ORDER NUMBER
G-305-23
IN THE MATTER OF
the Utilities Commission Act, RSBC 1996, Chapter 473
and
Pacific Northern Gas (N.E.) Ltd.
2023–2024 Revenue Requirements Application
for the Fort St. John/Dawson Creek and Tumbler Ridge Divisions
BEFORE:
C. M. Brewer, Panel Chair
T. A. Loski, Commissioner
on November 10, 2023
ORDER
WHEREAS:
A. On November 30, 2022, Pacific Northern Gas (N.E.) Ltd. (PNG(NE)) filed its 2023–2024 Revenue Requirements Application (RRA) with the British Columbia Utilities Commission (BCUC) for its Fort St. John/Dawson Creek (FSJ/DC) and Tumbler Ridge (TR) divisions pursuant to sections 58 to 61 of the Utilities Commission Act (UCA);
B. By Order G-373-22, the BCUC, among other things, approved PNG(NE)'s basic charges, delivery rates and Revenue Stabilization Adjustment Mechanism (RSAM) rate rider on an interim and refundable/recoverable basis, effective January 1, 2023. By the same order the BCUC established a regulatory timetable for the proceeding, subsequently amended by Orders G-83-23 and G-180-23, which included intervener registration, filing an amended application, two rounds of information requests (IRs) to PNG(NE), responses to IRs, status updates, written final arguments and reply argument;
C. British Columbia Old Age Pensioners’ Organization, Active Support Against Poverty, Council of Senior Citizens’ Organizations of BC, Disability Alliance BC, and Tenant Resource and Advisory Center, known collectively as BCOAPO et al. (BCOAPO) and Residential Consumer Intervener Association (RCIA) participated as interveners in the proceeding;
D. On February 28, 2023, PNG(NE) filed its amended application for approval of, among other things, 2023 and 2024 delivery rates on a permanent basis;
E. On July 21, 2023, PNG(NE) filed an evidentiary update to its RRA along with an updated application for approval of, among other things, revised 2023 and 2024 delivery rates on a permanent basis (Updated Application) and on September 20, 2023, PNG(NE) filed its IR No. 2 responses;
F. In its responses to IR No. 2 and as summarized in its final argument, PNG(NE) seeks an order granting approval of the 2024 rates as outlined in the Updated Application on an interim, refundable or recoverable basis and to provide PNG(NE) with sufficient time to implement the rate changes effective January 1, 2024, pending the final disposition of the Updated Application and the BCUC’s final decision on Stage 2 of the Generic Cost of Capital (GCOC) proceeding;
G. PNG(NE) seeks approval, on an interim and refundable/recoverable basis, to increase its basic charges and delivery rates to cover the forecast 2024 revenue deficiency for the FSJ/DC division for the following rate classes, among other rate classes:
1. Basic charges:
i. A 6.4 percent increase from $7.45/month to $7.93/month for Residential service;
ii. A 6.4 percent increase from $7.45/month to $7.93/month for Small Commercial service;
2. Delivery rates:
i. A 6.4 percent increase from $6.210/GJ to $6.605/Gigajoule (GJ) for FSJ Residential service;
ii. A 6.2 percent increase from $4.693/GJ to $4.985/GJ for FSJ Small Commercial service;
iii. A 6.6 percent increase from $6.012/GJ to $6.407/GJ for DC Residential service;
iv. A 7.0 percent increase from $4.156/GJ to $4.448/GJ for DC Small Commercial service; and
PNG(NE) is also seeking approval for an increase in the RSAM rate rider on an interim and refundable/recoverable basis for the FSJ/DC division applicable to Residential and Small Commercial customers from a credit rider of $0.206/GJ to a credit rider of $0.051/GJ;
H. PNG(NE) seeks approval, on an interim and refundable/recoverable basis, to increase its basic charges and delivery rates to cover the forecast 2024 revenue deficiency for the TR division for the following rate classes, among other rate classes:
1. Basic charges:
i. An 8.2 percent increase from $9.20/month to $9.95/month for Residential service;
ii. An 8.4 percent increase from $9.21/month to $9.98/month for Small Commercial service;
2. Delivery rates:
i. An 8.2 percent increase from $11.868/GJ to $12.841/GJ for Residential service;
ii. An 8.3 percent increase from $9.362/GJ to $10.142/GJ for Small Commercial service; and
PNG(NE) is also seeking approval for a decrease in the RSAM rate rider on an interim and refundable/recoverable basis for the TR division applicable to Residential and Small Commercial customers from a credit rider of $0.189/GJ to a credit rider of $0.217/GJ;
I. On October 24, 2023, RCIA filed its final argument and subsequently on October 26, 2023, BCOAPO filed its final argument. On November 6, 2023, PNG(NE) filed its reply argument; and
J. The BCUC has considered PNG(NE)’s request for 2024 interim rates and determines that approval of interim rates for 2024 is warranted.
