Hydro- Québec
TransÉnergie
Application R-3605-2006
RATEMAKING
FOR TRANSMISSION SERVICES
Original : 2006-07-06
HQT-12, Document 1
Page 1 of 27
Hydro- Québec
TransÉnergie
Application R-3605-2006
TABLE OF CONTENTS
1. CONTEXT .....................................................................................................................4
2. REVENUE REQUIREMENT AND TRANSMISSION REQUIREMENTS ...................... 5
2.1 Revenue Requirement .......................................................................................... 5
2.2 Transmission Requirement.................................................................................. 6
2.3 Transmission loss factor...................................................................................... 7
3. PRICING OF TRANSMISSION SERVICES ................................................................. 7
3.1 Context of the Transmission Provider’s proposal ............................................. 7
3.2 Transmission rates ............................................................................................... 8
3.2.1 Annual rate ................................................................................................... 9
3.2.2 Monthly, weekly, daily and hourly rates...................................................... 10
3.3 Cost recovery for transmission services.......................................................... 11
3.3.1 Transmission services for the supply of native load................................... 12
3.3.2 Network integration transmission service................................................... 13
3.3.3 Point-to-Point Transmission Services ........................................................ 13
4. RATES FOR ANCILLARY SERVICES ...................................................................... 15
4.1 Ancillary services for the supply of native load transmission service .......... 15
4.2 Ancillary services for the network integration transmission service ............ 16
4.3 Ancillary services for the point-to-point transmission services .................... 16
4.3.1 System control service ............................................................................... 16
4.3.2 Voltage control service ............................................................................... 17
4.3.3 Frequency Control Service......................................................................... 18
4.3.4 Energy Imbalance for Delivery Service ...................................................... 19
4.3.5 Energy Imbalance for Receipt Service ....................................................... 20
4.3.6 Service for the Maintenance of Spinning Reserves ................................... 21
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TransÉnergie
Application R-3605-2006
4.3.7 Service for the Maintenance of Non-Spinning Reserves............................ 22
5. NETWORK UPGRADES ............................................................................................ 23
5.1 Maximum Allowance for Network Upgrades .................................................... 23
5.2 Maximum Contribution for Switchyards ........................................................... 25
6. CONCLUSION ............................................................................................................ 26
Original : 2006-07-06
HQT-12, Document 1
Page 3 of 27
1
1. CONTEXT
2
In the current rate application, Hydro-Quebec, in its electricity transmission activities (the
3
Transmission Provider), carries out an update of its existing transmission rates, in effect
4
since April 18, 2006 with retroactive application to January 1, 2005 for point-to-point
5
transmission services, system integration services and for native load supply, in
6
compliance with decision D-2006-66 of the Régie de l’énergie (the Régie).
7
The new rates proposed will be applicable to existing transmission services, that is,
8
point-to-point transmission services, system integration services and the native load
9
service, as of January 1, 2007. The Transmission Provider proposes to continue to offer
10
its services within the framework of the Open Access Transmission Tariff (Tariffs and
11
Conditions), as explained in greater detail in exhibit HQT-10, Document 1.
12
As for the rates for ancillary services, the Transmission Provider updates them so as to
13
take into account the new transmission requirements. The method used for the
14
establishment of these rates is carried out in compliance with Régie decision D-2006-66.
15
The principles that have guided the Transmission Provider in setting the proposed
16
transmission rates for 2007 remain the same as those used to establish the rates that
17
are currently in effect, as well as the rates for 2001.Therefore, the proposed rates
18
continue to respect the definition of the transmission network set forth in article 2 of the
19
Act respecting the Régie de l’énergie (the Act). As well as the principle of “uniform rates
20
throughout the territory served”, prescribed in article 49 of the Act. The Transmission
21
Provider’s current proposal is also carried out in compliance with the general principles
22
for the setting and application of electricity transmission rates as set out in Régie
23
decision D-99-120.
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TransÉnergie
Application R-3605-2006
1
Finally, to respect decision D-2002-95 of the Régie, the Transmission Provider maintains
2
the application of a postage-stamp transmission rate, based on the average cost of the
3
transmission network and expressed in $/kW.
4
2. REVENUE REQUIREMENT AND TRANSMISSION REQUIREMENTS
5
The transmission rates proposed by the Transmission Provider are set as a function of
6
the projected required revenue for 2007 and the projected transmission requirements to
7
supply native load, system integration services and long and short-term point-to-point
8
transmission services.
9
2.1 Revenue Requirement
10
The revenue requirement for transmission activities ensure that the necessary expenses
11
for the provision of the transmission service are covered and that they include a
12
reasonable return on the Transmission Provider’s rate base.
13
For 2007, the Transmission Provider’s revenue requirement is $2 790 million, as
14
presented in greater detail in exhibit HQT-5, Document 1.
