MONTE S. FORSTER Barrister & Solicitor SENT ELECTRONICALLY

MONTE S. FORSTER*
Barrister & Solicitor
Monte S. Forster
T 403 262.8848
F 1 866 224.5593
[email protected]
SENT ELECTRONICALLY
November 24, 2005
12th Floor, Fifth Avenue Place
425 – 1st Street SW
Calgary, Alberta
Canada T2P 3L8
* Denotes a Professional Corporation
Alberta Energy and Utilities Board
640 – 5 Avenue SW
Calgary, Alberta
T2P 3G4
Attention: Mr. Jamie Cameron
Dear Mr. Cameron:
Re: Alberta Energy and Utilities Board (“Board”) Application No. 1363012;
Board Decision 2005-096; Alberta Electric System Operator (“AESO”) 2005/2006
General Tariff Application (“2005/2006 GTA”); Milner Power Inc. November
24, 2005, Review and Variance Application
I am enclosing a Review and Variance Application on behalf of Milner Power
Inc. (“Milner”) dated November 24, 2005 (the “Application”), wherein Milner
seeks, among other things, review and variance of the Board’s determinations in
the context of the AESO’s 2005/2006 GTA to decline to consider Milner’s August
17, 2005 submissions, and to relieve the AESO of certain outstanding directives
and undertakings.
It is a matter of concern that the Board would summarily choose to ignore
Milner’s August 17, 2005 submissions on the basis that it was then too late for the
Board to consider new evidence in the GTA, and then choose, some two months
later, to undertake a review of its decision, since issued, on the basis of new
evidence filed by the AESO in September and October 2005. As the Board
refused to even consider Milner’s submissions, the Board cannot say, and, of
course, did not endeavour to say, that the information provided by Milner would
not have altered the Board’s determinations in Decision 2005-096. The
submissions were simply ignored as being out of time.
Alberta Energy and Utilities Board
Attention: Mr. Jamie Cameron
November 24, 2005
Page 2
This disparity in treatment of Milner on the one hand, and of the AESO on the
other, is, in itself, a matter of concern, and is an error warranting review.
Nevertheless, Milner is not requesting, at this time, that the Board initiate a
review of Decision 2005-096 (and the Board’s determination to refuse to consider
Milner’s August 17, 2005 submissions) independently of Milner’s August 17,
2005 Complaint Application (the “Complaint”).1 Rather, Milner is advancing the
present Application, in part, to ensure that the Board retains the ability to grant
all necessary remedies requested in the Complaint.
The Board was express that its decision to decline to consider Milner’s August
17, 2005 submissions was, “without prejudice to Milner’s right to pursue its
complaint pursuant to Section 25 of the Electric Utilities Act.”2 Nonetheless,
certain parties have argued that the Board’s decision to relieve the AESO of its
earlier loss factor directives has prejudiced Milner in advancing its Complaint.
In consequence of these submissions, and the want of any further direction from
the Board, Milner has chosen to file the present Application as a precautionary
measure.
We request that the present Application be considered, as warranted, as a
concomitant application to Milner’s Complaint. The fact Milner is requesting
that the Board treat the present Application concomitantly with the Complaint
should not be seen as an indication that Milner is not concerned that the matters
raised in the Application (including the now evident significant variability in loss
factors calculations resulting from the AESO’s proposed methodology or
proposed method of implementing the methodology), be fully addressed, or that
delay in considering the Application would be appropriate. Rather, it is an
indication that each of the matters raised should be susceptible of full
consideration in the context of the Complaint. In particular, Milner requests that
the Board consider (concurrently with the parallel requests for relief in the
Complaint) Milner’s present requests for extension of the AESO’s existing tariffbased loss factor methodology and that all necessary amendments to the AESO’s
Rate Schedules be undertaken as soon as the Board’s schedule allows.
1
2
Application No. 1414213.
Board cover correspondence to Decision 2005-096, dated August 28, 2005.
Alberta Energy and Utilities Board
Attention: Mr. Jamie Cameron
November 24, 2005
Page 3
Please direct all correspondence concerning the present Application to the
following:
Ms. Pat Lucas
Vice President Operations
Milner Power Inc.
Suite 1210, 715 – 5th Avenue S.W.
Calgary, Alberta
T2P 2X6
Telephone: 403.750.9308
Facsimile: 403.263.9125
Email:
[email protected]
Yours truly,
<Filed electronically>
MONTE S. FORSTER
Mr. Monte S. Forster
Barrister & Solicitor
12th Floor, 425, 1st Street S.W.
