2017 2018 GENERAL TARIFF APPLICATION€¦ · 2017 – 2018. general tariff application . to the ....

2017 – 2018 GENERAL TARIFF APPLICATION

TO THE ALBERTA UTILITIES COMMISSION

APPLICATION

FEBRUARY 16, 2016

mlemieux

Text Box

21341-X0002

2017 - 2018 General Tariff Application

CONTENTS

FORWARD-LOOKING INFORMATION ADVISORY .................................................. I 1. INTRODUCTION .......................................................................................... 1-1

Application Overview .......................................................................................................1-2 1.1.1 Tariff Relief Assumptions in Respect of the 2015-2016 General Tariff Application ............................ 1-2 1.1.2 Modification of the 2015-2016 General Tariff Application Capital Structure Assumptions ................ 1-2 1.1.3 2016 Generic Cost of Capital Assumptions .......................................................................................... 1-3 1.1.4 2017-2018 General Tariff Application .................................................................................................. 1-3 1.1.5 Cumulative Tariff Relief 2015-2017 ..................................................................................................... 1-4 1.1.6 Technical Aspects of the Application ................................................................................................... 1-5 Overview of Revenue Requirement ..................................................................................1-5

1.2.1 Revenue Requirement ......................................................................................................................... 1-5 1.2.2 System Growth and Maintenance ....................................................................................................... 1-8 1.2.3 System Support Operating Costs ......................................................................................................... 1-8 Overview of Key Aspects of Application ............................................................................1-8

1.3.1 Cost Drivers .......................................................................................................................................... 1-8 1.3.2 Proposed 2017 Tariff Relief ............................................................................................................... 1-10 1.3.3 Consolidated Full Time Equivalent Forecasts .................................................................................... 1-10 1.3.4 Depreciation and Salvage Study ........................................................................................................ 1-11 Tariff/Rate Applied For ................................................................................................... 1-11 2015-2016 General Tariff Application .............................................................................. 1-12

1.5.1 Process and Timing ............................................................................................................................ 1-12 Other Approvals (Deferral and Reserve Accounts) Requested .......................................... 1-12

1.6.1 List of Deferral and Reserve Accounts Being Requested ................................................................... 1-12 1.6.2 Reconciliation of Existing Reserve Accounts ...................................................................................... 1-12 Organizational Structure................................................................................................. 1-13

1.7.1 AltaLink Ownership Structure ............................................................................................................ 1-13 1.7.2 AltaLink Organizational Structure ...................................................................................................... 1-13 Forecasting Methodology/Process and Key Assumptions ................................................ 1-13

1.8.1 Forecast Overview ............................................................................................................................. 1-13 1.8.2 General Assumptions ......................................................................................................................... 1-14 1.8.3 Forecasting Methodologies ............................................................................................................... 1-15 1.8.4 Economic Parameters ........................................................................................................................ 1-19 Labour Overview and Compensation Forecast ................................................................. 1-19

1.9.1 Alberta Labour Market Environment ................................................................................................. 1-19 1.9.2 Vacancy, Timing and Resource Hiring ................................................................................................ 1-23 1.9.3 Base Pay ............................................................................................................................................. 1-24 1.9.4 STIP .................................................................................................................................................... 1-27 1.9.5 LTIP .................................................................................................................................................... 1-31 1.9.6 Pension and Benefits ......................................................................................................................... 1-35 1.9.7 Other Labour Related Staffing Costs .................................................................................................. 1-38

Operational Performance ............................................................................................... 1-40 1.10.1 Reliability ........................................................................................................................................... 1-41 1.10.2 Safety ................................................................................................................................................. 1-48 1.10.3 Efficiencies ......................................................................................................................................... 1-50

Business Improvements .................................................................................................. 1-52 Major Issues and Policy Changes ..................................................................................... 1-58 Terms and Conditions ..................................................................................................... 1-58


2. COMMISSION DIRECTIVES .......................................................................... 2-1 3. TRANSMISSION REVENUE REQUIREMENTS ................................................ 3-1

Summary .........................................................................................................................3-2 Aggregate Revenue Requirements ....................................................................................3-2 Direct Assign Capital Deferral Account Included in Revenue Requirement .........................3-2 Transmission Revenue Requirement Schedules .................................................................3-2

4. TRANSMISSION FUEL COSTS ....................................................................... 4-1 5. TRANSMISSION OPERATING COSTS ............................................................ 5-1

Overview - Total Company Operating Expenses (O&M and A&G) .......................................5-2 5.1.1 Overview .............................................................................................................................................. 5-2 5.1.2 FTEs ...................................................................................................................................................... 5-2 5.1.3 Labour .................................................................................................................................................. 5-2 5.1.4 Contracted Manpower......................................................................................................................... 5-3 5.1.5 Other GOE ............................................................................................................................................ 5-3 Overview – Total Operation & Maintenance Costs ............................................................5-4

5.2.1 Overview .............................................................................................................................................. 5-4 5.2.2 Changes in Operation .......................................................................................................................... 5-5 Direct Operation & Maintenance ......................................................................................5-6

5.3.1 Summary of Direct Operating and Maintenance ................................................................................. 5-6 5.3.2 USA 560 - Supervision and Engineering ............................................................................................... 5-6 5.3.3 USA 561 - Operation & Maintenance Control Centre Operations ....................................................... 5-7 5.3.4 USA 562 - Station Equipment Maintenance ...................................................................................... 5-10 5.3.5 USA 563 - Overhead Line Expense ..................................................................................................... 5-16 5.3.6 USA 564 - Underground Line Expenses.............................................................................................. 5-20 5.3.7 USA 566 – Operation & Maintenance Miscellaneous Transmission .................................................. 5-20 5.3.8 USA 567 – Right-of-Way Payments .................................................................................................... 5-25 5.3.9 USA 569 – Operation & Maintenance of Structures .......................................................................... 5-28 5.3.10 USA 571.1 – Vegetation Management .............................................................................................. 5-28 5.3.11 USA 575 – Operations and Management IT Support ......................................................................... 5-38 Allocated Administrative and General ............................................................................. 5-40 Taxes Other Than Income Taxes ...................................................................................... 5-41

5.5.1 USA 408.1: Transmission Linear Property Tax ................................................................................... 5-41 Transmission Manpower – Full Time Equivalents ............................................................ 5-41 Transmission Operation & Maintenance Schedules ......................................................... 5-42

6. TRANSMISSION DEPRECIATION AND AMORTIZATION ................................ 6-1 Summary .........................................................................................................................6-2

6.1.1 Depreciation and Amortization Expenses and Amortization of Customer Contribution..................... 6-2 Transmission Depreciation Schedules ...............................................................................6-3

7. TRANSMISSION INCOME TAXES ................................................................. 7-1 Summary .........................................................................................................................7-2 Income Tax Rates .............................................................................................................7-2 Timing/Temporary Differences .........................................................................................7-3 Treatment of DAIC for Tax Purposes .................................................................................7-3 Transmission Income Tax Schedules ..................................................................................7-4

8. TRANSMISSION REVENUE OFFSETS ............................................................ 8-1 Summary .........................................................................................................................8-2

8.1.1 Fixed Contracts .................................................................................................................................... 8-2


8.1.2 Variable Labour Contracts ................................................................................................................... 8-3 8.1.3 Lease Revenue and Other .................................................................................................................... 8-4 8.1.4 Refund of Customer Contributions to FortisAlberta ............................................................................ 8-4 Transmission Revenue Offset Schedules ...........................................................................8-5

9. TRANSMISSION RETURN ON RATE BASE ..................................................... 9-1 Summary .........................................................................................................................9-2 Capital Structure ..............................................................................................................9-2 Return on Equity ..............................................................................................................9-2 Embedded Cost of Debt ....................................................................................................9-2 Long-Term Debt Deferral Account .....................................................................................9-3 Credit Rating Reports .......................................................................................................9-3 Transmission Return on Rate Base Schedules ....................................................................9-3

10. TRANSMISSION RATE BASE ...................................................................... 10-1 Summary ....................................................................................................................... 10-2 Capital – Direct Assign .................................................................................................... 10-3

10.2.1 Overview ............................................................................................................................................ 10-3 10.2.2 Look-back Assessment of the 2013-2014 Probabilistic Forecast ....................................................... 10-4 10.2.3 Direct Assign Capital Forecasting Approach ...................................................................................... 10-5 10.2.4 AltaLink’s Base Plan DA Capital Expenditures and Additions ............................................................ 10-6 10.2.5 Identification of Uncertainties ........................................................................................................... 10-7 10.2.6 Probabilistic Forecasting Approach ................................................................................................... 10-9 10.2.7 Application of the Uncertainty Forecasting Approach .................................................................... 10-10 10.2.8 Scenario Models .............................................................................................................................. 10-10 10.2.9 Probabilistic Forecasting Methodology ........................................................................................... 10-12 10.2.10 DA Capital Forecast GTA Test Period 2017-2018 ............................................................................. 10-13 10.2.11 DA Capital Expenditure Forecast Adjustments Pursuant to New Relationship Agreements ........... 10-14 10.2.12 EPCm Strategy .................................................................................................................................. 10-15

Capital Replacement and Upgrades .............................................................................. 10-15 10.3.1 Actual/Approved Variance ............................................................................................................... 10-17 10.3.2 CRU Forecast Methods .................................................................................................................... 10-20 10.3.3 Major Programs-Equipment Deficiency Trend Analysis .................................................................. 10-24 10.3.4 Future State-Population Profiles...................................................................................................... 10-28 10.3.5 Capital Maintenance Business Cases ............................................................................................... 10-35

Information Technology Capital Costs ........................................................................... 10-35 Facility Capital Costs ..................................................................................................... 10-36 Transmission Rate Base Schedules ................................................................................ 10-37

11. TRANSMISSION NECESSARY WORKING CAPITAL ...................................... 11-1 Summary ....................................................................................................................... 11-2 Allowance for Working Capital ....................................................................................... 11-3 Transmission Necessary Working Capital Schedules ........................................................ 11-4

12. DISTRIBUTION MFR .................................................................................. 12-1 13. DISTRIBUTION RETAIL REVENUE ............................................................... 13-1 14. DISTRIBUTION COST OF SALES ................................................................. 14-1 15. DISTRIBUTION OPERATION COSTS ........................................................... 15-1 16. DISTRIBUTION DEPRECIATION .................................................................. 16-1 17. DISTRIBUTION INCOME TAXES ................................................................. 17-1


18. DISTRIBUTION REVENUE OFFSETS ............................................................ 18-1 19. DISTRIBUTION RETURN ON RATE BASE .................................................... 19-1 20. DISTRIBUTION RATE BASE ........................................................................ 20-1 21. DISTRIBUTION NECESSARY WORKING CAPITAL ........................................ 21-1 22. ISOLATED OPERATING COSTS ................................................................... 22-1 23. GENERAL OPERATING AND MAINTENANCE .............................................. 23-1 24. COMMON OPERATIONS ........................................................................... 24-1 25. CORPORATE ADMINISTRATION AND GENERAL ........................................ 25-1

Overview - Total Administrative and General Expenses ................................................... 25-2 25.1.1 Overview ............................................................................................................................................ 25-2

Administrative and General Expenses ............................................................................. 25-3 25.2.1 USA 920 - Administrative and General Salaries ................................................................................. 25-4 25.2.2 Corporate Finance ............................................................................................................................. 25-6 25.2.3 CEO .................................................................................................................................................... 25-8 25.2.4 Business Development (or Corporate Development) ........................................................................ 25-8 25.2.5 Human Resources .............................................................................................................................. 25-8 25.2.6 External Engagement ......................................................................................................................... 25-9 25.2.7 Customer Service ............................................................................................................................... 25-9 25.2.8 Law and Regulatory ......................................................................................................................... 25-11 25.2.9 USA 921 - Administration Corporate/Office Supplies and Expenses ............................................... 25-11 25.2.10 USA 922 - Administrative Expense Transferred - credit ................................................................... 25-12 25.2.11 USA 923 - Outside Services Employed ............................................................................................. 25-12 25.2.12 USA 924 - Insurance Premiums ........................................................................................................ 25-13 25.2.13 USA 925 - Injuries and Damages ...................................................................................................... 25-13 25.2.14 USA 926 - Employee Pension and Benefits ...................................................................................... 25-13 25.2.15 USA 928 - Commission Expenses (Hearing Costs) ............................................................................ 25-14 25.2.16 USA 930.1 - General Advertising Expenses ...................................................................................... 25-16 25.2.17 USA 930.2 - Miscellaneous General Expenses ................................................................................. 25-16 25.2.18 USA 931 - Rents (Other Than Head Office) ...................................................................................... 25-17 25.2.19 USA 931.1 - Head Office Rent .......................................................................................................... 25-18 25.2.20 USA 934 - IT A&G Expenses ............................................................................................................. 25-19 25.2.21 USA 935 - General O&M Expenses .................................................................................................. 25-22

Corporate Costs............................................................................................................ 25-24 Corporate Manpower – Full Time Equivalents ............................................................... 25-24 Corporate Administration and General Schedules ......................................................... 25-24

26. GENERAL CORPORATE PROPERTY PLANT AND EQUIPMENT ..................... 26-1 27. COST FUNCTIONALIZATION ...................................................................... 27-1 28. FINANCING............................................................................................... 28-1

Summary ....................................................................................................................... 28-2 Assumptions in Respect of the 2015-2016 General Tariff Application ............................... 28-3 Modification of 2015-2016 General Tariff Application Assumptions ................................. 28-3 FFO/Debt Target Including Rationale .............................................................................. 28-3

28.4.1 The question of what FFO/Debt ratio is required can be reduced to what level is necessary to avoid the unacceptable risk of a credit rating downgrade ....................................................................................... 28-3 28.4.2 The case for preventing a credit rating downgrade......................................................................... 28-12

FFO/Debt Before Balance Sheet Strengthening ............................................................. 28-13


Appropriate Measures to Maintain a Minimum of 13% FFO/Debt .................................. 28-13 Other Considerations - Subordinated Debt or Temporary Equity Thickness .................... 28-15

28.7.1 Proposal Regarding the Issuance of Subordinated Debt ................................................................. 28-16 Financing Plan .............................................................................................................. 28-17

28.8.1 2015-2016 GTA Forecast .................................................................................................................. 28-17 28.8.2 Alternative Proposal Regarding the Issuance of Subordinated Debt............................................... 28-17 28.8.3 2017-2018 GTA Forecast .................................................................................................................. 28-17 28.8.4 Forecast on Long-Term Debt Interest Rates .................................................................................... 28-18 28.8.5 Credit Facilities................................................................................................................................. 28-18 28.8.6 2017-2018 GTA Forecast .................................................................................................................. 28-19

Credit Rating Reports ................................................................................................... 28-20 Financing Schedules .................................................................................................. 28-20

29. NO COST CAPITAL .................................................................................... 29-1 Summary ....................................................................................................................... 29-2 Self-Insurance Reserve ................................................................................................... 29-2 Future Income Tax .......................................................................................................... 29-2 Pension/Post Retirement Benefit .................................................................................... 29-2 Rainbow Reserve ........................................................................................................... 29-2 Hearing Cost Reserve ...................................................................................................... 29-3 No Cost Capital Schedules .............................................................................................. 29-3

30. AFFILIATE TRANSACTIONS ........................................................................ 30-1 Summary ....................................................................................................................... 30-2 Affiliate Transaction Schedules ....................................................................................... 30-2

31. SUPPLEMENTARY INFORMATION ............................................................. 31-1 Summary ....................................................................................................................... 31-2

31.1.1 Intervener Engagement Process ........................................................................................................ 31-2 Annual Report of Finances and Operations ..................................................................... 31-2 Operational Statistics of Report on Finances and Operations ........................................... 31-2 Refunding FortisAlberta Customer Contributions ............................................................ 31-2

31.4.1 Summary ............................................................................................................................................ 31-2 31.4.2 Background ........................................................................................................................................ 31-3 31.4.3 Rationale for Change ......................................................................................................................... 31-4 31.4.4 Proposed Change ............................................................................................................................... 31-5 31.4.5 Forecast Contribution Refunds and Estimated FortisAlberta Payments ........................................... 31-5 31.4.6 Estimated Savings for FortisAlberta Ratepayers ................................................................................ 31-6 31.4.7 Implementation Mechanics ............................................................................................................... 31-6

Accounting Policies ........................................................................................................ 31-9 Reserve Accounts ......................................................................................................... 31-16 Deferral Accounts ......................................................................................................... 31-16 Supplemental Information Schedules............................................................................ 31-16


LIST OF TABLES Table 1.1.4-1 - Applied for Revenue Requirement and Transmission Tariff 2015-2018 ........................... 1-4 Table 1.1.4-2 - 2017-2018 Transmission Tariff Impact - Future Income Tax ($M) .................................... 1-4 Table 1.1.5-1 - 2017-2018 Transmission Tariff Impact - Depreciation and Salvage Rates ($M) ................ 1-5 Table 1.2.1-1 - Overview Forecast Changes in Revenue Requirement for 2017 and 2018 ($M) .............. 1-7 Table 1.8.2-1 - AltaLink’s Forecast Rate Assumptions ............................................................................. 1-14 Table 1.9.2-1 - Actual Operating Vacancy Rate ....................................................................................... 1-23 Table 1.9.3-1 - 2016-2018 IBEW Base Pay Increases ............................................................................... 1-24 Table 1.9.3-2 - 2016-2018 UUWA Base Pay Increases ............................................................................. 1-25 Table 1.9.3-3 - Current Target Total Direct Compensation Market Position Non-union Employees Below Executive .................................................................................................................................................. 1-25 Table 1.9.3-4 - 2017 Calculation of Non-Union Base Pay Annual Increase.............................................. 1-26 Table 1.9.3-5 - 2018 Calculation of Non-Union Base Pay Annual Increase.............................................. 1-26 Table 1.9.3-6 - 2017-2018 Non-Union Base Pay Increases ...................................................................... 1-26 Table 1.9.3-7 - 2017 Calculation of Executive Base Pay Decrease ........................................................... 1-27 Table 1.9.3-8 - 2018 Calculation of Executive Base Pay Increase ............................................................ 1-27 Table 1.9.3-9 - 2017-2018 Executive Total Base Pay Change .................................................................. 1-27 Table 1.9.3-10 - Blended Salary Increase Calculation .............................................................................. 1-27 Table 1.9.4-1 - STIP ($M) .......................................................................................................................... 1-27 Table 1.9.4-2 - STIP Pay Levels – As a Percent of Base Pay ...................................................................... 1-28 Table 1.9.4-3 - AltaLink 2016 STIP Non-Union Employees ....................................................................... 1-28 Table 1.9.4-4 - AltaLink 2016 STIP Union Employees............................................................................... 1-28 Table 1.9.4-5 - AltaLink 2014 STIP Final Results (Non-union employees) ............................................... 1-30 Table 1.9.5-1 - LTIP ($M) Costs Included in the Revenue Requirement .................................................. 1-32 Table 1.9.5-2 - Actual Total Costs Including Cost Incurred by Shareholder1 ($M) ................................... 1-32 Table 1.9.5-3 - LTIP Customer Goals ........................................................................................................ 1-32 Table 1.9.5-4 - Shareholder/Customer Goal ............................................................................................ 1-33 Table 1.9.5-5 - LTIP Target Levels............................................................................................................. 1-33 Table 1.9.5-6 - LTIP Plan 2016 - January 1, 2016– December 31, 2018 ................................................... 1-34 Table 1.9.6-1 - 2014-2018 Benefit and Other Compensation Costs by Component ($M)....................... 1-35 Table 1.9.6-2 - Supplemental Pension Plan ($M) ..................................................................................... 1-37 Table 1.9.6-3 - Post Retirement Benefits ($M) ........................................................................................ 1-37 Table 1.9.6-4 - Perquisites and Signing Bonus ($M) ................................................................................ 1-37 Table 1.9.7-1 - Wellness Fund ($M) ......................................................................................................... 1-38 Table 1.9.7-2 - Outstanding Contribution Awards ($M) .......................................................................... 1-38 Table 1.9.7-3 - Severance Costs ($M) ...................................................................................................... 1-39 Table 1.9.7-4 - Relocation Expense ($M) ................................................................................................. 1-39 Table 1.9.7-5 - Calculation of Relocation Expense ................................................................................... 1-40 Table 1.9.7-6 - Attraction and Retention Bonus Expense ($M) ............................................................... 1-40 Table 1.10.1-1 - Significant Outages in 2014 (Top 10 Events Ranked by MW-Minutes Lost) .................. 1-42 Table 1.10.1-2 - Reliability Performance and Expected Range ................................................................ 1-45 Table 1.11-1- Recent Business Improvements - System Operations ....................................................... 1-53 Table 1.11-2 - Recent Business Improvements - Asset Management ..................................................... 1-54 Table 1.10.3-3 - Recent Business Improvements - EH&S ......................................................................... 1-58 Table 5.1.1-1 - AltaLink Total Company - Operating Expenses ($M) ......................................................... 5-2 Table 5.1.1-2 - AltaLink Total Company - FTEs Year End Summary ........................................................... 5-2


Table 5.1.3-1 - AltaLink Total Company - Operating Labour Expenses ($M) ............................................. 5-2 Table 5.1.3-2 - AltaLink Total Company - Labour Forecast Increase ($M) ................................................. 5-3 Table 5.1.4-1 - AltaLink Total Company - Contracted Manpower Operating Expenses ($M).................... 5-3 Table 5.1.4-2 - AltaLink Total Company - Contracted Manpower Forecast Increase ($M) ....................... 5-3 Table 5.1.5-1 - AltaLink Total Company - Other GOE Expenses ($M) ........................................................ 5-3 Table 5.1.5-2 - AltaLink Total Company - Other GOE Increase ($M) ......................................................... 5-3 Table 5.2.1-1 - Operation & Maintenance Expenses ($M) ........................................................................ 5-4 Table 5.2.1.1-1 - Operation & Maintenance Expenses ($M) ..................................................................... 5-4 Table 5.2.1.1-2 - Operation & Maintenance - Labour Forecast Increase ($M) .......................................... 5-4 Table 5.2.1.2-1 - Operating & Maintenance - FTE Year End Summary ...................................................... 5-4 Table 5.2.1.3-1 - Operation & Maintenance - Contracted Manpower Expenses ($M).............................. 5-5 Table 5.2.1.3-2 - Operation & Maintenance - Contracted Manpower Increase ($M) ............................... 5-5 Table 5.2.1.4-1 - Operation & Maintenance Expenses ($M) ..................................................................... 5-5 Table 5.2.1.4-2 - Operations & Maintenance - Other GOE Forecast Increase ($M) .................................. 5-5 Table 5.3.2-1 - USA 560 - Operation & Maintenance Supervision & Engineering ($M) ............................ 5-6 Table 5.3.2-2 - USA 560 - Operation & Maintenance Supervision & Engineering Forecast Increase ($M) . 5-6 Table 5.3.2-3 - USA 560 - Operation & Maintenance Supervision & Engineering Labour Forecast Increase ($M) ............................................................................................................................................................ 5-7 Table 5.3.2-4 - USA 560 - Operation & Maintenance Supervision and Engineering FTEs ......................... 5-7 Table 5.3.2-5 - USA 560 - Operation & Maintenance Supervision & Engineering Contracted Manpower Forecast Increase ($M) .............................................................................................................................. 5-7 Table 5.3.2-6 - USA 560 - Operation & Maintenance Supervision & Engineering GOE Forecast Increase ($M) ............................................................................................................................................................ 5-7 Table 5.3.3-1 - USA 561 - Operation & Maintenance Control Centre Operations ($M) ............................ 5-8 Table 5.3.3-2 - USA 561 - Operation & Maintenance Control Centre Operations Forecast Increase ($M) . 5-9 Table 5.3.3-3 - USA 561 - Operation & Maintenance Control Centre Operations Labour Forecast Increase ($M) ............................................................................................................................................................ 5-9 Table 5.3.3-4 - USA 561 - Operation & Maintenance Control Centre Operations FTEs ............................ 5-9 Table 5.3.3-5 - USA 561 - Operation & Maintenance Control Centre Operations Contracted Manpower Forecast Increase ($M) .............................................................................................................................. 5-9 Table 5.3.3-6 - USA 561 - Operation & Maintenance Control Centre Operations GOE Forecast Increase ($M) .......................................................................................................................................................... 5-10 Table 5.3.4-1 - USA 562 - AltaLink Station Major Assets Volume (including HVDC) ................................ 5-10 Table 5.3.4-2 - USA 562 - Operation & Maintenance Station Equipment Expense ($M) ........................ 5-11 Table 5.3.4-3 - Operation & Maintenance Station Equipment Expense Forecast Annual Increases ($M) .. 5-12 Table 5.3.4-4 - USA 562 - Operation & Maintenance Station Equipment Expense Labour Forecast Increase ($M) ........................................................................................................................................... 5-12 Table 5.3.4-5 - USA 562 - Operation & Maintenance Station Equipment Expense FTEs ......................... 5-12 Table 5.3.4-6 - USA 562 - AltaLink Total Maintenance Hours Forecast (including HVDC) ....................... 5-13 Table 5.3.4-7 - USA 562 - Operation & Maintenance Station Equipment Expense Contracted Manpower Forecast Increase ($M) ............................................................................................................................ 5-15 Table 5.3.4-8 - USA 562 - Operation & Maintenance Station Equipment Expense GOE Forecast Increase ($M) .......................................................................................................................................................... 5-16 Table 5.3.5-1 - USA 563 - Major Transmission Line Assets ...................................................................... 5-17


Table 5.3.5-2 - USA 563 - Operation & Maintenance Transmission Line Work Quantities ..................... 5-17 Table 5.3.5-3 - USA 563 - Operation & Maintenance Overhead Line Expense ($M) ............................... 5-18 Table 5.3.5-4 - USA 563 - Operation & Maintenance Overhead Line Expense Forecast Increase ($M) .. 5-18 Table 5.3.5-5 - USA 563 - Operation & Maintenance Overhead Line Expense Labour Forecast Increase ($M) .......................................................................................................................................................... 5-18 Table 5.3.5-6 - USA 563 - Operation & Maintenance Overhead Line Expense FTEs ............................... 5-18 Table 5.3.5-7 - USA 563 - Operation & Maintenance Overhead Line Expense Contract Manpower Forecast Increase ($M) ............................................................................................................................ 5-19 Table 5.3.5-8 - USA 563 - Outage Due to Contamination of Insulators ................................................... 5-19 Table 5.3.5-9 - USA 563 - Escorted Moves ............................................................................................... 5-19 Table 5.3.5-10 - USA 563 - Operation & Maintenance Overhead Line Expense GOE Forecast Increase ($M) .......................................................................................................................................................... 5-20 Table 5.3.7-1 - USA 566 - O&M Miscellaneous Transmission Expense ($M) ........................................... 5-21 Table 5.3.7-2 - USA 566 - O&M Miscellaneous Transmission Expense Forecast Changes ($M) ............. 5-22 Table 5.3.7-3 - USA 566 - O&M Miscellaneous Transmission Expense Labour Forecast Increase ($M) . 5-22 Table 5.3.7-4 - USA 566 - O&M Miscellaneous Transmission Expense FTEs ........................................... 5-23 Table 5.3.7-5 - USA 566 - O&M Third Party Request ............................................................................... 5-23 Table 5.3.7-6 - USA 566 - O&M Miscellaneous Transmission Expense Contract Manpower Forecast Increase ($M) ........................................................................................................................................... 5-24 Table 5.3.7-7 - USA 566 - O&M Miscellaneous Transmission Expense GOE Forecast Increase ($M) versus Management Update ............................................................................................................................... 5-25 Table 5.3.8-1 - USA 567 - Annual Structure Payment Expenses ($M) ..................................................... 5-25 Table 5.3.8-2 - USA 567 - Annual Structure Payments Compensation Rates .......................................... 5-26 Table 5.3.8-3 - USA 567 - 5 Year Forecast, Annual Structure Payments ($M) ......................................... 5-27 Table 5.3.8-4 - USA 567- Historic Annual Structure Payment Schedule 2010-2014 ................................ 5-27 Table 5.3.10-1 - USA 571.1 - Operation & Maintenance of Vegetation Management ($M) ................... 5-30 Table 5.3.10-2 - USA 571.1 - Operation & Maintenance of Vegetation Management Forecast Increase ($M) .......................................................................................................................................................... 5-30 Table 5.3.10-3 - USA 571.1 - Operation & Maintenance of Vegetation Management Volumes and Costs - All In ......................................................................................................................................................... 5-32 Table 5.3.10-4 - USA 571.1 - Average Cost per Hectare (includes right-of-way weed control) .............. 5-33 Table 5.3.10-5 - USA 571.1 - Cost of Annual Workload Volume Increment (AVI) (2015 dollars) ............ 5-34 Table 5.3.10-6 - Total VM Work ............................................................................................................... 5-35 Table 5.3.10-7 - USA 571.1 - Operation & Maintenance Vegetation Management Labour Expense Additions ($M) ......................................................................................................................................... 5-35 Table 5.3.10-8 - USA 571.1 - Operation & Maintenance of Vegetation FTEs .......................................... 5-36 Table 5.3.10-9 - USA 571.1 - Operation & Maintenance of Vegetation Management Contract Manpower Forecast Increase ($M) ............................................................................................................................ 5-36 Table 5.3.10-10 - USA 571.1 - Contracted Manpower - Volume of Work by Work Type (000 m2)......... 5-37 Table 5.3.10-11 - USA 571.1 - Operation & Maintenance of Vegetation Management GOE Forecast Increase ($M) ........................................................................................................................................... 5-37 Table 5.3.11-1 - USA 575 - Operation & Maintenance IT Support ($M) .................................................. 5-38 Table 5.3.11-2 - USA 575 - Operation & Maintenance IT Support Forecast Increase ($M) ..................... 5-39 Table 5.3.11-3 - USA 575 - Operation & Maintenance IT Support Labour Forecast Increase ($M) ........ 5-40 Table 5.3.11-4 - USA 575 - Operation & Maintenance IT Support FTEs .................................................. 5-40 Table 5.3.11-5 - USA 575 - Operation & Maintenance IT Support Contract Manpower Forecast Increase ($M) .......................................................................................................................................................... 5-40


Table 5.3.11-6 - USA 575 - Operation & Maintenance IT Support GOE Forecast Increase ($M) ............. 5-40 Table 5.5.1-1 - Property and Business Tax Forecast ($M) ....................................................................... 5-41 Table 5.5.1-2 - Property Tax Forecast ($M) ............................................................................................. 5-41 Table 6.1.1-1 - Depreciation Expense Detail .............................................................................................. 6-2 Table 7.1-1 - AltaLink’s Aggregate Income Taxes ($M) .............................................................................. 7-2 Table 7.2-1 - Income Tax Rates .................................................................................................................. 7-3 Table 8.1.1-1 - FortisAlberta Transmission Revenue Offset Forecast ($M) ............................................... 8-2 Table 8.1.1-2 - TransAlta Transmission Revenue Offset Forecast ($M) ..................................................... 8-3 Table 8.1.2-1 - Services to Affiliates Transmission Revenue Offset Forecast ($M) ................................... 8-4 Table 8.1.3-1 - Lease and Other Transmission Revenue Offset Forecast ($M) ......................................... 8-4 Table 8.1.4-1 - Charge to FortisAlberta for Refunded Customer Contributions ($M) ............................... 8-4 Table 10.1-1 - 2016-2018 Forecast Capital Expenditures ($M) ............................................................... 10-2 Table 10.2.1-1 - DA Capital Forecast - Uncertainty Adjusted .................................................................. 10-4 Table 10.2.2-1 - DA Capital Forecast - 2013-2014 Performance ............................................................. 10-5 Table 10.2.4-1 - DA Capital Forecast - Base Plan ..................................................................................... 10-7 Table 10.2.8-1 - Models ......................................................................................................................... 10-11 Table 10.2.10-1 - DA Capital Expenditures (Base versus Uncertainty Adjusted) ................................... 10-14 Table 10.2.10-2 - DA Capital Additions (Base versus Uncertainty Adjusted) ......................................... 10-14 Table 10.2.11-1 - Forecast Reduction to DA Capital for EPCm Rate Differential ................................... 10-14 Table 10.3-1 - 2014-2018 CRU Capital Expenditures Forecast ($M) ...................................................... 10-17 Table 10.3.1-1 - 2009-2014 CRU Capital Expenditures versus Approved ($M) ..................................... 10-18 Table 10.3.1-2 - 2013-2018 CRU Capital Expenditures versus Approved ($M) ..................................... 10-19 Table 10.3.4-1 - CRU Forecast to Age Profile Comparison Examples ..................................................... 10-35 Table 10.4-1 - IT Capital Expenditure Overview ($M) ............................................................................ 10-36 Table 10.5-1 - Facilities Capital Expenditures ($M) ............................................................................... 10-37 Table 11.2-1 - Lead/Lag Study Summary Results ..................................................................................... 11-3 Table 11.2-2 - Dollar Impact of Changes in Lead/Lag Study .................................................................... 11-3 Table 25.1.1-1 - Administrative and General Expenses ($M) .................................................................. 25-2 Table 25.1.1.1-1 - Administrative and General - Labour Expenses ($M) ................................................. 25-2 Table 25.1.1.1-2 - Administrative and General - Labour Forecast Increase ($M) .................................... 25-2 Table 25.1.1.2-1 - Administrative and General - FTE Year End Summary ................................................ 25-2 Table 25.1.1.3-1 - Administrative and General - Contracted Manpower Expenses ($M) ....................... 25-3 Table 25.1.1.3-2 - Administrative and General - Contracted Manpower Increase ($M) ......................... 25-3 Table 25.1.1.4-1 - Administrative and General Expenses ($M) ............................................................... 25-3 Table 25.1.1.4-2 - Administrative and General - Other GOE Forecast Increase ($M) ............................. 25-3 Table 25.2.1-1 - USA 920 - Administrative and General Salaries ($M) .................................................... 25-5 Table 25.2.1-2 - USA 920 - Administrative and General Salaries Labour Forecast Increase ($M) ........... 25-5 Table 25.2.1-3 - USA 920 - Administrative and General Salaries FTEs ..................................................... 25-5 Table 25.2.2-1 - Volume of Accounts Payable (A/P) Transactions ........................................................... 25-6 Table 25.2.9-1 - USA 921 - Office Supplies and Expenses ($M) ............................................................. 25-11 Table 25.2.9-2 - USA 921 - Office Supplies and Expenses Forecast Increase ($M) ................................ 25-12 Table 25.2.11-1 - USA 923 - Outside Services Employed ($M) .............................................................. 25-12 Table 25.2.11-2 - USA 923 - Outside Services Employed Contracted Manpower Forecast Increase ($M)25-12 Table 25.2.12-1 - USA 924 - Insurance Premiums ($M) ......................................................................... 25-13 Table 25.2.13-1 - USA 925 - Injuries and Damages ($M) - Small Damage Claims .................................. 25-13 Table 25.2.14-1 - USA 926 - Employee Pensions and Benefits ($M) ..................................................... 25-14


Table 25.2.15-1 - USA 928 - Commission Expenses ($M) ...................................................................... 25-14 Table 25.2.15-2 - USA 928 - Cost Orders & Expenses, 2012-2014 Management Update January 1, 2012 to November 17, 2014 ............................................................................................................................... 25-15 Table 25.2.16-1 - USA 930.1 - General Advertising Expenses ($M) ....................................................... 25-16 Table 25.2.17-1 - USA 930.2 - Miscellaneous General Expenses ($M) .................................................. 25-16 Table 25.2.17-2 - USA 930.2 - Miscellaneous General Expenses Forecast Increase ($M) ..................... 25-17 Table 25.2.18-1 - USA 931 - Rents (Other Than Head Office) ($M) ....................................................... 25-17 Table 25.2.18-2 - USA 931 - Rents (Other Than Head Office) Forecast Increase ($M) .......................... 25-18 Table 25.2.19-1 - USA 931.1 - Head Office Rent ($M) ........................................................................... 25-18 Table 25.2.19-2 - USA 931.1 - Head Office Rent Forecast Increase ($M) .............................................. 25-18 Table 25.2.19-3 - USA 931.1 - Head Office Rent Forecast Increase ($M) .............................................. 25-18 Table 25.2.20-1 - USA 934 - IT General & Administrative Expense ($M) ............................................... 25-19 Table 25.2.20-2 - USA 934 - IT General & Administrative Expense Forecast Increase ($M) ................. 25-19 Table 25.2.20-3 - USA 934 - IT General & Administrative Expense Labour Forecast Increase ($M) ..... 25-19 Table 25.2.20-4 - USA 934 - Operation & Maintenance IT Support FTEs .............................................. 25-20 Table 25.2.20-5 - USA 934 - IT General & Administrative Expense Contract Manpower Forecast Increase ($M) ........................................................................................................................................................ 25-20 Table 25.2.20-6 - USA 934 - IT General & Administrative Expense GOE Forecast Increase ($M) ......... 25-22 Table 25.2.21-1 - USA 935 - Maintenance of General Plant ($M) ......................................................... 25-22 Table 25.2.21-2 - USA 935 - Maintenance of General Plant Forecast Increase ($M) ............................ 25-23 Table 25.2.21-3 - USA 935 - Maintenance of General Plant Labour Forecast Increase ($M) ................ 25-23 Table 25.2.21-4 - USA 935 - Maintenance of General Plant FTEs .......................................................... 25-23 Table 25.2.21-5 - USA 935 - Maintenance of General Plant Contract Manpower Forecast Increase ($M) ............................................................................................................................................................... 25-23 Table 25.2.21-6 - USA 935 - Maintenance of General Plant GOE Forecast Increase ($M) .................... 25-24 Table 28.4.2-1 - Estimated Cost of a Credit Rating Downgrade ($M) .................................................... 28-13 Table 28.5-1 - FFO/Debt without Credit Metric Support ....................................................................... 28-13 Table 28.6-1 - Comparison of Subordinated Debt and Temporary Equity Support .............................. 28-14 Table 28.6-2 - Revenue Requirement Comparison of Credit Metric Support Alternatives ($M) .......... 28-14 Table 28.8.1-1 - 2015-2016 GTA Forecast AltaLink Long-Term Debt Issues .......................................... 28-17 Table 28.8.2-1 - Subordinated Debt Proposal ........................................................................................ 28-17 Table 28.8.2-2 - Updated Subordinated Debt Proposal ......................................................................... 28-17 Table 28.8.3-1 - 2017-2018 GTA Forecast AltaLink Long-Term Debt Issues .......................................... 28-17 Table 28.8.5.1-1 - 2013-2014 Compliance Filing Forecast Credit Facility Amounts .............................. 28-18 Table 28.8.5.1-2 - 2015-2016 GTA Credit Facility Amounts ................................................................... 28-19 Table 28.8.6-1 - 2017-2018 Forecast Credit Facility Amounts using S&P Methodology ....................... 28-20 Table 28.8.6-2 - Other Costs Associated with Short-Term Debt ............................................................ 28-20 Table 31.4.2-1 - FortisAlberta Contributions In Aid of Construction to AltaLink 2006 to 2016 ($M) ...... 31-4 Table 31.4.5-1 - Refund of Contribution Payments to FortisAlberta ($M) .............................................. 31-6 Table 31.4.6-1 - FortisAlberta versus AltaLink’s Cost of Debt and Equity Based on Forecast Contribution Refunds ($M) ........................................................................................................................................... 31-6


LIST OF FIGURES Figure 1.3.1-1 - Total Capital Expenditures ($M) ....................................................................................... 1-9 Figure 1.3.1-2 - Total Capital Additions ($M) ........................................................................................... 1-10 Figure 1.10.1-1 - Transmission Delivery Point Outage Duration ............................................................. 1-43 Figure 1.10.1-2 - Transmission Delivery Point Outage Frequency ........................................................... 1-44 Figure 1.10.1-3 - Transmission Restoration Time .................................................................................... 1-44 Figure 1.10.2-1 - AltaLink All Injury Frequency Rate ................................................................................ 1-48 Figure 1.10.2-2 - AltaLink Lost Time Severity Rate .................................................................................. 1-49 Figure 1.10.3-1 - AltaLink Transmission O&M Expense & Sustaining Capital per Gross Fixed ................ 1-51 Figure 1.10.3-2 - AltaLink Transmission O&M Expense per Gross Fixed Asset ........................................ 1-51 Figure 1.10.3-3 - AltaLink Operating FTEs per $10M Rate Base .............................................................. 1-52 Figure 5.3.4-1 - USA 562 - Substation, Protection and Telecom Equipment Repairs 2003-2018 ............ 5-14 Figure 5.3.10-1 - USA 571.1 - Priority Sites Identified as per Fall Air Patrols - 2005 to 2015 .................. 5-34 Figure 10.2.8-1 - Probability Outcomes Example .................................................................................. 10-12 Figure 10.3.2-1 - Asset Risk Management Process ................................................................................ 10-22 Figure 10.3.2-2 - Risk Identification Example......................................................................................... 10-23 Figure 10.3.3-1 - Circuit Breaker Notification Trend .............................................................................. 10-25 Figure 10.3.3-2 - Transmission Line Deficiencies Trend ......................................................................... 10-26 Figure 10.3.3-3 - Transformer Deficiencies Trend ................................................................................. 10-26 Figure 10.3.3-4 - Protection and Control Notification Trend ................................................................. 10-27 Figure 10.3.4-1 - Bathtub Curve ............................................................................................................. 10-28 Figure 10.3.4-2 - Age Profile Wood Pole Lines ....................................................................................... 10-29 Figure 10.3.4-3 - Age Profile High Voltage Circuit Breakers................................................................... 10-29 Figure 10.3.4-4 - Age Profile Transformers ............................................................................................ 10-30 Figure 10.3.4-5 - Age Profile P&C Equipment ........................................................................................ 10-30 Figure 10.3.4-6 - Transformer Age Profile Current Replacement Rate .................................................. 10-31 Figure 10.3.4-7 - Transformer Age Profile - 10 Replacements/Yr Scenario ........................................... 10-32 Figure 10.3.4-8 - Circuit Breaker Age Profile - 14 Replacements/Yr ...................................................... 10-33 Figure 10.3.4-9 - Wood Pole Line Age Profile - 64 km Rebuild/Yr .......................................................... 10-34 Figure 10.3.4-10 - Wood Pole Line Age Profile - 100 km Rebuild/Yr ..................................................... 10-34 Figure 25.2.20-1 - Service Desk Call Volumes (H) .................................................................................. 25-21 Figure 25.2.20-2 - Server Support Requests (H) .................................................................................... 25-21 Figure 28.4.1-1 - Corporate Criteria Framework ..................................................................................... 28-5 Figure 28.4.1-2 - Business and Financial Risk Assessments ..................................................................... 28-5 Figure 31.4.7-1 - Current Situation for FortisAlberta Customer Contributions - Financial Flows and Impacts - Using Example based on $100M Fortis Contribution in Year 1 ($M) ....................................... 31-7 Figure 31.4.7-2 - Refunding of FortisAlberta Customer Contributions - Financial Flows and Impacts - Using Example based on $100M Refund in Year 1 ($M).......................................................................... 31-8 Figure 31.4.7-3 - Proposed Refunding of FortisAlberta Contributions - Detailed Financial Flows and Impacts - Example based on $100M Refund in Year 1 ($M) .................................................................... 31-9


February 16, 2016 i See the “Forward-looking Information Advisory” on pages i-iii of this volume.

FORWARD-LOOKING INFORMATION ADVISORY

This 2017-2018 General Tariff Application (the Application or 2017-2018 GTA) and any document incorporated or deemed to be incorporated by reference herein contains or may contain certain statements or disclosures that may constitute forward-looking information under applicable securities laws. All statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that AltaLink Management Ltd. (AltaLink) anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified by terms such as “anticipate”, “believe”, “contemplate”, “continue”, “could” “enable”, “expect”, “forecast”, “future”, “intends”, “may”, “plan”, “potential”, “will” or other comparable terminology. Forward-looking information presented in such statements or disclosures may, without limitation, relate to: applications to the Alberta Utilities Commission (AUC or Commission) for approval of, among other things, AltaLink’s Revenue Requirements (including deferral and reserve accounts; capital structure and return-on-equity; financing plans; treatment of costs for applicable Test Periods including income taxes, operating expenses, depreciation, capital costs for Direct Assign (DA) projects and maintenance programs, financing costs related to long-term debt and short-term borrowing, and projected growth in AltaLink’s Rate Base and assets under construction); transmission system expansion forecasts; the anticipated direct assignment of transmission development projects to AltaLink from the Alberta Electric System Operator (AESO) as defined in AltaLink’s Annual Information Form (AIF) dated May 5, 2014 for the year ended December 31, 2013 or any new AIF filed with applicable securities regulatory authorities for a subsequent financial year of AltaLink during the Test Period of the Application pursuant to approved Need Applications (as defined in the AIF) or, in the case of Critical Transmission Infrastructure (as defined in the AIF), AltaLink’s eligibility to submit Facility Applications (as defined in the AIF) pursuant to designations by the Government of Alberta or competitive bidding processes; the timing and development of transmission projects and the anticipated capital costs of such projects; business strategy, plans and objectives of management for future operations; forecast business results; the achievement of certain operational and performance measures and the resulting effect on compensation of executive officers; and anticipated financial performance or condition of AltaLink.

Various factors or assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. These factors and assumptions include, but are not limited to:

• no changes in the legislative and operating framework for Alberta’s electricity market that are adverse to AltaLink (for example refer to “Regulated Tariff Revenue” and “Overview of Electricity Industry in Alberta” in AltaLink’s Management’s Discussion and Analysis (MD&A) of financial condition and results of operations dated February 19, 2015 for the year ended December 31, 2014 or any new annual management discussion and analysis filed with applicable securities regulatory authorities for a subsequent financial year of AltaLink corresponding to a test year of the Application (the Annual MD&A) and “The Transmission Business ” in the AIF;

• decisions from the AUC concerning outstanding tariff and other applications that are consistent with past regulatory practices and decisions and are obtained in a timely manner (for example, refer to “Regulated Tariff Revenue”, “Overview of Electricity Industry in Alberta” and “Major Capital Projects” in the Annual MD&A and “General Development of


February 16, 2016 ii See the “Forward-looking Information Advisory” on pages i-iii of this volume.

the Transmission Business” and “The Transmission Business – Tariff Regulation”; and “-Transmission System Planning and Development” in the AIF);

• approved rate of return and deemed capital structures of AltaLink’s transmission business that are sufficient to foster a stable investment climate (for example, refer to “Regulated Tariff Revenue”, “Overview of Electricity Industry in Alberta” and “Major Capital Projects” in the Annual MD&A and “General Development of The Transmission Business” and “The Transmission Business – Tariff Regulation”; and “- Transmission System Planning and Development” in the AIF);

• a stable competitive environment; • AltaLink obtaining sufficient capital on acceptable terms to finance its transmission system

expansion; and • no significant event occurring outside the ordinary course of business such as a natural

disaster or other calamity.

These assumptions and factors are based on information currently available to AltaLink including information obtained by AltaLink from third-party industry analysts. In some occurrences, material assumptions and factors are presented or discussed elsewhere in the Application, or in other documents incorporated or deemed to be incorporated by reference herein, in connection with the statements or disclosure containing the forward-looking information. AltaLink cautions readers and prospective investors that the foregoing list of material factors and assumptions is not exhaustive.

The forward-looking information in statements or disclosures in the Application, or in other documents incorporated or deemed to be incorporated by reference herein, is based (in whole or in part) upon factors which may cause actual results, performance or achievements of AltaLink to differ materially from those contemplated (whether expressly or by implication) in the forward-looking information. These factors are based on information currently available to AltaLink including information obtained by AltaLink from third-party industry analysts. Actual results may differ materially from those predicted by such forward-looking information. While AltaLink does not know what impact any of these differences may have, its business, results of operations, financial condition and its credit stability may be materially or adversely affected. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information includes, among other things:

• the risks associated with being subject to extensive regulation including risks associated with AUC action or inaction;

• the risk that the AUC does not provide specific relief to sustain AltaLink’s credit metrics over a growth period characterized by large multi-year transmission facility projects;

• the risk that transmission projects are not directly assigned to AltaLink by the AESO or that AltaLink is not designated for filing a Facility Application;

• the risk that AltaLink is not able to arrange sufficient, cost-effective financing to repay maturing debt and to fund capital expenditures and other obligations;

• the risk that system expansion plans are delayed; • the risks that the actual costs of completing a transmission project significantly exceed

estimated costs; • the risks to AltaLink’s facilities posed by severe weather, other natural disasters or

catastrophic events and AltaLink’s limited insurance coverage for losses resulting from these events;


February 16, 2016 iii See the “Forward-looking Information Advisory” on pages i-iii of this volume.

• the potential for service disruptions and increased costs if AltaLink fails to maintain and improve its aging asset base; and

• the risks associated with forecasting AltaLink’s Revenue Requirements and the possibility that AltaLink could incur operational, maintenance and administrative costs above those included in AltaLink’s approved Revenue Requirement.

AltaLink cautions that the above list of risk factors is not exhaustive. Other factors, which could cause actual results, performance or achievements of AltaLink to differ materially from those contemplated (whether expressly or by implication) in the forward-looking statements or other forward-looking information, are disclosed in AltaLink’s publicly filed disclosure documents, which may be incorporated or deemed to be incorporated by reference in this Application, including those disclosed under “RISK MANAGEMENT” in i) the current annual MD&A, or ii) AltaLink’s MD&A of financial condition and results of operations for the interim period ended November 5, 2015 or for a subsequent interim period of AltaLink that is filed with applicable securities regulatory authorities during the Test Period of this Application and “RISK FACTORS” in AltaLink’s current AIF. Risk factors that could lead to such differences include legislative and regulatory developments that could affect costs or revenues, the speed and degree of competition entering the market, global capital markets conditions and activity, timing and extent of changes in prevailing interest rates, currency exchange rates, inflation levels and general economic conditions in geographic areas where AltaLink operates, results of financing efforts, changes in counterparty risk and the impact of accounting standards issued by standard setters.

All forward-looking information herein is given as of the date of the Application. AltaLink is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable laws. Because of these risks, uncertainties and assumptions, readers and prospective investors should not place undue reliance on such forward-looking information or statements. Any forward-looking information contained in the Application, or in other documents incorporated or deemed to be incorporated by reference herein, is expressly qualified by this statement.


February 16, 2016 1-1 See the “Forward-looking Information Advisory”.

1. INTRODUCTION Section 1 of AltaLink’s Application addresses the following:

1.1 Application Overview

1.2 Overview of Revenue Requirement

1.3 Overview of Key Aspects of Application

1.4 Tariff/Rate Applied For

1.5 2015-2016 General Tariff Application

1.6 Other Approvals (Deferral and Reserve Accounts) Requested

1.7 Organizational Structure

1.8 Forecasting Methodology/Process and Key Assumptions

1.9 Labour Overview and Compensation Forecast

1.10 Operational Performance

1.11 Business Improvements

1.12 Major Issues and Policy Changes

1.13 Terms and Conditions



Application Overview AltaLink is filing its 2017-2018 General Tariff Application (2017-2018 GTA or the Application) in

February 2016 to address ongoing concerns of customers, investors and rating agencies with regulatory lag. Regulatory lag is also a primary concern for AltaLink. It is our goal to have our 2017 Revenue Requirement decided prior to the commencement of 2017. AltaLink anticipates that it can return to a normalized time frame as outlined in bulletin 2015-09: performance standards for processing rate related applications, where a "Full Cycle" of an application for a full process proceeding is 235-295 days (approximately 8-10 months). AltaLink looks forward to working with the Commission and interveners to implement any regulatory efficiencies that can be achieved with this Application.

AltaLink does not believe that the matters included in this Application are complex. AltaLink introduced novel rate relief measures in its 2015-2016 GTA which are significant. AltaLink also requested a target 13% FFO/debt level. This Application reflects the ongoing implementation of those measures requested in the 2015-2016 GTA. AltaLink will be guided by the Commission’s decision in that application.

AltaLink recognizes that the decision on the 2015-2016 GTA has not yet been rendered. Once that decision is issued, AltaLink will promptly file an update to the Application to reflect all changes required in order to comply with that decision, including the tariff relief measures proposed in the 2015-2016 GTA and carried forward in this Application.

1.1.1 Tariff Relief Assumptions in Respect of the 2015-2016 General Tariff Application This Application will continue the various elements of AltaLink’s Transmission Tariff relief

proposal included its 2015-2016 GTA, namely:

• discontinuation, effective January 1, 2015, of the collection of CWIP-in-Rate Base amounts and the return to allowance for funds used during construction (AFUDC) accounting;

• refund of the previously collected 2011 to 2014 CWIP-in-Rate Base amounts evenly over 2015 and 2016;

• discontinuation, effective January 1, 2016, of the future income tax (FIT) method of collecting Federal and Provincial income taxes and the conversion to the Flow-through method together with a 2% equity ratio increase in 2016 given that AltaLink is forecasting to be not currently taxable commencing in 2015 and for the foreseeable future; and

• refund of the accumulated FIT liability account balance beginning in 2016, with the remainder committed to be refunded in 2017.

1.1.2 Modification of the 2015-2016 General Tariff Application Capital Structure Assumptions As discussed more fully in Section 28, for purposes of this 2017-2018 GTA, AltaLink has modified

the following capital structure assumptions from AltaLink’s 2015-2016 GTA by:

• incorporating the issuance of $350M subordinated debt issue on July 1, 2016 with a coupon rate of 4.65%; and

• reducing the 2016 equity ratio from 39% to 38% in 2016 coincident with the inclusion of subordinated debt in the capital structure in place of the temporary equity originally proposed.



1.1.3 2016 Generic Cost of Capital Assumptions For purposes of this 2017-2018 GTA , AltaLink has incorporated return on equity of 8.3% and the

2017 and 2018 equity ratio of 38% (including the 2% for being non-taxable as noted above) as placeholders pending the Commission’s final determination of AltaLink’s 2015-2016 GTA and the upcoming 2016 Generic Cost of Capitol (GCOC) proceeding.

1.1.4 2017-2018 General Tariff Application AltaLink in its capacity as General Partner of AltaLink, L.P. (ALP), applies1 to the Commission for

approval of a general tariff rate for the 2017-2018 test years (the Test Period) consisting of:

• Transmission Tariffs of $853.2M and $989.5M in 2017 and 2018, respectively, which includes $944.1M and $989.5M of Revenue Requirement for 2017 and 2018;

• additional tariff relief of $90.9M in 2017 to refund future income tax liability as requested in Sections 7 and 28;

• the 2017 and 2018 Transmission Facility Owner (TFO) Tariff as set out in Section 1.4 and including the Terms and Conditions of Service (as the term is defined below) pursuant to which the AESO will use AltaLink’s transmission facilities;

• AltaLink’s deferral accounts for the Test Period as requested in Section 31.7; and • AltaLink’s reserve accounts for the Test Period as requested in Section 31.6.

Table 1.1.4-1 below outlines AltaLink’s applied for Revenue Requirement and Transmission Tariff for the periods 2015-2016 and 2017-2018.

1 Pursuant to Part 3 of the Electric Utilities Act, S.A. 2003, c E-5.1.



Table 1.1.4-1 - Applied for Revenue Requirement and Transmission Tariff 2015-2018 Actual 2015-2016 GTA 2017-2018 GTA 2014 2015 2016 2017 2018 Revenue Requirement Operating expense 140.5 151.6 160.9 175.7 180.1 Return - Equity 155.2 170.4 215.7 231.8 242.2 Return - Debt 136.3 135.3 178.8 195.4 206.6 Depreciation 172.0 294.2 354.1 350.3 372.8 Revenue Offsets (13.3) (8.1) (7.9) (9.1) (12.2) Income Taxes 54.7 65.9 0.0 0.0 0.0 Total Revenue Requirement 645.4 809.4 901.5 944.1 989.5 Refunds GCOC and Other - (22.2) - - - CWIP-in-Rate Base Amounts - (115.0) (115.0) - - FIT Liability Balance - - (85.0) (90.9) - Transmission Tariff 645.4 672.2 701.5 853.2 989.5 Capital Structure Equity Ratio 36.0% 39.0% 38.0% 38.0% 38.0% Debt Ratio 64.0% 61.0% 59.5% 54.4% 52.0% Subordinated Debt Ratio 0.0% 0.0% 2.5% 7.6% 10.0% Total Capital 100% 100% 100% 100% 100% Return on Equity 8.5% 8.3% 8.3% 8.3% 8.3% FFO/Debt 9.8% 13.1% 13.2% 13.0% 13.2%

Consistent with the commitment made in AltaLink’s 2015-2016 GTA related to the transition

from the FIT to the flow-through method of collecting income taxes, the 2017-2018 Transmission Tariff reflects the relief outlined below.

Table 1.1.4-2 - 2017-2018 Transmission Tariff Impact - Future Income Tax ($M) 2017 2018 Discontinuation of FIT 62.2 56.9 Refund of FIT liability balance 90.9 - Total Transmission Tariff relief 153.1 56.9 Cumulative relief 153.1 210.0

1.1.5 Cumulative Tariff Relief 2015-2017 When considering the tariff relief as reflected in AltaLink’s 2015-2016 GTA for the periods 2015-

2016 of approximately $417M2 combined with the avoided pre-collection of future income taxes reflected in Table 1.1.4-2 above, cumulative tariff relief to AltaLink’s customer amounts to approximately $627M over the 2015-2018 period.

Additionally, as discussed more fully in Section 6, the 2017-2018 Transmission Tariff also includes a decrease in the depreciation and salvage rates applied to the Towers and Fixtures

2 Exhibit 3524-X0551, pdf p. 261, Table 28.1-1



accounts as compared to the 2016 rates reflected in AltaLink’s 2015-2016 GTA. The resulting decrease is outlined in Table 1.1.5-1 below.

Table 1.1.5-1 - 2017-2018 Transmission Tariff Impact - Depreciation and Salvage Rates ($M) 2017 2018 Reduction related to survivor profile (23.2) (24.0) Reduction related to net negative salvage (6.5) (6.7) Total Transmission Tariff reduction (29.7) (30.7) Cumulative reduction (29.7) (60.4)

AltaLink is the largest TFO in Alberta’s electricity industry, with the transmission business representing approximately half of the total kilometres of transmission lines used in Alberta’s high-voltage electricity transmission system. AltaLink’s transmission system is interconnected and operates synchronously (i.e. on the same phase and frequency) with the North American Western Interconnected Electrical System. The transmission business serves approximately 226,000 square kilometres in the southern half of Alberta and includes approximately 13,000 kilometres of high-voltage transmission lines and approximately 308 substations, transmitting electric energy at voltages up to 500 kV from generation plants to the major load centres, cities and large industrial plants throughout central and southern Alberta. AltaLink’s transmission facilities are used to supply electricity to most major urban centres in Alberta, serving approximately 85% of Alberta’s population. More information about Alberta’s electricity industry and AltaLink’s transmission business is available in the AIF, attached as Appendix 6-B2.

1.1.6 Technical Aspects of the Application The capitalized words and phrases used throughout this Application have the meanings ascribed

to them in the Glossary and Abbreviations of Terms in Appendix 20, unless otherwise defined herein.

The Application includes tables and schedules containing numbers that may not add up to the exact totals indicated within the tables due to rounding.

Overview of Revenue Requirement 1.2.1 Revenue Requirement

In this section, AltaLink sets out the primary factors driving the increases in Revenue Requirement for 2017 and 2018. In addition, AltaLink provides a brief overview of some of the key aspects of the Application.

Throughout this Application, AltaLink refers to both its Revenue Requirement and its Transmission Tariff in the context of certain changes that AltaLink has proposed in this Application. The Transmission Tariff relief is provided to customers in the form of both changes to AltaLink’s Revenue Requirement and its Transmission Tariff. For clarity, AltaLink’s Revenue Requirement is included on line 13 of Schedule 3-1, while AltaLink’s Transmission Tariff is included on line 20 of Schedule 3-1. AltaLink’s Transmission Tariff is inclusive of Revenue Requirement and the following adjustments:

• settlement of reserve accounts; and • refund of the FIT Liability account balance.

This section contains an explanation of the primary factors driving the forecast increases in AltaLink’s Revenue Requirement (refer to the following Table 1.2.1-1 for further context



respecting these factors). Section 1.4 further discusses the changes in AltaLink’s applied for Transmission Tariff.

AltaLink’s 2017 Revenue Requirement forecast of $944.1M represents an increase of $42.6M (4.7%) over the 2016 Update Revenue Requirement as modified in this Application. However, after considering the proposed refunds of the FIT liability balance, AltaLink’s 2017 Transmission Tariff is reduced to $853.2M.

AltaLink’s 2018 Revenue Requirement and Transmission Tariff forecast of $989.5M represents an increase of $45.4M (4.8%) over 2017 Revenue Requirement forecast levels.

The combined Revenue Requirement increase over the 2016 Updated Revenue Requirement for 2017 and 2018 is primarily attributable to System Growth and Maintenance, driven in large part by capital additions $787.3M and $595.7M in 2017 and 2018 respectively. The costs associated with System Growth and Maintenance are predominantly driven by the system capital costs associated with two types of capital-related activities. The first and largest activity is the work associated with the AESO’s DA projects necessary to meet Alberta’s need for additional transmission system capacity; the second is the work necessary to maintain AltaLink’s existing transmission assets.

Approximately 95% of the 2017 forecast Revenue Requirement increase over the 2016 management update Revenue Requirement is driven by System Growth & Maintenance costs related to system capital additions, and roughly 108% of the 2018 forecast Revenue Requirement increase over the 2017 forecast levels is similarly driven by system capital additions, but offset by decreased system support operating costs.

System support operating costs account for the balance of change in Revenue Requirement. These costs increased by 0.2% for the 2017 forecast and decreased by approximately 0.4% in arriving at the 2018 forecast Revenue Requirement.

Table 1.2.1-1 sets out additional detail and provides a breakdown of the various cost groupings.



Table 1.2.1-1 - Overview Forecast Changes in Revenue Requirement for 2017 and 2018 ($M) Revenue Requirement - 2016 Management Update 901.5 Provision for Deferral Accounts 0.0 2016 Management Update Adjusted Revenue Requirement 901.5 Refund of previously collected under CWIP-in-Rate Base amounts (115.0) Refund of the FIT Liability account balance (85.0) Total Transmission Tariff 2017 Forecast 701.5 2017 Forecast: Revenue Requirement changes due to: % Chg System Growth & Maintenance System Capital System expansion 22.8 Existing system maintenance 6.1 Change in System Capital 29.0 3.2% Operating costs related to System Capital Taxes other than income tax 11.3 Annual Structure Payments 0.1 Self Insurance Reserve and insurance premiums 0.0 Brushing 0.0 Change in Operating costs related to System Capital 11.5 1.3% System Support Operating Costs Labour 1.8 Contractor services (0.4) Hearing Cost Reserve 1.5 Other expenses (0.7) Change in System Support Operating Costs 2.2 0.2% Change in Revenue Requirement from 2016 levels 42.6 4.7% Total Revenue Requirement - 2017 Forecast 944.1

Refund FIT Liability Account Balance (90.9)

Total Transmission Tariff 2017 Forecast 853.2 21.6%

2018 Forecast: Revenue Requirement changes due to: System Growth & Maintenance System Capital System expansion 30.6 Existing system maintenance 13.5 Change in System Capital 44.1 4.7% Operating costs related to System Capital Taxes other than income tax 3.9 Annual Structure Payments 0.7 Self Insurance Reserve and insurance premiums 0.0 Brushing 0.3 Change in Operating costs related to System Capital 4.9 0.5% System Support Operating Costs Labour 0.8 Contractor services (0.0) Hearing Cost Reserve (2.4) Other expenses (1.9) Change in System Support Operating Costs (3.5) -0.4% Change in Revenue Requirement from 2017 levels 45.4 4.8% Total Revenue Requirement - 2018 Forecast 989.5

Refund FIT Liability Account Balance 0.0

Total Transmission Tariff 2018 Forecast 989.5 16.0%



1.2.2 System Growth and Maintenance System Growth and Maintenance primarily captures the cost associated with DA projects, driven

by the identification of the need for future transmission projects. This category also captures those costs associated with the maintenance and network related costs that are directly attributable to AltaLink’s existing assets. The increase in forecast 2017 net mid-year Rate Base is $511M over the net mid-year Rate Base reflected in the 2016 Update. The increase in forecast 2018 net mid-year Rate Base is $332M over the 2017 net mid-year Rate Base forecast. For further details with respect to the impact of system growth on Rate Base, refer to Section 10, Schedule 10-1. Refer to Section 31, Schedule 31.2-A for a summary of the amounts comprising AltaLink’s total Rate Base.

The needed System Growth and Maintenance is reflected in AltaLink’s 2017-2018 Revenue Requirement forecast and comprises $40.5M or approximately 95% of the requested increase for the 2017 test year over the 2016 Update Revenue Requirement levels (refer to Table 1.2.1-1 above). For the 2018 test year, System Growth and Maintenance requirements comprise $49.0M or 108% of the requested increase over the 2017 Revenue Requirement forecast. Other costs associated with the System Growth and Maintenance include those operating costs (Operating Costs Related to System Capital) that are linked to the assets, including Taxes Other Than Income Taxes, Annual Structure Payments (ASP), insurance costs, and brushing (vegetation management (VM) costs). These costs account for year over year increases of approximately 1% over the Test Period. Operating Costs Related to System Capital are set out and explained in Section 5 and Section 25.

1.2.3 System Support Operating Costs The balance of the increase in the Revenue Requirement forecast for the Test Period is driven by

the System Support Operating Costs (as reflected in Table 1.2.1-1). These costs account for $2.2M (0.2%) of the requested increase for the 2017 test year over the 2016 Update Revenue Requirement and $3.5M (0.4%) of the requested reduction of 2018 Revenue Requirement forecast over the 2017 test year levels.

AltaLink’s Revenue Requirement forecast is detailed in Section 3.

Overview of Key Aspects of Application The key aspects of the Application discussed in this section are:

Section Cost Drivers 1.3.1 Proposed 2017 Tariff Relief 1.3.2 Consolidated FTE Forecasts 1.3.3 Depreciation and Salvage Study 1.3.4 Capital Forecast Preparation 1.8.3.2 and 10.2

1.3.1 Cost Drivers As explained in Section 1.2 above, the predominant cost drivers associated with the change in

Revenue Requirement for the Test Period are the number and size of the projected AESO DA projects. Figure 1.3.1-1 and Figure 1.3.1-2 illustrate AltaLink’s forecast of total capital expenditures of $792.1M in 2017 and $824.7M in 2018 and total additions of $787.3M in 2017

~ !! ••a I 1a• !~ ~ ALiAi.ii1i\

'111111111111 A BERKSHIRE HATHAWAY ENERGY COMPANY


and $595.7M in 2018 to Rate Base which Altalink is forecasting it w ill execute during the Test

Period. The impact on Revenue Requirement attributed to these levels of capital expenditures and additions is summarized in Section 1.2 (Table 1.2.1-2) under the heading System Capital and

described in Section 10. Refer to Section 31, Schedu le 31.28 for a summary of Alta link's total forecast capital expenditures and capita l additions during the Test Period.

Figure 1.3.1-1- Total Capital Expenditures (SM)

2,000

1,500

1,000

500

2012A 2013A 2014A 2015FC

February 16, 2016 See t he "Forward-looking Information Advisory".

2016FC

• DirectAssign

• Other

2017FC 2018FC

1-9

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Figure 1.3.1-2 - Total Capital Additions (SM)

3,500

3,000

2,500 • Direct Assign

• Ot er 2,000

1,500

1,000

500

2012A 2013A 2014A 2015 FC 2016 FC 2017 FC 2018FC

37. The balance of the cost drivers reflected in Revenue Requirement are predominantly related to operating expenses as summarized in Table 1.2.1-2 above and further explained in detail in Section 5 and Section 25.

1.3.2 Proposed 2017 Tariff Relief 38. Although a decision has not yet been rendered on the 2015-2016 GTA, this Application reflects

the Transmission Tariff relief measures proposed in the 2015-2016 GTA continuing into the 2017 and 2018 test years including:

• discontinuation of the collection of CWIP-in-Rate Base and reverting back to traditional AFUDC treatment beginning in 2015 and continuing into 2017 and 2018;

• discontinuation of the FIT method of collecting Federal and Provincial income taxes and converting to the use of the Flow-through method beginning in 2016 and continuing into

2017 and 2018 w hich lowered the Transmission Tariff by $119.lM; and

• refund of the remaining FIT liability balance of $90.9M in 2017, following the proposed refund in 2016.

1.3.3 Consolidated Full Time Equivalent Forecasts 39. Altalink's Fu ll Time Equivalent (FTE) forecast includes both operating and capital FTEs. The

forecast is described in the Application, both in terms of existing FTEs and additional FTEs that

wi ll be required through the Test Period. For this Test Period, Alta link is not forecasting any increase in its Operating FTEs from the 2016 Update level, but rather is forecasting a decrease of 9.8 FTEs by 2018.

February 16, 2016 1-10 See t he "Forward-looking Information Advisory".



AltaLink has provided an Operating FTE breakdown by Uniform System of Accounts (USA) (Appendix 2-A), and on a company functional basis AltaLink has provided both operating and capital FTEs in Appendix 2-C.

The Application also includes descriptions of business needs for transmission and corporate operating FTE additions by USA Activity Code (Section 5 and Section 25).

1.3.4 Depreciation and Salvage Study In the development of the depreciation expense component of its 2015-2016 GTA Revenue

Requirement forecast, AltaLink has engaged Gannett Fleming Inc. to prepare a full and comprehensive depreciation and salvage study. AltaLink has continued the use of this study as the basis for the 2017-2018 depreciation expense with the exception of the Towers and Fixtures accounts. AltaLink engaged Gannett Fleming to conduct a further asset life analysis of asset class 354 Towers and Fixtures based on AltaLink’s assessment of the life expectancy of towers built under AESO Rule 502.2 and those built prior to the rule. Refer to Section 6 of the Application for the details and Appendix 8-1 and Appendix 8-2 for a copy of the Direct Evidence of Larry E. Kennedy and the Engineering Review and Assessment of the Life Expectancy of New Towers.

Tariff/Rate Applied For AltaLink is applying for tariffs that reflect the Revenue Requirement forecast for the Test Period

as follows:

• the 2017 Revenue Requirement is forecast at $944.1M; and • the 2018 Revenue Requirement is forecast at $989.5M.

Consistent with the 2014-2015 GTA, in 2017, AltaLink is also seeking approval to refund the remaining $90.9M of the accumulated FIT liability account.

Therefore, after considering the refund of the FIT liability account balance, AltaLink’s Transmission Tariff forecast for the Test Period is as follows:

• the 2017 is forecast at $853.2M; and • the 2018 is forecast at $989.5M.

The tariffs, if approved by the Commission as filed in the Application, would translate into 12 equal monthly billings to AESO as follows:

• 2017: $71,100,000 • 2018: $82,458,333

AltaLink expects the proceeding schedule for the Application to reflect a decision by the AUC by the end of 2016, with a compliance filing process expected for early 2017. AltaLink therefore intends to submit a 2017 Interim Tariff following the Commission’s determination related to the 2015-2016 GTA (proceeding ID 3524). The Commission approved AltaLink’s 2016 Interim Tariff Application (Decision 21168-D01-2015) on December 23, 2015, approving the continuation of AltaLink’s 2015 interim tariff of $729.5M, and monthly billings of $60.8M, effective January 1, 2016, until a final decision of the Commission in respect of AltaLink’s 2015-2016 GTA. This amount is $123.7M lower (approximately $10.3M per month) than the applied for 2017 Transmission Tariff of $853.2M. AltaLink will reflect adjustments to the interim tariff in its 2017 Interim Tariff Application.



2015-2016 General Tariff Application 1.5.1 Process and Timing

AltaLink’s 2015-2016 GTA of was filed on November 18, 2014, amended on June 1, 2015 and further updated on October 16 and 23, 2015. AltaLink amended its application to include significant tariff relief to customers. Reply argument related to the 2015-2016 GTA was file February 9, 2016 and as such, AltaLink anticipates a decision will be issued in the second quarter of 2016.

Other Approvals (Deferral and Reserve Accounts) Requested 1.6.1 List of Deferral and Reserve Accounts Being Requested

AltaLink is requesting the continuation of five previously approved deferral accounts.

In Section 31.8, AltaLink requests continued deferral account treatment during the Test Period for:

• Federal and Provincial Taxes • Taxes Other Than Income Tax • ASP • DA Capital • Long-term Debt Deferral Account (LTDDA) • International Financial Reporting Standards (IFRS) to the extent that future Canadian ASB

pronouncements may impact upon the Commission’s Rule 026

In Section 31.7, AltaLink requests that reserve account treatment be continued during the Test Period for:

• Hearing Costs • Self Insurance

Consistent with its updated 2015-2016 GTA, AltaLink is requesting deferral account treatment during the Test Period for both provincial and federal income taxes. The rationale for this request is outlined in Section 31.8.

In Decision 2013-407,3 the Commission confirmed its previous findings4 in relation to the Rainbow & Capitalized G&A Tax reserve and AltaLink’s request for a deferral account treatment of current taxes which was denied. Accordingly, AltaLink is not requesting funding of the Rainbow & Capitalized G&A Tax reserve account in the Test Period.

1.6.2 Reconciliation of Existing Reserve Accounts In Section 31.7, AltaLink is requesting, as part of the Application, the reconciliation and

disposition of the following two reserve accounts with respect to adjustments for actual results and forecast funding/expense requirements in the Test Period:

• Self-Insurance Reserve (SIR) per Section 25.2.12 • Hearing Cost Reserve (HCR) per Section 25.2.15

3 Decision 2013-407, paragraph 1133. 4 Decision 2012-221, paragraph 131.



Organizational Structure 1.7.1 AltaLink Ownership Structure

Refer to Appendix 1-A for AltaLink’s ownership structure.

1.7.2 AltaLink Organizational Structure Refer to Appendix 1-B for the organization charts as of December 31, 2015 for Vice Presidents

and above and their direct reports.

Forecasting Methodology/Process and Key Assumptions 1.8.1 Forecast Overview

In Decision 2011-453, at paragraph 124, the Commission expressed concern with AltaLink’s use of its Management Update forecast as the baseline for its requested test year forecasts suggesting that AltaLink would be best to develop its forecasts from an assumed zero-base, which seeks to re-assess the resources and costs required to fulfill its statutory duties on an annual basis, without assuming that costs are simply incremental to the actual costs of the preceding year.

AltaLink has presented the forecast for the Application in a manner that it believes is clear, understandable, is consistent with the USA/Minimum Filing Requirements (MFR) Consensus document and accords with the direction in paragraph 124 of Decision 2011-453.

AltaLink implemented a zero-based approach several years ago and has used this approach for the last few applications. Each department assessed all activities required to be performed in order to meet the objectives necessary to fulfill statutory duties and business obligations during the Test Period. The departmental re-assessments established the FTE and contractor levels required to carry out the forecast workloads, as well as the General Operating Expense (GOE). These levels then formed the basis for the forecast portion of the Application.

The impact of activity drivers was specifically assessed for each department. The specific activities that will have to be undertaken during the Test Period as a result of the drivers were considered along with the need duration (short-term or on-going) and type (FTE or contractor). The amount of resources required to perform the identified activities were also quantified so that the causal relationship between the specific activity drivers and the need for resources within each department could be determined. Explanations of the need for all forecast FTE additions for each department are included in Sections 5.2 and 25.2.

The forecasts for the Test Period are described in the Application by USA Activity Codes.

2017 Labour Escalation Non-Union Employees Below Executive – As per Table 1.9.3-4, AltaLink forecast a 3.0%

increase. This reflects the Mercer market salary escalation forecast of 1.25% and an additional increase of 1.75%, which is forecast to achieve market median target total compensation at the end of the Test Period.

Executive Employees – As per Table 1.9.3-7, AltaLink forecast a 0.75% decrease. This reflects the Mercer market salary escalation projection of 1.25%, less 2.0%, which is forecast to achieve market median target total compensation at the end of the Test Period.

Union Base Pay Increases – As per Table 1.9.3-1 and Table 1.9.3-2, AltaLink forecast a 3.0% increase for 2017. This reflected a 2.0% annual structure increase and a 1.0% progression/step



increase, which is forecast to achieve market median target total compensation at the end of the Test Period.

2018 Labour Escalation Non-Union Employees Below Executive – As per Table 1.9.3-5, AltaLink forecast a 4.95%

increase. This reflects the Mercer market salary escalation projection of 3.2% and an additional increase of 1.75%, which is forecast to achieve market median target total compensation at the end of the Test Period.

Executive Employees – As per Table 1.9.3-8, AltaLink forecast a 1.2% increase. This reflects the Mercer market salary escalation projection of 3.2% less 2.0%, which is forecast to achieve market median target total compensation at the end of the Test Period.

Union Base Pay Increases – As per Table 1.9.3-1 and Table 1.9.3-2, AltaLink forecast a 4.0% increase for 2018. This reflected a 3.0% annual structure increase and a 1.0% progression/step increase, which is forecast to achieve market median target total compensation at the end of the Test Period.

1.8.2 General Assumptions AltaLink’s Revenue Requirement forecast for the Test Period is based on the assumptions

outlined in Table 1.8.2-1 below.

Table 1.8.2-1 - AltaLink’s Forecast Rate Assumptions

Assumption 2017

Forecast 2018

Forecast Blended Salary Escalation 2.89% 4.39% Union 3.0% 4.0% Non-union 3.0% 4.95% Executive -0.75% 1.2% Contractor 1.9% 2.1% General Inflation 1.9% 2.1% Capital Escalation 4.8% 4.3% Vacancy 2.5% 4.0% Interest Rates Long-Term Refer to Section 28.3 Refer to Section 28.3 Short-Term (Mid-year) 1.713% 2.279%

The forecasts in Table 1.8.2-1 were prepared by each department using constant 2016 Canadian dollars. Inflationary increases were subsequently added to the forecasts by the Budgets and Forecasts group. AltaLink has used a general inflation rate of 1.9% and 2.1% respectively for 2017 and 2018. The general inflation assumptions are consistent with, and based on, the Government of Alberta Budget 2015 (October) – 2015-2018 Fiscal Plan for the test years as described in Section 1.8.4. This general inflation rate is applied to operating expenses other than those for which a specific inflation rate is applicable.

