Decision D EQUS REA LTD.

Transcription

1 Decision D Application for Orders Amending the Terms and Conditions of Service and Rate Schedules of FortisAlberta Inc. in Respect of Option M Distribution Generation Credit/Charge October 2, 2017

2 Alberta Utilities Commission Decision D Application for Orders Amending the Terms and Conditions of Service and Rate Schedules of Proceeding October 2, 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 Preliminary matters and issues EQUS concern and apprehension Fortis objection to this proceeding The substantive issue The extension of Option M By what mechanism should Option M be extended to EQUS? Pooled approach Non-pooled approach Pseudo-POD approach Order Appendix 1 Proceeding participants Appendix 2 Summary of Commission directions Decision D (October 2, 2017) i

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5 Alberta Utilities Commission Calgary, Alberta Application for Orders Amending the Terms and Conditions of Service and Rate Schedules of FortisAlberta Inc. Decision D in Respect of Option M Distribution Generation Credit/Charge Proceeding Introduction 1. On December 20, 2016, (EQUS) filed an application with the Alberta Utilities Commission requesting an order directing FortisAlberta Inc. to amend its customer terms and conditions of service (T&Cs) and rate schedules to provide for the availability of Option M distribution generation (DG) credits and charges to on-site generating facilities that are connected to EQUS electric distribution system (the requested relief). EQUS also asked the Commission to issue any directions, orders and declarations considered necessary in connection with the requested relief and that the requested relief be made effective January 1, 2017, or such other date that the Commission may determine. 2. On December 22, 2016, the Commission issued a notice of application that required any interested party to submit a statement of intent to participate (SIP) by January 3, The Commission received SIPs from Fortis, the Office of the Utilities Consumer Advocate (UCA) and North Parkland Power REA. Despite the SIP filed, North Parkland Power was not an active participant in the proceeding. 3. The Commission established a process for the proceeding that included: (a) (b) A requirement that EQUS clarify whether it was bringing this complaint on its own behalf, on behalf of any specific EQUS members operating on-site generation facilities, or both. On January 18, 2017, EQUS confirmed that the application was submitted on behalf of EQUS in its own right. Consideration of a concern raised by Fortis that EQUS characterization of this proceeding as a hybrid complaint and a stand alone application had the potential to create confusion for both Fortis and the Commission regarding the correct process to be implemented and potentially jeopardize procedural fairness. In a letter dated January 24, 2017, the Commission communicated its determination that the characterization of the proceeding is less important than ensuring that the proceeding is fair, impartial and allows for those who are potentially impacted by the decision to be afforded an opportunity to participate and present their respective cases. The Commission advised that should Fortis, or any other registered participant, have any specific concerns or expectations in terms of required process and fair procedure, it should identify those concerns or expectations in its submissions. No further process concerns were raised by any party. 1 1 Exhibit X0011, AUC letter Commission response to EQUS submissions on preliminary matters. Decision D (October 2, 2017) 1

6 (c) (d) (e) (f) (g) (h) Consideration of a request by EQUS for confidential treatment of certain information (a request that EQUS subsequently withdrew). 2 Opportunity for the filing of evidence by Fortis and of additional evidence from EQUS. Two rounds of information requests (IRs) and responses to and from both EQUS and Fortis. Submissions from parties on further process. Consideration of a request from EQUS for the opportunity to file further rebuttal evidence. In a letter dated June 9, 2017, the Commission denied the request on the grounds that EQUS had an opportunity to, and did, file additional evidence on March 20, 2017, subsequent to the evidence submitted by Fortis on February 15, 2017, and that it had not identified any new evidence that it did not have an opportunity to address either in its March 20, 2017, filing or in the two subsequent rounds of IRs and responses. 3 Written argument and reply argument submissions. 4. The timelines established by the Commission for a number of the process steps referred to above were extended at the request of the parties. 5. The Commission received written argument on behalf of both Fortis and EQUS on June 23, The Commission received written reply argument on behalf of both Fortis and EQUS on July 5, On July 6, 2017, EQUS filed correspondence and corrected reply argument in which it addressed a typographical error that it had identified in its earlier-filed reply argument. 6. For the purposes of the decision, the Commission considers the record closed on July 6, In reaching the determinations set out within this decision, the Commission has considered all relevant materials comprising the record of this proceeding. References in this decision to specific parts of the record are intended to assist the reader in understanding the Commission s reasoning relating to a particular matter and should not be taken as an indication that the Commission did not consider all relevant portions of the record with respect to this proceeding. 2 Preliminary matters and issues 2.1 EQUS concern and apprehension 8. In the March 20, 2017, cover letter accompanying its filed evidence, EQUS raised concerns about a legal representative to Fortis in this proceeding who had been formerly employed as staff legal counsel to the Commission and who had been assigned to proceedings in 2 Exhibit X0012, EQUS letter re filings and process ID Exhibit X0082, AUC letter - Further process and schedule. 2 Decision D (October 2, 2017)

