RÉGIE DE L’ÉNERGIE
HYDRO-QUÉBEC DISTRIBUTION’S APPLICATION
FOR APPROVAL OF
TARIFFS EFFECTIVE 2004-2005
FILE R-3492-2002
PHASE 2
EVIDENCE OF
WILLIAM HARPER
ECONALYSIS CONSULTING SERVICES
ON BEHALF OF:
OPTION CONSOMMATEURS
OCTOBER 16, 2003
Table of Contents
1.0 Background ……………………………………………………………………....
1
2.0 Purpose of Evidence ……………………………………………………………..
2
3.0 Summary of January 8th Evidence and The Régie’s Phase 1 Decision ……….
3
3.1 Overview …………………………………………………………………..
3
th
3.2 Summary of January 8 , 2003, Phase 1 Evidence …………………………
5
3.3 Summary of Régie Decision (with respect to Cost Allocation) ……………
7
4.0 Hydro-Québec’s Proposed Phase 2 Cost Allocation Methodology …………….
11
4.1 Summary of Revenue Requirement and Rate Base ………………………..
11
4.2 Overview of Cost Allocation Methodology ………………………………..
12
4.3 Functionalization …………………………………………………………… 13
4.4 Classification and Allocation ………………………………………………. 25
5.0 Overall Conclusions ……………………………………………………………….. 38
Table 1: Revenue Requirement – Basis of Assignment to Functions ………………. 44
Table 2: Assignment of Costs to Functions ………………………………………….. 45
Table 3: Rate Base – Basis of Assignment to Functions ……………………………. 46
Table 4: Comparison of Load Characteristics – 2002 versus 2004 ………………… 47
Appendix A: Qualifications and Experience for William Harper
Evidence of
William Harper
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1.0 Background
2
3
On July 8th, 2002 Hydro-Québec Distribution (HQD) filed its first Application for approval
4
of distribution tariffs with the Régie de l’énergie (the Régie). The Application arose as a
5
result of changes in both the organizational structure of Hydro-Québec as well as
6
changes in the legislative and regulatory framework within which it operates. The
7
purpose of the application was to address the need for rates approved by the Régie as
8
of May 1st, 2004, when the then existing rate freeze was scheduled to expire.
9
10
In its original Application, HQD proposed that the Régie undertake its review in two
11
phases. Phase 1 would deal with a number of the policies and principles that would
12
need to be applied in determining the rates for 2004 including:
1. Regulatory principles regarding the establishment of the revenue requirement on
13
a forward test year basis,
14
15
2. Deemed capital structure, allowed rate of return on equity, and cost of debt,
16
3. Accounting policies,
17
4. Cost allocation policies,
18
5. The application of section 52.1 of the Act regarding cross-subsidization among
customer classes, and
19
6. Recognition and approval of the 2002-2003 revenue requirement.
20
21
Phase 2 would then deal with HQD’s proposals with respect to the actual rates to be
22
approved for 2004-2005, developed in accordance with the Régie’s decisions regarding
23
Phase 1.
24
25
Phase 1 took place during the fall of 2002 and the winter of 2002/2003 and the Régie
26
issued its decision1 on May 21st, 2003.
27
28
On July 7th, 2003, the Régie issued a procedural order2 initiating Phase 2 of its review of
29
HQD’s 2004-2005 distribution rate case. At that time, the Régie indicated that (at the
1
2
D-2003-93
D-2003-138
1
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
request of HQD) it was deferring consideration of a number of specific issues including
2
ROE-adjustment mechanism, changes to rate structure and terms & conditions of
3
service. Phase 2 would focus on the implementation of the regulatory principles
4
approved in Phase 1, HQD’s proposed revenue requirement (based on the Phase 1
5
cost of capital) and cost allocation.
6
7
HQD’s Phase 2 Application was filed with the Régie on August 13, 2003. In its
8
Application3, the utility sought immediate approval for an interim rate increase of 3% for
9
all customer classes4 to be effective October 1st, 2003. It also sought approval for its
10
proposed 2004 revenue requirement ($9,089.7 M), its revised cost allocation
11
methodology and a further rate increase of 2.98% effective April 1st, 2004 – to be
12
applied uniformly to all customer classes5. HQD also requested that the Régie confirm,
13
as part of its final decision regarding Phase 2, the interim rate approval requested for
14
October 1, 2003.
15
16
On September 9th, 2003 the Régie issued a decision6 rejecting HQD’s request for an
17
interim rate increase effective October 1st, 2003. Subsequently, on September 24th
18
HQD filed an amended Application wherein it sought the Régie’s approval to increase
19
its 2003-2004 rates by 3% 15 days following the Régie’s decision with respect to its
20
overall Application and by a further 2.98% applicable as of April 1, 2004.
21
22
2.0 Purpose of Evidence
23
24
I was retained by Option Consommateurs (OC) during Phase 1 to provide comments
25
regarding HQD’s proposed cost allocation methodology7. For Phase 2, OC has
26
requested that I review HQD’s Phase 2 proposals with respect to cost allocation matters
27
– with reference to my original evidence and the Régie’s Phase 1 decision – and
3
HQD Application Letter, August 13, 2003
Excluding the LR and MR classes
5
Again, excluding classes LR and MR
6
D-2003-168
7
Evidence of William Harper, January 8, 2003
4
2
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
comment on the appropriateness of HQD’s revised cost allocation methodology.
2
Furthermore, OC has asked me to comment on the transparency of the cost allocation
3
evidence filed by HQD.
4
5
The Phase 2 evidence starts with a summary of the issues identified in the January 8,
6
2003 Phase 1 Evidence and the Phase 1 findings of the Régie. This is followed by a
7
more detailed review and discussion of cost allocation methodology as currently
8
proposed by HQD. In its filing, HQD has provided the results of its cost allocation
9
methodology for 2002, 2003 and 2004. However, for purposes of the review and
10
comments, references are made with respect to the methodology and results as
11
presented for 2004 (i.e., HQD-8, Document 4). Overall, HQD’s revised methodology
12
reflects the Phase 1 decision of the Régie and addresses a number of the
13
methodological issues raised in the January 8th Evidence. However, there are a
14
number of areas where the methodology and/or the documentation of the allocation
15
process itself could be improved. These are noted throughout the text and summarized
16
in Section 5.0.
17
18
19
3.0 Summary of January 8th Evidence and the Régie’s Phase 1 Decision
20
21
3.1 Overview
22
23
Electric utilities perform cost of service (alternatively referred to as cost allocation)
24
studies in order to assess the appropriateness of the rates to be charged to each class
25
of customers. The objective of such studies is to determine both the total and the unit
26
costs of providing service to the utility’s various customer classes. The results are then
27
used to provide guidance in establishing the overall rate levels and designing the rate
28
structures for each individual class in a manner that fairly apportions the costs between
29
classes and provides appropriate pricing signals. The primary consideration in
3
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
undertaking a cost allocation study is to track costs and reflect cost causality to the
2
extent practical.
3
4
The Phase 1 January 8th Evidence noted that HQD’s proposed cost allocation
5
methodology followed standard utility industry practice whereby costs are
6
functionalized, classified and then allocated to customer classes. Furthermore, the
7
Evidence noted that the functions employed by HQD (i.e., Production, Transmission,
8
Distribution and Customer Service) were consistent with those employed by other
9
electric utilities. However, the Evidence identified a number of instances where:
10
•
considerations of cost causality,
11
12
•
•
Further analysis was recommended in order to confirm the appropriateness of the
proposed methodology.
15
16
Further documentation was recommended in order to clarify how the proposed
methodology worked, and
13
14
Changes were recommended to the methodology to more accurately reflect
These recommendations are summarized in Section 3.2 below.
17
18
Similarly, in its decision, the Régie agreed that HQD’s methodology generally followed
19
standard industry practice8 and accepted the basic cost of service functions as
20
proposed by HQD9. Further, the Régie observed that the direct assignment of costs
21
was preferable wherever possible and that cost allocation studies necessarily involved
22
trade-offs in terms of the level of precision attributable to the results and the complexity
23
of the required analyses. The Régie also noted that transparency was an important
24
attribute of cost allocation studies and that such studies must provide sufficient
25
information to allow for historical comparisons. Finally, the Régie noted that there were
26
a significant number of issues raised with respect to cost allocation and that all of them
27
would not be dealt with at this time – particularly the cost allocation with respect to
28
remotes. It observed that the cost allocation methodology would likely evolve with time
29
and experience.
8
9
D-2003-93, p. 143-144
Id., p. 144
4
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
In terms of the details and mechanics of the proposed methodology, the Régie accepted
2
certain aspects of HQD’s proposal but, in other areas, directed the utility to undertake
3
further analysis and revise its cost allocation methodology. The specific findings and
4
directives of the Régie with respect to cost allocation are summarized in Section 3.3.
