B R I T IS H C O LU M B I A U T IL I T IE S C O M M I S S I ON O R D E R N U M B ER G-134-97 SIXTH FLOOR, 900 HOWE STREET, BOX 250 a TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 BC TOLL FREE: 1-800-663-1385 CANADA FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and An Application by Kanelk Transmission Company Limited for Approval of its Revenue Requirements for 1998 to 2000 BEFORE: K.L. Hall, Commissioner ) P.G. Bradley, Commissioner ) December 18, 1997 O R D E R WHEREAS: A. On September 10, 1997, Kanelk Transmission Company Limited ("Kanelk") applied to the Commission for approval to set the Kanelk charges for Wholesale Transmission Services and System Support Services provided by, or through, Kanelk to British Columbia Hydro and Power Authority ("B.C.ÊHydro") for the years 1998, 1999 and 2000; and B. On November 18, 1997, Kanelk advised the Commission that it had been unable to reach agreement with B.C. Hydro on its 1998-2000 Revenue Requirements and requested that the Commission set the matter down for a written public hearing; and C. The Commission, by Order No. G-118-97, set the Kanelk 1998-2000 Revenue Requirements application down for a written public hearing and issued a Regulatory Timetable; and D. On December 8, 1997, Kanelk advised the Commission that it had reached a Negotiated Settlement with B.C.ÊHydro and Fording Coal Limited, and provided written confirmation of their support; and E. The Commission has reviewed the proposed Settlement Agreement and considers its approval to be in the public interest. NOW THEREFORE the Commission orders as follows: 1. The Commission approves for Kanelk Transmission Company Limited the proposed Settlement Agreement attached as Appendix I to this Order. 2. Kanelk is to comply with all the terms and conditions of the Settlement Agreement. 3. Kanelk is to file its Electric Tariff Rate Schedules for Commission approval in accordance with the terms of the Settlement Agreement. DATED at the City of Vancouver, in the Province of British Columbia, this ÊÊÊÊÊ9thÊÊÊÊday of January, 1998. BY ORDER Original signed by: Kenneth L. Hall Commissioner Order/Kanelk-Stlmt Agmt
APPENDIX I To Commission Order No. G-134-97 Page 1 of 11 KANELK TRANSMISSION COMPANY LIMITED Box 1900, 110- 12th Avenue S.W., Calgary, AB T2P 2M1 W.K. Taylor Vice President Tel: (403) 267-7406 Fax: (403) 267-2575 December 8, 1997 Mr. Robert Pellatt British Columbia Utilities Commission 6th Floor 900 Howe Street Vancouver, B.C. V6Z 2N3 Dear Mr. Pellatt: Re: Kanelk Transmission Company Limited 1998-2000 Rate Appl ication Kanelk is pleased to advise the Commission that a comprehensive settlement (the "Negotiated Settlement") on Kanelk's 1998, 1999 and 2000 revenue requirements has been negotiated between Kanelk, B.C. Hydro and Fording Coal (collectively "the Parties"). Details of the negotiated revenue requirement are set out in the attached schedules. Key differences from Kanelk's filing dated September 10, 1997 are as follows: · the forecast of capital expenditures has been reduced to $1,196,000, $560,000 and $474,500 for 1998, l 999 and 2000 respectively; the reduction in capital expenditures is principally due to modifications to the maintenance plan and to the elimination of the costs of the "Thermal Survey" and the "Elkview Coal Mine Move" from the forecast · the forecast of transmission line maintenance expense has been changed to $90,000 in 1998, escalating at 2% per year thereafter · the forecast of property taxes has been held constant at the level of actual 1997 property taxes · application costs have been reduced from $186,000 to $30,000, amortized evenly over the three year period 1998-2000
