and dispatch by a Regional Transmission Operator or and Independent System Operator result in a shortfall between the resource s offer and the revenue earned through market clearing prices; and Commented [A23]: Undefined. Commented [A24]: Undefined. Decision D (October 30, 2017)

57 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 12 of 45 Schedule B to ENMAX s EPSP PROCUREMENT PROCESS Capitalized terms used in this Schedule that are not otherwise defined herein have the meanings ascribed to them in Schedule A to the EPSP. Commented [AUC1]: Title does not match list in Schedule A definition of EPSP. A. ENERGY ACQUISITION PROCESS The EEC will procure energy supply over the Price Setting Period for the RRO Portfolio in accordance with the methods and procedures for acquiring Product set out below and in Schedules D and E.1. (a) The RRO Portfolio will consist of Products. (b) EEC will procure the energy supply through the daily trading of the RRO Trader as set out in Schedule E.1, over a period not greater than the Price Setting Period. (c) EEC will procure Hedge Volume Targets in 5 MW block sizes, or multiples thereof. (d) The total Hedge Volume Targets as determined in Schedule D to this EPSP will constitute the hedge volumes for the Month. Commented [AUC2]: Undefined. B. PROCUREMENT PROCESS TIMELINES (a) The Procurement process will begin no earlier than the first Business Day of the Price Setting Period for each Month. (b) The Procurement process will end on the last Business Day prior to the end of the Price Setting Period for each Month. C. RRO ENERGY CHARGE (a) Based on the results of the Procurement process for the Month, five Business Days prior to the first day of the Month: (i) ENMAX will calculate the RRO Energy Charge for the Month using the method described in Schedule F. Decision D (October 30, 2017)

58 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 13 of 45 Schedule C to ENMAX s EPSP LOAD FORECASTING METHODOLOGY Capitalized terms used in this Schedule that are not otherwise defined herein have the meanings ascribed to them in Schedule A to the EPSP. A. Load Forecast Model 1. EEC s RRO Load Forecast is prepared using a Neural Network with Regression Models using MetrixND software program developed and supported by Itron. 2. Regression Models require a Y variable, a list of X variables and an indication whether to include a constant term. Optionally, EEC can specify a weighting variable, a test period variable, and a bad spot variable. ARMA error processes may also be included in the model specification. Finally, error variances can be modeled as a GARCH process. Commented [AUC1]: Undefined. Commented [AUC2]: Undefined. 3. The Neural Network model provides a flexible nonlinear functional form. MetrixND provides EEC with an advanced Neural Network specification, which is detailed below. With this specification, EEC can select the number of nodes in the hidden layer, the functional form of each node, the variables to be included in each node, an initial seed for generation of the random starting point for the parameter values, and optionally (a) the order of the AR and MA processes for the error term, or (b) the GARCH specification for the error variance. The specification list is as follows: Dependent variable (y), Number of nodes in the hidden layer (H), Functional form for each node (linear, sigmoid, bell, third order), Independent variables (x s) to be included in each node, Random seed for model training, Number of trials to be used in training, Number of iterations for each trial, Convergence criterion for trials, Number of iterations for model learning, Convergence criterion for learning, Order (P) of autoregressive (AR) terms for the error process, Order (Q) of moving average (MA) terms for the error process, Order (SP) of seasonal autoregressive (SAR) terms, and Order (SQ) for seasonal moving average (SMA) terms. ARCH or GARCH variance specification Inclusion of the predicted value in the variance specification Inclusion of explanatory variables in the variance specification Commented [AUC3]: Undefined. Decision D (October 30, 2017)