7 which Fortis was an applicant or participant. EQUS also raised a concern in relation to alleged off-line communications between Fortis and the Commission regarding Fortis statement that it had already advised the Commission of its intent to file an REA-related tariff matters application in By letter dated March 27, 2017, the Commission responded to the concerns raised by EQUS. The Commission confirmed that the individual referred to in EQUS correspondence had been employed for a period of time at the Commission and that the individual had ceased being an employee of the Commission prior to the filing of this application. With respect to EQUS reference to communications between Fortis and the Commission, the Commission advised that it routinely consults with regulated parties for purposes of preparing a 24-month forecast which is published on its website under Application forecast, listed under Items of interest on the home page. The Commission explained that it was in that context, and as part of its wellestablished and transparent practice, that the Commission s chief executive officer had sent correspondence to the Commission s distribution list requesting assistance with the completion of the Commission s 24-month application forecast. The Commission asked that if any party had additional concerns, that they be raised promptly so that they could be addressed No further concerns regarding either of the above matters were raised in this proceeding. Commission findings 11. As no further concerns were identified by any party with respect to the concern and apprehension registered by EQUS following the Commission s March 27, 2017 letter, the Commission considers the issue to have been resolved. There is accordingly no need to address this matter further. 2.2 Fortis objection to this proceeding 12. In its filed evidence, responses to IRs and argument, Fortis raised concerns about whether this proceeding is the appropriate forum in which to consider EQUS allegations about Fortis application of Option M. More particularly, Fortis asserted that: (a) (b) EQUS allegation that Fortis application of Option M is arbitrary, preferential, discriminatory and in breach of Fortis responsibility to provide system access service (SAS) is misleading. The availability of Option M to REAs cannot be assessed in isolation. Rather, it must be assessed based on a complete consideration of the broader regulatory environment/tariff framework in which Fortis operates and with regard for how Fortis distribution tariff may or may not apply to REAs more generally. 6 The requested relief has consequences in terms of attendant costs, the potential to financially impact Fortis load customers and the need for changes to Fortis T&Cs. There is insufficient information available on the record of this proceeding to allow those consequences to be fully understood and addressed. 7 4 Exhibit X0017, EQUS letter re evidence and other submissions ID Exhibit X0023, AUC letter - Concerns raised by EQUS REA Ltd. 6 Exhibit X0014, Fortis evidence, paragraph 9, and Exhibit X0083, Fortis argument, paragraph 8. 7 Exhibit X0071, FortisAlberta comments on further process, Proceeding Decision D (October 2, 2017) 3

8 13. In view of the above, Fortis argued that EQUS demands for access to Fortis Option M credits should not be determined as a discrete issue in a hybrid application/complaint process. Rather, the issues raised in this proceeding are most properly considered distribution tariff matters and best addressed as part of a Phase II-type proceeding. Alternatively, these matters should be considered in the context of an REA-related tariff matters application that Fortis intends to file in That application will seek clarification as to which of the rates, costs, credits, terms and conditions of service currently included in its distribution tariff, if any, should apply to REAs and their members Fortis argued that EQUS insistence on urgent deliberation on this matter should not be given weight in light of the fact that it had the opportunity to raise the extension of Option M as an issue but failed to do so in previous Phase I and Phase II distribution tariff applications Fortis further argued that it may be premature and unnecessary to amend Fortis tariff at this time, in view of the Commission s ongoing DG inquiry 10 which may result in Option M type provisions being standardized across all distribution owners EQUS objected to any suggestion that the determination of the issues raised in this proceeding be deferred to a future date or to a possible future proceeding brought by Fortis. EQUS asserted that: 12 (a) (b) (c) (d) It attempted to have the issue of Fortis application of Option M addressed in Proceeding However, the Commission declined to consider the issue in that proceeding and stated that EQUS could file a future stand-alone application or complaint to address the matter. EQUS initiated this proceeding accordingly. The timing of a future Phase II proceeding is unknown. There is no requirement or guarantee that the DG inquiry will result in any regulatory change. Unless and until the availability of Option M credits and charges to on-site generating facilities that are connected to EQUS electric distribution system is determined by the Commission, EQUS is prejudiced in its ability to compete with Fortis for DG customers. Any further delay only serves to advance the commercial interests of Fortis. Commission findings 17. Regarding the Fortis objection to addressing EQUS application in the context of this proceeding, the Commission notes that it declined to consider issues concerning Fortis application of Option M credits in Proceeding and stated: 8 Exhibit X0014, Fortis evidence, paragraphs 57 and Exhibit X0083, Fortis argument, paragraph 27, and Exhibit X0087, Fortis reply argument, paragraph Proceeding 22534: AUC Distributed generation review in accordance with O.C. 120/ Exhibit X0083, Fortis argument, paragraph Exhibit X0072, ID EQUS reply to Fortis process submissions. 13 Proceeding 21980: Fortis 2017 annual performance based regulation rate adjustment application. 4 Decision D (October 2, 2017)

