B-1 Corey Sinclair Manager, Regulatory Affairs FortisBC Inc. Suite 100-1975 Springfield Road Kelowna, BC V1Y 7V7 Ph: (250) 469-8038 Fax: 1-866-335-6295 electricity.regulatory.affairs@fortisbc.com www.fortisbc.com September 27 2012 Via Email Original via mail Ms. Erica M. Hamilton Commission Secretary BC Utilities Commission Sixth Floor, 900 Howe Street, Box 250 Vancouver, BC V6Z 2N3 Dear Ms. Hamilton: Re: FortisBC Inc. Application for an Exempt Residential Rate FortisBC Inc. files the attached Application under sections 59-60 of the Utilities Commission Act, R.S.B.C. 1996, c.473, as amended, for British Columbia Utilities Commission (BCUC or the Commission) approval of an Exempt Residential Rate. If further information is required, please contact the undersigned at (250) 469-8038. Sincerely, Corey Sinclair Manager, Regulatory Affairs cc: FortisBC 2009 Rate Design and Cost of Service Analysis Interveners
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE September 27, 2012
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE TABLE OF CONTENTS BACKGROUND... 1 RATE SCHEDULE 3 RESIDENTIAL EXEMPT CUSTOMERS... 2 RCR CONTROL GROUP EXEMPTION... 2 FARM CUSTOMER EXEMPTION... 2 BC HYDRO FARM EXEMPTION... 3 REQUEST... 4 PROPOSED REGULATORY PROCESS... 4 Appendix A Draft Order Appendix B Rate Schedule 3 Appendix C Related Tariff Revisions September 27, 2012 Page i
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE BACKGROUND On March 31, 2011 FortisBC filed with the Commission an Application for a Residential Inclining Block (RIB) Rate that was intended to be the default, mandatory rate for all residential customers who are not taking service under FortisBC s Time-of-Use (TOU) option, rate schedule 2A. The application was the subject of a written hearing and included several rounds of information requests from both the Commission and interveners, as well as the filing of both evidence and final Company and intervener submissions and reply. On January 13, 2012 the Commission issued Order G-3-12 approving the RIB rate and specifically approved the Company s preferred option for implementation. The Order had the following effects: 1. The RIB rate was to become the default mandatory rate for all customers currently (at the time) served on FortisBC s Rate Schedule 1; 2. Coincident with the implementation of the RIB rate, the existing Time-Of-Use (TOU) rates would be closed to new customers; and 3. A control group of customers was to be established to develop elasticity data for the residential customer base. In addition, directives specific to the rate structure, application of future rate increases, and reporting requirements were made that are not relevant to this application. The RIB rate was implemented on July 1, 2012 in the manner described above after an extensive communication effort to advise and inform customers about the nature and intent of the rate. The Control Group was established from a stratified random sample of residential customers and each participant was kept on the prevailing flat rate in order to determine the impact of the inclining block rate structure on consumption habits. At implementation, the RIB rate was described instead as the Residential Conservation Rate (RCR), and continues to be formally referred to under this moniker in all communication including the approved tariff. In the intervening period between the implementation of the RCR and the filing of this application, the Company has identified two issues that it seeks to address. Namely, 1. In Order G-3-12 the Commission directed FortisBC to file a revised Tariff Sheet for Rate Schedule 01, no later than 30 days prior to the date the RIB rate becomes effective. The impact of replacing the existing Rate Schedule 1 with a revised version reflecting the RCR, coupled with the directive to establish a control group, has left the control group members to be billed on a flat rate that no longer appears in the FortisBC Electric Tariff No. 2 as approved by the Commission. September 27, 2012 Page 1
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE 2. Farm Customers, who under the FortisBC tariff are eligible to be served under residential rates, are potentially unduly penalized under the RCR, given that a large portion of their consumption is for non-residential use. RATE SCHEDULE 3 RESIDENTIAL EXEMPT CUSTOMERS The Company proposes that a flat rate schedule (Rate Schedule 3) be re-introduced into the FortisBC electric tariff and that the billing components be equal to the flat rate that would be in effect had the RCR not be approved as the default mandatory rate for residential customers. This rate has been maintained internally in order to bill the customers who are in the control group. FortisBC considers it appropriate that a rate under which it bills customers has Commission approval and appears in its published, publicly available tariff. In effect, FortisBC is not requesting approval of a new rate only that the old flat rate which was replaced by the RCR appears in the tariff under a new name and use. As this rate and the RCR are considered revenue neutral across the residential customer class, there are no cost-ofservice related issues inherent in the request. Rate Schedule 3 will be applicable to two customer groups: participants