2024 Generic Cost of Capital Formula

In proceeding 27084, the Alberta Utilities Commission (the Commission) issues its decision regarding the generic cost of capital (GCOC) that sets the cost of capital parameters for determining the fair rate of return on equity (ROE) and deemed equity ratios for Alberta’s electric and gas utilities. The result of this proceeding sets the GCOC parameters over the next five years. In sum, the Commission decided to implement the following formulaic approach for determining ROE starting in 2024:

𝑅𝑂𝐸𝑡= 9.0% + 0.5 × (YLD𝑡 − 3.10%) + 0.5 × (SPRD𝑡 − SPRD𝑏𝑎𝑠𝑒)2

In each year (t), the approved ROE will be determined by adjusting the notional ROE of 9.0 percent, approved in this decision, by the difference in forecast long-term Government of Canada (GoC) bond yield (YLD) and utility bond yield spread (SPRD) from their base values of 3.10 percent and the bond yield spread for February 2023 respectively. This approach was largely inspired by the formula used by the Ontario Energy Board (OEB).[1]



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Decision on ENMAX’s 2023-2025 Transmission General Tariff Application

In proceeding 27581, the Alberta Utilities Commission (the Commission) issues its decision regarding the 2023-2025 Transmission General Tariff Application of ENMAX Energy Corporation (ENAMX) in which ENMAX entered a negotiated settlement with interveners. The Commission notes that this decision was originally supposed to have been released in July of 2023, but was delayed after it was learned that ENMAX was being investigated by Commission Enforcement staff regarding the year-end capitalization of certain distribution and transmission projects. The investigation is ongoing, but the Commission understands that the investigation results are unlikely to have a material impact on this decision.[1]



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Reconsideration of ATCO Electric Z Factor for the Wood Buffalo Fire

In proceeding 28320, the Alberta Utilities Commission (the Commission) reconsiders the Z factor adjustment of ATCO Electric (ATCO) for the 2016 Wood Buffalo fire. On April 14, 2023, the Alberta Court of Appeal issued its decision regarding ATCO Electric Ltd. v Alberta Utilities Commission, 2023 ABCA 129 (the Appeal decision) where ATCO sought to appeal the Commission’s denial of ATCO’s loss recovery associated with the 2016 fires. The Commission’s original decision relied on ATCO Gas & Pipelines Ltd. v Alberta (Energy & Utilities Board), 2006 SCC 4 (the Stores Block decision) in which the Commission understood that ‘extraordinary retirements’ of assets are attributable to shareholders rather than customers. However, the Alberta Court of Appeal overturned the Commission’s decision (which depended on an interpretation and application of the Stores Block decision) and referred the matter back to the Commission.



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Fortis’s Application for Determining REA Asset Transfer Compensation

In Proceeding 28358, FortisAlberta Inc. (Fortis) requests the Alberta Utilities Commission (the Commission) to determine the amount of compensation that Fortis is to pay to Battle River Power Coop REA Ltd. (Battle River Power) for the transfer of electric distribution assets. The assets are in several municipalities that have recently passed bylaws requiring Battle River Power customers within municipal boundaries to take distribution services from Fortis.



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Alberta’s Renewable Generation Moratorium

The Government of Alberta issued a moratorium on the approval of renewable energy generation across the province until February 29, 2024. Additionally, the government also requires the Alberta Utilities Commission to commence an inquiry regarding the development and impact of renewable generation in Alberta. In the meantime, the Commission decided to continue processing renewable generation applications to the point where they require final approval. These decisions are likely to have some immediate effects on renewable generation planning, but the long-term outlook remains unknown until more details about the inquiry are made available.



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Micro-Generation Proposal Dispute

In Proceeding 28139, ATCO Electric Ltd. (ATCO) issued a notice of dispute over whether a micro-generation unit proposed by EvolvSolar meets the generator qualifications outlined in the Micro-Generation Regulation.

EvolvSolar and its client applied to ATCO to construct a solar system that would produce 296,667 kWh per year to power a farm grain drying process. ATCO did not approve the application because the site usage averaged only 204,600 kWh over the past two years (2021 and 2022). The Micro-Generation Regulation defines a micro-generation unit as one intended to meet all or a portion of the site’s annual energy consumption. ATCO, as the wires owner, believes the proposed project does not qualify as a micro-generation unit since it might produce more energy than what is consumed on site.[1]



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AESO Stakeholder Symposium

On June 27, the AESO hosted an inaugural symposium aimed at briefing stakeholders on the major challenges and initiatives the AESO is currently prioritizing. 

The overarching theme of the day’s discussion is that the Alberta electric grid is changing. Wind and solar capacity is growing rapidly (capacity is expected to more than double from 2021 levels by 2025).  Battery storage is coming online and there is an expectation that policies aimed at decarbonizing the grid will continue. Additionally, there is potential for even more change as demand side management evolves.   These changes already pose challenges for system reliability, and the AESO expects that more work will need to be done to enhance reliability as well as address market structure challenges. 



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2024 GCOC Arguments

In proceeding 27084, interveners submit their arguments over the matters put forward by the Alberta Utilities Commission (the Commission) regarding the generic cost of capital (GCOC). The Commission had already decided to proceed with a formulaic approach that was previously approved in 2009 and had asked interveners to provide recommendations for the formula’s variables. Interveners previously submited evidence detailing their variable recommendations and have since provided arguments supporting their evidence. However, some interveners continue to argue against the formulaic approach, and most proposed a specific return on equity (ROE) ratios for the 2024 GCOC.  A significant portion of argument focused on debating whether business risk has increased or decreased in the province and why the level of risk justifies each intervener’s proposal.



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TransAlta’s 2022-2023 GTA Decision

In proceeding 27964, the Alberta Utilities Commission (the Commission) issues its decision on the 2022-2023 general tariff application of TransAlta Corporation (TransAlta). TransAlta requested a $9.0 million revenue requirement for 2022 and $9.4 million for 2023. The three main contentions in this proceeding centered around TransAlta’s non-union salary escalation rates, its operations and maintenance (O&M) agreement with AltaLink Management Ltd. (AltaLink), and its First Nations Advisory Committee costs.[1]



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Review and Variance Application of ATCO Gas PBR3 Base Revenue

In Proceeding 28244, The City of Calgary (Calgary) submits to the Alberta Utilities Commission (the Commission) a review and variance application of Decision 26616-D01-2023 which establishes the 2023 revenue requirement of ATCO Gas Distribution (ATCO). Calgary argues that ATCO’s 2022 14 percent return on equity triggers a re-calculation of ATCO’s rate base going into the third term of performance-based regulation (PBR3) which had excluded data from years 2021 and 2022.[1]



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