59 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 14 of In addition to these variables and parameters, the user can specify weights to be used in the estimation process, whether to mark off bad spots in the databases, whether to mark off observations to be used to calculate forecast test statistics, the limits of the estimation period, and the limits of the forecast period. 5. The model forecasts load by hour as a function of past load settlement load data received from the AESO in conjunction with Daily Sunlight Hours, Calendar Days, Daily Temperatures, and Heating/Cooling days. The historical Daily Sunlight Hours and Daily Temperatures are taken from Government of Canada data. Daily Sunlight is forecast as a historical average, and Daily Temperature is forecast using historical data in conjunction with seasonal trend indications from sources such as Environment Canada, Accuvue weather, etc. 6. The Load Forecast model takes into account historical fluctuations, trends, seasonality, cycles and prediction errors, and may be adjusted with auto-regressive moving average ( ARMA ) errors to fine tune the results. The model is run using historical data over a three to 13 year period, depending upon which date range provides the best statistical indicators for the resulting forecast. B. RRO LOAD FORECASTING METHODOLOGY 7. The Total RRO Load for each Month will be determined as follows: Total RRO Load = the Load Forecast for the Month plus the distribution Line Loss Factor and the forecast Unaccounted for Energy for both Rate Classes 8. The Load Forecast for the Month for each Rate Class is calculated using MetrixND forecasting tool. Commented [AUC4]: Undefined. Commented [AUC5]: Undefined. Commented [AUC6]: Undefined. 9. A separate forecast will be created for both Rate Classes. Table 1: Rate Classes Res = Residential Rate Class Scom = Commercial Rate Class C. LOAD FORECAST UPDATES 10. The Load Forecast for each Month will be updated monthly during the Allowable Price Implementation Period for the Month prior to 90, 60 and 30 days prior to the Month using the latest available settlement data (excluding initial-daily settlement data) and by applying the methodology set out in Part A of this Schedule C. The updated Load Forecast will be used to recalculate the Total Hedge Volume Target for the Month in accordance with the methodology set out in Schedule D to this EPSP. Commented [AUC7]: Undefined. Commented [AUC8]: Undefined. Decision D (October 30, 2017)

60 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 15 of 45 D. METHODOLOGY CHANGES 11. EEC will, during the term of the EPSP, actively research methods to improve the accuracy of the load forecast methodology and may periodically identify refinements to the methodology set out in Part A of this Schedule C. Any load forecasting improvements identified will be filed with the Commission for approval prior to implementation. Decision D (October 30, 2017)

61 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 16 of 45 Schedule D to ENMAX s EPSP ENERGY PORTFOLIO HEDGE VOLUME DETERMINATION METHODOLOGY Commented [AUC1]: Title does not match title in Schedule A definition of EPSP. Capitalized terms used in this Schedule that are not otherwise defined herein have the meanings ascribed to them in Schedule A to the EPSP. A. HEDGE VOLUME DETERMINATION 1. The Total Hedge Target Volume required for a Month will be based on the forecast Total RRO Load prepared in accordance with Schedule C, as follows: (a) The Target Hedge Volume for Month will be calculated. (b) The Total Target Volume respecting the 7x24 Hedge Volume required for the Month will be equal to the average of the average hourly load in hours ending ( HE ) HE01 to HE07 and HE24 rounded to the nearest 5MW. (c) The Total Target Volume respecting the 7x16 Hedge Volume required for the Month will be equal to the average hourly load in HE08 to HE23 less the 7x24 Hedge Volume determined in 1(b) above, rounded to the nearest 5 MW. 2. The Total Target Volume Blocks respecting the 7x24 Hedge Volume Blocks and 7x16 Hedge Volume Blocks required for the Month will be determined as follows: (a) The 7x24 Hedge Volume Blocks will be equal to the 7x24 Hedge Volume determined in 1(b) above divided by 5 MW; and Commented [AUC2]: Undefined. Commented [AUC3]: Undefined. Commented [AUC4]: Undefined. Commented [AUC5]: How will it be calculated? Commented [AUC6]: Undefined. Commented [AUC7]: Undefined. Commented [AUC8]: Is this correct? Commented [AUC9]: Undefined. Commented [AUC10]: Undefined. Commented [AUC11]: Undefined. Commented [AUC12]: Undefined. (b) The 7x16 Hedge Volume Blocks will be equal to the 7x16 Hedge Volume determined in 1(c) above divided by 5 MW. Decision D (October 30, 2017)

62 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 17 of 45 EEC Energy Price Setting Plan Schedule E Procurement Protocol (Confidential) SECTION 1 BLOCK PROCUREMENT 1.1 GENERAL (a) EEC will prepare the following forecasts of the Net Metered Load for Eligible Customers for each hour in a Delivery Month: (i) (ii) (iii) (iv) an initial forecast no later than 120 days in advance of each Delivery Month (the Initial Forecast ); an interim forecast no later than 90 days in advance of each Delivery Month (the First Interim Forecast ); an interim forecast no later than 60 days in advance of each Delivery Month (the Second Interim Forecast ); and a final forecast no later than 30 days in advance of each Delivery Month (the Final Forecast ). (b) The RRO Portfolio will consist of energy, procured by EEC in five MW blocks ( Blocks ) of Products determined as follows: (i) the Hedge Volume Target for Flat Products shall be the average of the 8 off-peak hours as forecast in the most recent forecast of the Net Metered Load for Eligible Customers; and (ii) the Hedge Volume Target for Peak Products shall be the average of the 16 on-peak hours (excluding the Hedge Volume Target for Flat Products) as Decision D (October 30, 2017)

