AESO 2005-2006 GTA Refiling EUB Technical Session Agenda November 9, 2005

AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
AESO 2005-2006 GTA Refiling
EUB Technical Session
John Martin, AESO Regulatory
Stakeholder Presentation (Corrected)
November 9, 2005 — Calgary
Agenda
● Purpose
● Rate design principles
● Rate design options
● Discussion and questions
● Next steps
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Purpose
● Scope restricted to “consideration of the
magnitude of the customer POD charge as it
relates to low load customers of 5 MW or less”
● Should EUB “vary Decision 2005-096 with respect
to the customer POD charge as to low load
customers of 5 MW or less”?
● If appropriate, should relief “be offered to all
customers of 5 MW or less, or only for
transmission connected customers of the DISCO
and dual use customers of the AESO who operate
at 5 MW or less”?
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Purpose (cont’d)
● Short-term solution for 2006 DTS rate
● Transmission Regulation requires rate to be effective
January 1, 2006
● AESO needs time to program and test
● Longer-term solution to be developed through
consultation for 2007 GTA
● Will be tested in 2007 GTA proceeding
● Whole 2006 GTA rate design not up for review
● Where possible, rely on information already on
record
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Rate Design Principles
1. Recovery of the total revenue requirement
2. Provision of appropriate price signals that reflect
all costs and benefits
3. Fairness, objectivity, and equity
4. Stability and predictability of rates and revenue
(rate gradualism or avoiding rate shock)
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Recovery of Revenue Requirement
● Any reduction in charges for small customers will
result in an increase in charges for other
customers
● Not possible to affect just small customers and still
recover total revenue requirement
● Any rate approach can be designed to recover
forecast revenue requirement
● Any difference from forecast revenue will be recovered or
refunded through deferral account
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Appropriate Price Signals
● Does price signal align with costs?
● Some < 5 MW points of delivery have low costs
● Isolated generation (9 sites)
● Unconventional connections (2 sites)
● Customer-owned substations (12 sites – 4 eligible for
PSC, 8 ineligible)
● TFO-owned substations principally funded by
customer contribution (≈11)
● Not all contributions classified as POD costs in cost study
● Imprecise distinction between Local System and POD
classification in cost study
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Appropriate Price Signals (cont’d)
● Does price signal align with investment policy?
● Various investment policies applied to existing customers
● Directed investment policy will apply to new customers
● Will price signal influence customer behaviour?
● Existing customers cannot respond to fixed charge
● New customers should respond to fixed charge and
aligned investment policy
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Fairness, Objectivity, and Equity
● Does rate reflect costs?
AltaLink Electric PODNet Book Value
8,000
7,000
NBV$ X
6,000
5,000
AL POD NBV
4,000
Linear (AL POD NBV)
3,000
2,000
1,000
0
0
20
40
60
80
100
120
140
160
Capacity (MVA)
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Fairness, Objectivity, and Equity
(cont’d)
● Large amount of scatter in data
● Coefficient of correlation very low (r2 = 0.12)
● How much scatter is due to radial lines? To age of
facilities?
● Cluster of data points for low load-low cost sites
● Does some other alternative better represent the
data?
● What outcomes are imposed by averaging and
“postage stamp” requirements?
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Stability and Predictability
● Will the directed rate align with final rate?
● What “final” rate design will result when limitations of
cost data are overcome?
● How much “rate shock” is too much?
● Should customers receive forewarning of rate
changes?
● Would customers have made same choices if customer
charge was expected?