9 16. As has been acknowledged by the Alberta Court of Appeal an expert tribunal such as the AUC, is entitled to determine and govern its own process. The schedule for these particular proceedings is time constrained to facilitate the implementation of approved rates for January 1, In the Commission s view, this fact strongly militates against it exercising its discretion to expand the prior established scope of these proceedings to include the issues identified by EQUS REA in this instance. 22. The Commission emphasizes that its finding that the issues raised by EQUS REA regarding changes to allocation methodologies and to terms and conditions are not within the scope of the current proceeding does not preclude a further application being brought by it for determination of rate design or terms and conditions matters. EQUS REA may exercise its prerogative to seek relief from the Commission either through a potential complaint to the Commission, or in a separate application filed on a stand-alone basis The Commission already determined in Proceeding (to which both Fortis and EQUS were parties) that a proceeding such as this one is an appropriate forum in which to consider the extension of Option M to EQUS. EQUS acted in accordance with the Commission s direction in Proceeding and Fortis has not satisfied the Commission that there is any compelling reason to depart from its previous determination. 19. The Commission acknowledges the concerns raised by Fortis regarding a lack of information on the record of this proceeding and its suggestion that the issues raised in this proceeding should be considered in the context of a Phase II-type proceeding or its REA-related tariff matters application given the potential financial impact to its customers. However, the Commission is satisfied that there is sufficient information on the record upon which to determine the substantive issue raised in this proceeding. Even though Fortis raised the issue of potential financial impact to its customers, the record indicates that EQUS currently has no DG members. 15 Any prospective impact resulting from any relief granted in this proceeding can be brought forward by Fortis in either its Phase II proceeding or its REA-related tariff matters application if Fortis considers it necessary to do so. 3 The substantive issue 3.1 The extension of Option M 20. Fundamentally, the substantive issue raised in this proceeding is whether Option M DG credits and charges should be extended to EQUS (and by extension, to its DG members). 21. A number of ancillary issues were raised in the evidence and addressed extensively in the arguments filed by both EQUS and Fortis, including: (a) Is the provision of Option M by Fortis a distribution or a transmission tariff matter? 14 Proceeding 21980, Exhibit X Exhibit X0072, EQUS reply to Fortis process submissions. Decision D (October 2, 2017) 5

10 (b) Is Fortis current administration of Option M unjust, unreasonable, unduly preferential, arbitrary or unjustly discriminatory (and therefore contrary to Section 127(c) of the Electrical Utilities Act); and/or in violation of the Roles, Relationships and Responsibilities Regulation in relation to Fortis statutory obligation to provides SAS to EQUS? (collectively, the ancillary issues) 22. By way of background: (a) Fortis T&Cs provide for and define Option M as follows: Availability: Option M: Option M is available to Distribution Generation (DG) Customers that are interconnected to the distribution system downstream of a FortisAlberta transmission Point of Delivery (POD) and which are exporting into the Alberta Interconnected Electric System (AIES). The Option M Credit or Charge will be the difference between Alberta Electric System Operator (AESO) System Access Service charges to FortisAlberta at the upstream POD with the generator in operation and the charges that would have been incurred if the generator had not been in operation, calculated based on the amount of electricity exported into the AIES at the Point of Interconnection. 16 (b) DG customers are defined in Fortis T&Cs as a person that has onsite generating facilities that are interconnected and operating in parallel with Fortis Electric Distribution System and unless otherwise indicated, includes a Micro- Generation (MG) Customer. 17 However, MG customers are excluded from the availability of Option M credits or charges EQUS highlighted the restriction on the availability of Option M to Fortis DG customers under its tariff and offered extensive evidence and argument in an effort to demonstrate, among other things, that the restriction of Option M to Fortis DG customers is unfair, unreasonable and discriminatory as well as in violation of Fortis SAS obligations. On a practical level, EQUS asserted that Fortis practices also frustrate and inhibit the DG objectives of both the Commission and the Legislature. EQUS asserted that DG is widely and commonly understood to reduce the demand for transmission service at a point of delivery (POD). 19 The balance of EQUS evidence and argument addressed a number of different implementation methodologies and associated issues including those related to data and information requirements, connection and operating requirements and tariff matters. 16 Exhibit X0014, Evidence of Fortis, page Exhibit X0014, Evidence of Fortis, page Exhibit X0014, Evidence of Fortis, paragraph Exhibit X0001, EQUS application, pages 5-9, and Exhibit X0084, EQUS argument, paragraphs Decision D (October 2, 2017)