Escalation factors have been specifically forecast for other expenses such as salaries, benefits, contracted manpower, insurance, property taxes, ASP and capital projects as described below:

• salary and benefits escalation is based on analysis which is discussed in Section 1.9;



• contracted manpower costs are based on general inflation rates. Even though contractors provide mainly labour services and would normally be escalated at the same rate as labour, management expects to keep contactor escalation in line with general inflation given the current economic situation in Alberta;

• GOE escalation is based on general inflation rates and usage rates. Office expense, staff expense and building-related costs are escalated using the general inflation rates noted above;

• ASP and details of escalation can be found in Section 5.3.8 and in Appendix 12.1; • property and business taxes as well as insurance costs are escalated based on industry

specific rates, as described in Sections 5.4 and 25.2.5; and • capital project forecasts were escalated as provided in Section 10.2.

1.8.3 Forecasting Methodologies As described in Section 1.8.1, AltaLink assessed all activities required to be performed in each

department in order to meet its objectives over the Test Period. Activities and associated costs were forecast within the following departments:

• Chief Executive Officer • Chief Financial Officer • Chief Operating Officer • Projects • Customer Service • Communications and Stakeholder Engagement • Law and Regulatory • Human Resources

Departments were provided guidelines by the Finance department to ensure that common forecasting processes and methodologies were followed, including the consistent and appropriate use of USA Activity Code numbers. An overview of these guidelines is provided in Section 1.8.3.3.

When departments provided their forecasts, the roll-up for the overall company was then adjusted in accordance with general parameters and guidelines.

After forecasts from each department were developed and submitted to the Budgets and Forecasts group, the department forecasts were adjusted to include certain corporate costs, such as benefits and inflation.

The Budgets and Forecasts group performed a review to provide consistency, completeness and to eliminate errors or duplication.

An integrated business plan was developed in the fall of 2015 as the basis for the 2016 budget and the 2017-2018 GTA. It was developed using zero-base budgeting and utilizing the 2016 budget for its 2017-2018 forecast baseline.

Each department forecast the overall level of activity in the Test Period using an assumed zero-base and considered the change in activity and associated costs from the 2016 budget to 2017, and from 2017 to 2018.



USA Activity Code Definitions For the purpose of preparing the departmental forecasts, the activities were forecast

corresponding to a USA Activity Code number based on the definitions in the USA Consensus Documents that accompanied the Alberta Energy and Utilities Board’s (EUB/Board) Bulletin 2006-25.

Each department identified the different activities to be performed in the undertaking of AltaLink’s business by USA Activity Code.

Forecasting by USA Activity Codes In order to confirm the reasonableness of its forecast, AltaLink reviewed its forecast for the Test

Period in comparison to the 2014 actuals and the 2015-2016 Update, in which costs had been captured by USA Activity Code. AltaLink also performed basic ratio analysis to determine whether the forecast differences from year to year are reasonable taking into consideration any anticipated increase or decrease in forecast activities.

AltaLink analyzed its forecasts, as described by USA Activity Code, by comparing the level of forecast costs for specific USA Activity Codes in each test year to the overall operating costs for each test year in order to test the reasonableness of its forecast. Department heads responsible for departmental forecasts compared their forecasts for each USA Activity Code change year to year and provided explanations for increases and decreases in costs for different USA Activity Codes based on anticipated changes in activity levels.

Forecasting Capital Costs Once the activities in the Test Period were forecast, the activities were assessed to determine

which activities were capital costs in accordance with the Capitalization Policy.

All directly attributable internal labour costs and costs in support of capital projects were included in the capital program in accordance with the Capitalization Policy. No indirectly attributable internal labour costs or costs in support of capital projects were included in the capital program in accordance with the Capitalization Policy and in accordance with IFRS. Operating labour reflects only labour that is operating expense related.

Testing the Reasonableness of the Forecast The general reasonableness of the USA-based 2017 and 2018 forecasts was tested against the

background of the 2014 actuals and 2015-2016 Management Update.

AltaLink identified the level of expenditures attributed to each USA Activity Code compared to the total operating expenses for each test year as a means to assess consistency and range of reasonableness.

1.8.3.1 Operating Cost Forecast Preparation AltaLink forecasted general operating expense line items as reflected in the MFR Schedules 5

and 25.

The departmental labour, contracted manpower and supporting costs forecasts for this Test Period were developed by considering the activities expected to be undertaken by USA Activity Code.

As identified in Section 1.2, a number of external and internal factors operated as activity drivers for this Test Period resulting in increased resource requirements. Examples of activity drivers include the planned addition of new transmission facilities in the Test Period, the increasing



technological sophistication of the transmission facilities, and increased industry standards and the financial accounting standards which must be maintained. While these activity drivers generally require increased labour resources due to increased Operation & Maintenance (O&M) costs activities, opportunities for improving efficiencies were identified and forecast. Sections 5 and 25 contain descriptions of how various cost drivers will impact the number of FTEs required in the USA-specific subsections.

1.8.3.2 Capital Forecast Preparation AltaLink’s forecast capital expenditures include:

• costs in respect of AESO DA projects and projects forecast to be assigned by the AESO (detailed in Section 10.2);

• Capital Replacement and Upgrade (CRU), detailed in Section 10.3; and • general capital expenditures, including those related to information technology and

facilities, detailed in Section 10.4 and Section 10.5.

AltaLink’s DA projects capital forecasting approach incorporates the impacts of identifiable uncertainties through a probabilistic assessment methodology. The result is the Uncertainty Adjusted DA Capital Forecast, which the Commission directed AltaLink to use in Decision 2013-407. Full details are provided in Section 10.2.

Capital expenditures are comprised of those charges that are directly attributable to the capital projects and AFUDC. Costs that are directly attributable to capital projects are either charged directly to the project via Systems, Applications, and Products in Data Processing (SAP) timesheets or work orders or are charged indirectly via Directly Attributable, Indirectly Charged Costs (DAIC) accounting. DAIC accounting involves pooling all IFRS compliant costs that are directly attributable to capital projects but are not directly charged to projects and allocating this DAIC pool across all capital projects.

Section 10 outlines the process for the preparation of the capital forecast.

AltaLink’s capital cost escalation rates used within the capital forecast are in Section 10.2.

AFUDC is calculated in accordance with AUC requirements.

1.8.3.3 Forecast Guidelines This Section discusses guidelines and parameters that were applied from an overall corporate

perspective for the Application. The AUC USA Definitions Document was utilized in the development of the Test Period forecast. The objective of these parameters was to ensure consistency across the organization. The guidelines consisted of the following:

• forecast costs are to be recorded in the same cost elements as are used to record current actuals;

• benefits are to be forecast at the department level. Benefits are forecasted separately through the Human Resource department and loaded into the forecast of each department by the Finance department;

• general inflation will be applied to appropriate cost items by the Finance department and therefore all costs should be forecast without the impact of inflation. Specific escalations (e.g. brushing, salaries/wages, etc.) will be provided by certain departments;

• labour: o use current 2015 base salaries for the individual years in the Test Period;



o for new staff, assume a salary comparable to similar current positions or similar market positions;

o overall, there are no new FTEs requested in 2017-2018. Operating FTEs requested in Appendix 2-B are currently on staff and mainly the result of a delay in staff reductions. FTE reductions are assumed to take place at the start of the year; and

o employees who are replacing those who retire are not to be considered as new employees but replacements.

• general internal office supplies will be forecast through the Facilities department and not in individual departments;

• building and station utility costs and furniture requirements are to be forwarded to the Facilities department and not to be forecast in individual departments. The Facilities department will assess the requests and develop a consolidated forecast;

• all electronic equipment and software needs and upkeep should be provided to the Information Technology (IT) department where it will be assessed, forecast and ultimately procured;

• freight and courier charges for field maintenance work should be forecast in applicable departments;

• any affiliate charge-outs will be captured at the corporate level through Miscellaneous Revenue. Miscellaneous Revenue is forecast by the Operations and Finance departments;

• Staff Retirements: o account for retirements and succession planning; o forecast retirement based on conversations with potential retirees; and o treat retirements as replacements and not as new staff using the mid-year rule to

maintain consistency with other hiring assumptions. • staff expenses – departments forecast for specific items and expenditures; • Regulatory Commission expenses – reflects the funding forecast requirements related to

HCR; • all external legal costs, including those forecast for inclusion in the Regulatory HCR, will be

forecast by the Law and Regulatory department. This will include specific department legal issues, land and general litigation;

• small damage claims (up to $100,000 per annum) will be forecast in the Finance department;

• VM – costs associated with VM are forecast in terms of specific activities, trimming, mowing, slashing/removal, and application of herbicide; and

• contracted manpower – contracted manpower forecasts are prepared by each department.

1.8.3.4 Forecast Consolidation and Review Once the departmental reviews were completed, the forecasts were consolidated and

submitted for review by the Executive Team (CEO Department).

The overall review of the consolidated forecast was focused on looking at changes year over year. The forecasts were challenged to see if there were areas where the departments could reduce costs and FTEs in their forecasts.

Activity drivers that resulted in decreased resource requirements were assessed. Industry developments were considered in the context of AltaLink’s forecasts.

Some examples of industry developments include:



• the continued low price of oil and its impact on the Alberta economy; • the impact of the increased Rate Base on O&M activities; and • increased industry standards such as the AESO’s increased reliability standards and changing

ISO rules.

In addition, as transmission assets age, there is an increased amount of maintenance required. Aging assets continues to be an activity driver for AltaLink.

The Executive review was thorough and resulted in the forecast submitted within the Application.

1.8.4 Economic Parameters AltaLink’s general inflation rate forecast during the Test Period is based on the Government of

Alberta Budget 2015 Economic Outlook, 2015-2018, Alberta (published October 2015, page 52) as per Appendix 2-H:

• 2017: 1.9% • 2018: 2.1 (compounded 4.0%)

In accordance with AUC Decision 2011-453, paragraph 133, using the Government of Alberta’s Economic Outlook is reasonable as forecast factors have been developed by independent third party resources. The general inflation rates have been used to escalate contracted manpower, general operating expenses, with certain exceptions, such as rent, insurance, annual structure payments and other items which would be individually forecasted based on an existing contract, quote or other analysis.

Refer to Section 10.2 with respect to details regarding the forecast capital escalation rates used in the Application. Table 1.8.2-1 summarizes AltaLink’s forecast rates.

Labour Overview and Compensation Forecast 1.9.1 Alberta Labour Market Environment

The Alberta labour market continues to experience a significant economic downturn in 2016. Several economic forecasts predict the economic environment will continue to worsen in the first half of 2016, with a gradual recovery later in 2016 and into 2017, followed by a return to normal or close to normal economic conditions in 2018. Two forecasts are shared below.

ATB Financial - Alberta Economic Outlook ATB Financial predicts modest economic improvement in the Alberta marketplace in the second

half of 2016 and in 2017, as oil prices begin to rebound, with a forecasted Gross Domestic Product (GDP) of 1.6% in 2017, and 2.0% in 2018. ATB Financial forecasts that the unemployment rate will drop from 7.2% in 2016 to 6.3% in 2017, and continuing to drop in 2018 to 5.9%. In turn, employment is forecast to increase substantially from (0.3%) in 2016, to 1.8% in 2017, and 1.1% in 2018, further indicating gradual economic recovery in 2017 and 2018. See Appendix 2-I Attachment – Alberta Economic Outlook Q1, 2016, ATB Jan, 2016, for the full report.

Alberta Government Economic Outlook The Alberta Government Economic Outlook forecasts that “Alberta’s economy is expected to

see a modest recovery in 2016 and improve over the medium term”. The economy is forecast to expand marginally in 2016, with 2017 and 2018 picking up momentum and experiencing growth, measured by GDP, of 2.4% and 2.6%, respectively. The unemployment rate is expected to climb



above six percent in 2016, but reduce to 5.8% in 2017, with a further decrease to 5.1% in 2018. Subsequently, employment is forecast to grow from 0.5% in 2016, to 1.6% in 2017 and 2.2% in 2018, further signaling positive economic recovery. See Appendix 2-H Attachment – Budget 2015 Economic Outlook, 2015-2018, Alberta, for the full report.

Although the above forecast figures differ marginally, the story is similar. The economy is expected to remain unstable in 2016, with modest recovery in 2017, and rebounding to more normal economic conditions in 2018.

The current Alberta economic recession has contributed to lower turnover rates and decreased labour pressures in the short-term. However, living in Alberta, AltaLink understands the cyclical nature of the economy and understand that in time the economy will return to more normal conditions, even boom conditions, as it has in the past. As described above, we are expected to start to return to normal economic conditions in the latter half of 2016 and into 2017, and be at normal or close to normal economic conditions in 2018.

When conditions return to normal, it is critical that AltaLink is providing market median compensation so it doesn’t have an exodus of employees when the opportunity arises. Through the highs and lows of the cycle, AltaLink recognizes the importance of modifying salary forecasts to reflect economic conditions. AltaLink believes in adhering to the long standing AUC principle that it provides market median target total compensation. The salary forecasts included in the Application are intended to provide market median target total compensation by the end of the Test Period.

Compensation Approach AltaLink’s basic approach to employee compensation described below is unchanged from

previous test years.

A. Attract and retain qualified employees by providing market competitive compensation at market median.

1) AltaLink’s non-union market comparisons for both non-union employees below executive and for executive employees are provided in Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016. AltaLink’s union market comparisons are provided in Appendix 2-J Attachment – Union Market Analysis Summary, Jan 20, 2016, and Appendix 2-K Attachment – Union Market Data, Jan 20, 2016.

2) The market salary escalation projections are provided in Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016. As further described in 2013-2014 GTA, Section 1.8.5.4, paragraph 152, and as per the 2015-2016 GTA, Section 1.8.5.3, AltaLink is using the incentive target levels, to determine the competitive market position and therefore the appropriate level of base pay increases to achieve market median target total direct compensation.

3) Salary Increase Determination - AltaLink has three groups of employees: executive, non-union below executive, and union. AltaLink will determine the salary increase forecast for each of the above three groups depending on their market situation outlined as follows: i. if a group is at market, AltaLink will forecast the market salary escalation projections

as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016. This is intended to achieve market median compensation by the end of the two



year Test Period. For union employees, other union settlements in AltaLink’s peer group in Alberta will also be considered;

ii. if a group is below market, AltaLink will forecast the market salary escalation projection as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016, plus half of the percentage the group is below market. This is intended to achieve market median compensation by the end of the two year Test Period. For union employees, other union settlements in AltaLink’s peer group in Alberta will also be considered; and

iii. if a group is above market, AltaLink will forecast the market salary escalation projection as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016, minus half of the percentage the group is above market. This is intended to achieve market median compensation by the end of the two year Test Period. For union employees, other union settlements in AltaLink’s peer group in Alberta will also be considered.

B. Create a performance-based culture by designing programs that motivate employees to perform at high levels.

C. Develop a compensation system that is responsive to market forces while focusing on customer needs and benefits such as reliability, safety, cost and schedule.

Market Median Aggregate Compensation As Mercer stated in the 2015-2016 GTA, in many previous GTAs and supported by AltaLink,

individual compensation within + or – 10% of market may be considered competitive. This allows for employees who are early in their career at that level or who are not strong performers to be paid up to 10% below the market median. This also allows for employees who have been at their current level for a long time and who are strong performers, to be paid up to 10% above the market median. This compensation structure, which is quite common in the marketplace, allows for proper pay differentiation based on experience and performance.

In past GTAs, some interveners have misinterpreted this concept to suggest that aggregate compensation within + or – 10% of the market median is acceptable. AltaLink does not agree with this misinterpretation. The AUC has stated that target total market median compensation is appropriate and AltaLink agrees. In order to have a proper functioning compensation system that allows for pay below and above the market median, based on experience and performance, and that enables the attraction and retention of employees, aggregate compensation needs to be at the market median.

AltaLink’s compensation, including base pay, Short-Term Incentive Pay (STIP), Long-Term Incentive Pay (LTIP), pension and benefits, and executive compensation is described in further detail in the following sections. The compensation elements in the Application are forecast to result in market median compensation.

Compensation Overview Pension Plan Design – AltaLink wound up the Defined Benefit Pension Plan (DB Plan), effective

December 31, 2013, eliminating the cost of a DB Plan to its ratepayers and eliminating the DB Plan risk to ratepayers. All eligible employees are members of the Defined Contribution (DC) pension plan. The DC plan remains 8% employer contribution, 2% employee contribution.

With the elimination of the DB Plan, AltaLink will continue to focus on providing market median total compensation, specifically base pay, STIP, LTIP, perquisites and benefits.



Base Pay – AltaLink’s target total direct compensation is currently at or slightly below market for union employees as described in Appendix 2-J Attachment – Union Market Analysis Summary, Jan 20, 2016, and Appendix 2-K Attachment – Union Market Data, Jan 20, 2016. AltaLink’s target total direct compensation is 3.5% below market for non-union employees below executive, as described in Table 1.9.3-3. AltaLink’s target total direct compensation is 4.0% above market for executive employees, as per Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016, page 8. AltaLink is forecasting an overall blended 2.89% base pay budget increase for 2017 and 4.39% for 2018, which is forecast to result in market median target total direct compensation for all AltaLink employees, (union employees, non-union employees below executive, and for executive employees) by the end of the Test Period.

AltaLink’s base pay is set out in Section 1.9.3.

STIP – AltaLink has not changed the STIP design from the 2015-2016 GTA, with the exception that the target level for the CEO was increased to achieve market median compensation. STIP forms part of total direct compensation and is designed to achieve market median target total direct compensation for all employees.

AltaLink’s forecast STIP is set out in Section 1.9.4.

LTIP – AltaLink has a similar LTIP design from the 2015-2016 GTA. AltaLink has made three changes: increased the CEO LTIP target in order to achieve market median target total compensation, increased the forecast LTIP cost to replace the former Special Incentive Plan (SIP), to achieve market median target total compensation, and eliminated the project delivery goal, replacing it with an increase in the weighting of the net income goal.

AltaLink’s forecast LTIP is set out in Section 1.9.5.

Executive Compensation – AltaLink has forecast a 0.75% decrease in 2017 base pay and a 1.2% increase in 2018 and is making certain changes to LTIP target levels. AltaLink’s executive base pay changes and LTIP level changes are forecast to result in market median target total direct compensation by the end of the Test Period.

AltaLink’s forecast executive compensation is set out in Section 1.9.3.

Pension and Benefits AltaLink is not proposing any changes to pension or benefits in the Application. AltaLink wound

up the DB component of the Pension Plan effective December 31, 2013. All pension eligible employees are now members of the DC Plan. AltaLink has not changed the DC Plan from the 2015-2016 GTA.

AltaLink’s forecast pension and benefits are set out in Section 1.9.6.

Other Labour Related Staffing Costs Other labour related staffing costs include Wellness Fund, Outstanding Contribution Awards,

severance and relocation. AltaLink is not proposing any structure or design changes for such costs for the Test Period.

AltaLink’s other labour related costs are set out in Section 1.9.7.



1.9.2 Vacancy, Timing and Resource Hiring AltaLink’s 2017-2018 labour forecasts assume a projected vacancy rate of 2.5% and 4%,

respectively, based on the historical operating vacancy rate and a vacancy rate reflecting economic conditions.

AltaLink’s historical operating vacancy rate is shown below in Table 1.9.2-1.

Table 1.9.2-1 - Actual Operating Vacancy Rate

Approved Operating FTE’s Mid-year

(before vacancy) Actual Operating

FTEs Mid-year Vacancy Rate 2012 Mid-year 270 256 5.4%

2013 Mid-year 290 280 3.2%

2014 Mid-year 307 292 4.9%

2015 Mid-year 320 310 3.2%

4 year average N/A N/A 4.2% 2015 Year-end 325 324 0.3%

The four year average mid-year operating vacancy rate is 4.2%, however this longer term

average does not reflect the current economic conditions. AltaLink has seen a dramatic decrease in vacancy rate from 4.9% 2014 mid-year to 3.2% 2015 mid-year, and 0.3% by year end 2015. The significant reduction in operating vacancy rate is similar to the two years following the financial crisis in 2009 and 2010, which was an average operating vacancy rate of 2.4%.

Given 2015 year end operating vacancy rate of 0.31%, combined with the 2.4% historical operating vacancy rate following the financial crisis, AltaLink forecasts the operating vacancy rate will be 2.5% 2017, followed by a return closer to longer term averages in 2018 of 4%.

The reasons the operating vacancy rate declines significantly in an economic downturn are clear. Vacancy rate is a function of two things: turnover rate and the time it takes to replace employees when they leave. In an economic downturn, the turnover rate declines significantly, due to fewer job opportunities available. AltaLink’s turnover rate decreased from 9.3% in 2014, to 5.2% in 2015 reflecting the economic downturn. As well, in an economic downturn, there is far higher availability of qualified candidates; therefore time to hire is decreased. These factors result in a lower vacancy rate, which is clearly reflected in economic downturns like 2009/2010, and the most recent vacancy rate of 0.3% at year end 2015.

During the big build cycle over the last many years AltaLink added a significant number of FTEs. In the 2017-2018 Test Period, rather than an increase in FTEs, there will be a reduction in FTEs. In addition to the impact economic conditions have on vacancy rate, AltaLink is assessing the impact that reduced FTEs, rather than increased FTEs, will have on the vacancy rate. While AltaLink is still assessing this impact, it is AltaLink’s expectation that, in addition to the impact of economic conditions, reducing FTEs rather than increasing FTEs will further reduce the vacancy rate.



Timing of Resource Hiring AltaLink’s 2017-2018 labour forecasts assume that all new hires occur at mid-year. Therefore,

any new hires will only add half of annual salary costs in the forecast year. Similarly, any forecast reduction in FTEs will result in a corresponding half of annual salary costs in the forecast year.

1.9.3 Base Pay In 2017 and 2018, AltaLink is forecasting a blended base pay increase for all employees of 2.89%

and 4.39%, respectively. These base pay increases are forecast to result in AltaLink employees being paid at market median.

The following factors were taken into consideration when calculating the forecasted blended base pay increase for all employees to achieve market median target total direct compensation:

• the current competitive position of AltaLink for executive and non-union below executive employees, as described in Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016;

• the current competitive position for union employees as described in Appendix 2-J Attachment – Union Market Analysis Summary, Jan 20, 2016, and Appendix 2-K Attachment – Union Market Data, Jan 20, 2016;

• Mercer’s salary escalation projections of 1.25% in 2017 and 3.2% in 2018, as described in Appendix 2-M Attachment – 2017-2018 Salary Escalation Projection, Jan 15, 2016;

• AltaLink’s forecast salary increases during the Test Period include both an annual structure increase and normal course progression; and

• for union employees, other union settlements in AltaLink’s peer group in Alberta will also be considered.

Union Base Pay Increases As per Appendix 2-J Attachment – Union Market Analysis Summary, Jan 20, 2016, and Appendix

2-K Attachment – Union Market Data, Jan 20, 2016, union employees target total direct compensation is currently at or slightly below the median of the market.

AltaLink reached a settlement with the IBEW covering the period January 1, 2014 to December 31, 2016. Table 1.9.3-1 shows the financial terms of this settlement for 2016, 2017 and 2018 represent AltaLink’s forecast.

Table 1.9.3-1 - 2016-2018 IBEW Base Pay Increases

Component 2016

Agreement 2017

Forecast 2018

Forecast Annual Structure Increase 3.5% 2.0% 3.0% Normal Progression Increase¹ 1.0% 1.0% 1.0% Total Budget 4.5% 3.0% 4.0%

1 The “normal” progression budget for union step increases is 1%. Employees receive step increases, as per the collective agreement, until they reach the top step of their level.

AltaLink’s most recent settlement with the UUWA covered the period January 1, 2013 to December 31, 2015. Table 1.9.3-2 represents AltaLink’s forecasts for 2016, 2017 and 2018.



Table 1.9.3-2 - 2016-2018 UUWA Base Pay Increases

Component 2016

Forecast 2017

Forecast 2018

Forecast Annual Structure Increase 1.0% 2.0% 3.0% Normal Progression Increase1 1.0% 1.0% 1.0% Total Budget 2.0% 3.0% 4.0%

1 The “normal” progression budget for union step increases is 1%. Employees receive step increases, as per the collective agreement, until they reach the top step of their level.

The above applied for increases are below the current union settlements for 2017 with AltaLink’s peers which average 3.4% as per Appendix 2-K Attachment – Union Market Data, Jan 20, 2016. However, AltaLink forecasts other settlements reached for 2017 will be less given the current economic environment. AltaLink also forecasts that 2018 will see a return to more normal economic conditions. As per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projection, Jan 15, 2016, Mercer is forecasting a 1.25% salary escalation in 2017 and 3.2% in 2018. However, because many of AltaLink’s peers have already settled, with an average increase of 3.4% in 2017, AltaLink is forecasting an annual structure increase of 2.0% in 2017, which is 0.75% above the Mercer market forecast but it is 1.4% below AltaLink’s peers that have negotiated settlements for 2017. AltaLink is forecasting a 3.0% annual structure increase in 2018, marginally below the market increase of 3.2%. The above applied for increases are forecast to result in union employees being paid at the market median at the end of the Test Period.

Non-Union Below Executive Base Pay Increases The following three factors determined AltaLink’s forecast non-union base pay increases.

In order to reach market median target total direct compensation by the end of the Test Period, AltaLink is forecasting increases of 3.0% in 2017, and 4.95% in 2018, as described below:

• as per Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016, page 8, non-union employees below executive target total direct compensation is 3.0% below market. Further, in 2016, AltaLink forecast increase was 0.5% below the market forecast increase resulting in 3.5% below market going into 2017, as per Table 1.9.3-3;

• as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projection, Jan 15, 2016, Mercer’s salary escalation projections letter, the average annual aggregate salary increases for non-unionized employees will range from 1.0% - 1.5% in 2017. AltaLink has used the midpoint of this range, 1.25%, in order to forecast the 2017 increase; and

• as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projection, Jan 15, 2016, Mercer’s salary escalation projections letter, the average annual aggregate salary increases for non-unionized employees will range from 3.1% - 3.3% in 2018. AltaLink has used the midpoint of this range, 3.2%, in order to forecast the 2018 increase.

Table 1.9.3-3 - Current Target Total Direct Compensation Market Position Non-union Employees Below Executive

Market Position1 (3.0%) AltaLink 2016 forecast increase below market2 (0.5%) Total Percentage Below Market (3.5%) Additional Increase per year to achieve market median 1.75%

1 Appendix 2-L Attachment – 2015 Non-Union Employee Compensation Review, Jan 14, 2016, page 8. 2 Appendix 2-G Attachment – Most Recent 2016 Salary Increase Information, Dec 14, 2015.



Table 1.9.3-4 - 2017 Calculation of Non-Union Base Pay Annual Increase Mercer Market Salary Escalation Projection1 1.25% Additional annual increase per year to achieve market median target total direct compensation (3.5% below market divided by two years equals 1.75% per year) as per table 1.9.3-3

1.75%

Total annual increase 3.0% 1 Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016, page 4.

Table 1.9.3-5 - 2018 Calculation of Non-Union Base Pay Annual Increase Mercer Market Salary Escalation Projection1 3.2% Additional annual increase per year to achieve market median target total direct compensation (3.5% below market divided by two years equals 1.75% per year) as per table 1.9.3-3

1.75%


AltaLink’s 2017-2018 non-union total base pay increases are set out in Table 1.9.3-6.

Table 1.9.3-6 - 2017-2018 Non-Union Base Pay Increases Component 2017 Forecast 2018 Forecast Annual Structure Increase 2.0% 3.95% Progression Increase1 1.0% 1.0% Total Increase 3.0% 4.95%

1 Progression increase includes higher increases for employees who are paid below market, (typically employees who are newer in their role), and for Engineering Progression. Engineering Progression applies to engineers in training who, during the first three years of employment, receive mid-year adjustments in addition to the January 1 annual base pay increases. These mid-year adjustments are common market practice and are necessary to maintain market median target total direct compensation and to avoid compression.

AltaLink’s salary escalation reflects AltaLink’s overall base pay increases. However, individual increases for non-union staff will vary with the employee’s relative performance and specific salary compared to market.

The above applied for increases are forecast to result in non-union employees below executive level paid at market median at the end of the Test Period.

Executive Base Pay Increases In order to reach market median target total direct compensation, AltaLink is forecasting a

decrease of 0.75% in 2017, and a 1.2% increase in 2018, as described below:

• as per Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016, page 8, executive employees’ target total direct compensation is 4.0% above market; and

• as per Appendix 2-M Attachment – 2017-2018 Salary Escalation Projection, Jan 15, 2016, Mercer’s letter regarding salary escalation projections, the average annual aggregate salary increases for non-unionized employees is 1.25% for 2017, and 3.2% for 2018.

AltaLink’s required base pay change for executive employees to achieve market median pay is set out in Tables 1.9.3-7 and 1.9.3-8.



Table 1.9.3-7 - 2017 Calculation of Executive Base Pay Decrease Mercer Market Salary Escalation Projection1 1.25% Annual reduction per year to achieve market median compensation (4% above market divided by two years equals 2% per year)

(2.0%)

Total annual decrease (0.75%) 1 Appendix 2-M Attachment – 2017-2018 Salary Escalation Projections, Jan 15, 2016, page 4.

Table 1.9.3-8 - 2018 Calculation of Executive Base Pay Increase Mercer Market Salary Escalation Projection1 3.2% Annual reduction per year to achieve market median compensation (2% above market divided by two years equals 1% per year)

(2.0%)


AltaLink’s Executive compensation is set out in Table 1.9.3-9 below.

Table 1.9.3-9 - 2017-2018 Executive Total Base Pay Change 2017 Forecast 2018 Forecast Annual Budget (0.75)% 1.2%

The above applied for increases are forecast to result in executive employees being paid at market median at the end of the Test Period.

Table 1.9.3-10 - Blended Salary Increase Calculation

Weighting1 2017

Forecast 2018

Forecast Non-Union Below Executive 50% 3.0% 4.95% Executive 3% (0.75)% 1.2% Union 47% 3.0% 4.0% Total Blended Increase 100% 2.89% 4.39%

1 Reflects the percent of total labour.

1.9.4 STIP AltaLink STIP design and target payout levels remain unchanged from the 2015-2016 GTA with

the exception that AltaLink changed the Customer goal from the Net Promoter concept to customer satisfaction and the CEO target level was increased to 70%. Year over year increases reflect the CEO target level change, staffing levels and base compensation.

AltaLink’s 2014 actual expense, 2015-2016 GTA update and 2017-2018 forecast are provided in Table 1.9.4-1.

Table 1.9.4-1 - STIP ($M) 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast STIP 9.3 9.0 8.9 9.2 8.8

STIP Payout Levels The following Table 1.9.4-2 sets out AltaLink’s STIP target payout levels.



Table 1.9.4-2 - STIP Pay Levels – As a Percent of Base Pay Target CEO 70% SVPs 30% Management/Functional Expert/Senior Management 15% Entry to 1st Level Supervision/Specialist level 10% Administrative 7.5% Union (UUWA/IBEW) 7.5%

STIP Goals and Plan Design Shown in Tables 1.9.4-3 and 1.9.4-4, is AltaLink’s 2016 STIP for non-union and union employees.

Table 1.9.4-3 - AltaLink 2016 STIP Non-Union Employees

Goal Weight Minimum Target Maximum Customer Satisfaction 10% 70% 80% 95%

Reliability 30% 0.85 0.65 0.45 Safety 30% 0.85 0.55 0.25 Net Income 10% $185M $195M $205M Individual Goal 20% 0 20 40 Total 100%

Table 1.9.4-4 - AltaLink 2016 STIP Union Employees Goal Weight Minimum Target Maximum Customer Satisfaction

10% 70% 80% 95%

Reliability 40% 0.85 0.65 0.45 Safety 40% 0.85 0.55 0.25 Net Income 10% $185M $195M $205M Total 100%

STIP Goal Mechanics AltaLink’s objectives in setting STIP goals include:

• establishing goals that best capture customer interests; • keeping the goals simple, measurable, and limited in number to minimize complexity; • providing employees with a line of sight to see how they influence the results; • creating an environment in which people work together to achieve common goals; and • the target level for each goal is set to be achievable with some stretch. Payout at the target

level is designed to provide compensation at the market median.

The resulting STIP goals, as described further below, meet these objectives.

Customer Goal The Customer goal was introduced in the 2014 STIP to recognize the value in feedback from

customers. AltaLink’s leadership has taken many steps to increase customer focus and it is



AltaLink’s intent that by continuing with the Customer goal, it will further reinforce with employees the priority in which AltaLink places customer satisfaction.

The 2014 STIP customer metric utilized the results from the question, “How likely are you to recommend AltaLink to an Industry or work colleague?” This was based on the Net Promoter concept which is considered best practice in measuring customer loyalty. However, after reviewing the data and direct feedback from customers, AltaLink decided that this question was not as applicable for its regulated monopoly situation since customers do not have a choice of service providers. Beginning in 2015, AltaLink focused its metrics on overall customer satisfaction.

The 2015 customer metric will be based on the customer response to the question: On a scale of 0 to 10 where 0 means not at all satisfied and 10 means very satisfied, “How satisfied are you with AltaLink’s services?” Consistent with AltaLink’s mission to provide enhanced customer satisfaction, the metric will be the percentage of customers rating AltaLink an 8, 9 or 10 on the question above.

AltaLink changed the name of the Customer STIP goal from Customer Focus to Customer Satisfaction, reflecting the new survey question on which the goal is based.

The customer satisfaction metric for inclusion in the 2016 STIP will be based on customer feedback from 3 customer segments: Connecting, Existing Connected and the AESO.

Reliability Goal AltaLink’s reliability goal, measured by the System Average Interruption Duration Index (SAIDI),

was established to reflect the fact that transmission system reliability is important to customers. The SAIDI index was chosen as the reliability measure over which employees have the most influence. The STIP reliability goal includes all outages caused by AltaLink’s equipment, 25 kV and higher. During a service disruption, this goal focuses employees on returning service to customers as quickly as possible. The shorter the average duration of service interruption to customers, the better the reliability result. SAIDI measures on average the number of hours of outages for a delivery point in a year.

SAIDI is calculated as the Total Duration of Load Interruptions (in hours) / Total Number of Delivery Points Monitored. The 2016 target has been set at 0.65 and is based upon the average of the last three and five years excluding the major event in January (2014 January 526L event) with a 4% stretch. This target is unchanged from the 2015 target. The target value of 0.65 is approximately on par with AltaLink’s three year (0.68) and five year (0.68) average at AltaLink’s five year average excluding major events and remains well below the five year Canadian Electricity Association (CEA) averages which ranged from 1.11 to 1.24 for the years 2006 to 2013.

Safety Goal AltaLink implemented the STIP safety goal because a safe working environment is absolutely

critical in this industry. It is also in the interest of all stakeholders and positively impacts employee productivity. The safety goal, defined by AltaLink’s All Injury Frequency Rate (AIFR), is a measure of the number of medical aid or lost time accidents. This goal focuses employees on practices that will reduce injuries and accidents. AIFR is calculated as: medical aid injuries plus lost time injuries/200,000 hours worked, and includes measurement of AltaLink employees and contractors working in excess of 500 hours/year. The 2016 target is set at 0.55, which is a



stretch of 8% from the 2015 target of 0.6 and most recent three year average performance. The target of 0.55 is a material stretch as AltaLink’s safety results are in the top decile in the industry.

Net Income Goal AltaLink’s net income goal provides an incentive for employees to achieve operational

efficiencies that benefit customers by maintaining or lowering operational costs relative to workload. AltaLink sets the net income goal target based on AltaLink’s assessment of a reasonable stretch at target level given various factors such as approved rate of return.

Individual Goal (Non-union) AltaLink’s STIP individual goal rewards employees based on individual performance. This

supports a high performance culture that is in the interests of customers. The individual goal is a subjective assessment by the manager of each individual’s performance.

For information purposes, Table 1.9.4-5 provides AltaLink’s 2014 STIP final results.

Table 1.9.4-5 - AltaLink 2014 STIP Final Results (Non-union employees)

Goal Weight Minimum Target Maximum Final

Result Payout Customer Focus 10% 50% 65% 85% 58% 5%

Reliability 30% 1.1 0.7 0.3 0.46 48% Safety 30% 1.4 0.65 0.3 0.50 43% Net Income 10% $180M $195M $210M $199M 13% Individual and Department Goal1

20% 0 20 40 20 20%

Total 100% 129% 1 This payout is based on individual goal result at target. The actual payout varies by individual based on their individual goal rating.

AltaLink designs its STIP goals to be at a reasonable level of stretch for employees. In the last four years, AltaLink’s STIP payout has averaged 116%, based on target individual results, STIP paid out 123% of target in 2011, 108% in 2012, 104% in 2013, and 129% in 2014. Achieving STIP target level goals with some stretch results in market median pay; if overall target level goals are not reached, such as in 2007, employee total direct compensation is below median. STIP is designed so that if the stretch level target goals are exceeded, employee total direct compensation is above market median and the cost of STIP payout above target is paid by the shareholders. STIP is designed so that maximum payout requires a significant stretch. AltaLink has never had a STIP payout at maximum.

STIP Payout Example STIP is calculated by comparing AltaLink’s actual performance results to AltaLink’s annual target

results. There are three variables that contribute to STIP payout calculations: base pay, target payout levels and actual STIP target results.

STIP results are calculated one of two ways:

• results below or at 100% of target (when actual performance results are less than or equal to the annual target results); or



• results above 100% of target (when actual performance results more than the annual target results).

Example: Base Pay = $80,000 Target payout – Minimum = 0, Target = 10%, Maximum = 15%

If the total result is less than or equal to 100% (E.g. 95%) then: Base Pay X target Payout X STIP Result = STIP Payout $80,000 X 10% X 95% = $7,600 (less tax)

If the total result is greater than 100% (e.g. 108.9%) then: (Base Pay X target payout) + (Base Pay X (Result – 100%) X (Payout max – Payout min)) = STIP Payout ($80,000 X 10%) + ($80,000 X 8.9% X 5%) = $8,356 (less tax)

1.9.5 LTIP AltaLink has made three changes to LTIP:

• AltaLink has increased the LTIP target payout for the CEO position in order to achieve market median compensation.

• From 2011-2016, certain executives were eligible for a SIP. AltaLink did not previously request cost recovery of SIP in the regulated revenue, because the SIP goal, capital additions, was similar to the disallowed portion of LTIP. Therefore, it was paid by shareholders. SIP is included in AltaLink’s executive total compensation in Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016, page 8. Starting in 2017, the SIP plan will be replaced with higher LTIP levels in order to achieve market median target total compensation. While the specific LTIP levels have not been finalized, the cost of the previous SIP program, at target, has been included in the forecast LTIP in order to provide market median target total compensation. The specific LTIP levels will be finalized prior to the start of the Test Period.

• The project delivery goal was removed and the weighting on the Net Income goal has been increased from 25% to 50% to reflect AltaLink’s transition from a period of high capital build to a greater focus on ongoing Operations and Maintenance.

AltaLink has reflected 50% of the projected cost of LTIP in its 2015-2016 Revenue Requirement forecast. AltaLink’s LTIP forms part of total direct compensation and is designed to achieve market median target total direct compensation for director and above positions.

LTIP is critical to provide employees with competitive compensation to effectively operate the business and meet AltaLink’s customer commitments. AltaLink continues to be of the opinion that LTIP as a whole is designed to achieve and maintain market median compensation and should therefore be included in the Revenue Requirement at 100% of target. However, in accordance with the AUC Decision 2009-151, AltaLink’s 2017-2018 Revenue Requirement forecast includes only those expenditures related to LTIP goals that are 100% customer focused. Such expenditures account for 50% of AltaLink’s forecast 2017-2018 LTIP costs and are provided in the following Table 1.9.5-1.



Table 1.9.5-1 - LTIP ($M) Costs Included in the Revenue Requirement

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast LTIP1 2.3 1.0 0.9 1.3 1.3

1 Excludes forecast LTIP costs incurred by AltaLink shareholders.

The remaining cost of LTIP, which is attributable to goals that benefit both the shareholder and customers, will be paid by the shareholder. The following Table 1.9.5-2 includes the total and actual forecast costs.

Table 1.9.5-2 - Actual Total Costs Including Cost Incurred by Shareholder1 ($M)

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast LTIP 4.6 1.9 1.9 2.6 2.7

1 50% of total forecast cost excluded from AltaLink Revenue Requirement incurred by Shareholder.

LTIP Goals and Plan Design AltaLink has maintained the same three LTIP customer goals, Reliability, Cost and Schedule, as

approved in AltaLink’s previous GTAs as shown in Table 1.9.5-3.

Table 1.9.5-3 - LTIP Customer Goals Goal Weight Customer Benefit1

Reliability 16.7% Identified as the one customer priority. 100% customer benefit.

Cost 16.7%

Identified as one of the top two largest gaps between satisfaction and importance. 100% customer benefit.

Schedule 16.7%

Identified as one of the top two largest gaps between satisfaction and importance. 100% customer benefit.

Revenue Requirement portion of total LTIP Costs

50%

1 As per the Framework Partners Inc. survey referenced in the 2009-2010 GTA.

AltaLink’s LTIP goal that benefits both the shareholder and the customer is net income. Although net income has a wide ranging benefit to both the shareholder and to customers, and LTIP at 100% is part of competitive compensation, the cost of this goal will be paid by the shareholder for the Test Period.



Table 1.9.5-4 - Shareholder/Customer Goal Goal Weight Customer Benefit Shareholder Benefit Net Income 50% Provides incentive to employees to

achieve operational efficiencies that benefit customers by maintaining or lowering costs relative to workload. Also helps to ensure a financially viable TFO, which impacts ability to raise capital at lowest possible rates to deliver on customer needs.

Benefits shareholder through increased profitability.

Shareholder portion of Total LTIP Costs

50%

LTIP Plan Summary Eligible senior leaders will be issued phantom share units, with an initial target value of $1 per

unit. The number of units granted to a participant will be based on organizational level. The value of the units granted will be paid out (in cash less applicable taxes) after three years. The value of phantom share units at the time of payout will be based on results achieved in Reliability, Cost, Schedule, and Net Income. Participation in LTIP will include the CEO, Senior Vice Presidents, Vice Presidents and Directors.

Plan Payout Target Levels LTIP target levels remain the same, except the CEO target level has been increased from 40% to

70%. Target levels are provided in the following Table 1.9.5-5.

Table 1.9.5-5 - LTIP Target Levels AltaLink Organization

Level LTIP Target

as a % of Base Pay CEO 70% SVP 30% VP 15%

Director 15%

Plan Mechanics LTIP participation and eligibility will be reviewed annually by the Human Resources department

and the Governance Committee of AltaLink’s Board of Directors and approved each year for the following plan period (i.e. a new LTIP will be started each year, running for three years).

The initial per unit target value for each plan period is $1 per unit. The unit’s value will be determined at the end of each three-year plan period, according to the performance valuation table approved for that plan period by the Governance Committee (refer to LTIP Plan 2016, Table 1.9.5-6). At the end of the third year of each plan period, the share units will vest subject to policy vesting provisions and the value of those units (less applicable taxes) will be paid to participants in cash.



Table 1.9.5-6 - LTIP Plan 2016 - January 1, 2016– December 31, 2018

Customer Component

Goals Weight Minimum (0%) Target (50%) Maximum (100%) Reliability 16.7% 10.5 MW Hrs/dp

outage 7.5 MW Hrs/dp

outage 5.5 Hrs/dp outage

Cost Control 16.7% 0 100% 200%

Schedule

16.7%

70% of projects meet schedule as agreed to with customer within 60 days of P&L



Total 50%

Shareholder/Customer Component Goal Weight Minimum Target 2 X Target Net Income 50% $565M $625M $685M1

Total 50% 1 $.05/share unit for each $2M above 2 X target up to a maximum of 4x target.

Customer Goals Reliability Goal — The reliability goal reflects a key customer priority as identified by AltaLink’s

customers and customer representatives. The reliability goal is megawatt hours per delivery point outage (MW Hrs/DP outage), measured over a three year timeframe. The LTIP goal measures both the size or megawatts of the load interrupted and the duration of the interruption, reflecting the overall severity of the outage.

The target level is set at 7.5%, a 10% improvement over the previous three year period. Results are determined based on the objective measurement of reliability results.

Cost Control Goal — The capital cost control goal is a measurement of actual capital project costs compared to the approved project estimates 180 days post Permit & Licence (P&L). This aligns with the new cost estimate process, Approved Change Estimate (ACE).

AltaLink’s LTIP cost control goal reflects a key priority identified by AltaLink’s customers. The objective of the measure is to:

• balance objective of providing accurate estimates and delivering on the project cost; • place more incentive on project costs lower in the estimate range; • control point is aligned to the ACE process or the estimate 180 days post P&L; • payout is possible if results are within accuracy of project estimate range +10%/-15%; and • maximum payout if project costs are +/- 5% of Proposal to Provide Service (PPS) estimate.

Schedule Goal — The schedule goal reflects a key customer priority as identified by AltaLink’s customers. The schedule goal is the frequency that new projects are delivered on time as agreed to with the customer after the P&L.



Target is set at 85% of projects being delivered on time. Results are determined based on the objective measurement of in-service dates (ISDs) compared to the agreed to schedules with customers.

Shareholder/Customer Goal Net Income Goal — The project delivery goal was removed and the weighting on the Net

Income goal has been increased from 25% to 50% to reflect AltaLink’s transition from a period of high capital build to a greater focus on ongoing Operations and Maintenance. The biggest impact most employees have on the Net Income goal is to achieve operational efficiencies, resulting in lower operating costs. This benefits customers in the long-term.

1.9.6 Pension and Benefits AltaLink is not proposing any changes to the DC Pension Plan or Benefits for the Test Period.

AltaLink’s benefit package includes pension, disability coverage, life insurance, medical/dental, and vacation/holiday.

All changes in the pension and benefit expenses will be commensurate with inflation or benefit specific escalation, staff levels and/or compensation increases. AltaLink’s 2017-2018 employer-provided benefit coverage is forecast to be at the market median.

AltaLink’s 2014 actual expense, 2015-2016 GTA update, and 2017-2018 forecast is detailed in Table 1.9.6-1.

Table 1.9.6-1 - 2014-2018 Benefit and Other Compensation Costs by Component ($M)

Description 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Base Benefits1 7.0 8.6 8.6 9.2 9.1 DC Plan2 7.1 8.3 8.2 8.4 8.1 SPP 0.2 0.2 0.2 0.2 0.2 PRB 1.0 1.1 1.2 1.3 1.4 Other Labour Related Staffing Costs3 2.7 1.8 1.5 1.5 1.6

Perquisites and Signing Bonus 0.5 0.6 0.5 0.5 0.5

STIP 9.3 9.0 8.9 9.2 8.8 LTIP4 2.3 1.0 0.9 1.3 1.3 Targeted Retention 0.6 0.3 0.2 0.1 0.2 Total Benefit and Other Compensation Loading

30.7 30.8 30.3 31.7 31.1

Totals may not add due to rounding. 1 Base Benefits include Government Benefits, company provided benefits and benefit administration expense. 2 DC Plan includes DC Plan contribution and Pension Administration expense. 3 Other Labour Related Staffing Costs include Wellness Fund, Outstanding Contribution Awards, severance and relocation. 4 LTIP reflects the 50% (customer component) of LTIP at target payout.

A description of Pension and Benefit cost elements is provided below.



Pension DC Plan

AltaLink is not proposing any changes to its DC Plan during the Test Period. The DC Plan remains an 8% employer, 2% employee contribution. AltaLink’s 2017-2018 Revenue Requirement forecast reflects changes to DC Plan costs that arise from staffing and compensation changes only.

DB Plan Effective December 31, 2013, AltaLink wound up the DB Plan eliminating the cost and risk of a

DB Plan to the ratepayers. The cost of the DB windup was paid through the DB Plan Liability account and the balance remaining in the DB Plan Liability account after windup was refunded to ratepayers through a reduction to the 2015 Revenue Requirement. The DB Plan is now closed for both current and future employees and therefore has no impact on the 2017/2018 Test Period.

Base Benefits Base benefits includes the government-required benefits and company provided benefits

described below.

Government Benefits

• Canada Pension Plan (CPP) • Employment Insurance (EI) • Workers’ Compensation Board benefits

AltaLink has forecast 2017-2018 government benefits to reflect staffing changes and general inflation.

Company Provided Benefits AltaLink’s 2017-2018 company provided benefits forecast reflect staff changes and inflation

increases as described below:

• Dental – as per Appendix 2-E Attachment – Anticipated Health and Dental Cost Trends, Jan 13, 2016, the inflation trend factor for dental is forecast to be 5 - 8% per year during the Test Period. AltaLink has used the midpoint of that forecast, 6.5%, for dental cost escalation. The dental cost forecast reflects the 6.5% dental escalation and staffing levels.

• Extended Health – as per Appendix 2-E Attachment – Anticipated Health and Dental Cost Trends, Jan 13, 2016, the inflation trend factor for Extended Health is forecast to be 6 - 10% per year during the Test Period. AltaLink has used the midpoint of that forecast, 8 %, for Extended Health cost escalation. The Extended Health cost forecast reflect the 8% extended health escalation and staffing levels.

• Health Spending Account. • Wellness Flex Credits. • Life Insurance – changes reflect staffing levels and general inflation. • Education Assistance – changes reflect staffing levels and general inflation.

Supplemental Pension Plan AltaLink’s Supplemental Pension Plan (SPP) is a defined contribution plan provided to employees

that exceed the Income Tax Act limits on maximum pension contributions.



AltaLink is not proposing any changes to its SPP in the Test Period. AltaLink’s contribution remains at 8%. AltaLink’s 2014 actual expense, 2015-2016 GTA update and 2017-2018 forecast are provided in Table 1.9.6-2.

Table 1.9.6-2 - Supplemental Pension Plan ($M)

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

SPP 0.2 0.2 0.2 0.2 0.2

Post Retirement Benefits AltaLink’s 2014 actual expense, 2015-2016 GTA update and 2017-2018 forecast are provided in

Table 1.9.6-3.

Table 1.9.6-3 - Post Retirement Benefits ($M) 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast

PRB 1.0 1.1 1.2 1.3 1.4

Post Retirement Benefits (PRB) includes extended health care and dental benefits for retirees until age 65. PRB cost forecast is described in Appendix 2-F Attachment – Post Retirement Benefits Expense Forecast for 2017-2018, Jan 18, 2016. AltaLink has not made any changes to its PRB design; year to year variances reflect staffing levels and dental/health care inflation.

Perquisites & Signing Bonus (PSB) Perquisites levels have remained the same as in the 2015-2016 GTA with no adjustment for

inflation. Any changes to Perquisites are due to staffing levels. Perquisites are included in the target total direct compensation comparisons in Appendix 2-L Attachment – 2015 Non-union Employee Compensation Review, Jan 14, 2016. AltaLink’s 2014 actual expense, 2015-2016 GTA update and 2017-2018 forecast are provided in Table 1.9.6-4.

Table 1.9.6-4 - Perquisites and Signing Bonus ($M) 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast PSB 0.5 0.6 0.5 0.5 0.5

Executive Pension and Benefits AltaLink’s Executive Compensation Policy has been designed to attract and retain experienced,

qualified employees over the long-term through the provision of market-based median target total direct compensation.

AltaLink’s Pension and Benefits for executive employees is the same as all other employees including, union and non-union employees. Refer to Section 1.9.6, Pension and Benefits.

It should be recognized that many other companies provide their executive employees with enhanced levels of pension and base benefits compared to non-executives while AltaLink does not. AltaLink provides the same level of pension and base benefits (e.g. post-retirement benefits, dental and health care) to executives as it does to all other employees.



1.9.7 Other Labour Related Staffing Costs Wellness Fund

AltaLink is not proposing any changes to the structure of its Wellness Fund which is forecast at $850/person in 2017 with an inflationary increase to $900/person in 2018. Any increase in total cost shown in Table 1.9.7-1 is due to the inflation increase and staffing levels.

Table 1.9.7-1 - Wellness Fund ($M)

2014

Actual1 2015

Update 2016

Update 2017

Forecast 2018

Forecast Wellness Fund 0.7 0.6 0.6 0.7 0.7

1 Due to the change in benefits design in 2013 a number of claims for 2013 Wellness Fund credits were made and expensed in 2014.

AltaLink’s Wellness Fund delivers benefits to customers by supporting the attraction and retention of employees and increased productivity through an employee directed wellness program. Employees take an active role in tailoring this benefit to their individual needs and interests.

Outstanding Contribution Awards There have been no changes in the structure of Outstanding Contribution Awards. AltaLink’s

2014 actual expense, 2015-2016 GTA update, and 2017-2018 forecast are provided in Table 1.9.7-2.

Table 1.9.7-2 - Outstanding Contribution Awards ($M)

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Outstanding Contribution Awards

0.7 0.5 0.5 0.5 0.5

Changes reflect staffing levels and general inflation. Outstanding Contribution Awards support the high performance culture at AltaLink. All employees are eligible. An Outstanding Contribution Award recognizes individuals that have achieved results above and beyond what is normally expected. The amount of the award is determined based on the impact on one or more of the following AltaLink key values:

• Reliability • Safety • Cost Reduction • Productivity or Efficiency • Project Schedule • Customer Service • AltaLink Culture and Teamwork

Severance Costs AltaLink’s 2014 actual expenses, 2015-2016 GTA update, and 2017-2018 forecast in

Table 1.9.7-3.



Table 1.9.7-3 - Severance Costs ($M)

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Severance Costs 0.1 0.2 0.3 0.2 0.2

In 2017 and 2018, AltaLink is forecasting severance, as per previous applications, for individual situations such as employees who are determined that they are not a suitable fit for the position. The calculation of this severance cost is consistent with 2015-2016 GTA, assuming a 0.7% severance rate and an average four-month severance payout.

Although AltaLink is forecasting FTE reductions during the Test Period, it is AltaLink’s objective to manage this reduction by not renewing the contracts of term employees, attrition, and when employees depart AltaLink, it will endeavor to replace these positions with employees who may become surplus. Therefore, AltaLink has not applied for additional severance costs despite the reduction in FTE positions during the Test Period.

Relocation Costs AltaLink’s 2014 actual expenses, 2015-2016 GTA update, and 2017-2018 forecast are in the

following Table 1.9.7-4.

Table 1.9.7-4 - Relocation Expense ($M)

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Relocation Expense 0.1 0.4 0.1 0.1 0.1

AltaLink has forecast its 2017-2018 relocation expense based on the following assumptions: =

• AltaLink has forecast that 8% of new hires will be recruited from outside Calgary in 2017, and 10% in 2018. This is a reduction of the forecast for 2015-2016 of 15%. AltaLink reduced the assumption to reflect softer economic conditions in 2017, but a return to closer to normal economic conditions in 2018 as described in section 1.9.1;

• AltaLink has forecast a turnover rate of 5% in 2017, and 9% in 2018. The forecast turnover rate in 2017 is based on a similar turnover rate in 2015 which was 5.2%. The forecast turnover rate in 2018 is based on the average turnover rate from 2011 to 2014, which was 9.4%, and reflects the expected return to more normal economic conditions as described in section 1.9.1; and

• AltaLink has forecast a relocation cost of $18,000 per new hire; a reduction from the relocation forecast cost in 2015-2016, which was $30,000 per new hire. The average relocation cost in 2013-2014 was $18,000.

Based on the above assumptions, AltaLink has forecast relocation expense as shown in Table 1.9.7-5.



Table 1.9.7-5 - Calculation of Relocation Expense

Description 2017

Forecast 2018

Forecast Turnover 44 76 Permanent New Hires 0 0 New Hires 44 76 Percent Relocation 8% 10% Number Receiving Relocation 4 8 $18,000 Per Relocation ($M) 0.1 0.1

Attraction and Retention Bonus AltaLink’s 2014 actual expenses, 2015-2016 GTA update, and 2017-2018 forecast for Attraction

and Retention Bonus Expense is provided in Table 1.9.7-6.

Table 1.9.7-6 - Attraction and Retention Bonus Expense ($M)

2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Attraction and Retention Bonus Expense

0.6 0.3 0.2 0.1 0.2

AltaLink has committed to retention bonus amounts to individual employees and plans on continuing to provide targeted retention bonus amounts in individual situations as part of its strategy to address the competition for qualified staff.

In all market conditions, it is AltaLink’s philosophy that retention bonuses are targeted to a limited number of individuals whom it is critical to retain during certain projects or have critical skills that require retention.

In softer economic conditions, like we are currently experiencing (and forecast modest improvement in 2017), it is appropriate to limit targeted retention to even a fewer number of employees, which is why the 2017 forecast has been reduced by over 80% from the 2014 actual expense of $600,000 to $100,000 in 2017.

As we forecast a return to more normal economic conditions in 2018, AltaLink is forecasting a retention bonus amount of $200,000, representing a 66% decrease from the 2014 actual expense of $600,000.

Operational Performance AltaLink has a continuous improvement culture that seeks opportunities across the organization

to bring improvements such as reduced cycle times, improved project estimating accuracy, sustainable operating cost reductions, sustainable capital cost reductions, reduced safety risk, improved reliability performance, and environmental footprint reductions.

AltaLink continues to utilize various operational performance measures or Key Performance Indicators (KPIs) as management tools to identify operational performance trends. Longer-term trends in particular are useful as directional indicators. KPIs that are trending in a positive direction provide confidence to AltaLink that related practices, processes, external business factors and overall management decision making are creating positive business results. KPIs that are trending in a negative direction indicate business areas that require heightened



investigation to determine if changes to factors under AltaLink’s control could shift the negative trend. Efforts to improve KPI trends in one area – such as reliability – may have a negative impact on short-term cost reductions. As a company responsible for the delivery of critical infrastructure services, AltaLink seeks a balance between safety, reliability, environmental responsibility and cost effectiveness in its operations.

The CEA produces annual reports on certain composite KPIs based on data supplied by utilities across Canada. AltaLink is including these high-level CEA averages as a peer comparator for information purposes but notes that such comparisons have limited value as each reporting utility operates within varying internal and external business parameters. The ranking of any single entity is, at best, only suggestive of relative performance and is used by AltaLink to determine if AltaLink is trending against the Canadian composite KPI trends. AltaLink is most interested in improving AltaLink’s KPI trends and works toward that end regardless of peer comparisons.

AltaLink’s reliability performance measures and improvements are provided hereunder in Section 1.10.1, safety performance measures and improvements are set out in Section 1.10.2, and operational efficiencies are provided in Section 1.10.3.

1.10.1 Reliability Transmission reliability is a function of system planning and design, maintenance and operating

practices and expenditures, and of the more immediate environmental conditions such as weather, vegetation, bird and animal contact, vehicle accidents and human contact. In Alberta, the AESO is accountable for system planning and the transmission utility is responsible for maintenance and operating decisions. AltaLink is cognizant of the duties it must discharge and has established design and maintenance standards that seek to find an appropriate balance between cost, safety, reliability and the environment.

To illustrate the many factors affecting reliability, Table 1.10.1-1 describes various reasons for interruptions on AltaLink’s system in 2014. AltaLink considers both the number and cause of interruptions in 2014 to be indicative of a typical year.



Table 1.10.1-1 - Significant Outages in 2014 (Top 10 Events Ranked by MW-Minutes Lost) Date Cause of Outage Description 2014-10-22 Defective

Equipment 793S Horse Creek tripped off because of high temperature alarms in T1 and VR1. Site inspection found that the voltage regulator had failed. In this event, T2 and T3 were restored after one hour. T1 load was restored after 7 hours when voltage regulator was bypassed.

2014-01-15 Adverse Weather 526L (A743S – 268S) tripped due to an insulator failure. Line patrol found a broken insulator and a broken structure at two different locations of the line. The south portion of the line was restored 19 hours later. Other sections of the line were restored subsequently about 31 hours after the fault.

2014-05-11 Defective Equipment

377ST1 (Hardisty) locked out due to failed insulators on the 25 kV bus. 296S Rosyth and 656S Clippers were restored 2 hours later. The failed insulators were replaced and all load transfers were back in service 33 hours later.


133L/234L/505L/521L/522L (19S – 310P – 866S – 867S – 868S) tripped on a fault due to a broken insulator. 234L/505L/521L were successfully restored 31 hours later.

2014-05-04 Foreign Interference

551L (945S-953S) tripped due to a tree falling onto the line from outside of right-of-way. 551L was partially restored 4 hours later. 551L was fully restored 10 hours later after the tree was removed.


55S T1 locked out when a crow contacted the center phase of the 25 kV bus. Loads were back in service 2 hours after.


739L tripped when a tree fell on the line from outside the right-of-way. 739L was returned to service about 1 hour later when the tree was removed.


373S was isolated by overcurrent protection. During the site inspection, it was discovered that two switches and insulators off of the 25 kV bus were damaged. Loads at 373S was transferred via Fortis distribution after 3 hours. The station was returned to service on Oct 9 after all repairs were done.

2014-11-02 Adverse Weather 180L tripped due to severe weather condition. 928S E. Stavely and 349S were isolated. Loads were restored 3 hours after the event.


454S Buck Lake was isolated due to a failed lightening arrestor. After 454ST2 was isolated, 454ST1 was returned to service 2.5 hours after.

AltaLink measures its reliability performance by five-year average KPIs common to the industry. These longer-term averages depict general trends in reliability and avoid the pitfalls of comparing individual years that may vary widely due to environmental conditions. This Application includes the following reliability indices which show lagging trends in respect of



AltaLink’s transmission system reliability. Only forced outages are included. Pre-planned outages for maintenance do not form part of the reliability status reporting.

SAIFI: System Average Interruption Frequency Index

SAIDI: System Average Interruption Duration Index

SARI: System Average Restoration Index

AltaLink is also including the CEA Canadian composite reliability indices through 2014 for

comparison purposes as Figure 1.10.1-1. The CEA’s reporting standard is to report any delivery point interruptions caused by a transmission system problem exclusive of major events. AltaLink’s reliability indices provided herein reflect all transmission system outages including major events for pre-2005 data and excluding major events 2005 forward. The excluded major events are identified below each chart where applicable.

Figure 1.10.1-1 - Transmission Delivery Point Outage Duration

Excluded Major Events:

AltaLink – 2005 Empress tornado and Crowsnest storm; 2007 Ross Creek Rail Car; 2008 Bullshead Wind Storm; 2010 April Storms; 2014 January 526L Event.

AltaLink’s outage duration performance continues to compare favorably with the CEA composite index. The rolling five-year average indicates that the duration of outages is holding steady with some marginal improvement. AltaLink attributes this to a combination of operating practices and CRU investments such as the Reliability Improvements listed in this section and the Asset

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 05-09 06-10 07-11 08-12 09-13 10-14

AltaLink 1.7 0.6 1 0 1.0 0.8 0.7 0.7 0.6 0 8 0.5 1 0 0.8 0.8 0 8 0.7 0.7

CEA Composite 1.3 1.5 1.1 1.0 0.9 0 8 1.4 1.1 1.6 1.2 1 2 1.1 1.2 1 2 1.2 1.3

Hour

s/de

liver

y po

int/

year



and System Operations related Business Improvements listed in Section 1.11. These improvements continue to help improve the duration of outages and are expected to continue to sustain reliability performance through the Test Period.

Figure 1.10.1-2 - Transmission Delivery Point Outage Frequency

Excluded Major Events: AltaLink – 2005 Empress tornado and Crowsnest storm; 2007 Ross Creek Rail Car; 2008 Bullshead Wind Storm; 2010 April Storms; 2014 January 526L Event.

Figure 1.10.1-2 demonstrates that outages to delivery points resulting from an outage on AltaLink’s transmission system compare favorably with the CEA composite values. The rolling five-year average indicates that the frequency of outages has improved and the improvements have flattened in recent years. Similar to AltaLink’s outage duration performance, the improvement can be attributed to a combination of operating practices and CRU projects.

Figure 1.10.1-3 - Transmission Restoration Time

Excluded Major Events: AltaLink – 2005 Empress tornado and Crowsnest storm; 2007 Ross Creek Rail Car; 2008 Bullshead Wind Storm; 2010 April Storms; 2014 January 526L Event.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 05-09 06-10 07-11 08-12 09-13 10-14

AltaLink 1.0 1 0 1.4 1.1 1.0 1 3 1 0 0.8 0.6 0.7 1.1 1.1 1 2 1 0 0.9 0.9

CEA Composite 1.7 1.7 1.6 1.4 1.7 1 2 1.7 1.7 1.7 1.6 1.6 1.5 1 5 1.6 1.6 1.6

Inte

rrup

tions

/del

iver

y po

int/

year

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 05-09 06-10 07-11 08-12 09-13 10-14

AltaLink 3.7 1 5 2.1 2 3 1.9 1.2 1 3 1.5 2.2 1.6 2 3 1.8 1.8 1.6 1.6 1.6

CEA Composite 1.5 1 9 1.5 1.4 1.3 1.3 1.7 1.2 1.9 1.5 1.6 1.5 1.6 1.5 1.6 1.6

Hour

s/in

terr

uptio

n/ye

ar



Figure 1.10.1-3 illustrates System Average Restoration Index (SARI), which is a ratio of total interruption duration over the number of sustained interruptions and is a measure of response time. AltaLink had demonstrated significant improvements from 2008 to 2011 and closed the gap with its peers however the trend has since flattened and even begun worsening. To counteract the recent trend AltaLink is reviewing its field and system operations practices for opportunities to improve these trends. AltaLink has several CRU programs (for example, Line Airbreaks, Appendix 13-A04 or Disturbance Analysis Equipment, Appendix 13-A08) and Business Improvements (Section 1.11) that are working to enable faster isolation and reduced restoration time for customers.

Reliability Performance Expected Range AltaLink’s reliability expected performance ranges for the Test Period are provided in Table

1.10.1-2 and are calculated as one standard deviation on either side of the 2012-2016 averages. Using historical data to set expected performance ranges takes the nature of reliability indices into account, namely:

• SAIDI, SAIFI and SARI are all lagging indicators of past decisions in system design and capital expenditures;

• interruptions can vary widely between years; and • targets must balance reliability levels with cost.

Table 1.10.1-2 - Reliability Performance and Expected Range

Reliability Targets All kV 2012 2013 2014 2015F 2016F

2017-2018 Expected

Range 2017-2018

Target SAIDI 0.6 0.8 0.5 0.7 0.7 0.5-0.8 0.7 SAIFI 0.8 0.6 0.7 0.8 0.8 0.7-0.8 0.7 SARI 1.5 2.2 1.6 1.7 1.7 1.5-2.0 1.7

Reliability Improvements AltaLink has implemented the following initiatives to improve the reliability of its transmission

system. Most of these reliability initiatives are intended to minimize environmental damage on transmission equipment as well as protecting wildlife wherever possible.

GREENJACKETTM GREENJACKETTM is a unique material that insulates energized electrical equipment to prevent

animal and bird related outages and protect wildlife. In a typical year, wildlife related outages account for approximately 39% of all substation caused load interruptions. In the period since this program began, wildlife related outages have declined by 35% to 95% at most substations with a history of wildlife contacts following the installation of GREENJACKETTM. For further details on GREENJACKETTM refer to Appendix 13-A07 Substation Components.

Indoor Switchgear AltaLink installs indoor metal clad switchgear as standard design for new urban construction and

where appropriate, under its 25 kV bus replacement program. The use of indoor switchgear, which is entirely built and tested by the manufacturer, replaces AltaLink’s previous practice of building and testing site-specific outdoor switchgear. In addition to being the best economic option for sites with more than two feeders, indoor switchgear improves reliability by reducing weather and wildlife related outages.



Dissolved Oil Analysis AltaLink conducts two Dissolved Gas Analysis (DGA) programs to measure the combustible gases

in transformer main tanks and tap changers to identify and remediate units most likely to fail. DGA is the most effective means to discover transformers main tank and tap changer’s incipient failures and helps to avoid related forced outages. AltaLink’s tap changer DGA program tests all 138 kV and 240 kV transformers twice per year. In AltaLink’s main tank DGA program, main tanks are sampled once per year. The test results also help to prioritize preventative maintenance before failures with costly repairs occur. For example:

• transformer issues were found as a result of DGA at both 373S and 489S. The transformer at 373S was replaced with an operational spare and the one at 489S was repaired; and

• 525S and 123S had burning and coking on contacts discovered using DGA. All contacts were replaced, saving major replacement costs or failure.

Insulator Washing AltaLink’s insulator washing program improves the performance capability of insulators and

significantly reduces outages caused by dirty or contaminated insulators. The failure rate for cross-arms due to burn-off as a result of insulator flashovers increases at higher operating voltages, insufficient and degrading insulation qualities and contamination. Moreover, cross-arm fires due to contamination on the underside of insulators may result in a pole fire and loss of the complete structure. Similarly, contamination on substation insulators can also lead to the failure of substation equipment. Therefore, AltaLink also targets substations exposed to contamination for station-wide washing of all insulators. As discussed in Section 5.2.5 USA 563 Overhead Line Expense the continued proactive use of AltaLink’s insulator washing program since 2009 has enabled a decreasing number of outages for AltaLink customers. In 2015, AltaLink completed insulator washing on 1,067 structures of 3 lines.

Station-wide Insulator Replacements Substations located close to roadways are susceptible to unplanned power outages from

contamination of high voltage insulators. The contamination is a result of buildup caused by seasonal road salting activities after which vehicular traffic causes the de-icing medium to become air-borne and settle on both conductive and insulating electrical components within the substations. This contamination mixed with abnormal weather conditions like heavy fog or excess moisture can lead to voltage tracking and eventual failure of these devices. Other sources of contamination include aerial discharge at industrial facilities at or near to existing substations. AltaLink’s station-wide insulator replacement program replaces all insulators with a contamination resistant model at sites with known contamination issues. This program began in 2011 with one station-wide replacement. Since the program started, there has been no contamination-related load interruption at the substations where the insulators were replaced.

Partial Discharge Testing In 2009, AltaLink implemented Partial Discharge (PD) testing and an attendant program to

predict failures on Current Transformers (CTs) and Potential Transformers (PTs) in AltaLink’s transmission system after experiencing several unexpected in-service failures. PD measurement is done on units when they are in service avoiding planned outages. PD measurement is not only used for pinpointing faulty equipment but also used to determine if a site is safe to work for crew. Examples of success include:



• in 2012, high PD was detected on a transformer at 63S while the transformer was in service. Based on the result, AltaLink removed the transformer from service and performed further dissolved gas analysis. Results indicated defective bushing. Transformer was returned to service after the bushing replacement was completed. This testing prevented an imminent bushing failure; and

• similarly, high PD was detected on a CT at 262S Strachan substation. The CT was removed from service and further testing indicated very high power factor and off scale dissolved gasses in oil. All indicated that this CT was extremely close to failure when it was removed from service. Later teardown proved the critical defects in the CT.

CT/PT Replacement Program AltaLink’s ongoing CT/PT replacements program targets units that have reached or surpassed

their age thresholds for condition assessment and potential replacement. Where condition information is available through testing methods such as Doble, Infra-Red, PD testing and through visual assessment, AltaLink may opt to replace a CT or PT that is not necessarily among the oldest in inventory or at its age threshold. AltaLink also prioritizes replacement of units containing polychlorinated biphenyl (PCB) to comply with environmental regulations.

Aerial Mapping and Attributes Of the lines that AltaLink operates and maintains, 158 have original design-based operating

ratings. Aerial Mapping technology provides the opportunity to develop detailed engineered line ratings which may result in AltaLink being able to improve existing operating line ratings, raising the capacity of the particular line. Line spans that do not meet line clearance standards can be identified, any safety concerns mitigated, and line ratings increased.

AltaLink’s Aerial Mapping and Attributes is included under the Line Components business case (refer to Appendix 13-A02). As part of the program AltaLink inspects existing lines to determine if conditions have changed since original construction. Any clearance issues to ground, adjacent facilities, or distribution underbuilds will be prioritized and mitigated either combined with other maintenance plans or separate maintenance projects. Past experience shows that approximately 25% of the lines in study will have identified deficiencies that need to be resolved to meet thermal and safety code requirements.

Transformer Online Oil Condition Monitoring Transformer online oil monitoring devices allow early detection of internal problems which may

occur within a transformer. Interpretation of certain gas values can predict upcoming failures and enable AltaLink to remove equipment from service and perform maintenance during a planned outage instead of an unplanned outage.

Without condition monitoring devices, AltaLink physically tests aging and critical assets which may reduce reliability by:

• removing the asset from service (asset is unavailable to the transmission system); • in the case of aging assets, failures occurring between tests shorten test schedules and

increase both costs and asset unavailability; and • secondary failures may occur when assets are taken out of service to perform tests.

Conductor Sleeve Thermography AltaLink performs infra-red scans on conductor sleeves that are suspected to be faulty. The scan

is done when the line is at or near capacity. If the scan results in a “hot” sleeve then that sleeve



is deemed faulty and corrective action is taken. Depending on the number of sleeves found on a specific line it may be determined that the conductor should then be replaced from dead end to dead end. This program prevents line trips as a result of faulty sleeves and overheating damages to the main conductors. This improves asset availability and performance.

1.10.2 Safety As AltaLink’s safety culture matures and evolves, the company’s safety performance remains

strong. AltaLink has identified and implemented a number of initiatives to support these efforts.

AltaLink measures its safety performance by the following industry common indices, demonstrated in Figures 1.10.2-1 and 1.10.2-2.

AIFR: All Injury Frequency Rate

LTSR: Lost Time Severity Rate

Figure 1.10.2-1 represents lost time and medical aids for AltaLink employees and contractors.

AltaLink’s frequency of medical aids and lost time personal injuries is significantly less than the CEA transmission composite. Despite a period of unusually high workloads for both staff and contractors, the frequency of medical aids and lost time personal injuries has remained within AltaLink’s normal historical range.

Figure 1.10.2-1 - AltaLink All Injury Frequency Rate

Figure 1.10.2-2 shows AltaLink and CEA Lost Time Severity Rate (LTSR) which measures the degree of injury or the length of time away from work for the more serious incidents. As demonstrated, AltaLink’s LTSR is also lower than the CEA composite.



Figure 1.10.2-2 - AltaLink Lost Time Severity Rate

Safety Performance Expected Range

AltaLink has a strong culture dedicated to employee safety, and will continue to invest in employee and leadership training, industry best practices, and processes to ensure AltaLink’s employees work in a safe environment. AltaLink has established a 10% AIFR improvement goal for injury statistics. To support this goal, it has implemented Safety Leadership Training, Hazard/Near Miss Reporting, and Preventable Vehicle Accident (PVA) program.

Safety Improvements AltaLink holds safety of employees, contractors, and the public as a key value. AltaLink has

established an Environment Health & Safety (EH&S) management system designed to manage the risks and liabilities associated with the construction, Operation & Maintenance of its transmission system. Additionally, AltaLink has implemented the following safety programs.

Safety Leadership Training AltaLink has implemented a Safety Leadership Training course for its Project Managers, work

leaders, Managers, Directors and Vice Presidents. This course is designed to coach, mentor and educate these groups on their role and responsibilities under Alberta OHS Act, Regulation and Code. The objectives of the course are to:

• orient leadership to safety and environment legislation; • define safety and environment leadership roles and responsibilities; • review the concept of due diligence as a legal defense; and • define why AltaLink has safety and environment programs, policies, standards and training.

Hazard/Near Miss Reporting To keep the workplace safe for workers, contractors and the public, AltaLink has a reporting

program called Hazard/Near Miss reporting. The primary goal of the program is to have a proactive approach to identifying and reporting hazards/near misses to correct these conditions before they become an incident that has the potential to impact people. The program educates people on what a hazard or near miss is, the actions people need to take to protect other employees, who they report these occurrences to, and the tools available to complete the reporting. The program has been embraced by everyone at AltaLink.



Preventable Vehicle Accidents PVA is a program that provides tools and a framework for AltaLink employees while they drive

fleet or rental vehicles on company business. A PVA is an avoidable incident, involving a company or rental vehicle, which results in vehicle or property damage. This applies to any vehicle damage no matter how slight. AltaLink has incorporated steering wheel covers that prompts employees to do a 360 walkaround of their vehicle and vehicle trip card which provides a checklist of items to look for when conducting their walkaround. AltaLink offers frequent fleet and rental car drivers an online driver training tool. The training is designed to increase safe driving skills and identify high risk driving habits.

Joint Utility Safety Team Joint Utility Safety Team (JUST) is a joint initiative among AltaLink, the Government of Alberta,

ATCO Electric, ENMAX, EPCOR and FortisAlberta to change public understanding of, and behaviors toward, electrical safety through ongoing communication. JUST’s ultimate goal is to decrease the number of public electrical contacts and injury. Further information on JUST can be found at www.wherestheline.ca.

1.10.3 Efficiencies AltaLink is including the following two operational efficiency measures, defined in accordance

with AltaLink’s MFR schedules to this Application:

Where:

• O&M expense is defined as AltaLink’s total O&M costs less taxes (Schedule 5.1). O&M expense is a direct indicator of the annual cost to operate a utility.

• Sustaining Capital is defined as AltaLink’s total capital expenditures less DA capital (Schedule 10.4). Sustaining Capital are those costs necessary to maintain existing facilities. Combining O&M Expense and Sustaining Capital is a comprehensive, long-term view of the annual cost to operate a utility and also accounts for differences in capitalization practices of different utilities.

• Gross fixed assets are defined as AltaLink’s Total Property, Plant and Equipment less computer hardware and voice and data network equipment (Schedule 31.1-B/10-2).

These measures are useful indicators of a utility’s cost efficiency in operating and maintaining its facilities over time but are influenced in the shorter term by rates of organizational and asset growth and also by current economic factors such as availability and cost of inputs (labour, materials and capital). AltaLink is cognizant of the sensitivities in Decision 2009-151 wherein the AUC stated at paragraph 734:

The Commission notes that because gross plant is comprised of long term assets, the replacement of such assets over time will cause year-to year increases in the value of gross plant to rise by a faster rate than the rate



of inflation. As a result, the fact that O&M/gross plant or O&M plus sustaining capital/gross plant measures are declining is of limited value supporting the reasonableness of AltaLink’s O&M or capital maintenance program estimates.