5
6
3.2 Summary of January 8th, 2003 Phase 1 Evidence
7
8
The Evidence recommended the following changes to HQD’s proposed cost allocation
9
methodology:
10
•
In terms of Functionalization of the Revenue Requirement:
o Capital Taxes should be assigned to the Remote and Distribution-Grid
11
12
sub-functions in a manner that more closely reflects the basis on which
13
they were actually incurred (i.e., net book value – preferably including
14
assets under construction).
o Gross Revenue Taxes should also be assigned to all functions in a
15
16
manner that more closely reflects how the taxes are actually calculated
17
(i.e., based on revenues or total allocated costs – excluding the cost of
18
electricity commodity purchases and transmission services).
o Electricity Supply Procurement Costs should be functionalized as
19
Production.
20
21
•
In terms of Functionalization of the Rate Base:
22
o Working Fund Requirements associated with electricity commodity
23
purchases and transmission services should be assigned to the
24
Production and Transmission functions respectively. Furthermore, the
25
working fund requirements associated with labour expenses, other O&M
26
expenses, capital taxes, gross revenue taxes and municipal and school
27
taxes should each be allocated separately to functions using the same
28
methodology as was used to allocate the associated revenue requirement
29
component.
30
•
In terms of Classification and Allocation:
5
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
o In allocating the demand-related costs for the Medium and Low Voltage
1
2
sub-functions, the 1-NCP customer class values should be adjusted reflect
3
the load carrying capability of the minimum system. This recommendation
4
applied to allocation of both the revenue requirement and rate base.
5
o In the Customer Care & Accounting sub-function, the costs associated
6
with meter reading, billing and accounting should be separately identified
7
and allocated to customers based on a weighted customer count factor
8
that captures the relative cost of these activities for various customer
9
classes. This recommendation also applied to the allocation of both the
revenue requirement and the rate base.
10
o The allocation of HQD overheads should be changed so as to be
11
12
consistent with the allocation base used to allocate Hydro-Québec’s
13
corporate overheads (i.e., exclude purchased fuel costs for Remote
14
Communities).
15
16
The Evidence recommended that the following aspects of the cost allocation
17
methodology required further documentation in order to improve the transparency of the
18
process:
19
20
•
In terms of the Functionalization of costs:
21
o HQD should more clearly document how the costs and assets associated with
22
the various cost centres used for budgeting and cost reporting purposes are
23
functionalized.
24
o HQD should more clearly detail how municipal and school taxes are assigned
25
between the Distribution and Customer Service functions and among the
26
Distribution sub-functions.
27
o HQD should more clearly detail how the working fund requirements associated
28
with electricity commodity and transmission service purchases are assigned to
29
the various functions.
30
6
Evidence of
William Harper
1
•
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
In terms of the Classification and Allocation of costs:
o HQD should more clearly document how the revenue requirement and rate base
2
3
associated with the Customer Care & Accounting and the Sales & Marketing sub-
4
functions are attributed to small/medium versus large volume customers.
o HQD should more clearly explain how the amortization and remaining
5
6
unamortized balances for the costs associated with commercial programs are
7
allocated to customer classes.
8
9
Finally, the Evidence recommended that HQD undertake further analyses regarding the
10
following issues:
11
•
voltage, low voltage and the customer connections sub-functions.
12
13
The reliance on the minimum system method to establish the costs for medium
•
The appropriateness of using an average in-service date as the basis for making the
14
adjustments between accounting costs and current replacement costs required for
15
the minimum system calculations.
16
•
low voltage facilities.
17
18
The appropriateness of using the same demand/customer split for both medium and
•
The appropriateness of using 1-NCP to allocate the demand-related costs for the
medium and low voltage distribution sub-functions.
19
20
21
3.3 Summary of the Régie’s Decision (with respect to Cost Allocation)
22
23
Cost of Electricity Supply
24
25
The Régie noted that HQD’s allocation of the Electricity Supply costs conformed to its
26
earlier decision10 as to how the costs of the Heritage Pool should be allocated to
27
customer classes and accepted the method of allocation proposed by the Company.
28
10
D-2002-221
7
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
The Régie indicated that it expected additional details to be provided for Phase 2
2
regarding electricity usage by interruptible and other special rate categories and that it
3
would further consider the treatment of the supply costs for these classes at that time.
4
The Régie also deferred to a future rate hearing the allocation of extra-Heritage Pool
5
electricity supply costs, as no such costs were forecast for 2004.
6
7
Cost of Transmission
8
9
The Régie accepted HQD’s proposal to allocate the cost of transmission charges
10
payable to TransÉnergie (HQT) based on 1-CP (i.e., the coincident peak of each
11
customer class) for the time being. The Régie noted that the methodology used by
12
HQD to allocate its share of transmission costs to the end use customer classes would
13
be the subject of future review, after the Régie has made final determinations on HQT’s
14
transmission cost allocation study11.
15
16
Functionalization of HQD’s Distribution and Customer Service Costs
17
18
The findings with respect to functionalization focused primarily on three issues: the
19
determination of connection costs; the splitting of distribution costs between the medium
20
and low voltage sub-functions, and the treatment of customer care costs.
21
22
The Régie found that the use of the Minimum System Study analysis to determine
23
Connection costs was inappropriate and directed HQD to adopt an approach based on
24
the relative connections costs associated with the different types of customers it
25
serves12.
26
27
Similarly, the Régie was not convinced that the Minimum System study provided the
28
appropriate basis for separating out the costs for the low versus medium voltage
11
I understand that HQT recently filed the required cost allocation study. However, no schedule has been
established yet for the review of the study.
12
The Régie specifically directed HQD to adopt the methodology set out in response to an undertaking during the
oral phase of the hearing – HQD-12, document 4.1.3
8
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
distribution network facilities. HQD was directed to undertake additional analyses for
2
Phase 2.
3
4
Finally, with respect to Customer Care & Accounting, the Régie noted that a number of
5
activities were included in this sub-function and that the underlying cost drivers varied
6
depending upon the specific activity concerned. The Régie directed that HQD
7
undertake a detailed study of the Customer Care & Accounting activities (particularly
8
billing, meter reading and settlements) with a view to separating out the costs involved
9
and allocating each to customer classes based on the appropriate cost driver.
10
11
Overall, the Régie observed that there was lack of clarity in terms how each of the cost
12
components of the rate base and revenue requirement was assigned to functions and
13
directed HQD to provide more details in the future13.
14
15
Classification of Costs
16
17
The Régie accepted HQD’s proposal to classify Customer Service function costs as
18
customer-related.
19
20
The Régie accepted HQD’s proposals to classify Connection sub-function costs as
21
customer-related and Distribution Station & Operating Centre sub-function costs as
22
demand-related, noting that both practices were consistent with industry standards.
23
24
The Régie also accepted the approach proposed by HQD for the assignment to
25
functions of the costs associated with the Streetlights/Sentinel Lighting; the Sales &
26
Marketing sub-function and the Other sub-function14.
27
28
The Régie accepted the Minimum System Method for classifying distribution network
29
costs between customer-related and demand-related15. In doing so, the Régie noted
13
14
D-2003-93, page 156
D-2003-93, page 162
9
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
that it was one of the two standard methods used by the industry to classify such costs.
2
However, the Régie also noted that implementation of the Minimum System Method
3
varied from one distributor to another. The Régie indicated that it was not convinced
4
that there was no load carrying capability associated with the minimum system. As a
5
consequence, the Régie directed the Company to subtract a demand cost component
6
(based on 1 kW per customer) from the customer-related costs determined by the
7
Minimum System method and transfer it to the demand-related costs – as determined
8
by the Minimum System method. The 1 kW value was considered to be reasonable
9
until HQD had the opportunity to refine its method. The Régie also accepted HQD’s
10
methodology for recognizing the difference between replacement costs and embedded
11
asset costs for minimum system facilities based on the Handy Whitman index and
12
average in-service lives.
13
14
Allocation to Customer Classes
15
16
The Régie accepted the 1-NCP methodology for allocating the Distribution function’s
17
demand-related costs to customer classes.
18
19
In the case of the Connections sub-function, the Régie directed that the costs be
20
allocated to customer classes based on the customer count for each class and the unit
21
cost of connections for each customer class.
22
23
The Régie noted that for some of the Customer Care & Accounting activities (e.g. billing
24
and meter reading) factors other than simply the number of customers in each customer
25
class – such as meter reading frequency and billing frequency - affected the costs
26
incurred on behalf of each customer class. For Phase 2, the Régie directed that HQD
27
allocated the costs of these activities separately.
