Slide 1: ETS Stakeholder Session: Export Transmission Tariff Cost Allocation Model
ETS Stakeholder Session Presentation of the Export Transmission Tariff Cost Allocation Model March 24, 2014
Slide 2: Agenda
Agenda 9:10 p.m. Registration 9:30 a.m. Welcome Allan Cowan, Director Major Applications, Hydro One Networks 9:35 a.m. Introductions and Agenda Bob Betts, Facilitator, OPTIMUS|SBR 9:45 a.m. Presentation of the Export Transmission Mike Roger, Elenchus Tariff Cost Allocation Model 10:45 a.m. Questions
Slide 3: Facilitator's Remarks
Facilitator’s Remarks Introductions Facilitator, Bob Betts & OPTIMUS | SBR support team Meeting Facilities Safety Review Note taking process Participant Introductions 3
Slide 4: Meeting Process
Meeting Process Mobile phones “Off” or “Silenced” Avoid side discussions while others speaking All questions are good ones All comments are appreciated Materials and notes will be posted on Hydro One’s Regulatory Website: www.HydroOne.com/RegulatoryAffairs 4
Slide 5: Export Transmission Tariff Cost Allocation Model Stakeholder Presentation
Export Transmission Tariff Cost Allocation Model Stakeholder Presentation March 24, 2014 Michael Roger
Slide 6: Agenda
Agenda • ETS Rate Background • Cost Allocation Methodology • Description of Data Used • Assumptions and Methodology • Results • Scenarios • Recommended Methodology • Next Steps 3/21/2014 6
Slide 7: ETS Rate Background
ETS Rate Background RP-1999-0044 $1/MWh – reasonable compromise – interim EB-2006-0501 maintained rate – Stakeholder settlement – IESO responsible entity to undertake study – IESO study filed August 28, 2009 3/21/2014 7
Slide 8: ETS Rate Background (cont.)
ETS Rate Background (cont.) EB-2010-0002 rate set as $2/MWh – Reviewed IESO study – Additional study required EB-2012-0031 maintained rate – Reviewed IESO study – Hydro One to conduct cost allocation study to establish ETS rate 3/21/2014 8
Slide 9: Cost Allocation Methodology
Cost Allocation Methodology Apportionment of assets and expenses Historical or test year data: – Financial – Sales Three Steps: – Functionalization – Classification – Allocation 3/21/2014 9
Slide 10: Description of Data Used
Description of Data Used Load Data (IESO) – Domestic – Export Rate Base (Hydro One 2013) Revenue Requirement (Hydro One 2013) 3/21/2014 10
Slide 11: Assumptions and Methodology
Assumptions and Methodology Simple CA model based on cost causality Two customer groups – Domestic – Export Assets identified by Hydro One as: – Dedicated to Domestic customers – Dedicated to Interconnected customers – Shared 3/21/2014 11
Slide 12: Assumptions and Methodology (cont.)
Assumptions and Methodology (cont.) Shared Asset Functions Considered: – Network – Network Dual Function – Generation Line Connection – Generation Transformation Connection – Common – Other Miscellaneous Revenue 3/21/2014 12
Slide 13: Assumptions and Methodology (cont.)
Assumptions and Methodology (cont.) Allocation of Net Shared Assets between Domestic and Exports 12 CP and 1 CP are each run to determine sensitivity to allocator selected Domestic Export 12 CP Demand Allocator 89.94% 10.06% 1 CP Demand Allocator 91.87% 8.13% 3/21/2014 13
Slide 14: Assumptions and Methodology (cont.)
Assumptions and Methodology (cont.) Allocation of Net Shared Expenses OM&A is allocated on the basis of Net Assets Domestic Export Net Assets 12 CP 93.28% 6.72% Net Assets 1 CP 94.50% 5.50% 3/21/2014 14
Slide 15: Assumptions and Methodology (cont.)
Assumptions and Methodology (cont.) Allocation of Net Shared Expenses Amortization and Financing expenses are allocated on the basis of Net Assets for the fully loaded scenarios between domestic and export, and only to domestic in the interruptible scenarios. 3/21/2014 15
Slide 16: Results
Results Base Case – Exports as interruptible loads, allocated only OM&A costs, and fixed assets dedicated to Interconnected as identified by Hydro One ($5.04M) with no Miscellaneous Revenue credit – Dedicated Assets $5.04 M – Shared Assets $15.36 M – Total Rev. Req. $20.4 M – Using 2013 Forecast Exp
Slide 17: Results (cont.)
Results (cont.) Escalate Allocated HONI Revenue Requirement for Exports to include other transmitters (2014 UTR, 3.4%) – HONI $882.9 M – Total Network $912.8 M ETS Increased by 3.4% $1.36/MWh 3/21/2014 17
Slide 18: Scenarios
Scenarios Description (Base case $1.32/MWh) ETS Rate $/MWh Scenario 1 Same as Base case, but using 12 CP 1.37 average of 3 years Scenario 2 Same as Base case, but using 1 CP 1.14 (2012) Scenario 3 Same as Base case, but using 1 CP 1.22 average of 3 years Scenario 4 Same as Base case, but allocating
Slide 19: Scenarios (cont.)
Scenarios (cont.) Description (Base case $1.32/MWh) ETS Rate $/MWh Scenario 6 Allocating to Exports same costs as 4.17 Networks, $0.887M Miscellaneous revenue credit, using 12 CP 2012 3/21/2014 19
Slide 20: Recommended Methodology
Recommended Methodology Elenchus Recommendation for cost-based ETS rate methodology: – Export as interruptible load – 2013 actual domestic and export hourly data – 12 CP to allocate shared OM&A – Only Export dedicated assets – No Miscellaneous revenues – 2015 and 2016 HONI Proposed Assets and Revenu
Slide 21: Next Steps
Next Steps • 2013 actual sales data replacing 2012 data for determining CP allocator values • Re-run model with 2015, 2016 data when available • Prepare evidence 3/21/2014 21