NOW THEREFORE pursuant to sections 58 to 61 and 89 of the UCA and for the reasons set out in Appendix A to this order, the BCUC orders as follows:
1. The basic charges, delivery rates and the RSAM rate riders set forth in the Updated Application are approved on an interim basis, effective January 1, 2024. Any differences between the interim and permanent rates that are determined by the BCUC, following final disposition of the Updated Application and the BCUC’s final decision on Stage 2 of the GCOC proceeding, are subject to refund/recovery, with interest at the average prime rate of PNG(NE)’s principal bank for its most recent year.
2. PNG(NE) is directed to file with the BCUC, the rate schedules reflecting the interim approvals for endorsement by December 29, 2023.
3. PNG(NE) is directed to include a notice of the approved interim rates with the first bill following the effective date of January 1, 2024 for each customer.
DATED at the City of Vancouver, in the Province of British Columbia, this 10th day of November 2023.
BY ORDER
Original signed by:
C. M. Brewer
Commissioner
Attachment
Pacific Northern Gas (N.E.) Ltd.
2023–2024 Revenue Requirements Application
for the Fort St. John/Dawson Creek and Tumbler Ridge Divisions
REASONS FOR DECISION
1.0 Background
On November 30, 2022, Pacific Northern Gas (N.E.) Ltd. (PNG(NE)) filed its 2023–2024 Revenue Requirements Application (RRA) with the British Columbia Utilities Commission (BCUC) for its Fort St. John/Dawson Creek (FSJ/DC) and Tumbler Ridge (TR) divisions pursuant to sections 58 to 61, 89 and 90 of the Utilities Commission Act (UCA). On February 28, 2023, PNG(NE) filed its amended application to support its request for approval of rates on a permanent basis (Amended Application) and subsequently on July 21, 2023, PNG(NE) filed an evidentiary update to its RRA along with an updated application for approval of revised 2023 and 2024 rates on a permanent basis (Updated Application). These reasons for decision address PNG(NE)'s request for approval of interim rates effective January 1, 2024.
Considering the expected timing of a final decision on this proceeding, PNG(NE) seeks an order granting interim approval of the 2024 rates in the Updated Application and to provide PNG(NE) with sufficient time to implement the rate changes effective January 1, 2024.[1]
Two parties, British Columbia Old Age Pensioners’ Organization, Active Support Against Poverty, Council of Senior Citizens’ Organizations of BC, Disability Alliance BC, and Tenant Resource and Advisory Center, known collectively as BCOAPO et al. (BCOAPO) and Residential Consumer Intervener Association (RCIA) participated as interveners in the proceeding.