Calgary, Alberta
T2P 3L8
Telephone: 403.262.8848
Facsimile: 1.866.224.5593
Email: [email protected]
ALBERTA ENERGY AND UTILITIES BOARD
IN THE MATTER OF the Electric Utilities Act, SA 2003, c. E-5.1; the
Alberta Energy and Utilities Board Act, RSA 2000, c. A-19.5; the Alberta
Energy and Utilities Board Act, RSA 2000, c. A-19.5; the Transmission
Regulation, AR 174/2004; and the Alberta Energy and Utilities Board
Rules of Practice, AR 101/2001;
AND IN THE MATTER OF the Alberta Electric System Operator’s
2005/2006 General Tariff Application and Alberta Energy and Utilities
Board Decision 2005-096, wherein the Alberta Energy and Utilities Board
granted approval of certain aspects of the Alberta Electric System
Operator’s 2005/2006 General Tariff Application (Application No.
1363012) including requests by the Alberta Electric System Operator for
approval of certain Rate Schedules and to be relieved of certain
outstanding Loss Factor Directives;
AND IN THE MATTER OF an Application by Milner Power Inc. for
Review and Variance of Decision 2005-096 pursuant to section 126 of the
Electric Utilities Act, SA 2003, c. E-5.1.
MILNER POWER INC. REVIEW AND VARIANCE APPLICATION
ELECTRIC UTILITIES ACT SECTION 126
NATURE OF THE APPLICATION
TAKE NOTICE that Milner Power Inc.1 (the “Applicant”) brings the present Review and
Variance Application (the “Application”) before the Alberta Energy and Utilities Board
(“Board”) pursuant to section 126 of the Electric Utilities Act, SA 2003, c. E-5.1 (the
“EUA”) and section 46 of the Alberta Energy and Utilities Board Rules of Practice, AR
101/2001, concerning the Board’s approval of the Alberta Electric System Operator’s
(the “AESO’s”) 2005/2006 General Tariff Application (Application No. 1363012) (the
“GTA”) and, in particular, concerning the Board’s determinations to decline to consider
the Applicant’s August 17, 2005, submissions concerning, inter alia, the AESO’s request
for relief from certain outstanding loss factor directives issued by the Board in Decisions
2000-1, 2000-27 and 2002-104; to grant relief to the AESO from the said directives and
AESO undertakings to stakeholders in the AESO’s 2002 Negotiated Settlement, as
approved by the Board in Decision 2002-064; and to approve certain Rate Schedules
allowing the recovery of loss charges in accordance with the AESO’s newly proposed
and finalized Loss Factor Methodology, which the AESO proposes to implement January
1, 2006, and pursuant to which final loss factors have been determined by the AESO as of
November 18, 2005.
1
Milner Power Inc. is a wholly owned subsidiary of Maxim Power Corp. Milner Power Inc. owns and
operates the H. R. Milner power station (the “Milner Plant”) a 144-MW coal-fired power station located
near the town of Grande Cache, Alberta.
RELIEF SOUGHT
AND TAKE NOTICE that the Applicant seeks orders of the Board:
(a) Directing that the Board’s determinations in Decision 2005-096 to ignore
Milner’s August 17, 2005 submissions in the AESO’s GTA, be reviewed, and that
the Board consider the said submissions;
(b) Directing that the Board’s determinations in Decision 2005-096 to relieve the
AESO of its undertakings to stakeholders in the AESO’s 2002 Negotiated
Settlement and to relieve the AESO of those loss factor directives imposed by the
Board in Board Decisions 2000-1, 2000-27 and 2002-104, be reviewed, and that
the said determinations be varied in accordance with paragraph (c) hereof;
(c) Directing that Decision 2005-096 be varied and that the AESO comply with the
AESO’s undertakings to stakeholders and all outstanding Board directives
concerning the study, selection and implementation of the AESO’s loss factor
methodology in accordance with subsection 8(1)(d) of the Transmission
Regulation, AR 174/2004 (the “Regulation”) and Board Decisions 2000-1, 200027, 2002-064 and 2002-104;
(d) Directing that the AESO’s existing tariff-based loss factor methodology be
extended beyond December 31, 2005 to June 30, 2006, or to such future date as
the Board may direct, to permit the AESO to comply with the AESO’s
undertakings to stakeholders and all outstanding Board directives as directed in
paragraph (c) hereto; and
(e) Directing that the AESO’s applied for Rate Schedules be amended, as necessary,
to allow for the continuation of the recovery of losses in accordance with the
AESO’s existing tariff-based loss factor methodology and with no changes to the
AESO’s raw loss factors, until such time as that methodology is replaced by a
new Board approved methodology.