in the RCR control group, and eligible farm customers. These two proposed groups are discussed further in the following sections. With respect to the impact of future rate increases on Rate Schedule 3, the Company proposes to apply increases in a manner consistent with all other rates in its tariff. That is, to apply increases to all billing determinants in the percentage amount approved by the Commission from time to time. The Company considers the Pricing Principle used to apply rate increases to the RCR to be specific to the RCR and that varying the standard methodology for the exempt rate would bias the results of the control group comparisons. A copy of the proposed Rate Schedule 3 is included as Appendix B to this application. RCR CONTROL GROUP EXEMPTION The Company considers the need for a Commission-approved flat rate under which to charge customers who are in the RCR control group to be an administrative matter necessitated by the directives of Order G-3-12 and as such should not cause consternation to any customer or intervener group. Customers not part of the control group are unaffected and those in the control group have already accepted the rate and are currently being billed in a manner consistent with the proposed tariff. FARM CUSTOMER EXEMPTION Under the current FortisBC tariff, farms are permitted to be billed under residential rates as provided by section 4.3.5 of the Terms and Conditions, 4.3.5 Farms September 27, 2012 Page 2
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE Farm residences and their outbuildings shall qualify for the Residential Service rate provided the farm is assessed for property tax purposes as agricultural land and the Service is used primarily for the production of food or industrial crops on that land. Other use for commercial or non farm purposes shall be billed on the Commercial Service rate. Pursuant to Order G-3-12 current farm-use residential customers have been transferred to the RCR as of July 1, 2012 and any farm-use customers who elect to take service under the residential rate since July 12, 2012 and into the future will also be placed on the RCR under the current tariff conditions. BC HYDRO FARM EXEMPTION The Company notes that during BC Hydro`s Residential Inclining Block Rate Application process an exemption for farm customers was discussed. In its response to a Commission Information Request BC Hydro clarified its position on an exemption for farms in the following exchange, 1.4.3 Please explain why BC Hydro proposes to exempt customers designated as farm accounts under the existing Rate Schedule 1101 from the mandatory inclining block rate proposed. RESPONSE: Given the dual residential and commercial nature of farms under the residential service, BC Hydro proposes to exempt farms from the RIB rate. In addition, in its final argument in its RIB rate process BC Hydro again noted, BC Hydro proposes that residential customers designated as farm accounts be transferred to the proposed exempt rate RS 1151. The rationale for this exemption is the dual residential and commercial nature of farms, and the fact that farms currently receive service under several different rate classes. During the process associated with BC Hydro`s RIB Application, there was minimal discussion on the topic and ultimately the Commission ordered, the proposed exempt residential Rate Schedule 1151 for farm accounts, residential service customers in Zone 1B, and those residential customers enrolled in the Conservation Research Initiative Pilot project is approved. FortisBC does not have segmentation information that would allow for the identification of farms as a sub-group of the residential class and therefore cannot provide an estimate of the financial impact to the Company of a certain percentage of farm customers moving from the RCR. Like BC Hydro however, given the relatively small number of farms in the service area, it is not likely to be significant. FortisBC agrees with BC Hydro s rationale for offering an exemption for farm-use customers and proposes to allow such customers to elect to take service under the new Rate Schedule 3. September 27, 2012 Page 3
FORTISBC INC. APPLICATION FOR EXEMPT RESIDENTIAL RATE REQUEST FortisBC hereby applies to the Commission for the following items to be approved in order to address the issues identified in the previous section: 1. That a new rate schedule, Rate Schedule 3 Exempt Residential Service, be established and applicable to: a. Customers who are members of the RCR control group pursuant to Commission Order G-3-12; and b. Eligible Farm customers, as identified in the Special Conditions applicable to Rate Schedule 3. 2. An amendment to the Company s Terms and Conditions, Sheet TC14, as described in Appendix C to this application. A copy of a draft order is included with this submission as Appendix A. The proposed Rate Schedule 3 is attached as Appendix B. In addition, the presence of two separate residential rate schedules necessitates a minor change to Tariff Sheet 14 which is shown in the blackline and clean pages found in Appendix C. PROPOSED REGULATORY PROCESS The Company submits that there will be minimal impact to either FortisBC or its customers in general as a result of Commission approval of the items requested in this application. FortisBC will provide a copy of the application to all participants in its 2009 Cost of Service and Rate Design process and proposes that an opportunity for written comment by these parties should be sufficient for the Commission to make a determination in the matter. September 27, 2012 Page 4