63 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 18 of 45 (iii) forecast in the most recent forecasts of the Net Metered Load for Eligible Customers; The Hedge Volume Target for both Flat and Peak Products shall be adjusted each Month during the Price Setting Period by the First Interim Forecast, the Second Interim Forecast and the Final Forecast, as the case may be. SECTION 2 PROCUREMENT (a) Procurement of the Hedge Volume Target for Flat and Peak Products shall be in accordance with the procedures set out in this section 2.0. Decision D (October 30, 2017)

64 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 19 of 45 Decision D (October 30, 2017)

65 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 20 of 45 Decision D (October 30, 2017)

66 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 21 of 45 Decision D (October 30, 2017)

67 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 22 of 45 Decision D (October 30, 2017)

68 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 23 of 45 (g) EEC may elect to supply the Daily Target Volume on any Trading Day, provided it has first posted a bid for the volume on the NGX screen as the Best Bid for one continuous hour and may supply at its Best Bid price and only that price. In addition, the price paid for any self-supply must not exceed the price otherwise available at that time in the OTC market. No more than 60% of the total volume for any given Delivery Month may be filled through self-supply. Commented [A11]: Undefined. Commented [A12]: Undefined. (h) In the event that the Daily Target Volume is filled through self-supply, the RRO Trader must finalize the transaction within ten minutes of the Best Bid being removed from the NGX screen. (i) (j) Prior to closing any trade or any self-supply transaction, EEC must have first reviewed both the NGX and the OTC market to ensure that the trade or self-supply transaction price is the lowest available at the time. Once the RRO Trader has fulfilled his duties for the day either by filling the Daily Target Volume or by determining that no trades will be made, he may undertake unregulated activities, but once he has transitioned from RRO activities to unregulated activities, he cannot return to RRO activities for the rest of the day. Decision D (October 30, 2017)

69 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 24 of 45 (k) On each day during which he undertakes RRO activities, the RRO Trader must keep a log accounting for each hour spent working for the RRO. 2.5 BACKSTOP PROCUREMENT (a) 2.6 REPORTING REQUIREMENTS (a) (b) During each Business Day on which EEC is required to procure Blocks, EEC must collect the information required to prepare a monthly summary in a form substantially similar to that set out in Schedule H - Monthly Summary Report. No later than five Business Days before the end of each Month, EEC must prepare a Monthly Summary Report in a form substantially similar to that set out in Schedule H. The completed Monthly Summary Reports will be confidential and Decision D (October 30, 2017)

70 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 25 of 45 made available to the AUC and to parties who agree to a confidentiality undertaking. 2.7 INFORMATION TO BE FILED WITH THE MONTHLY ENERGY CHARGE (a) The monthly energy charge and its calculation; (b) (c) The confidential final load forecast for 30-days following the Prompt Month; Attestation of the manager of the RRO Operations Group within ENMAX Power Corporation confirming that the monthly energy rate has been calculated according to the methodology set out in the Schedule F; Commented [A13]: Undefined. Commented [A14]: Undefined. (d) Attestation of the RRO Trader confirming that the procurement of RRO volumes was in accordance to this Schedule; (e) Back-up data and links to support all costs included in the monthly rate calculation; and (f) Any additional transactional information requested, may be subject to confidential treatment. Decision D (October 30, 2017)

71 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 26 of 45 Decision D (October 30, 2017)