15
Table 1 below shows that, according to the rates that are currently in effect, the
16
revenues that would be recovered by the Transmission Provider are insufficient to cover
17
its revenue requirement for 2007. Moreover, the updates to transmission rates and of the
18
charges for the native load will allow the Transmission Provider to recover the required
19
additional revenue to which it is entitled.
20
Original : 2006-07-06
HQT-12, Document 1
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Hydro- Québec
TransÉnergie
1
2
Application R-3605-2006
Table 1- Revenues for 2007 Based on Existing Rates
Revenues based on existing rates
$2 615 M
Native load
$2 483 M
Point-to-point services
$ 132 M
Revenue requirement
$2 730 M
Additional revenue requirement
$115 M
2.2 Transmission Requirement
3
All transmission rates are established by the Transmission Provider based on the
4
transmission requirements presented in table 2 below. The detail of these projections is
5
presented in exhibit HQT-10, Document 2.
6
Table 2- Projected Transmission Requirements for 2007
Native load
35 863 MW
Network integration
0 MW
Point-to-point
Annual
479 MW
Monthly
0 MW
Weekly
0 MW
Daily firm
Daily non-firm
Hourly
10 981 MW
7 708 MW
11.1 TWh
7
8
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TransÉnergie
Application R-3605-2006
1
2.3 Transmission loss factor
2
The Transmission Provider proposes to maintain the transmission loss factor of 5.2% for
3
2007, as found in exhibit HQT-10, Document 2. This loss factor, approved by the Régie
4
in decision D-2006-66, has been applied to transmission services offered by the
5
Transmission Provider since January 1, 2001 under the Tariffs and Conditions.
6
3. PRICING OF TRANSMISSION SERVICES
7
3.1 Context of the Transmission Provider’s proposal
8
The objective of this section is to establish the rates of transmission services, for 2007,
9
which are applicable to users on the Transmission Provider’s network. More specifically,
10
this section seeks to determine:
11
Rates for point-to-point services;
12
Transmission charges to supply the native load.
13
In the section regarding rates in decision D-2006-66, the Régie writes the following:
14
“At the time of designing electricity transmission rates, the Régie also
15
considers criteria other than only cost causality, including economic
16
efficiency, rate stability and the simplicity of application.” (translator’s
17
version)
18
As per its 2001 (R-3401-98) and 2005 (R-3549-phase 2) rate applications, the
19
Transmission Provider continues to adhere to the ratemaking principles that have served
20
as a foundation for the establishment of its transmission rates. To this end, the
21
Transmission Provider takes into account all of its customer’s requirements, the features
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TransÉnergie
Application R-3605-2006
1
of its transmission system, its rate history since 2001, as well as the commercial and
2
regulatory context which defines the transmission of electricity in Quebec.
3
Therefore, the Transmission Provider opts for a strategy of continuity in its rate-setting in
4
pursuing the approach approved by the Régie for the rates that are currently in effect.
5
This strategy namely allows to ensure the stability of transmission rates all the while
6
remaining simple in their application.
7
In addition, since the Régie has ordered the establishment of a working group whose
8
mandate is to analyse and revise, as needed, the rate structure of point-to-point
9
transmission services, including the discount policy and the ancillary services that are
10
associated with it, the Transmission Provider considers this strategy appropriate in that it
11
would facilitate, where necessary, an eventual transition between the current approach
12
approved by the Régie and the new approach resulting from the findings of the working
13
group.
14
3.2 Transmission rates
15
The Transmission Provider proposes to renew the current rate structure for the
16
establishment of annual, monthly, weekly and hourly rates for 2007.
17
The annual, monthly, weekly and hourly rates are applied to point-to-point transmission
18
services. The annual rate is also used to establish the costs applicable to the service of
19
supplying the native load.
20
Table 3 below shows a comparative table of the rates applicable since 2005 and those
21
proposed beginning January 1, 2007.
22
Original : 2006-07-06
HQT-12, Document 1
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Hydro- Québec
TransÉnergie
1
Application R-3605-2006
Table 3- Rates in effect and proposed rates
Service
Annual
Monthly
Monthly
Weekly
Weekly
Daily
Daily
Hourly
System integration
Native load
Type
Firm
Firm
Non-firm
Firm
Non-firm
Firm
Non-firm
Non-firm
Unit
$/kW/year
$/kW/month
$/kW/month
$/kW/week
$/kW/week
$/kW/day
$/kW/day
$/MW/hour
$
$
Rates in effect
since 2005
72.90
6.08
6.08
1.40
1.40
0.28
0.20
8.33
0
2 482 974 000
Proposed rates
for 2007
72.45
6.04
6.04
1.39
1.39
0.28
0.20
8.33
0
2 598 201 900
2
The Transmission Provider describes in the following sections the transmission rate-
3
setting method and the recovery of revenues arising from it.