AltaLink’s performance measures are not intended to be viewed as absolute goals, but rather as indicators of performance taking recent influencing factors into account. Moreover, AltaLink uses such metrics consistent with the Canadian transmission industry to enable comparisons with CEA indices. As with all KPIs, the value of comparisons among utilities is proportional to commonality of included costs.

AltaLink’s cost to operate and maintain its transmission system, including operating costs and sustaining (non-growth) capital expenditures, is demonstrated in Figure 1.10.3-1. Operating costs relative to gross fixed assets is shown in Figure 1.10.3-2. Both ratios are forecast to decline because additions to gross plant in service, and in particular DA capital, is increasing at a faster rate than both operating expenses and Sustaining Capital.

Figure 1.10.3-1 - AltaLink Transmission O&M Expense & Sustaining Capital per Gross Fixed Asset

Figure 1.10.3-2 - AltaLink Transmission O&M Expense per Gross Fixed Asset

* CEA Composite

Another measure of AltaLink’s operational performance is provided in Figure 1.10.3-3, showing operating FTEs per $10M of Rate Base. This index increases initially during a period of capital expansion because new staff must be retained to first integrate, then operate and maintain the



new transmission facilities. As these new facilities become fully operational, the associated expenditures are added to Rate Base and the index declines.

Figure 1.10.3-3 - AltaLink Operating FTEs per $10M Rate Base

Amounts in table are rounded for presentation purposes.

Business Improvements AltaLink actively encourages employees to examine day-to-day business practices for

opportunities to increase effectiveness. Consequently, AltaLink has implemented a number of business improvements over the past several years that are now embedded in AltaLink’s normal-course activities. The associated efficiency gains are reflected in actual costs or activities incurred and as such are incorporated into AltaLink’s Revenue Requirement forecast for the Test Period.

The following tables detail recent AltaLink business improvements and the related efficiency gains which are identifiable and material and include lower operating cost, lower number of outages, increased productivity and more accurate and readily available information for quicker turnaround cycle times. Consistent with the directions given in paragraph 736 of Decision 2009-151, AltaLink is not requesting additional funding in respect of such initiatives.



Table 1.11-1- Recent Business Improvements - System Operations Delivery Partner Engagement Strategies Benefits • AESO - Collaborated with the AESO on

two key initiatives: o Planning Coordination work has

identified efficiency gains through improved alignment between AltaLink’s asset management/operations and AESO’s long term plans.

o Outage Coordination Improvement Initiative established more proactive and regular engagements with the AESO Operations group a variety of levels within the organizations to: - Establish and maintain interfaces

between leaders - Review and align short and long

term operating plans for both organizations

- Resolve/action operational issues

- Improve Work Coordination

• Improved alignment of operational plans, procedures and objectives with Delivery Partners, resulting in greater coordination and optimization in the planning and operations domain and reduced system risk.

Operational Process Improvement Initiative (OPII) with FortisAlberta Benefits • Undertook a formal project with

FortisAlberta Operations to integrate FortisAlberta Control Centre (FCC) centralized operations with AltaLink Control Centre (ACC) operations.

• Process improvements and collaborative modifications to transmission and distribution scheduling.

• Seamless transition from FortisAlberta distributed Operator in Charge model to centralized Operator in Charge model.

• Streamline communications between FCC and ACC.

• Reduce system risk and ensure worker safety through refinement of transmission scheduling expectations between FCC and ACC.

Emergency Response Plan (ERP) /Business Continuity Plan (BCP) Updates Benefits • Collaborated with other Berkshire

Hathaway Energy platforms to share best practices related to Emergency Response and identified improvement opportunities relevant to AltaLink.

• Ongoing enhancements and refinements to further align ERP with business functions and ease the on-boarding of new ERP members.

• Improved emergency response to provide urgent and balanced risk decision making to reduce restoration times for AltaLink’s transmission system and improve customer satisfaction

• Improved alignment with business functions and effective on-boarding ensures highly efficient, effective response and added ease of use in the event of an emergency.



Table 1.11-2 - Recent Business Improvements - Asset Management Asset Health Monitoring Benefits • Formalized and implementing a

Condition Monitoring & Assessment (CMA) process to consistently and effectively evaluate the real time condition of assets and monitor asset health scores for key asset groups.

• Reduced man-hours to prepare annual maintenance plans and revisions as necessary (for example, prioritize maintenance on assets showing excessive deterioration).

• Improved trending of asset group health. • Reduced equipment failures. • Improved trending of equipment

deterioration and identification of related causes.

• Improved development of long term CRU scope.

Modular Substation Benefits • In 2010, completed a prototype

standardized distribution supply substation where components are assembled by the manufacturer and transported to a prepared site.

• Successfully deployed the modular concept on a number of projects including: Westwood, Hull, Deer Hill, Nilrem and Hayter.

• Will be completing a number of other projects including: Boyle, Hughenden and Collinton.

• Plan to take learnings into the next generation of modular substations to realize even greater benefits.

• Because of the controlled environment in a manufacturing facility, modular parts can be constructed faster and for a lower cost compared to construction in the field.

• Reduced engineering and procurement costs.

• Expedited projected completion. • Standardization and facility assembly will

result in improved safety in the field and a higher quality substation.

Operational Readiness and Integration Benefits • A holistic planning process to ensure

AltaLink is prepared to integrate new transmission facilities and technologies into its power system.

• Ensures AltaLink’s preparedness to operate and maintain new/replacement assets in a safe, reliable and cost effective manner.

• Facilitates workload, resource and capital replacement planning.

• Provides customizable reports and outlooks using a portfolio perspective.

• Single source of planning information for multiple stakeholders.



Technical Data and Document Management Business Process Benefits • Develop a centralized, standardized and

searchable electronic records repository and process.

• This process manages the acquisition, control, processing, validation and delivery of technical data and documents which result from additions and/or changes to assets as a result of projects or maintenance.

• Creates a consistent foundation for fact-based decision making for the management of assets.

• Ensures documentation required for the safe operation, and maintenance of assets is accurate and readily accessible.

• Ensures critical documents required for the management, operation, and maintenance of assets are accessible, accurate, shareable, and reportable.

• Supports reliability compliance efforts which rely heavily on the availability of technical data and documents.

• Provides AltaLink with a scalable solution to manage the increase in volume of documents due to the larger number of active projects and project types.

Area Protection Coordination Review Benefits • Proactively determine which areas of the

protection system currently have protection coordination deficiencies and to help assess the amount of risk associated with each deficiency.

• Automated fault simulations studies within each fault clearing group considering hundreds of different scenarios of typical fault types occurring in various locations and under a multitude of contingency conditions.

• Increased system reliability as protection coordination deficiencies are discovered before they result in a forced outage.

• Confirmed focus on addressing the protection relay issues that present the most risk to system reliability.

• Increased efficiency by helping to group protection relay mitigation/upgrade work together.



Helicopter Washing Benefits • High pressure water washing of

transmission line insulators from a platform mounted on a helicopter coupled with ground based corn and water washing of flight restricted structures.

• Increase in the number of structures that can be washed due to: o reduction in structure to structure

travel time. o set up time of equipment. o Approximately 35 - 50 structures per

hour can be washed per hour from the air, where depending on the access may get 1 to 2 structures per hour from the ground.

• Overall reduction in outage duration to complete the work.

• Reduced mobilization and de-mobilization costs.

• Ability to wash structures where summer access is limited or not available.

• No crop disturbance constraints, reduction of land damage claims.

• Elimination of club root contamination issues (steam cleaning of vehicles).

• Reduction in the number of staging areas required over ground based operations.

• Inherent reduction in number of insulator contamination outage causes for customers.

Mobile DC Battery Bank trailer Response Units

Benefits

• Development of a specification for an emergency response trailer for battery and/or SS loss

• Improved restoration time for battery or single station service loss.

• Standardized connections, tools and procedures for restoration

• Future construction aid for battery replacements.



Deployable Control Room Benefits • Development of a specification for a

Deployable control room for small single transformer and single source industrials or Fuse replacements

• Development of a fully designed applications for trailer deployment.

• Costs reductions Removal of footing from station deployment.

• Large cost reduction in deployment / transportation costs.

• Environment protection for Maintenance personnel and equipment during maintenance and trouble shooting

Battery Monitoring -Technology Benefits • Evaluating Battery monitoring technology

for replacement of time based maintenance

• Develop a preventative maintenance strategy for Batteries

• Replacement of operating/contact work for current time based maintenance

• Ready for compliance with AESO Reliability Standards implementation at a later date.

• Potential for expansion to Predictive maintenance with trending capabilities

Transformer Maintenance Benefits • Recent power transformer purchases are

specified with reduced maintenance components.

• Allows AltaLink to reduce transformer maintenance outage durations and improve availability.

Circuit Breaker Technology Benefits • Pilot projects for new circuit breaker

technologies to validate technology advancements

• Until recently vacuum circuit breaker technology has only been available at voltages below 69 kV and is utilized by AltaLink for medium voltage applications. Further development of vacuum interrupters enabled AltaLink to install two 69 kV vacuum circuit breakers as a pilot project in 2014. Vacuum circuit breaker technology has following advantages:

a. Increased contact life. b. no tank heat for Alberta winters. c. no greenhouse gas content.

Remote Equipment Storage Benefits • Implementation of locations remote

equipment storage where essential repair tools and equipment are stored in secure containers at identified remote sites.

• Improved response times by providing quicker access to equipment in remote parts of the service area.

• Field staff can be transported by helicopter to the fault location; or, if field staff are present in the area at the time of an event, they can respond to the fault knowing that the equipment is available.



Table 1.10.3-3 - Recent Business Improvements - EH&S Carbon Footprint Initiative Benefits • Targeted reduction in overall energy

consumption by 2% in the areas of electricity and fuel consumption through: o behavioral changes (turning lights,

computers, etc. off). o efficiency upgrades (lighting or

occupancy sensors, etc.). o examining alternative green power

energy providers. o greening up the fleet. o retiring of less efficient vehicles. o reducing travel. o car pooling. o anti-idling campaigns. o reduced speed in all areas.

• Reduced Carbon Footprint. • Fuel Savings. • Energy Cost Savings.

Major Issues and Policy Changes

There are no policy changes in this Application.

The major issues for this Application are discussed in Sections 1.1 to 1.3.

In addition to the MFR, AltaLink includes:

• supplementary information on DA projects in Sections 3 and 10.2; • Schedules 31.1 (A-E); • Schedules 31.2 (A-B); and • supplementary information on credit metrics in Section 28.2.

Terms and Conditions AltaLink has adopted the Alberta TFO Terms and Conditions (T&Cs) approved in AUC Decision

2010-116, effective March 18, 2010.

On September 26, 2014 AltaLink, on behalf of the Alberta TFOs, applied to the Commission under Section 8, 10 and 23 of the Alberta Utilities Act for the Commission to amend its Directive 1 in Decision 2009-248 to remove the requirement for periodic progress reports on AESO authoritative documents reform process. The Commission has issued Decision 2014-307 in response and has relieved AltaLink from the obligation in Directive 1, but required AltaLink to provide a progress report on the efforts to integrate the Alberta TFO T&Cs with AESO’s authoritative documents on or before October 1, 2015. On October 1, 2015 AltaLink advised the Commission that it had received a schedule from the AESO of what provisions were left to transition. As part of AltaLink’s 2015-2016 GTA, AltaLink submitted, during its oral hearing, a more detailed schedule from the AESO showing that the completion of the integration of TFO T&Cs with the AESO’s authoritative document would be mid-2016.

The T&Cs for AltaLink can be found in Appendix 14 of this Application.



2. COMMISSION DIRECTIVES Section 2 contains a table with responses to outstanding AUC directives due at the time of this

Application from the following Decisions:

• AUC Decision 2010-116 (Refiling of Transmission Facility Owner Terms and Conditions) • AUC Decision 2013-407 (2013-2014 GTA) • AUC Decision 2013-417 (Utility Asset Disposition) • AUC Decision 2014-258 (2013-2014 GTA Compliance filing)

The table provides references to the locations of the responses which:

• are incorporated within the table; • are incorporated within specific sections of the Application; or • can be found in this section following the table as attachments.

Other directives from AUC Decision 2013-407 have been responded to in AltaLink’s 2013-2014 Compliance filing approved by the Commission in Decision 2014-258.

Although AltaLink has not yet received a decision from its 2015-2016 GTA, any directives received will be filed promptly after receiving a decision for proceeding 3524.



AUC Decision

Decision Reference

Directive Number

Topic Directive Response

2010-116 Page 6 Directive 0 TOAD progress reports

The Commission acknowledges AltaLink’s discussion of direction 1 from Decision 2009-248 respecting AltaLink’s plans to file periodic progress reports for information purposes on the AESO’s Transition of Authoritative Documents (TOAD) process and its potential to facilitate the eventual transition of certain T&C Articles out of the TFO T&Cs. The Commission approves AltaLink’s plan to file progress reports on an annual basis commencing on July 1, 2011.

The Commission issued Decision 2014-307 relieving AltaLink from the obligation in Directive 1, but required AltaLink to provide a progress report on the efforts to integrate the Alberta TFO T&Cs with AESO authoritative documents on or before October 1, 2015. On October 1, 2015 AltaLink advised the Commission that it had received a schedule from the AESO of what provisions were left to transition. As part of AltaLink’s 2015-2016 GTA, AltaLink submitted, during its oral hearing, a more detailed schedule from the AESO showing that the completion of the integration of TFO T&Cs with the AESO’s Authoritative document would be mid-2016.

2013-407 Page 43, para 249

Directive 18 Right-of-way payments

AltaLink is further directed to file copies of all SRB decisions issued between the date of this decision and the filing of the next GTA in respect of right-of-way payments involving all electric transmission utilities in Alberta.

Refer to Appendix 12.1 Attachment 1B to Appendix 12.1 Attachment 1G.



AUC Decision

Decision Reference

Directive Number


2013-407 Page 53, para 292

Directive 23 Accruals for lease levels

The Commission acknowledges that the timing of third-party activities can be difficult to forecast. However, the Commission is concerned that there appears to be a consistent trend of under-forecasting in this category. The Commission directs AltaLink to explain in detail any future variances in this category.

AltaLink forecast Lease Revenue and Other for 2013 and 2014 at $1.5M and $1.6M respectively. Actuals for 2013 were $1.9M and $3.1M for 2014, for a variance of approximately $0.4M in 2013 and $1.5M in 2014. The variance for both years was due to two main revenues; the first additional high load moves initiated by external parties requiring AltaLink to move its transmission wires to accommodate large loads moves and second, additional right-of-way billings, as a result of municipalities purchasing AltaLink right-of-way lands for road expansions.

2013-407 Page 145, para 731

Directive 26 Labour cost multiplier

In previous decisions, the Commission has approved the use of an actual labour cost multiplier for use by SNC-ATP to determine its hourly rates billed to AltaLink, along with certain mark-ups for procurement and construction management. For purposes of forecasting the capital expenditures related to the projects allocated to SNC-ATP due to its being at the PPS stage, AltaLink is directed to continue the use of this approach, as previously approved by the Commission, that being the two times labour multiplier and the other approved mark-ups.

AltaLink has complied with the Commissions directive to utilize a two times labour multiplier. Furthermore, AltaLink has complied with the directives by removing the estimated rate differential between the previously approved labour multiplier rates and the competitive market rates obtained and contracted through the CPP process. Table 10.2.11-1 presents the estimated rate differential removed from the Uncertainty Adjusted DA Capital Expenditures forecast.



AUC Decision

Decision Reference

Directive Number


2013-407 Page 145, para 732

Directive 27 Foresting of capital expenditures

For purposes of forecasting the capital expenditures related to those projects allocated to SNC-ATP and Burns & McDonnell pursuant to the new relationship agreements, AltaLink is directed to use the same rates as above, namely, the two times labour multiplier and other approved mark-ups. Given that the Commission cannot accept the rates resulting from the CPP, the rates approved pursuant to the master services agreement are the only proxy for market rates available to the Commission.

Refer to response to Directive 26 from Decision 2013-407.

2013-407 Page 157, para 790

Directive 29 Uncertainty adjusted forecast for IT expenditures

The Commission has reviewed the evidence in the application and considers the forecast expenditures to be reasonable. They are approved as filed. The Commission agrees with the concern of the Consumers’ Coalition of Alberta and for purposes of future proceedings, AltaLink is directed to use an uncertainty adjusted forecast for such expenditures.

AltaLink is reviewing with the AESO potential surplus lands and certain line segments to confirm the AESO, from a long term planning perspective with the new climate change policies, does not require them in the future. Decisions on these will be completed in 2016 and incorporated in the Management Update process of the 2017-2018 GTA.

2013-407 Page 182, para 956

Directive 38 Depreciation This information should continue to be available to parties in future depreciation studies, and the Commission directs AltaLink to ensure that, in addition to the years 2010 and 2011 being restated for the missing information, subsequent years be treated in a similar manner.

The information is provided in Part VI Net Salvage Statistics of the Gannett Fleming Depreciation Study report in Appendix 8 of the 2015-2016 GTA (exhibit 0003.00.AML-3524).

2013-417 Page 82, para 327

Directive 2 Utility Asset Disposition

In order to give effect to the court’s guidance that the “rate-regulation process allows and compels the Commission to decide what is in the Rate Base, i.e. what assets (still) are relevant utility investment on which the rates should give the company a return,” the Commission directs each of the utilities to review

AltaLink is currently in the process of selling the parcels of land identified as no longer required for utility service and is in consultation with the AESO on the course of action to be taken with respect to the identified line segments.



AUC Decision

Decision Reference

Directive Number


its Rate Base and confirm in its next Revenue Requirement filing that all assets in Rate Base continue to be used or required to be used (presently used, reasonably used or likely to be used in the future) to provide utility services. Accordingly, the utilities are required to confirm that there is no surplus land in Rate Base and that there are no depreciable assets in Rate Base which should be treated as extraordinary retirements and removed because they are obsolete property, property to be abandoned, overdeveloped property and more facilities than necessary for future needs, property used for non-utility purposes, property that should be removed because of circumstances including unusual casualties (fire, storm, flood, etc.), sudden and complete obsolescence, or un-expected and permanent shutdown of an entire operating assembly or plant. As stated above, these types of assets must be retired (removed from Rate Base) and moved to a non-utility account because they have become no longer used or required to be used as the result of causes that were not reasonably assumed to have been anticipated or contemplated in prior depreciation or amortization provisions. Each utility will also describe those assets that have been removed from Rate Base as a result of this exercise. At this time, the Commission will not require the utilities to make additional filings to verify the continued operational purpose of utility assets.



AUC Decision

Decision Reference

Directive Number


2014-258 Page 4, para 22

Directive 2 FTE breakdown by position and cost

No interested parties specifically commented on AltaLink’s response to Directive 1 in argument or reply. This notwithstanding, the Commission makes the following additional findings with respect to AltaLink’s response to Directive 1. First, the Commission finds that the breakdown of FTEs by position by cost centre and showing the O&M versus capital split applied for each position indicated in Attachment B-01 of Section B of the refiling application complies in full with Directive 1. Second, the Commission finds that the information provided in Attachment B-01 would be of significant assistance in processing future AltaLink GTAs. Accordingly, the Commission directs AltaLink to provide a breakdown of individual job classifications and FTEs, disaggregated by cost centre for each applied-for test year in AltaLink’s next GTA.

Refer to attached breakdown by Functional Group (Appendix 2-C).

2014-258 Page 4, para 21

Directive 1 Generic return on equity

The Commission, for the purposes of this refiling decision, confirms that AltaLink has complied with all generic cost of capital proceeding findings known to it at the time of the refiling application. However, in consideration of the interim nature of the findings in Decision 2013-459, AltaLink is directed to ensure that any subsequent change to the generic return on equity, or to any other related finding, on a final basis in respect of 2014 is addressed by AltaLink in a subsequent application.

AltaLink included the approved Return of Equity (ROE) and capital structure from the 2013 GCOC Decision in its 2015-2016 GTA including the required adjustment related to 2013 and 2014. Refer to Section 28 of this Application regarding the placeholder assumptions AltaLink adopted regarding ROE and equity ratio levels over the 2017 and 2018 Test Period.



AUC Decision

Decision Reference

Directive Number


2014-258 Page 16, para 76

Directive 3 Engineering, Procurement and Construction Management Services (EPCm) payments

Although the Commission will not direct AltaLink to make a second refiling to comply with the Commission’s direction and thereby account for the excess EPCm payments in question, the Commission wishes to make it clear that its decision not to order a second refiling should not be taken as approval of these payments nor as a finding that AltaLink has complied with Directive 27. The Commission will address AltaLink’s noncompliance as part of its review of capital project costs in future DA Capital Deferral Account (DACDA) proceedings. In anticipation of this review, the Commission further directs AltaLink to keep, as a separate reconciliation, a record for each capital project in which EPCm costs are governed by the relationship agreements, the amount of EPCm costs that are paid and the amount that would have been paid under the old master services agreement pricing for the same EPCm services. This information must be provided as part of the filing for any capital project for which an application has been made for final approval of that project’s costs.

Refer to response to Directive 26 from Decision 2013-407.



3. TRANSMISSION REVENUE REQUIREMENTSSection 3 of AltaLink’s Application addresses the following:

3.1 Summary

3.2 Aggregate Revenue Requirements

3.3 Direct Assign Capital Deferral Account Included in Revenue Requirement

3.4 Transmission Revenue Requirement Schedules



Summary This section of the Application describes AltaLink’s Revenue Requirement forecast for the Test

Period, including the DA Capital Deferral Account (DACDA) effect for each test year.

Aggregate Revenue Requirements AltaLink is applying to the AUC for approval of a Transmission Tariffs of $853.2M and $989.5M in

2017 and 2018, respectively, which includes $944.1M and $989.5M of Revenue Requirements for 2017 and 2018, as outlined in Schedule 3-1.

Direct Assign Capital Deferral Account Included in Revenue Requirement AltaLink is submitting a separate DADCA application at a later date, but is including certain

DACDA schedules in this Application for the purpose of calculating the Revenue Requirement for the Test Period. In this Application, AltaLink is seeking Commission approval to include in the DACDA the Revenue Requirement effect of the DA projects which remain in CWIP at the end of this Test Period. Project costs remaining in CWIP affect Revenue Requirement because the interest cost associated with the financing of these projects is deductible for income tax purpose.

In this Application, in addition to the usual financial schedules from AltaLink’s Revenue Requirement model, AltaLink is incorporating the financial schedules from the DACDA process. They are marked as Schedule 3-2.2017 (i), Schedule 3-2.2017 (ii), Schedule 3-2.2017 (iii) for the 2017 forecast year and Schedule 3-2.2018 (i), Schedule 3-2.2018 (ii), Schedule 3-2.2018 (iii) for the 2018 forecast year.

The amended DACDA Schedules treat the income tax effect of all DA projects, whether they are forecast to be in Rate Base or in CWIP in the test years, on a deferral basis.

Transmission Revenue Requirement Schedules Schedule 3-1 Summary of Transmission Revenues and Costs

Schedule 3-1A CWIP-in-Rate Base Continuity

Schedule 3-2.2012 (i) Schedule of 2012 DACDA Revenue Requirement

Schedule 3-2.2012 (ii) Schedule of 2012 DACDA Mid-year Rate Base

Schedule 3-2.2012 (iii) Schedule of 2012 DACDA CWIP









Schedule 3‐1

Feb 15/16

Summary of Transmission Revenues and Costs$Millions

2013Actual

2014 Actual

2015Forecast

2016 Mgt Update

2017 Forecast

2018 Forecast

Cross Prior Yr. 4 Prior Yr. 4 Prior Yr. 4 Prior Yr. 3 Prior Yr. 3 Prior Yr. 3 Prior Yr. 2 Prior Yr. 2 Prior Yr. 2 Prior Yr. 1 Prior Yr. 1 Prior Yr. 1 Test Period Test Period Test Period Test Period Test Period Test Period

Line Description Reference

ForecastExisting

Rate Base

ForecastDACDA

ForecastTotal

ActualExisting

Rate Base

ActualDACDA

ActualTotal

ForecastExisting

Rate Base

ForecastDACDA

ForecastTotal

ForecastExisting

Rate Base

ForecastDACDA

ForecastTotal

Year 1Existing

Rate Base

Year 1DACDA

Year 1Total

Year 2Existing

Rate Base

Year 2DACDA

Year 2Total

01 Revenues02 Transmission Tariffs 323.9 157.4 481.3 345.3 261.6 607.0 569.4 239.9 809.4 545.9 355.6 901.5 565.6 378.4 944.1 580.5 409.0 989.5 03 Deferral Accounts and Reserves 86.3 (79.1) 7.2 149.9 (111.5) 38.4 04 Payment from Balancing Pool05 Total Revenues 410.2 78.2 488.5 495.3 150.1 645.4 569.4 239.9 809.4 545.9 355.6 901.5 565.6 378.4 944.1 580.5 409.0 989.5 0607 Costs08 Operating Costs Schedule 5‐1 115.6 115.6 140.5 140.5 151.6 151.6 160.9 160.9 175.7 175.7 180.1 180.1 09 Depreciation Schedule 6‐1 137.3 ‐ 137.3 159.9 12.1 172.0 211.6 82.7 294.2 216.4 137.7 354.1 212.9 137.4 350.3 220.9 151.9 372.8 10 Return on Rate Base Schedule 9‐1 140.2 67.0 207.2 174.1 117.5 291.5 175.1 130.6 305.7 176.5 217.9 394.4 186.2 241.0 427.2 191.7 257.1 448.8 11 Revenue Offsets Schedule 8‐1 (12.3) ‐ (12.3) (13.3) ‐ (13.3) (8.1) ‐ (8.1) (7.9) ‐ (7.9) (9.1) ‐ (9.1) (12.2) ‐ (12.2) 12 Income Tax Expense Schedule 7‐1 29.4 11.2 40.6 34.1 20.6 54.7 39.2 26.7 65.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13 Total Costs ‐ Revenue Requirement 410.2 78.2 488.5 495.3 150.1 645.4 569.4 239.9 809.4 545.9 355.6 901.5 565.6 378.4 944.1 580.5 409.0 989.5 1415 Settlement of SIR Balance Schedule 29‐2 2.6

16DB Pension Plan Liability Account Refund to Customers Schedule 29‐4 (0.2)

17

Refund 2013‐2014 Revenue Reduction Arising from GCOC Decision 2191‐D01‐2015 (24.6)

18Refund Revenue Collected under CWIP‐in‐RB Schedule 3‐1A (115.0) (115.0)

19 Refund FIT Liability Account Balance Schedule 29‐3 ‐ (85.0) (90.9) ‐ 20 Transmission Tariffs 410.2 78.2 488.5 495.3 150.1 645.4 569.4 239.9 672.2 545.9 355.6 701.5 565.6 378.4 853.1 580.5 409.0 989.5 21

22Revenue at Existing Rates (2014 Mgt Update) 2014 Approved 607.0 645.4 645.4 2016 Mgt Update 701.5 701.5

2324 Increase 26.8 56.1 151.7 288.1 2526 % Cumulative Increase 4.2% 8.7% 21.6% 41.1%

Schd 3-1

Schd 3-1A

Schedule 3-1A Feb 15/16

AltaLink Management Ltd.CWIP-in-Rate Base Continuity

$millions

Line No. Direct Assign Projects2011

Actual2012

Actual2013

Actual2014

Actual Total

1 O/B 219$ 558$ 976$ 1,274$

2 CapEX 578$ 888$ 1,708$ 1,744$ 3 Less CCF (69)$ (119)$ (172)$ (115)$ 4 Less Accruals (15)$ (61)$ (126)$ (39)$

5 Net CapEx 493$ 709$ 1,411$ 1,591$

6 CapAdd 186$ 389$ 1,248$ 979$ 7 Less CC (31)$ (128)$ (135)$ (115)$

8 Net CapAdd 155$ 262$ 1,113$ 864$

910 Other Adjustments - Project Cancellations -$ (28)$ -$ -$

11 C/B 558$ 976$ 1,274$ 2,000$

1213 Mid-Year Balance for CWIP-in-RB Calculations Avg (Line #1, Line #11) 388$ 767$ 1,125$ 1,637$

14 Capitalization Ratio15 Equity % 37.0% 37.0% 36.0% 36.0%16 Debt % 63.0% 63.0% 64.0% 64.0%17 Rates of Return18 Equity % 8.75% 8.75% 8.30% 8.30%19 Debt % 5.31% 4.97% 4.28% 4.07%

20 WACC %Line #15 x Line #18 + Line #16 x Line #19

6.58% 6.37% 5.73% 5.59%

21 Returns22 Amount available for refund Line #13 x Line #20 26$ 49$ 64$ 92$ 230$

Refund in 2015 115$ Refund in 2016 115$

ALTALINK MANAGEMENT LTD.

Feb 15/16

Direct Assign Capital Projects Schedule 3‐2.2012 (i)Schedule of 2012 DACDA Revenue RequirementFor the 12 months ended December 31, 2012

Line No. 2012 Actual1 Revenue Requirement ($'Millions)2 Returns $50.8 34 Depreciation and Amortization - 5 Income Taxes 8.3

6 Sub Total 59.1

7 Operating Cost related to Direct Assign Project8 Amortization of 12% O&M Customer Contr bution9 Taxes Other Than Income Tax

10 Total 59.1

11

12Cost

RatesCapital

Structure

Mid-YearRate BaseBalance

13 Returns(a) (b) (c) (d)

=(a)x(b)x(c)

14 Equity 8.75% 37% $767.1 $24.8 15 Preferred Stock 0.00% 0% 767.1 - 16 Debt 4.97% 63% 767.1 24.0 17 Other Costs Associated with Short-Term Debt 1.9 18 WACC 6.370% 50.8 1920 Depreciation and Amortization (e)21 Depreciation provision - 22 Amortization of Customer Contribution - 23 - 24

25EquityReturn

Income TaxRates

Income TaxInclusion

Rate(i)

=(f+o/(1-r))x(g)x(h)

26 Income Tax - Current(f) (g) (h)

27 Federal Income Tax $24.8 15.00% 100% $5.0 28 Provincial Income Tax 24.8 10.00% 100% 3.3 29 [r] 25.00% 8.3 3031

32Timing

Difference (k)= ( j/(1-r))x(g)x(h)33 Income Tax - Timing Difference (j)34 Federal Income Tax - - 35 Provincial Income Tax - - 36 - 37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion

Rate (o) = (-l)x(m)x(n)39 Income Tax - Future (l) (m) (n)40 Federal Income Tax - 15.00% 100% - 41 Provincial Income Tax - 10.00% 0% - 42 (s) 25.00% -

43 Preferred Dividend Tax -

44 TOTAL $59.1

DACDA

(Depreciation minus CCA Claim)

Note The Operating Cost related to Direct Assign Project Amortization of 12% O&M Customer Contr bution amount on line 8 has been moved to Schedule 8-1 Miscellaneous revenue - other Line 3.

3-2.2012 (i)

Direct Assign Capital ProjectsFeb 15/16

2012 GTA Actual Schedule 3‐2.2012 (ii)

Schedule of 2012 DACDA Mid-Year Rate Base

Line No. Description

Depreciationand

AmortizationRates

Gross Balance as at Jan 1, 2012

Balance as at Jan 1, 2012

Net of Depreciation Additions

DepreciationProvision

Net Balance as at

Dec 31, 2012Net Mid-Year

Balance(a) (b) (c) (d) (e)

=[(b)+(d)/2]x(a)(f)

=(c)+(d)-(e)(g)

=[(c)+(f)]/2

1 Property, Plant and Equipment

2 352 STRUCTURES AND IMPROVEMENTS 2.36% - - - - - -

3 353 STATION EQUIPMENT 2.76% - - - - - - 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.27% - - - - - - 5 354 TOWERS AND FIXTURES 2.32% - - - - - - 6 355 POLES AND FIXTURES 3.36% - - - - - - 7 356 OVERHEAD CONDUCTORS AND DEVICES 1.79% - - - - - - 8 350.1 LAND RIGHTS 1.56% - - - - - - 9 350 LAND 0.00% - - - - - - 10 - - - - - -

1112 CWIP in Rate Base 1.00 557.5 557.5 419.3 - 976.8 767.1

13 Less: Customer Contributions 3.35% - - - - - -

14 557.5 557.5 419.3 - 976.8 767.1

1516 CCA Claim17 Class 47 8.00% - - - - 18 Class 46 30.00% - - - - 19 Interest cost associated with Debt AFUDC - - - - 20 - - - - 2122

2012 Actual

3-2.2012 (ii)

ALTALINK

Feb 15/16

General Tariff Application for the period from January 1st 2011 to December 31st 2013 Schedule 3‐2.2012 (iii)Schedule of 2012 DACDA CWIP

( In $ millions )

Line No.

Project Number Description

Opening BalanceJan 1, 2012

Forecast

Total CapitalExpenditures 2012 Forecast

Capital Additions2012 Forecast

Ending BalanceDec 31, 2012 Forecast

(a) (b) (c) (d)

1 D.9999 Total Direct Assignments 667.4 866.9 392.8 1,141.5 23 Customer Contributed Fund (62.6) (121.9) (127.5) (56.9)

Construction Accruals (47.4) (60.4) (107.8)

5 Net Direct Assignments 557.5 684.5 265.2 976.8 67 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% - 8 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WACC% - 9 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% - 10 Total AFUDC -

NOTE: Totals may not add due to rounding.

3-2.2012 (iii)


Feb 15/16

Direct Assign Capital Projects Schedule 3‐2.2013 (i)Schedule of 2013 DACDA Revenue RequirementFor the 12 months ended December 31, 2013

Line No. 2013 Actual1 Revenue Requirement ($'Millions)2 Returns $67 0 34 Depreciation and Amortization ‐ 5 Income Taxes 11 2

6 Sub Total 78 2

789

10 Total 78.2

11

12Cost

RatesCapital

Structure

Mid‐YearRate BaseBalance


=(a)x(b)x(c)

14 Equity 8.30% 36 00% $1,125.4 $33.626 15 Preferred Stock 0.00% 0% 1,125.4 ‐ 16 Debt 4.28% 64% 1,125.4 $30.820 17 Other Costs Associated with Short‐Term Debt $2.580

18 WACC 5.727% $67.027

19

20 Depreciation and Amortization (e)21 Depreciation provision ‐ 22 Amortization of Customer Contribution ‐

23 ‐

24

25EquityReturn

Income TaxRates

Income TaxInclusion

Rate(i)

=(f+o/(1‐r))x(g)x(h)

26 Income Tax ‐ Current(f) (g) (h)

27 Federal Income Tax $33.6 15 00% 100% $6.7 28 Provincial Income Tax 33.6 10 00% 100% 4.5 29 [r] 25 00% 11.2

3031

32Timing

Difference (k)= ( j/(1‐r))x(g)x(h)

33 Income Tax ‐ Timing Difference (j)34 Federal Income Tax ‐ ‐ 35 Provincial Income Tax ‐ ‐

36 ‐

37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion

Rate (o) = (‐l)x(m)x(n)

39 Income Tax ‐ Future (l) (m) (n)40 Federal Income Tax ‐ 15 00% 100% ‐ 41 Provincial Income Tax ‐ 10 00% 100% ‐

42 (s) 25 00% ‐

43 Preferred Dividend Tax ‐

44 TOTAL $78.2

DACDA


3-2.2013 (i)

Direct Assign Capital Projects

Feb 15/16

2013 Actual Schedule 3‐2.2013 (ii)Schedule of 2013 DACDA Mid‐Year Rate Base


Depreciationand

AmortizationRates

Gross Balance as at Jan 1,

2013

Balance as at Jan 1, 2013

Net of Depreciation Additions


Net Balance as at

Dec 31, 2013Net Mid‐Year

Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)‐(e)

(g)=[(c)+(f)]/2


2 352 STRUCTURES AND IMPROVEMENTS 2.39% ‐ ‐ ‐ ‐ ‐ ‐

3 353 STATION EQUIPMENT 2.99% ‐ ‐ ‐ ‐ ‐ ‐ 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.22% ‐ ‐ ‐ ‐ ‐ ‐ 5 354 TOWERS AND FIXTURES 2.54% ‐ ‐ ‐ ‐ ‐ ‐ 6 355 POLES AND FIXTURES 3.96% ‐ ‐ ‐ ‐ ‐ ‐ 7 356 OVERHEAD CONDUCTORS AND DEVICES 1.46% ‐ ‐ ‐ ‐ ‐ ‐ 8 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.17% ‐ ‐ ‐ ‐ ‐ ‐ 9 350.1 LAND RIGHTS 1.70% ‐ ‐ ‐ ‐ ‐ ‐

10 350 LAND 0.00% ‐ ‐ ‐ ‐ ‐ ‐ 11 389 Land Other 0.00% ‐ ‐ ‐ ‐ ‐ ‐ 12 ‐ ‐ ‐ ‐ ‐ ‐

1314 CWIP in Rate Base 1.00 976.8 976.8 297.2 ‐ 1,274.0 1,125.4

15 Less: Customer Contributions 3.35% ‐ ‐ ‐ ‐ ‐ ‐

16 976.8 976.8 297.2 ‐ 1,274.0 1,125.4

1718 CCA Claim19 Class 47 8.00% ‐ ‐ ‐ ‐ 20 Class 46 30.00% ‐ ‐ ‐ ‐ 21 Interest cost associated with Debt AFUDC ‐ ‐ ‐ ‐ 22 ‐ ‐ ‐ ‐ 2324

2013 Actual

3-2.2013 (ii)

ALTALINK

Feb 15/16

General Tariff Application for the period from January 1st 2013 to December 31st 2014 Schedule 3‐2.2013 (iii)Schedule of 2013 DACDA CWIP

( In $ millions )

Line No.


Opening Balance

Jan 1, 2013 Actual

Total CapitalExpenditures 2013 Actual

Capital Additions

2013 ActualEnding Balance

Dec 31, 2013 Actual(a) (b) (c) (d)

1 D.9999 Total Direct Assignments 1,141.5 1,708.1 1,248.2 1,601.4 23 Customer Contributed Fund (56.9) (37.1) ‐ (94.0)


5 Net Direct Assignments 976.8 1,545.4 1,248.2 1,274.0 67 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% ‐ 8 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WACC ‐ 9 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% ‐

10 Total AFUDC ‐


3-2.2013 (iii)

3-2.2014 (i)


Feb 15/16

Direct Assign Capital Projects Schedule 3-2.2014 (i)Schedule of 2014 DACDA Revenue RequirementFor the 12 months ended December 31, 2014

Line No. 2014 Actual1 Revenue Requirement ($'Millions)2 Returns $117.5 34 Depreciation and Amortization 12.1 5 Income Taxes 20.6

6 Sub Total 150.1

789

10 Total 150.1

11

12Cost

RatesCapital

Structure



=(a)x(b)x(c)

14 Equity 8.30% 36.00% $2,063.4 $61.7 15 Preferred Stock 0.00% 0% 2,063.4 - 16 Debt 4.07% 64% 2,063.4 53.8 17 Other Costs Associated with Short-Term Debt 2.0

18 WACC 5.594% 117.5

19

20 Depreciation and Amortization (e)21 Depreciation provision $14.007 22 Amortization of Customer Contribution (1.930)

23 $12.077

24

25EquityReturn

Income TaxRates

Income TaxInclusion

Rate(i)

=(f+o/(1-r))x(g)x(h)


27 Federal Income Tax $61.7 15.00% 100% $13.8 28 Provincial Income Tax 61.7 10.00% 100% 9.2 29 [r] 25.00% 22.9

3031

32Timing

Difference (k)= ( j/(1-r))x(g)x(h)

33 Income Tax - Timing Difference (j)34 Federal Income Tax (28.7) (5.7) 35 Provincial Income Tax (28.7) (3.8)

36 (9.6)

37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion

Rate (o) = (-l)x(m)x(n)

39 Income Tax - Future (l) (m) (n)40 Federal Income Tax (28.7) 15.00% 100% $4.3 41 Provincial Income Tax (28.7) 10.00% 100% 2.9

42 (s) 25.00% 7.2


44 TOTAL $150.1

DACDA


3-2.2014 (ii)


Feb 15/16

2014 Actual Schedule 3-2.2014 (ii)Schedule of 2014 DACDA Mid-Year Rate Base


Depreciationand

AmortizationRates


2014

Balance as at Jan 1, 2014 Net

of Depreciation Additions


Net Balance as at


Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)-(e)

(g)=[(c)+(f)]/2

1 Property, Plant and Equipment2 352 STRUCTURES AND IMPROVEMENTS 2.63% - - 86.0 1.1 84.9 42.5 3 353 STATION EQUIPMENT 3.07% - - 385.8 5.9 379.9 189.9 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.34% - - 61.1 1.6 59.5 29.7 5 354 TOWERS AND FIXTURES 2.77% - - 244.8 3.4 241.4 120.7 6 354.01 TOWERS AND FIXTURES 7 355 POLES AND FIXTURES 3.86% - - 27.8 0.5 27.2 13.6 8 356 OVERHEAD CONDUCTORS AND DEVICES 1.72% - - 146.9 1.3 145.6 72.8 9 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.17% - - - - - -

10 350.1 LAND RIGHTS 1.74% - - 15.2 0.1 15.1 7.5 11 350 LAND 0.00% - - 11.7 - 11.7 5.8 12 389 Land Other 0.00% - - - - - - 13 - - 979.3 14.0 965.3 482.6

1415 CWIP in Rate Base 1.00 1,274.0 1,274.0 726.9 - 2,000.8 1,637.4

16 Less: Customer Contributions 3.35% - - 115.3 1.9 113.3 56.7

17 1,274.0 1,274.0 1,590.9 12.1 2,852.8 2,063.4

1819 CCA Claim20 Class 47 8.00% - 791.2 31.6 727.3 21 Class 46 30.00% - 61.1 9.2 51.9 22 Interest cost associated with Debt AFUDC - - - - 23 - 852.4 40.8 779.2 2425

2014 Actual

3-2.2014 (iii)

ALTALINK

Feb 15/16

General Tariff Application for the period from January 1st 2013 to December 31st 2014 Schedule 3-2.2014 (iii)Schedule of 2014 DACDA CWIP

( In $ millions )

Line No.


Opening Balance

Jan 1, 2014 Actual

Total CapitalExpenditures 2014 Actual

Capital Additions

2014 ActualEnding Balance

Dec 31, 2014 Actual(a) (b) (c) (d)

1 D.9999 Total Direct Assignments 1,601.4 1,744.2 979.2 2,366.3 23 Customer Contributed Fund (94.0) (114.9) (115.3) (93.7)


5 Net Direct Assignments 1,274.9 1,590.8 863.9 2,001.7 67 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% - 8 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WAC - 9 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% -

10 Total AFUDC -


3-2.2015 (i)


Feb 15/16


Line No. 2015 Forecast1 Revenue Requirement ($'Millions)2 Returns $130.6 34 Depreciation and Amortization 82.7 5 Income Taxes 26.7

6 Sub Total 239.9

789

10 Total 239.9

11

12Cost

RatesCapital

Structure



=(a)x(b)x(c)

14 Equity 8.30% 39% $2,231.7 $72.2 15 Preferred Stock 0.00% 0% 2,231.7 - 16 Debt 4.17% 61% 2,231.7 56.7 17 Other Costs Associated with Short-Term Debt 1.6

18 WACC 5.778% 130.6

19


23 82.7

24

25EquityReturn

Income TaxRates

Income TaxInclusion

Rate (i)=(f+o)/(1-r)x(g)x(h)


27 Federal Income Tax $72.2 15.00% 100% $20.1 28 Provincial Income Tax 72.2 11.00% 100% 14.7 29 [r] 26.00% 34.8

3031

32Timing

Difference (k)= ( j)/(1-r)x(g)x(h)

33 Income Tax - Timing Difference (j)34 Federal Income Tax (98.9) (20.1) 35 Provincial Income Tax (98.9) (14.7)

36 (34.8)

37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion

Rate (o) = (-l)x(m)x(n)

39 Income Tax - Future (l) (m) (n)40 Federal Income Tax (98.9) 15.00% 100% $14.8 41 Provincial Income Tax (98.9) 12.00% 100% 11.9

42 (s) 27.00% 26.7


44 TOTAL $239.9

DACDA


3-2.2015 (ii)


Feb 15/16

2015 GTA Forecast Schedule 3-2.2015 (ii)Schedule of 2015 DACDA Mid-Year Rate Base


Depreciationand

AmortizationRates


2015

Balance as at Jan 1, 2015 Net of Depreciation Additions


Net Balance as at


Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)-(e)

(g)=[(c)+(f)]/2


2 352 STRUCTURES AND IMPROVEMENTS 3.29% 86.0 84.9 155.7 5.4 235.2 160.1

3 353 STATION EQUIPMENT 3.89% 385.8 379.9 973.2 33.9 1,319.2 849.5 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.68% 61.1 59.5 45.2 4.8 100.0 79.7 5 354 TOWERS AND FIXTURES 3.63% 244.8 241.4 1,228.6 31.2 1,438.8 840.1 6 354.01 TOWERS AND FIXTURES 7 355 POLES AND FIXTURES 5.13% 27.8 27.2 89.4 3.7 112.9 70.1 8 356 OVERHEAD CONDUCTORS AND DEVICES 2.17% 146.9 145.6 361.1 7.1 499.6 322.6 9 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.22% - - - - - -

10 350.1 LAND RIGHTS 1.84% 15.2 15.1 48.5 0.7 62.8 39.0 11 350 LAND 0.00% 11.7 11.7 37.4 - 49.1 30.4 12 389 Land Other 0.00% - - - - - - 13 979.3 965.3 2,939.2 86.8 3,817.6 2,391.5

14

15 CWIP in Rate Base - - - - - - -

16 Less: Customer Contributions 2.53% 115.3 113.3 96.9 4.1 206.1 159.7

17 864.0 852.0 2,842.2 82.7 3,611.5 2,231.7

1819 CCA Claim20 Class 47 6.56% 727.3 2,593.5 132.8 3,220.3 21 Class 46 30.00% 51.9 42.5 22.0 72.5 22 AFUDC (168.8) - 23 Interest cost associated with Debt AFUDC - 26.9 26.9 - 24 779.2 2,662.8 181.6 3,292.8 2526

Timing Difference (98.9)

Taxable Income 0.0

0.001%

2015 Forecast

3-2.2015 (iii)

ALTALINK

Feb 15/16


( In $ millions )

Line No.


Opening Balance

Jan 1, 2015 Forecast


Capital Additions

2015 ForecastEnding Balance

Dec 31, 2015 Forecast(a) (b) (c) (d)

UnloadedOpening Balance 2,366.3 Gross Expenditures 791.4 AFUDC 61.1 Gross Additions 2,783.0 Refund Revenue collected under CWIP-in-Rate Base 115.0 115.0

1 D.9999 Total Direct Assignments 2,366.3 960.7 2,939.2 387.9 23 Customer Contributed Fund (93.7) (66.0) (96.9) (62.7)

Construction Accruals (270.9) 23.1 (247.8)

5 Net Direct Assignments 2,001.7 917.8 2,842.2 77.3 67 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% 34.2 8 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WAC - 9 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% 26.9

10 Total AFUDC 61.1

NOTE: Totals may not add due to rounding. 61.1 61.1

3-2.2016 (i)


Feb 15/16



6 Sub Total 355.6

789

10 Total 355.6

11

12Cost

RatesCapital

Structure



=(a)x(b)x(c)

14 Equity 8.30% 38% $3,764.2 $118.7 15 Preferred Stock 0.00% 0% 3,764.2 -

Subordinated Debt 4.65% 3% 3,764.2 4.5 16 Debt 4.16% 59% 3,764.2 93.1 17 Other Costs Associated with Short-Term Debt 1.6

18 WACC 5.745% 217.9


23 137.7 24

25EquityReturn

Income TaxRates

Income TaxInclusion




32Timing

Difference (k)= ( j)/(1-r)x(g)x(h)33 Income Tax - Timing Difference (j)34 Federal Income Tax (118.7) (24.4) 35 Provincial Income Tax (118.7) (19.5)

36 (43.9) 37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion

Rate (o) = (-l)x(m)x(n)39 Income Tax - Future (l) (m) (n)40 Federal Income Tax (118.7) 0.00% 100% - 41 Provincial Income Tax (118.7) 0.00% 100% - 42 (s) 0.00% -


44 TOTAL $355.6

DACDA


3-2.2016 (ii)


Feb 15/16



Depreciationand

AmortizationRates


2016




Net Balance as at


Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)-(e)

(g)=[(c)+(f)]/2

1 Property, Plant and Equipment2 352 STRUCTURES AND IMPROVEMENTS 3.26% 241.7 235.2 15.7 8.135 242.7 239.0 3 353 STATION EQUIPMENT 3.82% 1,359.0 1,319.2 143.3 54.652 1,407.8 1,363.5 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.56% 106.3 100.0 9.0 6.162 102.8 101.4 5 354 TOWERS AND FIXTURES 3.47% 1,473.4 1,438.8 187.1 54.373 1,571.5 1,505.2 6 354.01 TOWERS AND FIXTURES 7 355 POLES AND FIXTURES 4.96% 117.1 112.9 62.4 7.358 168.0 140.4 8 356 OVERHEAD CONDUCTORS AND DEVICES 2.18% 508.0 499.6 41.4 11.526 529.5 514.6 9 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.22% - - - - - -

10 350.1 LAND RIGHTS 1.84% 63.7 62.8 13.8 1.299 75.3 69.1 11 350 LAND 0.00% 49.1 49.1 1.0 - 50.1 49.6 12 389 Land Other 0.00% - - - - - - 13 3,918.5 3,817.6 473.6 143.505 4,147.7 3,982.7

1415 CWIP in Rate Base - - - - - - -


17 3,706.3 3,611.5 443.1 137.7 3,916.9 3,764.2

1819 CCA Claim20 Class 47 6.79% 3,220.3 316.0 229.3 3,307.0 21 Class 46 30.00% 72.5 6.5 22.7 56.3 22 AFUDC (119.6) - - 23 Interest cost associated with Debt AFUDC - 4.5 4.5 - 24 3,292.8 327.0 256.5 3,363.3 2526


Taxable Income 0.0

0.000%

2016 Forecast

3-2.2016 (iii)

ALTALINK

Feb 15/16


( In $ millions )

Line No.


Opening Balance



Capital Additions



UnloadedOpening Balance 387.9 Gross Expenditures 419.9 AFUDC 10.4 Gross Additions 357.5 Refund Revenue collected under CWIP-in-Rate Base 115.0 115.0

1 D.9999 Total Direct Assignments 387.9 537.3 473.6 451.6 23 Customer Contributed Fund (62.7) (60.9) (30.4) (93.2)

Construction Accruals (247.8) 144.4 (103.4)

5 Net Direct Assignments 77.3 620.8 443.1 254.9 67 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% 5.7 8 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WAC -

Sub Debt portion of AFUDC 0.2 10 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% 4.5 11 Total AFUDC 10.4


3-2.2017 (i)


Feb 15/16



6 Sub Total 378.4

789

10 Total 378.4

11

12Cost

RatesCapital

Structure



=(a)x(b)x(c)



18 WACC 5.791% 241.0


23 137.4 24

25EquityReturn

Income TaxRates

Income TaxInclusion




32Timing


36 (48.2) 37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion



44 TOTAL $378.4

DACDA


3-2.2017 (ii)


Feb 15/16



Depreciationand

AmortizationRates


2017




Net Balance as at


Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)-(e)

(g)=[(c)+(f)]/2

1 Property, Plant and Equipment2 352 STRUCTURES AND IMPROVEMENTS 3.26% 257.4 242.7 39.8 9.0 273.5 258.1 3 353 STATION EQUIPMENT 3.82% 1,502.3 1,407.8 305.7 63.2 1,650.3 1,529.0 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.56% 115.3 102.8 18.5 6.9 114.3 108.5 5 354 TOWERS AND FIXTURES 2.17% 6.5 51.8 - 0.1 51.7 51.7 6 354.01 TOWERS AND FIXTURES (post 2011) 2.35% 1,654.0 1,519.7 111.3 40.2 1,590.9 1,555.3 7 355 POLES AND FIXTURES 4.96% 179.6 168.0 64.0 10.5 221.5 194.7 8 356 OVERHEAD CONDUCTORS AND DEVICES 2.18% 549.4 529.5 39.6 12.4 556.7 543.1 9 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.22% - - - - - -


1415 CWIP in Rate Base - - - - - - -


17 4,149.4 3,916.9 568.9 137.4 4,348.4 4,132.6



Taxable Income 0.0

0.00%

2017 Forecast

3-2.2017 (iii)

ALTALINK

Feb 15/16


( In $ millions )

Line No.


Opening Balance



Capital Additions



UnloadedOpening Balance 451.6 Gross Expenditures 583.3 AFUDC 15.9 Gross Additions 598.3

1 D.9999 Total Direct Assignments 451.6 586.0 594.9 442.7 23 Net Customer Contributed Fund (93.2) (25.7) (26.0) (92.9) 4 Construction Accruals (103.4) 15.2 (88.3)

5 Net Direct Assignments 254.9 575.5 568.9 261.5 67 Customer Contributed Fund (93.5) (93.8) 8 Refund to Fortis 67.8 67.8 9 Net Customer Contributed Fund (25.7) (26.0)

1011 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% 8.7 12 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WAC - 13 Sub Debt portion of AFUDC 1.0 14 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% 6.2 15 Total AFUDC 15.9


3-2.2018 (i)


Feb 15/16



6 Sub Total 409.0

789

10 Total 409.0

11

12Cost

RatesCapital

Structure



=(a)x(b)x(c)



18 WACC 5.822% 257.1


23 151.9 24

25EquityReturn

Income TaxRates

Income TaxInclusion




32Timing


36 (51.2) 37

38Timing

Difference

FutureIncome Tax

Rates

Income TaxInclusion



44 TOTAL $409.0

DACDA


3-2.2018 (ii)


Feb 15/16



Depreciationand

AmortizationRates


2018




Net Balance as at


Balance

(a) (b) (c) (d) (e) =[(b)+(d)/2]x(a)

(f)=(c)+(d)-(e)

(g)=[(c)+(f)]/2

1 Property, Plant and Equipment2 352 STRUCTURES AND IMPROVEMENTS 3.26% 297.2 273.5 13.7 9.9 277.2 275.4 3 353 STATION EQUIPMENT 3.82% 1,808.0 1,650.3 102.1 71.0 1,681.3 1,665.8 4 353.1 SYSTEM COMMUNICATION AND CONTROL 5.56% 133.8 114.3 4.5 7.6 111.2 112.8 5 354 TOWERS AND FIXTURES 2.17% 6.5 51.7 - 0.1 51.5 51.6 6 354.01 TOWERS AND FIXTURES (post 2011) 2.35% 1,765.3 1,590.9 66.9 42.3 1,615.5 1,603.2 7 355 POLES AND FIXTURES 4.96% 243.6 221.5 66.6 13.7 274.4 247.9 8 356 OVERHEAD CONDUCTORS AND DEVICES 2.18% 589.0 556.7 35.4 13.2 578.9 567.8 9 358 UNDERGROUND CONDUCTORS AND CONDUITS 2.22% - - - - - -


1415 CWIP in Rate Base - - - - - - -


17 4,718.3 4,348.4 231.7 151.9 4,428.2 4,388.3



Taxable Income 0.0

0.00%

2018 Forecast

3-2.2018 (iii)

ALTALINK

Feb 15/16


( In $ millions )

Line No.


Opening Balance



Capital Additions



UnloadedOpening Balance 442.7 Gross Expenditures 608.0 AFUDC 25.9 Gross Additions 295.6

1 D.9999 Total Direct Assignments 442.7 620.6 299.6 763.7 23 Net Customer Contributed Fund (92.9) (84.1) (67.8) (109.2) 4 Construction Accruals (88.3) 23.2 (65.0)

5 Net Direct Assignments 261.5 559.8 231.7 589.6 67 Customer Contributed Fund (124.6) (108.3) 8 Refund to Fortis 40.5 40.5 9 Net Customer Contributed Fund (84.1) (67.8)

1011 Equity Portion of AFUDC = AFUDC X Equity% X Equity Cost of Capital% / WACC% 14.0 12 Preferred Stock Portion of AFUDC = AFUDC X Preferred% X Preferred Cost of Capital% / WAC - 13 Sub Debt portion of AFUDC 2.2 14 Debt Portion of AFUDC = AFUDC X Debt% X Debt Cost of Capital% / WACC% 9.6 15 Total AFUDC 25.9




4. TRANSMISSION FUEL COSTS

NOT APPLICABLE TO ALTALINK’S APPLICATION



5. TRANSMISSION OPERATING COSTS Section 5 of AltaLink’s Application addresses the following:

5.1 Overview – Total Company Operating Expenses (O&M and A&G)

5.2 Overview – Total Operation & Maintenance Costs

5.3 Direct Operation & Maintenance

5.4 Allocated Administrative and General

5.5 Taxes Other Than Income Taxes

5.6 Transmission Manpower – Full Time Equivalents

5.7 Transmission Operation & Maintenance Schedules



Overview - Total Company Operating Expenses (O&M and A&G) 5.1.1 Overview

Table 5.1.1-1 - AltaLink Total Company - Operating Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Labour 39.9 44.7 48.2 50.1 51.9 52.7 Contracted Manpower 20.6 22.6 24.5 24.9 24.5 24.7 Other GOE 30.0 43.9 42.5 43.9 46.1 45.5 Total 90.5 111.1 115.2 118.9 122.4 122.9

Totals may not add due to rounding.

Table 5.1.1-2 - AltaLink Total Company - FTEs Year End Summary

Year End FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total O&M (Section 5) 207.2 210.8 227.4 227.4 217.0 214.0 Total A&G (Section 25) 80.6 85.2 97.6 94.6 99.2 98.2 Total 287.8 296.0 325.0 322.0 316.2 312.2


5.1.2 FTEs On an overall company basis, for the Test Period, (refer to Table 5.1.1-2) AltaLink is forecasting

no increases from the 2016 Update level, but rather is forecasting a decrease of 9.8 FTEs by 2018.

On a USA Activity Code basis, Section 5, O&M 2015 forecast is 217.0 FTEs, approximately 10 FTEs less than the 2016 Update level of 227.4 FTEs. This decrease is somewhat offset by Section 25, Administrative and General (A&G), of approximately 5 FTEs of 99.2 versus the 2016 Update level of 94.6. For 2018 both O&M and A&G areas are forecast to reduce from the 2017 forecast by a total of 4.0 FTEs.

As shown above, compared to the 2016 Update levels, AltaLink has slightly adjusted its workforce (FTEs) for the Test Period, between O&M and A&G to reflect the current forecast work levels required in each section. AltaLink has examined the workload in each USA Activity Code and has forecasted minor realignment in its workforce (FTEs) to address work levels required in each USA Activity Code. Consequently, the detailed USA Activity Codes as described in Sections 5 and 25 show higher or lower FTE numbers than the 2016 Update levels.

5.1.3 Labour Table 5.1.3-1 - AltaLink Total Company - Operating Labour Expenses ($M)

Operating Labour Expense

2013 Actual

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

Total O&M (Section 5) 25.0 28.0 30.3 31.4 32.2 32.3 Total A&G (Section 25) 14.9 16.7 17.9 18.7 19.7 20.3 AltaLink Total 39.9 44.7 48.2 50.1 51.9 52.7




Table 5.1.3-2 - AltaLink Total Company - Labour Forecast Increase ($M)

Forecast Increase 2017 Forecast vs

2016 Update 2018 Forecast vs

2017 Forecast Average Inflation 1.4 2.3 1.9 Other 0.3 (1.5) (0.6) Total 1.8 0.8 1.3


Consistent with a total decrease of operating FTEs for the Test Period, AltaLink’s total company Operating Labour Expense is forecast to increase from the 2016 update level primarily due to the impact of inflation assumptions defined in Section 1.8.

5.1.4 Contracted Manpower Table 5.1.4-1 - AltaLink Total Company - Contracted Manpower Operating Expenses ($M) Contracted Manpower Expense

2013 Actual

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

Total O&M (Section 5) 14.0 15.9 16.2 16.3 16.1 16.2 Total A&G (Section 25) 6.6 6.6 8.3 8.5 8.4 8.5 AltaLink Total 20.6 22.6 24.5 24.9 24.5 24.7


Table 5.1.4-2 - AltaLink Total Company - Contracted Manpower Forecast Increase ($M)



2017 Forecast Average

Inflation 0.5 0.5 0.5 Other (0.9) (0.3) (0.6) Total (0.4) 0.2 (0.1)

Totals may not add to due to rounding.

On an overall company basis, for the Test Period, AltaLink is forecasting an average decrease of $0.1M to contracted manpower with scope reductions in various areas as described in Sections 5 and 25 offsetting inflation assumptions defined in Section 1.8.

5.1.5 Other GOE Table 5.1.5-1 - AltaLink Total Company - Other GOE Expenses ($M)

Other GOE 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total O&M (Section 5) 15.4 21.2 23.2 24.2 24.0 25.0 Total A&G (Section 25) 14.6 22.7 19.3 19.7 22.0 20.6 AltaLink Total 30.0 43.9 42.5 43.9 46.1 45.5


Table 5.1.5-2 - AltaLink Total Company - Other GOE Increase ($M)




Inflation 0.6 0.7 0.6 Other 1.6 (1.2) 0.2 Total 2.1 (0.5) 0.8




On an overall company basis, AltaLink is forecasting an average increase of $0.8M for Other GOE expenses, of which $0.6M is primarily due to escalation and $0.2 is due to a timing of and decreases in GOE activities related to hearing costs.

Overview – Total Operation & Maintenance Costs 5.2.1 Overview

Section 5 provides information with respect to AltaLink’s O&M Costs as defined in the USA/MFR requirements documents approved by the AUC.

Table 5.2.1-1 - Operation & Maintenance Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



5.2.1.1 Labour Table 5.2.1.1-1 - Operation & Maintenance Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Labour 25.0 28.0 30.3 31.4 32.2 32.3

Table 5.2.1.1-2 - Operation & Maintenance - Labour Forecast Increase ($M)



2017 Forecast Average Inflation 0.9 1.4 1.2 Other (0.1) (1.3) (0.7) Total 0.8 0.1 0.5


As described in Section 5.1.1 above, AltaLink is forecasting no Operating Labour Expense increases above the 2016 Refiled Forecast for the Test Period other than that of escalation. As shown in Table 5.2.1.1-2, the average Operating Labour Expense increase of $0.5M is due to escalation.

Refer to Section 5.3 for a detailed description of O&M Labour forecasts on an individual USA Activity Code basis.

5.2.1.2 FTEs Table 5.2.1.2-1 - Operating & Maintenance - FTE Year End Summary 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total Year End FTEs 207.2 210.8 227.4 227.4 217.0 214.0



AltaLink’s O&M FTEs for the Test Period is forecast to be approximately 13 FTEs less than the 2016 Update Forecast. Refer to Section 5.3 for a detailed description of O&M FTE forecasts on an individual USA Activity Code basis.

5.2.1.3 Contracted Manpower Table 5.2.1.3-1 - Operation & Maintenance - Contracted Manpower Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Contracted Manpower 14.0 15.9 16.2 16.3 16.1 16.2

Table 5.2.1.3-2 - Operation & Maintenance - Contracted Manpower Increase ($M)






Operation & Maintenance contracted manpower is not forecast to increase over the 2016 Refiled Forecast during the Test Period.

Refer to Section 5.3 for a detailed description of the Contracted Manpower forecasts on an individual USA Activity Code basis.

5.2.1.4 Other GOE Table 5.2.1.4-1 - Operation & Maintenance Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Other GOE 15.4 21.2 23.2 24.2 24.0 25.0

Table 5.2.1.4-2 - Operations & Maintenance - Other GOE Forecast Increase ($M)




Inflation 0.2 0.2 0.2 Other (0.4) 0.8 0.2 Total (0.2) 1.0 0.4


Operations & Maintenance GOE is forecast to increase on average $0.4M over the 2016 Refiled forecast. Half of the increase is due to escalation and the other half is due to increased ASP payments driven by compensation rates for those landowners whose term agreements will be renewed in the Test Period.

Refer to Section 5.3 for a detailed description of the Other GOE forecasts on an individual USA Activity Code basis.

5.2.2 Changes in Operation There have been no significant changes with respect to AltaLink’s operations.



Direct Operation & Maintenance 5.3.1 Summary of Direct Operating and Maintenance

Refer to Schedule 5-1 for a summary of Direct Operating and Maintenance costs. The following pages set out the variances and explanations of the accounts reflected in Schedule 5-1.

5.3.2 USA 560 - Supervision and Engineering This account includes the cost of labour and expenses incurred in the general supervision and

direction of the Operation & Maintenance of the transmission system as a whole.

Staff included in USA 560 are all manager and above roles, including directors and vice presidents. The functional areas include supervision and management in Field Operations, Asset Management, Operational Services and Safety. The primary activities include: direct supervision of daily activities - both field maintenance including safety oversight and office activities, departmental management, financial oversight and management, along with direction setting for company alignment and other obligations.

AltaLink has examined its leadership structure and concluded that based on forecast supervision needs, AltaLink will not fill two position which have become vacant due to normal attrition. AltaLink has also assessed its first line of supervision for span of control and based on experience and Corporate Leadership Council information, concluded that a ratio of 10-12 staff per immediate supervisor was reasonable. Based on this review process, AltaLink is forecasting a complement of 20 FTEs as shown in Table 5.3.2-4. The forecast cost of labour and expenses associated with supervision and direction of the Operation & Maintenance of the transmission system as a whole is shown in the table below.

Table 5.3.2-1 - USA 560 - Operation & Maintenance Supervision & Engineering ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



Virtually all of USA 560 is attributable to labour expenses which are forecast on average to be approximately $3.6M per forecast year. No contractor expenses are forecast for USA 560. GOE (other expenses) are forecast to be approximately $0.2M in total per year. Subject to inflationary impacts, operating expenses are expected to remain constant for the Test Period.

Table 5.3.2-2 - USA 560 - Operation & Maintenance Supervision & Engineering Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour (0.3) 0.1 (0.1) Contracted Manpower 0.0 0.0 0.0 Other (GOE) (0.0) 0.0 (0.0) Total (0.3) 0.1 (0.1)


AltaLink forecasts operating expenses to decrease by $0.3M in 2017 due to two staff reductions as a result of attrition, with a slight increase forecasted in 2018 primarily due to escalation.



Labour Table 5.3.2-3 - USA 560 - Operation & Maintenance Supervision & Engineering Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.2 0.1 Other (0.4) (0.1) (0.2) Total (0.3) 0.1 (0.1)


As set out in Table 5.3.2-4, AltaLink is forecasting a reduction of two FTEs due to attrition during the Test Period.

Table 5.3.2-4 - USA 560 - Operation & Maintenance Supervision and Engineering FTEs

2013 Actual

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

Total Year End FTEs 25 23 22 22 20 20

Contracted Manpower Table 5.3.2-5 - USA 560 - Operation & Maintenance Supervision & Engineering Contracted Manpower Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other 0.0 (0.0) 0.0 Total 0.0 0.0 0.0


AltaLink is forecasting no contracted manpower in USA 560 for the Test Period.

Other GOE Table 5.3.2-6 - USA 560 - Operation & Maintenance Supervision & Engineering GOE Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.0) 0.0 (0.0) Total (0.0) 0.0 (0.0)


Subject to AltaLink’s GOE inflation assumptions discussed in Section 1.8, Forecasting Methodology, other GOE expenses have no material changes.

5.3.3 USA 561 - Operation & Maintenance Control Centre Operations This account includes the cost of labour, materials used and expenses incurred in AltaLink’s

Control Centre (ACC) operations, which is responsible for all aspects of operating the Alberta transmission system owned by AltaLink. The ACC monitors and controls the power system in a 24-hour, seven days-a-week control centre environment that is staffed by operators working 12-hour shifts. The ACC operation includes a number of engineers, analysts, technologists and management who plan the power system operations, analyze the system when events occur, manage metering for revenue and other purposes, maintain emergency preparedness and manage the Emergency Management System/Supervisory Control and Data Acquisition



(EMS/SCADA) system, which is the primary technology used by the ACC to remotely operate and control the power system. The majority of costs associated with this account are related to labour.

Labour: • executing and directing switching; • monitoring and controlling system voltages; • responding to power system trouble events; • arranging and controlling clearances for construction, maintenance, test and emergency

purposes; • planning the power system operations; • operating and maintaining the secure EMS/SCADA system; • analyzing the system when events occur; • preparing operating and compliance reports and data for billing and budget purposes; and • developing operating procedures and maintaining emergency preparedness.

Expenses: • EMS/SCADA vendor support; • meals, traveling and incidental expenses; • obtaining weather and special events reports; and • contractor costs.

Table 5.3.3-1 - USA 561 - Operation & Maintenance Control Centre Operations ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



Approximately 85% of USA 561 is attributable to labour expenses. Therefore, AltaLink’s forecast for the Test Period is directly related to efforts to operate and maintain a growing number of transmission facilities, increasingly complex transmission facilities and a significant number of aging assets. AltaLink’s workload is also affected by training and documentation requirements associated with evolving industry rules and standards, such as Alberta Reliability Standards (ARS). The ARS Critical Infrastructure Protection (CIP) suite of standards will be effective in October 2017, and will require incremental operating activities to support new processes and procedures to ensure compliance. As the electrical system becomes more complex and with the addition of new technologies such as high-voltage direct current (HVDC), series compensators, and Phasor Measurement Units (PMUs), the EMS is also expanding to add new advanced applications to help continue to ensure the security and reliability of the bulk electric system.



Table 5.3.3-2 - USA 561 - Operation & Maintenance Control Centre Operations Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.3 (0.0) 0.2 Contracted Manpower (0.0) (0.0) (0.0) Other GOE (0.0) 0.0 0.0 Total 0.3 (0.0) 0.1


AltaLink forecasts operating expenses to increase by $0.1M per year on average, which is all attributable to labour expenses. On average, there are no material changes attributable to contracted manpower or GOE. Labour, contracted manpower and other general operating expenses are discussed in turn below.

Table 5.3.3-3 - USA 561 - Operation & Maintenance Control Centre Operations Labour Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.2 0.3 0.2 Other 0.1 (0.3) (0.1) Total 0.3 (0.0) 0.2


Labour As shown in Table 5.3.3-4 AltaLink is forecasting 44 FTEs required for Control Center Operations

activities as described above over this Test Period. AltaLink has reviewed the current forecasted workloads and work processes for the Test Period and confirmed no changes to FTE levels.

Table 5.3.3-4 - USA 561 - Operation & Maintenance Control Centre Operations FTEs

2013 Actual

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

Total Year End FTEs 43 45 44 44 44 44

The forecast $0.2M per year average increase to labour expense is a function of inflationary assumptions as outlined in Section 1.8. The remainder of the forecast changes are driven by small forecast changes in staff overtime, shift differential and standby requirements combined with a slight reduction in capital project support for the Test Period.

Contracted Manpower Table 5.3.3-5 - USA 561 - Operation & Maintenance Control Centre Operations Contracted Manpower Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.0) (0.0) (0.0) Total (0.0) (0.0) (0.0)


There are no material forecast increases for 2017 and 2018 attributable to contracted manpower.



Other GOE Table 5.3.3-6 - USA 561 - Operation & Maintenance Control Centre Operations GOE Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.0) 0.0 (0.0) Total (0.0) 0.0 0.0


There are no material forecast increases for 2017 and 2018 attributable to other GOE.

5.3.4 USA 562 - Station Equipment Maintenance This account includes the costs incurred in the Operation & Maintenance of transmission sub-

stations, switching stations, HVDC converter stations, and telecommunication sites; the book cost of which is included in Account 562, Station Equipment. The new HVDC converter stations at Sunnybrook and Crossings went into operation in December 2015.

The four main work activity designations that make up this account are substations, protection and control (P&C), telecommunications and HVDC converter stations. The costs include all labour, materials and expenses incurred in the Operation & Maintenance of the equipment in these areas. If transmission station equipment is located in or adjacent to a generating station, the expenses applicable to transmission station operations shall nevertheless be charged to this account.

AltaLink’s goal is to achieve and sustain an optimized substation and converter station equipment maintenance programs by employing the most cost effective inspection, maintenance and document management practices while complying with all necessary rules and regulations, maintaining commitments to stakeholders and ensuring asset reliability and performance for direct customers and ratepayers.

AltaLink currently maintains over 675 individual transformers, 1850 circuit breakers, 100 capacitor banks, 3 SVC/SVCPLUS units and all the associated protection, control, telecommunication and auxiliary equipment as part of substation maintenance. In addition, in December 2015 AltaLink commenced operation of the two HVDC converter stations and the associated DC equipment.

AltaLink is forecasting a 4% increase in the total amount of substation equipment to be managed in the Test Period due to overall power system growth. Refer to Table 5.3.4-1.

Table 5.3.4-1 - USA 562 - AltaLink Station Major Assets Volume (including HVDC)

Major Assets 2014

Year-End Additions 2015-2016

2016 Year-End

Additions 2017-2018

2018 Year-End

Volume Increase

Substations 300 9 309 7 315 2% Converter Stations - 2 2 - 2 - Transformers 666 28 694 18 712 3% Circuit Breakers 1,756 132 1,888 103 1,991 5% SVC/ SVCPLUS 2 1 3 - 3 - Capacitor Banks 75 44 119 1 120 1% Total 2,799 216 3,015 129 3,144 4%




Stations maintenance work typically entails managing and completing over 3,000 repair work orders each year for equipment. This number is expected to increase to over 3,500 repair work orders each year by the end of the Test Period.

The main activities undertaken in station maintenance include:

• performing predictive maintenance such as site and equipment inspections in substations, converter stations, switching stations and telecommunication sites;

• performing routine preventative maintenance and testing on substation and converter station breakers, circuit switchers, regulators, transformers, protective relays, meters, control circuitry, SCADA, Asynchronous Transfer Mode (ATM) switches, Multiprotocol Label Switching (MPLS), multiplexers, radios, wave guides, antennas and auxiliary equipment to ensure optimal performance;

• performing corrective maintenance and repairs on substation and converter station buildings, ground grids, bus work, switches, breakers, circuit switchers, regulators, transformers, protective relays, meters, control circuitry, SCADA, ATM switches, MPLS, multiplexers, radios, wave guides, antennas and auxiliary equipment on an as required basis;

• performing emergency repairs on substation and converter station bus work, switches, breakers, circuit switchers, regulators, transformers, protective relays, meters, control circuitry, SCADA, ATM switches, MPLS, multiplexers, radios, wave guides, antennas and auxiliary equipment on an as needed basis; and

• general substation and converter station upkeep and maintenance including insulating gravel maintenance and snow removal.

AltaLink continues to analyze the HVDC operation over next few years as actual operations begin to further refine forecast future maintenance requirements. HVDC maintenance requirements (e.g. valve overhauls) are correlated to how the HVDC link is operated and dispatched by the AESO. If higher frequencies of power reference changes (dispatch) are required there will be a greater number of operating cycles on the equipment. Such operating cycles may accelerate future maintenance requirements in order to maintain required HVDC performance levels.

Stations Expense Forecasts (including HVDC) Table 5.3.4-2 - USA 562 - Operation & Maintenance Station Equipment Expense ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



On average more than half of USA 562 is attributable to labour expenses with an additional 20% attributed to contracted manpower. AltaLink’s forecast expense increase during the Test Period relates to preventative maintenance cycles on HVDC assets, overall cost escalation, addition of new and increasingly more complex assets as well as the continued Operation & Maintenance of aging station equipment and facilities.



Forecast year-over-year expense increases during the Test Period are presented in Table 5.3.4-3 below.

Table 5.3.4-3 - Operation & Maintenance Station Equipment Expense Forecast Annual Increases ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.4 0.3 0.3 Contracted Manpower 0.9 (0.2) 0.3 Other GOE (0.1) 0.1 (0.0) Total 1.1 0.1 0.6


AltaLink forecasts operating expenses to increase by $0.6M per year on average split between labour cost and contracted manpower as described further below.

Labour Table 5.3.4-4 - USA 562 - Operation & Maintenance Station Equipment Expense Labour Forecast Increase ($M)



The forecast $0.3M per year average increase to the labour is a function of both inflationary assumptions and minor reduction in support required for capital projects. The increase is attributable to AltaLink’s labour inflation assumptions, which are discussed in Section 1.8, Forecasting Methodology.

As shown in Table 5.3.4-5 AltaLink currently has identified 52.2 FTEs to perform stations maintenance activities including HVDC operations. AltaLink has reviewed the current workloads and work processes for the Test Period and confirmed this FTE forecast, along with the forecast reduction in capital support, will be required.

Table 5.3.4-5 - USA 562 - Operation & Maintenance Station Equipment Expense FTEs

2013 Actual

2014 Actual

2015 Update

2016 Update

2017 Forecast

2018 Forecast

Total Year End FTEs 37.6 40.6 53.8 53.8 52.2 52.2

General Station Maintenance Workload Analysis The main work disciplines that make up this account are substations technologists and

engineers, SCADA and P&C technologists, telecom technologists and HVDC Engineer and technologists. These technologists have diplomas in the following disciplines: Electrical Engineering Technology, Electronics Engineering Technology, Wireless Engineering Technology, and Journeyman Power System Electricians in the substation discipline. Responsibilities for the disciplines include activities to:

• inspect, maintain, and repair power transformers, regulators, instrument transformers, breakers, circuit switches, switches, bus connections, ground grids, ancillary equipment, HVDC equipment and buildings through predictive, preventative, corrective, and emergency maintenance programs and processes;



• inspect, maintain, and repair protective relays, metering, control circuitry, ancillary equipment, SCADA and HVDC equipment through predictive, preventative, corrective, and emergency maintenance programs and processes;

• inspect, maintain, and repair ATM switches, MPLS, multiplexers, radios, wave guides, antennas, SCADA and HVDC equipment through predictive, preventative, corrective, and emergency maintenance programs and processes;

• inspect, test and maintain systems in substations and converter station buildings; • provide equipment status and recommend improvements or replacements; • provide technical support and direction and monitoring the condition of HVDC assets; and • leading failure analyses and analyzing and reporting the performance of the HVDC system to

internal and external parties.