28
15
D-2003-93, page 162
10
Evidence of
William Harper
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
4.0 Hydro-Québec’s Proposed Phase 2 Cost Allocation Methodology
2
3
4.1 Summary of Revenue Requirement and Rate Base
4
5
For the 2004 rate year, HQD’s proposed non-return related revenue requirement is
6
$8,398.8 M and consists of the following costs16:
7
•
Electricity Purchases
$4,627.4 M
8
•
Transmission Services:
$2,313.0 M
9
•
Gross OM&A
$ 862.4 M
10
•
Capitalize OM&A
$ (271.2)M
11
•
Cost of Shared Services
$
405.0 M
12
•
Corporate Overheads
$
45.4 M
13
•
Depreciation and Amortization
$
430.3 M
14
•
Taxes
$
105.9 M
15
•
Purchased Fuel
$
26.9 M
16
•
Internal Revenues
$
(70.2)M
17
•
Other Revenues
$
(52.0)M
18
•
Ice Storm Reimbursement
$
( 5.9)M
19
•
Retirement Credit
$
(18.2)M
20
21
In addition, the 2004 revenue requirement includes cost of capital charges of $690.9
22
M.17
23
24
The rate base proposed by HQD for 2004 is $8,465.2 M18 and consists of:
25
•
Fixed assets with an average net book value of $7,819.3 M,
26
•
Unamortized credits and expenses with a value of $329.8 M,
27
•
A working capital allowance of $218.4 M and
16
HQD-8. Document 4, page 9
HQD-1, Document 1, page 15, Table 1
18
HQD-8, Document 4, page 8
17
11
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Inventories valued at $97.7 M.
2
3
4.2 Overview of Cost Allocation Methodology
4
5
HQD’s Phase 2 cost allocation methodology is generally the same as that proposed in
6
Phase 1, with the following exceptions:
•
7
HQD has made a number of specific changes in order to respond to the
directions of the Régie in its Phase 1 decision19,
8
•
9
HQD identified specific rate base cost components associated with the “Other”
10
sub-function20 and refined the allocation of various revenue requirement
11
components of the “Other” sub-function21,
•
12
HQD has made additional changes to the Phase 1 methodology with respect to
13
the functionalization and allocation of specific cost components (e.g. pole rental
14
revenues, taxes and the derivation of CP/NCP values) and, finally,
•
15
HQD has put forward proposals for incorporating a number of new
16
charges/credits (e.g., the costs associated with energy efficiency (DSM)
17
programs22, the costs and rate base associated with “actifs incorporels”, new
18
revenue requirement components associated with retirement credits, other
19
staffing related costs, revenue from internal electricity billings and write-offs &
20
withdrawals (“radiations & retraits”)) into the cost allocation methodology.
21
22
Where possible, HQD directly assigns the cost components of the revenue requirement
23
to a specific function and sub-function. These are identified in Table 1 provided at the
24
end of this Evidence. Other cost components of HQD’s revenue requirement are
25
tracked by “cost centres”23 and sufficient detail is generally available to permit the costs
26
to be assigned directly to HQD’s cost of service functions and in many cases to be
27
assigned to specific sub-functions as well. The remaining cost components of HQD’s
19
HQD-8, Document 1
HQD-8, Document 4, page 32
21
HQD-8, Document 1, pages 20-21 and HQD-8, Document 4, page 33
22
HQD-8, Document 1, page 6
23
Phase 1, HQD-4, Documents 5 to 5.3
20
12
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
revenue requirement are attributed to functions using an appropriate allocation factor.
2
Table 2 summarizes the results of this process.
3
4
A similar process is used to assign HQD’s rate base to cost of service functions (and
5
sub-functions) and Table 3 identifies those rate base components that are tracked to
6
functions by cost centres versus those that are directly assigned or allocated. The
7
functionalization of HQD’s revenue requirement and rate base as proposed for Phase 2
8
is addressed in greater detail in Section 4.3.
9
10
The costs assigned to each function are then either designated for direct assignment to
11
a specific customer class or classified as customer and/or demand-related so that they
12
can be allocated to customers classes. The details regarding the classification and
13
allocation of HQD’s 2004 revenue requirement and rate base are discussed in Section
14
4.4.
15
16
4.3 Functionalization
17
18
Functions Employed
19
20
HQD continues to use Production, Transmission, Distribution and Customer Service as
21
its primary functions – consistent with the findings of the Régie. In the case of
22
Distribution and Customer Service, the functions are broken down into the same sub-
23
functions as in Phase 1:
24
•
Distribution
25
o Distribution and Operating Centres
26
o Medium Voltage Lines
27
o Low Voltage Lines
28
o Connections
29
o Streetlights/Sentinel Lighting
13
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Customer Service
2
o Customer Care & Accounting
3
o Metering
4
o Sales & Marketing
5
o Other
6
However, in the case of the Customer Service function, the sub-functions (except for
7
Metering) are broken down into more detailed sub-categories than was the case in
8
Phase 1:
9
•
Customer Care & Accounting24
10
o Meter Reading
11
o Billing
12
o Collection/Settlement
13
o Debt Recovery
14
o Illegal Use/Power Theft
15
o Call Centre
16
o Complaints & Claims
17
o Public Relations
•
18
Sales &Marketing
19
o Small/Medium Power Customers – Marketing
20
o Small/Medium Power Customer – Sales Support/Service (“ Ventes en
territories”)
21
22
o Large Power Customers – Commercial Programs
23
o Large Power Customers – Sales Support/Service (“Autres”)
24
o Energy Efficiency Programs
•
25
Other
26
o Electricity Supply Procurement
27
o Other Activities
28
o External Revenues (“Facturation externe émise”)
24
HQD-8, Document 4, page 19
14
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
The Customer Care & Accounting changes reflect the direction of the Régie in its Phase
2
1 decision; while the introduction of an Energy Efficiency sub-category recognizes that
3
for 2004 the revenue requirement includes a charge for the amortization of cost
4
associated with the development of energy efficiency programs and the rate base
5
includes a component for unamortized balance associated with these activities. In the
6
case of the Other sub-function, the cost allocation methodology now captures the fact
7
that there are rate base components associated with HQD’s corporate activities (a
8
shortcoming noted in Phase 1).
9
10
Functionalization of HQD’s Revenue Requirement
11
12
o Costs Directly Assigned
13
14
As indicated in Section 4.1, the following costs/credits are directly assigned to specific
15
Cost of Service functions and sub-functions:
16
•
Electricity Purchases – are assigned to the Production function.25
17
•
Transmission Services – are assigned to the Transmission function.26
18
•
Ice Storm Reimbursement – is assigned to the Distribution function. It is then
19
allocated to the sub-functions affected (i.e., medium voltage, low voltage and
20
connections) based on net book value.27
•
21
Fuel Purchases – are assigned to Distribution-Remote Communities and to the
Other sub-function (Electricity Supply Procurement).28
22
•
23
Commercial Programs and Energy Efficiency Programs – are assigned to the
24
Sales & Marketing – Small/Medium Power (Marketing) and Sales & Marketing –
25
Energy Efficiency sub-functions respectively.29
25
HQD-8, Document 4, page 9, column 3
HQD-8, Document 4, page 9, column 4
27
HQD-8, Document 4, page15
28
HQD-8, Document 4, page 9, line 14
29
HQD-11, Document 8, pages 19-20, Question 12.1. Note: There are no amortization costs associated with
Commercial programs for Large Power customers in 2004.
26
15
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
External Revenues – are assigned to specific functions and sub-functions based
2
on the revenue source. Connection fees are assigned to the Distribution-
3
Connections sub-function. The revenues associated with reconnection and theft
4
recovery are assigned to the Customer Care sub-function components for debt
5
recovery and theft respectively. The revenues from the Lac Robertson remote
6
network are assigned to remotes. The remaining external revenues are all
7
assigned to the Customer Service-Other (External Revenue) sub-function.
8
Comments
9
10
11
The functionalization of the costs for electricity supply and transmission
12
services, as well as that of the ice storm reimbursement follow the same
13
approach as used in Phase 1 and there were no issues identified
14
regarding the treatment of these costs/credits.
15
16
In the case of Fuel Purchases, in Phase 1 all such costs were allocated to
17
the Remote Communities; whereas in Phase 2 $0.5 M have been
18
identified as electricity purchases made by the Electricity Supply
19
Procurement unit.30 However, it is not immediately clear what the purpose
20
of these later purchases is since HQD has indicated that prior to 2005 its
21
electricity requirements can be met by the Heritage Pool.31
22
23
The functionalization of the costs associated with Commercial Programs
24
to the Sales & Marketing sub-function (and subsequently to Small/Medium
25
Power Customers – Marketing and Large Power Customers – Commercial
26
Programs) is the same as in Phase 1. The revenue requirement expense
27
associated with Energy Efficiency Programs is a new item and is
28
functionalized separately.
29
30
31
HQD-11, Document 8, page 21, Question 14.1
HQD-5, Document 2, page 3
16
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
There have been a number of changes in the treatment of external
2
revenues:
3
•
First, revenues from pole rentals are no longer considered to be
4
“external revenues” but rather now an offset against O&M costs.32
5
However, the classification of pole rental revenues to sub-functions
6
follows the same process as in Phase 1 (i.e., classified to
7
overhead BT and MT distribution facilities based on net book
8
value).33
•
9
Specific external revenues have been identified as being
10
associated with the individual Customer Care & Accounting
11
activities and assigned accordingly.
•
12
The external revenues assigned to the Customer Service-Other
13
sub-function are tracked by revenue type such that they can be
14
allocated to customers more accurately.
15
Overall, these changes improve the cost tracking capability of the cost
16
allocation methodology.