4
3.2.1 Annual rate
5
Transmission rates are determined in such a way as to yield the revenue requirement
6
and by taking into account transmission requirements.
7
The annual rate is established based on the residual revenue requirement. The residual
8
revenue requirement is obtained from the Transmission Provider’s revenue requirement
9
minus the revenues derived from the commercialization of available capacity on the
10
transmission network, which result from short-term transactions. These short-term
11
revenues reduce the amount of revenue requirement assumed by the customers of the
12
long-term transmission service (native load, network integration and annual point-to-
13
point services).
14
The annual rate is then set by dividing the residual revenue requirement by the projected
15
annual peak for the supply of native load, the transmission system integration service
Original : 2006-07-06
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TransÉnergie
Application R-3605-2006
1
and the annual point-to-point transmission service. This approach is the same as the
2
one used to set the annual rate that is currently in effect.
3
The annual rate proposed starting January 1, 2007 is set as follows:
4
Table 4: Establishment of the annual rate
Proposed revenue requirement = $2 730 M
Revenues from short-term point-to-point services = $97 M
Residual revenue requirement = $2 730 M - $97 M = $ 2 633 M
Transmission requirements for the supply of native load = 35 862 MW
Transmission requirements for network integration service = 0 MW
Transmission requirements for the annual point-to-point transmission service = 479 MW
Long-term transmission requirements = 35 862 MW + 0 MW + 479 MW = 36 341 MW
Annual rate = $2 633 M/ 36 341 MW = $72.45/kW/year
5
The proposed annual rate starting January 1, 2007 shows a 0.6% decrease compared
6
with the existing rate. This slight rate reduction ensures the continuity and stability of
7
transmission rates in Quebec.
8
3.2.2 Monthly, weekly, daily and hourly rates
9
The Transmission Provider renews the rate structure of monthly firm and non-firm rates,
10
weekly firm and non-firm, daily firm and non-firm, as well as hourly and non-firm rates.
11
Table 5 hereafter indicates the rate-setting methods for monthly, weekly, daily and
12
hourly rates on the basis of the yearly rate, which is the same as the rate approved by
13
the Régie in decision D-2006-66. The Régie will notice that the monthly, weekly, daily
14
and hourly rates differ insignificantly from the rates that are currently in effect.
15
Original : 2006-07-06
HQT-12, Document 1
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TransÉnergie
1
Application R-3605-2006
Table 5 – Establishment of monthly, weekly, daily and hourly rates for 2005
Annual rate
= $72.45/kW/year
Firm monthly rate
= Annual rate/12 months= $72.45/kW/year / 12 months
= $6.05/kW/Month
Non-firm monthly rate
= Annual rate/12 months= $72.60/kW/year / 12 months
= $6.04/kW/Month
Firm weekly rate
= Annual rate/52 weeks
= $72.45/KW/year / 52 weeks
= $1.39/kW/week
Non-firm weekly rate
= Annual rate/52 weeks
= $72.45/KW/year / 52 weeks
= $1.39/kW/week
Firm daily rate
= Annual rate/52 weeks/5 days
= $72.45/KW/year / 5 days
= $0.28/kW/day
Non-firm daily rate
= Annual rate/365 days = $72.45/KW/year / 365 days
= $0.20/kW/day
Non-firm hourly rate
= Non-firm daily rate/24 hours x 1000
= $0.20/kW/day / 24 hours x 1000
= $8.33 MW/hour
2
3.3 Cost recovery for transmission services
3
The following sections provide a detailed account of the revenues that must be
4
recovered from the transmission service for the supply of native load, for the network
5
integration service, and for point-to-point transmission services. Essentially, the
6
revenues are determined by multiplying the transmission rates by the projected
7
transmission requirements corresponding to each service.
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TransÉnergie
Application R-3605-2006
1
3.3.1 Transmission services for the supply of native load
2
The revenues for 2007 derived from the native load supply correspond to the projected
3
transmission requirements for the native load multiplied by the annual rate. Table 6
4
below shows these revenues for 2007.
5
Table 6 – Revenues from the Native Load Supply Transmission Service
Revenues from native load supply transmission services
Annual rate x projected requirements / 1000 = $72.45/kW/year X 35 862 MW / 1000 = $2 598 M
Annual revenue requirements (in $) to be included in attachment J of the Tariffs and Conditions
Annual rate x projected requirements = $72.45/kW/year X 35 862 000 kW = $2 598 201 900
6
This amount represents a 4.6% increase of the Transmission Provider’s revenues
7
attributable to the transmission service for native load supply for 2007, with respect to
8
the current native load bill. However, it is relevant to note that this increase is relatively
9
slight compared with the 5.3% increase for transmission requirements for native load
10
supply since 2005.
11
The Transmission Provider notes that the adjustment it seeks for native load charges is
12
essentially the result of an increase in projected transmission requirements for this
13
service, the unitary cost to supply the native load being slightly lower than the one for
14
2005.