11 24. Fortis explained in its evidence and argument that: (a) (b) (c) Option M credits to DGs were first introduced in two decisions of the Commission s predecessor, the Alberta Energy and Utilities Board (the Board), in response to the way in which the transmission tariff was metered and billed. Fortis suggested that in those decisions, the Board expressed its expectation that credits received by distribution utility companies resulting from the change from gross to net billing would be passed through to end customers. 20 The implementation of Option M was first approved for Fortis predecessor in 2001 as part of that company s 2001 distribution tariff negotiated settlement application. In that negotiated settlement, Fortis predecessor agreed to work with customer groups to create a calculation method for Option M credits. Ultimately an agreement was reached on, among other things, provisions allowing for passthrough of supply transmission service charges to distributed generators if a POD energy flow reverses due to the aggregate DG supply exceeding the aggregate customer load on a POD. 21 Although Fortis identified that its own Option M was originally intended to incent gas flare generation as a means of offsetting the environmental impact of flaring activity, Fortis identified more generally that Option M credits have evolved as a subsidy paid by a distribution utility s load customers to incent the utility s DG customers to export to the distribution system as a means of reducing upstream transmission charges Fortis also offered extensive argument on the ancillary issues and most particularly as to why its application of Option M is not unjust, unreasonable, unduly preferential, arbitrary or unjustly discriminatory or in violation of the Roles, Relationships and Responsibilities Regulation in relation to Fortis statutory obligation to provide SAS to EQUS. However, at paragraph 29 of its argument, Fortis stated: Nevertheless, for the purposes of this Proceeding, and notwithstanding the above argument to reject the allegations of misconduct on FortisAlberta s part made by EQUS, the Company confirms that it is theoretically possible to extend Option M eligibility to the applicant if certain changes to the currently-approved tariff are implemented. [emphasis added] 26. The remainder of Fortis submission was largely directed at the various approaches available to distribution system owners, including Fortis and EQUS, when considering the standardized application of DG credits/ charges across the province. Commission findings 27. The Commission acknowledges the extensive argument offered by both parties concerning the ancillary issues. However, it is not necessary for the Commission to determine the ancillary issues and most particularly, whether Fortis application of Option M is unjust, unreasonable, unduly preferential, arbitrary or unjustly discriminatory or in violation of the 20 Exhibit X0083, Fortis argument, paragraphs Exhibit X0083, Fortis argument, paragraph Exhibit X0083, Fortis argument, paragraphs 20 and 23. Decision D (October 2, 2017) 7

12 Roles, Relationships and Responsibilities Regulation relative to SAS. This is because the Commission is satisfied that Option M should be extended to EQUS on other grounds. More specifically, the Commission considers that whether Option M should be extended to EQUS is a matter that can be determined on the basis of fundamental principles and the expectations previously articulated by the Commission and its predecessor relating to the flow-through of transmission cost savings to distribution generators. 28. In Decision , the Board confirmed its previous direction that any transmission cost savings would be passed through to DG customers, and expressed the expectation that nonregulated municipally-owned distribution utilities would do likewise: The Board accepts the position of EAL [ESBI Alberta Ltd.] that net treatment matches the physical reality that the connection with the system need be sized only to accommodate the maximum net transfer in either direction. Similarly, the Board agrees many loads are net of generation and non-electrical drives on site, and the load customer will normally require only the net load to be satisfied. The Board acknowledges IPSSA s [sic; Independent Power Producers Society of Alberta or IPPSA] concern with the possibility of regulatory delay and notes that in the utilities Phase II Decisions, the Board did direct the utilities to pass through credits received by them. In keeping with the spirit of that direction, the Board believes it is reasonable to expect the utilities to pass through credits received. While the Board is not in a position to direct the activities of the municipally-owned DISCOs [distribution companies], it is the Board s expectation that the municipally-owned DISCOs will pass through any transmission cost savings directly to their customers The board reiterated its expectations for passing on the one-time credits arising from the change from gross to net billing in Decision : The Board encourages EAL, the utilities, and IPPSA to develop a system to implement the Board s expectation that credits received by the DISCOs resulting from the change from gross to net billing are to be passed through to end customers. The reduction of flaring is an important public issue and the Board, through its Guide 60 Upstream Petroleum Industry Flaring Guide, has implemented a number of measures to assist in flaring reduction. The Board expects a resolution of this matter and would find an interim solution acceptable Decision and Decision indicate that transmission cost savings or credits received by a distribution utility attributable to the operation of distribution generators are to be passed on to DG customers of regulated utilities and that there is an expectation that nonregulated entities will do likewise. The Commission considers that Option M originated on the basis of the same principle that DG customers be the recipient of any transmission cost savings created due to their operation. 31. The Commission is of the view that any EQUS DG member, similar to a Fortis DG customer, could potentially reduce Fortis SAS charges from the AESO that would have been 23 Decision : ESBI Alberta Ltd., 1999/2000 General Rate Application Phase 1 and Phase 2, February 2, 2000, pages Decision : ESBI Alberta Ltd., 1999/2000 Tariff Application Refiling-Part B, Tariff and Terms and Conditions of Service, April 25, 2000, page Decision D (October 2, 2017)

