Docket UE20907 1
Order UE92-4IN THE MATTER of an application of Maritime Electric Company, Limited dated March 1, 1991.
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IN THE MATTER of a proposed Tariff for implementation on July 1, 1992.
BEFORE THE COMMISSION
on Thursday, the 18th day of June, 1992.
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
Reasons for Order
1. Introduction & Background
In March 1991, Maritime Electric Company, Limited ("Maritime Electric", or the "Company") filed an application for an order or orders of the former Public Utilities Commission approving a number of amendments to the Company's General Tariff. The application, if approved, would result in rate adjustments taking effect on July 1, 1991 and again on January 1, 1992. Following public hearings into the matter, the Public Utilities Commission-by Order E91-7- ordered the Company to file a revised Tariff for effect on August 1991. The revised Tariff was subsequently approved in Order E91-9. The following order was also issued:
26. The Company shall file with the Commission and interveners, by October 18, 1991, a Tariff for effect on January 1, 1992 which reflects the findings and conclusions contained in these reasons;
The Company subsequently applied for, and was granted-by Order E91-16- an extension for the filing of the Tariff to November 29, 1991.
On December 5, 1991, following the filing of the proposed Tariff, Maritime Electric notified the Commission that the proposed January 1, 1992 rate increase could be deferred until the end of the first quarter of 1992. On December 17, 1992, the Public Utilities Commission notified the parties to the original proceeding that the January 1, 1992 Tariff would not be implemented. On April 6, 1992, the Company filed a further Tariff proposal incorporating the second step of the phase in of uniform rates and proposing implementation on July 1, 1992.
The Commission invited comments on the Company's 1992 Tariff proposals from the interveners involved in the original Public Utilities Commission docket-the Town of Summerside ("Summerside" or the "Town") and the Minister of Energy and Forestry (the "Minister" or the "Department")-on whether the Company's Tariff filing complied with the findings contained in Order E91-7. Comments were received from both intervenors and forwarded to the Company for response. The Company's response was also distributed and further comments were received from Summerside.
2. Rate Adjustment Guidelines
Order E91-7 contains a number of directives or guidelines upon which the Company's Tariff proposals are to be made. The Town submits that Maritime Electric's application of certain of these guidelines is incorrect. In particular, the Town submits that the Company's interpretation of the 0.5 to 1.5 times rate adjustment criterion is incorrectly applied to rates requiring a decrease. In making this submission, the Town refers to the following clause of Order E91-7:
18. Rate Adjustments resulting from a detailed design study shall reflect an upper rate adjustment level of 1.5 times the average increase in basic rates proposed in any rate application and a lower level of 0.5 times the average increase in basic rates in any rate application.
The Town argues that:
The PUC Order clearly indicates the size of the movement which can take place, but does not establish the direction.
...
Maritime Electric's interpretation produces a bizarre result in that their study calls for a decrease in the Town rate; the principle of one to one benefit/cost ratio demands such a decrease; but the guideline as interpreted by Maritime Electric dictates an increase...1
Maritime Electric submits that the Company has:
... complied with both the clear words and the spirit of the Order.2
This issue arises, in part, from the derivation of the Summerside rate. The calculated rate for the Town of Summerside-based on the detailed rate design of Maritime Electric-is 2.11% lower than the existing rate. The final adjusted rate, however, reflects a 1.32% increase based on the lower level of 0.5 times the average increase in basic rates of 2.64%.
The Commission agrees with Maritime Electric that the Company has correctly interpreted and applied the 0.5 to 1.5 times adjustment mechanism required by Order E91-7. The Commission believes that implementation of this mechanism will continue to result in rates moving closer to actual costs while at the same time limiting rate shock to any customer class.
3. The Modified Baker Method
The following ordering clauses are contained in Order E91-7:
10. The Company shall implement the use of the Average and Excess Demand (AED) method in the determination of all rate proposals to the Commission.
12. The AED method shall be used as the basis for all rate changes that take effect on and after January 1, 1992 and until otherwise ordered.
20. The modified Baker method shall apply to all interruptible rate schedules that take effect on and after August 1, 1991 and until otherwise ordered.
