AESO 2018 ISO Tariff Consultation January 30, 2017 AESO Office, Calgary Public
Agenda • Introduction and objectives (slide 1-4) • Transmission cost causation study preliminary results (slide 5-36) • Point-of-delivery cost function database preliminary results and discussion (slides 37-61) • Rider C / Deferral Account Reconciliation (DAR) / Rates Update (slide 62-80) • Summary of comments from previous session (slides 81-82) • Application process and next steps (slides 83-85) • Discussion and wrap-up (slide 86) Please feel free to ask questions during presentation Public 1
Stakeholder session objectives • Enhance understanding of ISO tariff application • Review technical results of a number of analytical exercises by the AESO • Share information prior to filing of 2018 ISO tariff application • Gather feedback to ensure tariff application provides all information stakeholders require • Review application timeline and next steps Public 2
Applications currently in progress • Directions 5-8 on advancement costs and related provisions – Decision 3473-D02-2015 issued on August 26, 2015 – Process letter issued on October 22, 2015 with additional information on process in the new year [2016] – Awaiting Commission follow-up • 2015 Deferral Account Reconciliation application – Currently before the Commission in Proceeding 21735 – Interim settlement was approved and occurred in October 2016 – Hearing held on December 13 and 14, 2016 – Decision expected mid-March Public 3
Applications currently in progress • 2017 ISO tariff update – Currently before the Commission in Proceeding 22093 – Interim, refundable approval for January 1, 2017 issued by Commission on December 2, 2016 – Still some matters before the Commission – Final approval expected in 2017 Public 4
Transmission Cost Causation Study Preliminary Results Raj Sharma Public 5
Plan for 2018–2020 Transmission Cost Causation Study • The AESO included a 2014-2016 transmission cost causation study prepared by London Economics International (“LEI”) in its 2014 ISO tariff application – The study established the inputs and methodology for a comprehensive cost causation study that used both capital cost and operating and maintenance cost data – A negotiated settlement process was used with participants and approved by the Commission • The AESO proposed to update the LEI study itself using identical methodology with functionalization by voltage and classification by minimum system approach (in August 2015) 6
2014-2016 Transmission Cost Causation Study • The 2014-2016 Cost Causation Negotiated Settlement Agreement was approved as filed November 27, 2013 • In accordance with agreement, an updated study was filed January 21, 2014 • Results of this study set functionalization and classification values for ISO tariff for 2014, 2015, 2016 (and 2017). 7
Scope of 2014-2016 Transmission Cost Causation Study Scope included: • Functionalization of capital costs by voltage methodology (including use of low-side voltage to functionalize substation costs) • Functionalization of operating and maintenance (O&M) costs by specific allocators for most cost components, and functionalization of non-capitalized general and administration (G&A) costs in proportion to O&M costs • Weighting of capital and O&M costs over 2014-2016 • Classification of bulk system and regional system costs by minimum system methodology 8
Capital Functionalization Method in 2014- 2016 Transmission Cost Causation Study • Functionalizing individual line and individual substation facilities: – Point of Delivery: radial line and delivery substation – Bulk: remaining facilities 240kV and over – Regional: remaining facilities below 240kV 9
Capital Functionalization in 2014-2016 Transmission Cost Causation Study Function Year Total Bulk Regional POD 2014 $6.4 billion $2.2 billion $1.9 billion $10.5 billion 2015 $9.3 billion $2.6 billion $2.1 billion $14.0 billion 2016 $9.9 billion $2.7 billion $2.2 billion $14.7 billion 10
O&M Functionalization Method in 2014- 2016 Transmission Cost Causation Study • Capital related costs: depreciation, return, income tax, structure payments, linear and property taxes and capital related offsets • Non-capital costs: labour, G&A, fuel and variable O&M for isolated generation and revenue offsets to labour costs – Isolated generation cost as regional and POD using capital cost functionalization ratio – Control center operations cost based on number of lines and transformers – Vegetation management cost based on line brushing allocator – Substation cost based on transformers – Overhead line and miscellaneous cost based on km of line – Net salaries and wages allocated to groups using proportion of full time equivalents (FTEs) and then further to functions 11