15
Moreover, in the absence of revenues from the network integration transmission service,
16
the revenues from native load supply service correspond to the sum total of the revenue
17
requirement listed in Attachment H of the Tariffs and Conditions.
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TransÉnergie
Application R-3605-2006
1
As for the amount that Hydro-Quebec, in its electricity distribution activities (the
2
Distributor), must pay for native load service, the Transmission Provider proposes to
3
maintain the current approach, which consists of billing for this service based on the
4
fixed amount listed in Attachment H of the Tariffs and Conditions until the amount is
5
modified in a subsequent rate application.
6
Even if the actual transmission requirements differ from the projections submitted in the
7
current application, the Transmission Provider notes that the transmission service will be
8
offered at no additional cost to the Distributor.
9
3.3.2 Network integration transmission service
10
For 2007, the projected revenues for the network integration service are null since no
11
customer currently subscribes to this service. This is the reason for which the native load
12
will assume all the revenue requirements set out in attachment H of the Tariffs and
13
Conditions.
14
If a customer did subscribe to this service during 2007, the billing method used would
15
correspond to the method currently set out in the Tariffs and Conditions.
16
3.3.3 Point-to-Point Transmission Services
17
Table 7 hereafter shows the revenues for 2007 coming from point-to-point transmission
18
services and corresponding to the projected transmission requirements for these
19
services multiplied by the corresponding rates. The projection of these transmission
20
requirements is presented in greater detail in exhibit HQT-10, Document 2.
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TransÉnergie
1
Application R-3605-2006
Table 7 – Revenues from point-to-point transmission services
Revenues from long-term point-to-point transmission services
Annual rate x projected requirements = $72.45/kW/year X 479 MW / 1000 = $35 M
Revenues from short-term monthly point-to-point transmission services
No revenues projected for monthly point-to-point services
Revenues from short-term weekly point-to-point transmission services
No revenues projected for weekly point-to-point services
Revenues from short-term daily point-to-point transmission services
Firm daily rate x projected requirements = $0.28/kW/year x 10 981 MW / 1000 = $3 M
Non-firm daily rate x projected requirements = $0.20/kW/year x 7 708 MW / 1000 = $2 M
Revenues from short-term hourly point-to-point transmission services
Hourly rate x projected requirements = $8.33/MW/ hour x 11.1 TWh = $92 M
Total revenues from short-term point-to-point transmission services
Revenues from short-term monthly, weekly, daily and hourly services
= 0 + 0 + 5 + 92 = $97 M
Total revenues from point-to-point transmission services
Short and long-term point-to-point transmission services
= $35 M + 97 M = $132 M
2
The Transmission Provider proposes to maintain the current billing method for point-to-
3
point transmission services, which consists of applying the transmission rates that
4
correspond to reserved capacities, through the Open Access Same-Time Information
5
System (OASIS), augmented by the transmission loss factor, in compliance with the
6
Tariffs and Conditions.
7
The billing terms specify that customers must pay the Transmission Provider for the
8
reserved capacity, regardless of their use of that reserved capacity. They also specify
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TransÉnergie
Application R-3605-2006
1
that the Transmission Provider may offer, through OASIS and on a non-firm basis, the
2
capacity reserved on a firm basis that was not used by the customers, which allows for
3
the use of the transmission system to be optimized.
4
4. RATES FOR ANCILLARY SERVICES
5
The secure and reliable operation of the Transmission Provider’s network requires the
6
use of several ancillary services supplied by transmission and production equipment.
7
The ancillary services offered by the Transmission Provider are presented in greater
8
detail in exhibit HQT-10, Document 1.
9
The customers of transmission services must acquire certain ancillary services from the
10
Transmission Provider. Customers may acquire other ancillary services from other
11
sources. However, if customers cannot demonstrate that they acquire them from other
12
sources, or if the Transmission Provider does not consider the acquired services
13
comparable to its own, customers must necessarily acquire them from the Transmission
14
Provider.
15
The ancillary services must be billed to the transmission system users so as to
16
reimburse the suppliers of these services. That is, either Hydro-Québec, in its electric
17
power generation capacity (the Generator) or third-party generators, as the case may
18
be.
19
4.1 Ancillary services for the supply of native load transmission service
20
The Distributor must either provide, or see to it that its suppliers provide the ancillary
21
services associated with the native load transmission services found in the Tariffs and
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TransÉnergie
Application R-3605-2006
1
Rates. Consequently, the Transmission Provider must not bill the Distributor for these
2
services.
3
4.2 Ancillary services for the network integration transmission service
4
The Transmission Provider does not have any customers who subscribe to the network
5
integration service. If required, the Transmission Provider proposes to apply to the
6
network integration service the same ancillary services and the same rates as those
7
used for point-to-point transmission services, as is described in the following sections.