APPENDIX I To Commission Order No. G-134-97 Page 2 of 11 -2 The terms of the Negotiated Settlement are as follows: 1. Subject to Clauses 3 to 7 below, the annual charge to B.C. Hydro (payable in equal monthly installments) for the costs of the services and facilities directly related to Kanelk shall be as follows: 1998 $795,800 1999 $921,900 2000 $977,800 2. Kanelk will flow through to B.C. Hydro, on a dollar-for-dollar basis, charges (if any) incurred by Kanelk from the Alberta Transmission Administrator (including any retroactive adjustments now expected from the Alberta Transmission Administrator) for the provision of any system support services requested by B.C. Hydro pursuant to, and in accordance with, the terms and conditions approved by the Commission for wholesale transmission services for Kanelk ("Kanelk's Terms and Conditions"), as they may be amended from time to time. 3. Subject to the agreement of the Parties, such agreement not to be unreasonably withheld, should any additional capital expenditures be required to meet B.C. Hydro's safety or reliability standards (including, but not limited to, significant capital expenditures required as a result of major storm damage, and excluding minor capital expenditures arising from typical storm conditions), the additional capital expenditures will be added to Kanelk's rate base and Kanelk's revenue requirement as set out in Clause 1 will be adjusted accordingly. 4. In the event that Kanelk determines that a relocation of its facilities crossing the Elkview Coal Mine is necessary, Kanelk will consult with B.C. Hydro regarding the available options. If B.C. Hydro and Kanelk agree that such a relocation is necessary, and agree to the costs of that relocation, such agreement not to be unreasonably withheld, the costs incurred by Kanelk in relocating its facilities will be added to Kanelk's rate base and Kanelk's revenue requirement as set out in Clause 1 will be adjusted accordingly. 5. Any difference between the forecast of property taxes of $192,500 and B.C. Hydro's portion of actual property taxes paid by Kanelk (B.C. Hydro's portion being 90% of the total property taxes paid by Kanelk) will be added to or deducted from the invoice to BC. Hydro in the month following receipt by Kanelk of the invoices for property taxes. 6. Any difference between the forecast cost of $150,000 for the legal survey and land registration and the actual cost thereof will be added to or deducted from the forecast capital expenditures for 1998 and the revenue requirements as set out in Clause 1 above will be adjusted according for the years 1999 and 2000. 7. The rate of return, and consequently the revenue requirement set out in Clause 1, will be adjusted annually in accordance with the Commission's Automatic Adjustment Mechanism using a benchmark ROE of 12.75 %. 8. All other issues related to Kanelk's revenue requirement are agreed to by the Parties and are reflected in the attached schedules.
APPENDIX I To Commission Order No. G-134-97 Page 3 of 11 - 3 -9. The Negotiated Settlement is without prejudice to the rights of any of the Parties to apply to the Commission, following the decision on Kanelk's Terms and Conditions, with respect to the appropriate return on equity and/or appropriate depreciation rates in light of the Commission's decision on the treatment of unrecovered investment. 10. The Negotiated Settlement is contingent on the Commission's acceptance of the entire agreement and if the Commission rejects any part of this settlement, all Parties are released from the terms of the settlement. In conclusion, the Parties to this Negotiated Settlement believe that the comprehensive settlement set out herein balances the interests and views of all of the Parties and that the Negotiated Settlement is fair, reasonable and in the overall public interest. The Parties respectfully request that the Commission approve this Negotiated Settlement as the basis for setting Kanelk's revenue requirement and charges to Kanelk's customers for the years 1998, 1999 and 2000. Yours truly, W.K. Taylor Vice President Accepted and agreed to: B.C. Hydro: Fording Coal: Signature: Name (print): Title: Date:
APPENDIX I To Commission Order No. G-134-97 Page 4 of 11 - 3 -9. The Negotiated Settlement is without prejudice to the rights of any of the Parties to apply to the Commission, following the decision on Kanelk's Terms and Conditions, with respect to the appropriate return on equity and/or appropriate depreciation rates in light of the Commission's decision on the treatment of unrecovered investment. 10. The Negotiated Settlement is contingent on the Commission's acceptance of the entire agreement and if the Commission rejects any part of this settlement, all Parties are released from the terms of the settlement. In conclusion, the Parties to this Negotiated Settlement believe that the comprehensive settlement set out herein balances the interests and views of all of the Parties and that the Negotiated Settlement is fair, reasonable and in the overall public interest. The Parties respectfully request that the Commission approve this Negotiated Settlement as the basis for setting Kanelk's revenue requirement and charges to Kanelk's customers for the years 1998, 1999 and 2000. Yours truly, W.K. Taylor Vice President Accepted and agreed to: B.C. Hydro: Fording Coal: Signature: Name (print): ZORA LAZIC Title: ASSOCIATE GENERAL COUNSEL - REGULATORY Date: 9 DECEMBER 1997
APPENDIX I To Commission Order No. G-134-97 Page 5 of 11 - 3 -9. The Negotiated Settlement is without prejudice to the rights of any of the Parties to apply to the Commission, following the decision on Kanelk's Terms and Conditions, with respect to the appropriate return on equity and/or appropriate depreciation rates in light of the Commission's decision on the treatment of unrecovered investment. 10. The Negotiated Settlement is contingent on the Commission's acceptance of the entire agreement and if the Commission rejects any part of this settlement, all Parties are released from the terms of the settlement. In conclusion, the Parties to this Negotiated Settlement believe that the comprehensive settlement set out herein balances the interests and views of all of the Parties and that the Negotiated Settlement is fair, reasonable and in the overall public interest. The Parties respectfully request that the Commission approve this Negotiated Settlement as the basis for setting Kanelk's revenue requirement and charges to Kanelk's customers for the years 1998, 1999 and 2000. Yours truly, W.K. Taylor Vice President Accepted and agreed to: B.C. Hydro: Fording Coal: Signature: Name (print): J.D. NEWLANDS Title: Agent * Date: Dec. 12/97 Approved by Don Shylock Vice Pres. Development by Phone Dec9/97
APPENDIX I To Commission Order No. G-134-97 Page 6 of 11 Kanelk Transmission Company Limited Appendix C Statement of Earnings - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) Current Line Recorded Estimate Forecast _ No. 1996 1997 1998 1999 2000 1 Facilities Charge at Existing Rates (a) 602 2 739.8 735.6 735.6 735.6 2 Network Services Revenue 789.4 789.4 789.4 789.4 789.4 3 Interest Earned 0.3 0.0 0.0 0.0 0.0 4 Requested Increase in Facilities Charge 0.0 0.0 60.2 186.3 242.2 5 Revenue Requirement 1,391.8 1,529.1 1,585.1 1,711.2 1,767.1 6 Operating Deductions 7 Network Services Charges 789.4 789.4 789.4 789.4 789.4 8 Operating Expenses 121.6 151.2 177.9 181.4 185.0 9 Property Taxes 179.5 192.5 192.5 192.5 192.5 10 Taxes on Income 4.8 1.2 50.9 75.8 88.1 11 Depreciation 27.2 52.9 67.9 97.8 111.8 12 B.C.U.C. Application Amortization 142.7 142.7 10.0 10.0 10.0 13 Total Operaung Deductions 1,265.1 1,329.8 1,288.5 1,346.8 1 ,376.8 14 Required Return on Rate Base 126.7 199.3 296.6 364.4 390.3 ======= ======== ======= ======= ======= Notes: (a) Facilities Charge at Existing Rates: 1997 BCUC Decision: 735.6 777L Service Restoration Project (See 2.3) of $102K Prorated Surcharge @ 16.5% for Oct - Dec, 1997 4.2 739.8 ===== Revised: 12/2/97 Page 1
APPENDIX I To Commission Order No. G-134-97 Page 7 of 11 Kanelk Transmission Company Limited Appendix C Schedule of Rate Base - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) Current Line Recorded Estimate Forecast No. 1996 1997 1998 1 999 2000 1 Property - December 31 (a) 2,114.6 2,717.6 3,913.6 4,473.6 4,948.1 2 Less:Accumulated Depreciation - December 31 (b) 105.0 157.9 225.8 323.6 435.5 3 Depreciated Property - December 31 2,009.6 2,559.7 3,687.8 4,150.0 4,512.6 4 Add: Prior Year Depreciated Property 1,019.9 2 ,009.6 2,559.7 3,687.8 4 ,150.0 5 Subtotal 3,029.5 4 ,569.3 6,247.5 7,837.8 8 ,662.6 6 Mid - Year 1,514.8 2,284.7 3,123.8 3,918.9 4,331.3 7 Necessary Working Capital (Mid-year) 8 Unamortized BCUC application Cost 71.4 71.4 10.0 15.0 5.0 9 Other 19.0 23.6 