13 incurred had the generator not been in operation. However, under Fortis current Option M provisions, the EQUS DG member would not receive any credits for these transmission cost savings. This is inconsistent with the principles and expectations described above. On that basis, the Commission finds that Option M should be made available to EQUS (and by extension, to its DG members). Consistent with the manner in which Fortis Option M is currently designed, as explained in paragraph 22(b) of this decision, the Option M provision will not be available to any MG in the EQUS distribution system. 3.2 By what mechanism should Option M be extended to EQUS? 32. The mechanism by which Option M credits could be extended to EQUS was also addressed extensively by both parties in their responses to IRs and in the arguments filed. 33. In summary, three different mechanisms were proposed and discussed: (a) (b) (c) A pooled approach A non-pooled approach A pseudo-pod approach Pooled approach 34. Fortis suggested that the pooled approach proposed by EQUS refers to pooling on two levels: (1) at the DG customer base for which the Option M credits are paid out, and (2) at the level of the load customer base from which the costs associated with the payment of those Option M credits are recovered. Under the pooled approach, both the Option M credits that are calculated and paid to Fortis DG customers and EQUS DG members, as well as the costs associated with these credits, are collected by application of Fortis distribution tariff (presumably for subsequent pass through in EQUS tariff) Fortis clarified that its current Option M mechanism has elements of both a pooled and a non-pooled approach. The current administration of Option M does not include payments to REA customers. Therefore, these entities are not participants in a pooled Option M payment system. However, the payments of Option M to eligible Fortis customers are recovered from all of Fortis load customers and from REAs and so in that sense, the costs are pooled Fortis favoured a non-pooled approach over the pooled approach. However, Fortis confirmed that, in theory, a completely pooled approach could be implemented to facilitate access to the Option M credit/charge mechanism for EQUS and other REAs. However, this would require the satisfaction of certain identified operational requirements including those related to information exchange as well as the amendment of Fortis T&Cs EQUS favoured a fully pooled approach for reasons that included the clarity of the system whereby the Option M credits are more evidently linked to the transmission savings Exhibit X0083, Fortis argument, paragraph 36(a). 26 Exhibit X0081, FAI-AUC-2017MAY Exhibit X0081, FAI-AUC-2017MAY Exhibit X0088, EQUS reply argument, paragraph 63. Decision D (October 2, 2017) 9

14 38. Both EQUS and Fortis submitted their views on the operational requirements including the extent of information that will need to be exchanged and any consequent costs that could be incurred by Fortis in order to implement this methodology. 39. By way of a brief summary: (a) In response to a Commission IR, Fortis identified and explained the information that it would require from EQUS in order to calculate the Option M credit/charge for an EQUS DG member as follows: 29 A copy of the IOA (Interconnection Agreement) between EQUS and its DG member. This is required to properly set-up and verify the DG member for financial control purposes, as well as confirm the interconnection and operating parameters, for purposes of calculating Option M credit/charge amounts. The agreement will also have detailed information regarding the DG member s site such as the site name, AESO Asset ID, maximum export capacity, legal land location of the DG, the POD that it is being connected to, interconnection date/approvals and the DG s metering requirements to ensure that 15-minute-interval, bidirectional metering data is provided in an acceptable format/frequency to Fortis. The Meter Point Definition Record (MPDR) for the respective REAconnected DG site. This would provide the identity of the meter data manager (MDM) amongst other information. Fortis submitted that acting as Load Settlement Agent (LSA), it is required to know the identity of the MDM to perform the duties as set out in Rule 021: Settlement System Code Rules minute-interval metering data for each DG member in the format/frequency required by Rule 021 and Fortis. (b) Regarding necessary amendments to its T&Cs, Fortis submitted that under its approved tariff, Option M is only available to its own DG customers (as defined in Article 12). Consequently, amendments to its T&Cs would be required to extend Option M to REAs including EQUS. Fortis provided draft amended T&Cs in Attachment FAI-AUC-2017MAY , 31 which Fortis submitted were made with the intention of ensuring that: The interconnection and approvals related to the REA-connected DG member were properly established and demonstrated; The required metering data and information were available for Fortis to calculate and apply Option M to REAs; and 29 Exhibit X0032, FAI-AUC-2017APR Exhibit X0081, FAI-EQUS-2017MAY Exhibit X0081, FortisAlberta IR Responses - Proceeding Decision D (October 2, 2017)