2.0 Advanced Approval of 2024 Interim Rates
PNG(NE) seeks approval, on an interim and refundable/recoverable basis, effective January 1, 2024, to increase its basic charges and delivery rates to cover the forecast 2024 revenue deficiency for the FSJ/DC and TR divisions for the following rate classes, among other rate classes:[2]
FSJ/DC Division:[3]
1. Basic charges:
i. A 6.4 percent increase from $7.45/month to $7.93/month for Residential service;
ii. A 6.4 percent increase from $7.45/month to $7.93/month for Small Commercial service;
2. Delivery rates:
i. A 6.4 percent increase from $6.210/GJ to $6.605/Gigajoule (GJ) for FSJ Residential service;
ii. A 6.2 percent increase from $4.693/GJ to $4.985/GJ for FSJ Small Commercial service;
iii. A 6.6 percent increase from $6.012/GJ to $6.407/GJ for DC Residential service;
iv. A 7.0 percent increase from $4.156/GJ to $4.448/GJ for DC Small Commercial service; and
PNG(NE) is also seeking approval for an increase in the Revenue Stabilization Adjustment Mechanism (RSAM) rate rider on an interim and refundable/recoverable basis for the FSJ/DC division applicable to Residential and Small Commercial customers from a credit rider of $0.206/GJ to a credit rider of $0.051/GJ.[4]
TR Division:[5]
1. Basic charges:
i. An 8.2 percent increase from $9.20/month to $9.95/month for Residential service;
ii. An 8.4 percent increase from $9.21/month to $9.98/month for Small Commercial service;
2. Delivery rates:
i. An 8.2 percent increase from $11.868/GJ to $12.841/GJ for Residential service;
ii. An 8.3 percent increase from $9.362/GJ to $10.142/GJ for Small Commercial service; and
PNG(NE) is also seeking approval for a decrease in the RSAM rate rider on an interim and refundable/recoverable basis for the TR division applicable to Residential and Small Commercial customers from a credit rider of $0.189/GJ to a credit rider of $0.217/GJ.[6]
PNG(NE)'s requested 2024 rates for FSJ/DC and TR, for which they are seeking interim approval, incorporate PNG(NE)'s proposed rate smoothing deferral mechanism to provide customers with rate stability by using the Rate Smoothing deferral account to smooth the impact of the combined net revenue deficiencies for 2023 and 2024 with full amortization in 2024.[7]
PNG(NE) observes that its capital structure will be reviewed as part of Stage 2 of the present BCUC Generic Cost of Capital (GCOC) proceeding. In the decision accompanying Order G-236-23 approving Stage 1 of the present GCOC proceeding, PNG(NE) notes that the BCUC has indicated that for utilities that currently use the Benchmark Utility to set their capital structure and equity return, rates effective January 1, 2024 are to be set on an interim, refundable or recoverable basis pending the BCUC’s final decision on Stage 2 of the GCOC proceeding.[8] The BCUC also indicated that it will determine the manner by which any variance between approved interim rates and permanent rates, including interest if any, will be refunded or recovered at the time the BCUC renders its final decision on Stage 2 of the GCOC proceeding.[9]
Positions of the Parties
RCIA did not comment on PNG(NE)’s request for interim approval of the 2024 rates.
BCOAPO expressed concerns regarding PNG(NE)’s request for interim approval of the 2024 rates as outlined in the Updated Application. The primary consideration is that “the applied-for rates are for an increase that exceeds the threshold for rate shock” of 10 percent on a cumulative basis. BCOAPO’s second consideration is based on an alternative rate mitigation option that can prevent residential customers from experiencing rate shock and would result in lower rate increases for the test years.[10] BCOAPO’s proposed rate mitigation option includes different deferral amounts and amortization to those proposed by PNG(NE) for the Rate Smoothing deferral account to achieve a 5 percent residential rate increase in each test year for FSJ/DC and TR. This proposal results in an ending balance in the Rate Smoothing deferral account to be recovered in further test years, which BCOAPO submits is reasonable considering the potential amalgamation opportunities between the Pacific Northern Gas Ltd. divisions and a long-term strategic rate mitigation approach.[11]
Ultimately, BCOAPO submits that an option for this Panel would be to approve the 5 percent rate increases achieved through BCOAPO’s rate mitigation proposal on an interim basis effective January 1, 2024 “as a balancing point in advance of the final determinations by the BCUC.”[12]