17
18
o Costs Tracked and Assigned by Cost Centre
19
20
Details regarding the following components of the revenue requirement are tracked
21
based on HQD’s cost centre structure34 and, as result, can be classified directly to the
22
Distribution-Networks, Distribution-Remotes and Customer Service functions:
23
•
Direct O&M costs ( including Capitalized Overheads)
24
•
Shared Services costs
25
•
Revenues from Services to other HQ units (including other HQD units)
26
•
Amortization costs associated with fixed assets, “actifs incorporels”, and
write-offs & withdrawals (“radiations & retraits”).
27
32
HQD-11, Document 1, page 36, Question 18.1 and HQD-11, Document 2, pages 20-21, Question 16.1
HQD-8, Document 4, page 15, FC17
34
Phase 1, HQD-4, Documents 5 to 5.3
33
17
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
Furthermore, the costs centre structure permits the costs associated with the Customer
2
Service Function to be directly assigned to the specific sub-functions. In the case of the
3
Distribution-Networks function, the costs are assigned to the individual sub-functions
4
based on the net book value of assets in each sub-function.
5
Comments
6
7
8
This approach to assigning O&M costs, Shared Services costs, Revenues from
9
Services to other HQ units and the amortization associated with fixed assets is
10
the same as that employed in Phase 1. In Phase 2, the approach (i.e.,
11
assignment using cost centres) also appears to be the one used to assign the
12
amortization of the costs associated with “actifs incorporels” and write-offs &
13
withdrawals – both new cost components for the cost allocation methodology35.
14
15
In response to Information Requests36, HQD has confirmed that there are various
16
supporting cost centres where the associated activities are not directly
17
attributable to a specific sub-function and the associated costs must be
18
“allocated” to the relevant sub-functions. However, no details have been
19
provided on cost centres concerned or the allocation processes used, as HQD
20
has indicated that this is an issue that the Régie delegated to the next rate case.
21
While this may be the case, it would still have been useful for HQD to provide the
22
requested information so as to allow parties to fully understand how the current
23
cost allocation methodology functions and better understand the implications of
24
any changes that may be proposed in conjunction with the next rate case.
25
26
Finally, it not clear why for certain cost centres (e.g., Large Power Customers)
27
and for certain components of the Customer Care & Accounting sub-function
28
(e.g., Debt Recovery and Call Centre) the value for capitalized O&M costs is
35
36
HQD-11, Document 8, page 17, Question 11 and HQD-8, Document 4, page 15
HQD-11, Document 8, page 8, Question 5.4
18
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
“positive” (i.e., a charge to operations) as opposed to being a credit (i.e.,
2
reduction) to the cost of operations37.
3
4
o Costs Allocated to Functions
5
6
The following cost components of the revenue requirement are allocated to functions
7
and sub-functions based on factors intended to reflect costs causality:
8
•
HQ Corporate Overheads
9
•
Retirement Credit
10
•
Taxes
11
•
Cost of Capital
12
13
Corporate Overheads are allocated to functions in two parts:
•
14
The costs associated with Human Resources are allocated to functions and subfunctions based on the salary costs assigned to each.
15
•
16
The balance of Corporate overhead costs are allocated to the Distribution and
17
Customer Service functions and, subsequently, to the various Customer Service
18
sub-functions on the basis of total costs associated with each function, excluding
19
the costs of electricity, fuel purchases and transmission services. The Corporate
20
overhead allocated to distribution are allocated to individual sub-functions on the
21
basis of net book value.
22
23
The retirement credit is a new revenue requirement component introduced since Phase
24
1. HQD proposes to assign the credit to functions (and sub-functions) based on
25
salaries.
26
27
In the case of Taxes, there appear to be changes in how Capital and Gross Revenue
28
taxes are assigned for Phase 2.
29
37
HQD-11-Document 8, page 8, Question 5.2
19
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
In Phase 1, Capital taxes were assigned to the Distribution (including Remotes) and
2
Customer Service functions based on the net book value of the assets associated with
3
the functions, including assets under construction38. Within the Distribution function, the
4
costs were split between Networks and Remotes based on the number of cost centres
5
associated with each function. Finally, capital taxes associated with Remotes were
6
assigned to the split equally between Production, Transmission and Distribution;
7
whereas the capital taxes associated with Distribution-Networks were allocated to the
8
individual sub-functions based on net book value. For the Customer Service function,
9
capital taxes were allocated to the individual sub-functions based on net book value39.
10
11
For Phase 2, HQD has indicated that the assignment of capital taxes to the sub-
12
functions within both the Distribution and Customer Service functions is based entirely
13
on net book value40.
14
15
In Phase 1, Revenue taxes were assigned to the Distribution (including Remotes) and
16
the Customer Service functions based on net book value of assets in-service and, then
17
subsequently, assigned to sub-function using the same approach as for Capital taxes.
18
However, for Phase 2, the revenue taxes are all attributed to the Distribution function
19
and then assigned to sub-functions appears to also be based entirely on net book
20
value.41
21
22
Municipal & School taxes are assigned to sub-functions in the same manner they were
23
in Phase 1 – based on salaries42. However, there are no Municipal & School taxes
24
assigned to Remotes.43
25
38
Phase 1, HQD-5, Document 11, page 3 and HQD-10, Document 8, page 82-83, Question 32.9
Phase 1, HQD-10, Document 8, pages 82-83
40
HQD-11, Document 8, page 22, Question 16
41
HQD-11, Document 8, page 23 and Table R16.4
42
HQD-11, Document 8, page 23, Question 16.1
43
HQD-11, Document 8, page 24, Table R16.4, line 3
39
20
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
HQD’s cost of capital is allocated directly to customers by applying the proposed rate of
2
return (8.16%) to the rate base allocated to each customer class.
3
Comments
4
5
6
For HQ Corporate overheads, the methodology is the same as that used in
7
Phase 1 and no issues were identified with the approach at that time.
8
The allocation process used for the retirement credit reflects how the credit is
9
allocated between HQ’s various lines of business (including HQD)44.
10
11
12
The use of net book value to classify the Capital and Revenue taxes assigned to
13
the Distribution function is an improvement and consistent with the Evidence
14
given on behalf of OC in Phase 145 .
15
16
However, the concerns expressed earlier regarding the use of net book value to
17
assign Revenue taxes to functions and sub-functions as opposed to using an
18
approach that more closely aligned with the way in which Revenue taxes are
19
determined for Hydro Québec overall46 still exist.
20
21
Finally, it still not clear from the material presented how Capital, Revenue and
22
Municipal and School Taxes are initially assigned to the Distribution, Remotes
23
and Customer Service functions.
24
44
HQD-11, Document 8, pages 26-27, Question 19
Phase 1 OC Evidence, pages 14-15
46
Phase 1 OC Evidence, pages 15-16
45
21
Evidence of
William Harper
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Functionalization of HQD’s Rate Base
2
3
o Components Assigned Directly
4
5
Many of the components of HQD’s rate base can be directly assigned to both functions
6
and sub-functions:
•
7
Distribution Station and Operating Centres Facilities – the average net book
8
value is directly assigned to the corresponding Distribution Stations and
9
Operating Centres sub-function.
•
10
Metering Equipment – average net book value is directly assigned to the
Metering sub-function.
11
•
12
Other Networks Assets – consists of equipment associated with street and
13
sentinel lighting and the average net book value is directly assigned to the Street
14
Lights/Sentinel Lighting sub-function.
•
15
Unamortized costs for Commercial Programs – are assigned directly to the Sales
16
& Marketing sub-function and then further assigned to sub-components in the
17
same manner as the annual amortization costs associated with the programs47.
•
18
Unamortized costs for PGEE - are directly assigned to the Energy Efficiency
19
component of the Sales & Marketing sub-function – again, in the same manner
20
as the annual amortization of the costs associated with the programs48.
21
22
o Components Tracked by Cost Centres
23
24
The unamortized costs associated with “actifs incorporels” are recorded by cost centre
25
and can be assigned directly to the Distribution-Networks, Distribution-Remotes and
26
Customers Service functions.49 As was the case with the annual amortization costs
27
associated with “actifs incorporels”, the cost centre structure generally permits the costs
28
associated with the Customer Service Function to be directly assigned to the specific
47
HQD-8, Document 4, pages 30 and 31
HQD-8, Document 4, pages 30 and 31
49
HQD-11, Document 8, page 35, Question 27.2
48
22
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
sub-functions. In the case of the Distribution-Networks function, the costs are assigned
2
to the individual sub-functions based on the net book value of assets in each sub-
3
function.
4
5
General Plant assets are also recorded and tracked by major cost centre, i.e.,
6
Networks, Remotes, Customer Service, and Large Customer Marketing & Sales.
7
However, the subsequent assignment to individual sub-functions generally relies on
8
various allocation factors and follows the same process as in Phase 150.
9
10
o Components Allocated to Functions
11
12
The following cost components of the rate base are allocated to individual functions and
13
sub-functions:
•
14
The average net book values associated with overhead and underground
15
distribution network facilities are allocated to the Medium Voltage, Low Voltage
16
and Connections sub-functions. The allocation methodology used has been
17
revised, in response to the Régie’s Phase 1 decision51.