72 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 27 of 45 (a) Schedule F Energy Charge Applicable for each Month During the Plan Term EEC Energy Price Setting Plan ENERGY RATE CALCULATION The Monthly Energy Charge ( EC ) will consist of the sum of: i. The Base Energy Charge ( BEC ) in $/MWh, all AESO Pool Trading Charges ( AESOTT ) in $/MWh, and Commodity Risk Compensation ( CRC ) in $/MWh, which together are grossed up by one plus the Unaccounted for Energy and Line Losses ( UFE & LL ) factor (expressed as a percentage); Commented [AUC1]: Undefined. Commented [AUC2]: AESOTT is not included in Appendix A. a. where the CRC is comprised of: i. Adaptive CRC, which is calculated monthly using a rolling average of the gains and losses without CRC for the most recent month for which Monthly Settlement Data is available through the preceding 12 months divided by the commodity revenues without margins over the same period; and ii. Risk Cycle CRC, which is an annual fixed dollar per MWh value that is calculated by taking the sum of the net commodity gains or losses including the Adaptive and Risk Cycle CRC for the previous 12 month available data set divided by the total settled energy in MWh for the same data set. If the net dollar value is positive, the Risk Cycle CRC is set to zero for the following 12 months. If the net dollar value is negative, it is divided by the actual settle energy for the same time period and made absolute in a $/MWh and added to the monthly RRO rate for the following 12 months. Commented [AUC3]: Undefined. Commented [AUC4]: Undefined. Commented [AUC5]: Undefined. Commented [AUC6]: Is this by calendar month or some other annual period? Commented [AUC7]: Undefined. Commented [AUC8]: What does this mean? Commented [AUC9]: Undefined. Commented [AUC10]: Undefined. ii. All Adders ( ADD ) in $/MWh that include: a. after tax all-in Return Margin ( RM ); Decision D (October 30, 2017)

73 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 28 of 45 b. all AESO Collateral Costs ( AESOCC ); i. AESO Collateral Costs are calculated using EPCOR's methodology approved in Decision 2941-D c. all approved external EPSP development and regulatory costs ( EDR ); d. all NGX Trading Charges and Transaction Fees ( NGXTC ); e. six-month rolling average RAM ( RAM ) and Uplift ( UPLIFT ) charges; f. all NGX Collateral Costs ( NGXCC ); and g. all RRO Trader Costs and any costs associated with the physical separation of the RRO Trader as approved by the AUC. Commented [AUC11]: Please describe the methodology. Commented [AUC12]: Undefined. Commented [AUC13]: RRO trader costs are not included in the formula below. (b) The Monthly Energy Charge will be expressed as a $/MWh value. The formula to determine the Monthly Energy Charge is as follows: Monthly Energy Charge = ((BEC + CRC + AESOTC)*(1 + UFE & LL)) + RM + AESOCC + EDR + NGXTC + RAM + UPLIFT + NGXCC Decision D (October 30, 2017)

74 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 29 of 45 Schedule H EEC Energy Price Setting Plan MONTHLY SUMMARY REPORT This report is confidential when completed Date Trade Number Contract Month Product Blocks (MW) Volume (MWh) Target Price ($/MWh) Acquisition Price ($/MWh) Broker Fee ($/MWh) Broker Fee ($) Total Supply Cost ($) Source of Trade Totals xxxxx xxxxx xxxxx xxxxx Decision D (October 30, 2017)

75 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 30 of 45 Directive 23 Commission comment: Appendix title missing Proforma Monthly Energy Charge (Confidential) Feb-17 A B C D E F G H I J K L M N BEC CRC AESOTC UFE&LL RM AESOCC EDR NGXTC RAM UPLIFT NGXCC RROTRC EC ($/MWh) EC $/MWh $/MWh $/MWh % $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh ( /kwh) $ $ 0.06 $ % $ 3.34 $ 0.01 $ - $ 0.02 $ 0.01 $ 0.00 $ 0.09 $ 0.13 $ $ RRO Energy Charge Formula See Schedule 2 Calculations EC = (BEC + CRC + AESOTC ) x (1 + UFE&LL) + RM + AESOCC + EDR + NGXTC + RAM + UPLIFT + NGXCC + RROTRC Decision D (October 30, 2017)

