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Decision 22293-D01-2017

EQUS REA LTD. 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

Alberta Utilities Commission

Decision 22293-D01-2017

EQUS REA LTD.

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

Proceeding 22293

October 2, 2017

Published by the:


Fifth Avenue Place, Fourth Floor, 425 First Street S.W.

Calgary, Alberta

T2P 3L8

Telephone: 403-592-8845

Fax: 403-592-4406

Website: www.auc.ab.ca

Decision 22293-D01-2017 (October 2, 2017) • i

Contents

1 Introduction ........................................................................................................................... 1

2 Preliminary matters and issues ............................................................................................ 2 2.1 EQUS’ “concern and apprehension” .............................................................................. 2

2.2 Fortis objection to this proceeding ................................................................................. 3

3 The substantive issue ............................................................................................................ 5 3.1 The extension of Option M ............................................................................................ 5 3.2 By what mechanism should Option M be extended to EQUS? ..................................... 9

3.2.1 Pooled approach ................................................................................................ 9

3.2.2 Non-pooled approach ...................................................................................... 12 3.2.3 Pseudo-POD approach .................................................................................... 14

4 Order .................................................................................................................................... 19

Appendix 1 – Proceeding participants ...................................................................................... 20

Appendix 2 – Summary of Commission directions .................................................................. 21

Decision 22293-D01-2017 (October 2, 2017) • 1


Calgary, Alberta

EQUS REA LTD.

Application for Orders Amending the Terms and Conditions

of Service and Rate Schedules of FortisAlberta Inc. Decision 22293-D01-2017

in Respect of Option M Distribution Generation Credit/Charge Proceeding 22293

1 Introduction

1. On December 20, 2016, EQUS REA LTD. (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, 2017. 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) 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.

(b) 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 22293-X0011, AUC letter – Commission response to EQUS submissions on preliminary matters.

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 EQUS REA LTD.

2 • Decision 22293-D01-2017 (October 2, 2017)

(c) Consideration of a request by EQUS for confidential treatment of certain

information (a request that EQUS subsequently withdrew).2

(d) Opportunity for the filing of evidence by Fortis and of additional evidence from

EQUS.

(e) Two rounds of information requests (IRs) and responses to and from both EQUS

and Fortis.

(f) Submissions from parties on further process.

(g) 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

(h) 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, 2017. The Commission received written reply argument on behalf of both Fortis and

EQUS on July 5, 2017. 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,

2017.

7. 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 22293-X0012, EQUS letter re filings and process ID 22293. 3 Exhibit 22293-X0082, AUC letter - Further process and schedule.



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 2017.4

9. 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 well-

established 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.5

10. 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) 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

(b) 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 22293-X0017, EQUS letter re evidence and other submissions ID 22293. 5 Exhibit 22293-X0023, AUC letter - Concerns raised by EQUS REA Ltd. 6 Exhibit 22293-X0014, Fortis evidence, paragraph 9, and Exhibit 22293-X0083, Fortis argument, paragraph 8. 7 Exhibit 22293-X0071, FortisAlberta comments on further process, Proceeding 22293.



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 2017. 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.8

14. 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.9

15. 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 inquiry10 which may result in Option M type

provisions being standardized across all distribution owners.11

16. 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) It attempted to have the issue of Fortis’ application of Option M addressed in

Proceeding 21980.13 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.

(b) The timing of a future Phase II proceeding is unknown.

(c) There is no requirement or guarantee that the DG inquiry will result in any

regulatory change.

(d) 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 21980 and stated:

8 Exhibit 22293-X0014, Fortis evidence, paragraphs 57 and 76. 9 Exhibit 22293-X0083, Fortis argument, paragraph 27, and Exhibit 22293-X0087, Fortis reply argument,

paragraph 3. 10 Proceeding 22534: AUC Distributed generation review in accordance with O.C. 120/2017. 11 Exhibit 22293-X0083, Fortis argument, paragraph 38. 12 Exhibit 22293-X0072, ID 22293 EQUS reply to Fortis process submissions. 13 Proceeding 21980: Fortis 2017 annual performance based regulation rate adjustment application.