The Town submits that the Company's use of the AED (Average and Excess Demand) factor, rather than the coincident peak demand, to allocate the Company's interruptible credit is contrary to the Modified Baker Method. The Company, on the other hand, submits that it was required by the Commission to use the AED method and that it properly applied the AED factor to the Modified Baker Method in the calculation of the credit.
While the Commission can understand the Company's position that the Order to implement the AED method could be interpreted as requiring a further modification to the Baker method, the Commission does not consider this interpretation to be correct. The AED method is, for the purposes of Order E91-7, a method of cost allocation and rate design which recognizes load diversity and can have the effect of distributing a portion of fixed costs in proportion to energy usage.
In the Commission's view, the interruptible credit is a separate and distinct issue for which the Company was ordered to adopt the Modified Baker Method. The method used by Mr. Baker and shown in the order calculates the credit to interruptible customers based on their coincident peak. Further modification was not ordered or intended. As a result,
1. The Company shall revise the calculation of the interruptible credit so that the total credit is allocated to each interruptible customer class based on the Coincident Class Peak Load of the interruptible customer class as a percentage of the total Coincident Class Peak Load of all interruptible customer classes;
2. The Company shall file with the Commission for review and final approval a revised Tariff reflecting the revised interruptible credit, by June 26, 1992.
4. The AED Method
The Minister submits that the Company uses an AED method which differs in certain respects from the methodology presented at the hearing in the 1991 Cost Allocation Study. The difference results from the development of allocation factors at the sales rather than the production level. The Minister submits that the difference should have no impact on the proposed rates because the rate of customers who would be affected are already limited by the 0.5 to 1.5 times criteria.
The Company agrees that the methodologies do differ and submits that the method used for calculating rates avoids the use of certain estimated data, the accuracy of which is not known. The Company also submits that it does attempt to compensate for the difference by a later calculation and that it cannot comment on the impact of the difference without considerable work.
The Commission believes that Maritime Electric should be consistent, to the extent possible, in the methods it uses for calculating rates and allocating costs except where justification for the differences is provided to and accepted by the Commission . In this case, in the absence of evidence showing that the change in methodology is inappropriate or will result in materially different rates, the Commission will not at this time require further rate modification. However, for the avoidance of doubt,
3. In future rate applications, the Company shall use consistent methodologies for cost allocation and rate design except where differences in methodology are otherwise approved by the Commission.
4. Except as provided herein, the Company shall revert to the use of the methodology employed in the 1991 Cost Allocation Study until such time as an alternative methodology is approved by the Commission.
An Order will therefore issue.
IN THE MATTER of an application of Maritime Electric Company, Limited dated March 1, 1991.
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IN THE MATTER of the proposed Tariff for implementation on 1 July 1992.
Order
UPON the filing by Maritime Electric Company, Limited (the "Company") of a proposed Tariff for implementation on July 1, 1992;
AND UPON reading and considering written submissions on the filing by the Company, the Town of Summerside and the Minister of Energy and Forestry on the question of whether the proposed Tariff complies with the findings contained in Order E91-7;
NOW THEREFORE, for the reasons given in the annexed Reasons for Order;
IT IS ORDERED THAT
1. The Company shall revise the calculation of the interruptible credit so that the total credit is allocated to each interruptible customer class based on the Coincident Class Peak Load of the interruptible customer class as a percentage of the total Coincident Class Peak Load of all interruptible customer classes;
2. The Company shall file with the Commission for review and final approval a revised Tariff reflecting the revised interruptible credit, by June 26, 1992;
3. In future rate applications, the Company shall use consistent methodologies for cost allocation and rate design except where differences in methodology are otherwise approved by the Commission; and
4. Except as provided herein, the Company shall revert to the use of the methodology employed in the 1991 Cost Allocation Study until such time as an alternative methodology is approved by the Commission.
DATED at Charlottetown, Prince Edward Island, this 18th day of June, 1992.
BY THE COMMISSION:
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
1 Letter dated December 30, 1991 from Benjamin B. Taylor to The Island Regulatory and Appeals Commission
2 Letter dated March 27, 1992 from J.A. Lea to The Island Regulatory and Appeals Commission