•
18
The average unamortized costs associated with pension benefits, other post-
19
employment benefits and staff reduction costs are also allocated to sub-functions
20
using the same methodology as in Phase 1.52
•
21
Working fund requirements are directly attributed to each of the major cost
22
centres53 (e.g, Networks, Remotes, Customer Service and Large Customer Sales
23
& Marketing) - but they are then allocated to individual sub-functions. The
24
allocation methodology is the same as that used in Phase 1.54
•
25
The value of inventories related to meters are directly assigned to the Meters
26
sub-function while the balance of the cost of inventories is allocated across the
27
various Networks sub-functions (including Remotes) based on an inventory
50
HQD-11, Document 8, page 33, Question 26.1
HQD-8, Document 1, pages 10-14
52
HQD-11, Document 8, page 39, Question 30.1
53
HQD-11, Document 8, page 43, Question 32.2
54
HQD-11, Document 8, page 43, Question 32.1
51
23
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
analysis as of April 30, 200255. This is the same approach as was used in Phase
2
1.
3
4
Overall, the only change from Phase 1 is with respect to the classification of overhead
5
and underground network facilities. HQD’s proposed approach effectively involves two
6
steps56:
7
•
The accounting value of HQD’s connection assets is estimated by identifying the
8
number of overhead and underground connections by customer class,
9
determining the replacement value for these connections and then adjusting the
10
results based on the average age of HQD’s facilities and the historic escalation in
11
costs experienced for such facilities (as measured by the Handy-Whitman index).
•
12
The remaining value of the for the overhead and underground network facilities is
13
then split between the Medium Voltage and Low Voltage sub-functions. This is
14
accomplished by determining, for the period 1999-2002, the replacement value
15
for the major components (e.g. poles, cable and transformers) of medium voltage
16
and low voltage facilities actually installed in those years, using the resulting
17
values to determine the replacement costs for all similar medium voltage and low
18
voltage components and, then, using relative costs to split the actual net book
19
value of the for these assets (less the value attributed to connections) between
20
the Medium and Low Voltage sub-functions.
21
Comments
22
23
24
The approach adopted for determining Connection sub-function costs is
25
consistent with the Régie’s decision in Phase 157.
26
27
While the Régie did not provide specific direction as to how the costs associated
28
with the medium and low voltage sub-functions should be established, the
55
HQD-11, Document 8, page 45, Question 32.3
HQD-8, Document 1, pages 11-15.
57
D-2003-93, page 155
56
24
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
approach utilized by HQD is consistent with the evidence presented in Phase 158
2
and the methodology appears reasonable. One concern may be with the size of
3
the sample used in that the period 1999-2002 captures less than 10% of the total
4
poles and cable currently in-service. This could addressed by HQD either
5
expanding its sample period back to capture a large historical timeframe and/or
6
including more current years as time passes and the cost allocation methodology
7
is updated for future rate cases.
8
While there were no specific issues raised in Phase 1 regarding the methodology
9
10
used by HQD to classify General Plant, concerns were expressed regarding the
11
transparency of the processes employed in assigning the cost for various cost
12
centres to functions. This issue is still outstanding and, according to HQD,
13
something to be addressed in the next rate case.59
14
15
In the case of working capital requirements, issues were raised in Phase 1
16
regarding both the methodology used to classify costs as well as the
17
transparency of the overall process60. Again, both issues are still outstanding
18
and need to be addressed.
19
20
4.4 Classification and Allocation
21
22
Classification and Allocation of HQD’s Revenue Requirement
23
24
o Production, Transmission and Distribution-Distribution Stations/Operating Centres
Functions
25
26
27
The classification and allocation methodology for Production (i.e., Electricity Supply
28
costs) is the same as that employed for Phase 1 and accepted by the Régie.
58
Phase1, Réponse d’OC à la demande d’HQD, #2.5
HQD-11, Document 8, page 8, Question 5.4
60
Phase 1, Evidence d’OC, pages 23-25
59
25
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
2
The costs of Transmission are classified as 100% demand-related and allocated to the
3
various grid-connected customers based on each class’ contribution to the annual
4
system peak (i.e., 1 CP). This approach is similar to that used in Phase 1 and found
5
acceptable (in the interim) by the Régie. However, in establishing the 1 CP values for
6
the interruptible power customer classes (i.e., BT) for Phase 2, HQD has excluded the
7
interruptible portion of the loads.61.
8
9
Similarly, in the case of the Distribution-Distributing Stations/Operating Centres sub-
10
function, the costs are classified as 100% demand-related and allocated to customer
11
classes based on each class’ annual non-coincident peak (1 NCP) associated with
12
medium voltage facilities62. This approach is similar to that used in Phase 1 and found
13
acceptable by the Régie. However, in establishing the 1 NCP values for the
14
interruptible power customer classes (i.e., BT) for Phase 2, HQD has again excluded
15
the interruptible portion of the loads for these classes63.
16
Comments
17
18
19
HQD has indicated that since the BT loads are interruptible they should not be
20
allocated any demand costs64. However, in considering the appropriateness of
21
excluding of the interruptible portion of the loads associated with the BT
22
customer class for purposes of allocating transmission service costs it is
23
necessary to consider whether:
24
a) The interruptible portion of these loads were excluded from the calculation
25
of the 1 CP value used for HQD in the allocation of transmission service
26
costs by HQT, and
61
HQD-8, Document 4, page 17 and HQD-11, Document 1, page 95, Question 57
HQD-8, Document 4, pages 11 and 13 (FR 2)
63
HQD-8, Document 4, page 17 and HQD-11, Document 1, page 95, Question 57
64
HQD-11, Document 1, page 95, Question 57
62
26
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
b) The terms and conditions of service for these customer classes are such
1
2
that the interruptible portion of the load can be curtailed for faults on the
3
transmission system (as opposed to generation shortfalls).
4
5
Similarly, in determining the appropriateness of excluding of the interruptible
6
portion of the loads associated with the BT customer class for purposes of
7
allocating the costs of the Distributing Stations/Operating Centres sub-function it
8
is necessary to consider whether, under the terms and conditions of service for
9
this customer class, the load can be curtailed for faults on the distribution system.
10
11
From a review of the cost allocation process used by HQT to establish the
12
transmission costs attributable to HQD65, it is not clear whether interruptible loads
13
were included or not. However, a review of the Terms and Conditions associated
14
with the service to BT customers suggests that they are curtailable in the event of
15
an energy supply shortfall as opposed faults on the transmission or distribution
16
systems66. HQD should not exclude the interruptible portion of these class’ loads
17
when determining the 1 CP value to be used to allocate Transmission Service
18
costs or the 1 NCP values used to allocate the costs of the Distributing
19
Stations/Operating Centres sub-function unless it can clearly demonstrate that
20
such loads do not contribute to their cost responsibility and, in the interim, should
21
revert to the methodology as used in Phase 1.
22
23
A comparison of the loads and energies, by customer class, as presented in
24
Phase 1 with those used for cost allocation in Phase 2 (see Table 4) suggests
25
that the load characteristics assumed for the various customer classes are
26
changing over time. In the case of both the D and G rate classes, it would seem
27
that the class load factor is decreasing when calculated based on coincident
28
peak demand; but increasing when calculated based on non-coincident demand.
29
65
66
R-3401-98, HQT-13, Document 12.1, page 4, response R2f).
Electricity Rate Bylaw Number 663, Section 270 (English Version)
27
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
In addition, there appear to be some anomalies in the demand data used. In the
2
case of D and G rate classes, the 1 CP (or coincident peak load) value for 2004
3
exceeds the 1 NCP (or non-coincident peak value)67 – even though by definition
4
the latter should always be the higher of the two. HQD has indicated that the
5
demand characteristics for the customers other than large power customers are
6
estimated based on sample data however they have not provided any of the
7
supporting analyses68.
8
It would be useful if, as part of future rate cases, HQD were to provide the
9
10
supporting load research results and analyses used to establish the demand
11
characteristics by customers class and the accuracy of the estimates used. This
12
would increase the transparency of the process used to develop the demand
13
allocators required for the cost allocation methodology and allow parties to better
14
understand any changes in the load characteristics from those assumed in
15
previous cases.
16
17
o Distribution-Medium and Low Voltage Facilities
18
19
Consistent with the findings of the Régie in Phase 169, the costs in these two sub-
20
functions are classified between demand and customer-related using the minimum
21
system method. The methodology employed is generally the same as that used in
22
Phase 1 to determine customer costs with two exceptions:
•
23
First, the customer and demand portions (%) of the costs associated with
24
medium and low voltage facilities are individually determined (since the HQD
25
does not have to rely on the Minimum System calculations to separate out
26
medium and low voltage costs), and
67
See Table 4 and HQD-8, Document 4, page 17
HQD-11, Document 8, page 48, Question 37
69
D-2003-93, page 162
68
28
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Second, in accordance with the Régie’s Phase 1 decision70, a portion of the
2
customer-related costs associated with medium and low voltage facilities is
3
transferred to the demand-related costs associated with each based on a load
4
carry capability associated with the minimum system of 1 kW per customer.