8
4.3 Ancillary services for the point-to-point transmission services
9
The existing rates for ancillary services applicable to point-to-point transmission services
10
have been in effect since April 18, 2006, in compliance with Régie decision D-2006-66.
11
The Transmission Provider hereby submits for approval the updated rates for ancillary
12
services. The methodology used to set these rates complies with Régie decision D-
13
2006-66, in which the existing rates since 2001 for voltage control services, and for
14
spinning and non-spinning reserve services were upheld. For the frequency control
15
service, the Régie agreed to modify the rate so as to take into account a price of energy
16
of 7.5¢/kWh. As for the energy imbalance for delivery and energy imbalance for receipt
17
services, the Régie accepted that a price of energy of 7.5¢/kWh be taken into account as
18
well as the 50% increase and 50% credit.
19
4.3.1 System control service
20
The network management service is required to plan electricity transmission through the
21
control area, within, outside of or up to the control area. This service is provided by the
22
Transmission Provider and does not currently have a separate rate since it is included in
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Page 16 of 27
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TransÉnergie
Application R-3605-2006
1
the transmission service rates. The Transmission Provider proposes to continue this
2
approach.
3
4.3.2 Voltage control service
4
The rates for voltage control reflect the fact that the Transmission Provider may demand
5
the supply of reactive power from the power plants to meet transmission system
6
requirements. In order to provide or absorb reactive power in accordance with the
7
Transmission Provider’s operating standards, the Generator must limit the generation
8
capacity of its power plants.
9
The rates applicable to the voltage control service for 2007 have been established in
10
accordance with the methodology presented in Table 8 below. The Transmission
11
Provider has updated these rates by taking into account the projected transmission
12
requirements for 2007, all the while respecting the principles laid out in Régie decision
13
D-2006-66. This update exerts a downward pressure on these rates.
14
Table 8 – Rates for the Voltage Control Service
Type
Units
Firm annual rate
$/kW/year
Existing
rates
0.38
Firm monthly rate
$/kW/month
0.03
Non-firm monthly rate
$/kW/month
0.03
Firm weekly rate
$/MW/week
7.25
Non-firm weekly rate
$/MW/week
7.25
Firm daily rate
$/MW/day
1.45
Non-firm daily rate
$/MW/day
1.03
Non-firm hourly rate
$/MW/hour
0.04
Original : 2006-07-06
Rate setting method for the proposed
rates
Value for maintenance of spinning reserves /
Transmission requirements =
$13.4 M / 36 341 MW x 1000
Annual rate / 12 months =
$0.37/kW/year / 12 months =
Annual rate / 12 months =
$0.37/kW/year / 12 months =
Annual rate / 52 weeks x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks / 5 days x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 365 days x 1 000 =
$0.37/kW/year / 365 days x 1 000 =
Annual rate / 24 hours x 1 000 =
$1.01/kW/year / 24 hours x 1 000 =
HQT-12, Document 1
Page 17 of 27
Proposed
rates
0.37
0.03
0.03
7.12
7.12
1.42
1.01
0.04
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
4.3.3 Frequency Control Service
2
The frequency control service is necessary in order to maintain a balance between
3
supply and demand and to maintain the frequency at 60 Hertz. The Generator mobilizes
4
means of generation whose function it is to regulate and control frequency. Since
5
generation must be able vary within a regulating margin, this feature results in power
6
losses.
7
As mentioned in exhibit HQT-10, Document 1, following decision D-2006-66 this service
8
only applies to deliveries that supply a load in the Transmission Provider’s control area.
9
For the reasons set out in exhibit HQT-10, Document 1, the Transmission Provider
10
proposes to apply this ancillary service to all reservations for point-to-point transmission
11
services on the network.
12
The frequency control service rates for 2005 are set in compliance with the method
13
presented in Table 9 hereafter.
14
Table 9 – Rates for the Frequency Control Service
Type
Units
Firm annual rate
$/kW/year
Existing
rates
0.39
Firm monthly rate
$/kW/month
0.03
Non-firm monthly rate
$/kW/month
0.03
Firm weekly rate
$/MW/week
7.50
Non-firm weekly rate
$/MW/week
7.50
Firm daily rate
$/MW/day
1.50
Non-firm daily rate
$/MW/day
1.07
Non-firm hourly rate
$/MW/hour
0.04
Original : 2006-07-06
Rate setting method for the proposed
rates
Value for maintenance of spinning reserves /
Transmission requirements =
$13.5 M / 36 341 MW x 1000
Annual rate / 12 months =
$0.37/kW/year / 12 months =
Annual rate / 12 months =
$0.37/kW/year / 12 months =
Annual rate / 52 weeks x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks / 5 days x 1 000 =
$0.37/kW/year / 52 weeks x 1 000 =
Annual rate / 365 days x 1 000 =
$0.37/kW/year / 365 days x 1 000 =
Annual rate / 24 hours x 1 000 =
$1.01/kW/year / 24 hours x 1 000 =
HQT-12, Document 1
Page 18 of 27
Proposed
rates
0.37
0.03
0.03
7.12
7.12
1.42
1.01
0.04
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
The updated rates for the frequency control service take into account the fact that the
2
Régie found that it was justified to maintain a rate based on a price of energy of
3
7.5¢/kWh. As is the case for the voltage control rates, this update exerts a downward
4
pressure on rates.