15 Option M availability to MG customers as defined by the Micro-Generation Regulation is excluded. 32 (c) Fortis also asserted that there is a potential financial impact associated with the pooled approach that must be addressed: The implementation of this method may result in costs to its load customers. This is because the actual funding/costs of paying those incremental Option M credits would be functionalized as a transmission cost in Fortis distribution tariff, allocated to and collected from all rate classes in accordance with its approved transmission allocation method. 33 There will also be attendant costs in establishing and maintaining systems, processes and resources which are associated with the administration, processing and billing of Option M amounts to EQUS DG members. EQUS should be responsible to pay a fair allocation of these costs arising from the services being provided by Fortis because the absence of such an allocation mechanism would leave the costs to be recovered solely from Fortis customers. 34 The quantification of such costs would require a Phase II-type cost study to determine a fair allocation of the attendant costs of administering and billing Option M to EQUS REA and its members. In the absence of such a study and in the interim, Fortis suggested that the service charge currently approved for its Rider E Customer Specific Facilities, may be a good proxy for these administration and billing costs, given that Rider E and Option M are both customer-specific and manual in nature, and the work effort is of a comparable level and complexity In its evidence and argument, EQUS disputed all of the above. EQUS challenged the amount of information Fortis claimed as necessary to facilitate the pooled approach, the necessity for Fortis proposed amendments to its T&Cs and its claimed costs. More specifically: (a) EQUS submitted that only two data inputs are required for the calculation of Option M, and that these are already provided to Fortis for billing and load settlement purposes: The generator s 15-minute interval data; and Site ID 36 (which, through the Site Catalog, provides the DG s physical location). (b) EQUS further argued that the contents of the MPDR record are provided in the Alberta Electric System Operator (AESO) Measurement System Standard and 32 Exhibit X0081, FAI-AUC-2017MAY Exhibit X0081, FAI-AUC-2017APR03-004(b). 34 Exhibit X0081, FAI-AUC-2017APR03-003(b). 35 Exhibit X0081, FAI-AUC-2017APR03-003(d). 36 Exhibit X0060, EQUS-AUC-2017APR Decision D (October 2, 2017) 11

16 that it has no objection to Fortis accessing the AESO s system in this regard, even though all the relevant information is available through other sources, as explained below. o o o o The name of the DG and the AESO Asset ID are not part of the calculation. The POD number that the DG is connected to can be determined when EQUS provides the DG Site ID, which is required for load settlement. EQUS will undertake to confirm a DG s non-microgeneration status. The identity of the MDM will be known then the DG or its agent sends meter data to Fortis as Load Settlement Agent. 37 (c) EQUS identified several additional items that it submitted would be required in order to facilitate the provision of Option M, which are as follows: that Fortis be required to accept EQUS attestation that a DG customer is eligible for Option M that Fortis be ordered to request only that DG customer data items for which it can identify specific legislative or regulatory requirements 38 (d) (e) EQUS stated that Fortis does not provide electric distribution service to EQUS and EQUS is not a customer of Fortis. 39 Consequently, Article 12 of Fortis T&Cs does not apply to EQUS, and amendments to Fortis T&Cs would therefore not be required to extend Option M to EQUS or its members. EQUS argued that Fortis had provided no evidence to demonstrate the existence of the claimed costs. Furthermore, in order for EQUS to pay a fair allocation of costs, then Fortis would need to provide EQUS with transmission charges using the same rate classes that Fortis adopts for its own Customers Non-pooled approach 41. A non-pooled approach was suggested by Fortis and identified as its preferred approach. Under this approach, Fortis and EQUS would each pay out Option M credits to their respective DG customers/members. Under this approach, an REA would set up its own Option M credit payment and funding mechanism through its own self-regulated distribution tariff. 41 If such a method was implemented, then Fortis proposed amending its tariff to exempt and remove the portion of the transmission costs allocated to Rate 24, 42 the REA Farm Service rate that applies to EQUS, that are associated with the recovery of Option M credits to Fortis DG customers. 37 Exhibit X0084, EQUS argument, paragraph The DG Site ID and Planning information as required under the IOA. 39 Exhibit X0084, EQUS argument, paragraph Exhibit X0088, EQUS reply argument, paragraph Exhibit X0081, FAI-AUC-2017MAY In its Exhibit X0083, argument, page 39, paragraph 47D, Fortis later submitted that the exemption would also apply to Rate Decision D (October 2, 2017)

17 The transmission component energy charge of Fortis Rate 24 (and any applicable transmission riders) would serve as a proxy for avoided transmission costs for the REA Fortis stated that it favours the non-pooled approach for the following reasons: There is currently insufficient evidence on the record of this proceeding to enable Fortis to completely understand the potential financial impact on its customers (who are not parties to this proceeding) of extending Option M to REAs and the proposed modifications to its tariff. Fortis is concerned that the inflammatory language used by EQUS would suggest that any required joint administration of Option M between it and EQUS would prove to be unnecessarily strained for what the REA seemingly views as competitive reasons. A non-pooled approach would eliminate the need for provision of data, metering and additional financial exchanges/transactions associated with DG services between Fortis and EQUS. As the DG Inquiry in Proceeding proceeds and policymakers consider ways to enable the integration of alternative and renewable DG consistently throughout all distribution service areas in Alberta, the existing Option M-type mechanisms of Fortis, ATCO Electric and ENMAX, will likely be reviewed and potentially standardized. It would be premature and unnecessary to amend Fortis tariff now, particularly when the non-pooled approach option exists for EQUS. The non-pooled approach would be much simpler than Fortis Option M, which uses the more structurally complex AESO tariff as a proxy for avoided transmission costs EQUS argued against the non-pooled approach asserting that: It would create a significant and growing rates cross-subsidy, exempting all Fortis-area REA members from paying any share of Option M costs, while increasing Option M costs to all other Fortis customers. 45 It would create a strong economic incentive for any REA to discourage DGs from becoming REA members because to avoid taking on DG customers would be to receive a guaranteed Option M cross-subsidy from Fortis customers without making any contribution towards the reduced AESO SAS charges. 46 The fundamental Option M equation would be violated by the non-pooled methodology. From an allocation perspective, total energy at the customer meter would not equal energy at the POD and from DG Exhibit X0032, FAI-AUC-2017APR03-001(f). 44 Exhibit X0081, FAI-AUC-2017MAY29-003(c). 45 Exhibit X0084, EQUS argument, paragraph Exhibit X0084, EQUS argument, paragraph Exhibit X0084, EQUS argument, paragraph 83. Decision D (October 2, 2017) 13