The amount of substation maintenance, P&C, telecom and HVDC converter station work hours are summarized in the following Table 5.3.4-6.

Table 5.3.4-6 - USA 562 - AltaLink Total Maintenance Hours Forecast (including HVDC) Maintenance Hours (all disciplines including HVDC)

2013 Actual

2014 Actual

2015 Forecast

Revised 2016

Forecast**

2017 Forecast***

2018 Forecast***

Total Annual Work Identified

73,000 80,000 88,000 100,360 107,500 114,400

Available man-hours (based on existing FTEs)

57,000 54,500 61,500 73,200 74,300 74,300

Contracted Workforce* 2,500 4,500 5,500 5,500 9,000 7,000

Constrained Work 17,000 19,500 21,500 21,660 24,100 33,100

* Contracted workforce requirements are discussed under Contracted Manpower below. Note that the contracted workforce hours shown above does include periodic maintenance work required on converter station assets and systems.

** 2016 revised forecast to include HVDC hours in hours required within discipline to address high risk work, which now require additional resources to execute similar work.

***2017 and 2018 forecast includes, additional hours required for high risk safety sensitive work, new maintenance plans created due to new SCADA/security requirement as well as the inclusion of operating hours the HVDC system.

The above maintenance hour projections show a continuing increase in total annual workload

resulting from an increasing number of assets to maintain, increased safety requirements, additional maintenance requirements for HVDC and SCADA systems, and aging assets that require increased maintenance. AltaLink continues to monitor and leverage a balance of the workload between AltaLink’s FTEs and contracted manpower.

The demands for stations maintenance are growing due to both the increasing age of the power system and the addition of new substations and associated components over the Test Period. AltaLink is forecasting a 4% average increase in the amount of equipment components due to power system growth over the Test Period (refer to Table 5.3.4-1). AltaLink continues to review



as part of its maintenance process the asset and reliability risks within the constrained work to ensure all high risk work is completed.

The station maintenance workload forecast in Table 5.3.4-6 can be seen to grow as regularly scheduled inspections and maintenance are identifying an increasing amount of required future maintenance work. This is shown in for all disciplines as per the red trend line in Figure 5.3.4-1. Identified work is prioritized and any lower risk work which is not completed increases the maintenance queue (constrained work). By the end of 2018, AltaLink forecasts a total constrained work queue across the substation, P&C, Telecom, and HVDC disciplines of approximately 25% of the total work volumes shown in Table 5.3.4-6. AltaLink targets the constrained work queue to be at or below 20%. AltaLink continues to review its resource levels and the equipment risk to ensure high priority work is completed.

AltaLink will monitor its ability to execute the increased workload in the Test Period with its current work force and if the constrained work starts to increases above the forecast levels AltaLink may need to add additional resources in 2019 or earlier.

Figure 5.3.4-1 - USA 562 - Substation, Protection and Telecom Equipment Repairs 2003-2018

Contracted Manpower Contractors are utilized at AltaLink to optimize between full time permanent staff and a variable

work force to address variable and peak workloads and specialized maintenance tasks. At converter stations, contractors are used to perform specialized inspection and maintenance work on select HVDC assets and systems. The availability of a contractor work force also allows AltaLink to optimize when to hire full time staff as there is a two to three year lead-time for new staff to be fully qualified for independent fieldwork. Additionally for this Test Period, AltaLink



will be utilizing contractors to support regularly planned maintenance to ensure the constrained work does not surpass 20% of the entire work hours required.

AltaLink generally deploys contractors to support the maintenance of the transmission system in the following ways:

• contractors used as stand-alone work units to address specifically skilled electrical, mechanical and civil maintenance activities such as battery testing and replacement, HVAC adjustments and filter replacements, and building and site issues such as roof and fence repairs or hantavirus mitigations;

• contractors are used to complete specialized maintenance activities such as transformer, breaker and switch maintenance, equipment testing and inspection, valve hall work, oil reclaim and trouble response, if required;

• specialized contractors used to complete unique system maintenance that AltaLink does not have the capability to perform (i.e. fire suppression and deluge systems); and

• contractors are used to complement AltaLink crews for general system maintenance activities when required, to enable crews to maintain a sustainable queue of work within all disciplines.

Without contracted manpower to address the specific maintenance requirements, delayed and postponed maintenance will adversely impact transmission system performance, increase the risk of system failures, and make it increasingly difficult to comply with reliability standards and regulations. In addition to reduced transmission system reliability, non-compliance with reliability standards subjects AltaLink to the risk of financial penalties.

In Table 5.3.4-7 AltaLink is forecasting the following changes in contracted manpower.

Table 5.3.4-7 - USA 562 - Operation & Maintenance Station Equipment Expense Contracted Manpower Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other 0.8 (0.3) 0.3 Total 0.9 (0.2) 0.3


Of the forecast $0.3M per year average increase in contracted manpower, a $0.1M per year average increase is attributable to AltaLink’s contractor inflation assumptions that are discussed in Section 1.8 Forecasting Methodology. The other forecast increase is primarily due to periodic required maintenance work at its HVDC converter stations (assets and systems) and well as managing the increasing overall stations maintenance workload.

Specialized contractors will continue to be utilized to address high priority maintenance items such as transformer leaks, structural inspections for control buildings and minor repairs, air conditioning overhauls, tap changer inspections and maintenance and HVDC valve maintenance.

In 2014 AltaLink initiated a new rodent management program to reduce rodents entering control buildings and nesting in control cables after a significant incident where mice had damaged control cables at 320S Keephills and where AltaLink narrowly avoided the loss of a 500MW generating unit. This program will continue in this Test Period as the incidences of rodent have continued.



Other GOE The main expenses and materials in stations are:

• station control building repair expenses; • operating parts and supplies, such as equipment spare parts, lubricants, and consumable

materials; • test equipment calibration and repairs; • transportation expenses for travel to and from stations; and • meals, accommodation and other incidental expenses.

Table 5.3.4-8 - USA 562 - Operation & Maintenance Station Equipment Expense GOE Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other (0.2) (0.0) (0.1) Total (0.1) 0.1 (0.0)


On average GOE is expected to remain essentially unchanged from 2016 levels during the Test Period.

5.3.5 USA 563 - Overhead Line Expense This account includes the cost of labour, materials used and expenses incurred in Operation &

Maintenance of transmission line plant, the book cost of which is includible in Accounts 354, Towers and Fixtures; 355, Poles and Fixtures; 356, Overhead Conductors and Devices.

USA 563 includes work activities of the following nature:

• aerial Patrols; • ground Patrols; • management/tracking of maintenance items; • site inspection of maintenance items found on air patrols – i.e. confirmation; • assisting in trouble identification, assessment and location; • transferring loads, switching and reconnecting circuits and equipment for maintenance

purposes; • ground clearance checks; • audits of work performed and crews performing the maintenance work; • tagging or retagging of structures, installing danger signs, flight avoidance markers; • marking and identification of phasing; • corrective or Urgent Maintenance including; • splicing or patching of Conductors, Overhead Shield wires or Fiber Optic Cables; • replacing of individual insulators in a string; • overhauling and repairing line cut outs, line switches, line breakers, etc.; • insulator washing – aerial and ground based; • retagging, retying, or rearranging position or spacing of conductors; • installing, repairing and bonding of gates and fences in rural areas; • bonding of adjacent buildings; • site investigation of building or road encroachments; • first call operations for buried cables; • high loads move facilitation;



• assisting landowners, stakeholders, industrial customers, developers during activities in proximity to lines; and

• information requests from landowners and stakeholders.

AltaLink is forecasting to maintain close to 13,100 km of transmission circuit length at the start of the Test Period with an additional 246 circuit km to be added through the Test Period. Table 5.3.5-1 provides a summary of the current and forecasted line lengths managed. Transmission line assets require management of approximately 60,000 structures of various types at the end of 2015 corresponding to these lines. AltaLink forecasts adding approximately 1,200 transmission line structures through the end of the Test Period.

Table 5.3.5-1 - USA 563 - Major Transmission Line Assets Major Transmission Line Assets

2013 Year-End

2014 Year-End

2015 Year-End

2016 Forecast

Additions 2017-2018

2018 Forecast

Volume Increase

Lines circuit length (km) AC/DC

11,906 12,363 12,945 13,113 246 13,359 2%

Table 5.3.5-2 below illustrates the volume and typical types of work activities undertaken within this USA Activity Code over the past several years and forecast through the end of the Test Period.

Table 5.3.5-2 - USA 563 - Operation & Maintenance Transmission Line Work Quantities 2013

Actual 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Line Patrols 66 64 75 75 75 75 Emergency Line Patrols 32 24 25 25 25 25 Emergency Maintenance

46 45 50 50 55 55

Terrain and time of year and the overall requirements of the defined maintenance plan. Table Note: Timing and costs of activities will vary based on the length of the specific line.

A key driver of current and future overhead line expenses is a number of standards and practices, such as the Alberta Electrical Utility Code, ARS (FAC-501-WECC-AB2-1), as well as good maintenance practices. To comply with these standards and practices and to maintain a safe and reliable transmission system, AltaLink must patrol and inspect each line on a scheduled basis, and record and develop maintenance plans. Once the plan has been developed AltaLink must complete, audit and record the results of that plan. AltaLink is required to report that maintenance plan to the AESO on an annual basis for specific interconnection lines.

AltaLink’s goal is to achieve and sustain an optimized line maintenance program by employing the most cost effective inspection, maintenance and document management practices while complying with all necessary rules and regulations, maintaining relations with all landowners and stakeholders and sustaining asset reliability and performance for ratepayers.



Table 5.3.5-3 - USA 563 - Operation & Maintenance Overhead Line Expense ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



Approximately 25% of USA 563 is attributable to labour expenses with an additional 55% attributed to contracted manpower.

Total expenses for USA 563 show a slight decrease as compared with prior years despite the increase in circuit km and the number of structures to be inspected and maintained. A breakdown of these expense variances compared to 2016 forecast amounts is as follows:

Table 5.3.5-4 - USA 563 - Operation & Maintenance Overhead Line Expense Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour (0.2) 0.0 (0.1) Contracted Manpower (0.1) 0.1 (0.0) Other GOE (0.1) 0.0 (0.0) Total (0.4) 0.1 (0.2)


AltaLink forecasts operating expenses to decrease by $0.2M per year on average during the Test Period. The forecast is further discussed in turn below.

Labour Table 5.3.5-5 - USA 563 - Operation & Maintenance Overhead Line Expense Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.1 0.1 Other (0.3) (0.1) (0.2) Total (0.2) 0.0 (0.1)

Totals may not add to due rounding.

Table 5.3.5-6 - USA 563 - Operation & Maintenance Overhead Line Expense FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total Year End FTEs 12 13 13 13 13 13

As shown in Table 5.3.5-6, AltaLink is forecasting no staff changes for USA 563 and has no FTE changes from previous compliance levels. AltaLink has reviewed the current forecasted workloads and work processes for the Test Period based on its forecast maintenance plans and asset growth detailed above and has confirmed the current FTE compliment continues to be required. The additional work activities due to increasing volumes of assets will not require any increases to FTE levels over the Test Period.

Contracted Manpower Contractor costs in support of overhead line maintenance typically consist of:



• helicopter services in support of aerial patrols; • land agent support to facilitate landowner access to facilities; • infrared conductor scanning services to assess conductor sleeve condition; • occasional support for corrective maintenance activities, if required; • support of high load corridor moves; • support of insulator washing maintenance program requirements; • support of bonding, installing and repairing of gates, fences or adjacent buildings; and • support of pole testing and inspection programs.

Table 5.3.5-7 - USA 563 - Operation & Maintenance Overhead Line Expense Contract Manpower Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other (0.1) (0.0) (0.1) Total (0.1) 0.1 (0.0)


There are no material forecast increases for 2017 and 2018 attributable to contracted manpower.

Table 5.3.5-8 details the trends of contamination outages due to insulator flashover for the past 7 years. The continued proactive use of AltaLink’s insulator washing program has enabled a decreasing number of outages for AltaLink customers. Sustaining the program of insulator washing is a key component of the overall lines maintenance program to ensuring reliability of the system for known transmission lines which are subject to contamination.

Table 5.3.5-8 - USA 563 - Outage Due to Contamination of Insulators 2009

Actual 2010

Actual 2011

Actual 2012

Actual 2013

Actual 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast 18 16 15 11 6 9 13 11 10 10

Table 5.3.5-9 details the escorted line move requests from 3rd parties to which AltaLink continues to respond. For escorted moves initiated by 3rd parties AltaLink does collect offsetting miscellaneous revenue, see Section 8 for details.

Table 5.3.5-9 - USA 563 - Escorted Moves

Escorted Moves 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast 113 105 100 90 90 100

Alberta Transportation has developed high load corridors throughout the province of Alberta. The amount of third parties requests for high load moves for AltaLink has stabilized as shown in Table 5.3.5-9. AltaLink utilizes contractors to confirm routes, load heights, and escort loads that are close to or within the general public’s clearance limits and where necessary make arrangements to lift the conductors. These contractor costs form part of the forecast contracted manpower in this USA account.



Other GOE Table 5.3.5-10 - USA 563 - Operation & Maintenance Overhead Line Expense GOE Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.1) (0.0) (0.1) Total (0.1) 0.0 (0.0)


There are no material forecast increases for 2017 and 2018 attributable to general operating expenses.

5.3.6 USA 564 - Underground Line Expenses This account includes the cost of labour, materials used and expenses incurred in the Operation

& Maintenance of transmission, the book cost of which is included in Account 358, Underground Conductors and Devices. If the expenses are not substantial for both overhead and underground lines, these accounts may be combined.

Based on AltaLink’s small number of underground facilities and their relatively new installation, AltaLink is not forecasting any operating expenses in USA Activity Code 564 Underground Line Expenses, for this Test Period.

5.3.7 USA 566 – Operation & Maintenance Miscellaneous Transmission This account includes the cost of labour, materials used and expenses incurred in engineering,

transmission map and record work, transmission office expenses, and other transmission expenses not provided for elsewhere. Refer to Schedule 5-3 attached to this Application.

Labour: • engineering associated with planning and coordinating maintenance activities; • compliance activities as they relate to ISO Rules and standards; • corporate EH&S; • general records of physical characteristics of lines and stations, such as capacities, etc.; • land records including the administration of crossing and processing of agreements planning

commission circulations, encroachments and easement inquires or complaints; • ground resistance records; • asset records and GIS mapping; • general clerical work; and • miscellaneous labour.

Materials and Expenses: • EH&S electronic manuals and training sites; • building service supplies; • map and record supplies; • transmission office supplies and expenses, printing and stationery; • first-aid supplies and safety materials coordination; and • research, development, and demonstration expenses.

The staff included in USA 566 are a consolidation of various support resources for AltaLink’s compliance with external obligations and requests as well as the continued safe and reliable Operation & Maintenance of AltaLink’s system. The functional areas include Safety, Environment and Training; Power Quality and Electrical Effects; Engineering; Maintenance



Planning & Scheduling; Document Management; Material Services and Fleet; and Drafting. The primary activities include:

• development, implementation, training, management and oversight of programs, processes and procedures to ensure compliance with external obligations such as Safety Codes Act, Occupational Health and Safety Act, Electric Utilities Act, Alberta Electrical Utility Code, ISO Rules, Alberta Reliability Standards and AUC Rules;

• engineering analysis, review, and support for external obligations and requests related to above and the operations and maintenance of AltaLink’s system. Activities include review and approval of encroachment requests; protection system coordination with external interconnecting parties; investigation, analysis, and resolution of external power quality, electrical effects and noise inquiries; development, implementation and sustainment of asset maintenance programs and procedures to ensure compliance with ARS and ISO Rules, development and implementation and sustainment of asset maintenance, replacement and sparing strategies, standards, specifications and procedures to support the Operation & Maintenance of AltaLink’s system; engineering support for both office and field maintenance staff;

• prioritization, planning, scheduling, material and services procurement of maintenance work and management of asset maintenance programs;

• timely response to external party requests for crossing and encroachment; • management of all technical data, documents, and drawings; and • management of AltaLink’s vehicle fleet to ensure compliance with external obligations such

as Alberta Transportation Regulations and Traffic Safety Act as well as support the Operation & Maintenance of AltaLink’s system.

Table 5.3.7-1 - USA 566 - O&M Miscellaneous Transmission Expense ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



AltaLink’s forecast for the Test Period is directly related to efforts to operate and maintain aging facilities and new facilities, both with increasingly complex operating requirements and to ensure compliance with new reliability standards.

As a regulated TFO in Alberta, AltaLink is required to comply with all applicable legislation, regulations, codes, standards. Examples include:

• Safety Codes Act • Occupational Health and Safety Act • Electric Utilities Act • Alberta Electrical Utility Code • ISO Rules • Alberta Reliability Standards and CIP Compliance • AUC Rules



• Alberta Transportation Regulations • Traffic Safety Act • Environmental Regulations • Code of Conduct • Personal Information Protection Act • Bill 198

Additionally, AltaLink receives a number of external requests each year including:

• crossing and encroachment requests from external parties planning to cross or encroach AltaLink’s facilities;

• AESO data requests; • protection system coordination notifications and requests from interconnecting parties to

ensure protection systems continue to coordinate as the system grows and changes and to comply with ARS PRC-001-AB-0;

• coordination with interconnecting parties to ensure customer reliability requirements are sustainable;

• performance of root cause failure analysis on system events and equipment failures which have impacted customers; and

• power quality, electrical effects and noise inquiries related to requirements outlined in external rules and or obligations such as AUC Rule 012 – Noise Control.

As the industry evolves and Alberta and the transmission system continues to grow and interconnect many new generation sources and customers, the external obligations and requests increase in both volume as well as the complexity to evaluate these requests. As a result, AltaLink must ensure the proper resources are in place to sustain compliance to the existing level of obligations as well as address new requirements.

Table 5.3.7-2 - USA 566 - O&M Miscellaneous Transmission Expense Forecast Changes ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.5 (0.2) 0.1 Contracted Manpower (1.0) 0.0 (0.5) Other GOE (0.3) 0.0 (0.1) Total (0.8) (0.2) (0.5)


AltaLink forecasts operating expenses to decrease on average by $0.5M per year over the Test Period, primarily driven by a decreased forecast for contracted manpower. Labour, contracted manpower and other GOE are discussed in turn below.

Labour Table 5.3.7-3 - USA 566 - O&M Miscellaneous Transmission Expense Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.3 0.5 0.4 Other 0.2 (0.7) (0.2) Total 0.5 (0.2) 0.1




An average increase of $0.1M is primarily attributable to AltaLink’s labour inflation assumptions, which are discussed in Section 1.8 Forecasting Methodology, this is being partially offset by a $0.2M average decrease in labor expenses during the Test Period.

AltaLink has reviewed the current operating FTE levels associated with the activities for this USA Activity Code and confirms that current FTE levels will be reducing as detailed in Table 5.3.7-4.

Table 5.3.7-4 - USA 566 - O&M Miscellaneous Transmission Expense FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


AltaLink is forecasting a reduction of 6.8 FTEs from the 2016 level with an additional reduction of 3 FTEs in 2018, for a total reduction of 9.8 FTEs in the Test Period. Three positions are due to a transfer of staff from this account to USA account 920. These positions are associated with business process improvement activities and were reallocated to better reflect their focus on overall corporate improvement. The remainder of the reductions are due to AltaLink adjusting its workforce to match its overall company requirements, which resulted in a decrease in this USA account.

Contracted Manpower AltaLink utilizes contracted manpower to supplement certain activities that cannot be

completed by AltaLink staff from a work load perspective or are a specialty service that are not available within the group. Some examples of these activities include the following and are discussed further below:

• safety and environment qualifications; • training and certification delivery; • instructional designer for training material development; • ARS – CIP compliance requirements; • safety, AESO or environmental audits and inspections; • critical incident or a complex investigation(s); • engineering and technical support; • GTA preparation support; and • business process assistance.

AltaLink receives hundreds of crossing and/or encroachment requests annually from external parties planning to construct facilities that will cross or encroach upon AltaLink’s transmission system. This volume is anticipated to increase as development in the overall Alberta economy recovers. Refer to Table 5.3.7-5 – USA 566 O&M Third Party Request.

Table 5.3.7-5 - USA 566 - O&M Third Party Request 2013

Actuals 2014

Actuals 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast 1,074 1,012 775 850 1,000 1,000

As per the requirements of regulations and codes such as the Safety Codes Act and the Alberta Electrical Utility Code, AltaLink has a responsibility to review and approve these requests to help ensure these external facilities are constructed at safe distances from the transmission system. Currently AltaLink is utilizing a combination of internal engineering staff as well as contractors to



attempt to keep up with the demand of these requests. AltaLink’s goal is to turnaround these requests within 3-6 weeks from date of receipt, and to continuously look for opportunities to provide better service and response time with external parties. AltaLink utilizes contractors to meet peak request periods to ensure the 3-6 weeks response time is met.

Worker and public safety and environment are two of AltaLink’s core values; to improve performance in this function AltaLink undertakes an annual Safety & Environment Summit which brings together key leadership from AltaLink and the contractor community to discuss issues and trends and to foster an environment of learning and continuous improvement. From a learning perspective AltaLink brings in external parties to present and influence its leadership in the safety and environment areas.

STARS Air Ambulance service is another function that is contracted out; AltaLink registers worksites with STARS to enable a quick and effective response to an emergency situation.

One of the key aspects of AltaLink’s environmental program is to monitor its worksites to ensure that its operations do not negatively impact the environment. AltaLink employs third party services to complement existing staff by ensuring that environmental aspects comply with environmental regulations and good industry practices.

AltaLink also utilizes consultants and contracted manpower for engineering and technical support for a wide variety of activities such as engineering studies related to radio and television interference, power quality, Electromagnetic Fields, audible noise, ArcFlash protection; participation in CEA programs; crossing and encroachment study work; annual double testing fees; power system modeling support; and engineering standards development; geomagnetic disturbance and fault level engineering studies.

Table 5.3.7-6 - USA 566 - O&M Miscellaneous Transmission Expense Contract Manpower Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (1.0) (0.0) (0.5) Total (1.0) 0.0 (0.5)


The average decrease of $0.5M per year is attributable to a forecast reduction in the use of consultants and contracted services for several support areas as a result of completion of particular engineering studies and a reduced level of project and external party activities.

Other GOE GOE for this account consist of the following:

• staff expenses due to staff complement; • professional dues; • purchase of training manuals, engineering standards and subscriptions; • inventory write downs/adjustments; and • Education Partnership costs.



Table 5.3.7-7 - USA 566 - O&M Miscellaneous Transmission Expense GOE Forecast Increase ($M) versus Management Update Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.3) 0.0 (0.2) Total (0.3) 0.0 (0.1)


The average decrease of $0.1M per year over the Test Period is primarily driven by a forecast reduction in staff expenses and training related, in part, to the overall reduction in FTEs.

5.3.8 USA 567 – Right-of-Way Payments AltaLink is forecasting ASP rates and corresponding Revenue Requirement increases in the Test

Period. An independent study performed in 2016 by Serecon - Annual Structure Payments for Transmission Lines in Alberta (Serecon Report) - provides support for AltaLink’s ASP forecast (refer to Appendix 12.1 Attachment 1A). The Serecon Report provides evidence for the fair annual compensation to landowners as a result of AltaLink transmission facilities being on the landowners’ property. The study results are based on the Surface Rights Act compensation components of loss of use and adverse effects (tangible and intangible).

In 2017, AltaLink is forecasting approximately $0.2M increase over 2016 for ASPs included in Revenue Requirement, with an additional $0.6 increase in 2018. The revenues are primarily driven by compensation rates for those landowners whose term agreements will be renewed during the Test Period.

Table 5.3.8-1 - USA 567 - Annual Structure Payment Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 8.6 12.6 14.0 14.7 14.9 15.5

As in the 2015-2016 GTA, AltaLink engaged Serecon to produce a report detailing compensation practices within Alberta with respect to landowners allowing structures to be located on their lands. As outlined in the Serecon Report, Serecon has refined its report from previous analysis to determine fair compensation for the impacts that landowners face by having structures located on their properties.

In examining the types of structures located on landowners’ property, it is clear that transmission infrastructure is a unique infrastructure as it is the only infrastructure that creates an above ground linear overhead disturbance. This unique impact requires fair compensation to address the loss of use, tangible and intangible adverse effects.

AltaLink supports the methodology used by Serecon in determining fair compensation for the loss of use, tangible and intangible adverse effects associated with transmission structures.

As outlined in the Serecon Report, weed control costs and data have been collected from a number of custom commercial applicator companies that spray around infrastructure such as electrical transmission lines, well sites and other facilities in Alberta. There are a number of tangible costs including labour and spraying under and around the structures. An example of this cost would be approximately $130 on a 500 kV tower located in the middle of a field.



AltaLink supports Serecon’s recommended annual escalation for ASP rates at 2.0%. AltaLink has established its ASP rates in this Application by calculating an average rate for the term of the agreement. The averaging of the escalated annual rates for the term provides landowners a fair average rate over the entire term of the agreement.

AltaLink’s ASP rates forecast for the Test Period are shown in Table 5.3.8-2.

Table 5.3.8-2 - USA 567 - Annual Structure Payments Compensation Rates

2014 Total Compensation

Rate / Structure


Rate / Structure


Rate / Structure


Rate / Structure


Rate / Structure

500 kV Double-circuit $1470 $1,521 $1,574 $1,605 $1,638 500 kV Single-circuit or 240 kV High Capacity $1445 $1,495 $1,574 $1,605 $1,638

240 kV Lattice $1200 $1,242 $1,285 $1,311 $1,337 240 kV/138 kV 2 - pole $610 $631 $653 $666 $679

Single Poles $430 $445 $460 $469 $479

AltaLink did not encounter any Surface Rights Board (SRB) hearings on review of Annual Rentals since the last Test Period 2015-2016 GTA, but did encounter 6 SRB Compensations hearings on various projects such as WATL and Heartland that also tested the offers of ASPs within each hearing and was successful in each decision that the offer of ASP was satisfactory and no further negotiations were needed in each of these hearings.

• 2014-03-21 AltaLink Management Ltd. v. Soorya Investments Ltd., 2014 ABSRB 222 (CanLII)5

• 2014-03-20 AltaLink Management Ltd. v. Royal West Property Corp., 2014 ABSRB 221 (CanLII)6

• 2014-03-20 AltaLink Management Ltd. v. Yaltho, 2014 ABSRB 219 (CanLII)7 • 2014-07-24 AltaLink Management Ltd. v. Periche, 2014 ABSRB 477 (CanLII)8 • 2015-09-11 AltaLink Management Ltd. v. Dohei, 2015 ABSRB 680 (CanLII)9 • 2015-03-19 AltaLink Management Ltd. v. Chudobiak, 2015 ABSRB 225 (CanLII)10

The Revenue Requirement impact of the new ASP rates over the next five years is forecast in Table 5.3.8-3. The forecast includes new structure additions for the Test Period only.

5 Appendix 12-1 Attachment 1B. 6 Appendix 12-1 Attachment 1C. 7 Appendix 12-1 Attachment 1D. 8 Appendix 12-1 Attachment 1E. 9 Appendix 12-1 Attachment 1F. 10 Appendix 12-1 Attachment 1G.

http://canlii.ca/t/g6jwx

http://canlii.ca/t/g6jwz

http://canlii.ca/t/g6jx0

http://canlii.ca/t/gfz9q

http://canlii.ca/t/g8st1

http://canlii.ca/t/ggwzz

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Table 5.3.8-3 - USA 567 - 5 Year Forecast, Annual Structure Payments ($M) 2017 2018 2019 2020 2021

Forecast Forecast Forecast Forecast Forecast Renewals 2.8 3.7 4.9 2.6 2.6 Non-Re newa ls 12.1 11.8 11.2 13.7 14.0 Addit ions 0 .0 0.0 0.0 0.0 0.0 Total 14.9 15.5 16.1 16.3 16.6

Totals may not add to due to round ing.

Historic Annual Structure Payments 386. As pe r Direct ive 21 from Decision 2013-407, page 45, paragraph 258, Altalink's Historic Annual

Structure Payme nts fo r the past five years are shown in Table 5.3.8-4 be low.

Table 5.3.8-4 - USA 567- Historic Annual Structure Payment Schedule 2010-2014

YEAR 2010 2011 2012 2013 2014 500 kV Tower (T) Double-circuit 1,250.00 1,300.00 1,350.00 1,435.00 1,470.00

Loss of use 55.00 57.20 59.40 56.98 58.37

Tangible Adverse Effect 675.00 702.00 729.00 834.62 854.98

Intangible Adverse Effect 520.00 540.80 561.60 543.40 556.65

500 kV Tower (T) Single-circuit 1,022.00 1,250.00 1,300.00 1,410.00 1,445.00

Loss of use 45.00 46.35 47.74 55.99 57.38



240 kV Tower (T) High Capacity 1,178.00 1,250.00 1,300.00 1,410.00 1,445.00

Loss of use 45.00 46.35 47.74 55.99 57.38



240 kV Tower (T) D/ C 568.00 825.00 845.00 1,170.00 1,200.00

Loss of use 15.00 15.45 15.91 18.67 19.15



138 kV/ 240 kV Tower S/C 390.00 825.00 845.00 1,170.00 1,200.00

Loss of use 15.00 15.45 15.91 18.67 19.15



Two Pole Structure / Multiple Pole 390.00 445.00 465.00 595.00 610.00 240 kV / 138 kV

Loss of use 19.00 19.57 20.16 23.84 24.44




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YEAR 2010 2011 2012 2013 2014 Single Pole (SP} 243.00 295.00 307.00 415.00 430.00

Loss of use 11.00 11.33 11.67 14.45 14.98


Intangible Adverse Effect 84.73 104.90 109.27 103.23 106.97 Tota ls may not add to due to rounding.

Easements 387. Easement negotiations with landowners genera lly fo llowing the fi ling of the Facility Application

with the AUC on the preferred routes and once a ll affected landowners have been notified of the Facility Application fi ling. Altalink will engage the affected landowners and offer them a compensation package t hat consists of the fo llowing general compensation package:

• easement payment - fair market value will be paid per acre fo r the total area of the easement t hat crosses a landowner's property;

• $250 (minimum) - $5000 (maximum) per t it led parcel as Entry Fee Payment; and • $1500 minimum general disturbance payment.

5.3.9 USA 569 - Operation & Mainte nance of Structures 388. This account includes the cost of labour, materials used and expenses incurred in the operations

and maintenance of structures, the book cost of which is includible in Account 352, Structures and Improvements.

389.

5.3.10 390 .

Altalink is not forecasting any expenses in USA 569 O&M of Structures, fo r t his Test Period .

USA 571.1- Vegetat ion Management This account includes the cost of labor, materia ls used and expenses incurred in t he Operation & Maintenance of plant specifica lly related to t he control of trees, brush and general vegetation which may affect the safe and re liable operat ion of the transmission system. Also included is management of the physica l aspects of the rights-of-way such as access trails, culverts, water crossings, approaches, and erosion control.

391. Altalink's mandate is to provide a safe environment fo r the public, employees and contractors at a ll t imes, while accessing the right-of-way. To fu lfi ll this commitment, Altalink must remove the risk of vegetation contacts wit h energized t ransmission lines. The removal of vegetation, which can grow into the energized transmission lines and providing safe access for maintenance and emergency activities reduces outage responses t imes and minimizes the costs of maintenance activit ies. Furthermore, removal vegetat ion reduces t he risk and costs of forest fires and outages related to t ree to line contacts.

392. Although a lesser risk for t ransmission line outages due to vegetation Alta link must a lso maintain t he right-of-way through urban areas. Alta link is required to mow grass and remove snow where necessary to comply with city and county by-laws. Alta link a lso performs VM within substations, converter stations and te lecom tower sites.

393 . Altalink's goal is to maintain a sustainable Integrated Vegetat ion Management (IVM) program by utilizing the most cost effective VM practices while complying with a ll necessary rules and regulations and maintaining re lat ions with landowners and stake holde rs.

394. A key drive r of current and fut ure vegetat ion and right-of-way management fo recast is the Alberta Electrical Utility Code and the Alberta Reliability Standards (FAC-003-ABl-1}. To comply




with these required standards and practices and to maintain a safe and reliable transmission system AltaLink must maintain specified clearances to any vegetation under or alongside the transmission lines and be able to demonstrate compliance.

In order to do this AltaLink patrols and inspects each line on scheduled basis, including those outside forested areas, to ensure items such as agricultural shelterbelts planted trees, invasive weeds, and isolated pockets of vegetation are identified and addressed. AltaLink records its completed patrols, its findings, and develops a prioritized annual VM Plan. AltaLink completes Transmission Line Inspections (which include right-of-way and vegetation assessments) based the following parameters:

• the annual fall air patrols are started at or within a year of energization; and • scheduled detailed ground patrols (DGPs) or detailed air patrols are defined based on the

type and location of the facility. Lines through areas of high public access may be patrolled on a more frequent basis.

In 2014, as part of a VM risk review AltaLink initiated a specialized pre-growing season Aerial Vegetation Patrol practice in addition to the inspections detailed above to be completed each spring in the Green Area Zone and on rights-of-way with a higher risk of accidental vegetation contact. The Green Area Zone is primarily the unsettled portion of the province defined as forest lands not available for agricultural development other than grazing (Provincial Crown lands).

AltaLink develops an annual IVM program, executes against this plan, records completion of the work, records its results and also performs self-audits. The IVM program is adjusted based on the results of patrols, feedback from landowners or the public, LIDAR information, and the actual vegetation growth observed throughout the year.

The IVM methodology utilized to execute against the VM plan includes a combination of cultural, physical, behavioral, mechanical and chemical treatment methods to achieve acceptable control with minimal impact on the environment while ensuring control of the non-compatible vegetation which may create a risk to public safety, fire and system reliability.

Treatment methods include:

• Mowing/Mulching – use of larger machines equipped with blades or rotating drums that cut or shred vegetation along the right-of-way;

• Removals/Slash – typically the use of chainsaws to remove trees or larger brush; • Trim – the trimming of branches or stems from trees typically using a chain saw; • Herbicide/Spray – use of chemicals to control non compatible vegetation or weeds; and • Cultural, physical, behavioral methods which include gardens, pathways, secondary uses,

farming activities, planted compatible vegetation, etc.

Further description of key elements of AltaLink’s IVM program include assessing the accelerated VM required 1 to 2 years after new line construction activities. The accelerated VM requirements are based on the following conditions:

• vegetation growth along the right-of-way may be accelerated due to loosening up of the soil and distribution of seeds. Vegetation management may be required in the form of weed mitigation, mowing or application of herbicides;

• new trim sites required due to land owner commitments;



• road or water crossing buffers clearing operations have opened up areas for accelerated growth;

• clearing completed prior to the transmission line construction at times creates low spots and or crossings where clearances found after stringing have resulted in off cycle vegetation maintenance; and

• the VM methods being used (herbicide, mow, trim etc) will be done thereafter on a 1 to 8 year cycle depending on actual growth rates and site conditions.

Typical labor and contractor activities for IVM program include:

• contract management and supervision of multiple contract crews assigned to vegetation maintenance duties and right-of-way maintenance duties;

• maintenance and tracking within established programs for management of reliability requirements;

• planning and compliance management requirements within Alberta Reliability Standard FAC-003-AB1-1;

• obligations under the Wildfire Management Program with Alberta Agriculture and Forestry; • contract labor associated with trimming, removing/slashing, mowing of trees and brush; • contract labor associated with the application of herbicides to control weeds in or around

substations, switching cubicles or other underground devices; • contract labor associated with chemical treatment of right-of-way areas, other than the

initial application occurring as a result of construction of line; • contract labor associated with the application of herbicides to control noxious weeds; and • contract labor associated grass mowing, snow removal and general maintenance along

urban rights-of-ways.

AltaLink is forecasting to maintain the IVM program funding levels near 2016 levels through this Test Period and will re-evaluate for the 2019-2020 period.

AltaLink’s USA 571.1 expenses are forecasted at $7.7M in 2017 and $7.9M in 2018. The details of which are shown in Table 5.3.10-1.

Table 5.3.10-1 - USA 571.1 - Operation & Maintenance of Vegetation Management ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


Note: Program Management, patrolling and consenting expenses are included in Labour and Contracted Manpower; totals may not add due to rounding.

Table 5.3.10-2 - USA 571.1 - Operation & Maintenance of Vegetation Management Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.0 0.0 0.0 Contracted Manpower 0.0 0.3 0.1 Other GOE (0.0) 0.0 (0.0) Total 0.0 0.3 0.1




VM expenditures are made up of internal AltaLink labor, which includes managing the IVM program and right-of-way programs, patrolling and landowner consenting activities; external contracted manpower which includes brushing (mechanical and herbicide) and right-of-way and substation/telecom weed control, right-of-way clean up (urban grass mowing and snow removal), right-of-way maintenance activities, along with external contractors that assist with consenting requirements and GOE which support overall program activities.

There are no material variances forecast in the Test Period to previously approved levels of expenditures in labor or contracted manpower. The increases are driven by escalation assumptions as detailed in Section 1.8 of the Application.

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Table 5.3.10-3 - USA 571.1- Operation & Maintena nce of Veget ation Management Volume s and Costs - All In

2013 (Actual) 2014 (Actual) 2015 (Forecast 2016 (Forecast

m2 Unit

$ m2 Unit

$ m2 Unit

$ m2 Unit

$ Cost Cost Cost Cost

(OOO's) ($/ m2)

M (OOO's) ($/ m2)

M (OOO's) ($/ m2)

M (OOO's) ($/ m2)

M

Trim 217 2.43 0.5 425 2.41 1 .0 455 2.42 1 .1 537 2.42 1 .3

Mow 1,946 0.60 1 .2 2,100 0.58 1 .2 2,500 0 .60 1 .5 2,500 0.60 1 .5

Slash I 818 3.12 2.5 1,070 2.29 2.5 705 3.12 2.2 705 3.12 2.2

Removals

Herbicide 9,496 0.14 1 .3 5,836 0.19 1 .1 5,789 0 .19 1 .1 5,789 0.19 1 .1

Other right-of-way management, Substations, N/ A 0.7 N/ A 1 .4 N/ A 1 .4 N/ A 1 .5

Converter Stations Te lecom

Total 11,665 6.2 9,352 7.0 9,449 7.5 9,531 7.7


February 16, 2016 See t he "Forward-looking Informat ion Advisory".


2017 (Forecast 2018 (Forecast

m2 Unit

$ m2 Unit

Cost Cost (OOO's)

($/ m2) M (OOO's)

($/ m2)

438 2.51 1 .1 478 2.51

2,742 0.62 1 .7 2,742 0 .62

525 3.24 1 .7 556 3.24

9,000 0.20 1 .8 9,000 0 .20

N / A 1 .4 N/ A

12,705 7.7 12,776

5-32

$ M

1 .2

1 .7

1 .8

1 .8

1 .4

7 .9



In 2015, AltaLink contracted Ecological Solutions Inc. (ESI) to review the existing growth rates used to determine work cycle times, as well as to provide updated recommendations for its VM program. It is noted in the ESI report that AltaLink has eliminated the backlog of VM work and is now embarking on sustaining the least cost sustainable IVM program. The ESI report further identifies an increased rate and variability of growth rates which has resulted in revising of AltaLink’s IVM maintenance cycles. The study identified that the average VM maintenance cycle frequencies needed to be shortened from those used in the 2006 ESI report. As a result the VM maintenance cycles for trim site were reduced from every 3 years to a 1 - 2 years resulting in additional trimming requirements on an annual basis. Table 5.3.10-3 represents the ongoing sustained VM program based on the results of the 2015 ESI report. A summary of ESI’s report findings entitled Summary of Vegetation Management Review and Requirements – 2017-2018 GTA dated December 2015 is included in Appendix 12-2.

AltaLink’s actual investment and VM work completed remained on schedule since 2006 and the 9-year re-investment period has been completed slightly ahead of plan. During this re-investment period AltaLink improved upon and added record keeping systems that have improved access to data that provides insight into VM program operations and costs. The 2006 ESI report indicated that due to work deferrals hot spotting was leading to inefficiencies and work types had shifted to more expensive options and that with the re-investment program, average costs per hectare would decrease. The average cost per hectare is currently 44% less than 2004 costs, see Table 5.3.10-4. The number of priority sites peaked in 2006 and currently stands at less than 2% of that value, see Figure 5.3.10-1.

Table 5.3.10-4 - USA 571.1 - Average Cost per Hectare (includes right-of-way weed control)

2004 2005 2014 Actual AVI

2014 $ Hectares (ha) 1,142 1,251 971 781 Total Cost $7,586,336 $8,093,139 $5,789,614 $3,330,325 Cost/ha Nominal $6,645 $6,467 $5,964 $4,891 Cost/ha 2014$ $10,660 $10,375 $5,964 $4,891 Cumulative Change (%) in cost/ha

-44.05 -54.12



Figure 5.3.10-1 - USA 571.1 - Priority Sites Identified as per Fall Air Patrols - 2005 to 2015

Between 2005 and 2014 the cumulative vegetation workload liability has been eliminated

thereby avoiding higher future costs. AltaLink is now forecasting and planning a sustainable IVM program. The base funding requirement was reduced to $4.46M; however, the past several years of system growth, the change in growth patterns, the variability in tree growth rates, and the increased vegetation maintenance cycles to manage these changes is resulting in an adjustment in the AVI cost by $1.02M as shown in Table 5.3.10-5 for a total AVI cost required in 2016 of $5.48M.

Table 5.3.10-5 - USA 571.1 - Cost of Annual Workload Volume Increment (AVI) (2015 dollars)

Work Type Unit Cost Cost ($M)

2006 Cycles Cost ($M)

2015 Cycles Trim $2.50 $0.70 $0.70 Mow $0.60 $0.16 $0.21 Remove (hazard trees) $62.47 $0.43 $0.43 Remove (from right-of-way) $2.04 $1.65 $2.12 Herbicide $0.20 $1.51 $2.01 AVI Total $4.46 $5.48

AltaLink will review and adjust the AVI as required to meet all applicable regulations and ensure public safety to maintain an IVM sustainable program. The change to an IVM sustainable program will result in portions of right-of-way treated through the various VM methods. The amount of right-of-way that will be maintained through the use of herbicides and the amount of mowing have been forecast from work records, as shown in Table 5.3.10-6. In the development of the sustainable VM program estimates are used based on the information gathered since 2006 to forecast and project future requirements.



Table 5.3.10-6 - Total VM Work

Identified Total

Volume as of 2015 Cycle (years) Trim (m2) 1,104,605 4 Mow (m2) 2,435,292 7 Remove (Side) (trees) 6,845 1 Remove (right-of-way) (m2) 7,282,193 7 Herbicide (m2) 30,929,647 3 Total (m2) 41,221,479 Right-of-way Brush (ha) 4,065

An increase in herbicide (spray) activities is considered a healthy indicator for the overall IVM program as it is the most cost effective means of VM. As more lines are maintained with herbicide each maintenance cycle will require less of the more costly mow operations. AltaLink continues to look for opportunities to prudently manage the application of vegetation control activities to provide the lowest total unit cost as the asset base continues to grow. AltaLink manages the risk of herbicide application by only using certified herbicide applicators, approved herbicides (according to provincial regulations, including the Pest Control Products Act, the Environment Quality Act, the Pesticides Act and the Pesticides Management Code.) and by strictly following all manufacturers recommendations.

Unit costs for each activity in any specific year typically change dependent on both the characteristics of the specific locations being managed and the phase of VM program underway at that time.

The forecasts are estimated based on the best information available at the time and average costs. Much of the forecast volume is derived from aerial line patrols. Secondly, environmental conditions are highly variable and this variability impacts site access and also affects tree growth, tree mortality and pest infestations. Actual work types and volumes will change based on actual conditions on site. The total volumes completed each year by work type will change as costs or adjustments are made to future planned work.

Labour AltaLink internal labour activities focus on maintaining the IVM and right-of-way programs,

performing audits of work and contract crews and monitoring compliance, as well as assisting with standards and quality control on the new assets being constructed. AltaLink has one Vegetation Management Coordinator (VMC) looking after the overall VM programs and management of contractors. A Vegetation Management Specialist assists in program management, audits of work and monitoring of compliance.

Table 5.3.10-7 - USA 571.1 - Operation & Maintenance Vegetation Management Labour Expense Additions ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other 0.0 (0.0) 0.0 Total 0.0 0.0 0.0



Table 5.3.10-8 - USA 571.1 - Operation & Maintenance of Vegetation FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


AltaLink has reviewed the current projected workloads and work processes over the Test Period and confirmed no changes to FTE levels.

Contracted Manpower (Including Brushing) Table 5.3.10-9 - USA 571.1 - Operation & Maintenance of Vegetation Management Contract Manpower Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.2 0.1 Other (0.1) 0.1 (0.0) Total 0.0 0.3 0.1


The $0.1M per year average increase in contract manpower expenses is primarily attributable to AltaLink’s inflation assumptions that are discussed in Section 1.8.

The VM contracted manpower forecast is made up of two distinct categories based on the type of work performed in the management of AltaLink’s right-of-way.

The first category, “Brushing”, is work associated with the actual control methods done to manage the vegetation on AltaLink’s right-of-way, typically outside the urban areas. This work includes:

• spraying, herbicide application, for control of trees/brushes under the wires and on the right-of-way;

• mowing, mechanical removal of vegetation; • removing (slash or removal) of trees where the use of mechanical mowers is not possible or

economic (side hills, small sections, shelter belts); and • trimming, where the complete removal is not possible due to landowner concerns.

The second category “Other Contractor Cost” is work associated with the management of the overall VM program, right-of-way management through urban areas as well as the substation and radio sites. Activities consist of substation and right-of-way weed control, grass mowing and snow removal, right-of-way cleanup and the patrolling, site inspections, auditing, and landowner consenting and notifications required for the overall VM program.

Landowner consenting refers to the activities that need to be completed in advance of the brushing and right-of-way control activities. Specifically, consenting includes:

• confirming the area that needs to be managed or trees that need to be trimmed or removed by examining the specific site;

• drafting a sketch that is given to the landowner and to the brushing contractor as a part of the construction execution package;

• confirming the brushing work schedule as well as outlining how right-of-way are to be accessed, including addressing any landowner concerns;

• obtaining landowner permission to access their lands; and

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• obt aining permits for off right-of-way access and pipeline crossings.

420. There are no fees paid to the landowner for these maintenance activit ies, rather the consent ing costs reflect labour in the execut ion of the consenting/notificat ion process.

421. Consenting is generally done by contractors due to the requirements to work odd hours to meet the landowners' schedules. There is a large amount of evening and weekend hours required as

well as specialized knowledge, history and relationships with regiona l landowners.

422. The overall VM contracted manpower forecast for t he Test Period is driven by the volume of

work ident ified through t he annual aerial patrols and t he transmission line maintenance information system.

423. The volume of VM work forecast for the Test Period is shown in Table 5.3.10-10.

Table 5.3.10-10 - USA 571.1- Contracted Manpowe r - Vo lume of Work by Work Type (000 m2)

2015 2016 2017 2018 2013 Actual 2014 Actual Forecast Forecast Forecast Forecast

Activ ity (000 m2) (000 m2) (000 m2) (000 m2) (000 m2) (000 m2)

Trim 217 425 455 537 438 478 Mow 1,946 2,010 2,500 2,500 2,742 2,742

Slash/Remove 818 1,070 705 705 525 556

Herbicide 9,496 5,836 5,789 5,789 9,000 9,000

Total 11,665 9,352 9,449 9,531 12,705 12,776

Brushing $4.2M $4.9M $4.8M $5.0M $5.lM $5.3M

Cost Other Contractor $1.6M $1.6M $1.8M $1.9M $2.0M $2.lM costs

Total Contracted

$5.8M $6.6M $7.0M $7.2M $7.2M $7.4M Manpower Cost s

Other right-of-way management contractor costs include consenting, substat ion weed control and right-of-way clean up. Tota ls may not add to due to rou nding.

Other (GOE) 424. Typical General Operating Expenses incl ude:

• syst em record and report forms associated with vegetation and right-of-way management;

• meals, t raveling and incidental expenses; and

• materials used in VM.

Table 5.3.10-11 - USA 571.1 - Operation & Mainte nance of Vegetation Management GOE Forecast Increase (SM)

Forecast Increase 2017 Forecast 2018 Forecast Average

Inflat ion 0.0 0.0 0.0

Other (0.0) (0.0) (0.0)

Tot al (0.0) 0.0 (0-0) Tota ls may not add to due to rou nding

Fe bruary 16, 2016 5-37 See t he "Forward-looking Information Advisory" .



There are no material variances in GOE for this Test Period.

5.3.11 USA 575 – Operations and Management IT Support This account shall include the cost of labour, materials used and expenses incurred in Operation

& Maintenance of owned or leased IT systems that are assignable to Transmission Operations and is not provided for elsewhere. Telecom sites exist at all AltaLink facilities, including 42 stand-alone telecom sites. The scope of this work includes: Geographical Information Systems, drawing support applications, operational network monitoring and management tools and services, outage reporting and management systems, data reliability applications, radio support services, mobile dispatch systems, telecom engineering standards and design, and ensuring compliance to applicable government rules and regulations.

The Network Communications (NetCom) area is managing increasing demands on AltaLink’s telecommunications infrastructure due to several external factors and technology changes. These factors, specifically the ongoing support and migration of the MPLS technology, ARS including CIP compliance, cyber security review and analysis, and ongoing operational support for asset growth, drive the forecast for operational costs. Example of key activities forecast in this account:

• MPLS support; • ARS Standards and compliance – development and maintenance of new

telecommunications standards; • cyber security assessments and mediation programs; • asset management and monitoring development, Network Operations Centre (NOC); • cooperation with the AESO to develop consolidated, longer-term capital plans and project

identification documents; • participation in AESO workgroups focusing on SCADA and Telecom engineering standards;

• day-to-day troubleshooting and remediation of new trouble-tickets and events (excessive tower twist, MPLS network optimization, microwave radio link performance review, network security assessments, etc.);

• co-ordination, review and planning of third party use of telecom infrastructure by industry partners including independent power producers, distribution partners and community demand for tower co-location space;

• new service offerings including Voice over Internet Protocol (VoIP), SCADA to the AESO and PMU data from Independent Power Producers (IPPs), transported by AltaLink’s telecommunications network;

• supporting and optimizing the network routing paths and reviewing and reporting on network performance; and

• performing software upgrades

Table 5.3.11-1 - USA 575 - Operation & Maintenance IT Support ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Labour 1.1 1.1 1.5 1.5 1.7 1.6 Contracted Manpower 0.1 (0.0) 0.0 0.0 0.0 0.0 Other GOE 1.8 2.2 2.3 2.3 2.6 2.7 Total 2.9 3.3 3.8 3.9 4.3 4.4




Approximately 40% of USA 575 is attributable to labour expenses with the remainder primarily made up of GOE directly related to vendor support costs, increased third-party data and communications charges, and some staff and training related expenses.

Table 5.3.11-2 - USA 575 - Operation & Maintenance IT Support Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.1 (0.0) 0.1 Contracted Manpower (0.0) 0.0 (0.0) Other GOE 0.3 0.1 0.2 Total 0.4 0.1 0.3


AltaLink forecasts operating expenses to increase by $0.3M per year on average. The majority of this increase is attributable to GOE. Labour, contracted manpower and other GOE are discussed in turn below.

Labour USA 575 includes the following roles: Telecom Engineers, Network Architects, Maintenance

Analysts, Project Managers, Developers, IP Specialists and three Network Operators who run the Network Operations Centre.

Examples of typical activities:

• network communication system-level planning, technology review and integration, annual priority maintenance expenditures, and day-to-day operational support;

• hands-on engineering support of the programs and events that occur when operating a wide-area network;

• support the development and upkeep of engineering standards and integration of new technology and equipment into the utility telecom network;

• planning and support of third party use of the NetCom infrastructure such as tower co-locations and IPP interconnections;

• the IP Network Architect(s) is responsible for the planning, implementing, and commissioning of transport and routing services related to the daily operation of the routed network services ensuring business and operational needs are met in a resilient, safe, secure manner compliant with industry standards;

• the MPLS Network Engineer is responsible for performance analysis, network optimization, statistics reporting and the day to day support to the NOC and field operations around MPLS issues;

• implementation of network services and infrastructure including network switching hardware, wireless (WiFi networks), network security appliances, and network monitoring tools and software;

• the network maintenance analyst, planner, and scheduler is responsible for identifying needed maintenance, prioritizing it, and scheduling field crews day-to-day;

• monitoring and providing telecom services on the network as needed and alerting operations staff when network events occur. The real-time eyes on the network, focused on tracking network services and restoring them as soon as possible after an outage; and

• plan, design, implement and maintain CIP compliant processes and architectures in the Operations Technology, Substation, and Asset Management environments.



Table 5.3.11-3 - USA 575 - Operation & Maintenance IT Support Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.1 0.1 Other 0.1 (0.1) (0.0) Total 0.1 (0.0) 0.1


The forecast $0.1M per year average increase to labour expense is a function of inflationary assumptions as outlined in Section 1.8.

AltaLink has reviewed the current forecasted workloads and work processes for the Test Period and confirmed current FTEs forecasted to this operating function are to be unchanged over the Test Period. Forecast FTEs are shown in Table 5.3.11-4.

Table 5.3.11-4 - USA 575 - Operation & Maintenance IT Support FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


AltaLink is forecasting no changes in its staffing complement for this USA account in the Test Period.

Contracted Manpower Table 5.3.11-5 - USA 575 - Operation & Maintenance IT Support Contract Manpower Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.0) 0.0 (0.0) Total (0.0) 0.0 (0.0)


There are not material forecast increases for 2017 and 2018 attributable to contracted manpower.

Other GOE Table 5.3.11-6 - USA 575 - Operation & Maintenance IT Support GOE Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.1 0.0 Other 0.2 0.1 0.2 Total 0.3 0.1 0.2

GOE is forecast to increase on average by $0.2M primarily due to an increase in maintenance and support costs associated with increased MPLS devices, CIP ARS requirements, including next generation firewalls and a new leased fibre communication link to BC Hydro critical interconnection.

Allocated Administrative and General Refer to Section 25 for the details regarding this item.



Taxes Other Than Income Taxes 5.5.1 USA 408.1: Transmission Linear Property Tax

Taxes Other Than Income Taxes include business, property, and linear taxes paid to various taxation authorities in Alberta. AltaLink engaged AEC International, an international municipal property tax and assessment consulting firm to prepare the property tax forecast for this Application.

Based on AEC’s review, a copy of which is attached as Appendix 9, AltaLink is forecasting the following amounts for Taxes Other Than Income Taxes.

Table 5.5.1-1 - Property and Business Tax Forecast ($M)

Property Type 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Transmission Lines 9.5 9.8 10.7 11.8 13.8 14.3 Substations 13.1 16.6 22.0 25.2 34.6 37.5 Telecontrol 0.8 1.2 1.4 1.8 1.7 1.9 Buildings / Structures 0.3 0.3 0.6 1.3 1.3 1.5 Land 1.2 1.3 1.5 1.7 1.7 1.8 Property Tax Total 24.9 29.2 36.2 41.8 53.1 57.0 Business Tax Total 0.2 0.2 0.2 0.2 0.2 0.2

Total 25.1 29.4 36.4 42.0 53.3 57.2 Totals may not add to due to rounding.

A majority of the forecast growth in property taxes during the Test Period is attributable to capital additions, as shown in the following Table 5.5.1-2.

Table 5.5.1-2 - Property Tax Forecast ($M)

2017

Forecast 2018

Forecast Total Property Taxes ($M) 53.1 57.0 Increase in Property Taxes

11.3 3.9

Property Taxes on Capital

10.7 3.7 Property Taxes on Capital

94.7% 94.9%

Consistent with past practice and AUC precedent, AltaLink is seeking deferral account treatment for “Taxes Other Than Income Taxes” as indicated in Section 31.8.

Deferral account treatment will protect ratepayers and AltaLink from any volatility in the timing and size of capital additions and forecast risk in non-controllable property tax related variables such as the Assessment Year Modifier, mill rates, and cost factors.

Refer to Schedule 5-6 for Taxes Other Than Income Taxes.

Transmission Manpower – Full Time Equivalents Refer to Schedule 5-5 for transmission costs included in the transmission function.



Transmission Operation & Maintenance Schedules Schedule 5-1 Schedule of Transmission Operation & Maintenance Costs by Account

Schedule 5-2 Schedule of Transmission Operation & Maintenance Costs - Variance Explanations

Schedule 5-3 Details of Miscellaneous Transmission Expenses - Account 566

Schedule 5-4 Schedule of Transmission Costs

Schedule 5-5 Schedule of Transmission Manpower - Full Time Equivalents – Mid-year

Schedule 5-6 Schedule of Transmission Taxes Other Than Income Taxes

Schd 5-1

Schedule 5-1 AltaLink Management Ltd.Feb 15/16

General Tariff ApplicationSchedule of Operation & Maintenance Costs by Account

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test PeriodCross 2012 2013 2014 2015 2016 2017 2018

Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Direct Operation and Maintenance02 560 Supervision & Engineering Schedule 5-2 2.6 3.7 4.3 4.1 4.1 3.8 3.9 03 561 Control Centre Operations Schedule 5-2 6.3 6.8 7.5 7.1 7.4 7.7 7.7 04 562 Station Equipment Maint Schedule 5-2 9.4 9.6 12.0 12.7 13.2 14.3 14.4 05 563 Overhead Line Expenses Schedule 5-2 5.0 5.1 6.6 6.3 6.5 6.0 6.1 06 564 Underground line expenses Schedule 5-2 - - - - - - - 07 567 Right of way payments Schedule 5-2 6.4 8.6 12.6 14.0 14.7 14.9 15.5 08 569 Operation & Maintenance of structures Schedule 5-2 - 0.0 - - - - - 09 571.1 Vegetation management Schedule 5-2 6.2 6.2 7.0 7.5 7.7 7.7 8.0 10 575 Operations & Maintenance IT support Schedule 5-2 2.5 2.9 3.3 3.8 3.9 4.3 4.4 11 566 O & M Misc Transmission Schedule 5-3 9.6 11.4 11.9 14.1 14.5 13.7 13.5 12 Total Direct Operation & Maintenance 47.9 54.4 65.2 69.7 71.9 72.3 73.5 1314 Allocated Share of General Operation and Maintenance15 Allocated Share of Common Operations16 Total Operation & Maintenance 47.9 54.4 65.2 69.7 71.9 72.3 73.5 1718 Allocated Administrative & General Schedule 25-1 31.8 36.1 45.9 45.5 47.0 50.0 49.4 1920 Taxes Other Than Income21 408.1 Trans. Linear Property Tax Schedule 5-6 22.9 25.1 29.3 36.4 42.0 53.3 57.2 2223 TOTAL OPERATING & MAINTENANCE COSTS Schedule 3-1 102.6 115.6 140.5 151.6 160.9 175.7 180.1 24

Schd 5-2


General Tariff ApplicationSchedule of Transmission Operation & Maintenance Costs - Variance Explanations

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201020304 560 Non-Affiliate 2.6 3.7 4.3 4.1 4.1 3.8 3.9 05 Affiliate - - - - - - - 06 Supervision & Engineering 2.6 3.7 4.3 4.1 4.1 3.8 3.9 0708 Please see Note 1091011 561 Non-Affiliate 6.3 6.8 7.5 7.1 7.4 7.7 7.7 12 Affiliate - - - - - - - 13 Control Centre Operations 6.3 6.8 7.5 7.1 7.4 7.7 7.7 1415 Please see Note 1161718 562 Non-Affiliate 9.4 9.6 12.0 12.7 13.2 14.3 14.4 19 Affiliate - - - - - - - 20 Station Equipment Expenses 9.4 9.6 12.0 12.7 13.2 14.3 14.4 2122 Please see Note 1232425 563 Non-Affiliate 5.0 5.1 6.6 6.3 6.5 6.0 6.1 26 Affiliate - - - - - - - 27 Overhead line expenses 5.0 5.1 6.6 6.3 6.5 6.0 6.1 2829 Please see Note 1303132 564 Non-Affiliate - - - - - - - 33 Affiliate - - - - - - - 34 Underground line expenses - - - - - - - 3536 Please see Note 1373839 567 Non-Affiliate 6.4 8.6 12.6 14.0 14.7 14.9 15.5 40 Affiliate - - - - - - - 41 Right of way payments 6.4 8.6 12.6 14.0 14.7 14.9 15.5 4243 Please see Note 1444546 569 Non-Affiliate - 0.0 - - - check formula check formula47 Affiliate - - - - - - - 48 Operations & Maintenance structures - 0.0 - - - - - 4950 Please see Note 1515253 571.1 Non-Affiliate 6.2 6.2 7.0 7.5 7.7 7.7 8.0 54 Affiliate - - - - - - - 55 Vegetation Management 6.2 6.2 7.0 7.5 7.7 7.7 8.0 5657 Please see Note 1585960 575 Non-Affiliate 2.5 2.9 3.3 3.8 3.9 4.3 4.4 61 Affiliate - - - - - - - 62 IT support 2.5 2.9 3.3 3.8 3.9 4.3 4.4

Please see Note 1

Note 1: Please refer to Section 5.2 Direct Operation and Maintenance for variances and explanations of the accounts above.

Schd 5-3


General Tariff ApplicationDetails of Miscellaneous Transmission Expenses - GTA Account 566

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Non Affiliate03 Labour 5.6 7.4 8.1 8.9 9.1 9.7 9.4 04 Other 1.2 1.0 1.1 1.8 1.9 1.6 1.6 05 Contractor Services 2.3 2.6 2.0 2.6 2.5 1.5 1.6 06 Employee Benefits 0.5 0.4 0.7 0.9 1.0 0.9 1.0 07 Safety and Training - - - - - - - 08 Special Services and Studies - - - - - - - 0910 Total Non Affiliate 9.6 11.4 11.9 14.1 14.5 13.7 13.5 1112 Affiliate1314 Allocated Share of Common Operations1516 Total Schedule 5-1 9.6 11.4 11.9 14.1 14.5 13.7 13.5

Schd 5-4


General Tariff ApplicationSchedule of Transmission Costs

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Direct - Labour 18.9 22.8 24.7 26.8 27.8 28.6 28.6 02 Direct - Fringe 2.3 2.1 3.3 3.5 3.6 3.6 3.8 03 Direct O&M - Contractor Services 13.6 14.1 15.9 16.2 16.3 16.1 16.2 04 Direct O&M - Other 13.2 15.3 21.2 23.2 24.2 24.0 25.0 05 Schedule 5-1 47.9 54.4 65.2 69.7 71.9 72.3 73.5 0607 General O&M - Labour - - - - - - - 08 General O&M - Fringe - - - - - - - 09 General O&M - Contractor Services - - - - - - - 10 General O&M - Other - - - - - - - 11 Schedule 5-1 - - - - - - - 1213 Common Operations - Labour - - - - - - - 14 Common Operations - Fringe - - - - - - - 15 Common Operations - Contractor Services - - - - - - - 16 Common Operations - Other - - - - - - - 17 - - - - - - - 1819 Total Operations & Maintenance - Labour Schedule 5-5 18.9 22.8 24.7 26.8 27.8 28.6 28.6 20 Total Operations & Maintenance - Fringe 2.3 2.1 3.3 3.5 3.6 3.6 3.8 21 Total Operations & Maintenance - Contractor Services 13.6 14.1 15.9 16.2 16.3 16.1 16.2 22 Total Operations & Maintenance - Other 13.2 15.3 21.2 23.2 24.2 24.0 25.0 23 47.9 54.4 65.2 69.7 71.9 72.3 73.5 2425 Capital - Labour 42.6 51.9 55.4 58.0 57.4 56.9 53.2 2627 Other - Labour - - - - - - - 2829 Total Transmission - Labour Schedule 5-5 61.5 74.7 80.0 84.9 85.3 85.5 81.8

Schd 5-5


General Tariff ApplicationSchedule of Transmission Manpower - Full Time Equivalents (FTE's) - Mid-Year


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 GTA Complement - Permanent 180.3 200.7 209.0 219.1 227.4 222.2 215.503 Vacancy 0.0 0.0 0.0 5.5 5.7 5.6 8.604 Final Adjusted Complement - Perm 180.3 200.7 209.0 213.6 221.7 216.6 206.905 Vacancy Rate 0.0% 0.0% 0.0% 2.5% 2.5% 2.5% 4.0%0607 GTA Complement - Temporary - - - - - - - 08 Vacancy - - - - - - - 09 Final Adjusted Complement - Temp - - - - - - - 10 Vacancy Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%111213 GTA Complement - Total 180.3 200.7 209.0 219.1 227.4 222.2 215.514 Vacancy 0.0 0.0 0.0 5.5 5.7 5.6 8.615 Final Adjusted Complement 180.3 200.7 209.0 213.6 221.7 216.6 206.916 Vacancy Rate 0.0% 0.0% 0.0% 2.5% 2.5% 2.5% 4.0%17 Final Adjusted Complement by Area18 Total Operations & Maintenance 180.3 200.7 209.0 213.6 221.7 216.6 206.919 Capital - Final Adjusted Complement - Perm 310.9 363.7 389.6 401.5 414.2 409.3 381.920 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.021 491.2 564.4 598.6 615.1 635.9 626.0 588.82223 Labour cost ($Millions) - Schedule 5-4 Schedule 5-4 61.5 74.7 80.0 84.9 85.3 85.5 81.8 2425 Labour cost ($000's) per FTE 125.2 132.4 133.7 138.0 134.1 136.6 138.9

Schd 5-6


General Tariff ApplicationSchedule of Transmission Taxes Other Than Income Taxes

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 408.1 Trans. Linear Property Tax

02 Main Transmission Lines 9.5 9.5 9.8 10.7 11.8 13.8 14.3

03 Business Taxes 0.2 0.2 0.2 0.2 0.2 0.2 0.2 04 Main Transmission Substations & Property 13.2 15.3 19.4 25.5 30.0 39.3 42.7 05 Total Transmission Schedule 5-1 22.9 25.1 29.3 36.4 42.0 53.3 57.2



6. TRANSMISSION DEPRECIATION AND AMORTIZATION Section 6 of AltaLink’s Application addresses the following:

6.1 Summary

6.2 Transmission Depreciation Schedules



Summary AltaLink’s forecast depreciation expenses for the 2017 and 2018 test years are $350.3M and

$372.8M. The 2017 forecast is $3.8M decrease from AltaLink’s 2016 update forecast; the 2018 forecast is $22.5M increase ($18.7M increase) from 2017 forecast (2016 update forecast). Increases in 2017 and 2018 associated with new capital additions is offset by a forecast decrease in the depreciation rates applied to the Towers and Fixtures accounts. At the same time, a change in the treatment of contributions from FortisAlberta reduces the amount of amortization of customer contribution marginally.

6.1.1 Depreciation and Amortization Expenses and Amortization of Customer Contribution Table 6.1.1-1 below shows the make-up of the depreciation expense.

Table 6.1.1-1 - Depreciation Expense Detail

Note I

AltaLink proposes continuing to use for the 2017-2018 period the depreciation rates developed for the forecast year 2016 as filed in its 2015-2016 GTA (Application No. 1611000, proceeding ID 3254). In view of the very recent scrutiny of AltaLink’s depreciation study in the 2015-2016 GTA, it is AltaLink’s view that undertaking another comprehensive study at this time will not yield a different result, with the exception of Asset Class 354.00 Towers and Fixtures (see Note II below).

Note II As mentioned during the Oral Hearing of AltaLink’s 2015-2016 GTA, AltaLink had started to

examine the difference, if any, between towers built under AESO Rule 502.2 and those built prior to the rule. The finding of AltaLink’s review is filed in the 2017-2018 GTA under Appendix 8-B “Engineering Review and Assessment of the Life Expectancy of New Towers”. At the same time, AltaLink engaged Gannett Fleming to conduct further asset life analysis of asset class 354.00 Towers and Fixtures taking into account currently available new information. Gannett Fleming’s report is filed in the 2017-2018 GTA as Appendix 8-A “Direct Evidence of Larry E. Kennedy”.

Mr. Kennedy recommends to segregate the towers built under AESO Rule 502.2 (effective January 1st 2012) into asset class 354.01 Towers & Fixtures (post 2011) and use a 67-R2.5 IOWA curve for the Application. At the same time, Mr. Kennedy recommends to use a 57-R2.5 IOWA curve for the existing asset class 354.00 Towers and Fixtures in place of the 53-R1.5 IOWA curve recommended in the 2015-2016 GTA. AltaLink accepts these recommendations and continues to monitor the retirement activities of these two accounts with a view to refine the expected life profiles in the future as appropriate. See Gannett Fleming’s report in Appendix 8-A for details of these recommendations.

2013 2014 2015 2016 2017 2018

Actual Actual ForecastMgmt

Update Forecast Note Forecast

Depreciation expense (asset life) 120.1 156.8 212.9 255.4 249.3 Note II 264.1 Net Negative Salvage 18.8 22.2 83.2 98.4 99.4 Note II 107.5 Amortization of software 13.3 13.1 16.7 20.8 22.6 24.7 Amortization of Customer Contribution (14.8) (20.0) (18.6) (20.3) (21.1) Note III (23.6) Total Depreciation & Amortization expense 137.3 172.0 294.2 354.1 350.3 Note I 372.8

$millions



The result of the change in the survivor profile of the Tower account is a $47.2M reduction in depreciation expense on asset life for the 2017-2018 GTA period ($23.2M for the year 2017 and $24.0M for the year 2018) and a $13.2M reduction in Net Negative Salvage expense for the 2017-2018 GTA period ($6.5M for the year 2017 and $6.7M for the year 2018).

Note III In the 2017-2018 GTA, AltaLink is proposing a change to the treatment of contribution in aid of

construction in relation to new assets required by FortisAlberta. See Section 31.4 for details.

The change manifests in the amount of amortization in relation to the contributions from FortisAlberta being moved from AltaLink’s depreciation and amortization expense account to miscellaneous revenue. AltaLink’s Revenue Requirement is reduced by the same amount; the change in this regard is purely a different accounting treatment.

As a result, the amount of amortization associated with Customer Contribution is $0.9M lower in 2017 and $2.2M lower in 2018 than it would have been. Miscellaneous revenue are correspondingly higher by the same amounts.

Transmission Depreciation Schedules Schedule 6-1 Schedule of Transmission Depreciation and Amortization Expense

Schedule 6-2 Schedule of Transmission Depreciation Gross Provision

Schedule 6-3 Schedule of Transmission Depreciation Parameters and Rates

Schedule 6-4 Estimated Survivor Curves, Net Salvage Percents, Original Cost and Annual Accruals as of December 31, 2010 to December 31, 2014 “Life analysis” and “Cost of Removal”

Schd 6-1


General Tariff ApplicationSchedule of Transmission Depreciation and Amortization Expense

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 403 Depreciation and amortization expense02 Gross Provision Schedule 6-2 106.4 138.8 165.0 209.3 210.2 204.9 212.1 03 Amortization of Contributions Schedule 10-6 (11.9) (14.8) (18.1) (14.5) (14.6) (14.6) (15.9) 04 Amortization of Software Costs Schedule 10-7 9.5 13.3 13.1 16.7 20.8 22.6 24.7 05 Total Depreciation Expense Schedule 3-1 104.0 137.3 159.9 211.6 216.4 212.9 220.9

Schd 6-2


General Tariff ApplicationSchedule of Transmission Depreciation Gross Provision

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Transmission02 Transmission Schedule 10-3 96.0 125.8 150.2 189.9 189.8 183.6 190.9 03 Amortization of Differences - - - - - - - 04 Sub Total 96.0 125.8 150.2 189.9 189.8 183.6 190.9 0506 Allocated General PP&E Schedule 10-3 10.4 13.1 14.7 19.4 20.4 21.3 21.2 070809 Total Transmission Gross Provision Schedule 6-1 106.4 138.8 165.0 209.3 210.2 204.9 212.1 1011 Depreciation Gross Provision - Life 93.8 118.7 142.0 150.2 151.4 146.6 150.9 12 Depreciation Gross Provision - Net Salvage 12.6 20.1 23.0 59.1 58.9 58.2 61.2 13 106.4 138.8 165.0 209.3 210.2 204.9 212.1

Schd 6-3

Schedule 6-3 AltaLink Management Ltd. Feb 15/16General Tariff Application

Schedule of Transmission Depreciation Parameters and Rates

Estimated Estimated Prior Yr. 5 Prior Yr.42 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test Period Cross Survivor Net 2011 2012 2013 2014 2015 2016 2017 2018

Line Description Reference Curve Salvage Actual Actual Actual Actual Forecast Mgt Update Year 1 Year 201 TRANSMISSION PLANT02 350.10 LAND RIGHTS 56-L5 1.50% 1.56% 1.70% 1.74% 1.84% 1.84% 1.84% 1.84%03 352.00 STRUCTURES AND IMPROVEMENTS 50 R-2 -5 2.40% 2.36% 2.39% 2.63% 3.29% 3.26% 3.26% 3.26%04 353.00 STATION EQUIPMENT 47-L1.5 -15 2.73% 2.76% 2.99% 3.07% 3.89% 3.82% 3.82% 3.82%05 353.10 SYSTEM COMMUNICATION AND CONTROL 24-L1 -10 5.27% 5.27% 5.22% 5.34% 5.68% 5.56% 5.56% 5.56%06 354.00 TOWERS AND FIXTURES 49 R-2 -5 2.10% 2.32% 2.54% 2.77% 3.63% 3.47% 2.17% 2.17%07 354.01 TOWERS AND FIXTURES (Post 2011) 67-R2.5 -25 2.35% 2.35%08 355.00 POLES AND FIXTURES 46-R2 -45 3.25% 3.36% 3.96% 3.86% 5.13% 4.96% 4.96% 4.96%09 356.00 OVERHEAD CONDUCTORS AND DEVICES 65-R4 -29 1.76% 1.79% 1.46% 1.72% 2.17% 2.18% 2.18% 2.18%10 358.00 UNDERGROUND CONDUCTORS AND DEVICES 45 R-5 0 2.20% 2.20% 2.17% 2.18% 2.22% 2.22% 2.22% 2.22%111213 GENERAL PLANT14 390.00 STRUCTURES AND IMPROVEMENTS - GENERAL 43-R3 2.50% 2.47% 2.46% 2.44% 2.62% 2.57% 2.57% 2.57%15 391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 6.67% 7.15% 6.67% 6.67% 7.16% 7.16% 7.16% 7.16%16 391.10 COMPUTER HARDWARE 5-SQ 20.51% 20.00% 21.09% 18.79% 22.76% 20.00% 20.00% 20.00%17 391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 18.68% 23.40% 27.88% 21.94% 21.07% 20.53% 20.53% 20.53%18 392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 6-R2 18.72% 17.92% 22.67% 21.22% 13.89% 15.28% 15.28% 15.28%19 394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 11.12% 12.06% 10.00% 8.51% 10.00% 10.00% 10.00% 10.00%20 396.00 POWER OPERATED EQUIPMENT 25-L2 2.54% 2.46% 2.70% 2.49% 3.96% 3.86% 3.86% 3.86%212223 PLANT NOT STUDIED24 350.00 LAND 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%25 390.00 LEASEHOLD IMPROVEMENTS 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%26 0.00 CAPITAL LEASES 33.33% 33.33% 33.33% 33.33% 33.33% 33.33% 33.33% 33.33%27 389.00 LAND OTHER 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Schd 6-4

Schedule 6-4 Feb 15/16

Estimated Estimated Surviving Calculated AnnualSurvivor Net Original Cost Accrued Provision for

Account Description Curve Salvage at 12/31/2012 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (4) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT350.10 LAND RIGHTS 52-S6 0 44.0 17.9 0.8 1.93 (0.2) 0.7 1.56352.00 STRUCTURES AND IMPROVEMENTS 50-R2 (5) 127.8 29.6 3.1 2.39 (0.2) 2.9 2.25353.00 STATION EQUIPMENT 45-L2 (10) 1,480.5 337.8 39.0 2.64 (2.0) 37.1 2.50353.10 SYSTEM COMMUNICATION AND CONTROL 24-L0.5 (9) 418.3 143.4 21.6 5.17 (1.3) 20.3 4.85354.00 TOWERS AND FIXTURES 45-R2 (5) 359.0 125.8 9.1 2.53 (0.8) 8.3 2.32355.00 POLES AND FIXTURES 52-R3 (52) 523.3 93.0 11.3 2.15 0.3 11.6 2.21356.00 OVERHEAD CONDUCTORS AND DEVICES 60-R4 (29) 388.8 139.0 6.7 1.73 (1.3) 5.4 1.40358.00 UNDERGROUND CONDUCTORS AND DEVICES 45-R5 0 17.6 2.4 0.4 2.27 (0.0) 0.4 2.20

TOTAL TRANMISSION PLANT 3,359.2 889.0 92.0 (5.4) 86.6

GENERAL PLANT390.00 STRUCTURES AND IMPROVEMENTS - GENERAL 43-R3 10 19.7 4.8 0.4 2.27 0.0 0.5 2.47391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 0 4.2 2.0 0.3 6.67 0.0 0.3 7.15391.10 COMPUTER HARDWARE 5-SQ 0 38.7 10.3 7.7 20.00 - 7.7 20.00391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 0 39.9 29.0 8.0 20.00 1.4 9.3 23.40392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 9-L0.5 15 8.6 1.7 1.2 13.51 0.4 1.5 17.92394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 0 17.3 8.7 1.7 10.00 0.4 2.1 12.06396.00 POWER OPERATED EQUIPMENT 25-L2 15 13.7 3.6 0.5 3.93 (0.2) 0.3 2.46

TOTAL GENERAL PLANT 142.0 60.0 19.9 2.0 21.8

TOTAL PLANT STUDIED 3,501.2 949.0 111.9 (3.4) 108.5 3.10

PLANT NOT STUDIEDLANDLEASEHOLD IMPROVEMENTS 14.0

TOTAL PLANT NOT STUDIED 14.0

TOTAL UTILITY PLANT 3,515.3

Estimated Estimated Surviving Calculated AnnualSurvivor Net Original Cost Accrued Provision for

Account Description Curve Salvage at 12/31/2012 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (4) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT352.00 STRUCTURES AND IMPROVEMENTS 50-R2 (5) 127.8 1.5 0.2 0.12 (0.0) 0.1 0.11353.00 STATION EQUIPMENT 45-L2 (10) 1,480.5 33.8 3.9 0.26 (0.1) 3.8 0.26353.10 SYSTEM COMMUNICATION AND CONTROL 24-L0.5 (9) 418.3 12.9 1.9 0.47 (0.2) 1.8 0.42354.00 TOWERS AND FIXTURES 45-R2 (5) 359.0 6.3 0.5 0.13 (0.5) * 0.0 0.00355.00 POLES AND FIXTURES 52-R3 (52) 523.3 48.4 5.9 1.12 0.1 6.0 1.15356.00 OVERHEAD CONDUCTORS AND DEVICES 60-R4 (29) 388.8 40.3 2.0 0.50 (0.4) 1.5 0.39

TOTAL TRANSMISSION PLANT 3,297.6 143.2 14.3 (1.0) 13.2 0.40

(*) Amount of true up has been limited to the Annual Accrual Amount

TABLE 1. ESTIMATED SURVIVOR CURVES, NET SALVAGE PERCENTS, ORIGINAL COST AND ANNUAL ACCRUALS

AltaLink Management Ltd.COMPLIANCE FILING - AUC DECISION 2012-221

AS OF DECEMBER 31, 2012

Annual Accrual Total Depreciation

AltaLink Management Ltd.

