Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 1 de 11
TRADUCTION DE CERTAINES RÉPONSES AUX DEMANDES DE
RENSEIGNEMENTS N°1 ET N°2 D’OPTION CONSOMMATEURS À HQD
DEMANDE DU DISTRIBUTEUR RELATIVE À L'ÉTABLISSEMENT DES TARIFS
D'ÉLECTRICITÉ POUR L'ANNÉE TARIFAIRE 2009-2010
R-3677-2008
Pièce : HQD-16, document 9
Réponses traduites: 9.10, 9.11, 10.1, 10.3, 10.5, 11.4, 13.1, 15.2, 17.1, 20.1,
27.1, 28.1, 30.3, 32.2 et 34.1
Question:
9.10 If multiple but separate events (i.e., separate causes) occur on the same day
must the continuity of service associated with an individual event meet threshold
for it to be defined as a “major outage” or do all events occurring on that day
qualify as “major outages”?
Response:
For one individual event to cause a major outage, the continuity of service
index that is associated with it must exceed the 2.5 β threshold. All outages
that occur in that instance are an integral part of the “major outage”. In
practice, several outages are necessary to exceed the threshold.
The following definitions contribute to a better understanding of the
different notions that are used:
•
Outage: Interruption of the line service which affects one or several
customers.
•
Major outage or major event: set of service interruptions generally
provoked by severe weather conditions which lead to one or several
consecutive days of major events.
•
Day of Major Event (DME): Day during which a significant number of
outages occur such that the overall continuity of service index for
that day exceeds the statistical threshold of 2.5 β calculated
according to method C.23-01 and based on the standard IEEE Std
1366TM-2003. If an outage persists over several days, the resulting
continuity of service index is always associated with the day the
outage began.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 2 de 11
Therefore, these severe weather conditions can provoke a major outage
which leads to one or several DME although the re-establishment of service
may take longer. For example, on August 1st 2006 there was a major outage
that lead to three DME. Starting on the fourth day, although the threshold
was no longer exceeded, service had not been fully re-established.
Question:
9.11 In those cases where a single event leads to outages for more than one day
and for some days (i.e. towards the end of the restoration activity) the continuity
index does not exceed the threshold, is a “major outage” deemed to have
occurred that day?
Response:
The continuity of service index for an outage that extends over several
days is always attributed to the first day of the outage.
Question:
10.1 Is an emergency plan for re-establishment of service triggered only for
“major outages” or in case of any outage on the system?
Response:
An emergency plan is implemented as soon as a weather event provokes
or risks provoking service interruptions or whenever two of the following
criteria are met in an area that is served by a business office:
•
The continuity of service is significantly affected (> 6 hours);
•
All teams on site (or > 5 teams for a larger site) are required to
respond to service interruptions;
•
Two or more outages are attributed to each available team;
•
The service of 5% of customers for a site is interrupted.
As the event gets larger, the emergency plan is expanded.
Nonetheless, the event that triggers an emergency plan may or may not
lead to a day of major event. Therefore, when the established threshold for
the continuity of service index is not met, the costs of the emergency plan
are not considered in the calculation of costs associated with days of
major events.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 3 de 11
Question:
10.3 If for all outages, are the two different cost centres (per lines 3-5) created in
all such circumstances and are the costs for all outage tracked accordingly?
Response:
In every case or for every outage, specific cost centres are created. It is
therefore possible to establish a link between costs and days of major
event, which are determined in compliance with the technical threshold of
the continuity index. It is thereby possible to track the costs associated
only with these.
Question:
10.5 What is HQD’s policy with respect to what types of costs are capitalized
versus expensed during restoration from an outage?
Response:
For all restoration related to the replacement of an existing asset on the
network (devices, electricity poles, conductors, etc.), all the costs will be
capitalized. For all restoration pertaining to an accessory of the distribution
system (connecting wire, cable joint, cross-arm bracket for poles, insulator,
lightning conductor, etc.), all costs will be recorded as operating costs.
Question:
11.4 If the Table sets out the number of days with major events and the outages
associated with an event last more than one day, is the day only counted if the
continuity index for that day exceeds the threshold? Alternatively, were all days
associated with an event counted as long as there was at least one day where
the continuity index exceeded the threshold?
Response:
The Distributor takes into account each day for which the continuity index
exceeds the established threshold. It can occur that a significant weather
event generates two or more major event days. For example, in 2006, there
were about ten events which led to 17 days of major event.
However, one event can extend over more than one day or may lead to a
first day of major event but not affect a sufficient number of customers on
the second day to exceed the established threshold.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 4 de 11
Question:
13.1 Please confirm that the recovery of the deferral account balances related to
weather normalization is a “new” cost for 2009 for which the cost allocation
treatment has not been dealt with in previous HQD applications.
Response:
The implementation of a transmission and distribution levelling mechanism
associated with weather fluctuations, as well as its calculation methods by
customer class, were discussed in rate application R-3579-2005 and
approved in decision D-2006-34. The levelling account by customer class
has been presented in the allocation methodology since case R-3610-2006,
in Table 26B pertaining to the rate base under the function “Other”.