5
6
The demand-related costs associated with these two sub-functions are then allocated to
7
customer classes on the basis of each class’ non-coincident peak (1 NCP), again
8
consistent with the Phase 1 decision of the Régie71. Similarly, customer-related costs
9
are allocated to the various customer classes based on the number of customers in
10
each class. For the Medium Voltage sub-function the demand and customer measures
11
reflect the characteristics of all customers served at distribution voltages whereas for
12
the Low Voltage sub-function the allocators used reflect the number of customers
13
served at low voltages and their associated demands.
14
Comments
15
16
17
HQD’s approach to recognizing the load carrying capability of the minimum
18
system by identifying and subtracting from the customer costs determined using
19
the minimum system method an allowance for load carry capability of 1 kW per
20
customer conforms with the Régie’s Phase 1 decision.
21
22
HQD’s methodology is based on the same principle as the “zero intercept
23
method” except it is applied at a system level. However, it relies on just two data
24
points to determine the “intercept” which is then used to estimate customer costs
25
exclusive of any load carrying capability:
•
26
The customer-related costs derived through the minimum system analysis
27
and an associated load carrying capability of 1 kW per customer, as
28
directed by the Régie for purposes of Phase 2, and
70
71
D-2003-93, page 162
D-2003-93, page 166
29
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
The total costs associated with Medium Voltage and Low Voltage facilities
2
which HQD has indicated have a capacity of 51,000 MVA and HQD’s total
3
customer count.
4
Since two data points are the minimum required to establish an intercept, the
5
basis for both of these points is critical. But, as noted by the Régie72, the 1 kW
6
value is effectively a compromise (or interim) solution pending further refinement
7
by HQD. Furthermore, HQD has not provided any details as to how the 51,000
8
MVA value was established73.
9
10
Before this approach is adopted, on permanent basis, as part HQD’s cost
11
allocation methodology it is important that parties have a clearer understanding
12
of the basis for the calculations. Such an understanding will also allow parties to
13
gain some insight into the likely dynamics of the methodology over time. While
14
HQD has suggested74 that the results should be reasonably stable, their
15
calculations for the years 2002-2004 all yield a value of 14.2 kVa simply because
16
the same customer count and system capacity values were used in each year.
17
However, customer counts have changed annually in the past and are likely to do
18
so in the future75 and it is unclear, until more information is provided, what drives
19
the value for system capacity.
20
21
It should be noted that the choice of this approach, which adjusts costs, as
22
opposed to the approach discussed in Phase 176, which involved adjusting the
23
loads used to allocate demand costs, will impact on the eventual allocation of
24
costs to customer classes. As a result, the scope of HQD’s considerations
25
regarding refinements to the minimum system method should include an
26
assessment as the relative merits of the two approaches for recognizing load
27
carrying capability.
72
D-2003-93, page 163
HQD-11, Document 8, page 30, Question 22.1
74
HQD-11, Document 8, page 30, Question 22.2
75
Hydro Québec’s 2002 Annual Report, page 99 (English Version)
76
Phase 1, HQD-12, Document 4.1, page 9 and OC Evidence, page 32 and Exhibit OC-4.1
73
30
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
Finally, the concerns expressed earlier about the exclusion of interruptible BT
2
load from the determination of 1 NCP allocation factor for the demand costs
3
associated with Distribution Stations/Operating Centres also applies to the
4
determination of the 1 NCP allocation factor used for the demand costs
5
associated with Medium Voltage facilities.
6
7
o Distribution – Connections
8
9
The costs for this sub-function are split between those associated with actually
10
providing connections and the revenues received from connections fees. The costs
11
associated with providing connections are allocated to customer classes based on the
12
value of the connections attributed to each customer class – as established in during
13
the functionalization of costs. The credit associated with connection fees is allocated to
14
the grid-connected customer classes based on the relative fees received from each
15
class in 200277.
16
Comments
17
18
19
HQD acknowledges that connection fees are received from remote customers
20
but states that there is insufficient information to allow the revenues received to
21
be split between remote and grid-connected customers. In other instances
22
where details were not sufficient to allow for the costs (credits) to be tracked to
23
individual customer classes (e.g. costs associated with debt recovery and theft
24
management), HQD allocated the costs based on customer counts by class. A
25
similar approach could be used here for Remotes.
26
77
HQD-8, Document 4, page 18
31
Evidence of
William Harper
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
o Distribution-Streetlights/Sentinel Lighting
2
3
The costs associated with this sub-function are allocated directly to the corresponding
4
customer class.
5
6
o Customer Service – Customer Care & Accounting
7
8
As indicated in section 4.3, the Customer Care & Accounting sub-function is broken
9
down into eight major activities. The cost for each activity is then allocated to customer
10
classes separately:
•
11
Meter reading costs – for all customer classes except remotes are captured in
12
this sub-function78. The costs are split between those associated with
13
manually reading meters versus those incurred for remote meter reading and,
14
then, each is allocated to the relevant customer classes based on an
15
allocation factor that reflects the number of annual meter reads per class79.
•
16
Billing costs – for all customer customers classes, except the large power
17
customer classes80, are included in this activity. The costs are separated
18
between those associated with the normal billing process and those
19
associated with late payment notices. Normal billing costs are allocated to
20
customer classes based on the number of regular bills issued annually per
21
class. The costs associated with late payment notices are allocated to
22
classes based on the 2001 and 2002 value of outstanding bills by rate class81.
•
23
Collection/Settlement costs – for all customer classes are included in this
24
activity. However, the costs associated with grid-connected versus remote
25
customers are captured separately. In each case the costs are allocated to
26
customer classes based on the number of bills issued per class.
78
HQD-11, Document 8, page 50, Question 40
HQD-8, Document 4, page 21
80
HQD-11, Document 8, page 50, Question 40
81
HQD-8, Document 4, page 22
79
32
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Debt Recovery costs – for domestic and small/medium power customers are
2
reflected in this activity and allocated to the respective customer classes
3
based on the 2001 and 2002 value of outstanding bills by class82.
•
4
Illegal Use management costs - for domestic and small/medium power
5
customers are reflected in this activity. They are allocated between the two
6
major customer categories based on the relative number of 2000-2002 theft
7
cases recorded for each and, then within each category based on customer
8
count83.
•
9
Call Centre costs - for domestic and small/medium power customers are
10
reflected in this activity. They are allocated between the two major customer
11
categories based on the relative number of calls in 2002 and the average
12
length of call for each group and, then within each category based on
13
customer count84.
•
14
Complaints & Claims costs – for all customer classes, except large power
15
customers, are captured in this activity and allocated to classes based on the
16
number of complaints/claims received from each class over the period May
17
2001 – May 200285.
•
18
Public Relations costs – are allocated to the domestic and small/medium
power customer classes based on the number of customers in each class.
19
20
Comments
21
22
23
HQD’s proposals with respect to the allocation of Customer Care & Accounting
24
costs are consistent with the Régie’s Phase 1 decision and, indeed, go beyond
25
the requirements of Régie which focused on the separation of meter reading,
26
billing and settlement costs.
27
82
HQD-8, Document 4, page 24
HQD-8, Document 1, page 19
84
HQD-8, Document 1, page 19
85
HQD-8, Document 1, page 20
83
33
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
The allocation factors used are reasonable and the customer classes included in
2
the allocation reflect the classes for which costs are captured in this sub-function.
3
The only exception is allocation of Public Relations costs. It would appear that a
4
number of the activities undertaken86 (e.g. community business development,
5
public relations, media relations and crisis communications management) are
6
activities performed on behalf of the entire corporation as opposed to just
7
domestic and small/medium power customers and that some (if not all) of these
8
costs should be allocated to all HQD’s customers.
9
10
o Customer Service – Meters
11
12
Meter costs are allocated to customer classes using a weighted customer allocation
13
factor that reflects the unit cost of meters for each customer class87.
14
15
o Customer Service – Sales & Marketing
16
17
The methodology used to allocate the costs assigned to the individual components of
18
the Sales & Marketing sub-function to customer classes is generally the same as that
19
employed in Phase 1.
20
21
The only change is the introduction of a methodology for allocating costs associated
22
with the PGEÉ programs to customer classes – which is new revenue requirement
23
component for Phase 2. These costs are allocated to all customer classes based on
24
the cost of Heritage Pool electricity to each customer class prior to any adjustment for
25
special contracts88.
26
86
HQD-11, Document 8, page 53, Question 42.1
HQD-8, Document 11, page 29
88
HQD-11, Document 8, page 55, Question 44.1
87
34
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
Comments
2
Additional details provided in Phase 2 have clarified the functionalization and
3
allocation of Sales and Marketing costs, including the cost associated with
4
commercial programs. In the case of commercial program costs, they are split
5
between programs targeted at large power customers versus domestic or
6
small/medium power customers and then allocated to the individual customer
7
classes concerned based on energy volumes. However, if the purpose of the
8
programs was to protect/increase HQD’s revenues89 – then the programs were
9
undertaken for the benefit of all customer classes and the costs should be
allocated accordingly.