"LIFE ANALYSIS" (2012) $Millions

COMPLIANCE FILING - AUC DECISION 2012-221


TABLE 1. ESTIMATED SURVIVOR CURVES, NET SALVAGE PERCENTS, ORIGINAL COST AND ANNUAL ACCRUALSAS OF DECEMBER 31, 2012

"COST OF REMOVAL" (2012) $Millions

Schd 6-4

Schedule 6-4ALTALINK LP

SCHEDULE 1. ESTIMATED SURVIVOR CURVES, NET SALVAGE PERCENTS, ORIGINAL COST AND ANNUAL ACCRUALSAS OF DECEMBER 31, 2013"LIFE ANALYSIS" $Millions

Estimated Surviving Calculated AnnualSurvivor Original Cost Accrued Provision for

Account Description Curve at 12/31/2013 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT

350.10 LAND RIGHTS 56-L5 98.3 20.2 1.8 1.83 (0.1) 1.7 1.70 352.00 STRUCTURES AND IMPROVEMENTS 50 R-2 141.4 32.5 3.4 2.39 (0.2) 3.2 2.26 353.00 STATION EQUIPMENT 47-L1.5 1,552.2 350.4 41.6 2.68 (1.9) 39.7 2.56 353.10 SYSTEM COMMUNICATION AND CONTROL 24-L1 471.0 156.5 23.8 5.04 (1.9) 21.9 4.65 354.00 TOWERS AND FIXTURES 49 R-2 690.3 133.7 18.1 2.62 (1.4) 16.7 2.41 355.00 POLES AND FIXTURES 46-R2 595.0 117.5 15.9 2.67 - 15.9 2.67 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 431.7 135.7 6.9 1.61 (2.3) 4.7 1.08 358.00 UNDERGROUND CONDUCTORS AND DEVICES 45 R-5 15.6 2.7 0.4 2.27 (0.0) 0.3 2.17

TOTAL TRANMISSION PLANT 3,995.6 949.2 111.9 (7.8) 104.0

GENERAL PLANT

390.00 STRUCTURES AND IMPROVEMENTS 43-R3 41.8 5.4 1.0 2.37 0.0 1.0 2.46 391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 7.3 2.7 0.5 6.67 - 0.5 6.67 391.10 COMPUTER HARDWARE 5-SQ 58.3 16.0 11.7 20.00 0.6 12.3 21.09 391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 70.7 36.3 14.1 20.00 5.6 19.7 27.88 392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 6-R2 10.6 2.4 1.8 16.54 0.7 2.4 22.67 394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 18.1 8.8 1.8 10.00 - 1.8 10.00 396.00 POWER OPERATED EQUIPMENT 25-L2 14.8 4.1 0.6 3.93 (0.2) 0.4 2.70

TOTAL GENERAL PLANT 221.6 75.6 31.4 6.7 38.1 -

TOTAL PLANT STUDIED 4,217.2 1,024.9 143.3 (1.1) 142.2 3.37

PLANT NOT STUDIED

LANDLEASEHOLD IMPROVEMENTS 14.0



ALTALINK LP

SCHEDULE 1A. ESTIMATED SURVIVOR CURVES, NET SALVAGE PERCENTS, ORIGINAL COST AND ANNUAL ACCRUALSAS OF DECEMBER 31, 2013

"COST OF REMOVAL" $Millions

Estimated Estimated Surviving Calculated AnnualSurvivor Net Salavge Original Cost Accrued Provision for

Account Description Curve Percentage at 12/31/2013 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2 (5.00) 141.4 1.6 0.2 0.12 0.0 0.2 0.13353.00 STATION EQUIPMENT 47-L1.5 (15.00) 1,552.2 52.6 6.2 0.40 0.4 6.6 0.43353.10 SYSTEM COMMUNICATION AND CONTROL 24-L1 (10.00) 471.0 15.7 2.4 0.50 0.3 2.7 0.57354.00 TOWERS AND FIXTURES 49-R2 (5.00) 690.3 6.7 0.9 0.13 (0.0) 0.9 0.13355.00 POLES AND FIXTURES 46-R2 (45.00) 595.0 52.9 7.2 1.20 0.5 7.7 1.29356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 (29.00) 431.7 39.4 2.0 0.47 (0.4) 1.7 0.38358.00 UNDERGROUND CONDUCTORS AND DEVICES 45-R5 0.00 15.6 - - 0.00 - - 0

TOTAL TRANSMISSION PLANT 3,897.2 168.7 18.9 - 0.8 19.7 0.51



Schd 6-4





TRANSMISSION PLANT

350.10 LAND RIGHTS 56-L5 138.0 22.4 2.5 1.83 (0.1) 2.4 1.74 352.00 STRUCTURES AND IMPROVEMENTS 50 R-2 204.8 36.0 5.2 2.55 (0.1) 5.1 2.48 353.00 STATION EQUIPMENT 47-L1.5 1,983.1 389.6 54.2 2.73 (2.0) 52.2 2.63 353.10 SYSTEM COMMUNICATION AND CONTROL 24-L1 532.6 172.8 27.1 5.08 (2.0) 25.0 4.70 354.00 TOWERS AND FIXTURES 49 R-2 1,354.6 159.4 37.6 2.78 (1.3) 36.3 2.68 355.00 POLES AND FIXTURES 46-R2 657.3 131.1 17.5 2.66 (0.4) 17.1 2.60 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 611.0 143.6 9.9 1.61 (1.9) 7.9 1.30 358.00 UNDERGROUND CONDUCTORS AND DEVICES 45 R-5 15.6 3.0 0.4 2.27 (0.0) 0.3 2.18

TOTAL TRANMISSION PLANT 5,497.0 1,057.9 154.3 (8.0) 146.4

GENERAL PLANT

390.00 STRUCTURES AND IMPROVEMENTS 43-R3 63.9 6.6 1.5 2.38 0.0 1.6 2.44 391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 7.9 3.3 0.5 6.67 - 0.5 6.67 391.10 COMPUTER HARDWARE 5-SQ 70.3 27.9 14.1 20.00 (0.9) 13.2 18.79 391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 51.9 18.9 10.4 20.00 1.0 11.4 21.94 392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 6-R2 13.3 3.3 2.2 16.21 0.7 2.8 21.22 394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 17.8 8.0 1.8 10.00 (0.3) 1.5 8.51 396.00 POWER OPERATED EQUIPMENT 25-L2 14.8 4.6 0.6 3.87 (0.2) 0.4 2.49



PLANT NOT STUDIED

LANDLEASEHOLD IMPROVEMENTS 14.0



ALTALINK LP



Estimated Estimated Surviving Calculated AnnualSurvivor Net Salvage Original Cost Accrued Provision for

Account Description Curve Percentage at 12/31/2014 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2 (5.00) 204.8 1.8 0.3 0.13 0.0 0.3 0.15353.00 STATION EQUIPMENT 47-L1.5 (15.00) 1,983.1 58.4 8.1 0.41 0.5 8.7 0.44353.10 SYSTEM COMMUNICATION AND CONTROL 24-L1 (10.00) 532.6 17.3 2.7 0.51 0.7 3.4 0.64354.00 TOWERS AND FIXTURES 49-R2 (5.00) 1,354.6 8.0 1.2 0.09 0.1 1.2 0.09355.00 POLES AND FIXTURES 46-R2 (45.00) 657.3 59.0 7.9 1.20 0.4 8.3 1.26356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 (29.00) 611.0 41.6 2.9 0.47 (0.3) 2.6 0.42358.00 UNDERGROUND CONDUCTORS AND DEVICES 45-R5 0.00 15.6 - - 0.00 - - 0

TOTAL TRANSMISSION PLANT 5,359.0 186.1 23.0 - 1.4 24.5 0.46



Schd 6-4





TRANSMISSION PLANT

350.10 LAND RIGHTS 56-R4 228.7 25.2 4.3 1.89 (0.1) 4.2 1.84 352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 223.2 44.0 5.2 2.32 (0.2) 5.0 2.23 353.00 STATION EQUIPMENT 47-R2 2,997.7 459.0 82.5 2.75 (1.5) 81.0 2.70 353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 603.9 207.7 28.1 4.65 (2.3) 25.8 4.27 354.00 TOWERS AND FIXTURES 53-R1.5 2,141.5 199.6 62.8 2.93 (1.4) 61.4 2.87 355.00 POLES AND FIXTURES 50-R2.5 1,423.6 155.0 35.5 2.50 1.9 37.4 2.63 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 959.4 162.7 15.6 1.62 (1.9) 13.6 1.42 358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 53.9 5.0 1.1 2.04 (0.0) 1.1 2.01

TOTAL TRANSMISSION PLANT 8,631.9 1,258.2 235.1 (6.0) 229.6

GENERAL PLANT

390.00 STRUCTURES AND IMPROVEMENTS 45-R2 19.3 6.2 0.5 2.48 0.0 0.5 2.62 391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 7.9 3.9 0.5 6.67 0.0 0.6 7.16 391.10 COMPUTER HARDWARE 5-SQ 39.8 28.3 8.0 20.00 1.1 9.1 22.76 391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 96.2 71.4 19.2 20.00 1.0 20.3 21.07 392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 8-L2.5 10.4 5.1 1.1 10.41 0.4 1.4 13.89 394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 21.2 14.1 2.1 10.00 - 2.1 10.00 396.00 POWER OPERATED EQUIPMENT 25-L2 18.4 6.6 0.8 4.53 (0.1) 0.7 3.96



PLANT NOT STUDIED

LEASEHOLD IMPROVEMENTS 14.0



ALTALINK LP




Account Description Curve Percentage at 12/31/2015 Depreciation Amount Rate True-up Expense Rate(1) (2) (3) (4) (5) (6) (7) (8)= (7)/(5) (9) (10)=(7)+(9) (11)=(10)/(5)

TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 (40) 223.2 17.6 2.1 0.93 0.3 2.4 1.06353.00 STATION EQUIPMENT 47-R2 (40) 2,997.7 183.6 33.0 1.10 2.6 35.7 1.19353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 (25) 603.9 51.9 7.0 1.16 1.5 8.5 1.41354.00 TOWERS AND FIXTURES 53-R1.5 (25) 2,141.5 49.9 15.7 0.73 0.5 16.2 0.76355.00 POLES AND FIXTURES 50-R2.5 (100) 1,423.6 155.0 35.5 2.50 0.0 35.5 2.50356.00 OVERHEAD CONDUCTORS AND DEVICES 65-R4 (40) 959.4 65.1 6.2 0.65 0.9 7.2 0.75358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 (10) 53.9 0.5 0.1 0.20 0.0 0.1 0.21

TOTAL TRANSMISSION PLANT 8,403.2 523.6 99.7 5.9 105.6 1.26



Schd 6-4





TRANSMISSION PLANT

350.10 LAND RIGHTS 56-R4 242.5 29.6 4.6 1.89 (0.1) 4.5 1.84 352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 230.0 48.8 5.3 2.30 (0.2) 5.1 2.21 353.00 STATION EQUIPMENT 47-R2 3,333.1 535.8 89.6 2.69 (1.1) 88.5 2.66 353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 636.3 230.7 29.2 4.59 (2.5) 26.7 4.20 354.00 TOWERS AND FIXTURES 53-R1.5 2,638.4 259.3 74.2 2.81 (1.6) 72.6 2.75 355.00 POLES AND FIXTURES 50-R2.5 1,493.0 188.3 36.2 2.42 1.8 38.0 2.54 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 1,033.5 178.3 16.7 1.62 (1.9) 14.8 1.44 358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 53.9 6.1 1.1 2.04 (0.0) 1.1 2.01


GENERAL PLANT

390.00 STRUCTURES AND IMPROVEMENTS 45-R2 19.3 6.6 0.5 2.44 0.0 0.5 2.57 391.00 OFFICE FURNITURE AND EQUIPMENT 15-SQ 7.9 4.4 0.5 6.67 0.0 0.6 7.16 391.10 COMPUTER HARDWARE 5-SQ 39.8 30.9 8.0 20.00 - 8.0 20.00 391.20 COMPUTER SOFTWARE - NON SAP 5-SQ 96.2 75.7 19.2 20.00 0.5 19.8 20.53 392.00 TRANSPORTATION EQUIPMENT - FLEET VEHICLES 8-L2.5 10.4 5.8 1.0 9.78 0.6 1.6 15.28 394.00 TOOLS, SHOP AND LAB EQUIPMENT 10-SQ 21.2 15.4 2.1 10.00 - 2.1 10.00 396.00 POWER OPERATED EQUIPMENT 25-L2 18.4 7.3 0.8 4.46 (0.1) 0.7 3.86



PLANT NOT STUDIED




ALTALINK LP





TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 (40) 230.0 19.5 2.1 0.92 0.3 2.4 1.05353.00 STATION EQUIPMENT 47-R2 (40) 3,333.1 214.3 35.8 1.08 2.8 38.6 1.16353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 (25) 636.3 57.7 7.3 1.15 1.3 8.6 1.36354.00 TOWERS AND FIXTURES 53-R1.5 (25) 2,638.4 64.8 18.6 0.70 0.5 19.0 0.72355.00 POLES AND FIXTURES 50-R2.5 (100) 1,493.0 188.3 36.2 2.42 (0.0) 36.1 2.42356.00 OVERHEAD CONDUCTORS AND DEVICES 65-R4 (40) 1,033.5 71.3 6.7 0.65 0.9 7.6 0.74358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 (10) 53.9 0.6 0.1 0.20 0.0 0.1 0.21




Schd 6-4





TRANSMISSION PLANT

350.10 LAND RIGHTS 56-R4 242.5 29.6 4.6 1.89 (0.1) 4.5 1.84 352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 230.0 48.8 5.3 2.30 (0.2) 5.1 2.21 353.00 STATION EQUIPMENT 47-R2 3,333.1 535.8 89.6 2.69 (1.1) 88.5 2.66 353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 636.3 230.7 29.2 4.59 (2.5) 26.7 4.20 354.00 TOWERS AND FIXTURES 57-R2.5 408.6 259.3 74.2 2.81 (1.6) 72.6 1.71 354.01 TOWERS AND FIXTURES (post 2011) 67-R2.5 2,229.7 1.88 355.00 POLES AND FIXTURES 50-R2.5 1,493.0 188.3 36.2 2.42 1.8 38.0 2.54 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 1,033.5 178.3 16.7 1.62 (1.9) 14.8 1.44 358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 53.9 6.1 1.1 2.04 (0.0) 1.1 2.01


GENERAL PLANT




PLANT NOT STUDIED




ALTALINK LP





TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 (40) 230.0 19.5 2.1 0.92 0.3 2.4 1.05353.00 STATION EQUIPMENT 47-R2 (40) 3,333.1 214.3 35.8 1.08 2.8 38.6 1.16353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 (25) 636.3 57.7 7.3 1.15 1.3 8.6 1.36354.00 TOWERS AND FIXTURES 57-R2.5 (25) 408.6 64.8 18.6 0.70 0.5 19.0 0.46354.01 TOWERS AND FIXTURES (post 2011) 67-R2.5 (25) 2,229.7 0.47355.00 POLES AND FIXTURES 50-R2.5 (100) 1,493.0 188.3 36.2 2.42 (0.0) 36.1 2.42356.00 OVERHEAD CONDUCTORS AND DEVICES 65-R4 (40) 1,033.5 71.3 6.7 0.65 0.9 7.6 0.74358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 (10) 53.9 0.6 0.1 0.20 0.0 0.1 0.21




Schd 6-4





TRANSMISSION PLANT

350.10 LAND RIGHTS 56-R4 242.5 29.6 4.6 1.89 (0.1) 4.5 1.84 352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 230.0 48.8 5.3 2.30 (0.2) 5.1 2.21 353.00 STATION EQUIPMENT 47-R2 3,333.1 535.8 89.6 2.69 (1.1) 88.5 2.66 353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 636.3 230.7 29.2 4.59 (2.5) 26.7 4.20 354.00 TOWERS AND FIXTURES 57-R2.5 341.7 259.3 74.2 2.81 (1.6) 72.6 1.71 354.01 TOWERS AND FIXTURES (post 2011) 67-R2.5 2,296.6 1.88 355.00 POLES AND FIXTURES 50-R2.5 1,493.0 188.3 36.2 2.42 1.8 38.0 2.54 356.00 OVERHEAD CONDUCTORS AND DEVCES 65-R4 1,033.5 178.3 16.7 1.62 (1.9) 14.8 1.44 358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 53.9 6.1 1.1 2.04 (0.0) 1.1 2.01


GENERAL PLANT




PLANT NOT STUDIED




ALTALINK LP





TRANSMISSION PLANT

352.00 STRUCTURES AND IMPROVEMENTS 50-R2.5 (40) 230.0 19.5 2.1 0.92 0.3 2.4 1.05353.00 STATION EQUIPMENT 47-R2 (40) 3,333.1 214.3 35.8 1.08 2.8 38.6 1.16353.10 SYSTEM COMMUNICATION AND CONTROL 25-L1.5 (25) 636.3 57.7 7.3 1.15 1.3 8.6 1.36354.00 TOWERS AND FIXTURES 57-R2.5 (25) 341.7 64.8 18.6 0.70 0.5 19.0 0.46354.01 TOWERS AND FIXTURES (post 2011) 67-R2.5 (25) 2,296.6 0.47355.00 POLES AND FIXTURES 50-R2.5 (100) 1,493.0 188.3 36.2 2.42 (0.0) 36.1 2.42356.00 OVERHEAD CONDUCTORS AND DEVICES 65-R4 (40) 1,033.5 71.3 6.7 0.65 0.9 7.6 0.74358.00 UNDERGROUND CONDUCTORS AND DEVICES 50-R5 (10) 53.9 0.6 0.1 0.20 0.0 0.1 0.21






7. TRANSMISSION INCOME TAXES Section 7 of AltaLink’s Application addresses the following:

7.1 Summary

7.2 Income Tax Rates

7.3 Timing/Temporary Differences

7.4 Treatment of DAIC for Tax Purposes

7.5 Transmission Income Tax Schedules



Summary AltaLink requests the Commission’s approval to continue to include both federal and provincial

income tax in its Revenue Requirement for 2017 and 2018 on a Flow-through basis. Additionally, AltaLink has included the refund of $90.9M of the accumulated FIT account balance in 2017.

AltaLink is not currently taxable in 2017 and 2018, and does not expect to be currently taxable for the foreseeable future. For this reason, AltaLink is requesting an additional 2% increase to its equity ratio in 2017 and 2018.

AltaLink’s request is consistent with the additional 2% equity ratio granted to FortisAlberta and other Alberta municipal utilities in the 2013 GCOC Decision. In the 2013 GCOC Decision, the AUC confirmed its previous findings in Decisions 2004-052, 2009-216, and 2011-453 that its practice of adding two percentage points to the equity ratio of non-taxable utilities and to FortisAlberta continues to be warranted.11

AltaLink adopted IFRS commencing January 1, 2011.12 International Accounting Standard 12 requires a reporting entity to account for income taxes on the deferred tax basis which means that both the Federal and Provincial FIT should be included in IFRS statements of income and a corresponding regulatory asset and unfunded FIT liability would be included in the IFRS balance sheet.

Table 7.1-1 below illustrates the impact of income taxes in AltaLink’s Revenue Requirement for the Test Period.

Table 7.1-1 - AltaLink’s Aggregate Income Taxes ($M) 2013

Actual 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Income Taxes 40.6 54.7 65.9 - - - Increase (Decrease) N/A 14.1 11.2 (65.9) - -

There are no changes to income taxes for the 2017 and 2018 test years, as AltaLink is not taxable beginning in 2016 with the proposed use of the flow-through method of determining income taxes. The increase in income taxes in 2015 and 2014 arises principally from the previously applied for increase in Rate Base and the resulting increase in return on equity earned in 2014 and forecast to be earned in the 2015. In 2016, the significant decrease is due to the discontinuation of the collection of Federal and Provincial FIT in 2016. The refund of the previously collected amounts included in the FIT liability do not impact AltaLink’s 2017 and 2018 income taxes as this is a one-time reduction of the Transmission Tariff charged to the AESO in 2016 and 2017.

Income Tax Rates The income tax amounts have been calculated using the following substantively enacted tax

rates.

11 Decision 2191-D01-2015, paragraph 469. 12 Decision 2011-453, paragraphs 115 and 116.



Table 7.2-1 - Income Tax Rates 2017 2018

Federal Income Tax 15.00% 15.00% Provincial Income Tax 12.00% 12.00% Federal Future Income Tax 15.00% 15.00% Provincial Future Income Tax 12.00% 12.00%

Timing/Temporary Differences Recognition of certain revenues and expenditures under income tax statutes and regulation may

differ from regulatory accounting. In most cases, the difference is a matter of the timing when the revenues and expenditures are recognized. For example, the rates and method of accounting depreciation are different from Capital Cost Allowance (CCA) in computing taxable income; and certain expenditures, which are capitalized and amortized for accounting purposes, are deductible period expenses for income tax purpose. This gives rise to accounting income being temporarily different from taxable income. To the extent the flow-through method is used to determine income taxes for regulatory purposes, estimated future income tax liability based on cumulative temporary differences will be collected in transmission tariffs in future years when such temporary differences reverse.

Treatment of DAIC for Tax Purposes Under IFRS, which are now Canadian Generally Accepted Accounting Principles (GAAP), indirect

overhead costs may only be capitalized for accounting purposes if AltaLink can demonstrate that they are directly attributable to capital projects. Since transitioning to IFRS in 2001, AltaLink has reviewed these costs and the relationship between their incurrence and its capital activities, and determined that almost all of these costs are directly attributable to capital activities even though they are not directly charged to capital projects. AltaLink now refers to these costs as DAIC. AltaLink’s determination has been accepted by its external auditors, who have issued clean audit opinions on AltaLink’s IFRS compliant financial statements since 2011. Electricity customers received a very significant benefit from this determination, and its acceptance by AltaLink’s auditors, as it avoided a very significant increase in operating costs that would otherwise have had to be funded by customers in the Test Period.

IFRS 16 specifically prohibits the capitalization of administration and other general overhead costs. However, IAS 16 also includes the principle that any costs can be capitalized if they can be shown to be directly attributable to capital projects. As noted above, the reviews undertaken by AltaLink during and after the transition to IFRS, enabled DAIC costs to be capitalized, which would otherwise not have been allowed under IFRS 16, as AltaLink was successful in demonstrating that those costs are directly attributable to capital projects.

In the past, the DAIC costs are deducted in the year incurred for income tax purposes. AltaLink continues to have the view, that as a result of the thorough reviews of DAIC costs undertaken during and after the IFRS conversion, which were subsequently vetted and approved by AltaLink's external auditors, these costs are no longer characterized as indirect costs. As a result of being directly attributable to capital projects, the CRA may determine that these costs cannot be deducted for tax purposes in the year incurred, but rather must be capitalized to Undepreciated Capital Cost pools and deducted through annual CCA claims, and therefore reassess AltaLink's owner accordingly.



AltaLink understands the Commission’s position that if the DAIC costs have been deducted in the past for income tax purposes, they should continue to be deducted in the future. In accordance with the Commission’s direction with respect to this issue in Decision 2013-407:

Should AltaLink be reassessed by the CRA, the Commission will review the financial implications and consider what relief, if any, is necessary at that time.13

AltaLink will bring forward to the Commission for their consideration any reassessments received from the CRA in the future.

Transmission Income Tax Schedules Schedule 7-1 Schedule of Transmission Income Taxes, Utility Operating Income

Schedule 7-2 Schedule of Transmission Income Taxes

Schedule 7-3 Determination of Federal Taxable Income

Schedule 7-4 Schedule of Transmission Capital Cost Allowance

Schedule 7-5 Schedule of Large Corporations Tax

13 AUC Decision 2013-407, paragraph 1133.

Schd 7-1


General Tariff Application Schedule of Transmission Income Taxes, Utility Operating Income

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test PeriodLine Cross 2012 2013 2014 2015 2016 2017 2018No. Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 2010203 Utility Income Tax Expense Schedule 7-2 12.2 29.4 34.1 39.2 (85.0) (90.9) 0.0 04 Farms, Irrigation Transmission05 Utility Income Tax Expense - - - - - - - 0607 Total Utility Income Tax Expense Schedule 3-1 12.2 29.4 34.1 39.2 (85.0) (90.9) 0.0

Schedule 7‐2 AltaLink Management Ltd.Feb 15/16

General Tariff Application Schedule of Transmission Income Taxes

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test PeriodLine Cross 2012 2013 2014 2015 2016 2017 2018No. Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 409 Income taxes, utility operating income03 Federal Income Tax04 Federal Taxable Income Schedule 7‐3 (0.3) (16.1) (16.8) 0.0 0.0 0.0 0.0 05 Income Tax Rate 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%06 Federal Income Tax (0.0) (2.4) (2.5) 0.0 0.0 0.0 0.0 0708 Provincial Income Tax09 Federal Taxable Income (0.3) (16.1) (16.8) 0.0 0.0 0.0 0.0 10 Add: CCA Federal Flowthrough Schedule 7‐4 145.6 202.0 245.7 195.5 94.1 92.9 259.5 11 Less: CCA Provincial Flowthrough Schedule 7‐4 (145.6) (202.0) (245.7) (195.5) (94.1) (92.9) (259.5) 12 Provincial Taxable Income (0.3) (16.1) (16.8) 0.0 0.0 0.0 0.0 13 Income Tax Rate 10.00% 10.00% 10.00% 11.00% 12.00% 12.00% 12.00%14 Provincial Income Tax (0.0) (1.6) (1.7) 0.0 0.0 0.0 0.0 15 Reserve for Rainbow Pipeline Expense ‐ ‐ ‐ ‐ ‐ ‐ ‐ 16 Total Provincial Income Tax (0.0) (1.6) (1.7) 0.0 0.0 0.0 0.0 1718 Total Current Tax (L.5+L.14) (0.1) (4.0) (4.2) 0.0 0.0 0.0 0.0 1920 410 Provisions for future income taxes, utility operating income21 Federal Temporary Differences Schedule 7‐3 81.2 133.5 153.0 145.3 19.9 18.3 112.2 22 Income Tax Rate 15.00% 15.00% 15.00% 15.00% 0.00% 0.00% 0.00%23 12.2 20.0 23.0 21.8 (85.0) (90.9) ‐ 24 Provincial Temporary Differences Schedule 7‐3 N/A N/A N/A N/A N/A N/A N/A25 Reserve for G&A Capitalized 19.3 46.8 28.8 108.2 71.7 52.4 32.5 26 Income Tax Rate 10.00% 10.00% 10.00% 12.00% 0.00% 0.00% 0.00%27 ‐ 2829 Alberta FIT ‐ 13.4 15.3 17.4 ‐ ‐ ‐ 30 Total Future Tax 12.2 33.4 38.3 39.2 (85.0) (90.9) ‐ 3132 Other Items33 Large Corporations Tax Schedule 7‐5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 34 Preferred Dividend Tax ‐ ‐ ‐ ‐ ‐ ‐ ‐ 35 Other ‐ ‐ ‐ ‐ ‐ ‐ ‐ 36 Total Other Items ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3738 Utility Income Tax (L.18+L.29+L.35) Schedule 7‐1 12.2 29.4 34.1 39.2 (85.00) (90.9) 0.0

Schd 7-2

Schd 7-3


General Tariff Application Determination of Federal Taxable Income

$Millions

2012 2013 2014 2015 2016 2017 2018Line CrossNo. Description Reference Permanent Temporary Total Permanent Temporary Total Permanent Temporary Total Permanent Temporary Total Permanent Temporary Total Permanent Temporary Total Permanent Temporary Total0102 Income after Income Taxes and Financing Charges 63.8 63.8 82.0 82.0 95.0 95.0 99.8 99.8 98.4 98.4 104.2 104.2 106.7 106.7 03 Preferred Dividend Tax Schedule 7-2 - - - - - - - - - - - - - - 04 Income Tax Provision 12.2 12.2 29.4 29.4 34.1 34.1 39.2 39.2 (85.0) (85.0) (90.9) (90.9) 0.0 0.0

06 Utility Earnings Before Tax 76.0 76.0 111.4 111.4 129.2 129.2 139.0 139.0 13.4 13.4 13.3 13.3 106.7 106.7 0708 Add / (Deduct):09 Depreciation/Amortization of Contributions Schedule 6-1 104.0 104.0 137.3 137.3 159.9 159.9 211.6 211.6 216.4 216.4 212.9 212.9 220.9 220.9 1011 CCA - Federal Schedule 7-4 (145.6) (145.6) (202.0) (202.0) (245.7) (245.7) (195.5) (195.5) (94.1) (94.1) (92.9) (92.9) (259.5) (259.5) 12 G&A Capitalized Schedule 7-4 (19.3) (19.3) (46.8) (46.8) (28.8) (28.8) (108.2) (108.2) (71.7) (71.7) (52.4) (52.4) (32.5) (32.5) 13 Self Insurance Accrual Schedule 29-2 - - - - - - 0.3 0.3 1.5 1.5 1.5 1.5 1.5 1.5 14 Expense Related to Premiums15 Fleet Insurance Premiums Charged to Various Functions16 Self Insurance Claims Schedule 29-2 - - - - - - - - - - - - - - 17 Payments Related to Premiums18 Fleet Insurance Premiums Charged to Various Functions19 Rate Hearing Cost Provision Schedule 29-7 - - - - - - 2.8 2.8 2.4 2.4 3.9 3.9 1.5 1.5 20 Rate Hearing Cost Claims Payment Schedule 29-7 - - - - (0.6) (0.6) (2.0) (2.0) (2.4) (2.4) (3.9) (3.9) (1.5) (1.5) 21 Rainbow Reserve and G&A Capitalized Schedule 29-5 - - - - - - - - - - - - - - 22 Pension Expense Schedule 29-4 6.5 6.5 7.9 7.9 8.2 8.2 3.2 3.2 3.5 3.5 3.7 3.7 3.6 3.6 23 Pension Cash Contribution Schedule 29-4 (6.6) (6.6) (6.7) (6.7) (7.6) (7.6) (9.6) (9.6) (9.9) (9.9) (9.9) (9.9) (9.9) (9.9) 24 Non Allowable Meals, Mileage 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 25 Part VI.I Tax Deduction - - - - - - - - - - - - - - 26 Equity Portion of AFUDC in Depreciation 5.1 (5.1) - 6.2 (6.2) - 7.5 (7.5) - 7.0 (7.0) - 7.0 (7.0) - 6.8 (6.8) - 7.5 (7.5) - 27 Equity Portion of AFUDC Schedule 9-2 (0.8) (0.8) (1.1) (1.1) (1.4) (1.4) (1.6) (1.6) (1.5) (1.5) (2.8) (2.8) (2.9) (2.9) 28 Interest Expense AFUDC Debt (0.9) (0.9) (1.0) (1.0) (1.1) (1.1) (1.3) (1.3) (1.2) (1.2) (2.0) (2.0) (2.0) (2.0) 29 Amortization of Financing Fees 1.1 1.1 1.0 1.0 1.2 1.2 1.0 1.0 1.0 1.0 0.9 0.9 1.2 1.2 30 Financing Fees Deductible (0.8) (0.8) (1.0) (1.0) (3.9) (3.9) (5.2) (5.2) (5.1) (5.1) (6.0) (6.0) (5.1) (5.1) 31 Site Restoration (14.6) (14.6) (16.1) (16.1) (27.1) (27.1) (35.4) (35.4) (53.3) (53.3) (67.2) (67.2) (22.9) (22.9) 32 Other33 Subtotal 5.0 (81.2) (76.2) 6.0 (133.5) (127.5) 7.0 (153.0) (146.0) 6.3 (145.3) (139.0) 6.5 (19.9) (13.4) 5.0 (18.3) (13.3) 5.5 (112.2) (106.7) 3435 Federal Taxable Income Schedule 7-2 81.0 (81.2) (0.3) 117.4 (133.5) (16.1) 136.2 (153.0) (16.8) 145.3 (145.3) 0.0 19.9 (19.9) 0.0 18.3 (18.3) 0.0 112.2 (112.2) 0.0

Test Period

Year 1 Year 2

Prior Year 2 Prior Year 1

Forecast Mgt Update

Test Period Prior Year 3

Actual

Prior Year 5 Prior Year 4

Actual Actual

Schd 7-4


Schedule of Transmission Capital Cost Allowance$Millions

2011Line Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52No. 4% 8% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 30% 55% 100% TOTAL

1 FEDERAL23 Undepreciated Capital Cost December 31, 2011 301.5 769.9 152.8 - - 10.9 0.0 8.3 3.4 12.8 - 1.2 28.9 - - 1,289.6 4 301.5 769.9 152.8 - - 10.9 0.0 8.3 3.4 12.8 - 1.2 28.9 - - 1,289.6 5 2011 Gross Additions - 229.5 - - - 1.5 - 3.6 10.1 2.9 - - 34.3 8.3 0.8 291.0 6 Deduct: Land / Land Right Payments - 7 Allowance for Funds Used - (1.1) - - - (0.0) - (0.0) (0.0) - - - (0.2) (0.0) (0.0) (1.4) 8 Customer Contributions - (34.8) - - - - - - - - - - - - - (34.8) 9 Depreciation on Automotive Equip -

10 Meals and Expenses - 11 G&A Capitalized - (9.0) - - - (0.2) - (0.5) (1.4) - - - (2.2) (1.2) (0.1) (14.6) 12 Major Maintenance Expensed - - 13 Add: Site Restoration - 14 Sub Total - 184.6 - - - 1.3 - 3.1 8.6 2.9 - - 31.9 7.1 0.6 240.2 15 Deduct: Lesser of Cost or Proceeds - 16 Capital Additions - 184.6 - - - 1.3 - 3.1 8.6 2.9 - - 31.9 7.1 0.6 240.2 17 Undepreciated Capital Cost Before 2011 Claim 301.5 954.5 152.8 - - 12.2 0.0 11.3 12.0 15.7 - 1.2 60.8 7.1 0.6 1,529.8 1819 CAPITAL COST ALLOWANCE FOR 201120 On Balance Forward 12.1 61.6 9.2 - - 2.2 0.0 2.5 3.4 0.6 - 0.5 8.7 - - 100.7 21 On Net Capital Additions - 7.4 - - - 0.1 - 0.5 4.3 0.1 - - 4.8 2.0 0.6 19.7 22 Total 2011 Claim 12.1 69.0 9.2 - - 2.3 0.0 2.9 7.7 0.7 - 0.5 13.5 2.0 0.6 120.4 23 Undepreciated Capital Cost December 31, 2011 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 2425 PROVINCIAL2627 Undepreciated Capital Cost December 31, 2011 301.5 769.9 152.8 - - 10.9 0.0 8.3 3.4 12.8 - 1.2 28.9 - - 1,289.6 28 301.5 769.9 152.8 - - 10.9 0.0 8.3 3.4 12.8 - 1.2 28.9 - - 1,289.6 29 2011 Gross Additions - 229.5 - - - 1.5 - 3.6 10.1 2.9 - - 34.3 8.3 0.8 291.0 30 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 31 Allowance for Funds Used - (1.1) - - - (0.0) - (0.0) (0.0) - - - (0.2) (0.0) (0.0) (1.4) 32 Customer Contributions - (34.8) - - - - - - - - - - - - - (34.8) 33 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 34 Meals and Expenses - - - - - - - - - - - - - - - - 35 G&A Capitalized - (9.0) - - - (0.2) - (0.5) (1.4) - - - (2.2) (1.2) (0.1) (14.6) 36 Major Maintenance Expensed - - - - - - - - - - - - - - - - 37 Site Restoration - - - - - - - - - - - - - - - - 38 Sub Total - 184.6 - - - 1.3 - 3.1 8.6 2.9 - - 31.9 7.1 0.6 240.2 39 Deduct: Lesser of Cost or Proceeds - 40 Capital Additions - 184.6 - - - 1.3 - 3.1 8.6 2.9 - - 31.9 7.1 0.6 240.2 41 Undepreciated Capital Cost Before 2011 Claim 301.5 954.5 152.8 - - 12.2 0.0 11.3 12.0 15.7 - 1.2 60.8 7.1 0.6 1,529.8 4243 CAPITAL COST ALLOWANCE FOR 201144 On Balance Forward 12.1 61.6 9.2 - - 2.2 0.0 2.5 3.4 0.6 - 0.5 8.7 - - 100.7 45 On Net Capital Additions - 7.4 - - - 0.1 - 0.5 4.3 0.1 - - 4.8 2.0 0.6 19.7 46 Total 2011 Claim 12.1 69.0 9.2 - - 2.3 0.0 2.9 7.7 0.7 - 0.5 13.5 2.0 0.6 120.4 47 Undepreciated Capital Cost December 31,2011 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 48

Description

Schd 7-4

4950 AltaLink Management Ltd. Feb 15/1651 General Tariff Application 52 Schedule of Transmission Capital Cost Allowance53 $Millions5455 201256 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 5257 4% 8% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 30% 55% 100% TOTAL58 FEDERAL5960 Undepreciated Capital Cost December 31, 2012 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 61 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 62 2012 Gross Additions - 389.5 - - - 0.7 - 5.3 16.0 1.6 - - 68.6 5.1 - 486.8 63 Deduct: Land / Land Right Payments - 64 Allowance for Funds Used - (1.4) - - - (0.0) - (0.0) (0.1) - - - (0.2) (0.0) - (1.7) 65 Customer Contributions - (131.2) - - - - - - - - - - - - - (131.2) 66 Depreciation on Automotive Equip - 67 Meals and Expenses - 68 G&A Capitalized - (9.2) - - - (0.1) - (1.1) (3.2) - - - (4.6) (1.0) - (19.3) 69 Major Maintenance Expensed - - 70 Add: Site Restoration - 71 Sub Total - 247.9 - - - 0.5 - 4.2 12.7 1.6 - - 63.8 4.0 - 334.7 72 Deduct: Lesser of Cost or Proceeds - 73 Capital Additions - 247.9 - - - 0.5 - 4.2 12.7 1.6 - - 63.8 4.0 - 334.7 74 Undepreciated Capital Cost Before 2012 Claim 289.4 1,133.4 143.7 - - 10.4 0.0 12.6 17.0 16.5 - 0.6 111.1 9.2 - 1,744.0 7576 CAPITAL COST ALLOWANCE FOR 201277 On Balance Forward 11.6 70.8 8.6 - - 2.0 0.0 2.5 4.3 0.8 - 0.3 14.2 2.8 - 118.0 78 On Net Capital Additions - 9.9 - - - 0.1 - 0.6 6.3 0.0 - - 9.6 1.1 - 27.7 79 Total 2012 Claim 11.6 80.8 8.6 - - 2.0 0.0 3.2 10.7 0.8 - 0.3 23.8 3.9 - 145.6 80 Undepreciated Capital Cost December 31, 2012 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 8182 PROVINCIAL8384 Undepreciated Capital Cost December 31, 2012 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 85 289.4 885.5 143.7 - - 9.9 0.0 8.4 4.3 15.0 - 0.6 47.4 5.2 - 1,409.4 86 2012 Gross Additions - 389.5 - - - 0.7 - 5.3 16.0 1.6 - - 68.6 5.1 - 486.8 87 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 88 Allowance for Funds Used - (1.4) - - - (0.0) - (0.0) (0.1) - - - (0.2) (0.0) - (1.7) 89 Customer Contributions - (131.2) - - - - - - - - - - - - - (131.2) 90 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 91 Meals and Expenses - - - - - - - - - - - - - - - - 92 G&A Capitalized - (9.2) - - - (0.1) - (1.1) (3.2) - - - (4.6) (1.0) - (19.3) 93 Major Maintenance Expensed - - - - - - - - - - - - - - - - 94 Site Restoration - - - - - - - - - - - - - - - - 95 Sub Total - 247.9 - - - 0.5 - 4.2 12.7 1.6 - - 63.8 4.0 - 334.7 96 Deduct: Lesser of Cost or Proceeds - 97 Capital Additions - 247.9 - - - 0.5 - 4.2 12.7 1.6 - - 63.8 4.0 - 334.7 98 Undepreciated Capital Cost Before 2012 Claim 289.4 1,133.4 143.7 - - 10.4 0.0 12.6 17.0 16.5 - 0.6 111.1 9.2 - 1,744.0 99

100 CAPITAL COST ALLOWANCE FOR 2012101 On Balance Forward 11.6 70.8 8.6 - - 2.0 0.0 2.5 4.3 0.8 - 0.3 14.2 2.8 - 118.0 102 On Net Capital Additions - 9.9 - - - 0.1 - 0.6 6.3 0.0 - - 9.6 1.1 - 27.7 103 Total 2012 Claim 11.6 80.8 8.6 - - 2.0 0.0 3.2 10.7 0.8 - 0.3 23.8 3.9 - 145.6 104 Undepreciated Capital Cost December 31,2012 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 105

Description

Schd 7-4

106107 AltaLink Management Ltd. Feb 15/16108 General Tariff Application 109 Schedule of Transmission Capital Cost Allowance110 $Millions111112 2013113 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52114 4% 8% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 30% 55% 100% TOTAL115 FEDERAL116117 Undepreciated Capital Cost December 31, 2013 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 118 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 119 2013 Gross Additions - 1,208.2 - - - - - 7.2 12.0 6.2 - - 73.1 10.6 - 1,317.2 120 Deduct: Land / Land Right Payments - 121 Allowance for Funds Used - (1.9) - - - - - (0.0) (0.0) (0.0) - - (0.1) (0.0) - (2.1) 122 Customer Contributions - (137.4) - - - - - - - - - - - - - (137.4) 123 Depreciation on Automotive Equip - 124 Meals and Expenses - 125 G&A Capitalized - (42.9) - - - - - (0.3) (0.4) (0.2) - - (2.6) (0.4) - (46.8) 126 Major Maintenance Expensed - - 127 Add: Site Restoration - 128 Sub Total - 1,025.9 - - - - - 6.9 11.6 5.9 - - 70.4 10.2 - 1,130.9 129 Deduct: Lesser of Cost or Proceeds - 130 Capital Additions - 1,025.9 - - - - - 6.9 11.6 5.9 - - 70.4 10.2 - 1,130.9 131 Undepreciated Capital Cost Before 2013 Claim 277.9 2,078.6 135.0 - - 8.4 0.0 16.4 17.9 21.6 - 0.4 157.7 15.4 - 2,729.4 132133 CAPITAL COST ALLOWANCE FOR 2013134 On Balance Forward 11.1 84.2 8.1 - - 1.7 0.0 2.8 6.3 0.9 - 0.2 26.2 2.9 - 144.4 135 On Net Capital Additions - 41.0 - - - - - 1.0 5.8 0.1 - - 10.6 2.8 - 61.4 136 Total 2013 Claim 11.1 126.0 8.1 - - 1.7 0.0 3.5 10.1 1.0 - 0.2 35.7 4.7 - 202.0 137 Undepreciated Capital Cost December 31, 2013 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 138139 PROVINCIAL140141 Undepreciated Capital Cost December 31, 2013 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 142 277.9 1,052.6 135.0 - - 8.4 0.0 9.5 6.3 15.7 - 0.4 87.3 5.2 - 1,598.4 143 2013 Gross Additions - 1,208.2 - - - - - 7.2 12.0 6.2 - - 73.1 10.6 - 1,317.2 144 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 145 Allowance for Funds Used - (1.9) - - - - - (0.0) (0.0) (0.0) - - (0.1) (0.0) - (2.1) 146 Customer Contributions - (137.4) - - - - - - - - - - - - - (137.4) 147 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 148 Meals and Expenses - - - - - - - - - - - - - - - - 149 G&A Capitalized - (42.9) - - - - - (0.3) (0.4) (0.2) - - (2.6) (0.4) - (46.8) 150 Major Maintenance Expensed - - - - - - - - - - - - - - - - 151 Site Restoration - - - - - - - - - - - - - - - - 152 Sub Total - 1,025.9 - - - - - 6.9 11.6 5.9 - - 70.4 10.2 - 1,130.9 153 Deduct: Lesser of Cost or Proceeds - 154 Capital Additions - 1,025.9 - - - - - 6.9 11.6 5.9 - - 70.4 10.2 - 1,130.9 155 Undepreciated Capital Cost Before 2013 Claim 277.9 2,078.6 135.0 - - 8.4 0.0 16.4 17.9 21.6 - 0.4 157.7 15.4 - 2,729.3 156157 CAPITAL COST ALLOWANCE FOR 2013158 On Balance Forward 11.1 84.2 8.1 - - 1.7 0.0 2.8 6.3 0.9 - 0.2 26.2 2.9 - 144.4 159 On Net Capital Additions - 41.0 - - - - - 1.0 5.8 0.1 - - 10.6 2.8 - 61.4 160 Total 2013 Claim 11.1 126.0 8.1 - - 1.7 0.0 3.5 10.1 1.0 - 0.2 35.7 4.7 - 202.0 161 Undepreciated Capital Cost December 31,2013 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 162

Description

Schd 7-4

163164 AltaLink Management Ltd. Feb 15/16165 General Tariff Application 166 Schedule of Transmission Capital Cost Allowance167 $Millions168169 2014170 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52171 4% 8% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 30% 55% 100% TOTAL172 FEDERAL173174 Undepreciated Capital Cost December 31, 2014 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 175 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 176 2014 Gross Additions - 95.8 - - - - - 5.8 16.8 1.6 - - 30.4 13.6 - 164.0 177 Deduct: Land / Land Right Payments - 178 Allowance for Funds Used - (1.5) - - - - - (0.1) (0.3) (0.0) - - (0.5) (0.2) - (2.6) 179 Customer Contributions - (1.1) - - - - - - - - - - - - - (1.1) 180 Depreciation on Automotive Equip - 181 Meals and Expenses - 182 G&A Capitalized - (16.8) - - - - - (1.0) (3.0) (0.3) - - (5.3) (2.4) - (28.8) 183 Major Maintenance Expensed - - 184 Add: Site Restoration - 185 Sub Total - 76.4 - - - - - 4.7 13.6 1.3 - - 24.6 11.0 - 131.6 186 Deduct: Lesser of Cost or Proceeds - 187 Capital Additions - 76.4 - - - - - 4.7 13.6 1.3 - - 24.6 11.0 - 131.6 188 Undepreciated Capital Cost Before 2014 Claim 266.7 2,029.7 126.9 - - 6.7 0.0 17.2 19.4 21.9 - 0.2 145.5 20.8 - 2,655.1 189190 CAPITAL COST ALLOWANCE FOR 2014191 On Balance Forward 10.7 156.3 7.6 - - 1.3 0.0 3.8 5.8 1.2 - 0.1 36.3 5.4 - 228.4 192 On Net Capital Additions - 3.1 - - - - - 0.7 6.8 0.0 - - 3.7 3.0 - 17.3 193 Total 2014 Claim 10.7 159.3 7.6 - - 1.3 0.0 4.5 12.6 1.2 - 0.1 40.0 8.4 - 245.7 194 Undepreciated Capital Cost December 31, 2014 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 195196 PROVINCIAL197198 Undepreciated Capital Cost December 31, 2014 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 199 266.7 1,953.3 126.9 - - 6.7 0.0 12.5 5.8 20.6 - 0.2 121.0 9.8 - 2,523.6 200 2014 Gross Additions - 95.8 - - - - - 5.8 16.8 1.6 - - 30.4 13.6 - 164.0 201 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 202 Allowance for Funds Used - (1.5) - - - - - (0.1) (0.3) (0.0) - - (0.5) (0.2) - (2.6) 203 Customer Contributions - (1.1) - - - - - - - - - - - - - (1.1) 204 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 205 Meals and Expenses - - - - - - - - - - - - - - - - 206 G&A Capitalized - (16.8) - - - - - (1.0) (3.0) (0.3) - - (5.3) (2.4) - (28.8) 207 Major Maintenance Expensed - - - - - - - - - - - - - - - - 208 Site Restoration - - - - - - - - - - - - - - - - 209 Sub Total - 76.4 - - - - - 4.7 13.6 1.3 - - 24.6 11.0 - 131.5 210 Deduct: Lesser of Cost or Proceeds - 211 Capital Additions - 76.4 - - - - - 4.7 13.6 1.3 - - 24.6 11.0 - 131.5 212 Undepreciated Capital Cost Before 2014 Claim 266.7 2,029.7 126.9 - - 6.7 0.0 17.2 19.4 21.9 - 0.2 145.5 20.8 - 2,655.1 213214 CAPITAL COST ALLOWANCE FOR 2014215 On Balance Forward 10.7 156.3 7.6 - - 1.3 0.0 3.8 5.8 1.2 - 0.1 36.3 5.4 - 228.4 216 On Net Capital Additions - 3.1 - - - - - 0.7 6.8 0.0 - - 3.7 3.0 - 17.3 217 Total 2014 Claim 10.7 159.3 7.6 - - 1.3 0.0 4.5 12.6 1.2 - 0.1 40.0 8.4 - 245.7 218 Undepreciated Capital Cost December 31,2014 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 219

Description

Schd 7-4

220221 AltaLink Management Ltd. Feb 15/16222 General Tariff Application 223 Schedule of Transmission Capital Cost Allowance224 $Millions225226 2015227 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52228 4% 3% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 17% 23% 100% TOTAL229 FEDERAL230231 Undepreciated Capital Cost December 31, 2014 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 232 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 233 2015 Gross Additions - 116.6 - - - - - 8.3 30.6 - - - 36.6 8.8 - 201.0 234 Deduct: Land / Land Right Payments - 235 Allowance for Funds Used - (1.7) - - - - - (0.1) (0.4) - - - (0.5) (0.1) - (2.9) 236 Customer Contributions - (3.9) - - - - - - - - - - - - - (3.9) 237 Depreciation on Automotive Equip - 238 Meals and Expenses - 239 G&A Capitalized - (62.7) - - - - - (4.5) (16.5) - - - (19.7) (4.8) - (108.2) 240 Major Maintenance Expensed - - 241 Add: Site Restoration - 242 Sub Total - 48.3 - - - - - 3.7 13.7 - - - 16.4 3.9 - 86.0 243 Deduct: Lesser of Cost or Proceeds - 244 Capital Additions - 48.3 - - - - - 3.7 13.7 - - - 16.4 3.9 - 86.0 245 Undepreciated Capital Cost Before 2015 Claim 256.1 1,951.0 119.3 - - 5.4 0.0 16.4 20.5 20.7 - 0.1 122.0 16.3 - 2,527.7 246247 CAPITAL COST ALLOWANCE FOR 2015248 On Balance Forward 10.2 57.1 6.6 - - 1.1 0.0 3.8 6.8 1.3 - 0.0 17.6 2.9 - 107.5 249 On Net Capital Additions - 0.7 - - - - - 0.6 6.8 - - - 1.4 0.5 - 9.9 250 Total 2015 Claim 10.2 129.7 6.6 - - 1.1 0.0 4.4 13.6 1.3 - 0.0 25.1 3.4 - 195.5 251 Undepreciated Capital Cost December 31, 2015 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 252253 PROVINCIAL254255 Undepreciated Capital Cost December 31, 2014 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 256 256.1 1,902.7 119.3 - - 5.4 0.0 12.7 6.8 20.7 - 0.1 105.6 12.4 - 2,441.7 257 2015 Gross Additions - 116.6 - - - - - 8.3 30.6 - - - 36.6 8.8 - 201.0 258 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 259 Allowance for Funds Used - (1.7) - - - - - (0.1) (0.4) - - - (0.5) (0.1) - (2.9) 260 Customer Contributions - (3.9) - - - - - - - - - - - - - (3.9) 261 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 262 Meals and Expenses - - - - - - - - - - - - - - - - 263 G&A Capitalized - (62.7) - - - - - (4.5) (16.5) - - - (19.7) (4.8) - (108.2) 264 Major Maintenance Expensed - - - - - - - - - - - - - - - - 265 Site Restoration - - - - - - - - - - - - - - - - 266 Sub Total - 48.3 - - - - - 3.7 13.7 - - - 16.4 3.9 - 86.0 267 Deduct: Lesser of Cost or Proceeds - 268 Capital Additions - 48.3 - - - - - 3.7 13.7 - - - 16.4 3.9 - 86.0 269 Undepreciated Capital Cost Before 2015 Claim 256.1 1,951.0 119.3 - - 5.4 0.0 16.4 20.5 20.7 - 0.1 122.0 16.3 - 2,527.7 270271 CAPITAL COST ALLOWANCE FOR 2015272 On Balance Forward 10.2 57.1 6.6 - - 1.1 0.0 3.8 6.8 1.3 - 0.0 17.6 2.9 - 107.5 273 On Net Capital Additions - 0.7 - - - - - 0.6 6.8 - - - 1.4 0.5 - 9.9 274 Total 2015 Claim 10.2 129.7 6.6 - - 1.1 0.0 4.4 13.6 1.3 - 0.0 25.1 3.4 - 195.5 275 Undepreciated Capital Cost December 31,2015 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 276

Description

Schd 7-4

277278 AltaLink Management Ltd. Feb 15/16279 General Tariff Application 280 Schedule of Transmission Capital Cost Allowance281 $Millions282283 2016284 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52285 2% 4% 6% 5% 10% 0% 25% 0% 0% LEASE 8% 45% 0% 0% 100% TOTAL286 FEDERAL287288 Undepreciated Capital Cost December 31, 2015 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 289 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 290 2016 Gross Additions - 134.0 - - - - - 6.5 21.9 - - - 30.4 7.9 - 200.7 291 Deduct: Land / Land Right Payments - 292 Allowance for Funds Used - (1.8) - - - - - (0.1) (0.3) - - - (0.4) (0.1) - (2.7) 293 Customer Contributions - (4.1) - - - - - - - - - - - - - (4.1) 294 Depreciation on Automotive Equip - 295 Meals and Expenses - 296 G&A Capitalized - (47.9) - - - - - (2.3) (7.8) - - - (10.9) (2.8) - (71.7) 297 Major Maintenance Expensed - - 298 Add: Site Restoration - 299 Sub Total - 80.2 - - - - - 4.1 13.8 - - - 19.1 5.0 - 122.2 300 Deduct: Lesser of Cost or Proceeds - 301 Capital Additions - 80.2 - - - - - 4.1 13.8 - - - 19.1 5.0 - 122.2 302 Undepreciated Capital Cost Before 2016 Claim 245.8 1,869.2 112.7 - - 4.3 0.0 16.2 20.6 19.4 - 0.1 116.0 17.9 - 2,422.1 303304 CAPITAL COST ALLOWANCE FOR 2016305 On Balance Forward 3.7 80.5 6.8 - - - 0.0 - - 1.3 - 0.0 - - - 92.3 306 On Net Capital Additions - 1.8 - - - - - - - - - - - - - 1.8 307 Total 2016 Claim 3.7 82.3 6.8 - - - 0.0 - - 1.3 - 0.0 10.6 - - 94.1 308 Undepreciated Capital Cost December 31, 2016 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 309310 PROVINCIAL311312 Undepreciated Capital Cost December 31, 2015 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 313 245.8 1,789.0 112.7 - - 4.3 0.0 12.1 6.8 19.4 - 0.1 96.8 13.0 - 2,299.9 314 2016 Gross Additions - 134.0 - - - - - 6.5 21.9 - - - 30.4 7.9 - 200.7 315 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 316 Allowance for Funds Used - (1.8) - - - - - (0.1) (0.3) - - - (0.4) (0.1) - (2.7) 317 Customer Contributions - (4.1) - - - - - - - - - - - - - (4.1) 318 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 319 Meals and Expenses - - - - - - - - - - - - - - - - 320 G&A Capitalized - (47.9) - - - - - (2.3) (7.8) - - - (10.9) (2.8) - (71.7) 321 Major Maintenance Expensed - - - - - - - - - - - - - - - - 322 Site Restoration - - - - - - - - - - - - - - - - 323 Sub Total - 80.2 - - - - - 4.1 13.8 - - - 19.1 5.0 - 122.2 324 Deduct: Lesser of Cost or Proceeds - 325 Capital Additions - 80.2 - - - - - 4.1 13.8 - - - 19.1 5.0 - 122.2 326 Undepreciated Capital Cost Before 2016 Claim 245.8 1,869.2 112.7 - - 4.3 0.0 16.2 20.6 19.4 - 0.1 116.0 17.9 - 2,422.1 327328 CAPITAL COST ALLOWANCE FOR 2016329 On Balance Forward 3.7 80.5 6.8 - - - 0.0 - - 1.3 - 0.0 - - - 92.3 330 On Net Capital Additions - 1.8 - - - - - - - - - - - - - 1.8 331 Total 2016 Claim 3.7 82.3 6.8 - - - 0.0 - - 1.3 - 0.0 10.6 - - 94.1 332 Undepreciated Capital Cost December 31, 2016 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 333

Description

Schd 7-4

334335 AltaLink Management Ltd.336 General Tariff Application 337 Schedule of Transmission Capital Cost Allowance338 $Millions339340 2017341 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52342 4% 0% 6% 5% 10% 20% 25% 0% 100% LEASE 8% 45% 29% 55% 100% TOTAL343 FEDERAL344345 Undepreciated Capital Cost December 31, 2016 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 346 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 347 2017 Gross Additions - 123.2 - - - - - 6.8 24.8 - - - 30.9 6.7 - 192.4 348 Deduct: Land / Land Right Payments - 349 Allowance for Funds Used - (3.4) - - - - - (0.2) (0.6) - - - (0.8) (0.2) - (5.1) 350 Customer Contributions - - - - - - - - - - - - - - - - 351 Depreciation on Automotive Equip - 352 Meals and Expenses - 353 G&A Capitalized - (35.0) - - - - - (1.7) (5.7) - - - (7.9) (2.1) - (52.4) 354 Major Maintenance Expensed - - 355 Add: Site Restoration - 356 Sub Total - 84.8 - - - - - 4.9 18.6 - - - 22.2 4.5 - 135.0 357 Deduct: Lesser of Cost or Proceeds - 358 Capital Additions - 84.8 - - - - - 4.9 18.6 - - - 22.2 4.5 - 135.0 359 Undepreciated Capital Cost Before 2017 Claim 242.1 1,871.7 105.9 - - 4.3 0.0 21.1 39.2 18.1 - 0.0 127.6 22.4 - 2,452.4 360361 CAPITAL COST ALLOWANCE FOR 2017362 On Balance Forward 9.7 - 6.4 - - 0.9 0.0 - 20.6 1.2 - 0.0 30.6 9.9 - 79.2 363 On Net Capital Additions - - - - - - - - 9.3 - - - 3.2 1.2 - 13.7 364 Total 2017 Claim 9.7 - 6.4 - - 0.9 0.0 - 29.9 1.2 - 0.0 33.8 11.1 - 92.9 365 Undepreciated Capital Cost December 31, 2017 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 366367 PROVINCIAL368369 Undepreciated Capital Cost December 31, 2016 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 370 242.1 1,786.9 105.9 - - 4.3 0.0 16.2 20.6 18.1 - 0.0 105.4 17.9 - 2,317.5 371 2017 Gross Additions - 123.2 - - - - - 6.8 24.8 - - - 30.9 6.7 - 192.4 372 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 373 Allowance for Funds Used - (3.4) - - - - - (0.2) (0.6) - - - (0.8) (0.2) - (5.1) 374 Customer Contributions - - - - - - - - - - - - - - - - 375 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 376 Meals and Expenses - - - - - - - - - - - - - - - - 377 G&A Capitalized - (35.0) - - - - - (1.7) (5.7) - - - (7.9) (2.1) - (52.4) 378 Major Maintenance Expensed - - - - - - - - - - - - - - - - 379 Site Restoration - - - - - - - - - - - - - - - - 380 Sub Total - 84.8 - - - - - 4.9 18.6 - - - 22.2 4.5 - 135.0 381 Deduct: Lesser of Cost or Proceeds - 382 Capital Additions - 84.8 - - - - - 4.9 18.6 - - - 22.2 4.5 - 135.0 383 Undepreciated Capital Cost Before 2017 Claim 242.1 1,871.7 105.9 - - 4.3 0.0 21.1 39.2 18.1 - 0.0 127.6 22.4 - 2,452.4 384385 CAPITAL COST ALLOWANCE FOR 2017386 On Balance Forward 9.7 - 6.4 - - 0.9 0.0 - 20.6 1.2 - 0.0 30.6 9.9 - 79.2 387 On Net Capital Additions - - - - - - - - 9.3 - - - 3.2 1.2 - 13.7 388 Total 2017 Claim 9.7 - 6.4 - - 0.9 0.0 - 29.9 1.2 - 0.0 33.8 11.1 - 92.9 389 Undepreciated Capital Cost December 31, 2017 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 390

Description

Schd 7-4

391392 AltaLink Management Ltd.393 General Tariff Application 394 Schedule of Transmission Capital Cost Allowance395 $Millions396397 2018398 Class 1 Class 47 Class 2 Class 3 Class 6 Class 8 Class 9 Class 10 Class 12 Class 13 Class 17 Class 45 Class 46 Class 50 Class 52399 4% 7% 6% 5% 10% 20% 25% 30% 100% LEASE 8% 45% 30% 55% 100% TOTAL400 FEDERAL401402 Undepreciated Capital Cost December 31, 2017 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 403 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 404 2018 Gross Additions - 227.8 - - - - - 6.7 23.8 - - - 33.2 4.6 - 296.2 405 Deduct: Land / Land Right Payments - 406 Allowance for Funds Used - (3.6) - - - - - (0.2) (0.6) - - - (0.8) (0.2) - (5.4) 407 Customer Contributions - - - - - - - - - - - - - - - - 408 Depreciation on Automotive Equip - 409 Meals and Expenses - 410 G&A Capitalized - (21.7) - - - - - (1.1) (3.5) - - - (4.9) (1.3) - (32.5) 411 Major Maintenance Expensed - - 412 Add: Site Restoration - 413 Sub Total - 202.5 - - - - - 5.5 19.7 - - - 27.5 3.1 - 258.3 414 Deduct: Lesser of Cost or Proceeds - 415 Capital Additions - 202.5 - - - - - 5.5 19.7 - - - 27.5 3.1 - 258.3 416 Undepreciated Capital Cost Before 2018 Claim 232.4 2,488.7 99.6 - - 3.4 0.0 26.6 29.0 16.9 - 0.0 121.3 14.4 - 3,032.3 417418 CAPITAL COST ALLOWANCE FOR 2018419 On Balance Forward 9.3 169.2 6.0 - - 0.7 0.0 6.3 9.3 1.1 - 0.0 28.1 6.2 - 236.3 420 On Net Capital Additions - 7.5 - - - - - 0.8 9.8 - - - 4.1 0.9 - 23.1 421 Total 2018 Claim 9.3 176.7 6.0 - - 0.7 0.0 7.1 19.1 1.1 - 0.0 32.3 7.1 - 259.5 422 Undepreciated Capital Cost December 31, 2018 223.1 2,312.0 93.6 - - 2.7 0.0 19.4 9.8 15.8 - 0.0 89.0 7.3 - 2,772.9 423424 PROVINCIAL425426 Undepreciated Capital Cost December 31, 2017 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 427 232.4 2,286.2 99.6 - - 3.4 0.0 21.1 9.3 16.9 - 0.0 93.8 11.3 - 2,774.0 428 2018 Gross Additions - 227.8 - - - - - 6.7 23.8 - - - 33.2 4.6 - 296.2 429 Deduct: Land / Land Right Payments - - - - - - - - - - - - - - - - 430 Allowance for Funds Used - (3.6) - - - - - (0.2) (0.6) - - - (0.8) (0.2) - (5.4) 431 Customer Contributions - - - - - - - - - - - - - - - - 432 Depreciation on Automotive Equip - - - - - - - - - - - - - - - - 433 Meals and Expenses - - - - - - - - - - - - - - - - 434 G&A Capitalized - (21.7) - - - - - (1.1) (3.5) - - - (4.9) (1.3) - (32.5) 435 Major Maintenance Expensed - - - - - - - - - - - - - - - - 436 Site Restoration - - - - - - - - - - - - - - - - 437 Sub Total - 202.5 - - - - - 5.5 19.7 - - - 27.5 3.1 - 258.3 438 Deduct: Lesser of Cost or Proceeds - 439 Capital Additions - 202.5 - - - - - 5.5 19.7 - - - 27.5 3.1 - 258.3 440 Undepreciated Capital Cost Before 2018 Claim 232.4 2,488.7 99.6 - - 3.4 0.0 26.6 29.0 16.9 - 0.0 121.3 14.4 - 3,032.3 441442 CAPITAL COST ALLOWANCE FOR 2018443 On Balance Forward 9.3 169.2 6.0 - - 0.7 0.0 6.3 9.3 1.1 - 0.0 28.1 6.2 - 236.3 444 On Net Capital Additions - 7.5 - - - - - 0.8 9.8 - - - 4.1 0.9 - 23.1 445 Total 2018 Claim 9.3 176.7 6.0 - - 0.7 0.0 7.1 19.1 1.1 - 0.0 32.3 7.1 - 259.5 446 Undepreciated Capital Cost December 31, 2018 223.1 2,312.0 93.6 - - 2.7 0.0 19.4 9.8 15.8 - 0.0 89.0 7.3 - 2,772.9

Description

Schd 7-5


General Tariff Application Schedule of Large Corporations Tax

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test PeriodLine Cross 2012 2013 2014 2015 2016 2017 2018No. Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 2

1 Capital2 Equity (including preferred) - - - - - - - 3 Reserves - - - - - - - 4 Loans and Advances - - - - - - - 5 Long Term Debt - - - - - - - 6 Dividends Payable - - - - - - - 7 Shares in Other Corporations - - - - - - - 8 Loans and Advances to Other Corporations - - - - - - -

General Base Reduction - - - - - - - 9 Tax Base - - - - - - -

1011 Large Corporations Tax Before Adjustment - - - 12 Capital Reduction Amount - - - 1314 Large Corporations Tax Schedule 7-2 - - - - - - -



8. TRANSMISSION REVENUE OFFSETS Section 8 of AltaLink’s Application addresses the following:

8.1 Summary

8.2 Transmission Revenue Offset Schedules



Summary AltaLink’s Transmission Revenue Offsets are obtained from two main revenue streams: fixed

contracts and variable labour contracts, each is described below. AltaLink is forecasting a constant level of revenue offsets over the Test Period for revenue derived from fixed contracts. The forecast basis for the two exceptions to fixed contracts – TransAlta Transmission First Nations and Other - are provided in the related following sections.

Schedule 8.1 summarizes AltaLink’s forecast Transmission Revenue Offsets. AltaLink has not increased its forecast contracted manpower in respect of such revenues, in accordance with Decision 2010-292.

8.1.1 Fixed Contracts

AltaLink’s Transmission Revenue Offsets predominantly comprise revenue obtained from fixed contracts related to infrastructure services. In its 2002-2004 GTA, AltaLink explained the origin and purpose of its service contracts with Aquila Network Canada (now FortisAlberta) and TransAlta Utilities Corporation. Copies of the contracts were filed as part of the 2002-2004 GTA. These contracts maintain operational efficiencies between the companies and provide a direct benefit to Alberta customers through Miscellaneous Revenue. As detailed below, the subject contracts deal with the provision of services related to transmission poles with distribution attachments, telecommunications facilities, providing communications services, system control centre services, cell tower leases, and third party land leases. As this entire infrastructure does not materially change during the Test Period, the associated revenue remains consistent over the period.

Services to FortisAlberta AltaLink provides the following services to FortisAlberta:

• Telecommunication System Services — These services include the provision of voice communication services capable of operating FortisAlberta’s mobile communications assets, such as vehicle mobile radios, office radios, pagers and portable hand held radios;

• Joint Pole Use — This service includes the utilization of AltaLink’s transmission structures for the support and attachment of FortisAlberta’s under strung distribution facilities; and

• Miscellaneous Services — These services include facilitating high load moves, maintenance of distribution equipment controls, meter data services and Interruptible Load Remedial Action Scheme (ILRAS) services.

Table 8.1.1-1 summarizes the forecast Transmission Revenue Offsets AltaLink will receive for the provision of the foregoing services to FortisAlberta.

Table 8.1.1-1 - FortisAlberta Transmission Revenue Offset Forecast ($M)

FortisAlberta Contracts 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Telecommunications Services 0.7 0.7 0.7 0.7 0.7 Joint Use 2.6 2.6 2.6 2.5 2.5 Miscellaneous Service 0.0 0.0 0.0 0.0 0.0 Total 3.4 3.3 3.3 3.3 3.3




Services to TransAlta AltaLink provides the following general business and transmission services to TransAlta:

• Transmission (First Nations) — this service includes the development and execution of an annual maintenance program for TransAlta’s Withheld Assets located on First Nations lands.

• Telecommunication Services — this service includes provision of telecommunication channels between TransAlta’s generating facilities and head office utilized in the provision of System Control Services and corporate data transfer.

• General Business Services: o System Control Services — provision of supervisory control and data acquisition for

TransAlta's generating facilities, including data transfer, device visibility and device control; and

o Meter Data Services — provision of generation meter data acquisition in order for TransAlta to deliver on the power purchase arrangement obligations.

AltaLink’s forecast revenues derived from the Operation & Maintenance of TransAlta’s Withheld Assets are a function of the assets located on First Nations lands and AltaLink’s forecast operating expense and maintenance programs. Table 8.1.1-2 summarizes the forecast Transmission Revenue Offsets AltaLink will receive for the provision of the foregoing services to TransAlta.

Table 8.1.1-2 - TransAlta Transmission Revenue Offset Forecast ($M)

TransAlta Contracts 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Transmission (First Nation) 0.6 0.8 0.6 0.6 0.6 Telecommunications Services 0.1 0.1 0.1 0.1 0.1

General Business 0.3 0.3 0.3 0.3 0.3 Total 1.0 1.2 1.1 1.1 1.1


8.1.2 Variable Labour Contracts AltaLink also provides limited services to AltaLink Affiliated companies such as AltaLink

Investments, L.P. (AILP), AltaLink Holding, L.P. (AHLP), BHE AltaLink Ltd. (BHEA) and BHE Canada Ltd. (BHEC). AltaLink charges these entities for time spent by AltaLink employees on the affiliate companies’ accounting, financing, IT and legal activities. As directed in Decision 2005-019, AltaLink calculates the charge based upon two times the actual salary. The two times actual salary covers the cost of a person’s salary, plus benefits and all corporate overhead costs.

Table 8.1.2-1 summarizes the forecast Transmission Revenue Offsets AltaLink will receive for the provision of the foregoing services to affiliate companies. Exceptionally during 2013 and 2014, there were a number of non-recurring events which increased affiliate revenue, such as:

• senior executive secondment to SNC-Lavalin Inc. from January 2013 until March 2014; and • on September 30, 2013, SNC-Lavalin Group Inc. announced it had initiated a process to sell

an equity stake in AltaLink. On December 1, 2014, BHE Canada Holdings Corporation (BHE), formerly known as MidAmerican (Alberta) Canada Holdings Corporation, became the sole owner of the Partnership by acquiring 100 percent of SNC-Lavalin Group Inc.’s (SNC) interest in AltaLink. During 2013 and 2014, all regulated staff involved in the sale process tracked their time daily which was subsequently charged to affiliates.



With the creation of BHEC, certain AltaLink costs previously included as operating expenses and recovered in miscellaneous revenue have been removed from AltaLink. This results in the $0.6M forecast reduction in miscellaneous revenue.

Sponsorships and charitable donations committed by AltaLink or any of its Affiliates have never been included nor are part of the 2017-2018 GTA as per Decision 2003-061 (pages 15-16) and Decision 2007-012 (pages 41-42), these are considered non-utility costs and are not be included in Revenue Requirement.

Table 8.1.2-1 - Services to Affiliates Transmission Revenue Offset Forecast ($M)

Lease Revenue and Other 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Affiliates and Inter-Affiliates 3.2 1.2 1.2 0.6 0.6 Total 3.2 1.2 1.2 0.6 0.6

AltaLink’s affiliated companies are forecasting services from AltaLink L.P. during the Test Period to decrease as a result of the changes in the overall corporate structure. The amount of $0.6M should represent the new norm of affiliate services in future years.

8.1.3 Lease Revenue and Other As shown in Table 8.1.3-1, AltaLink is forecasting approximately $1.2M per year over the Test

Period related to cell tower and land lease. Other revenue comprises $0.4M per year of O&M services provided to third parties, $0.3M per year of utility right-of-way billings and high load moves, and approximately $0.3M annual amortization of customer contribution towards operating expenses related to customer contributed portion of AltaLink’s assets.

Table 8.1.3-1 - Lease and Other Transmission Revenue Offset Forecast ($M)

Lease Revenue and Other 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Land Lease 0.5 0.5 0.5 0.5 0.5 Tower Leases 0.6 0.8 0.8 0.7 0.7 Other 2.3 1.0 1.0 1.0 1.0 Total 3.4 2.3 2.3 2.2 2.2


8.1.4 Refund of Customer Contributions to FortisAlberta In Section 31.4, AltaLink sets out its proposal to refund in the Test Period certain customer

contributions paid or payable by FortisAlberta, as required under the AESO’s terms and conditions of service and in accordance with the AESO’s customer contribution policy for the requested construction of transmission facilities. Under this proposed change, AltaLink will charge FortisAlberta an annual amount to offset the increased returns resulting from the refunded customer contributions (refer to Section 31.4 for full rationale and details of this proposed change), resulting in no net change to AltaLink’s Transmission Tariff.

Table 8.1.4-1 - Charge to FortisAlberta for Refunded Customer Contributions ($M)

Charge to FortisAlberta 2014

Actual 2015

Forecast 2016

Forecast 2017

Forecast 2018

Forecast Charge to FortisAlberta 0.0 0.0 0.0 1.9 5.0



Transmission Revenue Offset Schedules Schedule 8-1 Schedule of Transmission Revenue Offsets

Schd 8-1

Schedule 8-1 AltaLink Management Ltd. Feb 15/16

General Tariff ApplicationSchedule of Transmission Revenue Offsets

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Revenue - Affiliates & Inter-Affiliates 1.8 4.3 3.2 1.2 1.2 0.6 0.6 03 Miscellaneous revenue - other 7.8 7.9 10.1 6.9 6.7 8.5 11.6 0405 Total Revenue Offsets 9.6 12.3 13.3 8.1 7.9 9.1 12.2



9. TRANSMISSION RETURN ON RATE BASE Section 9 of AltaLink’s Application addresses the following:

9.1 Summary

9.2 Capital Structure

9.3 Return on Equity

9.4 Embedded Cost of Debt

9.5 Long-Term Debt Deferral Account

9.6 Credit Rating Reports

9.7 Transmission Return on Rate Base Schedules



Summary AltaLink’s forecast return on Rate Base is summarized in Schedule 9-1.

AltaLink is forecasting the weighted average rate of return to change from 5.78% and 5.74% in 2015 and 2016 respectively, to 5.79% and 5.82% in the 2017 and 2018 Test Period, respectively. Refer to Section 28 for more details regarding this component of AltaLink’s evidence.

Capital Structure This Application reflects a capital structure consisting of the following:

• common equity ratio of 38% as a placeholder for 2017 and 2018, representing the 2015 approved rate of 36% plus 2% related to AltaLink’s non-taxable status, as discussed in further detail in Section 28;

• subordinated debt component of 7.63% and 10.00% for 2017 and 2018 respectively, based on the issuance of subordinated debt in 2016 and 2017;

• continuation of the Flow-through method for both federal and provincial income taxes in 2017 and 2018; and

• the refund of $90.9M of the previously collected FIT liability in 2017.

Refer to Section 28 for further details and explanations regarding these items and capital structure related matters. Also refer to Section 28.3.3 for a discussion of AltaLink’s modified capital structure that includes the issuance of subordinated debt in 2016 and 2017 such that subordinated debt represents approximately 10% of AltaLink’s capital structure for 2018.

Return on Equity AltaLink has incorporated a Return on Equity (ROE) of 8.30% as a placeholder for 2017 and 2018

given the 2016 GCOC proceeding is underway and the Commission is not expected to issue a Decision until late 2016. For further details of this request refer to Section 28.2.

Embedded Cost of Debt Schedule 28-1 sets out AltaLink’s forecast mid-year embedded cost of debt of 4.16% for each of

2017 and 2018, relative to all long-term and short-term debt other than subordinated debt (refer to Schedule 28-2 for details). Schedule 28-1 also sets out the embedded cost of subordinated debt of 4.94% and 5.06% for 2017 and 2018 respectively (refer to Schedule 28-4 for details).

For each test year, AltaLink calculated the mid-year embedded cost of debt as follows:

• each debt instrument’s gross proceeds are the gross proceeds outstanding at the end of each year;

• total carrying costs for each debt instrument are calculated as the sum of interest calculated on year-end gross proceeds plus the amortization of financing costs, discount or premium; and

• the mid-year cost rate for each test year is calculated by dividing the aggregate mid-year carrying costs by the aggregate mid-year gross proceeds.