GROUNDS OF THE APPLICATION
AND TAKE NOTICE that the grounds of the Application are that:
(a) The Board improperly declined to consider the August 17, 2005 submissions of
Milner in the GTA and consequently improperly relieved the AESO of its
undertakings to stakeholders under the AESO’s 2002 Negotiated Settlement (as
approved by the Board in Decision 2002-064), and improperly relieved the AESO
of the AESO’s obligations to comply with certain loss factor directives issued by
the Board in Decisions 2000-1, 2000-27 and 2002-104. The Board’s refusal to
consider Milner’s August 17, 2005 submissions was itself an error of law and led
to further errors of fact and law in Decision 2005-096;
2
(b) Since the date of Decision 2005-096 circumstances have changed in a substantial
and unforeseen manner and render the continuation of the tariff unjust and
unreasonable. The AESO has now issued its final loss factor calculations. These
calculations vary substantially from the AESO’s calculations issued eight months
earlier. The significant variation evidences either that the AESO does not have
the means to properly calculate loss factors under its new proposed loss factor
methodology or that the methodology allows such year to year variability in loss
factors that the AESO’s proposed methodology and/or proposed implementation
of the methodology, will fail entirely to send effective locational signals to
generators and will thus fail to meet the objectives of the Alberta Government’s
Transmission Development Policy (the “Policy”)2 and the Regulation; and
(c) The principle of rate stability mandates that the existing tariff-based loss factor
methodology and raw loss factors be continued until the Board approves an
acceptable replacement methodology consistent with the Policy and the
Regulation.
STATEMENT OF FACTS
1. Milner incorporates by reference and adopts paragraphs 1 to 50 of Milner’s
Complaint Application (Application No. 1414213) filed with the Board August 17,
2005 (the “Complaint”).
2. On August 17, 2005 Milner filed submissions with the Board in the GTA advising the
Board that the Complaint had been filed as of that date pursuant to Sections 25 and 26
of the EUA.
3. Milner noted in its August 17, 2005 submissions that the AESO’s proposed loss
factor methodology would fail to allocate costs to generators on the basis of the
contribution (cost-causation) of each generating unit to system losses, and would thus
fail to comply with the Regulation. Milner also noted that its Complaint included
requests that the AESO’s proposed loss factor methodology be revoked or suspended
until the AESO complied both with the Board’s outstanding loss factor directives3
2
November 2003 Transmission Development Policy Paper by the Alberta Department of Energy entitled
“Transmission Development – The Right Path for Alberta – A Policy Paper” The Policy is available at the
following link: http://www.energy.gov.ab.ca/docs/electricity/pdfs/transmissionPolicy.pdf
3
In Decision 2000-27 at pages 64 to 65, the Board directed EAL to study the following losses issues:
• Whether it would be appropriate or necessary to develop a methodology for providing loss
signals (that recognize the reduction or increase in system losses caused by adding a new
generator at a specific location) for the siting of new generation.
• Whether the Alberta system warrants the use of an “average MW in” approach for the
purposes of calculating loss factors for economic dispatch.
• Whether the “average MW in” approach provides optimal economic signals for both
economic dispatch and siting of new generation.
• Whether EAL should introduce optional five-year financial losses hedges in addition to or in
substitution for the five-year locked in physical hedges.
3
and with the AESO’s outstanding loss factor undertakings in the AESO’s 2002
Negotiated Settlement.4
4. Milner requested in its August 17, 2005 submissions that the Board defer all rulings
in the AESO’s GTA concerning the AESO’s request for waiver of the Board’s loss
factor directives and further that the Board ensure that no ruling issued in the context
of the 2006 GTA undermined the AESO’s Negotiated Settlement undertakings until
the Board had an opportunity to fully consider the Complaint.
5. The Board released Decision 2005-096 on August 28, 2005. The Board issued the
Decision with correspondence indicating that the Board was declining to consider
Milner’s August 17, 2005 submissions in the context of the GTA. The Board
expressly stated it was declining to consider Milner’s submissions because the time
for filing evidence in the AESO’s GTA had passed. Although refusing to consider
Milner’s submissions in the context of the GTA, the Board noted that its
determination not to consider Milner’s submissions and its determination to relieve
the AESO of its obligation to comply with the loss factor directives in the context of
the GTA was, “without prejudice to Milner’s right to pursue its complaint pursuant to
Section 25 of the Electric Utilities Act.”5
6. On October 7, 2005, in the course of submissions made in the Complaint, and
ostensibly in response to a Board request of September 22, 2005, for submissions on
certain limited points, TransAlta Utilities Corporation (“TransAlta”) and
TransCanada Energy Ltd. (“TransCanada”) submitted that the Board should
summarily dismiss all or a portion of the Complaint due to the Board’s determination
in Decision 2005-096, for the purposes of the GTA, to waive compliance with the
Board’s loss factor directives issued in Decisions 2000-1, 2000-27 and 2002-104.