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Possible Options:
Substation Fraction
● Apply “substation fraction” (dual-use ratio) at
substations with multiple customers
● EUB October 21 clarification
● Aligns with costs for 36 small customers
● Aligns with costs for 63 large customers
● Doesn’t address isolated generation or
unconventional connections
● Aligns with investment policy
● Still “rate shock” for 63 other small customers
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Possible Options:
Ramp Up
● “Ramp up” using $/MW charge < 5 MW
● AESO October 7 supplemental response
● Aligns with costs for 47 small customers
● Does not align with costs for large dual-use or
multi-DTS sites
● Does not align with investment policy for small
customers
● Reduces “rate shock” and limits maximum for 99
small customers
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Possible Options:
Phase In
● Phase in or transition to new rate design
● AESO January 31 tariff application
● Aligns with costs for 104 sites – dual-use, midsize, isolated generation, and unconventional
connections
● Does not align with costs for other sites
● Does not align with investment policy
● Customers given time to respond to price signal
● Reduces “rate shock” for almost all customers
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Possible Options:
Contract Billing
● Bill POD charge on contract capacity
● ADC (Rosenberg) GTA evidence
● Aligns with costs for 104 sites – dual-use, midsize, isolated generation, and unconventional
connections
● Does not align with costs for other sites
● Partially aligns with investment policy
● More “fixed” than using Billing Capacity
● Reduces “rate shock” for almost all customers
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Possible Options:
“Grandfather” Existing Services
● Bill POD charge to new services only
● Existing services remain on existing rate structure
● Aligns with costs for new services
● Does not align with costs for many existing
services
● Aligns new rate with new investment policy
● New customers can make appropriate choices
● Reduces “rate shock” for existing customers
● Difficult to manage in day-to-day application
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Possible Options:
Forego If Not TFO-Owned
● Forego POD charges where there is no TFOowned substation
● Aligns with costs for 40 sites – customer-owned
substations, isolated generation, and
unconventional connections
● Does not align with costs for other sites
● Aligns with investment policy
● Would eliminate Primary Service Credit
● New customers can make appropriate choices
● Still “rate shock” for 76 other small customers
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Possible Options:
Totalize Isolated Generation Sites
● “Virtually” totalize isolated generation sites
● Aligns with costs for 9 isolated generation sites
● Doesn’t address any other issues
● Question of compliance with Isolated Generating Units
and Customer Choice Regulation
● Does not align with costs for other sites
● Aligns with investment policy
● Still “rate shock” for 90 other small customers
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Treatment of Adjustments to
Customer Charge
● Should adjustment be dealt with within POD charge? Or
spread over all other components of interconnection charge?
Function
Total
Classification
CP
NCP
Energy
Customer
Bulk
41.0%
24.1%
–
16.9%
–
Local
17.1%
–
14.0%
3.1%
–
POD
41.9%
–
17.9%
–
24.0%
Total
100.0%
24.1%
31.9
20.0%
24.0%
Totals may be different due to rounding
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POD Charges for Possible Options
● Substation fraction:
$704/MW of Billing Capacity, plus
$21,993/month × Substation Fraction
● Ramp up:
$704/MW of Billing Capacity, plus
if < 5 MW: $4,666/MW, or
if ≥ 5 MW: $23,328/month × Substation Fraction
● Phase in (first year of three-year phase-in):
$704/MW of Billing Capacity, plus
if < 5 MW: $3,049/MW plus $7,622 × Fraction, or
if ≥ 5 MW: $22,866/month × Substation Fraction
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
POD Charges for Possible Options
(cont’d)
● Contract billing:
$704/MW of Billing Capacity, plus
if < 5 MW: $4,715/MW, or
if ≥ 5 MW: $23,575/month × Substation Fraction
● Grandfather existing services:
if < 5 MW and committed before Dec 31, 2005:
$1,647/MW of Billing Capacity, or
if ≥ 5 MW or committed after Jan 1, 2006:
$704/MW of Billing Capacity, plus
$25,495/month × Substation Fraction
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POD Charges for Possible Options
(cont’d)
● Forego if not TFO-owned:
$704/MW of Billing Capacity, plus
if < 5 MW and not TFO-owned: $0, or
if ≥ 5 MW or TFO-owned: $21,994/month ×
Substation Fraction
● Totalize isolated generation sites:
$704/MW of Billing Capacity, plus
$22,029/month × Substation Fraction
(for isolated sites, Fraction = 1 ÷ number of sites)
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
POD Charges for Possible Options
(cont’d)
● Many possible combinations and permutations
● Should only be considered if more rate design principles
are satisfied
● Must be billable in AESO billing system
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Evaluation of Options
● How well do options address all customer considerations?
● 1 = for only a few customers
3 = for almost all customers
Appropriate
Signal
Fair and
Equitable
Stable and
Predictable
Sub Fraction
2
2
1
Ramp Up
1
2
2
Phase In
2
2
3
Contract Capacity
2
1
3
Grandfather
3
1
3
Forego if Not TFO
2
2
1
Totalize Isolated
1
3
1
Option
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
Discussion
● Other options?
● Other considerations?
● How should options be evaluated?
● Should options apply to all customers? Only small
customers? Only AESO and DISCO flowthrough
small customers?
● Should effects be held within the POD charge? Or
also spread over Bulk System and Local System
charges?
● What additional information can AESO provide?
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Next Steps
● Submissions to EUB by Tuesday, November 15,
2005
● AESO will try to file its submission on Monday,
November 14
● AESO will consider technical session discussion
when preparing its submission
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AESO Regulatory
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AESO 2005-2006 GTA Refiling
EUB Technical Session (Corrected)
November 9, 2005
AESO Contacts
● Rob Senko
Director, Regulatory
(403) 539-2786
[email protected]
● John Martin
Manager, Regulatory
(403) 539-2465
[email protected]
● Information can be accessed on www.aeso.ca by
following path Tariff ► Current Applications ►
2005-2006 Tariff Refiling
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