Appendix A - Draft Order
Appendix A BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER G XX 12 SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC V6Z 2N3 CANADA web site: http://www.bcuc.com TELEPHONE: (604) 660 4700 BC TOLL FREE: 1 800 663 1385 FACSIMILE: (604) 660 1102 DRAFT ORDER IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and An Application by FortisBC Inc. for Approval of a Rate Schedule for Exempt Residential Service BEFORE: (Date) WHEREAS: A. On March 31, 2011 pursuant to Sections 58 61 of the Utilities Commission Act (Act), FortisBC Inc. (FortisBC) filed with the British Columbia Utilities Commission (BCUC or the Commission) and Application for a Residential Inclining Block Rate (Application); B. On January 13, 2012 the Commission issued its Decision on the Application by Order G 3 12. Directive 2 required FortisBC to implement the Residential Inclining Block (RIB) rate as soon as reasonably practicable, and by no later than July 31, 2012, and to file a revised Tariff Sheet for Rate Schedule 01, no later than 30 days prior to the date the RIB rate becomes effective; C. Directive 4 of Order G 3 12 directed FortisBC to apply the RIB rate on a mandatory basis to all Residential customers with the exception of those taking service under the Time of Use (TOU) rate at the time the Decision was issued; D. Directive 6 of Order G 3 12 directed FortisBC to establish a control group in conjunction with the introduction of the RIB rate to develop elasticity data for its own customers; E. On June 4, 2012 FortisBC submitted to the Commission tariff pages reflecting the replacement of the flat residential rate with the RIB rate. FortisBC called the new rate the Residential Conservation Rate (RCR); F. On July 1, 2012 FortisBC implemented the RCR and moved all residential customers not served on a TOU rate or those included in the control group to the RCR;.../2
Appendix A BRITISH COLUMBIA UTILITIES COMMISSION 2 ORDER NUMBER G XX 12 G. On September 27, 2012 FortisBC applied to the Commission for a Rate for Exempt Residential Customers which provides certain customers an exemption from the RCR. These customers are identified as participants in the RIB control group and farm customers who qualify for residential service under FortisBC s existing Terms & Conditions; H. The Commission has reviewed the submissions of FortisBC and finds that the creation of an Exempt Residential rate for customers exempt from the RCR is in the public interest. NOW THEREFORE the Commission orders, pursuant to section 99 of the Act: 1. The Exempt Residential Rate, as set out in the Application, is approved. 2. FortisBC is to implement this rate as soon as is reasonably practicable, and file a Tariff Sheet for this Rate Schedule as well as updated pages to its Terms and Conditions, within 30 days of the date of this decision. DATED at the City of Vancouver, In the Province of British Columbia, this day of <month> 2012. BY ORDER
Appendix B - Rate Schedule 3
Electric Tariff RATE SCHEDULES B.C.U.C. No. 2 Sheet 2B SCHEDULE 3 EXEMPT RESIDENTIAL SERVICE Appendix B APPLICABLE: To residential use including service to incidental motors of 5 HP or less. For residential service and use exempted from Rate Schedule 1, including: 1. Customers enrolled in FortisBC s Residential Conservation Rate (RCR) control group. A Customer who ceases to be enrolled in the RCR control group shall revert to service under Rate Schedule 1. 2. Farm customers that qualify for Residential Service as set out in FortisBC s Electric Tariff Terms and Conditions Section 4.3.5 and subject to SPECIAL CONDITION B below. BIMONTHLY RATE: Customer Charge $30.07 per period All kw.h @ 9.447 per kw.h OVERDUE ACCOUNTS: A late payment charge of 1 1/2 % will be assessed each month (compounded monthly 19.56% per annum) on all outstanding balances not paid by the due date. SPECIAL CONDITIONS: A. B FortisBC will periodically credit to the RCR control group subscriber s account any positive difference between the total dollar amount billed to the subscriber under the Schedule 3 Exempt Residential Service tariff and the total dollar amount derived by rendering bills on the same metered usage using the rates in Schedule 1 Residential Service for the applicable period, for the duration of the RCR rate control group. Farm customers who elect to take service under this rate schedule must provide to the Company a copy of the most recent year s BC Assessment notice identifying the subject property as having a BC Assessment farm classification. Issued September 27, 2012 Accepted for filing FORTISBC INC. BRITISH COLUMBIA UTILITIES COMMISSION By: Dennis Swanson Director, Regulatory Affairs By: Commission Secretary EFFECTIVE (applicable to consumption on and after) July 1, 2012 G-3-12 Page 1 of 2