Long-Term Debt Deferral Account Due to the risk related to a credit rating downgrade, as discussed further in Section 28, AltaLink

is seeking approval from the Commission to continue the Long-Term Debt Deferral Account.

Credit Rating Reports Refer to Appendix 4 for recent credit ratings reports issued by Standard & Poor’s and Dominion

Bond Rating Service (DBRS).

Transmission Return on Rate Base Schedules Schedule 9-1 Schedule of Transmission Return on Rate Base

Schedule 9-2 Schedule of Transmission AFUDC

Schd 9-1


General Tariff ApplicationSchedule of Transmission Return on Rate Base

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Rate Base Schedule 10-1 2,157.6 2,995.3 3,633.3 3,656.9 3,682.7 3,725.8 3,791.8 02 Net Mid Year Contributions Schedule 10-6 (317.6) (438.6) (491.4) (477.6) (467.0) (455.1) (490.0) 03 1,840.0 2,556.8 3,141.9 3,179.3 3,215.7 3,270.8 3,301.8 04 No Cost Capital Schedule 29-1 (47.2) (68.3) (95.6) (148.2) (142.7) (55.3) (10.4) 05 Net Rate Base 1,792.8 2,488.5 3,046.3 3,031.1 3,073.0 3,215.5 3,291.4 06 Cost Rate Schedule 28-1 6.424% 5.745% 5.70% 5.78% 5.74% 5.79% 5.82%0708 Total Return on Rate Base Schedule 3-1 112.1 140.2 174.1 175.1 176.5 186.2 191.7

Note:

Please refer to Schedule 31.2-A Schedule of AML Total Rate Base for total rate base information

Schd 9-2


General Tariff ApplicationSchedule of Transmission AFUDC

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Prior Year Work-In-Progress02 CRU 8.7 16.7 21.4 28.1 25.5 25.5 114.6 03 Direct Assignment04 IT&Facilities 4.6 3.8 7.0 5.8 2.1 (1.0) (1.4) 05 Total Prior Work-In-Progress 13.3 20.5 28.4 33.9 27.6 24.5 113.2 0607 Current Year Work-In-Progress08 CRU 16.7 21.4 28.1 25.5 25.5 114.6 24.3 09 Direct Assignment10 IT&Facilities 3.8 7.0 5.8 2.1 (1.0) (1.4) (1.4) 11 Total Current Work-In-Progress 20.5 28.4 33.9 27.6 24.5 113.2 22.9 1213 Mid Year Work-in-Progress14 CRU 12.7 19.0 24.7 26.8 25.5 70.0 69.5 15 Direct Assignment - - - - - - - 16 IT&Facilities 4.2 5.4 6.4 4.0 0.6 (1.2) (1.4) 17 Total Mid Year Work-In-Progress 16.9 24.4 31.1 30.7 26.0 68.8 68.0 181920 Add: Materials & Supplies Inventory Mid Year 15.3 18.0 18.8 20.7 21.2 22.7 24.6 2122 @ Cost of Capital Rate 6.42% 5.74% 5.70% 5.78% 5.74% 5.79% 5.82%2324 AFUDC 1.7 2.1 2.6 2.9 2.7 5.1 5.4

Equity Portion of AFUDC 0.8 1.1 1.4 1.6 1.5 2.8 2.9 Preferred Stock Portion of AFUDC - - - - - - - Sub Debt portion of AFUDC 0.1 0.3 0.5 Debt Portion of AFUDC 0.9 1.0 1.1 1.3 1.2 2.0 2.0



10. TRANSMISSION RATE BASE Section 10 of AltaLink’s Application addresses the following:

10.1 Summary

10.2 Capital - Direct Assign

10.3 Capital Replacements and Upgrades

10.4 Information Technology Capital Costs

10.5 Facility Capital Costs

10.6 Transmission Rate Base Schedules



Summary AltaLink’s Rate Base continuity can be found in Schedules 9-1, 3-2.2017 (i), 3-2.2018 (i), and

31.2-A.

AltaLink is forecasting mid-year Rate Base (after adjustments) of $7,349.0M and $7,680.6M, for the years 2017 and 2018 respectively. That is a 7.5% increase in 2017 over the 2016 applied for Rate Base, and a 4.5% increase in 2018 over the 2017 forecast Rate Base.

Increases to Rate Base are primarily driven by the forecast additions of DA projects required by the AESO. A description of these DA projects can be found in Section 10.2 of this Application as well as in Appendix 19-B.

AltaLink’s forecast capital expenditures include:

• costs in respect of DA projects directly assigned by the AESO and projects forecast to be assigned by the AESO;

• capital replacement and upgrades; and • general capital expenditures, all as described throughout Section 10.

Capital expenditures are comprised of those charges that are directly attributable to the capital projects, engineering and supervision (E&S) and AFUDC as applicable.

Table 10.1-1 - 2016-2018 Forecast Capital Expenditures ($M)

Description 2016

Update 2017

Forecast 2018

Forecast DA Project Capital Expenditures 419.9 583.3 608.0 Reduction for EPCm Rate Differential (Table 10.2.9-3) (8.0) (13.3) (13.2)

AFUDC 10.4 16.0 25.8 Additional AFUDC related to the refund of previously collected CWIP-in-Rate Base amounts

115.0 - -

Total DA Projects 537.3 586.0 620.6 Capital Replacement & Upgrades 206.0 168.9 173.3 Information Technology 29.8 31.0 26.7 Facilities 29.9 6.2 4.1 Total Capital Expenditures 803.0 792.1 824.7

Totals may vary due to rounding.

AltaLink’s 2016 Update and 2017-2018 Update capital expenditures are summarized in Table 10.1-1. Forecast capital expenditures related to DA capital projects are detailed in Schedules 3-2.2017(iii) and 3-2.2018(iii); all other capital expenditure forecasts are detailed in Schedule 10-4. Refer to Section 31, Schedule 31.2-B for further details regarding total capital expenditures and additions.



Capital – Direct Assign 10.2.1 Overview

In AltaLink’s 2013-2014 GTA, AltaLink addressed the challenges of forecasting the expenditures and additions of diverse projects given the unpredictable nature of many of the various risks and uncertainties that impact project execution both at an individual project and aggregate project portfolio level. AltaLink submitted a probabilistic modeling approach that forecasted AltaLink’s 2013-2014 Uncertainty Adjusted Capital Expenditure and Additions. The Commission approved AltaLink’s 2013-2014 Uncertainty Adjusted Capital Expenditure and Addition Forecast as filed,14 validating the new probabilistic modeling approach.

In the 2013-2014 test years AltaLink’s probabilistic forecasting methodology predicted the combined expenditures and combined additions to be approximately $3.1 billion and $2.0 billion, respectively. The actual combined expenditures and combined additions for the 2013-2014 test years were approximately $3.3 billion and $2.2 billion, a variance of 6% and 10% from the forecast approved by the Commission.

Consistent with AltaLink’s 2013-2014 GTA and 2015-2016 GTA, AltaLink is continuing to use the enhanced forecasting process for determining the 2017-2018 Test Period Revenue Requirements.

Prior to the 2013-2014 GTA, AltaLink historically filed the DA capital forecast for expenditures and additions based on individual project plans. The aggregation of the individual project plans, also known as AltaLink’s base plan, would be aligned with the AESO for forecasted ISDs. AltaLink’s DA forecasts, which reflect the portfolio view of all projects, included the best estimate of the individual projects’ ISDs giving consideration to all known project activities at the time the forecast was developed. Identified risks and mitigation efforts were incorporated to reflect the view at the time of the forecast for conditions anticipated in the project life cycle. Forecasts were updated based on known changes to conditions and then current project progress throughout the project lifecycle.

With the experience gained over the years of unprecedented growth in capital expenditures, it has become apparent that prior DA expenditure and additions forecasts did not account for external factors (or uncertainties), beyond AltaLink’s reasonable ability to predict or control, that could cause significant schedule delays and shift expenditures into future years. Since the external factors manifested themselves at an individual project level it was difficult to ascertain the trend and the broader impact on the overall project portfolio. The external factors influencing schedule delays include but are not limited to: project scope definition, design, stakeholder involvement, regulatory approvals, AESO functional specifications changes, Needs Identification Document (NID) approvals, labour availability, material delivery, weather and environmental considerations.

In recognition of the trends and circumstances described above, AltaLink submitted in the 2013-2014 GTA the enhanced DA forecasting approach to better address the uncertainties outside AltaLink’s control and improve the overall predictability of the GTA Revenue Requirement forecast. The improved forecasting approach, developed in conjunction with PricewaterhouseCoopers LLP (PwC) utilizes statistical probabilistic modeling techniques and scenario models incorporating potential external factors that may generate schedule

14 AUC Decision 2013-407, paragraph 351.



uncertainty. The models define the uncertainties that a project can experience at three specific stages of the project lifecycle: Pre Facility Application filing (Pre-FA), Post Facility Application but Pre-Permits and Licences receipt (Pre-P&L) and Post Permits and Licences receipt (Post P&L).

As part of this forecasting approach, consistent with AltaLink’s 2013-2014 GTA and 2015-2016 GTA, AltaLink has engaged PwC to provide an analysis considering the uncertainties associated with the timing of expenditures through a probability assessment of potential project delays on AltaLink’s 2017-2018 portfolio of capital projects and the impact on the Test Period Base Plan DA capital expenditures and DA capital additions forecast. PwC has provided the results of this analysis in a January 25, 2016 report titled AltaLink L.P. DA Capital Forecast Probabilistic Modelling (the PwC Report) which is attached as Appendix 19-A.

The output of the analysis is the Uncertainty Adjusted Gross DA Capital Expenditures and Uncertainty Adjusted Gross DA Capital Additions Forecast. The expected customer contributions are offset against the Uncertainty Adjusted Gross DA Capital Expenditures and Uncertainty Adjusted Gross DA Capital Additions Forecast to form the basis for the input into the Revenue forecast. The information presented below is presented on a gross expenditure and additions basis, unless otherwise stated:

Table 10.2.1-1 - DA Capital Forecast - Uncertainty Adjusted CAD$ Millions 2017 2018 Uncertainty Adjusted DA Capital Expenditures $583 $608 Uncertainty Adjusted DA Capital Additions $598 $296

Considering the uncertainties discussed above and the challenges associated with the existing forecasting environment, the enhanced approach adopted reflects an improvement from relying solely on a capital forecast for expenditures and additions based on individual project plans, a methodology employed prior to the 2013-2014 GTA, for the following reasons:

• the improved forecasting methodology has removed the bias inherent in the aggregation of the individual project assessments and has replaced it with a more pragmatic statistical portfolio scenario based approach;

• the approach accounts for the compounding of risks at the various stages of a project lifecycle that influence schedule delays and thus impact the overall expenditure profile; and

• the portfolio forecasting approach predicts a lower expenditure forecast over the Test Period as compared to the historical approach.

10.2.2 Look-back Assessment of the 2013-2014 Probabilistic Forecast A look-back assessment of the 2013-2014 actuals was done to evaluate the performance of the

model. When employed in the 2013-2014 GTA, the probabilistic modeling approach produced a forecast across the two year Test Period that was closer to the actual expenditures across the portfolio of projects.

As detailed in Table 10.2.2-1 below AltaLink’s actual capital expenditures for 2013-2014 were $3.46 billion or within 10% of the uncertainty adjusted forecast.



Table 10.2.2-1 - DA Capital Forecast - 2013-2014 Performance CAD$ Millions 2013-2014 Expenditures Additions Actuals $3,464 $2,229 Base Plan $4,272 $2,825 Uncertainty Adjusted $3,136 $1,970

On an individual project basis, the uncertainty adjusted 2013-2014 expenditure amounts were relatively well distributed when compared to the actual expenditures with 47.5% of project predictions resulting in expenditures less than what actually occurred and 52.5% of project predictions resulting in expenditures greater than what occurred.

The model also performed reasonably well with respect to predicting 2013-2014 project ISDs and additions: 19 projects had ISDs earlier than what was predicted by the model and 27 projects had later ISDs than what was predicted by the model.

A portfolio analysis provides a result with a higher confidence level than the comparable analysis done on a single project basis. While some projects within the portfolio may be further delayed while others may be advanced, when taken at an overall portfolio level the aggregated result is more reliable than the result for any individual project.

As evidenced by the actual results of 2013-2014, AltaLink’s capital expenditures for the 2013-2014 test years fell within the range between the base plan and the uncertainty adjusted forecast demonstrating the improvement in forecast Revenue Requirement accuracy through use of AltaLink’s portfolio analysis approach.

Further, AltaLink’s actual expenditures for 2015 were within 10% of the forecast in the recent 2015-2016 GTA; actuals in 2015 were $878 M relative to a forecast $791M. Additions actuals in 2015 were $2,881B vs a forecast of $2,783B.

10.2.3 Direct Assign Capital Forecasting Approach AltaLink is continuing to use the enhanced forecasting process for determining the Test Period

Revenue Requirement which incorporates the following key elements:

• AltaLink’s Base Plan for DA Capital Expenditures and Additions: o this plan represents the aggregation of current project schedules as managed by the

individual project teams and is not risk adjusted at a portfolio level; and o the base plan was reviewed and those projects that are considered to have a high

probability of not proceeding and instead of being cancelled were reduced by 50%. • The impact of identifiable risk or uncertainties which are external influences on project

schedules as identified at three different project phases: o Pre-FA o Post FA but Pre-P&L o Post P&L

• A probabilistic assessment methodology designed to improve the predictability of the timing of the expenditure/additions in the portfolio of projects to reflect the cumulative uncertainty factors identified: o the approach is a scenario planning methodology which includes statistical modeling.



• An Uncertainty Adjusted DA Capital Expenditure and Additions Forecast which will be the input for the Test Period Revenue Requirement: o the Uncertainty Adjusted DA Capital Forecast removes the bias which was apparent in

the approach prior to the 2013-2014 GTA thus yielding a lower Revenue Requirement within the Test Period.

10.2.4 AltaLink’s Base Plan DA Capital Expenditures and Additions AltaLink’s 2017-2018 portfolio of capital projects comprises 75 projects, excluding projects with

trailing costs only in the Test Period, with estimated individual project life costs ranging from approximately $1M to $600M. The base plan additions for the Test Period include 31 projects with ISDs expected in 2017 and 17 projects with expected ISDs in 2018. AltaLink’s Base Plan DA Capital Expenditures includes projects with forecasted ISDs in or prior to 2015 that may have continued expenditures (i.e., trailing costs) in 2016. These projects were excluded from consideration of potential project delays. Given that the preparation of the 2017-2018 Revenue Requirement was completed during the 2015 timeframe, shifting of expenditures started in 2016. As such, projects with ISDs in 2016 and trailing costs in subsequent years were subject to potential project delays. Refer to Appendix 19-B for Base Plan project scope descriptions. Refer to Appendix 19-C for Base Plan DA Capital Expenditure and Addition Forecast by project.

AltaLink prepares forecasts of annual capital expenditures (Base Plan DA Capital Expenditures) and additions (Base Plan DA Capital Additions) on an individual project level. The aggregation of the individual project plans form the basis of AltaLink’s Base Plan or working plan and is aligned with the AESO forecasted ISDs for AltaLink projects under direction. The AESO, as system planner, assesses and determines the current and future needs for the expansion and enhancement of the transmission system. AltaLink engages proactively and continuously with the AESO on ISDs including the issues of need and cost. At this time, AltaLink continues to work with the AESO to align and confirm the forecasted ISDs, refer to Appendix 19-E for futher details. The AESO and AltaLink discuss, among other things, project variances for cost, scope and risks that may impact the execution of the DA projects including confirmation of forecasted ISDs. These discussions occur regularly at weekly or monthly project level planning meetings between AltaLink and AESO project management and are further supported by senior leadership discussion on a monthly and quarterly basis. The most recent senior leadership quarterly discussion occurred on December 7, 2015. The focus and objective of these engagements is to provide project status updates, review and alignment of progress and planning, identification of execution changes or issues that may affect cost, schedule or ISDs.

On an individual project basis AltaLink developed inputs to the model including a forecast that considers all known project activities at the time of the project forecast incorporating identified risks and mitigation efforts and reflects the best estimate of the ISD aligned with the AESO’s forecasted date. The forecasts are however limited by the accuracy of the assumptions to anticipate the time impact of external factors.

As described, the base plan forecasts do not adequately reflect external factors (uncertainties) that may cause schedule delays and would have the effect of shifting expenditures further out to future years. Consistent with any large capital forecast, the working plan project forecast and timing is dependent upon a number of variables including but not limited to scope definition, design, stakeholder involvement, regulatory approvals, AESO functional specifications and NID approvals, labour availability, material delivery, weather, and environmental considerations.



Prior to AltaLink’s 2013-2014 GTA, the Capital Forecasts had generally been higher than the levels actually executed. The actual expenditures were lower due to delays caused by many factors beyond AltaLink’s reasonable ability to predict or control. Although there have always been unpredictable factors to consider, historically forecasts have not had to account for the interaction between projects or the increasing number of large sizes of projects that have become evident in the last few years.

The following Table outlines forecasted Base Plan DA Capital Expenditures and Base Plan DA Capital Additions for the Test Period.

Table 10.2.4-1 - DA Capital Forecast - Base Plan CAD$ Millions 2017 2018 Base Plan DA Capital Expenditures $639 $669 Base Plan DA Capital Additions $657 $305

Expenditures are the amounts forecasted to be incurred in any year and have been forecasted for each project on an individual project basis. Additions take place when an asset is deemed used and useful, a concept used by regulators to determine whether an asset should be included in the utility's Rate Base. This concept requires that an asset currently provides or is capable of providing a service to customers. Additions forecasted are the cumulative lifetime expenditures for any capital project.

10.2.5 Identification of Uncertainties AltaLink has segmented its DA project portfolio by the following stages of the project in order to

better identify the various external factors which contribute to schedule delays:

• Pre-FA: o The project is early in its lifecycle with activities consisting of stakeholder engagement,

siting/route selection, environmental activities, preliminary engineering, regulatory application preparation, land access consultation, cost estimating and schedule development.

• Pre-P&L: o The project has advanced in the project life cycle and AltaLink has provided the PPS to

the AESO and the Facility Application has been filed with the AUC. Activities in this stage include continuing engineering, long lead material procurement, land access negotiation and hearing preparation.

• Post P&L: o The project has received approval to proceed to construction. Activities include

construction, material procurement, commissioning and energization. Based on historical performance, AltaLink has identified forecasting uncertainties for each of these project stages: - Pre-FA Delays – uncertainties that can require additional activities, create pressure

on current project schedules, and lead to delays in filing Facility Applications include: • Procedural Delays (Scope Definition/NID Approval) – the potential that AESO

delays in issuing or approving documents, such as functional specifications, scope definition or NID filing, may impact a project’s schedule. Functional specification,



scope or load forecast modifications may contribute to delays in NID approvals and subsequently to delays in current project schedules.

• Stakeholder Engagement – the potential that concerns identified during stakeholder consultations require additional time to resolve. In some instances, changes/modifications to project scope or route selection may be necessary to fulfill regulatory obligations (i.e., AUC Rule 007). This uncertainty includes an environmental/historical aspect where there is the potential that alternate route/site selection may be necessary because environmentally sensitive areas or culturally or historically significant locations are present along current routing. In such an event, additional time may be necessary to find routing and siting alternatives and complete consultation with stakeholders.

• Land Access – the potential that the required land or right-of-way cannot be easily obtained or that agreements stipulate unusual conditions. Difficulties in obtaining land access can lead to changes in route or site selection and subsequently to elements required in the Facility Application.

• Customer Delay – customer projects only: The potential that the project may be deferred for internal business reasons or as a result of funding limitations in early stages.

- Pre-P&L Delays – uncertainties that can delay expected receipt of P&L for a project that has submitted a Facility Application include: • Procedural Delays (Government Agencies) – the potential that current project

schedules may be delayed because: o the AUC issues a notice of hearing that was not previously anticipated in the

project plan; o the AUC does not render individual decisions on interlinking projects

submitting separate Facility Applications, choosing instead to review all projects together; or

o other government agencies that contribute to approvals may experience capacity constraints in the face of an increasing number of, as well as more complex, applications driven by Alberta’s growth.

- Post P&L Delays – uncertainties that can delay schedules once a project is in construction include: • Safety – the potential that health and safety considerations may result in a work

slowdown or stoppage for a set time. In the event an incident has occurred on site or on a similar work site, or environmental factors contribute to unsafe conditions for workers, construction may be delayed to allow for an investigation to proceed or to make modification of work practices possible.

• Engineering Labour – the potential for capacity constraints at AltaLink and/or EPCm engineering work forces given the potential shortages of skilled workers in the Alberta labour market.

• Construction Labour – the potential for capacity constraints in contractor workforces given the potential shortages of skilled workers in the Alberta labour market.

• Outage availability – the potential that the outages to tie-in assets cannot occur as desired.



• Materials – the potential that material delivery may not meet the current project schedule or that material quality issues may require modification to procurement or construction execution plans.

• Weather – the potential that weather may affect the current construction schedule, particularly for projects that are already constrained by environmental restrictions or where construction access is limited to winter field conditions.

• Environmental/Historical – the potential that during construction, culturally or historically significant areas or sensitive environmental species may be encountered. In such an event, construction may be delayed until such time as approval to proceed is received.

• Land Access/AUC Decision on Route Selection – the potential that current project schedules may be delayed because: o obtaining land through the Surface Rights Board process may require more

time than planned; o obtaining right-of-way agreements from landowners may require more time

than anticipated; and o as an outcome of the hearing process, the AUC decision may require a

change to the preferred and/or alternate routes as submitted – for example, the decision may call for some combination of these routes – and may subsequently lead to additional requirements for activities such as engineering, stakeholder consultation, land access and environmental assessment, and ultimately a change in project schedule.

• Project Execution – the potential that a tight Alberta labour market may affect recruitment and retention of qualified staff.

• Project Specific – the potential that the project may be delayed due to an uncertainty that is unique to the project and is not covered in the other uncertainties above.

• Customer Delay – customer projects only: the potential that the project may experience delays resulting from challenges in securing construction funding.

10.2.6 Probabilistic Forecasting Approach AltaLink has engaged PwC to provide an analysis of the base plan using statistical probability

analysis to determine an “uncertainty adjusted” DA Capital Expenditures and DA Capital Additions Forecast considering prospective changes in the project timing due to uncertainties. PwC has provided additional information on the modeling analysis in the PwC Report, attached as Appendix 19-A.

In order to assess the external uncertainties, PwC has helped develop a scenario planning modeling approach. A scenario planning approach estimates potential delays over all combinations of the primary identified uncertainties affecting each project. The scenario planning approach also simulates outcomes for large numbers of potential scenarios and calculates an expected value.

A scenario is a combination of multiple events that may occur and that will have an impact on a value being measured, if they do occur. For example, when trying to assess the time of arrival for a trip, scenarios for different outcomes of events such as start time, traffic conditions, vehicle performance and weather would be considered. Each of these uncertainties has numerous potential outcomes and each outcome has a particular probability of occurring. If an



outcome occurs, it will impact the resulting arrival time in specific way. The joint probability can be derived by combining the probabilities of the different possible outcomes of the uncertainties that might affect the time of arrival.

In preparing the scenario planning approach model, the forecast analyst is asked to focus on each of the uncertainties and articulate how it might impact a project’s timeline in terms of specific, discrete outcomes. The outcomes and their associated likelihoods are clear and concrete. The forecast analyst is not required to identify the statistical form of the probability distribution of each uncertainty as it will be simulated directly using the discrete outcomes. The scenario planning approach also allows the analyst to utilize his/her knowledge of the specific project and knowledge of the current environment in which the projects will proceed in identification of project delay risks and probabilities.

10.2.7 Application of the Uncertainty Forecasting Approach There are four key steps in the uncertainty process when using the Scenario Planning Approach:

1) Identify the key uncertainties for each stage – Pre-FA, Pre-P&L and Post P&L – of a project’s life cycle.

2) Assess the potential outcomes of each uncertainty on the project’s timeline (such as manageable delay, moderate delay, or significant delay) as well as the impact (length of delay) of each outcome.

3) Assess the probability of each outcome occurring, with the sum of the probabilities of the outcomes under each uncertainty adding up to 100%.

4) Using accepted probability theory based on the above inputs and the Base Plan DA Capital Expenditure Forecast, estimate the expected timing of expenditures for each project for each year.

10.2.8 Scenario Models In order to simplify the analysis process, AltaLink identified groupings of projects that were

subject to similar: i) outcomes and impacts of outcomes for all of the identified uncertainties; and ii) probabilities of outcomes. These assessments were based on a typical or average project of a given stage, with the understanding that large (expenditures greater than $100M) or unusual projects which might deviate significantly from the standard assessments were determined to have their own unique probabilities of outcomes and unique impacts (delays) associated with those outcomes.

Based on the above analysis, the following models were developed.



Table 10.2.8-1 - Models Model

Pre-FA Pre-P&L Post P&L Pr

ojec

t Cla

ss

Homogeneous projects standard assessments (6 models)

Pre-FA Homogenous Projects

Pre-P&L Homogenous

Projects

Post P&L Homogenous

Projects 1 system model and 1 customer model each collectively coded for probability and impacts. 18 system/34 customer Projects

1 system model and 1 customer model each collectively coded for probability and impacts. 6 system/6 customer Projects

1 system model and 1 customer model each collectively coded for probability and impacts. 0 system/8 customer Projects

Unique projects (3 models)

Pre-FA unique individual projects

Pre-P&L unique individual projects

Post P&L unique individual projects

0 models individually coded for probability and impacts to address project-specific complexities. 0 Projects



For each of the relevant uncertainties in the above 9 models, utilizing past experience in similar projects and knowledge of the current projects provided, specific probability outcomes and the resulting impact (delay) for each outcome were identified. The identified outcomes, probabilities and impacts formed the basis of each model.

Figure 10.2.8-1 below provides an example of the uncertainties, outcomes, probabilities of those outcomes, and the impacts of the outcomes (delays) for the grouped projects at the Pre-FA stage.



Figure 10.2.8-1 - Probability Outcomes Example

Similar assessments were made for each of the other 8 groups. Refer to the PwC Report,

attached as Appendix 19-A.

10.2.9 Probabilistic Forecasting Methodology AltaLink, with the help of PwC, assessed each model based on the uncertainties and outcomes

associated with its characteristics to determine the “uncertainty adjusted forecast”. These models range in possible scenarios from 10 to over 23,000, each of which can indicate the possibility of expenditure delays for any project in any year. As such, there can be approximately 23,000 different possible shifts of expenditures (depending on the applicable risk model) for a project into future years. All the scenarios are then aggregated into expected expenditures for each year, given the estimated probability of these scenarios actually occurring.

The expenditures that are delayed are further adjusted for forecast annual escalation based on 3.2%, 4.8% and 4.3% for 2016, 2017 and 2018 respectively (refer to Appendix 19-D1). This cost represents only the expectation of an increase in project costs due to escalation as a result of the time delay. For clarity this cost does not and is not intended to represent potential cost



increases due to other factors other than time delays. The purpose of this analysis is to assess the impact of uncertainties on the timing of expenditures only.

AltaLink undertakes to update, and if required, adjusts the escalation forecast on an annual basis. Updates to escalation rates are the result of movement of markets due to supply/demand and the varying influences of the cost drivers and depending on these market factors prices may experience periods of rapid or slow escalation. AltaLink has an escalation methodology that is reflective of the market, specifically considers the exact items that are most pertinent to AltaLink’s capital program and is able to be substantiated through publically available indices. Appendix 19-D1 provides the escalation methodology and forecasts utilized within the probabilistic forecasting model.

As a result of the prolonged and increasing uncertainty in the market place, in January 2016 AltaLink performed an interim update of the escalation forecast to assess and test for potential market movements that may result in changes to the 2017-2018 escalation (refer to Appendix 19-D2). Results of the interim assessment have further refined the escalation forecast, and confirmed current market expectations of escalation for the years 2017 and 2018.

As additions are the sum total of lifetime expenditures for any project, delays in additions due to uncertainties must reflect expected delays in expenditures. Additions are shifted in time by approximately the same delay factor used to shift expenditures. However, since additions are considered as being fully operational at the ISD or not at all, rules needed to be established as to how they are counted and by exactly how much to shift those to a later date (Addition Shifting Rule).

The Addition Shifting Rule, developed by the forecast analysts, is based upon the quarter in which the ISD of a project falls and the number of quarters by which expenditures are expected to be delayed. The rule is as follows:

• if ISD quarter + Number of quarters of expenditure delay is less than or equal to four quarters then no delay in additions results;

• if ISD quarter + Number of quarters of expenditure delay is greater than four quarters and less than or equal to eight quarters, then a one year delay to Additions is applied; and

• if ISD quarter + Number of quarters of expenditure delay is greater than eight quarters and less than or equal to twelve quarters then a two year delay to Additions is applied; and so on.

For example, if a project’s Base Plan forecast ISD is April 12, 2017 the ISD quarter is 2. If the total delays are 0.70 years (which is rounded up to 3 quarters), the total number of quarters is 5; therefore, the new Uncertainty Adjusted ISD date occurs in 2018, for a one year delay.

Using the rules above, the potential delays for each project for each of 2017 and 2018 are calculated over all the possible identified scenarios and the expected delays are used to shift Base Plan DA Capital Expenditures and Base Plan DA Capital Additions to a later date by the size of the expected delays.

10.2.10 DA Capital Forecast GTA Test Period 2017-2018 Table 10.2.10-1 below summarizes the results of the modeling and specifically illustrates the

comparison between the Uncertainty Adjusted DA Capital Expenditures and the Base Plan DA Capital Expenditures for 2017 and 2018.



Table 10.2.10-1 - DA Capital Expenditures (Base versus Uncertainty Adjusted) CAD$ Millions 2017 2018 Base Plan DA Capital Expenditures $639 $669 Uncertainty Adjusted DA Capital Expenditures $583 $608

The Uncertainty Adjusted DA Capital Additions are calculated from the Uncertainty Adjusted DA Capital Expenditures. Table 10.2.10-2 below compares the Uncertainty Adjusted DA Capital Additions to the Base Plan DA Capital Additions.

Table 10.2.10-2 - DA Capital Additions (Base versus Uncertainty Adjusted) CAD$ Millions 2017 2018 Base Plan DA Capital Additions $657 $305 Uncertainty Adjusted DA Capital Additions $598 $296

Through the use of the probabilistic modeling methodology, described above, AltaLink has prepared a DA Capital Forecast that accounts for potential delays due to factors outside its control. In developing the DA Forecast for Revenue Requirement setting purposes, AltaLink built in the impact of various possible outcomes of several identified uncertainties and refers to such a forecast as the “Uncertainty Adjusted DA Capital Expenditures” and “Uncertainty Adjusted DA Capital Additions”. This results in reducing the capital expenditure forecast for the Test Period by $56M in 2017 and by $60M in 2018 from what would have otherwise been reflected in this Application had AltaLink used the base forecast (Base Plan DA Capital Expenditures and Base Plan DA Capital Additions).

The forecasting methodology has removed the bias inherent in the aggregation of the individual project assessments and has replaced it with a pragmatic statistical portfolio scenario based approach. The improved approach accounts for the compounding of uncertainties at the various stages of a project lifecycle that influence schedule delays and thus impact the overall expenditure profile. The improved portfolio forecasting approach predicts a lower expenditure forecast over the Test Period and is expected to be more in line with AltaLink historical execution and delivery of capital projects. It should be noted that while the forecasting method provides a forecast of expected capital expenditures and additions, AltaLink will be striving to meet the Base Plan forecast and there is a possibility that the actual capital expenditure and additions may exceed the forecast presented in this Application.

10.2.11 DA Capital Expenditure Forecast Adjustments Pursuant to New Relationship Agreements In AUC Decision 2013-407 Directives 26 and 27 were issued with respect to the EPCm rates to be

utilized for forecasting capital expenditures. AltaLink has undertaken to comply with these directives by removing the estimated rate differential between the previously approved labour multiplier rates and the competitive market rates obtained and contracted through the CPP process. Table 10.2.11-1 below presents the estimated rate differential removed from the Uncertainty Adjusted DA Capital Expenditures forecast. Refer to Schedules 3-2.2017(iii) and 3-2.2018(iii) for the adjustments to capital expenditures and additions in the MFR schedules.

Table 10.2.11-1 - Forecast Reduction to DA Capital for EPCm Rate Differential CAD$ Millions 2017 2018 Expenditure Forecast Adjustment -$13.3 -$13.2 Addition Forecast Adjustment -$12.6 -$3.3



10.2.12 EPCm Strategy Throughout its history, and as examined through numerous regulatory proceedings, AltaLink has

utilized an outsource EPCm model for a significant number of DA projects. This model has successfully delivered, cost effectively, billions of dollars of projects and value to the ratepayers of Alberta. Part of this value has been the ability of the model to adjust and respond to the volatility of volume and timing of DA projects. The outsourcing model has operated as anticipated when the model was originally put forth in prior proceedings before the Commission.

AltaLink plans to continue to utilize an outsourcing EPCm model to address the forecasted project volume variability in the 2016 to 2018 timeframe and beyond. The outsourcing model adjusts to the variability of project volumes dropping significantly from 2015 to 2016 but rising again in 2017-2018 without the requirement of AltaLink incurring the cost of establishing and then constantly right sizing an in-house engineering and support groups.

As stated in the 2015-2016 GTA hearing, going forward AltaLink is examining the detailed structure of the EPCm model to ensure the continued efficient delivery of DA projects. Among other possible options, AltaLink is assessing expanding the use of AltaLink self-management for smaller DA projects where the outsource EPCm economics are not as clear, extending a Relationship Agreement, or establishing a new competitive procurement process to put in place EPCm services providers among other options. As AltaLink continues to consider and assess its requirements beyond 2017, it intends to develop an approach that will provide AltaLink the ability to use external resources for variable future project volumes and continue to deliver transmission projects that provide reliable service to Albertans cost effectively.

AltaLink is fully aware and has considered that the initial 5 year terms of the Relationship Agreements expire May 1, 2017. Under the terms of the existing Relationship Agreements, work on existing projects that has been commenced by an existing EPCm service provider will survive the expiry of the Relationship Agreements and will continue to be performed and completed under the provisions and obligations of the existing Relationship Agreement. For this reason, EPCm services for virtually all projects subject to the 2017-2018 GTA will be performed pursuant to the existing Relationship Agreements.

Capital Replacement and Upgrades AltaLink’s CRU projects cover the transmission asset base including lines, substations,

telecommunications and relays. CRU projects are the key investments by which AltaLink sustains the safe, reliable and efficient operation of its transmission system over the long-term. AltaLink’s forecast CRU capital expenditures for the Test Period are provided in Schedule 10.4 and further detailed below.

Customers directly benefit from AltaLink’s CRU projects that collectively:

• continue to provide safe and reliable transmission service; • reduce the probability of damage to equipment and property; • minimize frequency and duration of outages due to equipment failure; • address safety and environmental concerns outlined by legislation and regulation; • ensure public and worker safety; and • restore full asset functionality.



AltaLink plans CRU projects on the understanding that there is only one trajectory for existing assets – functional performance erosion due to age, wear and weather. For the majority of its assets, AltaLink cannot reliably and safely operate the power system by waiting for assets to fail before replacing them - in many cases these energized assets will fail violently. Maintaining a safe, efficient and reliable transmission system relies on completing CRU before asset conditions have eroded to the point of failure resulting in unacceptable risk and impacts to customers.

AltaLink is forecasting CRU investment requirements of $154.6M in 2017 and $162.3M in 2018, respectively. Forecast investment in CRU expenditures are required to continue to address deteriorating asset condition, safety, and reliability obligations. The specific basis for AltaLink’s CRU forecast varies among the CRU projects and are described in the Appendix 13-A, Capital Maintenance business cases.

AltaLink has entered into a Letter of Intent with Alberta Transportation for the relocation and modification of some existing transmission assets required for the construction of the Southwest Calgary Ring Road. AltaLink’s anticipated scope of work includes the following:

• 916L/832L: remove approximately 3 km of TransAlta owned 240 kV/138 kV double-circuit transmission line off of Tsuu T’ina lands and relocate to an underground location along Glenmore Trail and 37 Street;

• 150L/3L: remove approximately 1 km of two TransAlta owned 138 kV transmission lines (150L and 3L) off of Tsuu T’ina lands and relocate as a double-circuit 138 kV transmission line (150L/3L) on the north side of Highway 8 and the associated Transportation Utilities Corridor and

• Sarcee 42S Substation: reconfigure and re-terminate the existing transmission structures and transmission lines at the Sarcee 42S Substation site to accommodate an interchange at Sarcee Trail and Highway 8 and other possible modifications to mitigate against the risk of increased contaminate exposure.

The project will be a coordinated effort between Alberta Transportation, the City of Calgary, Enmax, ATCO Pipelines, Alberta Infrastructure, and TransAlta. The project is not an AESO DA project. The project is considered a customer line move whereby it is anticipated that project costs for the new assets will be recovered through Alberta Transportation subject to customer contribution policy. TransAlta will fund the salvaging of the existing TransAlta owned assets. The project is anticipated to cost greater than $100M and is to be completed in 2017 or 2018.

AltaLink has added a new CRU business case for the 2017-2018 Test Period to address Pipeline Induction Mitigation. This work was formerly captured in the Line Components business case. AltaLink identifies pipeline equipment near its operational facilities where safety and/or corrosion risks may be present, which would require study and/or mitigation. These interference effects from operational facilities are investigated and prioritized thoroughly and cases with interference that exceeds acceptable industry limits are mitigated with a few different possible solutions. For more details, refer to the Pipeline Induction Mitigation business case in Appendix 13-A17.

AltaLink’s historical and forecast CRU expenditures are provided in Table 10.3-1.



Table 10.3-1 - 2014-2018 CRU Capital Expenditures Forecast ($M)

Description 2014

Actual 2015 Filed

2016 Filed

2017 Forecast

2018 Forecast

Transmission Urgent Repair $5.2 $5.5 $6.0 $6.0 $6.3 Transmission Planned Maintenance $40.4 $36.7 $41.8 $44.9 $46.5

Substation Planned Maintenance $45.3 $40.7 $47.4 $51.3 $54.5

Telecom $14.7 $7.8 $11.0 $10.1 $10.6 Metering $2.7 $2.3 $2.1 $1.2 $1.2 AltaLink Control Centre $2.3 $2.9 $3.1 $3.2 $3.3 Tools & Instruments $2.3 $2.7 $2.1 $2.4 $2.1 Vehicles $4.7 $5.7 $4.4 $4.4 $4.6 Transmission Line Moves $7.1 $9.6 $10.1 $6.2 $6.4

Pipeline Mitigation & Study $3.7 $4.8

Transmission Capital Maintenance Total

$124.7 $113.9 $128.2 $133.4 $140.3

551L Rebuild $0.0 $2.9 $9.6 $22.7 $23.6 Carry-Forward (2014 Work Approved and forecast to be executed in 2015)

$0.0 $14.6 $0.0 $0.0 $0.0

Ring Road Project $0.3 $6.8 $68.2 $12.8 $9.4 Capital Maintenance Total

$125.0 $138.3 $206.0 $168.9 $173.3 Line Move Customer Contribution -$1.7 -$3.9 -$4.1 -$1.6 -$1.6 Ring Road Customer Contribution

$0.0 -$6.8 -$68.2 -$12.8 -$9.4

Net Transmission Capital

$123.3 $127.6 $133.8 $154.6 $162.3

10.3.1 Actual/Approved Variance AltaLink is forecasting a 4% increase in 2017 CRU capital expenditures over the $128.2M filed

amount for 2016, followed by a 5% increase in 2018 when the unique 551L Rebuild and Ring Road projects are removed from the total.

CRU investments are managed as ongoing multi-year investments making it appropriate to compare variances on a cumulative basis over the longer term. Any one year can have variability due to numerous factors, including customer outage availability and weather. As such, the programs need to be looked at over the longer term.

AltaLink’s 2009-2014 total CRU expenditures have followed previous approved levels over the past 6 years with only a 2% variance. A summary breakdown for 2009-2014 is provided in Table 10.3.1-1.



Table 10.3.1-1 - 2009-2014 CRU Capital Expenditures versus Approved ($M)

Description

Total 2009-2014

Total 2009-2014

Variance of Actual/

Approved

Average 2009-2014

Average 2009-2014

Approved Actual Approved Actual

Transmission Urgent Repair 23.6 38.1 61% 3.9 6.4 Transmission Planned Maintenance

150.4 161.2 7% 25.1 26.9

Substation Planned Maintenance

223.4 228.6 2% 37.2 38.1

Telecom 37.1 26.0 -30% 18.6 13.0 Metering 9.2 10.1 11% 1.5 1.7 Mobile Substation 10.5 3.6 -66% 1.8 0.6 Langdon SVC 39.4 27.2 -31% 6.6 4.5 Transmission Line Moves 47.8 36.9 -23% 8.0 6.2 Vehicles 21.0 21.4 2% 3.5 3.6 AltaLink Control Centre 11.2 10.4 -7% 1.9 1.7 Tools & Instruments 12.0 11.7 -3% 2.0 1.9 Total 585.7 575.0 -2% 97.6 95.8

Note: The 2014 actual expenditures do not include the forecast $14.6M approved amount that is expected to be executed in 2015.

Table 10.3.1-2 displays a breakdown of the actual and approved CRU capital expenditures related to the 2013-2014 GTA, the 2015-2016 GTA and the Test Period. Table 10.3.1-2 displays the variance for each previous GTA interval, followed by explanations of any individual material variances.

Table 10.3.1-2 demonstrates the trends for year-over-year CRU projects. This table excludes the 551L rebuild project and the line moves associated with the Ring Road. These projects are unique and not expected to be repeated in the foreseeable future.



Table 10.3.1-2 - 2013-2018 CRU Capital Expenditures versus Approved ($M)

Description

Average Approved 2013-2014

Average Actual

2013-2014 Var

Average Filed ($M) 2015-2016

Variance from

2013-2014 Average

Average Filed ($M) 2017-2018

Variance from

2015-2016 Average

Trans Urgent Repair 4.9 6.5 33% 5.7 -11% 6.2 8%

Trans Plan Maintenance 35.6 35.6 0% 38.0 7% 45.7 20%

Subs Plan Maintenance 40.5 43.1 6% 44.1 2% 52.9 20%

Telecom 18.6 13.0 -30% 9.4 -27% 10.4 10% Metering 1.8 2.2 20% 2.2 0% 1.2 -45% Mobile Substation 1.9 0.0 -100% 0.0 0% 0.0 0%

Trans Line Moves

8.2 5.1 -37% 9.9 93% 6.3 -36%

Vehicles 4.5 4.6 1% 5.0 11% 4.5 -11% AltaLink Control Centre

2.1 2.0 -2% 3.0 46% 3.2 7%

Tools & Instruments 2.4 2.3 -2% 2.4 2% 2.3 -5%

Pipeline Mitigation & Study

0.8 0.6 -21% 1.2 105% 4.2 241%

Subtotal 121.3 115.0 121.0 136.9 2013-2014 Work Approved and expected to be executed in 2015

7.3

Total 121.3 122.2 1% 121.0 -1% 136.9 13% Note: for 2013-2016, pipeline induction mitigation and study was included in the Line Components business case, a part of the Transmission Planned Maintenance category.

As demonstrated in the tables above, AltaLink continues to consistently manage the CRU investment program to effectively manage risk and equipment condition with low variances in any given test year.

Transmission Planned Maintenance – The increase in expenditures are due to additional work requirements, including an increase in line hardware replacements due to some early component failures related to some of the new transmission lines. There is also a general need to increase line spending, as shown by the lines leading indicators and age profile. This is



reflected primarily in the lines rebuild forecasts. Refer to the following two business cases for details: Appendix 13-A02 and Appendix 13-A05.

Substation Planned Maintenance – The increase in expenditures are due to substation component replacements and P&C Major projects, all due to the deteriorating condition of those assets. Consult the following business cases for details: Appendix 13-A07 and Appendix 13-A16.

Metering – The decrease in expenditures is due to a decrease in forecast for full metering upgrades, which involve replacing instrument transformers as well as meters. For more details, consult the Metering business case, Appendix 13-A22.

Transmission Line Moves – The decrease in expenditures are due to fewer large customer moves being identified at this current time. The current expenditure is consistent with previous small line moves forecasts. For more details, consult the Transmission Line Moves business case Appendix 13-A24.

Pipeline Induction Mitigation – This is a new business case. This is an emerging issue whose scope was consistent with a dedicated business case. This program was formerly captured in the Lines Component business case (Appendix 13-A02).

10.3.2 CRU Forecast Methods AltaLink’s forecast CRU projects during the Test Period strive to maintain system functionality

and to manage the risks associated with the loss of functionality and component specific failures of equipment.

As described in AltaLink’s previous GTA filed with the Commission, AltaLink plans CRU projects based on field tests, performance history, condition monitoring test results, industry equipment history (including age and manufacturer notifications), asset condition determined through physical inspections and historical project expenditures. This information amounts to thousands of individual data reports and through the analysis of this data AltaLink identifies components that have a moderate to high probability of failure and that should be repaired, upgraded or replaced to maintain safe and effective operations. AltaLink also assesses the consequences of failure for these assets. The consequences of failure range from mild to severe, such as environmental contamination, widespread outages or loss of life.

AltaLink’s CRU projects fall into one of two general categories:

• sustaining projects that maintain or extend asset life by replacing, upgrading or adding components in lieu of total asset replacement. Some examples of sustaining project tasks are line component replacements, tap-changer rebuilds and ground grid upgrades; and

• replacement projects that replace failing assets and infrastructure. Breaker replacements are an example of a replacement project. An overview of AltaLink’s major asset replacements is further described in Section 10.3.3.

AltaLink’s application of knowledge and experience together with the risk analysis process transforms the detailed condition data to something more useful - each potential project is analyzed and prioritized on the basis of the urgency of work to mitigate system, safety, and environmental risks and to ensure compliance with regulations. AltaLink’s decision to maintain, replace or upgrade transmission assets and infrastructure is based on consequence of failure combined with the well-defined criteria described below.



Criteria to Maintain or Extend Asset Life • The asset must be maintained or modified using a technology that will not become obsolete

before the end of its extended life. • The asset must have exhibited good performance during its useful life to date. • The cost of life extension per year must be less than the cost of total facility replacement

per year. • The addition of life extending components (e.g. filters on tap-changers) must result in

reduced maintenance costs and/or extend asset life.

Asset Replacement Criteria • Physical condition of the asset – the physical condition of the asset is assessed using routine

inspections and industry acceptable tests and compared to equipment specifications and industry experience. Where the inspection and test data reveal a deteriorating trend in condition and increasing probability of failure, plans for refurbishment or replacement are made.

• Obsolescence – the ability to support the asset in service often diminishes with age for many transmission system assets. For example, parts to repair older equipment become expensive or unavailable. The unavailability of spare parts or skilled labour to perform maintenance on older assets contributes to a replacement decision.

• Ownership costs – ongoing maintenance of a particular asset or asset class may no longer be cost effective. High maintenance costs of an existing asset, combined with greater reliability or functionality of replacements, will contribute to a replacement decision.

• Operation ratings – as the transmission system develops, ratings of older equipment may be inadequate. Operating assets above ratings can accelerate the rate of deterioration and increase the risk of failure.

• Asset performance – review of performance trends can indicate performance degradation for specific assets, asset classes or manufacturers contribute to a replacement decision.

Asset Risk Management Process The Asset Risk Management process includes 5 steps, as shown in Figure 10.3.2-1. A significant

amount of analysis and risk based decision making occurs after the asset risk has been determined in step 4.



Figure 10.3.2-1 - Asset Risk Management Process

Steps 1-4 above are enabled by the “Risk Assessment Frameworks” and provide the

identification of the risk associated with the assets. Examples of these frameworks can be found within the detailed CRU business cases in Appendix 13. The result of steps 1-4 is a risk prioritized identification of assets requiring investment action. Key decisions on how much risk to accept and what level of CRU investment is required in the GTA period is performed in Step 5.

Step 5 involves an engineering investigation and analysis to identify the nature and timing of the investment required to mitigate the risk associated with the prioritized assets. Investment actions can include the complete replacement of the asset, the life extension of the asset through component replacement, or increased operational maintenance with continued monitoring. There is also a need to verify recent maintenance activity, health indicators, the timing of other projects and the technical feasibility of investment alternatives.

The inputs of the Risk Assessment Frameworks are periodically reviewed with both engineering and subject matter experts and the outputs are reviewed as part of the review process that occurs in step 5 above.

As an example, Figure 10.3.2-2 below is the risk scatter plot for all of AltaLink’s circuit breakers 69 kV and above. Each dot represents a single breaker, and its relative position with respect to asset health and consequence of failure. The breakers in the top and right areas of the graph



present the most risk to AltaLink. This is generally the type of results created from Step 1 to 4 of the Asset Risk Management Process.

Figure 10.3.2-2 - Risk Identification Example

As Risk is a function of both Health Score and Consequence, the breakers that are highlighted in light blue correspond to a population above a constant risk score (as indicated by the green line). These breakers represent the portion of the population with the highest relative risk of failure. This subset of the overall population is then reviewed in Step 5 of the process (Figure 10.3.2-1) to identify the breakers that will become candidates for replacement in the Test Period and beyond. There are currently about 250 breakers on or above this line, compared to a total of about 750 high voltage breakers.

In Step 5, AltaLink evaluates assets both above and near the line to determine the best candidates for replacement. The driver to replace a breaker below the line would involve factors such as work bundling due other specific site activities, or a specific model of breaker with known problems that are not necessarily reflected in the risk assessment. Conversely, there are some breakers that are above the line that will not be forecast for replacement in the Test Period. AltaLink’s Subject Matter Experts have determined that these assets, while they are high risk, can have their replacement delayed until at least the next test year beyond the Test Period, with the risks being managed through either specific component replacement or ongoing monitoring and maintenance activities. The main benefit to Step 5 is that it determines the best



overall investment considering factors such as recent maintenance activities, timing, work bundling, resourcing, and customer outage coordination.

The risk exposure that stems from the continued operation of the entire population of breakers must be managed and grows over time. As these assets continue to see operational stresses and impacts from adverse environments and weather, the associated risk of failure continues to increase. In the scatter plot, the breakers would move upwards as they age and represents the additional risk exposure that needs to be managed. In addition, if the investment level goes down, the amount of risk exposure that must be managed increases. Effectively, the breaker population would move toward the top-right of the graph, increasing the total risk exposure to customers and AltaLink due to breaker performance.

The asset risk management process considers several indicators to assess future asset performance and risk. Two such indicators are further discussed below in Section 10.3.3 (deficiency trends) and Section 10.3.4 (asset population profiles). This analysis and the risk assessment method described above demonstrate that AltaLink’s current method of CRU risk assessments results in a significantly risk adjusted CRU expenditure forecast for the Test Period. The results further demonstrate that AltaLink’s current CRU forecast expenditure levels are increasing future risk exposure due to the large population of aging equipment and cannot be sustained over the longer term. AltaLink’s forecast capital expenditures for the Test Period represent the minimum prudent amount of CRU investment to mitigate power system risks.

10.3.3 Major Programs-Equipment Deficiency Trend Analysis The CRU Program is a vital part of AltaLink’s overall maintenance strategy. Where it no longer

makes sense to perform preventative or corrective maintenance activities, AltaLink replaces or refurbishes the asset. Deficiency trends are one leading indicator of the overall health of AltaLink’s maintenance programs.

Notifications are deficiencies reported for major assets, and they provide both an indication of asset condition/performance and a leading indicator for future maintenance or investment requirements. As notifications grow, so does the need to manage the associated risk to avoid asset failures that ultimately compromise the safe, reliable operation of the system.

The increasing number of high-priority notifications represents a growing risk exposure to degrading reliability associated with the assets. This trending of notifications is an important part of the investment forecasting process; both as an evaluation of the current state and an indication of deteriorating asset condition and the need for component or full asset replacement over future periods.

Notifications come through multiple sources including visual inspections, root cause failure analysis and SCADA alarming. AltaLink categorizes notifications into three categories: high-priority, medium-priority and low-priority. High priority notifications are typically those that result in asset functional failure, equipment lockouts, or imminent failure within the short-term; action is usually required within the current year or the next. Medium and Low priority notifications are those that identify longer term deteriorating asset conditions, and are a leading indicator of future investment requirements. Low-priority notifications will likely not require significant action for 5 years, while the medium-priority notifications usually require action in the 3-4 year timeframe.



The high-priority notifications are representative the short-term need for capital replacements. The medium-priority and low-priority notifications represent a leading indicator of deficiencies that will eventually progress into high priority items.

Current notification and deficiency trends for 4 major groups of AltaLink’s assets are provided as examples in Figures 10.3.3.-1, 10.3.3-2, 10.3.3.-3, and 10.3.3-4, followed by a summary discussion.

Figure 10.3.3-1 - Circuit Breaker Notification Trend

Figure 10.3.3-1 illustrates the increasing trend in circuit breaker notifications. This trend of increasing high-priority notifications confirms that AltaLink’s breaker fleet is deteriorating in condition. Breaker replacements continue to be required to address this trend before breakers fail violently within the substations. Breakers are not assets that can be run to failure. AltaLink has included risk prioritized breaker replacements within the Test Period forecast to continue to address these circuit breaker notification trends. They have been prioritized using AltaLink’s replacement criteria which results in replacements by breaker type. This trend is a contributing factor to AltaLink’s continued level of high-voltage breaker replacements. More details about breaker replacements can be found in Appendix 13-A12 Substation Major Equipment.



Figure 10.3.3-2 - Transmission Line Deficiencies Trend

Figure 10.3.3-2 above shows that the level of outstanding notifications, including high, medium and low priority notifications, continues to persist on AltaLink’s transmission lines. These deficiencies represent a significant risk of transmission line failures. AltaLink is forecasting continued lines capital investments to address this leading indicator within the Test Period.

For more information regarding the transmission line CRU business cases, refer to Appendix 13-A02 to Appendix 13-A05.

Figure 10.3.3-3 - Transformer Deficiencies Trend



Figure 10.3.3-3 illustrates an increasing trend in transformer notifications. This trend of increasing notifications confirms that AltaLink’s transformer fleet is deteriorating in condition over time. AltaLink is forecasting one transformer replacement per year in the Test Period to address this risk and it is anticipated this pace of replacement will increase in future GTA periods in order to adequately address these notification trends.

Figure 10.3.3-4 - Protection and Control Notification Trend

The trend of P&C high-priority notifications (shown in Figure 10.3.3-4) demonstrates a significant increase in recent years. This reflects the aging population of relays across AltaLink’s transmission network and recorded deficiencies in relay operations year to year. As a result, AltaLink is forecasting an increase to the P&C CRU investment over the Test Period. For more details on the P&C CRU programs, refer to Appendix 13-A15 and Appendix 13-A16.

Summary of Notification Trend Analysis This review of notification trends demonstrates that the additional risk exposure resulting from

an increasing number of notifications will continue to grow and may potentially become unmanageable in the coming years. AltaLink continues to assess future investment requirements and will forecast needed expenditure increases to sustain the reliability and performance customers expect.

Early indications of failure or end of life are confirmed through the increasing trends of notifications signaling deteriorating conditions within the assets requiring increasing maintenance, component repairs, and ultimately complete replacement. In summary, AltaLink’s



forecast capital expenditures for the Test Period represent the minimum prudent amount CRU investments to mitigate system risk. The reliable supply of electricity is the core of AltaLink’s business and expected or required by customers. The cost of an outage for some industrial customers can be very high, and improving the overall asset health will likely result in less outages for customers.

10.3.4 Future State-Population Profiles Age is not the only factor influencing asset health but it does drive many condition based factors

and is therefore another strong indicator for current and future replacement requirements. This is due to the basic bathtub curve of failure rates for assets, as represented in Figure 10.3.4-1 below. As assets age, the probability of failure increases and end of life comes closer.

Figure 10.3.4-1 - Bathtub Curve

Assets can fail at any point over the bathtub curve, and failures are clearly more likely to happen

as the age of the asset moves toward the right side of the curve – as they age and wear out.

Some assets will last longer than expected, while others will fail earlier than expected. An age-based indicator of required future replacements is to profile the total number of assets past the average service life (ASL) of the asset group. The ASL has been determined by the Depreciation Study that is included in Appendix 8 of the 2015-2016 GTA (exhibit 0003.00.AML-3524). If the number of assets beyond the average life becomes significantly large, the likelihood of failures increases by a similar order of magnitude. The understanding of asset population profiles assists in assessing where current investment levels may not be sufficient to maintain asset performance due to the volumes of equipment experiencing wear out.

The age profiles of AltaLink’s major assets are provided in Figure 10.3.4-2 to Figure 10.3.4-5.



Figure 10.3.4-2 - Age Profile Wood Pole Lines

Figure 10.3.4-3 - Age Profile High Voltage Circuit Breakers



Figure 10.3.4-4 - Age Profile Transformers

Figure 10.3.4-5 - Age Profile P&C Equipment

The figures below indicate the volume of major asset replacements (Transformer, Circuit

Breaker and Wood Pole Line examples are provided) and corresponding expenditures that would be required to maintain a constant number (ie. the current number) of assets past the average service life of the asset group.



Transformers Figure 10.3.4-6 below show the future transformer age profile in two different future scenarios:

one replacement per year (the current forecast replacement rate) and ten replacements per year. Figure 10.3.4-7 indicates that AltaLink would have to replace ten transformers annually to simply stabilize the transformer age profile on a going forward basis, if this method was the only approach AltaLink utilized to manage asset performance and risk.

Utilizing the current maintenance approach and risk assessment process, AltaLink believes the current level of transformer replacement, at one per year, is sufficient and prudent for the Test Period.

AltaLink anticipates an increase in the number of transformer replacements in future test years as indicated by this population profile. The existing transformer replacement rate will become unsustainable in future periods.

Figure 10.3.4-6 - Transformer Age Profile Current Replacement Rate



Figure 10.3.4-7 - Transformer Age Profile - 10 Replacements/Yr Scenario

Circuit Breakers

Figure 10.3.4-8 provides a similar age profile analysis regarding for high voltage circuit breakers. Figure 10.3.4-8 demonstrates that the current level of investment, replacing 14 breakers per year, continues to manage the overall population of breakers past average service life. The number of breakers past ASL in 2027 would be about the same as in 2017. Note that the average service life used in this analysis is the estimated average service life of breakers where oil is the interrupting medium, which represent the majority of replacements over the next 10 years (there are still about 170 breakers of this type that remain in service at AltaLink). This average service life differs from the overall breaker ASL because most of the remaining breakers are SF6 breakers (there are over 700 SF6 breakers in service at AltaLink), which are expected to have longer average service life. As circuit breakers have the highest amount of moving parts they experience mechanical wear out due to their function (involving springs, contacts, and gasses to break the electrical current/arc) within the stations equipment account.

Below is a summary of the drivers for replacement of breakers:

• known manufacture model design/defects; • poor equipment condition and inspection (ie. leaking oil, excessive wear); • history of slow clearing times; • insufficient short circuit interruption ratings (ie. inability to clear); • high maintenance costs/obsolescence; and • replacement of older models having potential low level PCB oil contamination.



Figure 10.3.4-8 - Circuit Breaker Age Profile - 14 Replacements/Yr

Wood Pole Transmission Lines

Figures 10.3.4-9 and 10.3.4-10 show the kilometers of wood poles lines beyond average service life assuming two different future scenarios: 64 km of rebuilds per year (the current forecast) and 100 km rebuilds per year. The current forecast represents the minimum investment required to maintain reliability within the Test Period. The second scenario’s investment level would be required to stabilize the total amount of wood pole transmission lines past ASL over a long term. Failures on transmission lines can be difficult to repair: often there is limited access to the failed structures, and crews have to work expediently in areas that are not normal working areas for heavy-duty equipment. AltaLink cannot let its population of wood pole lines past 50 years to grow significantly larger than 1200 km and maintain current reliability performance.

AltaLink believes the wood pole rebuild investments will require continued increases to ensure asset performance as the overall wood pole line population continues to age.



Figure 10.3.4-9 - Wood Pole Line Age Profile - 64 km Rebuild/Yr

Figure 10.3.4-10 - Wood Pole Line Age Profile - 100 km Rebuild/Yr

Summary

Table 10.3.4-1 below compares the pace of replacements for the Test Period, the required pace to sustain the current age profile, and the expenditures required for each scenario. AltaLink does not propose to set the pace of replacements to match the “sustain age profile” levels for the Test Period. However, as the analysis indicates, the current pace of replacements for wood pole lines and transformers will need to increase in future periods based on the age and overall composition of the assets.



Table 10.3.4-1 - CRU Forecast to Age Profile Comparison Examples Description

2017-2018 Forecast Average (Units)

2017-2018 Forecast Average

($M)

Sustain Age Profile

Average (Units)

Sustain Age Profile

Average ($M)

Transformers 1 3.8 10 21.8 High Voltage Circuit Breakers 14 4.2 14 4.2 Wood Pole Lines (km) 64 20.5 100 32.0

Total 28.5 58.0

10.3.5 Capital Maintenance Business Cases AltaLink’s Capital Maintenance business cases are provided in Appendix 13-A. AltaLink has set

out its forecast CRU capital expenditures in Table 2-1 of the business cases; forecast expenditures include inflation as described in Section 1.8 of this Application. In Table 2-2 of the business cases, AltaLink has also reported historical units, average cost and total capital expenditures in the same sub-category levels as forecast expenditures in the Test Period. Average costs are calculated as a simple mathematical average of total expenditures divided by number of units. As AltaLink’s CRU capital expenditures are frequently site-specific, the probative value of average costs is limited. However, significant year/year variations in average cost would likely indicate either a change in base price, a change in site selection, or a change in the nature of the work.

The 2014 actual expenditures by sub-category were derived from AltaLink’s accounting system. The 2015 and 2016 expenditures are the expenditure forecast as filed in the 2015-2016 GTA.

In this Application, AltaLink has presented variances between forecast 2017-2018 capital expenditures and the average of the 2015-2016 expenditure forecast.

All the analysis methods and the risk assessment method described in Section 10.3 demonstrate that AltaLink’s current method of CRU risk assessments results in a significantly risk adjusted CRU expenditure forecast for the Test Period. The results further demonstrate that AltaLink’s current risk adjusted CRU forecast increases future risk exposure and cannot be sustained over the longer term. AltaLink’s forecast capital expenditures for the Test Period represent the minimum prudent amount of CRU investment to manage power system risks and sustain performance and reliability.

Information Technology Capital Costs AltaLink’s 2017 and 2018 IT capital expenditures are provided in Schedule 10-4 and summarized

in Table 10.4-1.

~ !! ••a I 1a• !~ ~ ALiAi.ii1i\


Table 10.4-1 - IT Capital Expenditure Overview ($M)

2014

Category Appe ndix Actua ls

IT Hardware / Others 16.2

IT Hardware 13-Bl.01 8.9

Alberta Reliability 13-Bl.02 4 .8

Standards(Cyber)

MPLS 2.5

IT Software SAP (Dev) 10.5

IT Software SAP (Dev) 13-B2.01 7.5

Support a nd Maintenance 13-B2.02 1.6

Strategic Procurement 1.4

AESO Reporting

Require ments 0.0

IT Software Non-SAP (Dev) 5.3

IT Software Non-SAP (Dev) 13-B3.01 4 .0

Support a nd Maintenance 13-B3.02 1.3

IT System Operations Outage

Management 0.0

Grand Total 32.0

Tota ls may not add due to rounding.

2015 2016

Filed Filed

11.0 10.4

6.4 6.5

4.6 4 .0

0.0 0.0

12.2 9.5

4.3 5.6

4.1 2.5

1.5 1.4

2.2 0.0

11.7 9.8

7.2 6.2

3.2 3.0

1.3 0.6

34.9 29.8


2017 2018

Forecast Fo recast

9.3 7.4

5.2 4 .3

4 .2 3.1

0.0 0.0

10.3 9.7

5.9 4 .9

4.4 4 .8

0.0 0.0

0.0 0.0

11.3 9.5

5.6 4 .3

5.7 5.2

0.0 0.0

31.0 26.7

615. Altalink's forecast is consistent with its IT strategy described in previous GT As. This strategy is to purchase hardware and deve lop systems that sustain and enhance existing systems and infrastructure. Alta link incorporates appropriate technology that a ligns with, and supports its business strategy and is consistent with the IT corporate standards t hat have been previously determined.

616 . The drivers of Altalink's fo recast IT capital expenditu res are ongoing lifecyc le maintenance and the need for a structured, cohesive informat ion system that will support Altalink's operat ions over the foreseeable futu re. Altalink' s planned IT programs are a constructive response to two specific req uirements of t ransmission asset growt h: i) support ing Altalink' s asset risk management; and ii) support ing Altalink's organizationa l maturity as it transit ions from a growt h period. Ult imately, Altalink' s forecast IT programs wil l enhance its operat ions with data in an accessible and reliable information platform.

6 17. For a detailed explanation of each IT category identified in Table 10.4 -1, refer to Appendix 13-B for the respective corresponding business cases for 2017-2018 .

10.5 Facility Capital Costs

618. Facility Capital Costs The fo llowing capita l projects have been fo recast as enhancements to Altalink's various fie ld and office faci lities. Table 10.5-1 shows Altalink' s Facilit ies forecast for the Test Period.

February 16, 2016 10-36 See t he "Forward-looking Informat ion Advisory".

~ !! ••a I 1a• !~ ~ ALiAi.ii1i\


Table 10.5-1 - Facilities Capital Expenditures ($M)

2014

Category Appendix Actual

Facilities 10.7

General Facilities 13-Cl.01 5.8

Maintenance

Altalink East Relocation 0.2

Acheson Material Yard 4.6

Expansion

New FTSB Service Cent re 0.0

Cont rol Centre Upgrades 13-Cl.06 0.0

Field Office Buildings and 0.0

Material Storage

Road 274 Upgrade 0.0

Grand Total 10.7 Tota ls may not add due to rounding.

2015 2016

Filed Filed

18.3 29.9

3.9 3.9

0.0 0.0

0.0 0.0

3.1 23.1

2.4 2.6

5.4 0.4

3.5 0.0

18.3 29.9


2017 2018

Forecast Forecast

6.2 4.1

3.9 4.1

0.0 0.0

0.0 0.0

0.0 0.0

2.3 0.0

0.0 0.0

0.0 0.0

6.2 4.1

619. Altalink's facility forecast is driven by the ongoing lifecycle maintenance including replacements

and upgrades to maintain it s facilities operations over t he foreseeable fut ure. Alt a Link's planned faci lity programs ensure the safe accommodat es employees, t ransmission operations and assets.

620. For a detailed explanation of each facil ity category identified in Table 10.5-1, refer to Appendix 13-C for the respective corresponding business case.

10.6 Transmission Rate Base Schedules

Schedule 10-1 Schedule of Transmission Rate Base

Schedule 10-2 Schedule of Transmission Property, Plant and Equipment

Schedule 10-3 Schedule of Transmission Accumu lated Depreciat ion

Schedule 10-4 Schedule of Transmission Capital Expendit ures

Schedule 10-5 Schedule of Transmission Engineering, Services and Genera l

Schedule 10-6 Schedule of Transmission Contribut ions in Aid of Const ruction

Schedule 10-7 Schedule of Transmission Computer System Costs

February 16, 2016 See the "Forward-looking Information Advisory".