5
4.3.4 Energy Imbalance for Delivery Service
6
The energy imbalance for delivery service is called upon when there is a variance
7
between scheduled capacity and that which is actually delivered to a load located within
8
the Transmission Provider’s control area. This service aims to compensate the
9
Transmission Provider for variances between scheduled and delivered quantities,
10
thereby inducing customers to eliminate such variances.
11
The Transmission Provider proposes to set the rate for this service based on the
12
generation price, by using the method approved by the Régie for the existing rate. This
13
does not lead to any modifications of existing rates for this ancillary service. Therefore,
14
where the quantity consumed is greater than the quantity scheduled, the proposed rate
15
corresponds to the generation price augmented by 50%. The credit granted on any
16
delivered quantity which is inferior to the scheduled quantity, corresponds to 50% of the
17
energy price.
18
The rate and the credit that the Transmission Provider proposes for 2007 are shown in
19
Table 10 hereafter. The Transmission Provider wishes for these elements to stay at their
20
2005 level for which the Régie, in decision D-2006-66, had set the price of energy at
21
7.5¢/kWh and the increase and credit at 50%, having found that both elements were
22
related to each other.
23
Original : 2006-07-06
HQT-12, Document 1
Page 19 of 27
Hydro- Québec
TransÉnergie
1
Application R-3605-2006
Table 10 – Rate for the Energy Imbalance for Delivery Service
Type
Units
Existing rates
Proposed
rates
Rate (receipt superior to scheduled capacity)
¢/kWh
11.25
11.25
Credit (receipt inferior to scheduled capacity)
¢/kWh
3.75
3.75
2
4.3.5 Energy Imbalance for Receipt Service
3
Having been proposed by the Transmission Provider as a new ancillary service in its
4
2005 rate application, in decision D-2006-66, the Régie approved the request that the
5
energy imbalance for receipt service be added to the other ancillary services offered by
6
the Transmission Provider to the customers of its point-to-point transmission services.
7
The energy imbalance for receipt service is used to minimize the variances between the
8
amount of scheduled energy and that which is in fact delivered by customers to the
9
transmission network. As specified in exhibit HQT-10, Document 1, the Transmission
10
Provider proposes to apply this ancillary service to all receipts for point-to-point
11
transmission service customers for which the source is in the Transmission Provider’s
12
control area.
13
The proposed rate is applied to all quantities received by the Transmission Provider
14
which are inferior to the scheduled quantity. In addition, a credit is granted for any
15
quantity received by the Transmission Provider which is superior to the scheduled
16
quantity.
Original : 2006-07-06
HQT-12, Document 1
Page 20 of 27
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
The proposed rate and the credit for 2007 are established in the same way as those
2
applicable to the energy imbalance for delivery service and they are presented in table
3
11 below.
4
Table 11 – Rate for Energy Imbalance for Receipt Service
Type
Units
Existing rates
Proposed
rates
Rate (receipt inferior to scheduled capacity)
¢/kWh
11.25
11.25
Credit (receipt superior to scheduled
capacity)
¢/kWh
3.75
3.75
5
4.3.6 Service for the Maintenance of Spinning Reserves
6
The rates for the maintenance of non-spinning reserves service reflect the share of the
7
power component costs related to the power generation associated with the spinning
8
reserve, which corresponds to 1 000 MW. The Transmission Provider acquires this
9
reserve from the Generator’s power plants.
10
The rates applicable to the maintenance of spinning reserves service for 2007 are
11
established according to the methodology presented in Table 12 hereafter. Following
12
decision D-2006-66, the Transmission Provider bills for this service only in transactions
13
that supply loads located in the latter’s control area. For the reasons specified in exhibit
14
HQT-10, Document 1, the Transmission Provider proposes to apply this ancillary service
15
to all the reservations for the point-to-point services on the network.
Original : 2006-07-06
HQT-12, Document 1
Page 21 of 27
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
The applicable rates for the maintenance of the spinning reserve service for 2007 are
2
presented in table 12 below.