18 The adoption of the Transmission Component energy charge of Fortis Rate 24 (and any applicable transmission riders) by EQUS REA as a proxy for avoided transmission costs for the REA) would be another unstable, unpredictable cross subsidization factor. There is no evidence that this energy charge would in any way reflect the variable level of Option M credits paid by an REA to its DG. 48 Basing the non-pooled cost on farm-based transmission charges, i.e., Rate 24, would be incorrect and unfair to EQUS, since EQUS serves more load than simply farm customers Pseudo-POD approach 44. EQUS suggested that in theory, it would be possible for an REA such as EQUS to adopt an Option M type mechanism in its own tariff by the creation of one or more pseudo-pods, using hourly load settlement data. EQUS elaborated further on this approach as follows: AESO charges at the pseudo-pod could be calculated using this data, and reconciled to the local Point Of Delivery totals to ensure accuracy. The Option M type mechanism could then be applied to each pseudo-pod. Distributed generation output would reduce the pseudo-pod demand and energy. That reduction in demand and energy would in turn reduce the associated AESO tariff charges by an amount exactly equal to the Option M type payments made to the distributed generator. Transmission costs and revenues would then be in balance at the pseudo-pod level, with one rather significant exception as follows EQUS acknowledged, however, that substantial changes in industry practices would be required in order to implement this approach. At present, Fortis applies the REA Farm Service Rate 24 to all EQUS member load. This results in a significant difference between the transmission costs that an EQUS member creates at the POD and the charges flowing to that EQUS member under Rate 24 This is a structural problem that also exists in the current practices for flowing transmission costs through to REA members, one that would have to be addressed in the requested hypothetical scenario in which EQUS might adopt an Option M type mechanism in its own distribution tariff Fortis took the position that its non-pooled approach would be simpler to administer than creating pseudo-pods as a proxy for avoided transmission costs for the REA. 52 Commission findings 47. The Commission finds that there are greater potential problems and impediments associated with the non-pooled and the pseudo-pod approaches than with the pooled approach. 48 Exhibit X0084, EQUS argument, paragraph Exhibit X0088, EQUS reply argument, paragraph Exhibit X0060, EQUS-AUC-2017APR03-008(e) to (g). 51 Exhibit X0060, EQUS-AUC-2017APR (e) to (g). 52 Exhibit X0081, FAI-AUC-2017MAY Decision D (October 2, 2017)

19 48. In concept, the non-pooled approach appears to offer some advantages: it might be easier to implement because less information would need to be exchanged between parties and it might have fewer attendant costs. 49. However, based on the record of the proceeding, the Commission finds that the nonpooled approach does not align with the expectation that distribution utilities will pass through transmission cost savings to their DG customers. The Commission is of the view a logical relationship between the value of exempting one or more REA rate classes from paying Option M costs and the avoided transmission costs that could be created by EQUS DG members is unlikely to exist. That is, the Commission is not convinced that the credits (by virtue of excluding Rates 24 and 29 from paying certain charges) passed on to EQUS DG members would be sufficiently related to any contributions those same EQUS DG members made to the avoided transmission costs. As a result, the non-pooled approach could lead to arbitrary results or undesirable subsidies between customers. For example, under the non-pooled methodology, all REAs in Fortis service area would be exempt from paying any share of Option M costs, regardless of whether they have DGs connected to their system, creating a possible subsidy from Fortis customers to the REAs. 50. At a conceptual level, the pseudo-pod methodology seems to address many of the concerns raised in this proceeding. It would permit EQUS to offer its own Option M-like program 53 separate from Fortis distribution tariff. This would avoid or at least minimize some of the points of contention between Fortis and EQUS, for example, on whether and to what extent Fortis T&Cs should apply to EQUS (or its DG members). However, it would appear based on the evidence on the record, that EQUS itself considers it unlikely that the pseudo-pod approach could be implemented in the current industry framework. 54 Moreover, considering the intermingled nature of the Fortis and EQUS distribution systems, numerous pseudo-pods would be required to facilitate this methodology, requiring the reconciliation of data at multiple data points, which the Commission notes could be onerous. 51. Given the potential problems associated with the two methodologies discussed above, and the advantages of the pooled approach (described below), the Commission considers the pooled approach to be the optimal approach to extend Option M credits to EQUS: The pooled approach is the approach which is most aligned with the Commission s expectation that a distribution utility pass on transmission cost savings or credits attributable to the operation of distribution generators to its DG customers. Under the pooled approach, Option M credits will be calculated based upon actual metering data at the generator and the specific POD that it is connected to, providing the volume of energy exported by the DG and the transmission costs avoided as a result of its operation. Under this approach, the Option M credits paid out to EQUS (and by extension, to its DG members) will therefore best match the reduced AESO SAS charges at the POD connected to the DG. The pooled approach represents an extension of Fortis current approach of providing Option M credits to its own DG customers and so is an already established methodology. 53 Exhibit X0088, EQUS reply argument, paragraph Exhibit X0060, EQUS-AUC-2017APR03-008(e) to (g). Decision D (October 2, 2017) 15