Electric Tariff RATE SCHEDULES B.C.U.C. No. 2 Sheet 2C SCHEDULE 3 EXEMPT RESIDENTIAL SERVICE (Cont d) Appendix B Pursuant to Commission Order No. G-199-11 rates under this schedule are subject to an interim rate increase of 1.5% effective with consumption on and after January 1, 2012. Pending the outcome of a public process with respect to FortisBC s 2012-2013 Revenue Requirements application, all or a portion of the interim increase may be refunded with interest, calculated at the average prime rate of the principal bank with which FortisBC Inc. conducts its business. Issued September 27, 2012 Accepted for filing FORTISBC INC. BRITISH COLUMBIA UTILITIES COMMISSION By: Dennis Swanson Director, Regulatory Affairs By: Commission Secretary EFFECTIVE (applicable to consumption on and after) July 1, 2012 G-199-11 Page 2 of 2
Appendix C - Related Tariff Revisions
Electric Tariff TERMS AND CONDITIONS B.C.U.C. No. 2 Sheet TC14 4. TYPE OF SERVICE (Cont d) 4.3.3 Partial commercial use Where a partial commercial use is carried on in a single metered residential Premises (with or without outbuildings), and if the total connected load of the commercial enterprise is less than 5,000 watts, excluding space heating, the Customer shall be billed under Residential Service rates. If the total connected load of the commercial enterprise is greater than 5,000 watts, excluding space heating, the account shall be billed at Commercial Service rates. Where commercial use is carried on in a residential Premises or in an outbuilding to that Premises and the commercial area is separately metered, the commercial area only shall be on a Commercial Service rate. If new buildings are erected or major alterations are made to Premises receiving combined Service, the Customer shall be required to arrange the wiring to provide for separate metering. 4.3.4 Other Use Where water pumps supply single family residences, the water pumps shall be on the Residential Service rate provided they can be supplied single phase and total 5 HP or less. 4.3.5 Farms Farm residences and their outbuildings shall qualify for the a Residential Service rate provided the farm is assessed for property tax purposes as agricultural land and the Service is used primarily for the production of food or industrial crops on that land. Other use for commercial or non -farm purposes shall be billed on the Commercial Service rate. 5. METERING 5.1 Installation Appendix C The Company shall provide all meters necessary for measuring the Customer's use of the electric Service provided by the Company. The meters shall remain the property of the Company and shall be maintained in accurate operating condition in accordance with the regulations of Measurement Canada. The Customer may furnish, install and maintain at its expense a meter system to verify the accuracy of the Company's meter system. The Customer's meter system and the manner of its installation shall be approved by the Company. Issued FORTISBC INC. By: Dennis Swanson Director, Regulatory Affairs Accepted for filing BRITISH COLUMBIA UTILITIES COMMISSION By: Commission Secretary EFFECTIVE (applicable to consumption on and after) Page 1 of 2
Electric Tariff TERMS AND CONDITIONS B.C.U.C. No. 2 Sheet TC14 4. TYPE OF SERVICE (Cont d) 4.3.3 Partial commercial use Where a partial commercial use is carried on in a single metered residential Premises (with or without outbuildings), and if the total connected load of the commercial enterprise is less than 5,000 watts, excluding space heating, the Customer shall be billed under Residential Service rates. If the total connected load of the commercial enterprise is greater than 5,000 watts, excluding space heating, the account shall be billed at Commercial Service rates. Where commercial use is carried on in a residential Premises or in an outbuilding to that Premises and the commercial area is separately metered, the commercial area only shall be on a Commercial Service rate. If new buildings are erected or major alterations are made to Premises receiving combined Service, the Customer shall be required to arrange the wiring to provide for separate metering. 4.3.4 Other Use Where water pumps supply single family residences, the water pumps shall be on the Residential Service rate provided they can be supplied single phase and total 5 HP or less. 4.3.5 Farms Farm residences and their outbuildings shall qualify for a Residential Service rate provided the farm is assessed for property tax purposes as agricultural land and the Service is used primarily for the production of food or industrial crops on that land. Other use for commercial or non-farm purposes shall be billed on the Commercial Service rate. 5. METERING 5.1 Installation Appendix C The Company shall provide all meters necessary for measuring the Customer's use of the electric Service provided by the Company. The meters shall remain the property of the Company and shall be maintained in accurate operating condition in accordance with the regulations of Measurement Canada. The Customer may furnish, install and maintain at its expense a meter system to verify the accuracy of the Company's meter system. The Customer's meter system and the manner of its installation shall be approved by the Company. Issued FORTISBC INC. By: Dennis Swanson Director, Regulatory Affairs Accepted for filing BRITISH COLUMBIA UTILITIES COMMISSION By: Commission Secretary EFFECTIVE (applicable to consumption on and after) Page 2 of 2