10-37

Schd 10-1


General Tariff ApplicationSchedule of Transmission Rate Base

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Adjusted Prior Year Property, Plant and Equipment Schedule 10-2 3,132.7 3,604.4 4,948.4 5,045.6 5,176.0 5,307.9 5,413.7 02 Adjusted Prior Year Accumulated Depreciation Schedule 10-3 (1,240.4) (1,317.8) (1,412.0) (1,504.8) (1,636.5) (1,746.5) (1,822.1) 03 Prior Year Net Property 1,892.3 2,286.6 3,536.5 3,540.8 3,539.5 3,561.4 3,591.5 0405 Current Year Property, Plant and Equipment Schedule 10-2 3,604.4 4,948.4 5,045.6 5,176.0 5,307.9 5,413.7 5,647.2 06 Current Year Accumulated Depreciation Schedule 10-3 (1,317.8) (1,412.0) (1,504.8) (1,636.5) (1,746.5) (1,822.1) (1,971.1) 07 Current Year Net Property 2,286.6 3,536.5 3,540.8 3,539.5 3,561.4 3,591.5 3,676.1 0809 Mid-Year Net Property 2,089.4 2,911.5 3,538.6 3,540.2 3,550.5 3,576.5 3,633.8 10 Working Capital Schedule 11-1 68.2 83.8 94.6 116.7 132.3 149.4 158.0 11 Rate Base Schedule 9-1 2,157.6 2,995.3 3,633.3 3,656.9 3,682.7 3,725.8 3,791.8

Schd 10-2


General Tariff ApplicationSchedule of Transmission Property, Plant & Equipment

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Previous Year Balance02 Transmission Plant03 101 Distribution Systems 0.0 0.0 0.0 0.0 0.0 0.0 0.0 04 350.1 Land rights 77.4 83.0 125.7 126.1 126.1 126.1 126.1 05 352 Building and Impr. - Trans Ops 130.8 180.9 200.7 206.6 210.9 211.9 213.2 06 353 Station equipment 1,199.4 1,367.1 1,670.3 1,703.8 1,736.4 1,765.3 1,789.7 07 353.1 System communication & control 397.6 466.2 533.4 547.6 575.9 595.8 617.7 08 354 Towers and fixtures 352.9 380.0 872.4 873.5 875.2 410.6 407.7 09 354.01 Towers and fixtures - - - - - 464.5 464.5 10 355 Poles and fixtures 459.9 537.3 635.1 652.5 680.0 713.0 758.0 11 356 Overhead conductors and devices 382.8 442.5 674.1 675.6 683.3 692.5 702.6 12 358 Underground conductors and Conduits 15.5 15.5 53.9 53.6 53.6 53.6 53.6 13 Total Transmission Plant 3,016.3 3,472.5 4,765.6 4,839.4 4,941.5 5,033.2 5,133.2 1415 General Plant16 390 Structures and improvements 17.0 16.9 19.3 21.4 33.1 66.2 72.2 17 391 Office furniture and equipment 6.9 7.6 7.9 8.3 8.2 8.2 8.2 18 391.1 Computer hardware & voice and data network equipment 18.9 24.0 30.5 42.5 51.4 56.0 53.6 19 391.2 Computer software -non SAP20 392 Transportation equipment, fleet vehicles 5.2 8.1 9.7 10.9 11.6 11.9 12.3 21 394 Tools, shop, garage, stores and laboratoy equipment 15.3 17.4 20.7 22.6 24.5 24.3 24.5 22 396 Vehicles Production 14.8 15.1 16.6 17.7 20.8 23.2 24.7 23 399.2 Leasehold Improvements 18.4 19.9 26.0 27.6 27.6 27.6 27.6 24 Total General Plant 96.4 109.0 130.7 151.2 177.2 217.4 223.1 2526 Land27 350 Land 19.7 22.7 51.9 54.7 57.0 57.0 57.0 28 389 Land - other 0.2 0.2 0.2 0.4 0.4 0.4 0.4 29 Total Non-depreciable Plant 20.0 22.9 52.1 55.0 57.3 57.3 57.3 3031 Total previous year balance Schedule 10-1 3,132.7 3,604.4 4,948.4 5,045.6 5,176.0 5,307.9 5,413.7 32 Additions to property33 Transmission Plant34 101 Distribution Systems - - - - - - - 35 350.1 Land rights 5.6 42.7 0.3 - - - - 36 352 Building and Impr. - Trans Ops 50.3 20.2 7.8 4.7 1.6 2.0 1.7 37 353 Station equipment 173.8 310.1 54.2 43.6 38.5 33.2 39.0 38 353.1 System communication & control 70.7 72.7 30.0 36.6 30.4 30.9 33.2 39 354 Towers and fixtures 28.4 493.4 2.1 4.6 1.9 2.5 2.6 40 354.01 Towers and fixtures - - - - - - - 41 355 Poles and fixtures 79.4 104.9 24.9 40.4 46.0 62.1 142.7 42 356 Overhead conductors and devices 60.9 234.4 4.6 11.5 12.9 17.4 37.6 43 358 Underground conductors and Conduits - 38.4 (0.3) - - - - 44 Total Transmission Plant 469.0 1,317.0 123.6 141.6 131.3 148.0 256.9 4546 General Plant47 390 Structures and improvements (0.0) 2.4 2.1 11.7 33.1 6.1 4.1 48 391 Office furniture and equipment 0.7 0.4 0.4 - - - - 49 391.1 Computer hardware & voice and data network equipment 6.0 10.6 13.6 8.8 7.9 6.7 4.6 50 391.2 Computer software -non SAP51 392 Transportation equipment, fleet vehicles 3.0 1.8 1.4 1.6 0.9 1.5 1.3 52 394 Tools, shop, garage, stores and laboratoy equipment 2.1 3.5 2.3 2.7 2.1 2.4 2.1 53 396 Vehicles Production 0.9 1.8 2.0 4.1 3.5 2.9 3.3 54 399.2 Leasehold Improvements 1.5 6.2 1.6 - - - - 55 Total General Plant 14.1 26.6 23.6 28.8 47.5 19.6 15.4 5657 Land58 350 Land 3.0 29.3 2.8 2.3 (0.0) - - 59 389 Land - other - - 0.1 - - - - 60 Total Non-depreciable Plant 3.0 29.3 2.9 2.3 (0.0) - - 6162 Total additions to property 486.1 1,372.9 150.1 172.7 178.8 167.6 272.3 63

Schd 10-2


General Tariff ApplicationSchedule of Transmission Property, Plant & Equipment

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 264 Retirements and adjustments65 Transmission Plant66 101 Distribution Systems - - - - - - - 67 350.1 Land rights 0.0 0.0 - - - - - 68 352 Building and Impr. - Trans Ops 0.2 0.4 1.8 0.5 0.6 0.6 0.3 69 353 Station equipment 6.1 6.9 20.7 11.0 9.6 8.8 7.2 70 353.1 System communication & control 2.1 5.6 15.7 8.4 10.6 8.9 9.4 71 354 Towers and fixtures 1.2 1.0 1.0 2.9 2.0 5.4 0.3 72 354.01 Towers and fixtures73 355 Poles and fixtures 2.0 7.2 7.5 12.9 13.1 17.0 8.8 74 356 Overhead conductors and devices 1.2 2.8 3.1 3.8 3.7 7.2 2.5 75 358 Underground conductors and Conduits - - - - - - - 76 Total Transmission Plant 12.8 23.9 49.9 39.4 39.6 48.0 28.5 7778 General Plant79 390 Structures and improvements - - - - - - - 80 391 Office furniture and equipment - - - 0.1 - - - 81 391.1 Computer hardware & voice and data network equipment 0.9 4.1 1.6 - 3.3 9.1 6.0 82 391.2 Computer software -non SAP83 392 Transportation equipment, fleet vehicles 0.1 0.3 0.2 0.9 0.5 1.1 0.9 84 394 Tools, shop, garage, stores and laboratoy equipment - 0.2 0.4 0.7 2.4 2.2 1.3 85 396 Vehicles Production 0.6 0.3 0.9 1.0 1.1 1.4 2.1 86 399.2 Leasehold Improvements - - - - - - - 87 Total General Plant 1.5 4.9 3.1 2.8 7.3 13.8 10.3 8889 Land90 350 Land 0.0 0.1 0.0 - - - - 91 389 Land - other - - - - - - - 92 Total Non-depreciable Plant 0.0 0.1 0.0 - - - - 9394 Total retirements and adjustments 14.4 28.8 53.0 42.2 46.9 61.9 38.8 9596 Year End Balance97 Transmission Plant98 101 Distribution Systems 0.0 0.0 0.0 0.0 0.0 0.0 0.0 99 350.1 Land rights 83.0 125.7 126.1 126.1 126.1 126.1 126.1

100 352 Building and Impr. - Trans Ops 180.9 200.7 206.6 210.9 211.9 213.2 214.6 101 353 Station equipment 1,367.1 1,670.3 1,703.8 1,736.4 1,765.3 1,789.7 1,821.6 102 353.1 System communication & control 466.2 533.4 547.6 575.9 595.8 617.7 641.6 103 354 Towers and fixtures 380.0 872.4 873.5 875.2 875.0 407.7 410.0 104 354.01 Towers and fixtures - - - - - 464.5 464.5 105 355 Poles and fixtures 537.3 635.1 652.5 680.0 713.0 758.0 892.0 106 356 Overhead conductors and devices 442.5 674.1 675.6 683.3 692.5 702.6 737.8 107 358 Underground conductors and Conduits 15.5 53.9 53.6 53.6 53.6 53.6 53.6 108 Total Transmission Plant 3,472.5 4,765.6 4,839.4 4,941.5 5,033.2 5,133.2 5,361.7 109110 General Plant111 390 Structures and improvements 16.9 19.3 21.4 33.1 66.2 72.2 76.4 112 391 Office furniture and equipment 7.6 7.9 8.3 8.2 8.2 8.2 8.2 113 391.1 Computer hardware & voice and data network equipment 24.0 30.5 42.5 51.4 56.0 53.6 52.3 114 391.2 Computer software -non SAP - - - - - - - 115 392 Transportation equipment, fleet vehicles 8.1 9.7 10.9 11.6 11.9 12.3 12.7 116 394 Tools, shop, garage, stores and laboratoy equipment 17.4 20.7 22.6 24.5 24.3 24.5 25.2 117 396 Vehicles Production 15.1 16.6 17.7 20.8 23.2 24.7 25.9 118 399.2 Leasehold Improvements 19.9 26.0 27.6 27.6 27.6 27.6 27.6 119 Total General Plant 109.0 130.7 151.2 177.2 217.4 223.1 228.3 120121 Land122 350 Land 22.7 51.9 54.7 57.0 57.0 57.0 57.0 123 389 Land - other 0.2 0.2 0.4 0.4 0.4 0.4 0.4 124 Total Non-depreciable Plant 22.9 52.1 55.0 57.3 57.3 57.3 57.3 125126 Total Property Plant and Equipment Schedule 10-1 3,604.4 4,948.4 5,045.6 5,176.0 5,307.9 5,413.7 5,647.2

Schd 10-3


General Tariff ApplicationSchedule of Transmission Accumulated Depreciation

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Previous Year Balance02 Transmission Plant03 101 Distribution Systems (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) 04 350.1 Land rights 24.3 25.5 27.0 29.1 31.5 33.8 36.1 05 352 Building and Impr. - Trans Ops 36.6 40.0 44.2 49.4 55.7 61.7 67.4 06 353 Station equipment 408.8 431.6 465.2 495.7 535.2 569.0 616.5 07 353.1 System communication & control 171.9 193.8 210.9 218.1 235.9 250.5 271.3 08 354 Towers and fixtures 184.1 188.6 202.8 224.1 246.1 256.3 248.7 09 354.01 Towers and fixtures (post 2011) - - - - - 6.4 17.3 10 355 Poles and fixtures 131.8 143.4 154.2 158.0 174.9 189.0 181.2 11 356 Overhead conductors and devices 253.6 256.5 260.1 269.1 278.3 286.5 281.5 12 358 Underground conductors and Conduits 2.5 2.9 3.6 4.8 6.0 7.2 8.4 13 108 Salvage (FC: 105,106,109,9999) - - - - - - - 14 Total Transmission Plant 1,212.7 1,281.3 1,367.1 1,447.4 1,562.5 1,659.4 1,727.5 1516 General Plant17 390 Structures and improvements 3.4 3.8 4.3 4.1 4.8 6.1 7.9 18 391 Office furniture and equipment 1.5 2.0 2.5 3.4 3.8 4.4 5.0 19 391.1 Computer hardware & voice and data network equipment 6.7 9.9 11.2 16.5 27.2 34.7 36.6 20 391.2 Computer software -non SAP - - - 1.5 1.5 1.5 1.5 21 392 Transportation equipment, fleet vehicles (0.0) 1.1 2.8 3.9 4.5 5.8 6.5 22 394 Tools, shop, garage, stores and laboratoy equipment 6.9 8.9 10.6 11.1 12.8 12.8 13.0 23 396 Vehicles Production 7.0 6.7 7.3 7.9 7.6 7.4 6.9 24 399.2 Leasehold Improvements 2.2 4.1 6.2 8.9 11.7 14.4 17.2 25 108 Salvage (FC: 108) - - - - - - - 26 Total General Plant 27.7 36.5 44.9 57.3 74.0 87.1 94.6 2728 Total previous year balance 1,240.4 1,317.8 1,412.0 1,504.8 1,636.5 1,746.5 1,822.1 29 Depreciation Provisions30 Transmission Plant31 101 Distribution Systems32 350.1 Land rights 1.2 1.5 2.1 2.3 2.3 2.3 2.3 33 352 Building and Impr. - Trans Ops 3.7 4.6 5.4 6.9 6.9 6.9 7.0 34 353 Station equipment 35.1 45.4 51.9 66.9 66.9 67.9 69.0 35 353.1 System communication & control 26.1 26.2 28.9 31.9 32.6 33.7 35.0 36 354 Towers and fixtures 7.1 15.9 24.3 31.7 30.4 8.9 8.9 37 354.01 Towers and fixtures (post 2011) 10.9 10.9 38 355 Poles and fixtures 17.0 23.2 24.8 34.2 34.5 36.5 40.9 39 356 Overhead conductors and devices 5.5 8.2 11.7 14.7 15.0 15.2 15.7 40 358 Underground conductors and Conduits 0.3 0.8 1.2 1.2 1.2 1.2 1.2 41 Total Transmission Plant Schedule 6-2 96.0 125.8 150.2 189.9 189.8 183.6 190.9 4243 General Plant44 390 Structures and improvements 0.4 0.4 0.5 0.7 1.3 1.8 1.9 45 391 Office furniture and equipment 0.5 0.5 0.5 0.6 0.6 0.6 0.6 46 391.1 Computer hardware & voice and data network equipment 4.0 5.4 6.6 10.7 10.7 11.0 10.6 47 391.2 Computer software -non SAP - 48 392 Transportation equipment, fleet vehicles 1.2 2.0 2.2 1.6 1.8 1.8 1.9 49 394 Tools, shop, garage, stores and laboratoy equipment 2.0 1.9 1.8 2.4 2.4 2.4 2.5 50 396 Vehicles Production 0.4 0.5 0.4 0.8 0.8 0.9 1.0 51 399.2 Leasehold Improvements 1.9 2.3 2.7 2.8 2.8 2.8 2.8 52 Total General Plant Schedule 6-2 10.4 13.1 14.7 19.4 20.4 21.3 21.2 5354 Total depreciation provisions 106.4 138.8 165.0 209.3 210.2 204.9 212.1 55

Schd 10-3



$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 256 Retirements and adjustments57 Transmission Plant58 101 Distribution Systems - - 0.0 - - - - 59 350.1 Land rights 0.0 0.0 (0.0) - - - - 60 352 Building and Impr. - Trans Ops 0.2 0.4 0.1 0.6 0.9 1.2 0.5 61 353 Station equipment 12.3 11.9 21.4 27.4 33.1 20.4 13.1 62 353.1 System communication & control 4.2 9.0 21.8 14.1 17.9 13.0 13.1 63 354 Towers and fixtures 2.6 1.7 3.0 9.8 13.7 16.5 0.7 64 354.01 Towers and fixtures (post 2011)65 355 Poles and fixtures 5.3 12.4 21.0 17.3 20.5 44.2 19.9 66 356 Overhead conductors and devices 2.7 4.6 2.6 5.6 6.8 20.2 5.5 67 358 Underground conductors and Conduits - - (0.0) - - - - 68 108 Salvage (FC: 105,106,109,9999) - - - 69 Total Transmission Plant 27.4 40.0 69.9 74.8 92.9 115.4 52.8 7071 General Plant72 390 Structures and improvements - - 0.7 - - - - 73 391 Office furniture and equipment - (0.0) (0.3) 0.1 - - - 74 391.1 Computer hardware & voice and data network equipment 0.9 4.1 1.2 - 3.3 9.1 6.0 75 391.2 Computer software -non SAP - - (1.5) 76 392 Transportation equipment, fleet vehicles 0.1 0.3 1.1 0.9 0.5 1.1 0.9 77 394 Tools, shop, garage, stores and laboratoy equipment - 0.2 1.3 0.7 2.4 2.2 1.3 78 396 Vehicles Production 0.6 (0.1) (0.2) 1.0 1.1 1.4 2.1 79 399.2 Leasehold Improvements - 0.2 - - - - - 80 108 Salvage (FC: 108) - - - - - 81 Total General Plant 1.5 4.7 2.3 2.8 7.3 13.8 10.3 8283 Total retirements and adjustments 29.0 44.7 72.2 77.6 100.2 129.3 63.1 8485 Year End Balance86 Transmission Plant87 101 Distribution Systems (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) 88 350.1 Land rights 25.5 27.0 29.1 31.5 33.8 36.1 38.4 89 352 Building and Impr. - Trans Ops 40.0 44.2 49.4 55.7 61.7 67.4 73.9 90 353 Station equipment 431.6 465.2 495.7 535.2 569.0 616.5 672.4 91 353.1 System communication & control 193.8 210.9 218.1 235.9 250.5 271.3 293.2 92 354 Towers and fixtures 188.6 202.8 224.1 246.1 262.7 248.7 257.0 93 354.01 Towers and fixtures (post 2011) - - - - - 17.3 28.2 94 355 Poles and fixtures 143.4 154.2 158.0 174.9 189.0 181.2 202.3 95 356 Overhead conductors and devices 256.5 260.1 269.1 278.3 286.5 281.5 291.7 96 358 Underground conductors and Conduits 2.9 3.6 4.8 6.0 7.2 8.4 9.6 97 108 Salvage (FC: 105,106,109,9999) - - - - - - - 98 Total Transmission Plant 1,281.3 1,367.1 1,447.4 1,562.5 1,659.4 1,727.5 1,865.6 99

100 General Plant101 390 Structures and improvements 3.8 4.3 4.1 4.8 6.1 7.9 9.8 102 391 Office furniture and equipment 2.0 2.5 3.4 3.8 4.4 5.0 5.6 103 391.1 Computer hardware & voice and data network equipment 9.9 11.2 16.5 27.2 34.7 36.6 41.2 104 391.2 Computer software -non SAP - - 1.5 1.5 1.5 1.5 1.5 105 392 Transportation equipment, fleet vehicles 1.1 2.8 3.9 4.5 5.8 6.5 7.5 106 394 Tools, shop, garage, stores and laboratoy equipment 8.9 10.6 11.1 12.8 12.8 13.0 14.2 107 396 Vehicles Production 6.7 7.3 7.9 7.6 7.4 6.9 5.7 108 399.2 Leasehold Improvements 4.1 6.2 8.9 11.7 14.4 17.2 20.0 109 108 Salvage (FC: 108) - - - - - - - 110 Total General Plant 36.5 44.9 57.3 74.0 87.1 94.6 105.5 111112 Total Accumulated Depreciation Schedule 10-1 1,317.8 1,412.0 1,504.8 1,636.5 1,746.5 1,822.1 1,971.1 113

Schd 10-3



$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 2114 Previous year balance115 Transmission Plant 1,213.6 1,282.2 1,367.9 1,448.3 1,563.4 1,660.3 1,728.4 116 General Plant 24.1 33.0 41.3 53.8 70.4 83.6 91.0 117 1,237.7 1,315.1 1,409.3 1,502.1 1,633.8 1,743.8 1,819.4 118119 Gross Provision120 Transmission Plant Schedule 6-2 96.0 125.8 150.2 189.9 189.8 183.6 190.9 121 General Plant Schedule 6-2 10.4 13.1 14.7 19.4 20.4 21.3 21.2 122 106.4 138.8 165.0 209.3 210.2 204.9 212.1 123124 Retirements, Net Salvage and Adjustments125 Transmission Plant (27.4) (40.0) (69.9) (74.8) (92.9) (115.4) (52.8) 126 General Plant (1.5) (4.7) (2.3) (2.8) (7.3) (13.8) (10.3) 127 (29.0) (44.7) (72.2) (77.6) (100.2) (129.3) (63.1) 128129 Total Accumulated Depreciation130 Transmission Plant 1,282.2 1,367.9 1,448.3 1,563.4 1,660.3 1,728.4 1,866.5 131 General Plant 33.0 41.3 53.8 70.4 83.6 91.0 101.9 132 1,315.1 1,409.3 1,502.1 1,633.8 1,743.8 1,819.4 1,968.4 133134135136 Accumulated Depreciation - Life 1,164.8 1,224.0 1,308.0 1,149.4 1,234.0 1,287.5 1,392.9 137 Accumulated Depreciation - Net Salvage 150.3 185.2 194.1 484.4 509.9 532.0 575.5 138 1,315.1 1,409.3 1,502.1 1,633.8 1,743.8 1,819.4 1,968.4

Schd 10-4

Schedule 10-4Feb 15/16

AltaLink Management Ltd.General Tariff Application

Schedule of Transmission Capital Expenditures$Millions

Cross CWIP Cap Cap CWIPLine Description Reference Balance Expend Adds Balance

01 TRANSMISSION CAPITAL MAINTENANCE02 Transmission Urgent Repairs 0.2 6.5 6.3 0.4 03 Transmission Planned Maintenance 1.8 16.5 16.5 1.7 04 Substation Planned Maintenance 5.7 34.4 32.4 7.7 05 Meter Replacements 0.4 1.6 1.3 0.7 06 Mobile Substation - 0.1 0.1 - 07 Langdon SVC 0.1 0.9 1.0 (0.0) 08 Other - - - - 09 Power System Risk Mitigation Total - - - - 10 Transmission Line Moves 0.5 7.7 4.3 3.9 11 Vehicles - 4.2 3.9 0.3 12 Tools & Instruments - 2.1 2.1 - 13 8.7 73.8 67.9 14.6 1415 Telecommunication16 Telecom - 7.9 5.9 2.0 17 - 7.9 5.9 2.0 1819 SCADA/EMS20 System Control Centre Upgrades 0.0 1.6 1.6 0.0 21 0.0 1.6 1.6 0.0 2223 TOTAL CAPITAL MAINTENANCE 8.7 83.4 75.4 16.7 2425 DIRECT ASSIGNED PROJECTS 667.4 866.9 392.8 1,141.5 2627 Subtotal 676.1 950.3 468.2 1,158.2 2829 GENERAL PLANT30 Information Technology Hardware 1.2 16.8 16.1 1.9 31 Information Technology Software - SAP 2.2 7.0 8.3 0.9 32 Information Technology Software - Non-SAP 1.1 5.6 6.0 0.7 33 Facilities 0.1 5.5 5.3 0.3 34 Total General Plant 4.6 34.8 35.7 3.8 3536 Total 2012 Capital Additions 503.9 3738 680.8 985.1 503.9 1,162.0

2012

Schd 10-4

Schedule 10-4 Feb 15/16AltaLink Management Ltd.General Tariff Application



39 TRANSMISSION CAPITAL MAINTENANCE40 Transmission Urgent Repairs 0.4 7.7 7.0 1.1 41 Transmission Planned Maintenance 1.7 32.0 28.4 5.4 42 Substation Planned Maintenance 7.7 46.2 40.6 13.3 43 Meter Replacements 0.7 1.7 1.7 0.7 44 Mobile Substation - - - - 45 Langdon SVC (0.0) 0.0 - 0.0 46 Other - - - - 47 Power System Risk Mitigation Total - - - - 48 Transmission Line Moves 3.9 3.2 6.2 0.9 49 Vehicles 0.3 4.4 4.6 0.0 50 Tools & Instruments - 2.4 2.4 - 51 14.6 97.6 90.9 21.4 5253 Telecommunication54 Telecom 2.0 5.8 7.8 - 55 2.0 5.8 7.8 - 5657 SCADA/EMS58 System Control Centre Upgrades 0.0 1.8 1.8 0.0 59 0.0 1.8 1.8 0.0 6061 TOTAL CAPITAL MAINTENANCE 16.7 105.2 100.4 21.4 6263 DIRECT ASSIGNED PROJECTS 1,141.5 1,708.1 1,248.2 1,601.4 6465 Subtotal 1,158.2 1,813.3 1,348.6 1,622.8 6667 GENERAL PLANT68 Information Technology Hardware 1.9 19.9 18.5 3.3 69 Information Technology Software - SAP 0.9 6.7 6.4 1.2 70 Information Technology Software - Non-SAP 0.7 3.7 2.8 1.5 71 Facilities 0.3 9.4 8.7 1.0 72 Total General Plant 3.8 39.6 36.4 7.0 7374 Total 2013 Capital Additions 1,385.1 7576 1,162.0 1,852.9 1,385.1 1,629.8

2013

Schd 10-4




77 TRANSMISSION CAPITAL MAINTENANCE78 Transmission Urgent Repairs 1.1 5.2 5.5 0.7 79 Transmission Planned Maintenance 5.4 40.4 37.9 7.9 80 Substation Planned Maintenance 13.3 45.5 43.3 15.4 81 Meter Replacements 0.7 2.7 3.0 0.5 82 Mobile Substation - - - - 83 Langdon SVC 0.0 - - 0.0 84 Other - 6.0 5.5 0.5 85 Power System Risk Mitigation Total - - - - 86 Transmission Line Moves 0.9 7.4 6.5 1.8 87 Vehicles 0.0 4.7 3.5 1.2 88 Tools & Instruments - 2.3 2.3 - 89 21.4 114.1 107.5 28.1 9091 Telecommunication92 Telecom - 14.7 11.8 2.9 93 - 14.7 11.8 2.9 9495 SCADA/EMS96 System Control Centre Upgrades 0.0 2.3 2.3 0.1 97 0.0 2.3 2.3 0.1 9899 TOTAL CAPITAL MAINTENANCE 21.4 131.1 121.5 31.0

100101 DIRECT ASSIGNED PROJECTS See DACDA Schedules 3-2.2014 (iii)102103 Subtotal 21.4 131.1 121.5 31.0 104105 GENERAL PLANT106 Information Technology Hardware 3.3 16.2 16.3 3.2 107 Information Technology Software - SAP 1.2 10.5 10.6 1.1 108 Information Technology Software - Non-SAP 1.5 5.3 5.2 1.5 109 Facilities 1.0 10.7 11.7 0.0 110 Total General Plant 7.0 42.6 43.8 5.8 111112 Total 2014 Capital Additions 165.3 113114 28.4 173.7 165.3 36.8

2014

Schd 10-4




115 TRANSMISSION CAPITAL MAINTENANCE116 Transmission Urgent Repairs 0.7 5.5 6.2 (0.0) 117 Transmission Planned Maintenance 7.9 36.7 37.8 6.9 118 Substation Planned Maintenance 15.4 40.7 45.9 10.3 119 Meter Replacements 0.5 2.3 2.7 0.1 120 System Control Centre Upgrades 0.1 2.9 2.9 0.1 121 Mobile Substation - 0.0 0.0 - 122 Other 0.5 0 0 0.5 123 Telecom 2.9 7.8 7.5 3.3 124 Transmission Line Moves 1.8 9.6 13.0 (1.6) 125 Tools & Instruments - 2.7 2.7 (0.0) 126 Vehicles 1.2 5.7 5.7 1.2 127 511 L Rebuild - 2.9 - 2.9 128 31.0 116.8 124.3 23.5 129130 Ring Road Project - 6.8 - 6.8 131132 Carry-Forward - 14.6 12.7 1.9 133134 TOTAL CAPITAL MAINTENANCE 31.0 138.3 137.0 32.3 135136 DIRECT ASSIGNED PROJECTS See DACDA Schedules 3-2.2015 (iii)137138 Subtotal 31.0 138.3 137.0 32.3 139140 GENERAL PLANT141 Information Technology Hardware 3.2 11.0 11.6 2.6 142 Information Technology Software - SAP 1.1 12.2 12.2 1.1 143 Information Technology Software - Non-SAP 1.5 11.7 15.6 (2.4) 144 Facilities 0.0 18.3 17.5 0.9 145 Total General Plant 5.8 53.2 56.9 2.1 146147 Total 2015 Capital Additions 193.9 148149 36.8 191.5 193.9 34.4

2015

Schd 10-4




150 TRANSMISSION CAPITAL MAINTENANCE151 Transmission Urgent Repairs (0.0) 6.0 6.0 (0.0) 152 Transmission Planned Maintenance 6.9 41.8 41.9 6.8 153 Substation Planned Maintenance 10.3 47.4 49.0 8.7 154 Meter Replacements 0.1 2.1 2.1 0.1 155 System Control Centre Upgrades 0.1 3.1 3.1 0.1 156 Mobile Substation - 0.0 0.1 (0.1) 157 Other 0.5 0 0 0.5 158 Telecom 3.3 11.0 11.0 3.3 159 Transmission Line Moves (1.6) 10.1 11.1 (2.6) 160 Tools & Instruments (0.0) 2.1 2.1 (0.0) 161 Vehicles 1.2 4.4 4.4 1.2 162 511 L Rebuild 2.9 9.6 5.0 7.5 163 23.5 137.8 135.9 25.5 164

Ring Road Project 6.8 68.2 - 75.0

165 Carry-Forward 1.9 - 1.9 - 166167 TOTAL CAPITAL MAINTENANCE 32.3 206.0 137.8 100.5 168169 DIRECT ASSIGNED PROJECTS See DACDA Schedules 3-2.2016 (iii)170171 Subtotal 32.3 206.0 137.8 100.5 172173 GENERAL PLANT174 Information Technology Hardware 2.6 10.4 10.4 2.6 175 Information Technology Software - SAP 1.1 9.5 9.5 1.1 176 Information Technology Software - Non-SAP (2.4) 9.8 9.8 (2.4) 177 Facilities 0.9 29.9 33.1 (2.3) 178 Total General Plant 2.1 59.7 62.9 (1.0) 179180 Total 2016 Capital Additions 200.7 181182 34.4 265.7 200.7 99.5

2016

Schd 10-4




183 TRANSMISSION CAPITAL MAINTENANCE184 Transmission Urgent Repairs (0.0) 6.0 5.7 0.3 185 Transmission Planned Maintenance 6.8 48.6 50.2 5.2 186 Substation Planned Maintenance 8.7 51.3 49.7 10.2 187 Meter Replacements 0.1 1.2 1.2 0.1 188 System Control Centre Upgrades 0.1 3.2 3.1 0.2 189 Mobile Substation (0.1) - 0.0 (0.1) 190 Other 0.5 - - 0.5 191 Telecom 3.3 10.1 10.0 3.4 192 Transmission Line Moves (2.6) 6.2 5.4 (1.7) 193 Tools & Instruments (0.0) 2.4 2.4 - 194 Vehicles 1.2 4.4 4.4 1.2 195 511 L Rebuild 7.5 22.7 22.7 7.5 196 25.5 156.1 154.8 26.8 197198 Ring Road Project 75.0 12.8 - 87.8 199200 Carry-Forward - - - - 201202 TOTAL CAPITAL MAINTENANCE 100.5 168.9 154.8 114.6 203204 DIRECT ASSIGNED PROJECTS See DACDA Schedules 3-2.2017 (iii)205206 Subtotal 100.5 168.9 154.8 114.6 207208 GENERAL PLANT209 Information Technology Hardware 2.6 9.3 11.0 0.9 210 Information Technology Software - SAP 1.1 10.3 10.4 1.0 211 Information Technology Software - Non-SAP (2.4) 11.3 10.2 (1.3) 212 Facilities (2.3) 6.2 6.1 (2.1) 213 Total General Plant (1.0) 37.2 37.6 (1.4) 214215 Total 2017 Capital Additions 192.4 216217 99.5 206.2 192.4 113.2

2017

Schd 10-4




218 TRANSMISSION CAPITAL MAINTENANCE219 Transmission Urgent Repairs 0.3 6.3 6.3 0.3 220 Transmission Planned Maintenance 5.2 51.3 51.1 5.4 221 Substation Planned Maintenance 10.2 54.5 56.5 8.3 222 Meter Replacements 0.1 1.2 1.2 0.1 223 System Control Centre Upgrades 0.2 3.3 3.3 0.2 224 Mobile Substation (0.1) - - (0.1) 225 Other 0.5 - - 0.5 226 Telecom 3.4 10.6 10.8 3.1 227 Transmission Line Moves (1.7) 6.4 6.6 (2.0) 228 Tools & Instruments - 2.1 2.1 - 229 Vehicles 1.2 4.6 4.6 1.2 230 511 L Rebuild 7.5 23.6 23.6 7.5 231 26.8 163.9 166.1 24.6 232233 Ring Road Project 87.8 9.4 97.5 (0.3) 234235 Carry-Forward - - - - 236237 TOTAL CAPITAL MAINTENANCE 114.6 173.3 263.6 24.3 238239 DIRECT ASSIGNED PROJECTS See DACDA Schedules 3-2.2018 (iii)240241 Subtotal 114.6 173.3 263.6 24.3 242243 GENERAL PLANT244 Information Technology Hardware 0.9 7.4 8.0 0.4 245 Information Technology Software - SAP 1.0 9.7 10.3 0.5 246 Information Technology Software - Non-SAP (1.3) 9.5 10.2 (1.9) 247 Facilities (2.1) 4.1 4.1 (2.1) 248 Total General Plant (1.4) 30.8 32.6 (3.2) 249250 Total 2018 Capital Additions 296.2 251252 113.2 204.1 296.2 21.2

2018

Schd 10-5


General Tariff ApplicationSchedule of Transmission Engineering, Services & General (DAIC)

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Transmission ES & G 36.7 50.2 53.7 58.0 56.8 55.5 53.4 0304 Transmission Capital Expenditures Schedule 10-4 1,852.0 3,561.0 1,917.9 1,152.2 803.0 792.1 824.8 0506 Transmission ES & G Rate 2.0% 1.4% 2.8% 5.0% 7.1% 7.0% 6.5%07080910 Allocated General Plant ES & G N/A N/A N/A N/A N/A N/A N/A1112 General Plant Capital Expenditures Schedule 10-4 N/A N/A N/A N/A N/A N/A N/A1314 Allocated General Plant ES & G Rate N/A N/A N/A N/A N/A N/A N/A

Schd 10-6


General Tariff ApplicationSchedule of Transmission Contributions in Aid of Construction

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Contributions02 Prior Year Gross Contributions 299.6 430.7 568.2 569.3 573.2 577.2 578.5 0304 Additions to property 131.2 137.4 1.1 3.9 4.1 1.3 99.2 05 Customer Refund to Fortis - - 06 Retirements, Transfers & Disposals07 131.2 137.4 1.1 3.9 4.1 1.3 99.2 0809 Current Year Gross Contributions 430.7 568.2 569.3 573.2 577.2 578.5 677.7 1011 Accumulated Amortization12 Prior Year Accum. Amortization 41.6 53.5 68.3 86.4 100.9 115.5 130.1 13 Retirements, Transfers & Disposals14 Gross Amortization (Line 2 X Line 15 + Line 4 X Line 15/2) Schedule 6-1 11.9 14.8 18.1 14.5 14.6 14.6 15.9 15 Amortization Rate 3.35% 3.35% 3.35% 2.53% 2.53% 2.53% 2.53%1617 Current Year Accum. Amortization 53.5 68.3 86.4 100.9 115.5 130.1 146.0 181920 Net Mid Year Contributions Schedule 9-1 317.6 438.6 491.4 477.6 467.0 455.1 490.0

Schd 10-7


General Tariff ApplicationSchedule of Transmission Computer System Costs

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 SAP

03 Prior Year Gross Cost 31.9 38.5 41.4 52.9 63.3 73.2 80.7 0405 Additions 8.3 6.0 11.6 12.7 9.9 10.4 10.3 0607 Retirement (1.6) (3.1) - (2.4) - (2.9) (0.9) 0809 Adjustment - - - - - - - 1011 Current Year Gross Cost 38.5 41.4 52.9 63.3 73.2 80.7 90.1 1213 Accumulated Amortization1415 Prior Year Accum. Amortization (11.1) (13.0) (13.8) (18.6) (22.0) (28.8) (33.6) 1617 Amortization (Line 3 X Line 19) + (Line 5 + Line 7)/2 X Line 19 Schedule 6-1 (3.5) (4.0) (4.7) (5.8) (6.8) (7.7) (8.5) 1819 Amortization Rate 10% 10% 10% 10% 10% 10% 10%2021 Retirement 1.6 3.1 - 2.4 - 2.9 0.9 2223 Current Year Accum. Amortization (13.0) (13.8) (18.6) (22.0) (28.8) (33.6) (41.2) 2425 Current Year Unamortized Cost 25.5 27.5 34.4 41.3 44.4 47.1 48.8 2627 Mid Year SAP Unamortized Computer System Costs 23.2 26.5 30.9 37.8 42.8 45.7 48.0 2829 Non-SAP 5 Years Amortization 20%30 Prior Year Gross Cost 25.0 34.4 32.5 26.8 26.4 24.3 21.1 3132 Additions 9.4 2.5 2.6 7.8 5.1 6.6 5.9 3334 Retirement - (4.3) (8.4) (8.2) (7.2) (9.7) (2.5) 3536 Adjustment - - - - - - - 3738 Current Year Gross Cost 34.4 32.5 26.8 26.4 24.3 21.1 24.5 3940 Accumulated Amortization4142 Prior Year Accum. Amortization (11.4) (17.4) (21.5) (19.0) (16.2) (14.1) (8.9) 4344 Amortization (Line 30 X Line 46) + (Line 32 + Line 34)/2 X Line 46 Schedule 6-1 (5.9) (8.4) (5.9) (5.3) (5.1) (4.5) (4.6) 4546 Amortization Rate 20% 20% 20% 20% 20% 20% 20%4748 Retirement - 4.3 8.4 8.2 7.2 9.7 2.5 4950 Current Year Accum. Amortization (17.4) (21.5) (19.0) (16.2) (14.1) (8.9) (11.0) 5152 Current Year Unamortized Cost 17.0 11.1 7.7 10.2 10.2 12.2 13.6 5354 Non-SAP 2 Years Amortization 50%55 Prior Year Gross Cost - - 3.6 6.2 16.3 19.2 22.4 5657 Additions - 3.6 2.6 10.1 6.9 7.9 7.7 5859 Retirement - - - - (3.9) (4.7) (5.9) 6061 Adjustment - - - - - - - 6263 Current Year Gross Cost - 3.6 6.2 16.3 19.2 22.4 24.2 6465 Accumulated Amortization6667 Prior Year Accum. Amortization - - (0.9) (3.3) (9.0) (13.9) (19.6) 6869 Amortization (Line 55 X Line 71) + (Line 57 + Line 59)/2 X Line 71 Schedule 6-1 - (0.9) (2.4) (5.6) (8.9) (10.4) (11.6) 7071 Amortization Rate 50% 50% 50% 50% 50% 50% 50%7273 Retirement - - - - 3.9 4.7 5.9 7475 Current Year Accum. Amortization - (0.9) (3.3) (9.0) (13.9) (19.6) (25.4) 7677 Current Year Unamortized Cost - 2.7 2.9 7.3 5.3 2.8 (1.2) 7879 Non-SAP Total Current Year Unamortized Costs 17.0 13.7 10.6 17.5 15.5 15.0 12.4 8081 Mid Year Non-SAP Unamortized Computer System Costs 15.3 15.4 12.2 14.1 16.5 15.3 13.7 8283 Total Mid Year Unamortized Computer System Costs Schedule 11-1 38.5 41.9 43.1 51.9 59.4 61.0 61.7

Additions 17.6 12.0 16.8 30.6 21.9 24.8 23.8 Retirement (1.6) (7.5) (8.4) (10.6) (11.1) (17.4) (9.3) Amortization (9.5) (13.3) (13.1) (16.7) (20.8) (22.6) (24.7)



11. TRANSMISSION NECESSARY WORKING CAPITAL Section 11 of AltaLink’s Application addresses the following:

11.1 Summary

11.2 Allowance for Working Capital

11.3 Transmission Necessary Working Capital Schedules



Summary For purposes of this Application, AltaLink has revised its Necessary Working Capital

requirements and provided its updates as Appendix 7, Lead/Lag.

The previous Lead/Lag Study was undertaken by AltaLink in 2014. To ensure that the most up-to-date cash working capital requirements were captured for the Test Period, AltaLink completed a new Lead/Lag Study in 2015. The results of this study demonstrate an overall increase to the cash working capital requirement. Utilizing the 2015 Lead/Lag Study days, as compared to the 2014 Lead/Lag Study days, results in an average increase to the total Revenue Requirement over the Test Period of $0.7M per year.

AltaLink's Lead/Lag Study recommends ratios for the determination of an allowance for working capital with respect to AltaLink’s receipt of revenues, payment of operating expenses, income tax payments, Goods and Services Tax (GST) remittances, interest payments, equity distributions, retained earnings and depreciation. The methodology utilized for the 2015 Lead/Lag Study is consistent with the methodology utilized in AltaLink's previous lead/lag studies, and was most recently approved in AUC Decision 2013-407.

The working capital allowance represents the average amount of capital necessary, beyond that required for Property, Plant and Equipment (PP&E) and other Rate Base items, to bridge the gap between the time expenditures are made to provide service and the time payment is received for that service. The working capital allowance determined via a Lead/Lag Study is indicative of a utility’s average daily working capital requirements.

AltaLink's 2015 Lead/Lag Study analyzed transactions over the period of time, January - December, 2014 to determine: i) for each revenue stream, the average number of lag days between the provision of service to customers and the receipt of payment for that service from customers (the revenue lags); and ii) for each expense (or payment, in the case of GST and equity distributions), the average number of lag days between the provision of service to customers and the date that AltaLink paid for the goods and services that it acquired to provide service (the expense lags).

The difference between these two lags is referred to as a net lag or net lead. A net lag occurs when the payment of an expense precedes the collection of its related revenue stream. In this situation, AltaLink's investors must supply capital to finance the expense until receipt of the related revenues. Investor funding is necessitated by the fact that the cash outflows for expenses preceded the cash inflows for the related revenues. The working capital allowance for a net lag is therefore added to Rate Base in order to provide AltaLink with a reasonable opportunity to recover the cost of the related investor-supplied funding. A net lead position occurs in the opposite situation with the opposite impact.

Once the revenue lags and expense lags were determined, the calculation of the working capital allowance involved the following steps:

• Step 1 – weight each revenue lag by its related revenue stream, as reported in the 2014 Report of Finances and Operations (Appendix 6-A4), to calculate the total weighted average revenue lag.

• Step 2 – weight each expense lag by its related expense, as reported in the 2014 Report of Finances and Operations (Appendix 6-A4), to calculate the total weighted average expense lag.



• Step 3 – subtract the weighted average expense lag from the weighted average revenue lag to obtain the net (lead)/lag days (refer to Schedule 11-3).

• Step 4 – divide the net (lead)/lag by 365 days to obtain the working capital ratio; multiply this ratio by the total expenses to calculate the average amount of working capital required to finance the expenses (refer to Schedule 11-2).

The resulting net (lead)/lag days from the 2015 Lead/Lag Study are summarized and compared to the 2014 Lead/Lag Study in Table 11.2-1 below. In calculating the revenue and expense lags, AltaLink performed a detailed analysis on 99.7% of revenue receipts and 90.3% of cash operating expenses.

Allowance for Working Capital The summary in Table 11.2-1 sets out the Lead/Lag Study results (refer to Appendix 7 for the

complete Lead/Lag Study).

Table 11.2-1 - Lead/Lag Study Summary Results Lead/Lag Study Summary: Net (Lead)/Lag Days

2015 Study 2014 Study Difference Operating Expenses 50.5 days 41.1 days 9.4 days Income Tax Payments 0.7 days 0.8 days (0.1) days GST Remittances (1.0) days (9.2) days 8.2 days Equity Interest Payments (52.0) days (61.9) days 9.9 days Distributions 0.7 days 0.8 days (0.1) days Retained Earnings 44.4 days 44.0 days 0.4 days Depreciation 44.4 days 44.0 days 0.4 days

The results summarized in Table 11.2-1 illustrate that there are a number of changes in Lead/Lag Study components when comparing the 2015 and 2014 Lead/Lag Study results. As noted in Section 11.1, these changes result in an overall average increase to the Total Revenue Requirement of $0.7M per year in the Test Period.

The dollar impact of these changes is noted in the table below, along with the related variance explanations.

Table 11.2-2 - Dollar Impact of Changes in Lead/Lag Study Average Increase (Decrease) in Total Revenue Requirement ($M) Operating Expenses 0.3 Income Tax Payments (0.0)* Goods & Services Tax Remittances 0.0 Interest Payments 0.3 Equity Distributions (0.0)* Retained Earnings 0.0* Depreciation 0.0* Total 0.7

* Note: Amounts rounded down to zero.

Operating Expenses – Overall, the working capital requirement for operating expenses has increased, primarily due to a shift in the weighting of individual operating expense items. The respective weighting of individual operating expenses is based on the dollar weighting as per the



2014 Report of Finances & Operations. There was an increase in dollar weighting of operating expenses with shorter lag times, thereby resulting in an increase to the working capital requirement. This is because the shorter the expense lag, the longer AltaLink is financing the expenses for until the corresponding revenue is received.

Income Tax Payments & Equity Distributions – AltaLink does not pay income taxes directly. Instead, income tax is paid by its partners and such payments are considered to be included in the quarterly equity distributions paid to the partners. As a result, the equity distribution lag is also applied to the income tax payments component. There was minimal change to the quarterly equity distribution payments between the 2014 and 2015 lead /lag studies, with the dollar impact rounding to $0.0M.

Goods and Services Tax Remittances – The negligible increase in working capital requirement of less than $0.1M (which rounds to $0.0M) is due to a reduced expense lag on GST-eligible payments. The shorter the expense lag, the longer the period that AltaLink is financing the expenses for until the corresponding revenue (or in this case, GST refund) is received.

Interest Payments – The increase in working capital requirement for interest payments is due to a decreased payment lag on both short-term and long-term debt interest. The shorter the period of time between when interest expenses are incurred and payments are made, the lesser the overall lag for those payments, and the longer the amount of time that AltaLink is financing the interest expense for until the corresponding revenue is received.

Retained Earnings & Depreciation – As both of these items are assigned a zero expense lag, the negligible change of less than $0.1M is entirely a result of a slight increase in the revenue receipt lag, from 44.0 days in the 2014 Study to 44.4 days in the 2015 Study. This dollar impact on total Revenue Requirement rounds down to $0.0M.

Transmission Necessary Working Capital Schedules Schedule 11-1 Schedule of Transmission Necessary Working Capital

Schedule 11-2 Schedule of transmission Necessary Working Capital Calculation

Schedule 11-3 Transmission Lead/Lag Days for Necessary Working Capital

Schedule 11-4 Schedule of Transmission Net Operating Expense Lead/Lag Days

Schedule 11-5 Schedule of Transmission Operating Expense Lag Days

Schedule 11-6 Transmission GST Impact on Working Capital

Schd 11-1


General Tariff ApplicationSchedule of Transmission Necessary Working Capital

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Operating Expense Schedule 11-2 7.8 16.0 19.4 17.1 18.1 24.3 24.9 02 Income Tax Expense Schedule 11-2 0.6 0.0 0.0 0.1 0.0 0.0 0.0 03 Material and Supplies Schedule 11-2 1.5 1.8 1.9 2.3 2.4 2.7 2.8 04 Unamortized Computer System Costs Schedule 11-2 38.5 41.9 43.1 51.9 59.4 61.0 61.7 05 Unamortized Financing Fees Schedule 11-2 8.0 12.5 18.4 23.2 26.2 28.6 32.5 06 Good & Services Tax Schedule 11-2 2.1 3.8 1.7 (1.3) (1.1) (0.4) (0.4) 07 Depreciation Expense Schedule 11-2 12.6 16.7 20.9 35.5 42.7 42.6 45.3 08 Debt Interest Schedule 11-2 (8.1) (11.0) (16.4) (22.7) (28.7) (23.7) (23.7) 09 Preferred Equity Schedule 11-2 - - - - - - - 10 Common Equity (retained earnings component) Schedule 11-2 5.9 7.0 9.4 10.3 13.0 14.1 14.7 11 Common Equity (dividend component) Schedule 11-2 1.4 0.0 0.0 0.2 0.2 0.2 0.2 12 Total Necessary Working Capital Schedule 10-1 68.2 83.8 94.6 116.7 132.3 149.4 158.0

Schd 11-2


General Tariff ApplicationSchedule of Transmission Necessary Working Capital Calculation

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Total Operating & Maintenance Costs Schedule 3-1 102.6 115.6 140.5 151.6 160.9 175.7 180.1 02 Less: Provision for Injuries and Damages03 Net O&M 102.6 115.6 140.5 151.6 160.9 175.7 180.1 04 O&M Lag Days Schedule 11-3 27.6 50.5 50.5 41.1 41.1 50.5 50.5 05 Cash Operating Expenses Working Capital Schedule 11-1 7.8 16.0 19.4 17.1 18.1 24.3 24.9 0607 Utility Income Taxes Schedule 3-1 20.5 40.6 54.7 65.9 0.0 0.0 0.0 08 Income Tax Lag Days Schedule 11-3 10.2 0.0 0.0 0.8 0.8 0.7 0.709 Income Tax Working Capital 0.6 0.0 0.0 0.1 0.0 0.0 0.0 1011 Mid Year Other Inventory 1.5 1.8 1.9 2.3 2.4 2.7 2.8 1213 Total Inventory Working Capital Schedule 11-1 1.5 1.8 1.9 2.3 2.4 2.7 2.8 1415 Unamortized Computer System Costs Schedule 10-7 38.5 41.9 43.1 51.9 59.4 61.0 61.7 1617 Unamortized Financing Fees Schedule 11-2 8.0 12.5 18.4 23.2 26.2 28.6 32.5 1819 GST Working Capital Schedule 11-3 2.1 3.8 1.7 (1.3) (1.1) (0.4) (0.4) 2021 Debt Interest Schedule 28-1 82.0 90.1 134.2 133.7 169.1 166.1 166.1 22 Debt Interest Lag Days Schedule 11-3 -36.2 -44.6 -44.6 -61.9 -61.9 -52.0 -52.023 Long Term Debt Working Capital Schedule 11-1 (8.1) (11.0) (16.4) (22.7) (28.7) (23.7) (23.7) 2425 Return - Preferred Equity - - - - - - - 26 Preferred Shares Lag Days 44.20 44.38 44.38 44.04 44.04 44.38 44.38 27 Preferred Equity Working Capital - - - - - - - 2829 Return - 50% of Common Equity Schedule 28-1 48.5 57.3 77.6 85.2 107.8 115.9 121.1 30 Common Equity Lag Days Schedule 11-3 10.2 0.0 0.0 0.8 0.8 0.7 0.731 Common Equity (Dividend) Working Capital Schedule 11-1 1.4 0.0 0.0 0.2 0.2 0.2 0.2 3233 Return - 50% of Common Equity Schedule 28-1 48.5 57.3 77.6 85.2 107.8 115.9 121.1 34 Common Equity Lag Days Schedule 11-3 44.2 44.4 44.4 44.0 44.0 44.4 44.4 35 Common Equity (Retain Earning) Working Capital Schedule 11-1 5.9 7.0 9.4 10.3 13.0 14.1 14.7 3637 Depreciation Schedule 6-1 104.0 137.3 172.0 294.2 354.1 350.3 372.8 38 Depreciation Lag Days Schedule 11-3 44.2 44.4 44.4 44.0 44.0 44.4 44.4 39 Depreciation Working Capital Schedule 11-1 12.6 16.7 20.9 35.5 42.7 42.6 45.3 4041 Total Working Capital Schedule 11-1 70.1 88.6 98.4 116.7 132.3 149.4 158.0

Schd 11-3


General Tariff ApplicationTransmission Lead/Lag Days for Necessary Working Capital

No. of Lead/Lag days


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Operating & Maintenance Expense Schedule 11-2 27.6 50.5 50.5 41.1 41.1 50.5 50.50203 Income Tax Expense Schedule 11-2 10.2 0.0 0.0 0.8 0.8 0.7 0.70405 Depreciation Schedule 11-2 44.2 44.4 44.4 44.0 44.0 44.4 44.40607 Debt Interest Schedule 11-2 -36.2 -44.6 -44.6 -61.9 -61.9 -52.0 -52.00809 Preferred Equity Schedule 11-2 44.2 44.4 44.4 44.0 44.0 44.4 44.41011 Equity (Retained Earnings) Schedule 11-2 44.2 44.4 44.4 44.0 44.0 44.4 44.41213 Equity (Dividends) Schedule 11-2 10.2 0.0 0.0 0.8 0.8 0.7 0.71415 Good & Services Tax Schedule 11-2 1.4 0.9 0.9 -9.2 -9.2 -1.0 -1.0

Schd 11-4


General Tariff ApplicationSchedule of Transmission Net Operating Expense Lead/Lag Days

$Millions

2014 2014 Lead/Lag DaysCross Actual Lag Weighted 2015/2016

Line Description Reference Revenue Days Revenue Application01 Revenue02 Industrial Facility Charges03 Transmission Tariff Schedule 3-1 645.4 44.4 28,637.6 44.004 Other0506 Total 645.4 44.4 28,637.6 44.00708 Payment from Balancing Pool09 Deferrals (not forecasted to occur in GTA period)1011 Total Transmission Revenue 645.4 44.4 28,637.6 44.01213 Operating Expenses Schedule 11-5 127.2 -6.1 (778.8) 3.01415 Net Transmission Operating Expense Lag Schedule 11-3 50.5 41.1

Schd 11-5


General Tariff ApplicationSchedule of Transmission Operating Expense Lag Days

$Millions

2014 2014 Lead/Lag DaysCross Actual Lag Weighted 2015/2016

Line Description Reference Revenue Days Revenue Application01 Salary and Wages02 Salaries and Wages (net) 31.5 1.1 35.8 1.3 03 Employee Benefits (net) 7.1 1.0 7.3 1.1 04 Overtime & Standby (net) 2.0 0.3 0.6 0.4 05 Incentives (net) 4.3 8.2 34.7 7.7 0607 Contracted Manpower (net) 22.6 9.2 207.6 12.1 080910 Taxes Other Than Income Taxes 29.3 5.5 160.0 6.0 1112 General Operating Expenses13 Insurance 9.5 (10.8) (102.3) (6.2) 14 Commercial Cards (net) 4.3 0.9 3.9 1.1 15 Rent (net) 2.3 (0.3) (0.6) (0.3) 16 Annual Structure Payment 12.6 (16.1) (202.3) (13.3) 17 Other General Operating Expenses (net) 15.2 (0.1) (0.8) (0.1) 1819 Miscellaneous Revenue (13.3) (5.1) 68.3 (6.6) 2021 Total Schedule 11-4 127.2 -6.1 212.2 3.0

Schd 11-6


General Tariff ApplicationTransmission GST Impact on Working Capital

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 REVENUE:02 Total Operating Revenue Schedule 3-1 380.4 488.5 645.4 809.4 901.5 944.1 989.5 03 Net Receipts Applicable to GST 380.4 488.5 645.4 809.4 901.5 944.1 989.5 04 GST Rate 5% 5% 5% 5% 5% 5% 5%05 GST Billable (a) 19.0 24.4 32.3 40.5 45.1 47.2 49.5 0607 Day Factor - Revenues Schedule 11-4 44.2 44.5 44.5 44.0 44.0 44.4 44.408 Day Factor - Remittance Lag -52.4 -52.3 -52.3 -48.4 -48.4 -68.6 -68.609 (b) -8.2 -7.8 -7.8 -4.3 -4.3 -24.3 -24.31011 GST Impact on Working Capital Increase/(Decrease) (a)*(b)/365 (0.4) (0.5) (0.7) (0.5) (0.5) (3.1) (3.3) 1213 EXPENSES:14 Total Fuel & Operating Costs Schedule 3-1 102.6 115.6 140.5 151.6 160.9 175.7 180.1 15 Property Taxes Schedule 5-6 (22.9) (25.1) (29.3) (36.4) (42.0) (53.3) (57.2) 16 Parent Charges 17 Labour & Fringe (Contractors) Schedule 5-4, 25-4 (19.3) (20.6) (22.6) (24.5) (24.9) (24.7) (24.8) 18 Deferred Pension Write - Off19 Provision for Injuries and Damages Schedule 29-2 (1.2) 1.2 (1.1) (0.3) (1.5) (1.5) (1.5) 20 Rate Case Provision21 Reserve for I&D Claims Schedule 29-2 - - - - - - - 22 Rate Case Claims23 Capital Expenditures less labour Schedule 10-4, 5-4 1,833.1 3,538.2 1,893.2 1,125.4 775.2 763.5 796.2 24 Net Costs Applicable to GST 1,892.3 3,609.2 1,980.6 1,215.7 867.7 859.7 892.8 25 GST Rate 5% 5% 5% 5% 5% 5% 5%26 GST Refundable (c) 94.6 180.5 99.0 60.8 43.4 43.0 44.6 2728 Day Factor - Expenses (Including Capital) -42.8 -43.6 -43.6 -53.2 -53.2 -45.4 -45.429 Day Factor - Remittance Lag 52.4 52.3 52.3 48.4 48.4 68.6 68.630 (d) 9.6 8.7 8.7 -4.9 -4.9 23.3 23.33132 GST Impact on Working Capital Increase/(Decrease) (c)*(d)/365 2.5 4.3 2.4 (0.8) (0.6) 2.7 2.8 3334 Net GST Impact on Working Capital Increase/(Decrease) Schedule 11-2 2.1 3.8 1.7 (1.3) (1.1) (0.4) (0.4)



12. DISTRIBUTION MFR




13. DISTRIBUTION RETAIL REVENUE




14. DISTRIBUTION COST OF SALES




15. DISTRIBUTION OPERATION COSTS




16. DISTRIBUTION DEPRECIATION




17. DISTRIBUTION INCOME TAXES




18. DISTRIBUTION REVENUE OFFSETS




19. DISTRIBUTION RETURN ON RATE BASE




20. DISTRIBUTION RATE BASE




21. DISTRIBUTION NECESSARY WORKING CAPITAL




22. ISOLATED OPERATING COSTS




23. GENERAL OPERATING AND MAINTENANCE




24. COMMON OPERATIONS




25. CORPORATE ADMINISTRATION AND GENERAL Section 25 of AltaLink’s Application addresses the following:

25.1 Overview – Total Administrative and General Expenses

25.2 Administrative and General Expenses

25.3 Corporate Costs

25.4 Corporate Manpower – Full Time Equivalents

25.5 Corporate Administration and General Schedules



Overview - Total Administrative and General Expenses 25.1.1 Overview

Section 25 provides information with respect to AltaLink’s A&G expenses as defined in the USA/MFR requirements documents approved the AUC.

Table 25.1.1-1 - Administrative and General Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


25.1.1.1 Labour Table 25.1.1.1-1 - Administrative and General - Labour Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Labour 14.9 16.7 17.9 18.7 19.7 20.3

Table 25.1.1.1-2 - Administrative and General - Labour Forecast Increase ($M)



2017 Forecast Average Inflation 0.5 0.9 0.7 Other 0.4 (0.2) 0.1 Total 0.9 0.7 0.8

A&G labour on average for the Test Period is forecast to increase by inflation and the transfer of 3 FTEs from USA 566 as well as the addition of 2 FTEs in USA 935.

Refer to Section 25.2 for a detailed description of A&G Labour forecasts on an individual USA Activity Code basis.

25.1.1.2 FTEs Table 25.1.1.2-1 - Administrative and General - FTE Year End Summary 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


The increase in operating FTEs for the Test Period in the A&G USA accounts is due to a transfer of 3 FTEs from USA 566 and the addition of 2 FTEs in USA 935 (see Section 25.13 for added detail). However, AltaLink’s overall company FTEs is forecasting to stay at 2016 levels, (see Section 5 for added detail).

Refer to Section 25.2 for a detailed description of A&G FTE forecasts on an individual USA Activity Code basis.



25.1.1.3 Contracted Manpower Table 25.1.1.3-1 - Administrative and General - Contracted Manpower Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Contracted Manpower 6.6 6.6 8.3 8.5 8.4 8.5

Table 25.1.1.3-2 - Administrative and General - Contracted Manpower Increase ($M)



2017 Forecast Average Inflation 0.2 0.2 0.2 Other (0.3) (0.0) (0.2) Total (0.2) 0.2 (0.0)

Administrative and General contracted manpower is forecast to remain at the same level as 2016.

Refer to Section 25.2 for a detailed description of the Contracted Manpower forecasts on an individual USA Activity Code basis.

25.1.1.4 Other GOE Table 25.1.1.4-1 - Administrative and General Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Other GOE 14.6 22.7 19.3 19.7 22.0 20.6

Table 25.1.1.4-2 - Administrative and General - Other GOE Forecast Increase ($M)



2017 Forecast Average Inflation 0.4 0.5 0.4 Other 1.9 (2.0) (0.0) Total 2.3 (1.5) 0.4

O&M Other GOE is forecast to increase over 2016 by an average of $0.4M, of which $0.4M is due to escalation and Other GOE expenses mainly driven by:

• $0.6M for additional PC-Software licenses; • $1.6M increase in hearing costs reflective of the regulatory activity forecast; and • $0.2M increase in general insurance and SIR levels.

In 2018, a reduction in hearing costs of $2.5M accounts for the decrease.

Refer to Section 25.2 for a detailed description of the Other GOE forecasts on an individual USA Activity Code basis.

Administrative and General Expenses Section 25 relates to corporate and administrative activities that indirectly support the

operations and maintenance of AltaLink’s transmission facilities. As with Section 5, expenses and FTEs are recorded, forecasted, and discussed in order by USA Activity Code. Indirect corporate and administrative activities are summarized as follows:



• Administrative and General Expenses (USA 920): Supervision and management of corporate operations not directly attributable to Transmission Operations, such as customer services, finance, law and regulatory, and human resources;

• Administration Corporate/Office Supplies and Expenses (USA 921): General operating activities in support of USA 920, such as training and professional development, business travel, travel expenses associated with training and professional development, and general office expenses;

• Outside Service Employed (USA 923): Contractors and consultants in support of USA 920, such as strategic and management consulting, legal and audit fees, GTA and regulatory issues;

• Insurance Premiums (USA 924): Commercial insurance coverage to protect against a number of risks, including damage to property and boiler/machinery, commercial general liability, and excess liability;

• Injuries and Damages (USA 925): Payments to and from the SIR, which provides insurance coverage for injuries and damages claims not covered by commercial insurance;

• Employee Pension and Benefits (USA 926): AltaLink’s DC pension and PRB plans, including PRB, and Pension Administration. Employee benefits for active employees are fully attributed to operating and capital functions and included in labour costs for all other USA Activity Codes;

• Commission Expenses (USA 928): All third party expenses related to regulatory proceedings, which are reviewed and approved by the Commission as per the Commission’s Rule 022;

• General Advertising Expenses (USA 930.1): Advertising campaigns related to public safety as well as scheduled outages and maintenance work affecting the public;

• Miscellaneous General Expenses (USA 930.2): General management activities that are not otherwise attributable to another USA Activity Code, such as credit facility fees and Board of Directors fees;

• Rents Other Than Head Office (USA 931): Office space for the back-up control centre in Calgary and field offices located in Red Deer and Lethbridge;

• Head Office Rent (USA 931.1): Office space in three separate buildings all located in the vicinity of 26th Street and 3rd Avenue SE in Calgary;

• IT A&G Expenses (USA 934): A number of owned and leased IT systems that support corporate functions such as treasury and accounting applications, document and records management, e-mail, and office furniture tracking systems; and

• General O&M Expenses (USA 935): Operations and maintenance associated with head office buildings, office furniture and equipment, general computer hardware, general voice and data network equipment, general communication equipment, and all other miscellaneous equipment.

25.2.1 USA 920 - Administrative and General Salaries This account includes the compensation (salaries, bonuses, and other consideration for services,

but not including directors’ fees) of officers, executives, and other employees of the utility properly chargeable to utility operations and not chargeable directly to a particular operating function.



Table 25.2.1-1 - USA 920 - Administrative and General Salaries ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 9.4 11.5 11.9 12.5 13.2 13.7

USA 920 is wholly attributable to labour expenses, which are forecast to increase by inflation and the transfer of 3 FTEs from USA 566.

Table 25.2.1-2 - USA 920 - Administrative and General Salaries Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.4 0.6 0.5 Other 0.3 0.0 0.2 Total 0.7 0.6 0.6

As per the following Table 25.2.1-3, AltaLink forecasts the following FTE levels in USA 920 during the Test Period.

Table 25.2.1-3 - USA 920 - Administrative and General Salaries FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


2015

Update 2016

Update 2017

Forecast 2018

Forecast Corporate Finance 31 31 31 30 Customer service 8 8 11 11 CEO 6 6 6 6 External engagement 8 7 7 7 Human resources 5 5 5 5 Regulatory & legal 17.6 16.6 16.6 16.6 Total FTEs 75.6 73.6 76.6 75.6

a) Corporate Finance: Corporate finance is decreasing by 1 operating FTEs during the Test Period as a term Accounts Payable position will not be renewed in 2018.

b) Customer service: The business improvement team was transferred from USA 566 to USA 920 and accounts for the increase in 3 FTEs.

c) The remainder of the areas will remain at 2015-2016 levels.

AltaLink is using a zero-based approach to forecast its required FTE levels in the Application. In line with this approach, the following paragraphs detail the functions of each department and why AltaLink needs the current level of FTEs. The departments in USA 920 are:

• Corporate Finance o Accounting o Treasury o Internal Audit, Enterprise Risk Management and Compliance

• Human Resources • Communications



• Customer Service • Law and Regulatory • CEO Department.

25.2.2 Corporate Finance

Treasury and the Internal Audit group will remain at their current FTE levels throughout the Test Period. However, there’s a planned reduction in Accounting as a term Accounts Payable position will not be renewed in 2018.

Accounting – includes:

• Financial Reporting • Capital Accounting • General Accounting • Financial Planning • Financial Systems • Payroll and senior administration of the Accounting group

Financial Reporting – This group is responsible for preparing quarterly and annual formal financial statements of AltaLink L.P., and its general and limited partners. It also prepares financial statements for the partnership’s pension plans and joint ventures. It prepares the backup for the Report on Operations, sections of the AIF, income taxes and other financial information that is reported internally and externally. This includes the provision of monthly management and financial information to AltaLink’s managers, executives and owners. This group also reviews and coordinates the implementation of new financial reporting standards issued and contemplated by the International Accounting Standards Board as well as changes to existing standards. There has also been a significant increase in the complexity of the reporting since the acquisition from Berkshire Hathaway Energy, including the consolidation of more entities and US GAAP reporting. As these activities are considered non-regulated, the costs related to these do not form part of this Application.

General Accounting – This group is responsible for processing supplier invoices and expense claims, cheque and electronic funds payments, accruals, invoicing, bank reconciliations, GST administration and analysis and monitoring of accounts receivable and payable. There has been a very significant increase in the volume of activity handled by this group as shown in the Table below:

Table 25.2.2-1 - Volume of Accounts Payable (A/P) Transactions Year 2012 2013 2014 2015E 2016E 2017E 2018E Volume of A/P Transactions 33K 37K 47K 46K 43K 40K 40K

The volume of accounts payable transactions mirrors the significant increase in AltaLink’s activities. In addition, procurement initiatives and the in-house purchasing of materials related to small direct-assigned projects have substantially increased volume levels. Sourcing this steady stream of small projects internally is less expensive than hiring external contractors to do the work. AltaLink hired an additional term Accounts Payable employee in 2014 to manage the volume and will be continuing to make improvements during the Test Period to further automate the remaining manual financial entries. This position will be terminated during the Test Period.



Financial Planning – This group is responsible for coordinating the annual budgeting process, quarterly forecast updates, long-range planning, monthly revenue calculations, goodwill impairment calculation, scenario analysis for investors and debt rating agencies as well as other quantitative analysis requested by managers or executives. To carry out many of these activities, the group has a financial and revenue model, and it is responsible for updating and maintaining this model.

Financial Systems – AltaLink continues to review its procedures and systems to identify and implement more efficient practices. AltaLink has a number of system and procedure enhancement initiatives underway during the Test Period and it expects to continue these initiatives during the next few years. Implementing these initiatives requires a significant amount of effort to review existing processes and identify any changes that will be required to enable them to function more efficiently. Time and effort is also required to design and test proposed changes to the impacted processes. The Financial Systems group leads these initiatives within Finance, coordinating the review of existing processes, identifying process improvement alternatives, assisting in the design of new processes, coordinating the delivery of any required system changes, and completing the required pre-implementation testing. Once implemented, the Financial Systems group is responsible for the maintenance of any new configurations when changes are required to AltaLink’s central accounting system. Projects are underway or planned that will address identified system and process improvement opportunities related to: compliance with new AESO reporting requirements, the automation of journal entries, improvement to the travel and expense process, improvement to management reporting and upgrades of key systems, such as accounts payable, SAP ERP and governance, risk and compliance modules. On an ongoing basis, the Financial Systems group is directly involved in making any required changes to AltaLink’s central accounting system including the addition of tables and assessment cycles, general ledger account maintenance and various modifications required to system generated reports.

Payroll – This group ensures that all AltaLink employees are paid accurately and on-time on a bi-monthly basis. This group also ensures that employees leaving the company are paid appropriately and that information with respect to new employees to the company is entered accurately into the payroll system. AltaLink continues to automate its payroll functions that are currently managed through manual processes, such as some reporting and manual forms. Although a number of process improvements have been led in this area over the last few years, this group remains small with only 3 total FTEs. Reducing the group to less than 3 is a significant business risk as this group supports the Human Resources function performing system testing and assisting in process changes during system upgrades, changes to collective agreements, changes to payroll and tax legislation and the implementation of payroll and Human Resources system improvements as well as supporting the management of positions.

Senior Administration – This group is responsible for providing overall direction to the Accounting group, carrying out quality assurance of key outputs from the group, establishing accounting policies, attracting and retaining sufficient staff with the appropriate skill sets to carry out the work, developing and training AltaLink staff, implementing controls over financial reporting, liaising with AltaLink’s external auditors, resolving accounting issues and providing general administrative services to the Accounting group.

Treasury – The Treasury group’s activities includes cash management, cash forecasting, money market borrowing, investment of surplus funds, treasury accounting, covenant compliance,



financial statement review, budgeting, bank relationship management including the provision of new credit, capital markets monitoring, placement of long-term debt, debt investor relations, credit rating agency management, pension fund administration and management, and regulatory assistance. In addition to the foregoing the Treasury group also has responsibility for Insurance and Property Tax Management. These activities include the procurement of insurance, insurance administration and claims management, and property tax compliance and management.

Internal Audit – Internal Audit conducts audits and reviews based on risk and reports their recommendations to the Committees of the Board of Directors and senior management. The examinations include testing the effectiveness and efficiency of controls, compliance, and risk management and work is conducted in compliance with international internal auditing standards. Some examples of risk based audit work include: internal controls over financial reporting also known as Canadian Sarbanes-Oxley Act, Alberta reliability standards, safety, project management, IT security, asset management, environmental, regulatory, governance, customer services, procurement, enterprise risk management and code of ethics compliance. The auditors also conduct billing audits of external vendors and contractors.

Enterprise Risk Management and Compliance – AltaLink recognizes that risk is present in business activities and that the effective management of risk benefits its customers and stakeholders. As a result, AltaLink implemented an Enterprise Risk Management (ERM) Program. The ERM Program function is comprised of the design, Operation & Maintenance of the Program on behalf of the CFO. This group is also responsible for supporting ERM systems, including processes, analysis, reporting, presentations and ERM data management. This group oversees AltaLink’s compliance with the Alberta Reliability Standards, ISO Rules, and other laws and regulations.

25.2.3 CEO The CEO department consists of AltaLink’s Executive Leadership team and is not expected to

change during the Test Period. The Executive Leadership team is involved in the day-to-day management decisions as well as the implementation of Board and owner decisions as well as short-term and long-term strategic plans. The Leadership also oversees all the key areas of the business including financial oversight, legal and regulatory matters, capital project execution and delivery, operations, external engagement, communications, customer service and human resources.

25.2.4 Business Development (or Corporate Development) The Business Development employees were terminated from AltaLink and hired by BHE Canada.

They are not included in this Application.

25.2.5 Human Resources Human Resources will have 5 operating FTEs in USA 920 during the Test Period.

AltaLink’s Human Resources department is extremely efficient, having a higher number of employees per Human Resources staff than most other companies, but still delivering excellent leadership and support to the organization on a wide variety of Human Resources matters including; Recruitment, Organization Design and Effectiveness, Compensation, Benefits, Labour Relations, and Leadership Development and Coaching. According to the 2011 Performance Benchmarking Suite provided by the Human Resources Leadership Council, a company of AltaLink’s size, fewer than 1,000 employees, the median Employee Headcount per Human



Resources Staff Headcount is 43 employees per Human Resources staff. Using the same metrics by geography of North America for any size company, the median is 59 employees per Human Resources staff. AltaLink will have a higher employee headcount per Human Resources staff than both of the above noted averages, reflecting the high efficiency of AltaLink’s Human Resources staff. Including the SVP, Human Resources, who is included in the CEO FTE headcount numbers, AltaLink’s ratio in 2017 is forecast to be 73 employees per Human Resources staff and in 2018 it is forecast to be 77 employees per Human Resources staff. This ratio is calculated based on the forecast of 871 mid-year FTEs in 2017 divided by 12 total Human Resources staff, and 877 mid-year FTEs in 2018 divided by 11 total Human Resources staff.

25.2.6 External Engagement AltaLink’s External Engagement group includes 7 operating FTEs.

This team is required to deliver balanced and accurate information to AltaLink internal and external stakeholders. They contribute to ensuring AltaLink’s operations are clearly understood by those who may be impacted by AltaLink’s work.

AltaLink has more than 850 employees in six office locations across Alberta. It is critical that AltaLink’s employees are provided with the information they need to effectively operate the business. The Communications team is responsible for delivering information to employees and external stakeholders through AltaLink’s communications media, including the Internet and AltaLink’s intranet sites, online newsletter, social media and video production. These employees also support AltaLink’s eight business units by providing strategic communications counsel and support for the internal and external audiences. These employees also plan and execute AltaLink’s employee events.

The Government Relations Manager is responsible for developing AltaLink’s government relations strategy and sharing AltaLink information with Alberta’s 87 provincial constituencies, including 36 within AltaLink’s service territory and an additional 44 including the cities of Edmonton and Calgary, which AltaLink facilities also serve. Also included in the provincial government relations program is the relationship maintenance with all Cabinet ministers and their respective departments. AltaLink also works closely with opposition party caucuses to ensure they fully understand AltaLink, its transmission business and the value and impacts of its operations on Albertans.

25.2.7 Customer Service The Customer Service team is comprised of 11 Operating FTEs as 3 FTEs from the business

improvement team were transferred from USA 566 to 920.

Overall the role of the Customer Service department is to provide organization wide leadership and facilitation regarding customers’ experience with AltaLink, with an aim to enabling strong levels of customer satisfaction. Key focus areas of the Customer Service department’s work efforts include:

• leading the development and implementation of a customer-focused culture and business processes;

• defining and enabling segmented customer value propositions and solutions; • representing and advocating for the “Voice of the Customer” to support AltaLink to

consistently deliver on customer expectations;



• collaborating with customers and market participants to optimize industry processes to meet customer needs; and

• guiding AltaLink's continuous process improvement to its management system, enabling industry-leading results.

The workload drivers in support of this role include the following:

a) AltaLink has implemented a segmented customer satisfaction survey process which measures perceptions of AltaLink’s performance relative to customer needs. The Customer Service department is responsible to develop and operate this process, facilitate identification of associated improvement plans and manage associated internal and external communications. The Customer Service department assists AltaLink in assimilating the feedback into their day to day operations to improve AltaLink’s service for customers.

b) Customer Service continuously works with AltaLink staff and customers to improve AltaLink’s service delivery, which is tailored to the unique needs of different customer segments and key accounts.

c) Developing and implementing new services for Customers, based on their needs and requests. A disciplined new services development process has been implemented by the Customer Service department to ensure new services meet customer needs. Examples of new services which have been introduced include new connecting customer service options which allow customers the choice to be more involved in steering of and transparency to their interconnection projects as well as telecom monitoring and reporting services.

d) Guiding connecting customers through the complex, AESO Connection process. This work is resource intensive with significant cross industry coordination between the customer, the AESO, the Distribution Company and internal AltaLink delivery teams. Customer contracts and financial transactions associated with new connections are managed by the Customer Service team.

e) Operational meetings with existing connected customer segment which includes approximately 150 transmission connected customer sites. These meetings provided customers with detailed reviews of reliability, power quality and future maintenance and outage plans. These meetings have been extremely well received by customers, with 78% of them rating the value of the meetings > 8 on a scale of 0-10 where 10 is highest. The strengthened relationships with customers have resulted in increased demand for ongoing communications, particularly associated with power quality and reliability incidents which are frequently facilitated by Customer Service representatives.

f) Customer needs continue to centre around delivery of reliable, safe, cost effective and responsibly delivered transmission services, and related communications. Customer Service FTEs work directly with customers, AltaLink service delivery staff, and industry stakeholders on industry wide initiatives which stem from customer interests. Participation on industry work groups and formal processes in past have related to mitigating the cost of transmission, expanding customer choice and competition, transmission cost management policy, and streamlining customer connections and Project Delivery.

g) AltaLink’s Customer Service department is responsible for leading AltaLink’s continuous process improvement, which is designed to systematically improve key elements of AltaLink’s management system (e.g. leadership and governance, strategy and planning, people engagement, customer experience, partners and suppliers, process and Project Management) to deliver value to customer and stakeholders. Along with AltaLink’s strategic commitment to Customer Service, this commitment represents a significant and important



change initiative which will support AltaLink’s ability to sustain and improve its performance as an excellent TFO, based on proven, objective standards.

25.2.8 Law and Regulatory The Law and Regulatory department has 16.6 operating FTEs reflected in USA 920.

The Law and Regulatory department focused on performing legal and regulatory work related to GTAs, Generic Cost of Capital proceedings, expected Generic Income Tax proceedings, future Performance-Based Regulation matters, financing applications and AESO Tariff related matters. There has been a marked increase in the size, complexity and duration of these regulatory proceedings. The department’s experienced resources assist in the development, support and administration of these applications which include hundreds of thousands of pages of testimony including confidential modules, motions, information responses and tracking of past proceeding matters, which require the current level of resources in order to provide quality, tracking, analysis and efficiency to the regulatory process.

25.2.9 USA 921 - Administration Corporate/Office Supplies and Expenses USA Activity Code 921 includes staff, office, and other expenses associated with general

administration that are not directly chargeable to other accounts. USA 921 is attributable to GOE in support of USA 920. The major activities in this USA Activity Code support corporate and facilities staff and mainly include:

• training and professional development; • staff expenses which include professional dues, business-related travel (meetings with

bankers, investors, rating agencies, peer groups, accounting standards groups and others), travel related to training and professional development and employee events;

• office expenses, such as printing, stationery, and postage/courier; • other expenses, such as bank fees and other general expenses; and • a credit for the use of GOE (facilities, office, systems and general overhead) for BHEC, a non-

regulated affiliate company was approved by AltaLink’s compliance committee. A credit of approximately $0.3M offsets the use of regulated facilities as the nature of the work is non-regulated. In January 2016, employees from this small group were terminated from AltaLink and rehired as employees of a BHEC which does not form part of this Application. The credit is meant to cover the use of facilities, office, systems and general overhead which would be included in a variety of USA codes in the 900 series, such as 931.1 (Head Office Rent), 934 (IT A&G Expense) and 921 (Administration Corporate) for which BHEC could not be billed separately by a third party. Also refer to Sections 25.2.4 (FTEs) and 8.1.2 (Revenue Offsets).

The Revenue Requirement for 2017 and 2018 does not include any amount for charitable donations nor sponsorships. The views of the Board in Decision 2003-061 (pages 15-16) and Decision 2007-012 (pages 41-42) state that the Board considers that donations are non-utility costs and should be removed from Revenue Requirements.

Table 25.2.9-1 - USA 921 - Office Supplies and Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 2.0 1.8 2.1 2.3 2.0 2.1



AltaLink forecasts operating expenses to decrease on average by $0.1M per year over the Test Period mainly related to inflation. In addition, cost containment measures which included revising its Business and Entertainment policy and the curtailment of employee events. In 2015, AltaLink revised its Business and Entertainment policy as follows:

• All air travel outside Alberta but within Canada must be approved by an Executive; and • All air travel outside Canada must be approved by the CEO.

Table 25.2.9-2 - USA 921 - Office Supplies and Expenses Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other (0.3) 0.0 (0.1) Total (0.2) 0.1 (0.1)

Note: Totals may not add due to rounding.

25.2.10 USA 922 - Administrative Expense Transferred - credit There are no administrative expenses transferred. USA 920 includes operating administrative

and general salaries which does not include salaries attributed to capital charges.

25.2.11 USA 923 - Outside Services Employed USA Activity Code 923 represents the fees and expenses of professional consultants and others

for general services which are not applicable to a particular operating function or to other accounts. USA 923 is wholly attributable to contracted manpower for corporate functions including mainly legal fees, audit fees, strategic and management consulting.

Contractors can be categorized into base or cyclical expenses. Base contractors include recurring basic business functions that are required to run AltaLink. The contractors that fall into this category include general legal fees, audit fees, search firms, leadership development, strategy development, property tax consultants, labour, pension and employment consultants and rating agency fees. These types of contractors account for most of the contracting dollars.

The use of cyclical contractors varies based upon projects that are one-time events or are due to a multi-year trend that is expected to end after the project is complete. These projects include GTA and other regulatory issues and customer surveys.

Table 25.2.11-1 - USA 923 - Outside Services Employed ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 4.5 4.1 5.9 6.0 5.8 5.9

Table 25.2.11-2 - USA 923 - Outside Services Employed Contracted Manpower Forecast Increase ($M) Forecast Increase

2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other (0.3) (0.0) (0.2) Total (0.2) 0.1 (0.0)

Note: Totals may not add due to rounding.



AltaLink forecasts consulting expenses to decrease marginally during the Test Period:

• as the implementation of business improvement processes are being brought in-house and led by internal staff; and

• cost containment measures across all other departments.

AltaLink forecasts Outside Services Employed to remain at the same level in 2018 as in 2017, other than a small inflationary adjustment.

25.2.12 USA 924 - Insurance Premiums USA Activity Code 924 includes the cost of insurance premiums. AltaLink’s forecast insurance

premiums for 2015-2016 are set out in Table 25.2.12-1 below.

Table 25.2.12-1 - USA 924 - Insurance Premiums ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 2.2 2.6 3.0 3.4 3.6 4.0

Additional details on insurance coverage, limits, deductibles and insurance market conditions are provided in Appendix 3.

25.2.13 USA 925 - Injuries and Damages USA 925 represents the annual cost to protect the utility against injury and damage claims of

employees or others, losses of such character not covered by insurance, and expenses incurred in settlement of injuries and damages claims. Refer to Appendix 3-B for the SIR Policy. There have been no changes to the SIR policy subsequent to the 2015-2016 GTA.

Table 25.2.13-1 below provides information on Small Damage Claims for the 2013-2018 period inclusive. SIR information can be found in the SIR continuity schedule, Schedule 29-2.

Table 25.2.13-1 - USA 925 - Injuries and Damages ($M) - Small Damage Claims

2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Funding 0.2 0.2 0.2 0.2 0.2 0.2 Small Damage Claims 0.2 0.2 0.2 0.2 0.1 0.1

AltaLink is forecasting SIR funding of $1.5M for 2017 and $1.5M in 2018. Claims are forecast at $1.5M in each of 2017 and 2018. Refer to Schedule 29-2 for additional information. Information related to new claims can be found in Appendix 3-C.

The SIR Policy can be found in Appendix 3-B and the general framework for use of the SIR can be found in Section 29.2.

Refer to the 2017-2018 GTA Schedule 29-2 for the SIR continuity schedule.

25.2.14 USA 926 - Employee Pension and Benefits USA 926 represents the cost of pensions only, as determined by IAS 19 under IFRS. This includes

the cost of AltaLink’s DC pension plan, PRB, and Pension Administration. Other employee benefits are fully attributed to operating and capital functions and are included in labour costs.

Refer to Section 1.8.5.7 for a comprehensive write-up of pensions and PRB.



Table 25.2.14-1 - USA 926 - Employee Pensions and Benefits ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 3.8 3.6 3.4 3.6 3.6 3.6

Employee pension and benefits are expected to remain stable over 2017 and 2018 as increased compensation levels are expected to be offset by staff reductions. As detailed in Section 1.8.5.7, AltaLink does not forecast any changes to its DC and PRB plan.

25.2.15 USA 928 - Commission Expenses (Hearing Costs) USA Activity Code 928 includes all third party expenses related to AltaLink’s regulatory

proceedings. Actual expenses charged to USA 928 are solely a function of hearing expenses reviewed and approved under Commission Rule 022. Forecast expenses are discussed in Section 29.6 as part of the HCR.

Table 25.2.15-1 - USA 928 - Commission Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 0.5 2.4 2.8 2.4 3.9 1.5

Refer to Table 25.2.15-2 for a list of Cost Orders issued by the AUC during the 2012-2014 calendar years.

USA 928 is a function of both the number and scope of regulatory proceedings that may potentially result in charges to AltaLink’s HCR. This account is therefore capable of varying significantly year-over-year depending upon known and anticipated regulatory proceedings.

The following section provides detailed payment and forecasting information by year. The requested funding for the Test Period is forecasted to result in a closing balance at the end of the Test Period of $0M.

Refer to Schedule 29-7 for the Hearing Cost Funding.

2017 Funding Forecast AltaLink is forecasting the HCR will require $3.9M of funding in 2017 to cover the following:

• AltaLink 2015-2016 GTA o AltaLink’s share of Intervener cost awards $0.5M

• AUC 2016 GCOC o AltaLink’s expense $0.5M o AltaLink’s share of Intervener cost awards $0.1M

• AltaLink 2017-2018 GTA o AltaLink expense $1.3M o AltaLink’s share of Intervener cost awards $1.6M

• Plus Opening Balance $0.0M • Total $3.9M Totals may not add due to rounding.



2018 Funding Forecast AltaLink is forecasting the HCR will require $1.5M of funding in 2018 to cover the following:

• AltaLink 2015-2016 GTA o AltaLink’s share of Intervener cost awards $0.5M

• AUC 2016 GCOC o AltaLink’s expense $0.5M o AltaLink’s share of Intervener cost awards $0.1M

• AltaLink 2017-2018 GTA o AltaLink expense $0.0M o AltaLink’s share of Intervener cost awards $0.4M

• Plus Opening Balance $0.0M • Total $1.5M

Table 25.2.15-2 - USA 928 - Cost Orders & Expenses, 2012-2014 Management Update January 1, 2012 to November 17, 2014

2012 Calendar Year Cost Decision Amount ($M)

Cost Decision 2012-030 0.4 (2011 GCOC) Total for 2012 Period $0.4M

2013 Calendar Year Cost Decisions Amount ($M)

Cost Decision 2013-077 (2011-2012 GTA Compliance) Cost Decision 2012-312 and 2013-234 0.50 (2013-2014 GTA Intervener Advance Funding) Cost Decision 2013-216 0.10 (R&V of Decision 2011-474) Cost Decision 2013-179 (2013 Interim Rate Tariff) Total for 2013 Period $0.5M

2014 Calendar Year Cost Decisions– Management Update Amount ($M)

Cost Decisions - Actual Cost Decision 2014-052 2.10 (2013-2014 GTA) Cost Decision 2014-013 0.20 (Utility Asset Disposition) Cost Decision 2014-235 (2014 Interim Tariff Application) Cost Decision 2014-302 0.10 (2014 Interim Tariff Application) Total for 2014 Actual $2.4M




25.2.16 USA 930.1 - General Advertising Expenses USA Activity Code 930.1 includes the cost of advertising and related activities not provided for

elsewhere.

USA 930.1 is primarily driven by activities that include media advertising (newspapers, periodicals, billboards, and radio), developing advertising material, and retaining the services of advertising agencies and commercial artists.