O&M Functionalization in 2014-2016 Transmission Cost Causation Study Function Year Total Bulk Regional POD 2014 $35.3 million $66.6 million $68 million $169.9 million 12
Combined (Capital and O&M) Functionalization in 2014-2016 Transmission Cost Causation Study Ratio of Non-Capital to Capital Costs Type 2014 2015 2016 Non-Capital 19.5% 18.0% 16.3% Capital 80.5% 82.0% 83.7% Combined Functionalization Function Year Bulk Regional POD 2014 53.2% 24.2% 22.6% 2015 58.4% 22.2% 19.4% 59.4% 21.5% 19.1% 2016 13
Functionalization in 2014-2016 Transmission Cost Causation Study – Other Items • Deduct Regulated Generating Unit Connection Charge (RGUCC) revenue from bulk function revenue requirement for the year 14
Functionalization in 2014-2016 Transmission Cost Causation Study Function Year Bulk Regional POD 2014 52.8% 24.4% 22.8% 2015 58.2% 22.3% 19.5% 2016 59.2% 21.6% 19.2% 15
Classification Methodology in 2014-2016 Transmission Cost Causation Study • Bulk classification: – Ratio of per kM cost of 2x795 ACSR and 2x1033 ACSR 240kV conductor – Ratio of per kM cost of 3x1590 ACSR and 2x2156 ACSR 500kV conductor – Ratio of cost of basic and high efficiency transformer • Regional classification: – Ratio of per kM cost of 1x266 ACSR and 1x477 ACSR 138kV conductor – Ratio of cost of basic and high efficiency transformer 16
Classification in 2014-2016 Transmission Cost Causation Study Function Classification Bulk Regional Demand 93.1% 87.4% Energy 6.9% 12.6% 17
Scope of 2018-2020 Transmission Cost Causation Study • Update of 2014-2016 transmission cost causation study • Using identical methodology • Using same data sources, plus a few additional sources • For years 2018-2020 18
Process for 2018-2020 Transmission Cost Causation Study • Update inputs and conduct 2018-2020 transmission cost causation study in 2016 • Present draft results to stakeholders in January 2017 • Include the study in the 2018 ISO tariff application 19
Preliminary 2018 Functionalization - Capital Capital Cost Functionalization Function TOTAL Bulk Regional POD $10.6 billion $4.4 billion $3.1 billion $18.1 billion 20
Preliminary 2018 Functionalization – O&M 2014 O&M Cost Functionalization Function Total Bulk Regional POD $37.3 million $64.3 million $67.1 million $168.8 million 21
Preliminary 2018 Functionalization – Combined (Capital and O&M) Ratio of Non-Capital to Capital Costs Non-Capital 13.2% Capital 86.8% Combined Functionalization Function Bulk Regional POD 53.5% 26.2% 20.3% 22
Preliminary 2018 Functionalization – Other Items • Deduct Regulated Generating Unit Connection Cost (RGUCC) revenue from bulk function revenue requirement for the year 23
Preliminary 2018 Functionalization Function Bulk Regional POD 53.4% 26.3% 20.3% 24
Preliminary 2019 Functionalization - Capital Capital Cost Functionalization Function TOTAL Bulk* Regional POD $10.5 billion $4.5 billion $3.3 billion $18.3 billion 25
Preliminary 2019 Functionalization – O&M 2014 O&M Cost Functionalization Function Total Bulk Regional POD $37.3 million $64.3 million $67.1 million $168.8 million 26
Preliminary 2019 Functionalization – Combined (Capital and O&M) Ratio of Non-Capital to Capital Costs Non-Capital 12.2% Capital 87.8% Combined Functionalization Function Bulk Regional POD 53.2% 26.1% 20.7% 27
Preliminary 2019 Functionalization – Other Items • Deduct Regulated Generating Unit Connection Cost (RGUCC) revenue from bulk function revenue requirement for the year • Add Fort McMurray West 500kV transmission project (“CP” project) revenue requirement to bulk function revenue requirement for the year 28
Preliminary 2019 Functionalization Function Bulk Regional POD 55.0% 25.1% 19.9% 29
Preliminary 2020 Functionalization - Capital Capital Cost Functionalization Function TOTAL Bulk* Regional POD $10.4 billion $4.8 billion $3.5 billion $18.7 billion 30
Preliminary 2020 Functionalization – O&M O&M Cost Functionalization Function Total Bulk Regional POD $37.3 million $64.3 million $67.1 million $168.8 million 31
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