7. On October 11, 2005, Milner responded to the Board’s correspondence of September
7, 2005 and replied, inter alia, to the submissions of TransAlta and TransCanada.
Milner submitted that the Board’s refusal to consider Milner’s August 17, 2005
submissions and determination to relieve the AESO of its obligations to comply with
the Board’s loss factor directives, did not undermine the importance of AESO
compliance with directives of the substantive nature of the Board’s loss factor
4
The 2002 Negotiated Settlement specified in part (Decision 2002-064 at page 23):
(j) Board Directives: The Settlement does not affect the TA’s obligations to comply with Board
directives. The TA will, in a timely fashion and in any event not later than December 31,
2002, comply with all Board Directives. None of the Stakeholders, by signing this Settlement
or otherwise, agree that the TA has complied with the Board Directives. The TA shall provide
quarterly reports to the Stakeholders on the progress to date, and intended completion dates,
for all outstanding Board Directives. For clarity, the COS Credit Rate Schedule shall be
interim refundable as of January 1, 2002 pending a COT Credit application and approval by
the Board. …
(l) Audit and Adjustment of Loss Factor Methodology: The existing loss factor methodology will
continue to apply in 2002.
(m) Review of Loss Factor Methodology: The TA will conduct a fundamental review of the
treatment of loss factor cost allocation and recovery methodologies.
5
Board August 28, 2005 cover correspondence to Decision 2005-096.
4
directives and was expressly without prejudice to Milner’s right to pursue the
Complaint. Milner also noted that because the directives were issued in the context
of and assumed compliance with the directives through a tariff-based methodology,
the Board was arguably obliged to vary the directives to reflect the new rule-based
methodology mandated by the Regulation. Milner further stated:6
The fact the Board has relieved the AESO from certain outstanding tariff-based
directives in Decision 2005-096 does not foreclose the Board from issuing new
directives to the same substantive effect in the [Complaint]. Additionally,
whether the Board does or does not issue new directives to the same effect, the
Board may still choose to revoke the AESO’s proposed methodology and direct
that the AESO implement an “average MW in” approach and phase-in the new
approach. The Milner [Complaint] Application is not premised on the existence
of the Board’s directives. The Application is based, inter alia, on the need of the
AESO’s loss factor methodology and the implementation of that methodology to
comply with the EUA, the Transmission Development Policy, the Transmission
Regulation, and the principles of justness and reasonableness.
8. On November 2, 2005, TransAlta replied to Milner’s October 11, 2005 submissions,
again suggesting that the Complaint be dismissed in whole or in part.
9. On September 27, 2005, the AESO submitted its GTA refiling (Application No.
1420890).
10. On October 7, 2005 the AESO filed new evidence in the GTA and requested that the
Board modify its approval of the AESO’s DTS rate design to “mitigate[] the impact
of the $/month charge on small DTS services.”7
11. On October 31, 2005, in response to concerns raised by interveners, the AESO
advised the Board that it was withdrawing its proposal for modification of its DTS
rate design. Nonetheless, the AESO proposed that the Board rely on the evidence
filed by the AESO on October 7, 2005, in determining whether Rather, the AESO
proposed that the Board “rely on the information contained in it Supplementary Filing
as part of the Board’s determination of an appropriate DTS rate design for 2006.”8
12. On November 7, 2005 the Board issued a “Notice of Board Review” and stated, in
part:9
On November 7, 2005, the Board, pursuant to s. 46(1) of the AEUB Rules of
Practice, made a determination that in light of the new evidence received from
the AESO in the Refiling and Supplemental Filing, that it would review its
findings in Decision 2005-096. In reaching its decision to review Decision 2005096, the Board determined that had the information contained in the Refiling and
6
Milner October 11, 2005 submissions, at page 9.
AESO October 7, 2005 submissions, at page 1.
8
AESO October 31, 2005 submissions, at page 1.
9
Board November 7, 2005 Notice Letter, at page 2.
7
5
Supplementary Filing as it related to the impact of the customer POD charge on
low load customers of 5 MW or less been before the Board in the original
proceeding, the Board would have taken such information into consideration in
its decision. For this reason, the Board considered that a review of its own
decision was warranted to consider this information.
13. On November 18, 2005, the AESO issued its final loss factor calculations for 2006.
For numerous AESO customers, the final loss factors to be applied for 2006 vary
substantially from those calculated by the AESO in March 2005.