In the current application, the Distributor requests the amortization of this
account, in compliance with the terms described in HQD-4, document 2.
More specifically, page 11 mentions that since the levelling account is
already established by customer class, in compliance with the
methodology approved by the Régie, the amortization by customer class is
calculated using the same proportions, corresponding to one-fifth of the
residual balance for each customer class. Thus, the amortization charge by
customer class corresponds to variances recorded in the levelling account
and included in the rate base for each of these categories. Thus, it is not a
new element of the allocation methodology.
Question:
15.2 How does HQT determine the portion of the variation in point to point
revenues for the preceding year that is to be allocated to native load (i.e. HQD)?
If it is based on an allocation, does the allocation factor used for native load
include all native load transmission costs or does it exclude the cost of
connections?
Response:
The Transmission Provider allocates the balance of the variance account
between native load service and point-to-point service based on projected
long-term transmission service requirements, as mentioned in Exhibit HQT12, document 1, page 17 of case R-3669-2007. Once the amounts by service
are determined, either an upward or downward adjustment is directly
applied to the native load bill.
As explained in Exhibit HQT-10, document 2 of the case mentioned in the
preceding paragraph, native load requirements correspond to all of the
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 5 de 11
Distributor’s customer requirements for transmission services including
municipal systems but excluding remote communities.
Consequently, the Transmission Provider determines the variance account
for point-to-point revenues in the same way as in the establishment of
native load billing. I.e. the revenue requirement excluding short-term pointto-point transmission revenues divided by total native load and long-term
point-to-point transmission service requirements (MW).
These revenue requirements include connection costs.
17.1 Please explain more fully why the application of a criterion based on
maximum deviation assumes that the weight given to the “Cost Increase” in the
calculation of differentiated increases is reduced.
Response:
The two Tables that follow compare the underlying calculations for two
differentiated increase scenarios.
TABLE R-17.1
COMPARISON OF TWO DIFFERENTIATED INCREASE SCENARIOS
Illustration of the application of differentiated increases in 2009
The first scenario is taken from Appendix A of HQD-12, document 1; it is a
scenario of growth in which the cost increases of a given rate class are
entirely allocated to that class, the value of the regulatory provision is
determined on an historical basis and the adjustments are allocated prorated to sales in that category. An average increase of 2.2% is necessary to
meet the new revenue requirement of $207 M.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 6 de 11
The second scenario provides the underlying calculations for one of the
additional scenarios the Distributor submitted to the Régie in Table 3 of
HQD-12, document 1. Any scenario of differentiated increases by customer
class which departs from scenario 1 entails a distortion in the cost
increase that is attributed to each customer class. For this distortion to be
fair to all customer classes the cost increase requires a uniform adjustment
via a weighting factor.
The second scenario was therefore established by calculating the
weighting factor associated with the cost increase that is attributed to each
customer class, so that:
1) The increase for each class does not exceed 2.64% (120% * 2.20%)
2) The regulatory provision for each class remains the same relative to the
base scenario.
3) Total additional revenues are $207 M. For a scenario in which the
maximum increase is 20% higher than the average increase, a single
weighting factor makes it possible to meet these constraints, i.e. 29%.
A comparison of column “Cost Increase 2009” in the first Table and column
“Cost Constraints 2009” (i.e.« Coûts contraints 2009 ») in the second Table
shows the impact of this weighting factor. For example, the domestic “Cost
Increase 2009” of $120 M becomes “Cost Constraints 2009” of $35 M (i.e.
$120 M * 29%). In total, the column “Cost Constraints 2009” in the second
scenario totals $39 M instead of $135 M like in the first scenario, for a $96 M
variance.
This variance will be recovered via the column “2009 Adjustments” for
which the total goes from $42 M in the first scenario to $138 M in the
second scenario. This adjustment is allocated evenly pro-rated to revenues
before increases for each customer class.
Question:
20.1 Please reconcile the total 2009 cost of service reported in reference (i)
{$9,828.5 M} with the total reported in reference (ii) of $9,930.4 M (i.e.,
$10,683.5-$753.1).
Response:
The main variations are attributable to the two internal billing line-items
and the amortization of the weather normalization account.
Concerning the two internal billing line-items, explanations were already
provided in response to OC question 15.2 in case R-3492-2002, Phase 1
(HQD-10, document 8, page 22) and in response to OC questions 1-A and 1B in case R-3579-2005 (HQD-14, document 6, page 4), as well as in
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 7 de 11
response to questions by the FCEI (question 10.3 of case R-3610-2006 in
Exhibit HQD-16, document 16, page 16 and question 11.1 of case R-36442007 in Exhibit HQD-15, document 6, page 15). It consists of reclassifying
reciprocal transactions between two of the Distributor’s internal units,
which must be considered when cost-allocation is carried out.