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, 2017. 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. …14

18. The Commission already determined in Proceeding 21980 (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 21980 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 21980-X0032. 15 Exhibit 22293-X0072, EQUS reply to Fortis process submissions.



(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 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).

…

Option M: 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.18

23. 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 22293-X0014, Evidence of Fortis, page 4. 17 Exhibit 22293-X0014, Evidence of Fortis, page 5. 18 Exhibit 22293-X0014, Evidence of Fortis, paragraph 69. 19 Exhibit 22293-X0001, EQUS application, pages 5-9, and Exhibit 22293-X0084, EQUS argument, paragraphs

15-22.



24. Fortis explained in its evidence and argument that:

(a) 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

(b) 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 pass-

through 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

(c) 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.22

25. 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 22293-X0083, Fortis argument, paragraphs 19-20. 21 Exhibit 22293-X0083, Fortis argument, paragraph 21. 22 Exhibit 22293-X0083, Fortis argument, paragraphs 20 and 23.



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 2000-01, the Board confirmed its previous direction that any transmission

cost savings would be passed through to DG customers, and expressed the expectation that non-

regulated 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.23

29. The board reiterated its expectations for passing on the one-time credits arising from the

change from gross to net billing in Decision 2000-25:

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.24

30. Decision 2000-25 and Decision 2000-01 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 non-

regulated 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 2000-01: ESBI Alberta Ltd., 1999/2000 General Rate Application Phase 1 and Phase 2, February 2,

2000, pages 219- 220. 24 Decision 2000-25: ESBI Alberta Ltd., 1999/2000 Tariff Application Refiling-Part B, Tariff and Terms and

Conditions of Service, April 25, 2000, page 47.



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) A pooled approach

(b) A non-pooled approach

(c) A pseudo-POD approach

3.2.1 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).25

35. 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.26

36. 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.27

37. 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.28

25 Exhibit 22293-X0083, Fortis argument, paragraph 36(a). 26 Exhibit 22293-X0081, FAI-AUC-2017MAY29-002. 27 Exhibit 22293-X0081, FAI-AUC-2017MAY29-002. 28 Exhibit 22293-X0088, EQUS reply argument, paragraph 63.



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 REA-

connected 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.30

15-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-2017MAY29-003.01,31 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 22293-X0032, FAI-AUC-2017APR03-002. 30 Exhibit 22293-X0081, FAI-EQUS-2017MAY29-002. 31 Exhibit 22293-X0081, FortisAlberta IR Responses - Proceeding 22293.



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.35

40. 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 ID36 (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 22293-X0081, FAI-AUC-2017MAY29-003. 33 Exhibit 22293-X0081, FAI-AUC-2017APR03-004(b). 34 Exhibit 22293-X0081, FAI-AUC-2017APR03-003(b). 35 Exhibit 22293-X0081, FAI-AUC-2017APR03-003(d). 36 Exhibit 22293-X0060, EQUS-AUC-2017APR03-002.



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 The name of the DG and the AESO Asset ID are not part of the calculation.

o 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.

o EQUS will undertake to confirm a DG’s non-microgeneration status.

o 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 requirements38

(d) 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.

(e) 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.”40

3.2.2 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 22293-X0084, EQUS argument, paragraph 47. 38 The DG Site ID and Planning information as required under the IOA. 39 Exhibit 22293-X0084, EQUS argument, paragraph 59. 40 Exhibit 22293-X0088, EQUS reply argument, paragraph 57. 41 Exhibit 22293-X0081, FAI-AUC-2017MAY29-002. 42 In its Exhibit 22293-X0083, argument, page 39, paragraph 47D, Fortis later submitted that the exemption would

also apply to Rate 29.