76 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 31 of 45 Table 1: Calculation of RRO Energy Charge Base Energy Charge Schedule 1 Calculations Feb-17 Commodity Risk Compensation AESO Trading Charges Unaccounted for Energy/ Line Loss Adders RRO Energy Charge BEC CRC AESOTC UFE&LL ADD EC Reference Table 2 Table 5 Sched 2 Schedule 2 Table 6 Units $/MWh $/MWh $/MWh % $/MWh $/MWh $ % $ Formula # Variable Formula 1 EC = (BEC + CRC + AESOTC ) x (1 + UFE&LL) + ADD Table 2: Base Energy Charge Total Hedge Cost Total Hedge Volume Base Energy Charge THC THV BEC Reference Sched 3 Sched 3 Sched 3 Units $ MWh $/MWh 3,332, , Formula # Variable Formula 2 BEC = THC / THV 3 THC = TFC + TPC Table 3 & 4 4 THV = TTFV + TTPV Table 3 & 4 Commission comment: TFC and TPC do not appear in this worksheet. Commission comment: TTFV and TTPV do not appear in this worksheet. Table 3: Flat Product Price Flat Product Cost Flat Product Volume Flat Product Price FPC FPV FPP Reference Sched 3 Sched 3 Sched 3 Units $ MWh $/MWh 2,478,840 86, Formula # Variable Formula 5 FPP = FPC / FPV Decision D (October 30, 2017)

77 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 32 of 45 Table 4: Peak Product Price Peak Product Cost Peak Product Volume Peak Product Price PPC PPV PPP Reference Sched 3 Sched 3 Sched 3 Units $ MWh $/MWh 853,664 25, Formula # Variable Formula 6 PPP = PPC / PPV Table 5: Commodity Risk Compensation Variable Risk Compensation Variable Risk Compensation Risk Cycle Adder Commodity Risk Compensation VRC VRC RCA CRC Reference Sched 5 Sched 5 Units % $/MWh $/MWh $ /MWh 0.22% $ Commission comment: There are two different variables labelled "VRC" Formula # Variable Formula 7 CRC = VRC + RCA 8 VRC ($/MWh) = VRC% x BEC Table 6: Adders All-in Return Margin AESO Collateral Costs External EPSP Development and Regulatory Costs NGX Trading Charge and Transaction Fees Retail Adjustment to Market Cost Forecast Uplift Charges NGX Collateral Costs RRO Trader Costs Total Adders RM AESOCC EDR NGXTC RAM UPLIFT NGXCC RROTRC ADD Reference Sched 2 Sched 2 Sched 2 Sched 2 Sched 2 Sched 2 Sched 2 Sched 2 Units $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $/MWh $ 3.34 $ $ - $ $ $ $ 0.09 $ 0.13 $ 3.62 Formula # Variable Formula 9 ADD = RM + AESOCC + EDR + NGXTC + RAM + UPLIFT + NGXCC + RRTRC Decision D (October 30, 2017)

78 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 33 of 45 Table 7: AESO Collateral Costs Forecasted RRO Load for Current Month Forecasted RRO Load for Next Month AESO Prudential Pool Price Trading Limit Credit Rate AESO Collateral Costs LF M LF M+1 APPP TL LOC AESOCC Reference Sched 2 Sched 2 Sched 2 Sched 2 Sched 2 Units MWh MWh $/MWh $ % $/MWh 112, , ,815, Directive 36 Formula # Variable Formula 10 AESOCC = [(LFM + LFM+1) x APPP - TL] / FLU x LOC/12 Table 8: NGX Collateral Costs RRO Collateral Credit Rate NGX Collateral Cost RROC LOC NGXCC Reference Sched 2 Sched 2 Sched 2 Units $ % $/MWh 15,851, Formula # Variable Formula 11 NGXCC = (RROC x LOC / 12) / FLU Decision D (October 30, 2017)

79 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 34 of 45 Format Legend blue Input cells Schedule 2 Inputs green Formulas Applicable Month Feb-17 Used in BEC Calcualtion on Schedule 1 Description Variable Name Units Value Reference Forecasted Load Residential Forecasted Load (Usage) FLU R MWh 81,937 Unaccounted for Energy and Line Loss UFE & LL MWh 2,032 Forecasted Load (Total) FL R MWh 83,969 Commercial Forecasted Load (Usage) FLU C MWh 27,595 Unaccounted for Energy and Line Loss UFE & LL MWh 684 Forecasted Load (Total) FL C MWh 28,279 Total Forecasted Load (Usage) FLU MWh 109,532 Unaccounted for Energy and Line Loss UFE & LL MWh 2,716 Total Forecasted Load (Total) FL MWh 112,249 Flat Target Volume FTV MW 128 Peak Target Volume PTV MW 58 Flat Hours FH Count 672 Peak Hours PH Count 448 Losses Unaccounted for Energy UFE MWh -0.08% Line Loss LL MWh 2.50% Total Unaccounted for Energy and Line Loss UFE & LL MWh 2.42% Previous 12 month UFE & LL Dec % Jan % Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % 12 Month Average UFE & LL UFE & LL 2.42% Decision D (October 30, 2017)