10
11
12
o Customer Service – Other
13
14
The general approach used to classify and allocate the costs in this sub-function is the
15
same as that employed for Phase 1. However, the treatment of non-rate customer
16
revenues has been refined such that the revenues attributable to administration fees
17
and account opening fees are now separated and allocated separately to domestic and
18
small/medium customer categories based on analyses of the 2002 receipts for each. In
19
each case, the revenues are then further allocated to individual customer classes based
20
on customer counts. Other miscellaneous revenues are also allocated to customer
21
classes based on customer counts.
22
Comments
23
24
25
In terms of methodology, the concern raised in Phase 1 regarding the
26
inconsistency between the approach used to allocate HQ corporate overheads
27
versus that used to allocate HQD’s own overhead costs is still outstanding.
28
However, the details provided in the Application improve the overall transparency
89
HQD-11, Document 8, page 32, Question 24.1
35
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
of the allocation process for this sub-function relative to what was provided in
2
Phase 1.
3
4
Classification and Allocation of HQD’s Rate Base
5
6
o Distribution Sub-Functions
7
8
The rate base costs assigned to the various Distribution sub-functions are classified and
9
allocated to customers in the same manner as was used for the revenue requirement:
10
•
The rate base attributed to the Distribution Stations & Operating Centres sub-
11
function is classified as demand-related and allocated to customers based on
12
1 NCP
13
•
The rate base attributed to Connections is allocated to customer classes
14
based on customer-weighted allocation factor that takes into account both the
15
number of customers in each class and the relative cost of connections in
16
each case.
17
•
The rate bases attributed to Medium and Low Voltage Facilities are classified
18
as customer-related and demand-related using the same percentages as
19
were developed and used to classify the revenue requirement.
20
21
•
The rate base attributed to Streetlights/Sentinel Lighting is allocated directly
to the Street Lighting customer class.
22
23
Comments
24
25
The same comments that were made with respect to the classification and
26
allocation of revenue requirement associate with these sub-functions also apply
27
to the treatment of the rate base:
28
29
•
BT interruptible loads should not be excluded in determining the 1 NCP
values used in allocating demand costs.
36
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Additional information and greater transparency is required regarding the
derivation of the 1 NCP value by customer class.
2
•
3
Similarly, additional information is required regarding the assumptions
4
used in determining the costs associated with the load carry capability
5
implicit in the minimum system calculation.
6
7
o Customer Service – Customer Care & Accounting
8
9
The rate base associated with each of the Customer Care & Accounting sub-categories
10
is allocated to customer classes in the same proportions as the overall revenue
11
requirement in each case is allocated to classes. To this extent, the classification and
12
allocation process incorporates the same refinements and reflects the direction of the
13
Régie from Phase 1.
14
15
o Customer Service – Meters
16
17
Again, the classification and allocation of the rate base mirrors that of the revenue
18
requirement associated with the Meters sub-function and is based on the customer
19
count weighted allocation factor that reflects the relative costs of meters by class.
20
21
o Customer Service – Sales & Marketing
22
23
The rate base associated with each of the Sales & Marketing sub-categories is
24
allocated to customer classes in the same proportion as the revenue requirement
25
(exclusive of external revenues) was allocated to classes. This includes the
26
unamortized costs for PGEÉ programs which are allocated to customer classes based
27
on the cost of Heritage Pool resources for each class, prior to any adjustment for
28
special contracts90.
29
90
HQD-8, Document 4, page 30
37
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Comments
1
2
3
As with the revenue requirement the unamortized costs associated with
4
commercial programs are split between programs targeted at large power
5
customers versus domestic or small/medium power customers and then the rate
6
base is allocated to the individual customer classes concerned based on energy
7
volumes. However, again, if the purpose of the programs was to protect/increase
8
HQD’s revenues – then the programs were undertaken for the benefit of all
9
customer classes and the costs should be allocated accordingly.
10
11
o Customer Service – Other
12
13
For Phase 2, rate base costs are attributed to the Other sub-function and allocated to
14
customer classes using the same approach as was employed for the revenue
15
requirement associated with the sub-function.
16
17
5.0 Overall Conclusions
18
19
HQD’s Phase 2 cost allocation methodology addresses the specific findings and
20
directions of the Régie in its Phase 1 decision. However, there are still specific areas
21
where the methodology could be refined in order to more accurately reflect
22
considerations of cost causality; where further analyses need to be undertaken or where
23
further explanation/documentation is required regarding how the proposed methodology
24
works. Finally, while HQD flagged the major changes proposed from the original Phase
25
1 methodology (particularly those arising from the Régie’s Phase 1 decision), there
26
were a number of other changes (including both changes to the existing methodology
27
and proposals regarding the treatment of new cost components) that were not readily
28
transparent in the application. These conclusions are discussed in greater detail below
29
and accompanied, in each case, with specific recommendations for consideration by the
30
Régie.
38
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
2
A. Future Changes/Refinements to HQD’s Cost Allocation Methodology
3
4
There a still several issues identified in the Phase 1 Evidence where refinements should
5
be made to the cost allocation methodology before HQD’s next rate case:
6
7
A.1 Revenue Tax Functionalization – where in order to more closely reflect the
8
basis on which Hydro Quebec’s gross revenue taxes are actually calculated, the
9
allocation to customer classes should be based on distribution revenues or total
10
allocated costs – excluding the cost of electricity commodity purchases and
11
transmission services.
12
13
A.2 Working Capital Functionalization – where, again, in order to more closely
14
reflect cost causality, the working fund requirement should be separated into its
15
various components (e.g., those associated with electricity supply, transmission
16
services, labour expenses, other O&M expenses, capital taxes, gross revenue
17
taxes, and municipal and school taxes) and each should be allocated separately
18
to functions. In each case, the functionalization of the working fund requirements
19
could mirror the same methodology as was used to allocate the associated
20
revenue requirement component.
21
22
A.3 HQD Overhead Allocation – where the approach should be changed so it is
23
consistent with the allocation base used to allocate Hydro-Québec’s corporate
24
overheads (i.e., exclude purchased fuel costs for Remote Communities).
25
26
In addition, in Phase 2 HQD provided morel information regarding its cost allocation
27
methodology and the following additional changes have been identified:
28
29
A.4 Connection Fees – should be allocated to remote community customer
30
classes as well as the grid-connected customer classes.
39
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
2
A.5 Public Relations costs - should be allocated to all customer classes,
3
including large power customers.
4
5
A.6 Commercial Program costs – should also be allocated to all customer
6
classes based on energy volumes.
7
8
B. Issues Requiring Further Analyses
9
10
There are also a few issues that require further analyses and which the Régie should
11
direct HQD to report on for the next rate case:
12
13
B.1 Interruptible Load treatment – in the determination of the 1 CP and 1 NCP
14
allocation parameters needs to be reassessed and based on the treatment of
15
such loads in HQT’s allocation of transmission service costs and the terms and
16
conditions for curtailment.
17
18
B.2 HQD’s Load Research results – and the derivation on the class load
19
statistics.
20
21
B.3 Minimum System Load Carrying Capability recognition – including the
22
appropriate level of load carrying capability associated with the minimum system,
23
the basis for deriving the total system’s capacity and the overall approach to
24
used in adjusting for the load carrying capability of the minimum system.
25
26
B.4 MT/BT Asset Functionalization – where the sample base used to determine
27
the split between MT and BT assets should be expanded over time.
28
40
Evidence of
William Harper
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
C. Further Documentation Required
2
3
There a still several of the areas identified in the Phase 1 Evidence where further
4
documentation is required in order for parties to clearly understand HQD’s cost
5
allocation methodology and, where Régie should direct HQD to provide further
6
information prior to the next rate case:
7
8
C.1 Functionalization Based on Cost Centres – needs to be more clearly
9
documented in terms of which cost centres are aligned with which functions and
10
the basis for allocating the costs attributed to cost centres that support more than
11
one function.
12
13
C.2 Working Capital – where the methodology should clearly set out how the
14
various working capital components (particularly those associated with electricity
15
commodity and transmission services) are assigned to functions.
16
17
C.3 Taxes – where the assignment of taxes, particularly to the major functions
18
(i.e. Remotes; Distribution-Grid, and Customer Service), should be clearly
19
documented.
20
21
In addition, HQD should provide further documentation on the following issues which
22
were identified during the review of the proposed 2004 cost allocation methodology:
23
24
C.4 Fuel Costs – where an explanation is required as to the basis for the
25
purchased electricity costs assigned to the Other sub-component.
26
27
C.5 Capitalized O&M Costs – where an explanation is required as to why the
28
values attributed to some sub-functions are “positive”.
29
41
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
1
C.6 Load Research – where more documentation is required as to the ongoing
2
results of HQD’s load research programs and any changes assumed in the load
3
characteristics of the various rate classes.
