AltaLink Management Ltd. 2014-2015 Deferral Accounts Reconciliation Compliance with Directions from Decision 22542-D02-2019 (AUC Decision 24329-D01-2019)
Deferral Accounts Reconciliation
In this decision, the AUC determined if AltaLink Management Ltd. (“AltaLink”) had complied with the AUC’s directions from Decision 22542-D02-2019. In Decision 22542-D02-2019 the AUC considered an application filed by AltaLink on April 5, 2017, for approval of the reconciliation of certain 2014 and 2015 deferral accounts, including AltaLink’s direct-assign capital deferral account (“DACDA”) in respect of transmission capital projects directly assigned to AltaLink by the Alberta Electric System Operator.
The AUC found AltaLink to partially have met the requirements of the directions from Decision 22542-D02-2019.
Compliance with Commission Directions from Decision 22542-D02-2019
SNC Settlement Disallowance - Direction 2
Direction 2 of Decision 22542-D02-2019 required AltaLink to apply a disallowance of $7,837,938. AltaLink noted that a portion of the $7,837,938 amount related to the Southern Alberta Transmission Reinforcement Medicine Hat area reconfiguration project (“Medicine Hat Project”) that was included in AltaLink’s 2016 DACDA application. As a result, AltaLink proposed to reduce the 2014-2015 DACDA by an amount less than $7,837,938 to reflect the disallowed SNC settlement costs that AltaLink attributed to the Medicine Hat Project. The AUC found this proposal to be reasonable.
The AUC also agreed with AltaLink’s proposal that any contribution refunds triggered by the disallowance in Direction 2 be addressed in a future AltaLink DACDA application.
Directions 9, 10 and 11
The AUC was satisfied AltaLink applied the correct disallowance costs to comply with directions 9-Matting Costs Disallowance, 10-Tower inspection costs disallowance and 11-Disallowance related to material vs labour classification of SNC Surcharge on high-voltage direct-current project costs.
Information Related to Ipatik Substation Move - Direction 12
In its findings in Decision 22542-D02-2019, the AUC determined that AltaLink’s decision to relocate the Ipiatik substation was reasonable. However, because the amount of the actual costs incurred as a result of the decision to move the substation was unclear, the AUC requested AltaLink provide additional information in its compliance filing.
The AUC found that AltaLink’s response to Direction 12 provided some, but not all, of the information requested. However, AltaLink was able to provide subcontract amendment cost information related to relocation expenditures. Because the services provided by these subcontractors represented the largest component of the estimated total cost of the relocation, the AUC indicated that its decision that relocation of the substation was reasonable and prudent was unchanged. No further action was required from AltaLink.
Removal of Costs Related to Bowmanton-Whitla Project Bolt Replacement Costs - Direction 13
The AUC found that AltaLink complied with Direction 13 as AltaLink had applied the disallowance specified therein.
Fortis Connection Projects Contribution Update - Directions 15 and 18
In Direction 15 from Decision 22542-D02-2019, the AUC directed AltaLink to provide an update of the contribution amounts for each of the FortisAlberta Inc. (“Fortis”) connection projects considered in the 2014-2015 DACDA application.
Direction 18 noted the Commission’s findings in section 7.1 from Decision 22542-D02-2019 and directed AltaLink to provide the same information in respect of Fortis connection projects which were considered in AltaLink’s 2014-2015 DACDA application as trailing cost additions. The AUC found AltaLink had supplied information and information request responses complying with Directions 15 and 18.
Inclusion of Cancelled Project Costs - Direction 16
In Direction 16, the AUC asked AltaLink to confirm that none of the costs of the Fortis connection projects considered in AltaLink’s 2014-2015 DACDA application included costs that were transferred in from another project.
AltaLink indicated that costs initially incurred for the (eventually cancelled) Waiparous substation project were transferred to the Cochrane 291S upgrade project and noted that the Cochrane 291S upgrade project included costs transferred from the Waiparous project, a matter that had been identified in AltaLink information responses during the 2014-2015 DACDA application.
The AUC considered that only a portion of the costs incurred on the Waiparous project, to the point of cancellation, could be recoverable as part of the prudent final cost of the Cochrane 291S project. The AUC therefore found that the balance of the Waiparous project costs totalling $1,754,585 should be recovered by AltaLink from Fortis in accordance with the applicable provisions of the construction commitment agreement for that project. The AUC directed AltaLink to remove $1,754,585 from the cost of the Cochrane 291S project and to apply any changes in the contribution offset arising from this change in its second refiling application.
Subject to the above, AltaLink was found to have complied with Direction 16.
Heartland Project Land Cost Disallowance - Direction 17
In Decision 22542-D02-2019, the AUC found that the net cost of properties acquired for the Heartland project was $12.8 million. Of this $12.8 million, the AUC found that AltaLink expenditures of $5.1 million were required to keep landowners whole. After deducting the $5.1 million from the $12.8 million, the AUC applied a 50 percent disallowance to the residual $7.7 million cost. Direction 17 to Decision 22542-D02-2019 directed AltaLink to apply this disallowance in its compliance filing. The AUC found that AltaLink had applied the Heartland project land cost disallowances in its compliance filing as required by Direction 17.
Long-Term Debt Deferral Account - Direction 19
Direction 19 required AltaLink to calculate the true-up of its long-term debt deferral account (“LTDDA”) using the same true-up mechanism on only the portions of debt that had been used to fund assets added to rate base.
The AUC accepted AltaLink’s evidence that $1.1 million of the $2.0 million LTDDA variance was related to allowance for funds used during construction (“AFUDC”). In the circumstances, given the amount and the effort that would be required to adjust the accounting for all or even a select number of projects, the AUC considered AltaLink’s request to continue to settle the full 2014 LTTDA variance of $2.0 million by way of a cash payment by AltaLink to be reasonable.
Re-Accrual of Allowances for Funds Used During Construction - Direction 20
Due to gaps in AltaLink’s application and information request responses, in Direction 20, the AUC required that AltaLink provide a detailed AFUDC reconciliation in its refiling application. The AUC accepted AltaLink’s calculations of AFUDC on the cancelled projects and directed AltaLink to remove the $13,752 related to AFUDC from its recovery of cancelled project costs. Subject to the removal of $13,752, the AUC approved AltaLink’s reaccrual of AFUDC amounts.
AltaLink was ordered to provide a second refiling of its 2014 and 2015 deferral accounts reconciliation application on or before September 23, 2019.