The separate presentation of other revenues (HQD-5, document 1) and
cost-of-service (HQD-6, document 1) shows the variance associated with
the reclassification of reciprocal transactions.
As for the amortization of the weather normalization account, the
Distributor has allocated this account using the same methodology as
approved by the Régie for the deferral account associated with the levelling
account of the rate base. The amount coincides with the amortization of the
levelling account provided in Exhibit HQD-1, document 1, page 13. See also
response to Régie question 2.1 in Exhibit HQD-16, document 1.
Finally, the Distributor has included revenues other than those generated
from electricity sales in its allocation methodology because these elements
must be allocated by customer class, whereas these other revenues are
excluded from the cost-of-service. Revenues other than those generated
from electricity sales are provided in Exhibit HQD-5, document 1 on page 3.
It is important to note that totals from other revenues differ from one
exhibit to the other as a result of the reallocation of reciprocal transactions.
Table R-20.1 shows the conciliation of data provided in Table 1 of Exhibit
HQD-6, document 1 and Exhibit HQD-11, document 3.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 8 de 11
Table R-20.1
Conciliation of Cost-of-Service between Exhibits HQD-6 and HQD-11
Projected Test Year 2009
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 9 de 11
Question:
27.1 The first reference suggests that departure from cost causality is not
sustainable in the long-term, even if based on the principle of social equity.
However, the second reference suggests that departure from the principle of cost
causality is acceptable. Please reconcile.
Response:
The second reference does not suggest that the Distributor has chosen to
set the level of the customer charge without taking costs into account.
However, it does indicate that there is no absolute rule to set the level of
the customer charge and that the Distributor must make choices that will
take several elements into account.
Therefore, the Distributor has chosen to include customer service and
metering costs in the customer charge.
Question:
28.1 Please indicate what activities are captured by each of the following
components of Customer Service:
•
Collections;
•
Electricity Theft;
•
Remote Communities – Other.
Response:
The main activities that are captured by the “Collections” function deal
with the recovery of amounts owing as a result of negotiations and the
follow-up of different collection agreements, service interruptions when
attempts to negotiate an agreement fail (except for the main residence of
residential customers between December 1st and April 1st) and the
treatment of closed accounts (collection of amounts owing that are
associated with accounts that are closed).
As for electricity theft, this function essentially includes activities
associated with inspectors on the ground that look for and report
electricity theft, as well as licensed engineers. Another activity consists of
billing customers that are at fault.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 10 de 11
For the cost of services rendered to remote community customers, see
response to Option consommateurs question 40.2 in Exhibit HQD-11,
document 8 of case R-3492-2002 – Phase 2.
Question:
30.3 Given the comment in footnote #21 why isn’t the break-even point in Table
26 $1.42/litre as opposed to $1.27/litre?
Response:
The price of 1.42 $/litre for fuel-oil is equivalent in ¢/litre to 17.55 ¢/kWh
which is the price applicable during on-peak periods. This means, as
indicated in Exhibit HQD-12, document 1, page 47, lines 11 to 13, that it is in
the interest of existing dual energy customers to use fuel-oil during onpeak periods if the price of fuel-oil is below 1.42 $/litre. This price provides
a real-time signal to customers upon which they can base their decision.
As mentioned in response to question 30.1, the price of 1.27 $/litre is the
result of an ex-post analysis of savings for a Rate DT customer who uses
dual-energy mode throughout the year compared with the price that would
have been paid under Rate D for AEH. This analysis accounts for the
electricity bill, the fuel-oil bill and the differential costs associated with
maintenance and it is used as a benchmark in the decision to subscribe or
not to the dual-energy rate.
Question:
32.2 Does the 10.97 cents/kWh represent a constant annuity in real or nominal
terms? If in nominal terms (i.e., fixed at 10.97 cents/kWh for 10 years) please
restate in “real” terms (i.e., annuity is escalated each year at inflation).
Response:
A constant annuity determines the price or the cost that will be used every
year over the defined period. Here, the annuity of 10.97 ¢/kWh is the
avoided cost of supply – transmission for space heating (Rate D) over the
next ten years. In other words, 10.97 ¢/kWh in 2009, 10.97 ¢/kWh in 2010
and so on for each of the ten years. The increasing annuity to which it is
associated is 10.12 ¢/kWh.
Le 20 octobre 2008
No de dossier : R-3677-2008
Traduction de certaines réponses aux DDR N°1 et N°2 d’Option consommateurs
Page 11 de 11
Question:
34.1 Please comment on whether, with this fourfold increase in seasonal cost
difference, it is still appropriate to extend the demand charge to the summer
months. If so, please explain why.
Response:
The Distributor proposes to bill capacity that exceeds 50 kW on an annual
basis to ensure better consumption management of domestic customers’
capacity requirements since these customers currently have no incentive
to do so. The seasonal aspect is captured by the mechanism for minimum
capacity billing which ensures that a winter capacity requirement does not
have the same impact on customers’ bills than a summer capacity
requirement.