4
5
D. Transparency in Future Rate Filings
6
7
As well as addressing the aspects of the allocation methodology identified above as
8
requiring further clarification, it is important that HQD – in each rate application – clearly
9
document all of the changes it is proposing to make to its cost allocation methodology.
10
This include changes to methodology in terms of how it functionalizes, classifies and
11
allocates both the existing cost elements of the revenue requirement and rate base as
12
well changes/additions to the methodology required to incorporate new cost elements.
13
While in the current application, HQD clearly pointed out a number of the changes it
14
was proposing (particularly those in response to the Régie’s Phase 1 decision); there
15
appear to be a number of other changes to the cost allocation methodology that were
16
made in Phase 2 but not flagged in the Application. Examples of this include: the
17
treatment of pole rental revenues; the derivation of the 1 CP and 1 NCP allocation
18
factors; the allocation of capital and general revenue taxes within the Distribution
19
function; and the treatment of the revenue requirement and rate base associated with
20
“actifs incorporels”.
21
22
The Régie should direct HQD to, as part of any future rate filing, to flag and fully
23
document any and all changes to its cost allocation methodology.
24
25
Furthermore, to assist parties in understanding the year over year changes in the
26
results of the cost allocation methodology the Régie should direct HQD to:
27
28
•
Prepare a schedule which sets out the individual revenue requirement and rate
29
base costs components that are tracked by “cost centre” and presents a total for
30
each cost centre.
42
Evidence of
William Harper
•
1
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Provide schedules that, for each allocation factor91 used, detail both the
2
definition and the actual values used to calculate the allocation factors. Note:
3
HQD has already done this in a number of instances, e.g., for each of the
4
Customer Care & Accounting sub-components92. However, other areas – such
5
as the allocation bases used to split some of the cost components93 among
6
Remotes, Distribution and Customer Service – need to be better documented.
7
91
This includes the allocation factors used both in the functionalization of costs as well as the factors used to
allocate the costs in the various functions and sub-functions to customer classes.
92
HQD-8, Document 4, Tables 15-22
93
For example, taxes and working capital.
43
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Table 1 ($ M)
Revenue Requirement
Basis of Assignment to Functions
Cost Centres
Cost of Service
Electricity Supply
Transmission Services
Direct O&M
Shared Services
Capitalized O&M
Corporate Overheads
Internal Billing Sent Out
Write-Offs & Withdrawals
("Radiations & Retraits")
PEB Credit ("Crédit de Retraite")
Ice-Storm Gov't Credit
"Actifs Incorporels"
Commercial Programs
DSM
Depreciation
Taxes
Fuel Purchases
External Billing Sent Out
Total
HQD
Pres.Office
Reg. Affs &
Rate
Design
HQD
HR
Elect.
Supply
Procur.
Distribution
Customer
Service
Large Pwr
Customers
Not
Tracked by
Cost
Centre
4627.4
2313.0
13.2
5.1
-9.1
11.9
1.3
-11.2
10.6
-10.5
3.3
0.5
1.1
467.0
246.8
-230.8
344.2
143.5
-13.7
12.3
7.8
2.9
-52.7
-13.4
-2.2
Direct Assignment
Direct Assignment
Cost Centre
Cost Centre
Cost Centre
Allocated
Cost Centre
105.9
26.9
-52.0
7.7
-18.2
-5.9
25.9
6.3
2.8
387.5
105.9
26.9
-52.0
Cost Centre
Allocated
Direct Assignment
Cost Centre
Direct Assignment
Direct Assignment
Cost Centre
Allocated
Direct Assignment
Direct Assignment
7058.9
8399.4
7.7
-18.2
-5.9
10.1
12.9
2.9
6.3
2.8
0.2
9.4
347.3
0.1
0.1
4.9
787.7
39.8
513.3
0.2
23.9
Basis of
Assignment
4627.4
2313.0
862.5
405.0
-271.3
45.4
-70.2
45.4
-1.9
Total
44
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Table 2 (M $)
Assignment of Costs to Functions
Customer Service
Functions
Direct Assignment
Electricity Supply
Transmission Services
Write-Offs & Withdrawals
("Radiations & Retraits")
Ice-Storm Gov't Credit
Commercial Programs
DSM
Fuel Purchases
External Billing Sent Out
Cost Centres
HQD Pres. Office
Reg. Affairs & Rate Design
HQD Human Resources
Elect. Supply Procurement
Customer Service
Large Power Customers
Distribution
Allocated Costs
Corporate Overhead
PEB Credit ("Crédit de Retraite")
Taxes
Total
Prod.
Trans.
Total
Distribution
Cust. Care
Metering
Sales & Mark.
Others
Total Cust.
Service
Total
Remotes
4627.4
4627.4
2313.0
2313.0
5.6
-5.9
-8.6
-0.1
0.1
0.0
2.1
5.4
2.8
5.4
2.8
0.5
-42.7
0.9
0.5
-38.9
-3.8
9.4
0.1
0.1
4.9
351.8
84.6
77.2
23.9
2313.0
26.4
-0.6
7.7
-5.9
6.3
2.8
26.9
-51.9
76.9
9.4
0.1
0.1
4.9
513.6
23.9
787.8
9.4
0.1
0.1
4.9
513.6
23.9
710.9
4627.4
TOTAL
25.5
-9.5
94.8
11.2
-4.9
3.1
2.7
-1.1
1.4
3.6
-1.6
1.0
-0.5
17.5
-8.1
5.5
2.5
-0.6
5.7
45.5
-18.2
106.0
812.8
357.4
87.5
112.4
-24.4
532.9
113.3
8399.4
45
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Table 3 ($ M)
Rate Base
Basis of Assignment to Functions
Distribution
Functions
Op.
Centres
MT
BT
Connections
Streetlight
Total Dist.
Cust. Care
Metering
Customer Service
Sales &
Mark.
Others
Total Cust.
Service
Total
Remotes
TOTAL
Basis of
Assignment
Rate Base
Fixed Assets
-Operating Centres
9.2
9.2
- Meters
245.2
-OH & UG Lines
3903.9
2167.3
379.7
245.2
6450.9
- General Plant
Direct assignment
Direct assignment
6450.9
-Remotes
480.5
- Other Network Assets
9.2
245.2
19.3
19.3
0.7
295.8
164.2
28.8
1.5
491.0
68.2
34.7
19.5
1.0
123.4
1.0
30.8
17.1
3.0
0.1
52.0
10.5
6.0
6.1
0.4
23.0
2.4
480.5
19.3
Allocated
Direct assignment
Direct assignment
614.4
Cost centres
77.4
Cost centres
Unamortized Expenses
- Actifs Incorporels
- Post Employement
Benefits (PEBs)
- Other PEBs
0.2
91.0
50.5
8.8
0.4
150.9
85.3
18.9
28.8
9.2
142.2
10.2
303.3
Allocated
-0.1
-44.0
-24.4
-4.3
-0.2
-73.0
-41.5
-9.2
-13.9
-4.3
-68.9
-4.9
-146.8
Allocated
0.3
0.2
0.5
0.3
0.1
0.1
0.1
0.6
- Severance
- Commercial Programs
- DSM
- Ice Storm Gov't
Reimbursement
29.7
17.0
3.2
0.1
23.3
12.9
2.3
0.1
38.7
0.1
46.9
26.0
4.6
0.2
77.8
11.2
4377.7
2430.8
426.1
21.4
7267.2
14.4
14.4
27.9
27.9
1.1
2.4
49.9
16.8
Allocated
Direct assignment
27.9
Direct assignment
49.9
Dir. Ass./allocated
Working Capital
- Working Funds
- Materials, Fuels &
Supplies
Total
81.0
11.4
77.8
0.3
9.0
203.8
316.1
160.7
6.7
170.5
9.3
218.5
Allocated
9.0
10.8
97.6
Allocated
687.3
510.7
8465.2
46
Evidence of
William Harper
Hydro-Québec Distribution
Régie File R-3492-2002 Phase 2
Table 4
Comparison of Load Characteristics
2002 Versus 2004
20021
Rate
Annual
Class
Energy
1 CP
20042
1 NCP
1 CP3
1 NCP4
Annual
(MT)
LF
LF
Energy
(GWh)
(MW)
(MW)
D & DM
50,186
15,427
14,966
37.1%
G
12,173
2,769
2,858
50.2%
1 CP
1 NCP
1 CP5
1 NCP6
(MT)
LF
LF
(GWh)
(MW)
(MW)
38.3%
52,651
16,353
15,545
36.7%
38.6%
48.6%
12,248
2,883
2,859
48.4%
48.8%
Notes:
1) Source: HQD-8, Document 2, page 17
2) Source: HQD-8, Document 4, page 17
3) Calculated as: {(Annual Energy x 1,000)/8,760}/ 1 CP
4) Calculated as: {(Annual Energy x 1,000)/8,760}/ 1 NCP
5) Same as (3) but based on 8,784 hours – as opposed to 8,760
6) Same as (4) but based on 8,784 hours – as opposed to 8,760
47