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.43

42. 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 22534 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.44

43. 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.47

43 Exhibit 22293-X0032, FAI-AUC-2017APR03-001(f). 44 Exhibit 22293-X0081, FAI-AUC-2017MAY29-003(c). 45 Exhibit 22293-X0084, EQUS argument, paragraph 81. 46 Exhibit 22293-X0084, EQUS argument, paragraph 88. 47 Exhibit 22293-X0084, EQUS argument, paragraph 83.



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.49

3.2.3 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.50

45. 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.51

46. 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 22293-X0084, EQUS argument, paragraph 87. 49 Exhibit 22293-X0088, EQUS reply argument, paragraph 63. 50 Exhibit 22293-X0060, EQUS-AUC-2017APR03-008(e) to (g). 51 Exhibit 22293-X0060, EQUS-AUC-2017APR03-008 (e) to (g). 52 Exhibit 22293-X0081, FAI-AUC-2017MAY29-003.



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 non-

pooled 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

program53 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 22293-X0088, EQUS reply argument, paragraph 73. 54 Exhibit 22293-X0060, EQUS-AUC-2017APR03-008(e) to (g).



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) 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.

(b) Whether and to what extent Fortis’ T & Cs need to be modified to accommodate

the extension of Option M to EQUS.

(c) 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.



56. For all of the above reasons, the Commission directs the following:

(a) 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.

(b) 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) 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.

(d) 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.



57. The Commission expects a resolution on the matters related to the information that needs

to be exchanged between EQUS and Fortis and any other operational requirements and may

consider an interim solution acceptable.

58. Finally, the Commission acknowledges that:

(a) There is an ongoing inquiry being conducted by the Commission on matters

relating to electric distribution system-connected generation pursuant to Order in

Council 120/2017 (OIC). One of the topics discussed in the review was related to

the credits received by distribution system-connected generators, such as

Option M. This inquiry will culminate in a report to the Minister of Energy as

directed in the OIC.

(b) If the REA-related tariff matters application to be submitted by Fortis is not

conjoined with the directed compliance filing, then the REA-related tariff matters

application or a Fortis Phase II study or both of those proceedings could involve

review and consideration of various costs associated with the payment and

administration of Option M credits.

59. Accordingly, while the Commission grants the extension by Fortis to EQUS of Option M

in this proceeding, it has done so on the basis of Fortis’ existing Option M methodology. To the

extent that methodology is affected by subsequent proceedings, future policy and/or regulatory

changes, the Commission’s directions in this decision are also subject to review and change.



4 Order

60. It is hereby ordered that:

(1) FortisAlberta Inc. shall submit a compliance filing to reflect the findings,

conclusions and directions in this decision, either by way of a stand-alone

application or as part of its REA-related matters application, by January 15, 2018.

Dated on October 2, 2017.


(original signed by)

Neil Jamieson

Panel Chair


Carolyn Hutniak

Commission Member


Moin Yahya

Commission Member



Appendix 1 – Proceeding participants

Name of organization (abbreviation) Company name of counsel or representative

EQUS REA Ltd. (EQUS)

McLennan Ross Barristers & Solicitors

Office of the Utilities Consumer Advocate (UCA)

FortisAlberta Inc. (Fortis)

North Parkland Power Rural Electrification Association

Alberta Utilities Commission Commission panel N. Jamieson, Panel Chair C. Hutniak, Commission Member M. Yahya, Commission Member Commission staff

K. Kellgren (Commission counsel) N. Mahbub A. Corsi A. Spurrell M. Baitoiu



Appendix 2 – Summary of Commission directions

This section is provided for the convenience of readers. In the event of any difference between

the directions in this section and those in the main body of the decision, the wording in the main

body of the decision shall prevail.

1. For all of the above reasons, the Commission directs the following:

(a) 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.

(b) 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) 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.

(d) 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. ....................................................................................... Paragraph 56

equs rea ltd.€¦ · it had already advised the commission of its intent to file an rea-related...

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