In addition to the alternative rate mitigation option outlined above, BCOAPO offers an option to delay approval of 2024 interim rates in the event the Panel determines it necessary to address the risk of not issuing its decision by December 31, 2023.[13]
In reply, PNG(NE) acknowledges BCOAPO’s concern for the magnitude of the proposed rate increases for 2023 and 2024. PNG(NE) reiterates that the cost of service impact of the inflationary pressures and the loss of deferral account credit amortizations are significant factors contributing to the considerable revenue deficiencies in the test period.[14] It is concerning to PNG(NE) that BCOAPO is suggesting lower rate increases for the test period than those proposed by PNG(NE), given the thorough analysis that PNG(NE) conducted and the mitigative measures proposed to alleviate rate pressures in the test period. PNG(NE) submits that it has presented a realistic approach to rate setting for the test period.[15] Additionally, PNG(NE) notes that in RCIA’s final argument, it did not support rate-smoothing beyond the test years as this would result in deferring a portion of the revenue deficiency for a longer period and there is no expectation that PNG(NE)’s revenue requirement will decrease in future test years. PNG(NE) is persuaded by RCIA’s argument and rejects BCOAPO's proposal to defer revenue deficiencies into the future through a longer amortization of the Rate Smoothing deferral account, considering that a reduction in the cost of service is not anticipated and load growth opportunities are limited.[16] PNG(NE) maintains its recommendation for the BCUC to establish interim rates for Test Year 2024 as set forth in the Updated Application and submits that this is an efficient mechanism to implement rate changes in advance of a BCUC decision on this proceeding.[17]
3.0 Panel Determination
Pursuant to sections 58 to 61 and 89 of the UCA, the BCUC has the authority to set interim rates. With PNG(NE) seeking interim approval of its proposed 2024 basic charges, delivery rates and RSAM rate riders for its FSJ/DC and TR divisions in light of the pending final determinations for the 2023 and 2024 permanent rates, the Panel finds that setting 2024 rates for PNG(NE)’s FSJ/DC and TR divisions on an interim basis is warranted. This approach, including the timing of issuing this order in November 2023, supports regulatory and administrative efficiency by ensuring PNG(NE) has sufficient time to implement the rate changes, effective January 1, 2024.
The Panel has also considered BCOAPO’s rate mitigation proposal with respect to PNG(NE)’s request for the incremental increase in 2024 interim rates. However, the Panel finds these recommendations premature at this stage of the proceeding given that the Panel has yet to determine the final rates for 2023 and 2024. As the rates for 2024 are being sought on an interim basis, any differences between the interim and permanent rates that are determined by the BCUC are subject to refund/recovery, with interest at the average prime rate of PNG(NE)’s principal bank for its most recent year. Therefore, the Panel considers it more appropriate to further consider BCOAPO’s recommendations for rate mitigation as part of the Panel’s final determination on PNG(NE)’s rates for 2023 and 2024.
The Panel approves the 2024 basic charges, delivery rates and RSAM rate riders as set forth in the Updated Application for PNG(NE)’s FSJ/DC and TR divisions, on an interim and recoverable or refundable basis, effective January 1, 2024, subject to the final decision on the Updated Application and the BCUC’s final decision on Stage 2 of the GCOC proceeding.
[1] Exhibit B-12, BCUC IR 70.4, PNG(NE) Final Argument, Section 2, pp. 8, 10, Section 16.2.1, p. 37.
[2] Exhibit B-12, BCUC IR 70.4, PNG(NE) Final Argument, Section 2, pp. 8, 10, Section 16.2.1, p. 37.
[3] Exhibit B-11-1, FSJ/DC division, Section 1.3, pp. 9–10.
[4] Exhibit B-12, BCUC IR 70.4, Exhibit B-11-1, FSJ/DC division, Tab Schedules – Tab 6, pp. 18, 37.
[5] Exhibit B-11-1, TR division, Section 1.3, pp. 9–10.
[6] Exhibit B-12, BCUC IR 70.4, Exhibit B-11-1, TR division, Tab Schedules – Tab 6, pp. 10, 21.
[7] Exhibit B-11-1, FSJ/DC division, Section 1.2.1.5, p. 6, Exhibit B-11-1, TR division, Section 1.2.1.4, p. 5.
[8] Exhibit B-12, BCUC IR 70.4, PNG(NE) Final Argument, p. 32.
[9] Decision and Order G-236-23 dated September 5, 2023, p. 144.
[10] BCOAPO Final Argument, pp. 21–25, 26.
[11] BCOAPO Final Argument, pp. 21–25.
[12] BCOAPO Final Argument, p. 26.
[13] BCOAPO Final Argument, p. 26.
[14] PNG(NE) Reply Argument, p. 9.
[15] PNG(NE) Reply Argument, p. 10.
[16] PNG(NE) Reply Argument, p. 10, RCIA Final Argument, p. 18.
[17] PNG(NE) Reply Argument, p. 16.