29.7 35.6 39.4 10 Subtotal 90.4 95.0 39.7 50.6 44.4 11 Rate Base-Mid Year 1,605.1 2,379.6 3,163.5 3,969.5 4,375.7 Notes: (a) Gross Property Continuity Opening Balance 1,086.6 2,114.6 2,717.6 3,913.6 4,473.6 Plus: Additions (1997 adjusted per Sec 2.3) 1,016.8 603.0 1,196.0 560.0 474.5 Less: Retirements (correction of l995 retirement) (11.1 ) 0.0 0.0 0.0 0.0 Closing Balance 2,114.6 2,717.6 3,913.6 4 ,473.6 4,948.1 (b) Accumulated Depreciation Continuity Opening Balance 66.7 105.0 157.9 225.8 323.6 Plus: Depreciation Provision 27.2 52.9 67.9 97.8 111.8 Less: Writeoffs (11.1 ) 0.0 0.0 0.0 0.0 Closing Balance 105.0 157.9 225.8 323.6 435.5 Revised: 12/2/97 Page 2
APPENDIX I To Commission Order No. G-134-97 Page 8 of 11 Kanelk Transmission Company Limited Appendix C Schedule of Return - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) 100% Mid-Year Mid-Year Mid-Year Mid-Year Line Capitalization Capital Rate Base Cost Rates Return No. ($) R atios ($) (%) ($) 1 1996 - Recorde d 2 Debt 1,629.3 65.222 1,046.9 6.844 71.7 3 Common Shareholders' Equity 868.8 34.778 558.2 9.864 55.1 4 Total 2,498.1 100.000 1,605.1 7.894 1 26.7 5 1997 Current Estimate 6 Debt 65.000 1,546.8 9.542 147.6 7 Common Shareholders' Equity 35.000 832.9 6.204 51.7 8 Total 100.000 2,379.6 8.374 1 99.3 9 1998 - Forecas t 10 Debt 65.000 2,056.2 8.500 174.8 11 Common Shareholders' Equity 35.000 1,107.2 11.000 121.8 12 Total 100.000 3,163.5 9.376 296.6 13 1999 - Forecast 14 Debt 65.000 2,580.2 8.200 211.6 15 Common Shareholders' Equity 35.000 1,389.3 11.000 1 52.8 16 Total 1 00.000 3,969.5 9.180 364.4 17 2000 Forecast 18 Debt 65.000 2,844.2 7.800 221.8 19 Common Shareholders' Equity 35.000 1,531.5 11.000 168.5 20 Total 100.000 4 ,375.7 8.920 390.3 Revised: 12/2/97 Page 3
APPENDIX I To Commission Order No. G-134-97 Page 9 of 11 Kanelk Transmission Company Limited Appendix C Schedule of Income Tax - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) Current Line R ecorded Estimate Forecast _ No. 1996 1 997 1998 1 999 2000 1 Revenues 1,391.8 1,529.1 1,585.1 1,711.2 1,767.1 2 Less: 3 Operating Expense 1,090.4 1,275.7 1,169.7 1,173.2 1,176.9 4 Depreciation Expense 27.2 52.9 67.9 97.8 111.8 5 Interest Expense 71.7 147.6 174.8 211.6 221.8 6 Net Income Before Taxes 202.5 52.9 172.7 228.6 256.6 7 Less :Timing Differences 47.3 50.1 58.6 58.7 59.2 8 Taxable Income 155.3 2.8 114.1 169.8 197.4 9 Income Tax 10 Combined Tax @44.62% 5.3 1.2 50.9 75.8 88.1 11 Tax Adjustment (0.5 ) 0.0 0.0 0.0 0.0 12 TotalTax Provision 4.8 1.2 50.9 75.8 88.1 Revised: 12/2/97 Page 4
APPENDIX I To Commission Order No. G-134-97 Page 10 of 11 Kanelk Transmission Company Limited Appendix C Schedule of Operating Expense - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) Current Line Recorded Estimate Forecast _ No. 1996 1997 1998 1999 2000 1 Labour Charges/Mgmt Fees 40.4 65.7 67.0 68.4 69.7 2 Auditor's fees 7.2 8.1 8.3 8.4 8.6 3 Transmission line maintenance 67.1 65.1 90.0 91.8 93.6 4 Miscellaneous Expenses 2.0 3.3 3.4 3.5 3.5 5 Legal Fees 4.9 9.0 9.2 9.4 9.6 6 Total 121.6 151.2 177.9 181.4 185.0 Revised: 12/2/97 Page 5
APPENDIX I To Commission Order No. G-134-97 Page 11 of 11 Kanelk Transmission Company Limited Appendix C Summary of Working Capital - (100% Pocaterra to Natal + 50% of Natal to Coleman) ($000's) Current Line Recorded E stimate Forecast _ No. 1 996 1997 1998 1999 2000 1 Current Year Income Tax 4.8 1.2 50.9 75.8 88.1 2 6.90% 6.90% 6.90% 6.90% 6.90% 3 0.3 0.1 3.5 5.2 6.1 4 Operating Expense 1,090.4 1,275.7 1,169.7 1,173.2 1,176.9 5 less: Network Services Charge 789.4 789.4 789.4 789.4 789.4 6 Total 301.1 486.4 380.3 383.9 387.5 7 5.10% 5.10% 5.10% 5.10% 5.10% 8 15.4 24.8 19.4 19.6 19.8 9 Depreciation Expense 27.2 52.9 67.9 97.8 111.8 10 12.60% 12.60% 12.60% 12.60% 12.60% 11 3.4 6.7 8.6 12.3 14.1 12 Return on Common Equity . 55.1 51.7 121.8 152.8 168.5 13 12.60% 12.60% 12.60% 12.60% 12.60% 14 6.9 6.5 15.3 19.3 21.2 15 Interest Expense 71.7 147.6 174.8 211.6 221.8 16 -9.80% -9.80% -9.80% -9.80% -9.80% 17 (7.0) (14.5) (17.1) (20.7) (21.7) 18 TOTAL WORKING CAPITAL 19.0 23.6 29.7 35.6 39.4 Revised: 12/2197 Page 6
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.