AltaLink, L.P.

AltaLink, L.P.

June 02, 2015 08:30 ET

AltaLink Proposes to Save Alberta Customers More Than $550 Million Over Three Years

AltaLink files amendment to its 2015-2016 General Tariff Application with the Alberta Utilities Commission

CALGARY, ALBERTA--(Marketwired - June 2, 2015) -

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On June 1, AltaLink, Alberta's largest electric transmission company, submitted a proposal to the Alberta Utilities Commission (AUC), to save Albertans more than $550 million between 2015 and 2017. AltaLink is proposing to change the existing regulated capitalization and tax treatment of its business to significantly reduce costs to Albertans without impacting the reliability of the transmission system.

This submission amends AltaLink's previously filed 2015-2016 General Tariff Application (GTA), which outlines AltaLink's proposed costs over the two-year period. The submission also commits to further savings for customers in 2017.

"Since we filed our GTA in November 2014, Alberta's economy has clearly weakened," said Scott Thon, president and CEO of AltaLink. "We recognize every Albertan is either directly or indirectly feeling the impact of low oil prices. At the same time, we are sensitive to the impact of price increases our customers experience associated with the much-needed expansion of Alberta's electricity grid."

"As a result, I challenged the AltaLink team to go back to the drawing board to deliver more cost reductions. And we did. By changing the way we finance our business, we found a way to pass more than $550 million in savings to customers."

With the full support of its new owner, Berkshire Hathaway Energy, AltaLink reviewed its previous application looking for opportunities to reduce cost. The result is a solution that will reduce AltaLink's revenue requirement by more than 20 per cent in 2015, 25 per cent in 2016 and includes commitments for a further $111 million in 2017. The total savings to Albertans will be:

  • $178 million in 2015
  • $266 million in 2016
  • $111 million in 2017

All Alberta customers will benefit from AltaLink's proposal. Under this proposal, residential and farm customers will save more than $115 million compared to AltaLink's original application. Individual large industrial customers - customers requiring more than 60 MW of supply - will save $500,000 in 2015 and $1.3 million in 2016.

The amendment proposes the following measures to provide rate relief over the 2015-2016 period during which time oil prices are expected to be at their most depressed:

  • Refund of amounts collected from 2011 to 2014 for Construction Work In Progress (CWIP)-in- Rate Base over 2015 and 2016 relating to the system portion of projects, resulting in a reduction of 2015 and 2016 revenue requirement by $109M and $100M, respectively;
  • Discontinuation as of January 1, 2016 and beyond of the Future Income Tax (FIT) method of collecting federal and provincial income taxes and converting to the flow-through method for the collection of income taxes. Because AltaLink is forecasting that it will not incur taxes in 2015 and for the foreseeable future, consistent with the Commission's past decisions AltaLink is requesting an increase in its equity ratio of 2% in 2016. The discontinuation of both Federal and Provincial FIT with a concurrent increase in equity thickness reduces 2016 revenue requirement by $61M and results in a commitment by AltaLink to a further reduction of 2017 revenue requirement of approximately $43M;
  • Refund during 2016 and 2017 the accumulated FIT liability, associated with the proposal to move to the flow-through method for collecting income taxes. This refund further reduces AltaLink's 2016 revenue requirement by $83M and, if accepted, results in a commitment by AltaLink to an additional reduction of $75M in the 2017 revenue requirement.

AltaLink is asking the AUC for additional support to help ensure customers continue to benefit from AltaLink's ability to access low-cost debt. AltaLink is proposing a temporary increase in its equity ratio which will allow AltaLink to maintain an appropriate funds-from-operations to debt ratio to avoid a downgrade in its credit ratings. A downgrade in AltaLink's existing credit rating could cost Albertans millions of dollars in additional financing costs.

"The unprecedented change in Alberta's economy requires innovative solutions to create savings for Albertans," said Thon. "Our commitment to Albertans is clear. Through these efforts, more than half a billion dollars will remain in the hands of customers across Alberta."

"We're looking forward to working with our customers throughout the regulatory process to deliver these savings during difficult times."

As a fully regulated company, AltaLink's costs are approved by the AUC through a public process. AltaLink's application is currently under review by the AUC.

Headquartered in Calgary, with offices in Edmonton, Red Deer and Lethbridge, AltaLink is Alberta's largest electricity transmission provider. We are committed to meeting the province's demand for electricity, providing innovative solutions, and partnering with our stakeholders and communities in doing so. A wholly-owned subsidiary of Berkshire Hathaway Energy, AltaLink is part of a global group of companies delivering electricity and utility services to customers worldwide.

Backgrounder

Difference between filing and amendment

The table below outlines the difference between the filing in November 2014 and the amendment filed on June 1, 2015.

($ Millions) 2015 2016 2017
Revenue Requirement before Tariff Relief1 881.0 1,004.7 -
Discontinuation of the collection of CWIP-in-Rate Base (88.9 ) (32.7 ) -
Refund of previously collected CWIP-in-Rate Base (109.1 ) (99.6 ) -
Discontinue FIT and add 2% equity ratio for being currently non-taxable (2016+) - (61.3 ) (43.0 )
Refund of FIT liability - (82.8 ) (75.0 )
Total Tariff Relief (197.9 ) (276.4 ) (118.0 )
Cumulative Total Tariff Relief (197.9 ) (474.3 ) (592.3 )
Revenue Requirement/Transmission Tariff after Tariff Relief 683.1 728.4 -
Temporary increase in equity ratio to mitigate credit rating downgrade risk 19.6 10.5 7.0
Transmission Tariff net of Mitigation2 702.7 738.9 -
Net Tariff Relief (178.3 ) (265.8 ) (111.0 )
Cumulative Net Tariff Relief (178.3 ) (444.1 ) (555.1 )
1. The revenue requirement represents AltaLink's updated revenue requirement in response to AML-CCA-2015MAY01-084 as amended June 1, 2015, after adding back the proposal to discontinue CWIP-in-Rate Base.
2. Transmission tariff for 2015 excludes the settlement of the SIR and DB reserve accounts for $2.4M, and the refund of the 2013-2014 GTA Revenue Requirement of $24.6M due to the 2013 GCOC Decision ($702.7M + 2.4M - 24.6M = $680.5M per Schedule 3-1).

Backgrounder

Customer Savings

Based on 2013 usage (Alberta Energy: Electricity Statistics) the pro-rata share of AltaLink's proposed $555M refund would be allocated on a province-wide basis as follows:

$ Millions 2015 2016 2017
Residential $ 31.9 $ 47.5 $ 19.9
Farm $ 6.0 $ 9.0 $ 3.8
Commercial $ 48.7 $ 72.5 $ 30.3
Industrial $ 91.7 $ 136.7 $ 57.1
Total $ 178.3 $ 265.8 $ 111.0

The annual cost savings for industrial customers are material:

Annual Savings 2015 2016
Industrial customer (7.5 MW pipeline pump station) $ 70,000 $ 176,000
Industrial customer (30 MW oil sands facility) $ 300,000 $ 700,000
Industrial customer (60 MW refinery / pulp & paper) $ 500,000 $ 1,300,000

Transmission costs / MWh expected to drop approximately 5% in 2015 and 10% in 2016 under proposed AltaLink GTA amendment.

Cost / MWh 2015 2016
November 2014 filing $26.73/MWh $29.84/MWh
June 1, 2015 amendment $25.53/MWh $26.83/MWh

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