80 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 35 of 45 Return Margin All-in Return Margin After Tax RMBT $/MWh $ 2.44 Effective Tax Rate PILOT % 27% Energy Return Margin Before Tax RM $/MWh $ 3.34 Directive 1 Last 6 months Uplift Charges Jul-16 $ Final Aug-16 $ Final Sep-16 $ Interim Oct-16 $ Interim Nov-16 $ Initial Dec-16 $ Initial Average 6 Month Uplift Feb-17 $ Uplift Charge UPLIFT Feb Last 6 months RAM Charges Jul-16 $ 2, Aug-16 $ 1, Sep-16 $ 2, Oct-16 $ (21.50) Nov-16 $ 1, Dec-16 $ Average 6 Month RAM Feb-17 $ 1, RAM Charge RAM Feb AESO Collateral Costs (AESOCC) AESO Prudential Pool Price APPP $/MWh TL $ 3,815,139 AESO Credit Proceedures Guide LOC Rate LOC % 0.75 Directive 35 Forecasted RRO Load for Current Month FL M MWh 112,249 Forecasted RRO Load for Next Month FL M+1 MWh 108,340 Posted Amount $ 2,581,937 Monthly AESO Collateral Costs $ 1,614 AESO Collateral Costs AESOCC $/MWh Directive 36 Decision D (October 30, 2017)

81 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 36 of 45 NGX Collateral Costs (NGXCC) NGX Posted Amount NGXPA $ 41,550,000 % 38% Collateral Allocated to RRO RROC $ 15,851,904 LOC Annual Rate LOC % 0.75 Directive 35 Total NGX Monthly Credit Costs $ 9,907 NGX Monthly Charge NGXCC $/MWh NGX Trading Charges and Transaction fees (NGXTC) NGX Trading Charge $/MWh NGX Fee Sched Total Hedge Volume THV MWh 112,000 Cost of Trading on the NGX $ 2,240 Directive 30 AESO Trading Charge (AESOTC) AESO Trading Charge AESOTC $/MWh $ Directive 29 External EPSP Development and Regulatory Costs (EDR) Cost Claim Amount $ Approved Cost Claim Number of Months to recover cost (Minimum 3 months) Month 3 Claim > 50k <100k = 6, Claim >100K = 12 External EPSP Development and Regulatory Costs $/Month - External EPSP Development and Regulatory Costs EDR $/MWh Directive 31 and Directive 34 RRO Trader Costs (RROTRC) Total Estimated Annual Cost of RRO Trader RROTRC $ 175,130 Confidential Appendix D (Directive 9) Monthly RRO Trader Cost $/MWh Decision D (October 30, 2017)

82 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 37 of 45 Schedule 3 Target Procurement Feb-17 7x24 Base Product 7x16 Peak Product Block # Transaction Date Trade Source Trade Number Volume Transaction Price Block # Transaction Date Trade Source Trade Number Volume Transaction Price MW $/MWh MW $/MWh OTC OTC OTC OTC OTC OTC OTC OTC NGX OTC NGX OTC NGX OTC NGX OTC NGX OTC NGX OTC NGX OTC OTC OTC NGX NGX NGX NGX NGX NGX NGX NGX NGX NGX Flat Product Volume MW Peak Product Volume 58.0 MW Flat Product Volume FPV 86,016 MWh Peak Prodct Volume PPV 25,984 MWh Flat Product Price FPP $/MWh Peak Product Price PPP $/MWh Flat Product Cost FPC 2,478,840 $ Peak Product Cost PPC 853,664 $ Total Hedge Volume THV 112,000 MWh Base Energy Charge BEC $/MWh Total Hedge Cost THC 3,332,504 $ Decision D (October 30, 2017)

83 Energy Price Setting Plan Compliance Plan Appendix 3 - EEC EPSP with Commission Comments Page 38 of 45 Schedule 4 Hedging Feb-17 Hour Load w/ Losses #days Avg. Usage + Losses Hedging Target 1 3, , , , , , , , , , , , , , , , , , , , , , , , Hedging Target Avg. Usage + Losses Decision D (October 30, 2017)