14. Forty-eight generators now have final loss factors higher than those predicted in
March of 2005. On average these generators have seen their loss factors revised
upward by 2.0% with one generator experiencing a 3.77% revision in its loss factor.
Sixteen generators that were forecast to receive a credit in March were instead
assessed a charge when the final loss factors were released.10
15. In thirty-three instances the final loss factors assigned to generators were lower than
predicted in March. For these generators, the average change in the loss factors from
that predicted in March was 2.5% with one generator experiencing a 6.37% revision
in its loss factor. Ten generators that the AESO had assessed a charge in March were
given a credit in the final loss factors.11
SUBMISSIONS IN SUPPORT OF THE APPLICATION
16. The Board’s refusal to consider Milner’s submissions in mid-August 2005 on the
basis it was too late at that time to receive new evidence, and acceptance and
consideration of new evidence filed by the AESO up to seven weeks later, is at best
arbitrary, and amounts to an error of law.
17. As the Board refused to even consider Milner’s submissions, the Board cannot say
that the information provided by Milner would not have altered the Board’s
determinations in Decision 2005-096.
18. The AESO’s final loss factor calculations vary substantially from the AESO’s
calculations issued eight months earlier. The significant variation evidences either
that the AESO does not have the means to properly calculate loss factors under its
new loss factor methodology or that the methodology or the AESO’s proposed
implementation of the methodology allows for such year to year variability in loss
factors that the AESO’s methodology will fail entirely to send effective locational
signals to generators and will thus fail to meet the objectives of the Policy and the
Regulation.12
10
The AESO’s final loss factors can be accessed that the following link:
http://www.aeso.ca/files/2006_loss-factors_20051118_Final.pdf
11
See footnote 10 above.
12
The Policy states in part (page 6 of 19):
6
19. It is submitted that Milner’s August 17, 2005 submissions were improperly excluded
from the Board’s consideration. Moreover, it is submitted that the significant
variation now evident in the AESO’s loss factor calculations, and which appear to
flow as a natural consequence of the AESO’s proposed methodology or proposed
implementation of the methodology, warrant further study of the merits of the
methodology, the implementation of the methodology and the “average MW in”
methodology.
20. Milner accordingly requests that the Board review its determination not to consider
Milner’s August 17, 2005 submissions and further that the Board review its
determination to relieve the AESO of the Board’s directives in Decisions 2000-1,
2000-27 and 2002-104, and the AESO’s undertakings, approved in Decision 2002064.
21. Milner further requests that Decision 2005-096 be varied and that the AESO be
directed to comply with all outstanding Board directives and its undertakings to
stakeholders concerning the study, selection and implementation of the AESO’s loss
factor methodology in accordance with subsection 8(1)(d) of the Regulation and
Board Decisions 2000-1, 2000-27, 2002-064 and 2002-104.
22. Milner further requests, given the importance of the principle of rate stability, that the
AESO’s existing tariff-based loss factor methodology be continued until the Board
approves an acceptable replacement methodology consistent with the Policy and the
Regulation.
23. Milner accordingly requests the Board direct that the AESO’s existing tariff-based
loss factor methodology and raw loss factors be extended beyond December 31, 2005
to June 30, 2006, or to such other date as the Board may direct, to permit the AESO
to comply with all outstanding Board directives and the AESO’s undertakings to
stakeholders as requested herein.
24. Milner finally requests the Board revise Decision 2005-096 to permit the amendment
of the AESO’s applied for Rate Schedules to allow for the continuation of the
recovery of losses in accordance with the AESO’s existing tariff-based loss factor
The primary purpose of allocating losses to generators is to act as an effective locational incentive.
Therefore, the loss factor methodology should be a long term signal and relatively stable, to allow
it to be factored into investment decisions. In order of priority, the loss methodology should:
a. Provide a locational incentive for generators
b. Allow the ISO to pursue transmission projects that will reduce overall transmission losses in
the long term to the benefit of all consumers, as consumers ultimately pay for losses through their
energy price.
c. Where possible, provide a signal for generation dispatch, so as to minimize transmission
losses on real time basis.
Alberta Energy considers that the current loss methodology used by the ISO must be reviewed and
made more consistent with average system losses as opposed to marginal locational losses.
7
methodology and with no changes to the existing raw loss factors until such time as
that methodology is replaced by a new Board approved methodology.
ALL OF WHICH IS RESPECTFULLY SUBMITTED THIS 24TH DAY OF
NOVEMBER 2005.
<Filed electronically>
____________________
MONTE S. FORSTER
Counsel for Milner Power Inc.
8