3
Table 12 – Rates for the Maintenance of Spinning Reserves Service
Type
Units
Firm annual rate
$/kW/year
Existing
rates
1.40
Firm monthly rate
$/kW/month
0.12
Non-firm monthly rate
$/kW/month
0.12
Firm weekly rate
$/MW/week
26.87
Non-firm weekly rate
$/MW/week
26.87
Firm daily rate
$/MW/day
5.37
Non-firm daily rate
$/MW/day
3.83
Non-firm hourly rate
$/MW/hour
0.16
Rate setting method for the proposed
rates
Value for maintenance of spinning reserves /
Transmission requirements =
$49.7 M / 36 341 MW x 1000
Annual rate / 12 months =
$1.37/kW/year / 12 months =
Annual rate / 12 months =
$1.37/kW/year / 12 months =
Annual rate / 52 weeks x 1 000 =
$1.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks x 1 000 =
$1.37/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks / 5 days x 1 000 =
$1.37/kW/year / 52 weeks x 1 000 =
Annual rate / 365 days x 1 000 =
$1.37/kW/year / 365 days x 1 000 =
Annual rate / 24 hours x 1 000 =
$3.75/kW/year / 24 hours x 1 000 =
4
The update carried out by taking into account the projected transmission requirements
5
for 2007 exerts a downward pressure on those rates.
6
4.3.7 Service for the Maintenance of Non-Spinning Reserves
7
The rates for the maintenance of non-spinning reserves service reflect the share of the
8
power component costs related to the power generation that is associated with the non-
9
spinning reserve. The Transmission Provider must maintain an additional reserve
10
equivalent to one-half of its second largest contingency, representing the compensation
11
of a generation loss following the failure of a second 1 000 MW alternator located at
12
Churchill Falls, which is provided by the Generator. The total operating reserve of 1 500
13
MW is available within 30 minutes.
Original : 2006-07-06
HQT-12, Document 1
Page 22 of 27
Proposed
rates
1.37
0.11
0.11
26.35
26.35
5.27
3.75
0.16
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
Following decision D-2006-66, the Transmission Provider bills for this service only in
2
transactions that supply loads located in the latter’s control area. For the reasons
3
specified in exhibit HQT-10, Document 1, the Transmission Provider proposes to apply
4
this ancillary service to all the reservations for the point-to-point services on the network.
5
The applicable rates for the maintenance of the non-spinning reserve service for 2007
6
are presented in table 13 below.
7
Table 13 – Rates for the Maintenance of Non-Spinning Reserves Service
Type
Units
Firm annual rate
$/kW/year
Firm monthly rate
$/kW/month
Non-firm monthly rate
$/kW/month
Firm weekly rate
$/MW/week
Non-firm weekly rate
$/MW/week
Firm daily rate
$/MW/day
Non-firm daily rate
$/MW/day
Non-firm hourly rate
$/MW/hour
Existing
rates
0.70
0.06
0.06
13.43
13.43
2.69
1.91
0.08
Rate setting method for the proposed rates
Value for maintenance of non-spinning reserves /
Transmission requirements =
$24.8 M / 36 341 MW x 1000
Annual rate / 12 months =
$0.68/kW/year / 12 months =
Annual rate / 12 months =
$0.68/kW/year / 12 months =
Annual rate / 52 weeks x 1 000 =
$0.68/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks x 1 000 =
$0.68/kW/year / 52 weeks x 1 000 =
Annual rate / 52 weeks / 5 days x 1 000 =
$0.68/kW/year / 52 weeks x 1 000 =
Annual rate / 365 days x 1 000 =
$2.10/kW/year / 365 days x 1 000 =
Annual rate / 24 hours x 1 000 =
$1.86/kW/year / 24 hours x 1 000 =
8
The update, carried out by taking into account the projected transmission requirements
9
for 2007, also exerts a downward pressure on these rates.
10
5. NETWORK UPGRADES
11
5.1 Maximum Allowance for Network Upgrades
12
In decision D-2006-66, the Régie upheld the calculation method used by the
13
Transmission Provider since its rate application in 2001, to determine the maximum
Original : 2006-07-06
HQT-12, Document 1
Page 23 of 27
Proposed
rates
0.68
0.06
0.06
13.08
13.08
2.62
1.86
0.08
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
amount that could be added to the rate base for any network upgrade carried out with
2
the aim of meeting customer requirements. For the current application, the Transmission
3
Provider proposes to continue to apply this method so as to ensure coherence with
4
previous Régie decisions.
5
In accordance with the current method, the maximum allowance that the Transmission
6
Provider may bear for network upgrades corresponds to the levelized value of the
7
annual transmission rate over a 20-year period, considering the operation and
8
maintenance (O&M) costs as well as applicable capital and public utility taxes (PUT).
9
Any amount exceeding this maximum is borne by the transmission services customer for
10
whom the network upgrade was made. This way of proceeding ensures rate neutrality
11
for the rest of the customers when new customers are connected to the transmission
12
grid.