20 Fortis has confirmed that a completely pooled approach could be implemented to facilitate access to the Option M credit mechanism for EQUS and other REAs, subject to the satisfaction of other operational requirements. 52. As previously discussed, the pooled approach requires the co-operation of both parties. This may pose the greatest challenge to the successful implementation of the pooled approach. 53. In that regard, the Commission notes that both Fortis and EQUS offered extensive evidence and submissions regarding: (a) (b) (c) The amount and kind of data and other information that Fortis will reasonably require from EQUS to allow for the extension of Option M to EQUS. Whether and to what extent Fortis T & Cs need to be modified to accommodate the extension of Option M to EQUS. The degree to which Fortis existing administrative framework will need to be modified and who should bear any attendant costs. 54. The current level of disagreement between Fortis and EQUS on all of the above is apparent on the face of the record; and, as noted previously, the successful negotiation of a resolution to those matters is dependent on the co-operation of the parties. Nevertheless, for the following reasons the Commission considers that issues concerning the exchange of information and data, connection and operational requirements and any revisions to Fortis T&Cs or to its administrative framework, are matters best handled through negotiation between Fortis and EQUS: EQUS and Fortis are in the best position, as owners of their respective systems with a substantial history in operating their interconnected systems, to understand the technical and operational requirements associated with implementing the pooled approach. The Commission considers that permitting the parties to arrive at a solution to implement the Commission s decision is most likely to produce a result that is operationally and technically feasible for both parties. Both parties should be incented to facilitate the most efficient and effective resolution of this matter in the interests of their respective customers and are expected to be able to work cooperatively to do so. The Commission expects that both parties shall make any reasonably necessary concessions to effect the Commission s directions from this decision. 55. The Commission is also cognizant of the fact that while this proceeding was brought by EQUS, any resultant changes to the Fortis T&Cs and tariff will likely have the potential to directly affect other REAs and perhaps others who are not participants in this proceeding but who should be afforded the opportunity to offer comment and submissions regarding broader amendment to Fortis tariff and T&Cs. 16 Decision D (October 2, 2017)

21 56. For all of the above reasons, the Commission directs the following: (a) (b) Fortis is to extend Option M to EQUS by way of the pooled approach (as described by the parties in this proceeding, and as summarized by the Commission in this decision). It is the Commission s expectation that EQUS will then distribute the Option M credits to its DG members. Fortis and EQUS are to work cooperatively with a view to reaching consensus on: The data and information exchange required to facilitate the extension of Fortis Option M to EQUS. The Commission expects that Fortis will implement the pooled approach with the minimum amount of information reasonably required of EQUS and notes that Fortis will ultimately bear the onus of demonstrating the necessity of the information it requires. The Commission expects that EQUS will provide or facilitate the production of all information reasonably required by Fortis. The Commission considers that there may be cost consequences associated with an unreasonable request for information that is not strictly required to effect the Commission s decision in this case or a refusal to facilitate the production or provision of information reasonably required for the expeditious and efficient extension of Option M to EQUS. Any necessary amendments to Fortis T&Cs and tariff. (c) (d) Fortis is directed to submit a compliance filing to this decision that reflects any revisions necessary to its T&Cs to comply with the Commission s directions and to advise what has been agreed to between Fortis and EQUS in terms of the information to be exchanged and any operational requirements. If Fortis will be filing an REA-related tariff matters application within the same time frame, Fortis may choose to combine its compliance filing to this decision with that application. The Commission will provide Fortis with the option to address any associated costs of extending Option M to EQUS either in the compliance filing or in the REA-related tariff matters application (if they are not combined together) or in a future Phase II application. To the extent that the compliance filing addresses the said costs, the Commission will require a detailed description of the specific costs that Fortis is likely to incur. In order to come to a determination on this issue, the Commission will also require more clarity on how the costs associated with the provision of Option M to Fortis DG customers are collected and how that compares to the methodology it has proposed to collect the costs associated with providing Option M to EQUS. Consequently, Fortis should provide an explanation of how it currently recovers the costs associated with the payment of Option M credits for its own DG customers, whether it is different from the methodology it proposed to collect costs from EQUS DG members and finally, if it is different, Fortis should provide reasons justifying the difference in methodology. Decision D (October 2, 2017) 17