13
The Transmission Provider proposes to revise the current amount of $560/kW set for the
14
purposes of the maximum allowance in the context of the 2005 rate Application (R-3549-
15
2004 – Phase 2). The amount for new maximum allowance is set at $576/kW, as shown
16
in Table 14 hereafter. This amount is determined by taking into account the applicable
17
financial parameters found in exhibit HQT-8, Document 2, as well as the proposed
18
annual transmission rate for 2007.
19
Original : 2006-07-06
HQT-12, Document 1
Page 24 of 27
Hydro- Québec
TransÉnergie
1
Application R-3605-2006
Table 14- Maximum Allowance for Network Upgrades
Year
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
TOTAL
Investments ($/kW)
Prospective cost of capital
Operation and maintenance (O&M)
Capital Taxes
2007
2008
2009
Public utilities tax (PUT)
Number of years
Cumulated
Net
Depreciation
Deprec.
assets
($)
($)
($)
21
21
554
22
43
532
23
66
509
23
90
486
24
114
462
25
139
437
26
164
412
26
191
385
27
218
358
28
246
330
29
274
301
30
304
272
31
335
241
31
366
210
32
398
177
33
432
144
34
466
109
35
502
74
36
538
38
38
576
0
576
-
576
6.50%
1.4%
0.49%
0.36%
0.29%
0.55%
20
Cost of
Capital
($)
37
36
35
33
32
30
28
27
25
23
21
20
18
16
14
12
9
7
5
2
429
O&M
($)
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
8
⇐ Maximum allowance for
network upgrades
Capital
tax ($)
3
2
1
1
1
1
1
1
1
1
1
1
1
1
1
0
0
0
0
0
Public
Utilities
Tax ($)
3
3
3
3
3
2
2
2
2
2
2
1
1
1
1
1
1
0
0
0
Annual
Cost
(S/kW)
72.45
70.78
69.44
68.45
67.43
66.38
65.29
64.17
63.02
61.84
60.62
59.36
58.07
56.73
55.36
53.95
52.49
50.99
49.44
47.85
1 214
697
2
5.2 Maximum Contribution for Switchyards
3
In its decision D-2006-66 pertaining to the Transmission Provider’s 2005 rate application
4
(R-3549-2004 – Phase 2), the Régie upheld the maximum contributions for switchyards
5
which has been in effect since 2001 and it accepted that a distinction be made for the
6
power plants owned by Hydro-Quebec.
7
However, following an analysis of the costs of switchyards for projects carried out
8
recently and others in progress, the Régie noted that there were certain variances in the
9
maximum contribution amounts. As a result, the Régie ordered the Transmission
Original : 2006-07-06
HQT-12, Document 1
Page 25 of 27
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
Provider to submit, before October 31, 2006, a study on the minimal costs of switchyards
2
highlighting factors which have an influence on the choice and costs.
3
In light of this context, the Transmission Provider consequently proposes to maintain the
4
amounts of the maximum contributions for switchyards currently in effect in the Tariffs
5
and Conditions.
6
The Transmission Provider’s maximum contribution for switchyards is presented in table
7
15 below.
8
Table 15- Maximum Contribution for Switchyards
Nominal voltage
Transmission Provider’s maximum contribution
Less than 44 kV
Power plants not owned by
Hydro-Quebec
$35/kW
Power plants owned by
Hydro-Quebec
$30/kW
Between 44 kV and 120 kV
$55/kW
$48/kW
More than 120 kV
$95/kW
$83/kW
The maximum contribution is doubled where voltage is stepped up in two stages
9
6. CONCLUSION
10
The approach selected by the Transmission Provider in setting the proposed rates for
11
2007 complies with the one used to set rates in its 2001 and 2005 rate applications.
12
Furthermore, the Transmission Provider’s proposal complies with the provisions of the
13
Act and with the Régie’s previous decisions. Therefore, the transmission rates derived
14
from this proposal are, in the view of the Transmission Provider, fair and reasonable.
15
The proposed rates allow the Transmission Provider to recover the total revenue
16
requirement proposed to the Régie for 2007 and they reflect the nature and
Original : 2006-07-06
HQT-12, Document 1
Page 26 of 27
Hydro- Québec
TransÉnergie
Application R-3605-2006
1
characteristics of the transmission network. These rates continue to be appropriate in
2
light of the current market structure and well-suited for the commercial, regulatory, and
3
legal context of electricity transmission in Quebec.
4
Therefore, the Transmission Provider asks the Régie to approve, beginning January 1
5
2007, the transmission tariffs and service conditions as a whole, including the native
6
load charges, in accordance with the terms proposed in this application. These rates are
7
presented in greater detail in the transmission rate chart and the text of the Tariffs and
8
Conditions, filed respectively as Exhibits HQT-12, Document 2 and HQT-12, Document
9
4.
Original : 2006-07-06
HQT-12, Document 1
Page 27 of 27