AltaLink will be continuing advertising to keep the public informed of operations which may impact their day-to-day lives. Some of these operations will include: constructions, low-level helicopter flights, scheduled outages or operating maintenance work in their communities. This advertising may include many mediums.

AltaLink is also a member of the JUST, investing into the power line safety awareness campaign. In 2006, Alberta’s electric utilities and the Alberta Government formed JUST to collectively help address the common safety issue of contact with power lines. JUST’s mandate is to positively affect change in attitudes and behaviours toward power line safety, to help reduce power line incidents. Through ongoing safety awareness and industry education, JUST is committed to helping breed a long-term “culture of power line safety” in Alberta. This involves everyone working around overhead or underground power lines, including electric utilities, oil and gas, construction, forestry and agricultural industries. AltaLink supports JUST’s public education campaigns in multi-media.

Table 25.2.16-1 - USA 930.1 - General Advertising Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 0.1 0.0 0.0 0.0 0.1 0.1

General Advertising Expenses are minimal and expected to remain at the same level in the Test Period.

25.2.17 USA 930.2 - Miscellaneous General Expenses USA Activity Code 930.2 includes the cost of general management not provided for elsewhere.

USA 930.2 is primarily related to credit facility fees, trustee fees, Board of Directors fees, and Educational Partnerships.

Credit facilities are discussed in detail in Section 28.4.

Table 25.2.17-1 - USA 930.2 - Miscellaneous General Expenses ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Total 1.8 1.5 1.3 1.3 1.1 1.1

During the Test Period, approximately half of USA Activity Code 930.2 is related to credit facility fees. These fees are expected to decrease due to smaller credit facilities. Credit facility fees are discussed in detail in Sections 28.3.3 and 28.3.4. All other expenses attributed to USA 930.2 are forecasted to remain stable for the Test Period.



Table 25.2.17-2 - USA 930.2 - Miscellaneous General Expenses Forecast Increase ($M)



2017 Forecast Average Inflation 0.0 0.0 0.0 Other (0.3) (0.0) (0.1) Total (0.2) 0.0 (0.1)


25.2.18 USA 931 - Rents (Other Than Head Office) USA Activity Code 931 shall include rents properly includible in utility operating expenses for the

property of others used, occupied, or operated in connection with utility operations other than head office rent. This account shall include rents for other offices and field offices.

Non-head office rents include offices for the backup control centre and field offices. The back up control centre operation is located within AESO facilities in Calgary and supplies back up services to AltaLink’s main control centre.

Field offices in Red Deer and Lethbridge are where AltaLink crews are housed out of to support field activities.

Table 25.2.18-1 - USA 931 - Rents (Other Than Head Office) ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Other GOE 0.1 0.1 0.1 0.1 0.1 0.1 Total 0.1 0.1 0.1 0.1 0.1 0.1

As shown in Table 25.2.18-1, there are no forecast expenses for labour and contracted manpower in USA Activity Code 931.

The expense recorded in USA Activity Code 931 is attributable to non-head office space requirements of AltaLink staff and prevailing market rates for office space when AltaLink commits to a lease.

AltaLink rents facilities in three locations outside the Head Office complex:

• AESO Facilities • Red Deer • Lethbridge

The AESO location is currently used to locate AltaLink’s Emergency Control Centre (AECC) consoles, and no AltaLink staff reside at this location. The AECC facility ensures an alternate site in case of a disaster or AltaLink’s primary Control Centre site is not accessible.

The Red Deer lease affords office, garage, yard and training space to AltaLink staff working out of Red Deer. This location provides effective response times for system trouble in the Alberta Central Area and the associated gas plant facilities in the Red Deer Area.

The Lethbridge facility provides office and yard space for field staff working in the Lethbridge area. This location provides effective response times for system trouble in the Southern part of AltaLink’s transmission area.



Table 25.2.18-2 - USA 931 - Rents (Other Than Head Office) Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Other GOE 0.0 0.0 0.0 Total 0.0 0.0 0.0

As shown in Table 25.2.18-2 above, there are no forecast increases in the Test Period.

25.2.19 USA 931.1 - Head Office Rent USA Activity Code 931.1 includes rents properly includible in utility operating expenses for the

property of others used, occupied, or operated in connection with the head office.

Table 25.2.19-1 - USA 931.1 - Head Office Rent ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018

Forecast Other GOE 1.0 1.2 1.3 1.3 1.4 1.5 Total 1.0 1.2 1.3 1.3 1.4 1.5

As shown in Table 25.2.19-1, there are no forecast expenses for labor and contracted manpower in USA Activity Code 931.1.

The expense recorded in USA Activity Code 931.1 is attributable to office space requirements of AltaLink staff and prevailing market rates for office space when AltaLink commits to a lease.

Currently in 2014, Head Office rent in USA 931.1 account, includes the leases at three office buildings; AltaLink Plaza, Golder Building and the AltaLink East building located in the vicinity of 2611 - 3rd Avenue SE. Three floors are leased in AltaLink Plaza, one floor in Golder, and two floors in the AltaLink East building.

AltaLink continues to leverage lower rents by not being located downtown. In downtown Calgary current average rents for class "A" office buildings are $32.00 per sq. ft. AltaLink rents currently average $19.70 per sq. ft. while being located in a similar product class but in the suburban office market.

Table 25.2.19-2 - USA 931.1 - Head Office Rent Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Other GOE 0.0 0.1 0.1 Total 0.0 0.1 0.0

As shown in Table 25.2.19-2 above the Head Office rent expenses are expected to increase by an average of $0.1M over the Test Period.

Table 25.2.19-3 - USA 931.1 - Head Office Rent Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other 0.0 0.1 0.0 Total 0.0 0.1 0.0

As shown in Table 25.2.19-3 above the increase in GOE for the Test Period is less than $0.1m attributable primarily to escalation.



25.2.20 USA 934 - IT A&G Expenses This account includes the compensation (salaries, and expenses) for employees of the IT

department related to general and administrative activities properly chargeable to utility operations for the provision of regular utility services and not chargeable directly to a particular operating function. Some examples of the systems supported are: Document/Records Management, back office systems (e-mail, file - print, web, etc.), business systems such as SAP, treasury, consultation and reporting. The majority of the effort and expenses within this account are for the full time labour, the contracted labour and support and maintenance to deliver the IT service.

Table 25.2.20-1 - USA 934 - IT General & Administrative Expense ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



Approximately 30% of USA 934 is attributable to labour expenses with an additional 15% attributed to contracted manpower. The remainder of this account is attributable to GOE. The forecast increase within USA 934 is directly related to inflation and increases in software licensing further described below.

There are no material differences to previously approved levels of expenditures in labour or contracted manpower.

Table 25.2.20-2 - USA 934 - IT General & Administrative Expense Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.2 0.1 0.1 Contracted Manpower 0.1 0.0 0.1 Other GOE 0.7 0.1 0.4 Total 0.9 0.2 0.6


AltaLink forecasts operating expenses to increase by $0.6M per year on average. $0.1M is attributable to labour and $0.1M is attributable to contracted manpower and $0.4M to GOE. Labour, contracted manpower and other GOE are discussed in turn below.

Labour Table 25.2.20-3 - USA 934 - IT General & Administrative Expense Labour Forecast Increase ($M)



The $0.1M per year average increase to labour expense is a function of inflationary assumptions which are discussed in Section 1.8 Forecasting Methodology.



AltaLink has reviewed the current forecasted workloads and work processes and has determined no additional FTE increases are required to perform IT services.

Table 25.2.20-4 - USA 934 - Operation & Maintenance IT Support FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


Contracted Manpower Contracted Manpower for this account includes activities for:

• service desk and desk side services; • support and maintenance of servers; and • select managed services to support business systems.

AltaLink’s managed services continue to be required to augment the demand for resourcing and the ability to secure hard to hire skills.

Managed Services is the practice of transferring day-to-day related management responsibility as a strategic method for improved effective and efficient operations. The person or organization that owns or has direct oversight of the organization or system being managed is referred to as the offered, client, or customer. The person or organization that accepts and provides the managed service is regarded as the service provider.

AltaLink remains accountable for the functionality and performance of managed service and does not relinquish the overall management responsibility of the organization or system.

The benefits of a managed service are:

• ramp up and down resource capacity based on growth and technical competencies; • timely access to a variety of seasoned senior, certified technical skills; • reduce dependencies on skill’s market variability; and • focus full time staff on high value activities and provide additional on the job training.

Table 25.2.20-5 - USA 934 - IT General & Administrative Expense Contract Manpower Forecast Increase ($M)


Outside of inflation, contractor expenses are forecast to increase over the Test Period attributable to costs for the continued managed service support required for increased information system usage across AltaLink.

AltaLink continues to leverage existing managed services to deliver back office and specific business applications.

The 2017 and 2018 contracted manpower includes the forecast costs based on the contract renewal for the managed service for infrastructure and operations. A procurement process is underway in 2016 to evaluate and select a managed service for infrastructure and operations support. The contract includes service provisions for the continued management of key



operations services for the back office. The service desk serves as a front line support group that provides a central service and problem resolution centre for IT issues, which include computer problems, system and hardware, network issues, access to data servers, printing services, software problems and upgrades, including desktop tools, e-mail software and specialized technical tools.

Service desk call volumes are forecast to remain at 2016 levels over the Test Period.

Figure 25.2.20-1 - Service Desk Call Volumes (H)

Server requests for support are forecast to increase from the 2016 levels for the Test Period.

This moderate increase is attributed to implementation of the multi-year server strategy that has contributed to an infrastructure platform that has reduced support requests. This is shown in Figure 25.2.20-2 below.

Figure 25.2.20-2 - Server Support Requests (H)



Other GOE GOE for this account includes activities for:

• meal, traveling and incidental expenses; • annual software maintenance and support; and • peripheral hardware.

This account will increase as AltaLink continues to:

• leverage current investments in software where practical; • review, refines, consolidate or retires software agreements when required; • review, augment or replace software purchases with software subscriptions; and • rationalize license agreements with vendors.

Table 25.2.20-6 - USA 934 - IT General & Administrative Expense GOE Forecast Increase ($M)

Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other 0.6 0.0 0.3 Total 0.7 0.1 0.4


GOE is forecast on average to increase by $0.4M over the Test Period. Approximately $0.1M of this increase represents the average yearly inflation discussed in Section 1.8 Forecasting Methodology. The remaining $0.3M per year average increase is a result of increased expenditures for PC Software licenses attributed to the shift in the pricing model for software subscriptions. These increases in subscription licensing prices started in 2016 and will continue in full for the Test Period.

25.2.21 USA 935 - General O&M Expenses This account shall include the cost assignable to customer accounts, sales and administrative

and general functions of labour, materials used and expenses incurred in the maintenance of property, where the book cost is included in Account 390, Structures and improvements, Account 391, Office furniture and equipment, Account 391.1 Computer hardware & voice and data network equipment, Account 397, Communication equipment, and Account 398 Miscellaneous Equipment. This account includes operating costs and all corporate leases.

Table 25.2.21-1 - USA 935 - Maintenance of General Plant ($M)

Expense 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018



Approximately 10% of USA 935 is attributable to labour expenses with additional 20% attributed to contracted manpower. The remainder of this account is attributable to GOE which are driven primarily by operating cost associated with current and new office space required to accommodate staff.



The variance to previously approved levels of expenditures in labour is due to changes in FTE levels further described below.

Table 25.2.21-2 - USA 935 - Maintenance of General Plant Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Labour 0.1 0.0 0.1 Contracted Manpower (0.1) 0.0 (0.0) Other GOE 0.4 0.2 0.3 Total 0.4 0.2 0.3


AltaLink forecasts operating expenses to increase by $0.3M per year on average. This is mainly due to a small increase in labour which is offset by decreased contracted manpower and a forecast increase in Other GOE as described below.

Labour AltaLink has reviewed the current forecasted workloads and work processes for the Test Period

and confirmed current FTEs along with the following proposed changes to the existing staff compliment. AltaLink is forecasting 2 FTE positions to continue to provide the necessary support to the Devry and Golder building locations in Calgary.

Table 25.2.21-3 - USA 935 - Maintenance of General Plant Labour Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.0 0.0 0.0 Other 0.1 (0.0) 0.0 Total 0.1 0.0 0.1

Table 25.2.21-4 - USA 935 - Maintenance of General Plant FTEs 2013

Actual 2014

Actual 2015

Update 2016

Update 2017

Forecast 2018


AltaLink is forecasting to add two additional full-time term positions in the Test Period. Both FTEs are required to ensure that the Devry and Golder facilities in Calgary are appropriately supported for reception and mail service. To date these functions have been supported by the main office staff on a part-time basis. Up on review of workload and required service level it was determined that additional staff dedicated to the two office buildings were required. The two positions are a mail room clerk and a receptionist.

Contracted Manpower Table 25.2.21-5 - USA 935 - Maintenance of General Plant Contract Manpower Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average





AltaLink is forecasting on average no additional contracted manpower expenses for the Test Period. Once escalation is removed, AltaLink’s contracted manpower is forecast to decrease by approximately $0.1M on average.

Other GOE Table 25.2.21-6 - USA 935 - Maintenance of General Plant GOE Forecast Increase ($M) Forecast Increase 2017 Forecast 2018 Forecast Average Inflation 0.1 0.1 0.1 Other 0.4 0.1 0.2 Total 0.4 0.2 0.3


GOE is forecast to increase on average by approximately $0.3M in the Test Period. Approximately $0.1M is due to escalation and the remainder, $0.2M is due to additional expenses required for the new HVDC facilities. These expenses include services for cleaning, snow removal, utilities and waste management at the new HVDC sites.

Corporate Costs Refer to Schedule 25-4.

Corporate Manpower – Full Time Equivalents Refer to Schedule 25-5 for FTEs included in the corporate function.

Corporate Administration and General Schedules Schedule 25-1 Schedule of Corporate Administration and General (by Account)

Schedule 25-2 Schedule of Corporate Administration and General Account

Schedule 25-3 Schedule of Corporate Administration and General Account

Schedule 25-4 Schedule of Corporate Costs

Schedule 25-5 Schedule of Corporate Manpower – Full Time Equivalents – Annual Averages

Schedule 25-7 Communications Expenditures

Schd 25-1


General Tariff ApplicationSchedule of Corporate Administration & General By Account

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Administrative and General expenses02 920 Administrative and General Salaries Schedule 25-2 9.1 9.4 11.5 11.9 12.5 13.2 13.7 03 921 Administration Corporate Schedule 25-2 1.9 2.0 1.8 2.1 2.3 2.0 2.1 04 922 Administrative expense transferred - credit Schedule 25-2 - - - - - - - 05 923 Outside service employed Schedule 25-3 3.7 4.5 4.1 5.9 6.0 5.8 5.9 06 924 Insurance premiums Schedule 25-3 2.0 2.2 2.6 3.0 3.4 3.6 4.0 07 925 Injuries and damages Schedule 25-3 0.2 2.0 6.9 1.7 1.7 1.6 1.6 08 926 Employee pension and benefits Schedule 25-3 3.6 3.8 3.6 3.4 3.6 3.6 3.6 09 928 Commission expenses Schedule 25-3 0.4 0.5 2.4 2.8 2.4 3.9 1.5 10 930.1 General advertising expenses Schedule 25-3 0.1 0.1 0.0 0.0 0.0 0.1 0.1 11 930.2 Miscellaneous General Expenses Schedule 25-2 1.5 1.8 1.5 1.3 1.3 1.1 1.1 12 931 Rents Schedule 25-3 0.0 0.1 0.1 0.1 0.1 0.1 0.1 13 931.1 Head office rent Schedule 25-3 0.4 1.0 1.2 1.3 1.3 1.4 1.5 14 934 IT G&A expense Schedule 25-3 5.2 5.5 6.3 7.7 8.0 9.0 9.2 15 935 Maintenance of General Plant Schedule 25-3 3.7 3.2 3.9 4.3 4.4 4.8 5.0 1617 Total 31.8 36.1 45.9 45.5 47.0 50.0 49.4 18 Less Disallowed/Utility Costs - - - - - - - 1920 Total Corporate Administration & General Accounts 31.8 36.1 45.9 45.5 47.0 50.0 49.4

Total Labour Schedule 25-4 7.8 7.4 8.8 10.0 10.7 10.9 11.5 Total Other 24.0 28.7 37.2 35.4 36.3 39.2 37.9

Total Corporate Administration & General Accounts 31.8 36.1 45.9 45.5 47.0 50.0 49.4

Allocation to Business Units

Transmission Schedule 5-1 31.8 36.1 45.9 45.5 47.0 50.0 49.4 Distribution - - - - - - - Total 31.8 36.1 45.9 45.5 47.0 50.0 49.4

Schd 25-2


General Tariff ApplicationSchedule of Corporate Administration & General Account

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 920 Administrative and General Salaries02 Non-Affiliate 9.1 9.4 11.5 11.9 12.5 13.2 13.7 03 Affiliate - - - - - - - 04 921 Administration Corporate05 Non-Affiliate 1.9 2.0 1.8 2.1 2.3 2.0 2.1 06 Affiliate - - - - - - - 07 922 Administrative expense transferred - credit08 Non-Affiliate - - - - - - - 09 Affiliate - - - - - - - 10 930.2 Miscellaneous General Expenses11 Non-Affiliate 1.5 1.8 1.5 1.3 1.3 1.1 1.1 12 Affiliate - - - - - - -

Note: Please refer to Section 25.2 Administrative and General Expenses for variances and explanations of the accounts above.

Schd 25-3


General Tariff ApplicationSchedule of Corporate Administration & General Account

Variance Explanations$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 923 Outside service employed02 Non-Affiliate 3.7 4.5 4.1 5.9 6.0 5.8 5.9 03 Affiliate - - - - - - - 04 924 Insurance premiums05 Non-Affiliate 2.0 2.2 2.6 3.0 3.4 3.6 4.0 06 Affiliate - - - - - - - 07 925 Injuries and damages08 Non-Affiliate 0.2 2.0 6.9 1.7 1.7 1.6 1.6 09 Affiliate - - - - - - - 10 926 Employee pension and benefits11 Non-Affiliate 3.6 3.8 3.6 3.4 3.6 3.6 3.6 12 Affiliate - - - - - - - 13 928 Commission expenses 14 Non-Affiliate 0.4 0.5 2.4 2.8 2.4 3.9 1.5 15 Affiliate - - - - - - - 16 930.1 General advertising expenses17 Non-Affiliate 0.1 0.1 0.0 0.0 0.0 0.1 0.1 18 Affiliate - - - - - - - 19 931 Rents20 Non-Affiliate 0.0 0.1 0.1 0.1 0.1 0.1 0.1 21 Affiliate - - - - - - - 22 931.1 Head office rent23 Non-Affiliate 0.4 1.0 1.2 1.3 1.3 1.4 1.5 24 Affiliate - - - - - - - 25 934 IT G&A expense26 Non-Affiliate 5.2 5.5 6.3 7.7 8.0 9.0 9.2 27 Affiliate - - - - - - - 28 935 Maintenance of General Plant29 Non-Affiliate 3.7 3.2 3.9 4.3 4.4 4.8 5.0 30 Affiliate - - - - - - -

Note: Please refer to Section 25.2 Administrative and General Expenses for variances and explanations of the accounts above.

Schd 25-4


General Tariff ApplicationSchedule of Corporate Costs

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Administration and General - Labour Schedule 25-1 7.8 7.4 8.8 10.0 10.7 10.9 11.5 03 Administration and General - Fringe 6.6 7.5 8.0 7.9 8.0 8.8 8.8 04 Administration and General - Contractor 5.8 6.5 6.7 8.3 8.5 8.4 8.5 05 Administration and General - Other 11.6 14.7 22.5 19.3 19.7 22.0 20.6 06 31.8 36.1 45.9 45.5 47.0 50.0 49.4 0708 Capital Labour 19.7 22.1 22.3 24.3 23.6 24.7 24.4 0910 Total Corporate Labour 27.5 29.5 31.1 34.3 34.3 35.6 35.9

Schd 25-5


General Tariff ApplicationSchedule of Corporate Manpower - Full Time Equivalents (FTE's) - Mid-Year


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 GTA Complement - Permanent 75.5 79.6 82.9 91.4 96.1 96.9 98.703 Vacancy 0.0 0.0 0.0 2.3 2.4 2.4 3.904 Final Adjusted Complement - Perm 75.5 79.6 82.9 89.1 93.7 94.5 94.805 Vacancy Rate 0.0% 0.0% 0.0% 2.5% 2.5% 2.5% 4.0%0607 GTA Complement - Temporary - - - - - - - 08 Vacancy - - - - - - - 09 Final Adjusted Complement - Temp - - - - - - - 10 Vacancy Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%111213 GTA Complement - Total 75.5 79.6 82.9 91.4 96.1 96.9 98.714 Vacancy 0.0 0.0 0.0 2.3 2.4 2.4 3.915 Final Adjusted Complement 75.5 79.6 82.9 89.1 93.7 94.5 94.816 Vacancy Rate 0.0% 0.0% 0.0% 2.5% 2.5% 2.5% 4.0%17 Final Adjusted Complement by Area18 Total Operations & Maintenance 75.5 79.6 82.9 89.1 93.7 94.5 94.819 Capital - Final Adjusted Complement - Perm 131.3 129.9 124.3 124.6 127.6 128.6 127.320 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.021 206.8 209.5 207.2 213.7 221.3 223.1 222.02223 Labour cost ($Millions) - Schedule 25-4 Schedule 25-4 27.5 29.5 31.1 34.3 34.3 35.6 35.6 2425 Labour cost ($000's) per FTE 133.2 140.7 150.0 160.6 155.0 159.7 160.4

Schd 25-7


General Tariff ApplicationCommunication Expenditures

$000


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 930.1 General advertising expenses Schedule 25-1 0.1 0.1 0.0 0.0 0.0 0.1 0.1 03



26. GENERAL CORPORATE PROPERTY PLANT AND EQUIPMENT




27. COST FUNCTIONALIZATION




28. FINANCING Section 28 of AltaLink’s Application addresses the following:

28.1 Summary

28.2 Assumptions in Respect of the 2015-2016 General Tariff Application

28.3 Modification of 2015-2016 General Tariff Application Assumptions

28.4 FFO/Debt Target Including Rationale

28.5 FFO/Debt Before Balance Sheet Strengthening

28.6 Appropriate Measures to Maintain a Minimum of 13% FFO/Debt

28.7 Other Considerations - Subordinated Debt or Temporary Equity Thickness

28.8 Financing Plan

28.9 Credit Rating Reports

28.10 Financing Schedules



Summary AltaLink requires a minimum FFO/Debt ratio of 13% in order to avoid the possibility of a credit

rating downgrade.

AltaLink recognizes that customers have expressed concerns over the level of Transmission Tariffs resulting from the large build. As explained below this Application reflects the various tariff relief measures reflected in AltaLink’s 2015-2016 GTA that is currently before this Commission.

AltaLink notes it is currently in the midst of the 2016 GCOC proceeding. The purpose of the GCOC proceeding is to establish a fair return for utilities, including AltaLink. In the 2016 GCOC proceeding, AltaLink has requested an ROE of 9-10.5%, with equity thickness of 40%. AltaLink continues to assert that this capital structure and ROE will be required to comply with the fair return standard.

For the purposes of the 2017-2018 GTA, AltaLink has included as placeholders ROE and equity ratios of 8.30% and 38% respectively for 2017 to 2018 inclusive. Those placeholders reflect the currently approved levels for 2015 in Decision 2191-D01-2013 for ROE, and with the approved level for equity increased by 2% for being non-taxable.

This Commission has held that it is in the public interest for AltaLink to maintain an “A” category rating, that the FFO/Debt ratio for an A-rating should be in the range of 11.1-14.3%, and the actions of ratings agencies are unpredictable. AltaLink in its 2015-2016 GTA requested a 13% minimum FFO/Debt ratio.

To date, ALP has been able to maintain it’s “A” category credit rating due to the continued support provided by the Commission in Decision 2013-407, and their expected support in the 2015-2016 GTA Decision which has yet to be released. This support has allowed AltaLink to access the market and issue in excess of $2.5 billion worth of long-term debt in the 2013-2015 test years, at very favourable interest rates as demonstrated in Schedule 28.2 of this Application, which translates into significant long-term cost savings for rate-payers.

AltaLink continues to experience pressures on its credit metrics by virtue of the big build and forecasts approximately $0.8B of gross capital expenditures for each year of the Test Period. Accordingly, in order to ensure continued favourable interest rates on new term debt issuance during this high growth period, it remains essential that the Commission continue to provide the support AltaLink requires to maintain its “A” category credit rating during this 2017-2018 Test Period.

In this Application AltaLink is seeking approval for a second subordinated debt issue in 2017. This issue, together with the 2016 subordinated debt issue would represent no more than 10% of AltaLink’s capital structure. The two subordinated debt issues requested in AltaLink’s 2015-2016 GTA, are effectively replacing medium-term notes and will ensure that AltaLink is able to maintain a minimum FFO/Debt ratio of 13% while at the same time preserving its “A” category credit rating.

AltaLink is also requesting that the Commission approve a reduction to its depreciation rates specifically related to transmission towers. This is further explained in Section 6 of the Application. Although this decrease in the tower transmission rates results in a decrease of approximately $47.2M to AltaLink’s tariff and FFO for the 2017 and 2018 Test Period, the



proposed adoption of subordinated debt in its capital structure will allow AltaLink to maintain a minimum FFO/Debt ratio of 13% over that period.

Assumptions in Respect of the 2015-2016 General Tariff Application In this 2017-2018 GTA, AltaLink has included the following elements from AltaLink’s 2015-2016

GTA:

• discontinuation, effective January 1, 2015, of the collection of CWIP-in-Rate Base amounts and the return to AFUDC accounting;

• refund of the previously collected 2011 to 2014 CWIP-in-Rate Base amounts evenly over 2015 and 2016;

• discontinuation, effective January 1, 2016, of the FIT method of collecting Federal and Provincial income taxes and conversion to the Flow-through method together with a 2% equity ratio increase in 2016 given that AltaLink is forecasting to be not currently taxable commencing in 2015 and for the foreseeable future; and

• refund of the accumulated FIT liability account balance beginning in 2016, with the remainder committed to be refunded in 2017.

Modification of 2015-2016 General Tariff Application Assumptions For purposes of this 2017-2018 GTA, AltaLink has included the following assumptions arising

from AltaLink’s 2015-2016 GTA:

• issuance of $350M subordinated debt issue on July 1, 2016 with a coupon rate of 4.65%;15 and

• reduction in the 2016 equity ratio from 39% to 38% in 2016 coincident with the inclusion of subordinated debt in the capital structure in place of the temporary equity originally proposed.

FFO/Debt Target Including Rationale It is AltaLink’s view that nothing has changed subsequent to the 2015-2016 GTA hearing in

December. An FFO/Debt target of 13% continues to be the level which is at the “razors edge” of a credit rating downgrade should Standard & Poor’s elect to reduce their regulatory advantage assessment from the current level of “Strong” to “Strong Adequate”. S&P confirmed in a meeting with AltaLink on February 3, 2016 that the 13% level was a minimum and an Alberta utility could be downgraded even if their credit metrics were at the minimum standard. In addition, S&P confirmed that any Alberta utility could be downgraded at any time, without warning and without having their credit rating on negative trend. It remains AltaLink’s view that credit metrics firmly in the range of 13% to 23% represent an appropriate target.

28.4.1 The question of what FFO/Debt ratio is required can be reduced to what level is necessary to avoid the unacceptable risk of a credit rating downgrade

Rating agencies have expressed concern with the regulatory environment in Alberta and that concern encompasses all Alberta utilities. AltaLink considers that an FFO/Debt ratio of less than 13% creates an unacceptable risk of a credit rating downgrade. It is urgent to address the concerns of rating agencies, bond investors and debt analysts. Further, AltaLink is well aware of

15 The issue date and coupon rate have been updated in this 2017-2018 GTA.



the concerns of both its bond raters and its bond holders, and fully appreciates that even with an FFO/Debt ratio of 13% it remains poised on the edge of a downgrade.

Several recent credit rating reports make specific mention of the regulatory environment in Alberta and the April 23, 2015 S&P report16 reiterates the need to maintain FFO/Debt ratios firmly in the range of 13% to 23% should the regulatory advantage assessment be downgraded. Regardless of whether AltaLink is in the low or medial cash flow volatility table, the downward pressure in the perception of Alberta being a supportive regulatory environment is one of the key factors in determining ratings. It means that AltaLink must be prudent in its choices in maintaining its ratios in the range described so as to mitigate the significant risk of a downgrade and resultant increases in borrowing costs.

The cost of a downgrade is significant. Higher financing costs mean a higher Revenue Requirement in the future and therefore there is benefit to customers by preventing a credit metric degradation. A downgrade drastically increases costs for the foreseeable future.

AltaLink has no control over whether a credit rating agency will change its rating. While the rating agencies set out a number of factors that go into the formation of their ratings, the emphasis on various factors rests with the rating agencies. In addition, the actions of credit rating agencies are unpredictable.

The primary issue is the level of FFO/Debt required to prudently mitigate the real risk of a credit rating downgrade. Given the unknown trigger that may cause a downgrade and coincidentally increase borrowing costs for AltaLink to the detriment of ratepayers, it is appropriate that AltaLink targets a minimum 13% FFO/Debt ratio.

A ratio of 13% can be considered a floor below which a downgrade in AltaLink’s credit rating is virtually certain should S&P downgrade AltaLink’s regulatory advantage assessment.

A credit rating downgrade, by its nature, is binary. An entity’s credit ratings are either downgraded or they are not. Thus, the full negative consequences of a downgrade would adversely affect AltaLink and ratepayers, if the credit rating agencies determine that the FFO/Debt set by the Commission is insufficient. The worst possible outcome would be for ratepayers to be a dollar short, thereby bearing the full cost of the credit rating downgrade even though most of the required credit support had already been provided.

On April 21, 2015 at a public briefing attended by approximately 50-100 attendees representing corporations, debt investors, investment bankers, debt analysts and other interested parties, S&P went on the record that they had put Alberta’s regulatory regime on Negative Trend. They cited the following weaknesses in the Alberta regime:

• Unpredictable aspects thrown into recent distribution decisions; • Potential cracks in regulatory compact?—wait and see; • Cost of capital lower than peers; • Equity layers lower than peers; and • Policy changes regarding transmission.

All of the attending participants were provided a copy of the slide deck17 used at the meeting.

16 Appendix 4-F7. 17 Appendix 4-F6.



The April 21, 2015 briefing was followed up with the release on April 23, 2015 of a report titled “How Regulatory Advantage Scores Can Affect Ratings On Regulated Utilities”.18 S&P in this report shows how the “regulatory advantage assessment” score is used in the determination of credit ratings.

AltaLink believes it is helpful to take a step back and look at the rating process in its entirety. S&P on page 5 of their report titled “Corporate Methodology”,19 dated November 19, 2013, provided a graphical representation of the ratings process, a copy of which is reproduced below.

Figure 28.4.1-1 - Corporate Criteria Framework

To determine a firm’s credit rating, S&P combines business risk and financial risk in the development of an “anchor score”. Various “modifiers” are applied to the “anchor score” which yields a “Stand-Alone Credit Profile” or “SACP”. An assessment of “Group or government influence” is then made which results in the final “Issuer Credit Rating”.

The table below20 shows how S&P combines the business and financial risk assessments to obtain an “anchor score”. ALP currently has an “Excellent” business risk profile and a “Significant” risk profile the combination of which yields an anchor score of “a-".

Figure 28.4.1-2 - Business and Financial Risk Assessments

S&P on page 3 of their April 23 publication21 discussed how the regulatory advantage assessment is used in the ratings process:

18 Appendix 4-F7. 19 Appendix 4-F4. 20 Appendix 4-F7, pdf p. 301 (modified from Table 4). 21 Appendix 4-F7, pdf p. 299.



While our final regulatory advantage assessment has a significant influence on a utility’s business risk profile, it can have an even greater impact on its financial risk profile. As regulatory advantage declines, we expect higher cash flow volatility; as such, a utility’s regulatory advantage score directly affects which of the three cash-flow volatility tables – low, medial, or standard - we’ll use as a guideline when assessing the issuer’s financial risk. Generally speaking, low cash-flow volatility allows for higher debt levels at the same rating category than medial volatility, and medial volatility allows for more debt than standard volatility (see tables 1 and 2). Using the low volatility table, for instance, we would consider an adjusted funds from operations (FFO)-to-debt ratio of 9%-13% to align with a “significant” financial risk profile, whereas we would consider this level of leverage “aggressive” under the medial table and “highly leveraged” under the standard table.22

The implications of a reduction in the “regulatory advantage assessment” from AltaLink’s current level of “Strong” are explained more fully near the bottom of page 4 of the April 23 report.

“Under our criteria, we apply the low volatility table only if a utility has a strong regulatory advantage score. With a regulatory advantage less

22 Appendix 4-F7, pdf pp. 299-300.



than strong, a company would need to maintain a higher adjusted FFO-to-debt ratio, in the range of 13%-23%, to warrant a “significant” financial risk profile score (see table 3) and achieve a similar rating outcome of ‘a-’. This is highly unlikely, given the current allowed returns under most Canadian regulatory jurisdictions are based on similar formula.23

If S&P downgrades AltaLink’s regulatory advantage assessment from the current level of Strong to Strong/Adequate, S&P will have to use the medial volatility table as per their published criteria. This is confirmed on page 4 of the April 23, 2015 S&P report, “Under our criteria, we apply the low volatility table only if a utility has a strong regulatory advantage score”.24 Using Table 3 on page 425 from the same report (Column titled Company B), an entity with an “Excellent” Business Risk Profile (equivalent to AltaLink’s current rating and the highest rating possible) and an FFO/Debt ratio of 9%-13% has three possible rating outcomes, BBB+, BBB, or BBB- after S&P applies their comparable rating analysis (underline added).

Therefore, if S&P downgrades AltaLink’s regulatory advantage assessment there is no other possible outcome other than a BBB category credit rating.

Further support for how close AltaLink is to a possible ratings downgrade was provided on page 6 of an August 26, 2015 report titled “Are Recent Regulated Utility Downgrades A Sign Of Erosion In The Canadian Utility Sector Outlook?”:26

“Specifically in Alberta, uncertainty regarding asset dispositions, given recent decisions by the Alberta Utilities Commission and the provincial and federal courts, has not led to any downgrades to date, nor do we expect any because of this in the next couple of years. At the same time, any indication of substantial operating, capital, or asset replacement costs being disallowed would likely change our view on the province's regulatory regime and impact ratings. We continue to assess the province's regulatory regime as supporting credit quality and focused on maintaining a balance between the shareholder and ratepayers. We believe Alberta regulated utilities continue to enjoy transparent and supportive regulatory support for their cash flows and an ability to

23 Appendix 4-F7, pdf p. 300. 24 Appendix 4-F7, pdf p. 300. 25 Appendix 4-F7, pdf p. 300. 26 Appendix 4-F8.



recover their costs and earn a return on and of capital in a timely manner.” 27 (underlining and bolding added)

S&P’s underlined quote above is perfectly clear. Any regulatory decision which meets the above test will likely lead to a downgrade of AltaLink into the BBB category.

In order to avoid the significant risk of a credit rating downgrade, AltaLink is targeting a minimum FFO/Debt ratio of 13%. At this level, AltaLink’s “Financial risk profile” will be scored as “Significant” rather than the lower category of “Aggressive” should AltaLink’s regulatory advantage assessment be downgraded. This will allow AltaLink to maintain its “A” category credit rating and is supported by the following S&P statement on page 6 of their April 23, 2015 report: “In the hypothetical scenario, for Company B to attain an ‘A’ category rating, given a strong/adequate regulatory assessment and therefore higher regulatory risk, we would expect to see stronger sustained cash flows, with an adjusted FFO-to-debt ratio firmly in the 13%-23% range (not 9%-13%).”28

DBRS has also weighed in on the issue of a deterioration in the regulatory environment of Alberta in their January 2015 Industry Study titled “Canadian Utilities Q3 2014”.29

One potential credit negative for utilities in the Alberta market are the implications from the Utilities Asset Disposition (UAD) and ATCO Slave Lake decisions. In November 2013, the Alberta Utilities Commission (AUC) issued Decision 2013-417 on the UAD, which stated that the shareholders of the utilities should be responsible for all gains and losses on dispositions of gas utility assets outside the ordinary course of business. The AUC also stated that gas utility assets that are no longer used or required to be used are to be removed from rate base. This was a significant departure from the AUC’s previous practice, where losses arising from the disposition of utility assets would be for the account of customers while gains would be shared between the shareholders and customers. The UAD decision provided the AUC’s view on the Supreme Court of Canada’s 2006 decision on the net gain on sale of a gas utility asset (Stores Block decision). Following the UAD decision, DBRS stated that any changes in the long-standing regulatory construct, which provides a reasonable opportunity for the recovery of prudent investments in the regulated utility sector, could negatively affect DBRS’s view of the regulatory regime in Alberta. This also poses a risk for the other utilities across Canada because of the potential widespread acceptance of this decision by other provincial regulators. Additionally, as the AUC called for the Alberta utilities to review their rate bases and confirm that all assets included in rate base are required to be used or continue to be used to provide utility services, this could potentially lead to significant stranded costs for DBRS-rated utilities which may result in negative rating implications. The Court of

27 Appendix 4-F8, pdf p. 309. 28 Appendix 4-F8, pdf p. 302. 29 Appendix 4-C1.



Appeal of Alberta granted the Alberta utilities’ application for leave to appeal the UAD decision in April 2014. DBRS will continue to monitor any future developments on the UAD decision. … In October 2014, the AUC issued Decision 2014-297 on ATCO Electric Ltd.’s (ATCO Electric) 2012 Distribution Deferral Accounts and Annual Filing for Adjustment Balances (ATCO Slave Lake decision). The AUC determined, through the principles established in the Stores Block decision and UAD decision, that the asset retirement as a result of the Slave Lake fire was an extraordinary event and, as such, the book value of the destroyed assets ($0.4 million) must be for the account of the shareholders. Additionally, rather than recovering the cost of the replacement asset through a deferral account, ATCO Electric would instead capitalize the asset to its rate base. Although ATCO Electric will now be able to earn its return on the replacement asset, the value would be recovered through a much longer period (average collection period of 45 years) than through a deferral account.

DBRS views the Slave Lake decision as a material event for the regulatory regime in Alberta. One factor DBRS currently considers when assessing the regulatory framework in which a utility conducts its business is stranded cost recovery. Under the DBRS methodology, this criteria is viewed as Good for Alberta as there have been few examples of stranded costs in the province. Additionally, there is uncertainty as to what the AUC considers to be an extraordinary event for the disposition or retirement of assets. Should the frequency and magnitude of stranded cost writedowns increase, this could result in negative rating implications for DBRS-rated utilities in Alberta.30

The fixed income analysts have also expressed their concerns.

For example, in a Scotiabank Report dated March 6, 2015, entitled “Fixed Income Research, Corporate Bond Weekly”, at page 4 the following is set forth:

The regulatory agenda continues to be busy, including an appeal to the courts scheduled for June on the regulator’s proposed extremely controversial treatment of stranded assets. We will continue to follow this contentious process with particular interest, as we believe an adverse outcome would create unusual risk of material loss incident upon the creditors of Alberta Utilities.31 (emphasis added)

In a similar vein, a Scotiabank Report dated March 13, 2015, entitled “Credit Analysis”, at pages 7 through 10 states (emphasis added):

The Alberta Utilities Commission’s November 2013 decision on Utilities Asset Disposition places a new risk for stranded assets on the shareholders of Alberta utilities. In our view, this also increases risk for

30 Appendix 4-C1, pdf p. 156. 31 Exhibit 3524-X0292, pdf p. 66.



bondholders…We think that in the scenario that the AUC’s decision prevails, ratings in the sector would be at risk and spreads could widen. Because of this risk, we think the bond market should be aware of the issues being raised, and follow these legal and regulatory developments closely.32 … The UAD decision included a long list of circumstances in which utility assets should be treated as “extraordinary retirements” and removed from the rate base, including “unusual casualties (fire, storm, flood, etc.), sudden and complete obsolescence, or un-expected and permanent shutdown.” This UAD decision squarely placed considerable new, hard-to-quantify risks on utilities.33 … We think the potential impact on bondholders of the UAD decision, if it remains unmodified by the courts or the AUC, is simple. Higher risk means higher spreads. This could mean a sudden loss of value for bond investors, after higher-than-usual issuance over the past several years to fund higher-than-usual capex within the sector. Going forward, this would mean higher borrowing costs for Alberta utilities. We believe, just as it’s hard to quantify what the higher risks are in the context of depreciation studies and ROEs, it’s impossible to specify how much higher the spread would have to be to cover this risk. But we think it would likely, over time, become material, say, 10 to 20 bps, for Alberta utilities, compared to other provincial jurisdictions. We think the spread widening would become even more than 10 to 20 bps if this risk were to be crystalized by the real-life occurrence of a material adverse event.34

In a RBC Capital Markets Report dated April 23, 2015, entitled “Utilities: Ontario vs. Alberta, where are the real credit risks?”,35 the following is stated at pages 2 and 3 (emphasis removed):

Stranded assets at risk of non-recovery… hard to imagine… unprecedented and a material credit negative if upheld…While it has flown under the “credit radar” of many, largely due to materiality, bond investors and rating agencies have become more vocal. … The cost could be 15bps or more for Alberta-based utilities, with a risk of filtering through to other jurisdictions: From our credit lens, an upheld decision by the Alberta Court of Appeal or the Supreme Court of Canada is a clear credit negative. While difficult for us to fathom, we offer our view on the cost associated with this downside risk: …

32 Appendix 4-G1, pdf p. 3. 33 Appendix 4-G1, pdf p. 4. 34 Appendix 4-G1, pdf p. 5. 35 Appendix 4-G4.



Therefore, we think a negative decision on stranded assets that results in credit rating downgrades could cause spreads on Alberta-based utilities to widen out by ~15bps in a split-rated scenario, or wider if ratings fall fully into the “BBB bucket” (see below “risk of falling into the BBB bucket”). … From what we think has been largely due to materiality, the ATCO Slave Lake (only $400,000) and UAD decisions had not garnered a lot of investor attention, but the criticism is growing. We sense that the lack of earlier attention on these two decisions by the bond community may have been misinterpreted by regulators as being immaterial to credit investors and credit spreads, and therefore neutral for ratepayers. However, we have heard the voices of investors grow louder, as well as commentary from the rating agencies become increasingly critical. “A-level” ratings have been the benchmark for utilities in Alberta. Back in the days of the 2011-2013 General Tariff Application (GTA) proceedings, the AUC had determined for the utilities that it regulates “it is critical to keep ratings at the A-level”. For us, this has been the single most important regulatory benchmark in terms of how we view credit spreads for Alberta base utilities. Risk of falling into the “BBB-bucket”. In our discussions with the rating agencies (DBRS and S&P), and our interpretation of their reports and methodologies, it is clear that the risk of non-recovery on a stranded asset would cast a negative credit view on the AUC’s regulatory framework. The key credit risk on the horizon would be relegation to the “BBB-bucket” or a “split-rating” for Alberta-based utilities.

DBRS in its most recent rating report dated November 6, 201536 confirmed AltaLink’s current credit rating and stated that the transmission regulatory environment had shown signs of deterioration in 2015.

On February 11, 2016 S&P affirmed AltaLink, L.P.’s credit ratings at A- Stable.37 One of the key assumptions cited on page 3 of their report is “The Alberta regulatory regime will be relatively stable and ALP will not experience any material, adverse regulatory decisions”. AltaLink’s view on the credit metric situation has not changed with this report. S&P will continue to monitor all regulatory decisions issued by the AUC. If any of these decisions (for AltaLink or any other AUC regulated Alberta utility) result in a material adverse outcome, it is highly probable S&P will downgrade Alberta’s regulatory advantage assessment from “Strong” to “Strong/Adequate”. If this occurs and AltaLink does not have a FFO/Debt ratio of at least 13%, based on statements by S&P as set out in Appendix 4,38 the credit rating will be cut resulting in a BBB category rating with the attendant increased costs on new debt issues and market access challenges.

36 Appendix 4-A12. 37 Appendix 4-D10. 38 Appendix 4-F7, pdf p. 300.



28.4.2 The case for preventing a credit rating downgrade The case for preventing a credit rating downgrade has been extensively debated and

documented in prior GTA’s. Losing the “A” category credit rating will impede AltaLink’s debt market access and raise the cost of borrowing. AltaLink has already experienced problems with market access (even though its ratings were in the “A” category) when on June 26, 2015 it tried to raise $500M of 30 year term debt and was unable to do so, having to settle for $350M in proceeds. Bond investors cited “regulatory issues” with stranded asset risk and a bad GCOC decision as chief among their concerns. This was in spite of AltaLink offering an enhanced yield in order to entice investors to purchase the bond offering. Access as a BBB issuer is even worse. During periods of market turmoil the bond market can simply close to BBB issuers. This was very evident in 2008-2009 as documented in AltaLink’s response to UCA.AML-060a in the 2011-2103 GTA proceeding.

“During the period June 11, 2008 to January 29, 2009 inclusive there was not a single issuer without at least one “A” credit rating who was able to issue long-term debt on any terms in the public Canadian debt market. Please refer to Attachment UCA.AML-060a for a comprehensive list of individual debt transactions in the Canadian capital market during 2008 and 2009.”39

The implications of a credit rating downgrade in terms of cost were discussed by RBC Capital markets in a June 16, 2015 publication titled Canadian Credit Insights.40 (underlining added)

“We estimate that the market is currently pricing in upwards of 50% probability of a downgrade into ‘A/BBB’ split ratings and ~10% chance of a downgrade into full ‘BBB’ ratings for Alberta regulated utilities. Despite the Alberta Utilities Commission’s stated intent to target stand-along credit ratings in the ‘A’ range for utilities under its jurisdiction, we point to (i) uncontrollable regulatory/procedural lag as the most likely rating action trigger, (ii) investors still wary after their recent Enbridge experience, and (iii) the potential significant market impact of a broad downgrade of Alberta regulated utilities.

For regulated utility (and infrastructure) issues, it pays to be ‘A’. Infra/utility long bonds, which generally carry ‘A’ credit ratings, currently trade at a 75-100 bp premium to ‘BBB’ rated peers of similar tenor. We expect this premium to persist in the current volatile rate environment. Infra/utility issuers benefit from favorable supply/demand dynamics as a results of (i) the dearth of other ‘A’ rated corporate long bonds, and (ii) persistent demand from pension funds and life insurance companies for ‘A’ rated fixed income assets that offer enhanced yields to government bonds and provide a match to long-dated liabilities. We provide a detailed historical analysis of infra/utility long bond spreads and issuance starting on page 6.”

An incremental 75-100 bp’s on every AltaLink debt issue represents a significant cost to ratepayers (see Table 28.4.2-1 below) and Appendix 5 Attachments 2 and 3.

39 Appendix 5 Attachment 1. 40 Appendix 4-G7.



Table 28.4.2-1 - Estimated Cost of a Credit Rating Downgrade ($M) @ 75 bp’s @ 100 bp’s

NPV @ 5% 105 140

In addition to the costs above, AltaLink’s access to the term debt markets will be closed in the short run as the debt markets search for a new equilibrium as debt investors seek to reduce or exit entirely their existing holdings of AltaLink bonds due to restrictions in their investment guidelines on BBB holdings. This is problematic should AltaLink be seeking to issue new term debt.

FFO/Debt Before Balance Sheet Strengthening AltaLink’s FFO/Debt ratio is forecast at 11.9% in 2017 and 12.1% in 2018 (see Table 28.5-1

below) prior to the addition of any Sub-Debt or other balance sheet strengthening.

Table 28.5-1 - FFO/Debt without Credit Metric Support 2017 2018 FFO/Debt Ratio 11.9% 12.1% Equity Ratio 38% 38% Return on Equity 8.3% 8.3%

Appropriate Measures to Maintain a Minimum of 13% FFO/Debt

As detailed above, AltaLink is firmly of the view that its credit metrics must generate a minimum of 13% FFO/Debt to avoid the unacceptable risk of a credit rating downgrade. Therefore, the issue is to how best to achieve these results.

Consistent with AltaLink’s 2015-2016 GTA, AltaLink examined how a temporary increase in equity thickness or a subordinated debt issue might strengthen the balance sheet and result in an FFO/Debt ratio of 13% or higher.

The two alternatives AltaLink examined were:

• A 3% temporary equity increase in 2017 and 2018; and • Subordinated debt issues of $350M in 2016 and $450M in 2017.

The resulting FFO to debt ratios can be seen below in Table 28.6-1.



Table 28.6-1 - Comparison of Subordinated Debt and Temporary Equity Support 2017 2018 Subordinated Debt Option FFO/Debt Ratio 13.0% 13.2% Equity Ratio 38% 38% Return on Equity 8.3% 8.3% Temporary Equity Option (3%) FFO/Debt Ratio 13.0 13.2%

Equity Ratio 41% 41%

Return on Equity 8.3% 8.3%

A comparison of the cost of a temporary increase in the common equity ratio versus a

subordinated debt issue must account for the following:

• A subordinated debt issue is expected to receive 50% equity credit while a temporary increase in the equity ratio receives 100% equity credit;

• A subordinated debt issue is expected to be outstanding for a minimum of 5 years while a temporary increase in the equity ratio is only required for those years necessary to maintain the FFO/Debt ratio at a minimum 13%;

• The subordinated debt issue will maintain a higher level of credit metric support beyond this GTAs Test Period relative to a temporary increase in equity ratio. The benefit of subordinated debt would provide more flexibility to allow for additional tariff relief measures. Using the above assumptions, the subordinated debt alternative is cheaper during the Test Period than the temporary increase in equity ratio. See Table 28.6-2 below.

Table 28.6-2 - Revenue Requirement Comparison of Credit Metric Support Alternatives ($M) 2017 2018 Base Case including Subordinated Debt FFO/Debt Ratio 13.0% 13.2% Equity Ratio 38% 38% Return on Equity 8.3% 8.3% Revenue Requirement 944.1 989.5 Temporary Equity Alternative FFO/Debt Ratio 13.0% 13.2% Equity Ratio 41% 41% Return on Equity 8.3% 8.3% Revenue Requirement 947.9 992.6 Incremental Revenue Requirement with Temporary Equity Alternative 3.8 3.1



Other Considerations - Subordinated Debt or Temporary Equity Thickness AltaLink is aware that ratepayers have not historically supported any increase in AltaLink’s

common equity ratio to mitigate the significant risk of a credit rating downgrade.

While interveners have historically opposed increasing the common equity ratio to mitigate credit rating downgrade risk, the subordinated debt option garnered less significant objections in the 2015-2016 GTA. Accordingly, AltaLink reaffirms its proposal to strengthen its balance sheet by issuing subordinated long-term debt with certain features that would enable credit rating agencies to recognize 50% of the principal amount as equity.

The use of hybrid securities, such as preferred shares and subordinated debt, to strengthen utility balance sheets is well established in Alberta. The Commission has repeatedly allowed ATCO’s regulated utilities to issue preferred shares and previously allowed AltaLink to issue subordinated debt to replace preferred shares on TransAlta’s balance sheet when AltaLink acquired TransAlta’s transmission system in 2002.41

Doing so would also level the playing field between AltaLink and ATCO Electric, which enjoys a stronger balance sheet by virtue of the preferred shares in its approved capital structure. ATCO Electric requires less FFO (i.e. Revenue Requirement) to achieve credit metrics consistent with the A category than AltaLink requires.

Permitting AltaLink to issue subordinated debt would be in the best interests of ratepayers even if the concerns regarding regulatory advantage did not imperil its credit ratings. Prior to and since the maturity of its prior subordinated debt in 2012, AltaLink has been examining ways to incorporate hybrid instruments in its capital structure as is the case with ATCO Electric and its affiliates.

Unlike preferred share dividends, interest coupons on subordinated debt are deductible for income tax purposes.

Approval of the subordinated debt alternative would also benefit ratepayers by reducing interest rates on senior debt. It has been well documented that all Alberta utilities are currently issuing senior debt with wider spreads because bond investors are concerned about the potential for credit rating downgrades. AltaLink's proposals to mitigate that credit downgrade risk have been applauded by bond investors and analysts who value that AltaLink is committed to fighting for its credit ratings. By issuing subordinated debt and mitigating the credit rating downgrade risk, AltaLink believes that the credit spreads on its senior debt would normalize resulting in lower coupons on future senior debt issues.

In order to assist the Commission and interveners AltaLink has included the following additional information in Appendix 5:

Appendix 5, Attachment 4 Financing instrument comparison between Medium-Term Notes (MTN’s), Subordinated debt and Rate-reset preferred shares

Appendix 5, Attachment 5 Indicative Term Sheet for Subordinated Debt Issue

AltaLink is of the view that utilities with stronger balance sheets can offer more tariff options to their customers than utilities whose financial strength is barely adequate for their credit ratings. A strong balance sheet provides utilities with flexibility to restructure or optimize tariffs. A utility

41 Decision U99115, Decision U99118, Decision 2009-216, and Decision 2011-055.



whose FFO/Debt ratio is at minimal levels has no capacity to adopt additional relief measures unless there are offsetting increases in other components of the Revenue Requirement. At minimal FFO/Debt ratios, FFO cannot decrease without corresponding reductions in debt. Strengthening AltaLink’s balance sheet through the use of subordinated debt would enable AltaLink to study and identify other means to sustainably reduce Revenue Requirements in future general tariff applications.

28.7.1 Proposal Regarding the Issuance of Subordinated Debt As part of the 2017-2018 GTA, AltaLink has reflected the issuance of $350M of “preferred share

like” subordinated debt (Sub-Debt) beginning in 2016 and continuing with such issuances up to 10% of its capital structure. These would be issued in one or more tranches to the public. As mentioned above, this instrument would form part of AltaLink’s capital structure in the same fashion as ATCO Electric’s approximate 10% preferred share layer. The Sub-Debt issue would be issued in lieu of conventional secured MTNs which AltaLink will continue to issue from time to time with the approval of the Commission. This Sub-Debt is expected to receive 50% equity credit from AltaLink’s credit rating agencies, DBRS and S&P.

The Sub-Debt issue is 60 years. Like a preferred share, the Sub-Debt will have call features that allows for redemption at par at the end of year 5. Additionally, the Sub-Debt will have a par call each quarter thereafter. Equity credit from S&P is expected to be nil after ten years. AltaLink could only replace the Sub-Debt with an instrument which must have equal or higher equity credit. If the Commission approves this alternative, in order to maintain the equity credit, there can be no condition in the decision which would require AltaLink to call the Sub-Debt at any particular time and replace it with a conventional medium term note. The initial fixed coupon rate on the sub-debt issue for 2016 is forecast at 4.65% for the first five years (5.37% for the 2017 issue). Additional details can be found in Appendix 5 Attachment 8. The coupon will float thereafter and be reset quarterly. This indicative rate assumes no change in today’s market conditions.

As with all of AltaLink’s term debt, the Sub-Debt issue would be included in the LTDDA calculation.

The rating agencies are expected to attribute 50% equity credit on the Sub-Debt due to its long-dated and subordinated nature coupled with the fact that non-payment of interest does not constitute a default. The 50% equity credit allowance translates into a higher FFO to Debt ratio which should mitigate the unacceptable risk of a credit rating downgrade in 2017-2018.

The Sub-Debt concept is not new. AltaLink and its advisors have designed the Sub-Debt so as to receive 50% equity credit from the credit rating agencies, be low cost to ratepayers, and most importantly, marketable to end investors. Although the Sub-Debt proposed in the indicative term sheet is somewhat unique, AltaLink and its capital market advisor believe that the structure proposed by AltaLink can be sold broadly to institutional debt investors in Canada – the structure should have particular appeal to those who have previously purchased AltaLink debt securities and to those looking for incremental yield above what they can achieve by purchasing AltaLink’s conventional secured MTNs.

2016 GCOC and the 2017-2018 GTA

The current GCOC Decision is expected to establish an ROE and equity thickness for AltaLink in 2016 and 2017 based on the fair return standard. The ROE and equity thickness AltaLink has forecast in this 2017-2018 GTA is based on the current ROE and the existing equity approved for



AltaLink with the additional 2% equity thickness as a result of AltaLink being non-taxable currently and into the foreseeable future.

Financing Plan 28.8.1 2015-2016 GTA Forecast

On October 24, 2015 AltaLink forecast the following debt issues in an update to the 2015-2016 GTA at page 28-21.

Table 28.8.1-1 - 2015-2016 GTA Forecast AltaLink Long-Term Debt Issues

Issue Date

Maturity Date

Term in

Years

Principal Amount

$(M)

Government of Canada Bond Yield

Credit Spread

All-in Yield

Agency Commission

(%)

Agency Commission

($)

Other New Issue Expenses

June 30,

2015

June 30, 2045 30 $350.0 2.420% 1.670% 4.090% 0.50% $1,750,000 $548,450

July 1, 2016

July 1, 2026 10 $350.0 2.140% 1.433% 3.573% 0.40% $1,400,000 $548,250

28.8.2 Alternative Proposal Regarding the Issuance of Subordinated Debt As an alternative to a 39% equity ratio in 2016, AltaLink proposed incorporating up to $350M of

“preferred share like” Sub-Debt in Revenue Requirement that would be issued in one or more tranches to the public. This instrument would form part of AltaLink’s capital structure in the same fashion as ATCO Electric’s approximate 10% preferred share layer. The Sub-Debt issue would be issued in lieu of conventional secured MTNs which AltaLink will continue to issue from time to time with the approval of the Commission. This Sub-Debt is expected to receive 50% equity credit from AltaLink’s credit rating agencies, DBRS and S&P. For 2017-2018 GTA purposes AltaLink has assumed the issuance of the sub-debt in place of the July 1, 2016 MTNs issue.

Table 28.8.2-1 - Subordinated Debt Proposal

Issue Date

Maturity Date

Term in

Years

Principal Amount

$(M)


Credit Spread

Subordination Cost

All-in Yield

Agency Commission

(%)

Agency Commission

($)

Other New Issue

Expenses May 1, 2016

May 1, 2076 60 $350.0M 1.77% 0.76% 1.85% 4.38%1 1.00% $3,500,000 $935,750

1Yield information was provided on page 28-13 of the October 24, 2015 update to the 2015-2016 GTA.

The subordinated debt proposal has been updated to reflect the expected timing of the 2015-2016 GTA decision and current yields. See Table 28.8.2-2 below.

Table 28.8.2-2 - Updated Subordinated Debt Proposal

Issue Date

Maturity Date

Term in

years

Principal amount

$(M)


Credit Spread

Subordinated Cost

All-in yield

Agency Commission

%

Agency Commission

$

Other New Issue

Expenses 1-Jul-16 1-Jul-76 60 $350.0M 1.050% 1.200% 2.400% 4.650% 1.00% $3,500,000 $935,750

28.8.3 2017-2018 GTA Forecast AltaLink forecasts long-term debt issues during the Test Period in Table 28.8.3-1 below.

Table 28.8.3-1 - 2017-2018 GTA Forecast AltaLink Long-Term Debt Issues

Issue Date

Maturity Date

Term in

years

Principal amount

$(M)


Credit Spread

Subordination Cost

All-in yield

Agency Commission

%

Agency Commission

$

Other New Issue

Expenses 1-Jul-17 1-Jul-77 60 $450.0 M 1.770% 1.200% 2.400% 5.370% 1.00% $4,500,000 $1,060,250 1-Jun-18 1-Jun-28 10 $350.0 M 2.850% 1.550% - 4.400% 0.40% $1,400,000 $565,750



AltaLink is forecasting the issuance of a $450.0M sub-debt issue of July, 2017. Detailed terms of the proposed sub-debt can be found at Appendix 5 Attachments 4 and 5. The features of the sub-debt issue are expected to result in a 50% equity credit from the rating agencies. AltaLink has proposed a sub-debt issue in 2017 to ensure its FFO/Debt ratio is above 13% in order to avoid the unacceptable risk of a credit rating downgrade.

In 2018, AltaLink is forecasting the issuance of a 10 year medium-term note. The selection of a 10 year term is based on the same principles articulated at page 28-21, paragraph 905 of the October 24, 2015 update to the 2015-2016 GTA:

The selection of maturity dates on forecast long-term debt is based on the finance principle that one should finance long term assets with long-term debt. In addition to reducing refinancing risk this practice minimizes the variability of interest costs over time resulting in a reduction in the volatility of transmission costs to customers. AltaLink does issue some shorter term debt (principally ten years to maturity) in order to take advantage of the normally upward sloping yield curve and reduce rate-payer costs. In addition, this practice serves to diversity the maturity structure of the debt portfolio and reduce rollover risk.

Pursuant to Decision 2009-151 and effective January 1, 2009, AltaLink will continue to use the effective interest rate method for calculating the amortization of deferred financing costs on new debt issues. For debt issued prior to 2009, AltaLink will continue to use the straight line method.

AltaLink’s forecast and historical long-term debt issues can be found in Schedule 28.2. As approved in Decision 2011-453, and beginning in 2011, all of the long-term debt issues are classified as 100% related to regulated operations. This is a direct result of AltaLink having no debt attributable to goodwill subsequent to December 2009.

28.8.4 Forecast on Long-Term Debt Interest Rates The forecast interest rates on new long-term debt issues are based on estimates of future

Government of Canada Bond Yields and AltaLink’s forecast new issue credit spread. AltaLink’s principal bankers have provided their most recent forecast for Government of Canada bond yields (refer to Appendix 5 Attachment 6). Details regarding AltaLink’s estimated new issue credit spread can be found in Appendix 5 Attachment 7 (updated on October 16, 2015). Consistent with past practice, AltaLink will update the forecast interest rate on new long-term debt issues just before the oral hearing for this Application.

28.8.5 Credit Facilities 28.8.5.1 2015-2016 GTA Forecast

In the 2015-2016 GTA, AltaLink forecast the credit facility amounts as indicated in Table 28.8.5.1-1 below.

Table 28.8.5.1-1 - 2013-2014 Compliance Filing Forecast Credit Facility Amounts Available Credit Facilities 2015F Beginning of Year $1,000M End of Year $1,000M

The costs associated with these forecast credit facility amounts were provided on page 28-24 of the October 24, 2015 update to the 2015-2016 GTA.



Table 28.8.5.1-2 - 2015-2016 GTA Credit Facility Amounts 2015F 2016F Standby Fees $1,600,000 1 $1,600,000 2 Other Fees 4 $510,000 3 $510,000 3 $2,110,000 $2,110,000

1 Refer to Schedule 3-2.2015(i) - Line 17. 2 Refer to Schedule 3-2.2016(i) - Line 17. 3 Included in Miscellaneous General Expense (USA 930.2). Refer to Section 25.2.16. 4 Includes credit facility new money fees, extension fees, arrangement fees, agency fees and legal fees plus any non-interest costs

associated with the commercial paper program.

28.8.6 2017-2018 GTA Forecast The sizing of AltaLink’s credit facilities is based on the following considerations:

• Purpose of credit facilities – Credit facilities are necessary to ensure that a short-term liquidity crunch does not lead to potentially disastrous consequences such as bankruptcy. Since 2008 AltaLink has seen its access to the money market (where AltaLink issues its commercial paper) and the term debt markets either restricted or closed at various points in time. AltaLink’s credit facilities protect the company in either of these scenarios by providing ready access to capital when its traditional sources are unavailable.

Other Considerations:

• AltaLink’s credit facilities provide support to the commercial paper (CP) program. This support is a necessary condition in order to obtain an R-1 low credit rating which is the minimum rating required to access the CP market in Canada. With an authorized CP program limit of $750M, AltaLink must have credit line support of at least $750M to obtain the required credit rating (Note: DBRS requires credit support of at least 1:1). For further information on DBRS required liquidity support refer to Appendix 4-C2).

• In addition to a CP backstop facility AltaLink requires a credit facility to support day to day operations which includes letters of credit, cheque writing, and overdraft protection.

• Credit facilities must be sized to allow for the maximum expected commercial paper outstanding during the year plus a buffer. The buffer provides a cushion should the term debt markets be closed or weak, thereby preventing a term debt issue whose proceeds would be used to pay down the outstanding commercial paper and in the process restore AltaLink’s liquidity under its credit facilities. With a target new issue debt size of $400M to $500M AltaLink needs credit facilities in excess of this amount in order to provide for the possibility that it cannot issue term debt due to market access issues.

• AltaLink’s liquidity must be sufficient from a rating agency perspective or we risk a credit rating downgrade. S&P’s published guidelines can be found in a January 2, 2014 report entitled, “Methodology and Assumptions: Liquidity Descriptors For Global Corporate Issuers”42 and a dedicated regulated utility report with the title of “Key Credit Factors For the Regulated Utilities Industry” dated November 19, 201343. In the “Key Credit Factors” report (paragraph 84 on page 19),44 Standard and Poor’s reduced the minimum requirement

42 Appendix 4-F5. 43 Appendix 4-F2. 44 Appendix 4-F2, pdf p. 155.



for the A/B ratio to 1.1 as the standard for adequate liquidity for those regulated utilities with a business risk profile of at least satisfactory.

Using the published S&P guidelines the required credit facilities are calculated in Appendix 5 Attachment 10 and summarized below.

Table 28.8.6-1 - 2017-2018 Forecast Credit Facility Amounts using S&P Methodology 2017 2018

Available Credit Facilities $1,000M $1,000M

Although DBRS has no published liquidity guidelines, privately they have indicated that liquidity equal to about the next year’s net capital spending would likely be considered adequate. Using this approach as our guidelines would result in required credit facilities of $765M in 2015 and $658M in 2016.

Based on the above considerations, AltaLink is forecasting credit facility amounts of $1,000M in each of 2017 and 2018. The costs associated with these credit facility amounts are as set out in the following table (refer to Appendix 5 Attachment 10).

Table 28.8.6-2 - Other Costs Associated with Short-Term Debt 2017F 2018F

Standby Fees $1,600,0001 $1,600,0002 Other Fees4 $495,0003 $495,0003 $2,095,000 $2,095,000

1 Refer to Schedule 3-2.2015(i) - Line 17. 2 Refer to Schedule 3-2.2016(i) - Line 17. 3 Included in Miscellaneous General Expense (USA 930.2). Refer to Section 25.2.16. 4 Includes credit facility new money fees, extension fees, arrangement fees, agency fees and legal fees plus any non-interest costs

associated with the commercial paper program.

Credit Rating Reports Refer to Appendix 4 for credit rating reports.

Financing Schedules Schedule 28-1 Schedule of Capital Structure and Average Cost of Capital.

Schedule 28-2 Schedule of Debt Capital Employed and Embedded Cost

Schedule 28-4 Schedule of Subordinated Debt

Schd 28-1


General Tariff ApplicationSchedule of Capital Structure and Average Cost of Capital

$Millions2012

Cross Mid Year ProratedLine Description Reference Balance Ratio Rate Base Cost % Return $

Debt Schedule 28-2 1,577.8 63.00% 1,129.5 4.54% 49.1 01 Preferred Stock - 0.00% - 0.00% - 02 Common Equity 926.7 37.00% 663.3 9.64% 63.0 03 No Cost Capital Schedule 29-1 47.2 47.2 04 Schedule 9-1 2,551.7 100.00% 1,840.0 6.42% 112.1 05 Contributions for Extensions Schedule 10-6 317.6 06 Mid Year Rate Base Schedule 10-1 2,157.6

2013

Cross Mid Year ProratedLine Description Reference Balance Ratio Rate Base Cost % Return $07 Debt Schedule 28-2 2,287.2 64.00% 1,592.6 3.89% 59.3 08 Preferred Stock - 0.00% - 0.00% - 09 Common Equity 1,286.5 36.00% 895.9 9.03% 80.9 10 No Cost Capital Schedule 29-1 68.3 68.3 11 Schedule 9-1 3,642.0 100.00% 2,556.8 5.74% 140.2 12 Contributions for Extensions Schedule 10-6 438.6 13 Mid Year Rate Base Schedule 10-1 2,995.3

2014

Cross Mid Year ProratedLine Description Reference Balance Ratio Rate Base Cost % Return $14 Debt Schedule 28-2 3,265.6 64.00% 1,949.6 4.10% 80.5 15 Preferred Stock - 0.00% - 0.00% - 16 Common Equity 1,836.9 36.00% 1,096.7 8.53% 93.6 17 No Cost Capital Schedule 29-1 95.6 95.6 18 Schedule 9-1 5,198.1 100.00% 3,141.9 5.70% 174.1 19 Contributions for Extensions Schedule 10-6 491.4 20 Mid Year Rate Base Schedule 10-1 3,633.3

2015

Cross Mid Year ProratedLine Description Reference Balance Ratio Rate Base Cost % Return $21 Debt Schedule 28-2 3,922.0 61.00% 1,849.0 4.17% 77.0 22 Preferred Stock - 0.00% - 0.00% - 23 Common Equity 2,507.5 39.00% 1,182.1 8.30% 98.1 24 No Cost Capital Schedule 29-1 148.2 148.2 25 Schedule 9-1 6,577.7 100.00% 3,179.3 5.78% 175.1 26 Contributions for Extensions Schedule 10-6 477.6 27 Mid Year Rate Base Schedule 10-1 3,656.9

2016

Cross Mid Year ProratedLine Description Reference Balance Ratio Rate Base Cost % Return $28 Debt Schedule 28-2 4,092.2 59.46% 1,827.1 4.16% 76.0 29 Subordinated Debt 175.0 2.54% 78.1 4.65% 3.6 30 Preferred Stock - 0.00% - 0.00% - 31 Common Equity 2,615.4 38.00% 1,167.7 8.30% 96.9 32 No Cost Capital Schedule 29-1 142.7 142.7 33 Schedule 9-1 7,025.2 100.00% 3,215.7 5.74% 176.5 34 Contributions for Extensions Schedule 10-6 467.0 35 Mid Year Rate Base Schedule 10-1 3,682.7

2017


2018


Schd 28-2


General Tariff ApplicationSchedule of Debt Capital Employed and Embedded Cost

$Millions

Senior Debentures Short-term Debt Total Long & Short-term Debt

Line No. Net ProceedsAnnual Interest &

AmortizationEmbedded Cost

of Debt Net ProceedsAnnual Interest &

AmortizationEmbedded Cost

of Debt Net ProceedsAnnual Interest &

AmortizationEmbedded Cost of

Debt(a) (b) (c) (d) (e) (f) (g) (h) (i)

1 Forecast - Year End2 Dec 31st, 2010 985.3 55.6 5.645% 37.4 1.5 4.099% 1,022.8 57.2 5.588%3 Dec 31st, 2011 1,310.0 69.9 5.333% 16.0 3.2 20.037% 1,326.0 73.1 5.510%4 Dec 31st, 2012 1,800.0 83.2 4.622% 29.7 0.8 2.770% 1,829.7 84.0 4.592%5 Dec 31st, 2013 2,700.0 116.6 4.317% 44.7 0.6 1.440% 2,744.7 117.2 4.270%6 Dec 31st, 2014 3,700.0 155.3 4.196% 86.5 1.8 2.040% 3,786.5 157.0 4.147%7 Dec 31st, 2015 4,050.0 169.7 4.190% 7.6 0.1 0.850% 4,057.6 169.8 4.184%8 Dec 31st, 2016 4,050.0 169.7 4.191% 76.8 0.9 1.120% 4,126.8 170.6 4.134%9 Dec 31st, 2017 4,050.0 169.6 4.188% 12.1 0.2 1.800% 4,062.1 169.8 4.181%

10 Dec 31st, 2018 4,200.0 174.8 4.162% 55.2 1.4 2.500% 4,255.2 176.2 4.141%

11 Forecast - Mid Year12 Mid-Year 2011 1,147.7 62.7 5.467% 26.7 2.4 8.864% 1,174.4 65.1 5.544%13 Mid-Year 2012 1,555.0 76.5 4.921% 22.8 2.0 8.809% 1,577.8 78.5 4.978%14 Mid-Year 2013 2,250.0 99.9 4.439% 37.2 0.7 1.971% 2,287.2 100.6 4.399%15 Mid-Year 2014 3,200.0 135.9 4.247% 65.6 1.2 1.836% 3,265.6 137.1 4.199%16 Mid-Year 2015 3,875.0 162.5 4.193% 47.0 0.9 1.944% 3,922.0 163.4 4.166%17 Mid-Year 2016 4,050.0 169.7 4.190% 42.2 0.5 1.096% 4,092.2 170.2 4.159%18 Mid-Year 2017 4,050.0 169.7 4.190% 44.4 0.5 1.213% 4,094.4 170.2 4.157%19 Mid-Year 2018 4,125.0 172.2 4.175% 33.7 0.8 2.374% 4,158.7 173.0 4.160%

Note: Effective January 1, 2011, all debts are used in financing regulated activities.

Schd 28-2

Schedule 28-2 Feb 15/16Schedule of Debt Capital Employed and Embedded Cost

2011Actual Net Capital Employed

Line No. Description Series Issue DateCoupon

RateMaturity

Date

PrincipalAmountOffered

Underwriting Discount &

ExpenseTotal

Amount

Per $100 ofPrincipalAmount

EffectiveCost Rate

PrincipalOutstanding

31-Dec-11Annual

Interest

AnnualAmortization of

Discount (Premium)

AnnualAmortization of Financing Fees

CarryingCost

Average EmbeddedCost Rate

20 Senior & Subordinated Debt21 $200M Senior Secured Bonds Series 03-2 5-Jun-03 5.43% 5-Jun-13 200.0 - 200.0 100.00 5.43% 200.0 10.9 0.0 0.5 11.3 5.67%22 $125M Senior Secured Bonds Series 03-2B 8-Dec-03 5.43% 5-Jun-13 125.0 - 125.0 100.00 5.43% 125.0 6.8 (0.1) 0.2 6.9 5.51%23 $85M Subordinated Bridge Bonds Series 3 29-Apr-02 8.00% 1-Oct-12 85.0 - 85.0 100.00 7.89% 85.0 6.7 0.0 6.7 7.90%24 $150M Medium Term Notes Series 06-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%25 $100M Medium Term Notes Series 2008-1 29-May-08 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.34%26 $100M Medium Term Notes Series 2008-1 (Additional) 14-May-09 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.30%27 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%28 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%29 $275M Medium Term Notes Series 2011-1 Actual 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%3031323334 Subtotal Senior & Subordinated Debt 1,310.0 - 1,310.0 1,310.0 69.0 (0.1) 1.0 69.9 35 Bank Credit Facility 20.04% 16.0 16.0 100.00 20.04% 16.0 3.2 20.04%36 Total 1,326.0 1,326.0 1,326.0 69.0 (0.1) 1.0 73.1 5.51%37 Prior Year 1,039.0 57.8 5.56%38 Total 2,365.0 130.9 5.53%39 Mid Year 1,182.5 65.4 5.53%40 Cross41 Allocation to Business Units Reference42 Transmission S. 28-1 1,182.5 65.4 5.53%43 Distribution S. 28-1 - - 44 Total Mid Year 1,182.5 65.4




RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


45 Senior & Subordinated Debt46 $200M Senior Secured Bonds Series 03-2 5-Jun-03 5.43% 5-Jun-13 200.0 - 200.0 100.00 5.43% 200.0 10.9 0.0 0.5 11.3 5.67%47 $125M Senior Secured Bonds Series 03-2B 8-Dec-03 5.43% 5-Jun-13 125.0 - 125.0 100.00 5.43% 125.0 6.8 (0.1) 0.2 6.9 5.51%48 $150M Medium Term Notes Series2006-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%49 $100M Medium Term Notes Series 2008-1 29-May-08 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.34%50 $100M Medium Term Notes Series 2008-1 (Additional) 14-May-09 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 (0.2) 5.0 5.02%51 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%52 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%53 $275M Medium Term Notes Series 2011-1 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%54 $300M Medium Term Notes Series 2012-1 29-Jun-12 3.99% 30-Jun-42 300.0 - 300.0 100.00 3.99% 300.0 12.0 0.0 12.0 4.00%55 $275M Medium Term Notes Series 2012-2 27-Nov-12 2.98% 28-Nov-22 275.0 - 275.0 100.00 2.98% 275.0 8.2 0.1 8.3 3.03%56575859 Subtotal Senior & Subordinated Debt 1,800.0 - 1,800.0 1,800.0 82.5 (0.1) 0.8 83.2 60 Bank Credit Facility 2.77% 29.7 29.7 100.00 2.77% 29.7 0.8 2.77%61 Total 1,829.7 1,829.7 1,829.7 82.5 (0.1) 0.8 84.0 4.59%62 Prior Year 1,326.0 73.1 5.51%63 Total 3,155.7 157.1 4.98%64 Mid Year 1,577.8 78.5 4.98%65 Cross66 Allocation to Business Units Reference67 Transmission S. 28-1 1,577.8 78.5 4.98%68 Distribution S. 28-1 - - 69 Total Mid Year 1,577.8 78.5

Schd 28-2




RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


70 Senior & Subordinated Debt71 $150M Medium Term Notes Series2006-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%72 $100M Medium Term Notes Series 2008-1 29-May-08 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.34%73 $100M Medium Term Notes Series 2008-1 (Additional) 14-May-09 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 (0.2) 5.0 5.02%74 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%75 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%76 $275M Medium Term Notes Series 2011-1 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%77 $300M Medium Term Notes Series 2012-1 29-Jun-12 3.99% 30-Jun-42 300.0 - 300.0 100.00 3.99% 300.0 12.0 0.0 12.0 4.00%78 $275M Medium Term Notes Series 2012-2 27-Nov-12 2.98% 28-Nov-22 275.0 - 275.0 100.00 2.98% 275.0 8.2 0.1 8.3 3.03%79 $250M Medium Term Notes Series 2013-1 12-Jul-13 4.45% 11-Jul-53 250.0 - 250.0 100.00 4.45% 250.0 11.1 0.0 11.1 4.45%80 $125M Medium Term Notes Series 2013-2 17-Sep-13 3.62% 17-Sep-20 125.0 - 125.0 100.00 3.62% 125.0 4.5 0.1 4.6 3.69%81 $350M Medium Term Notes Series 2013-3 17-Sep-13 4.92% 17-Sep-43 350.0 - 350.0 100.00 4.92% 350.0 17.2 0.0 17.3 4.93%82 $500M Medium Term Notes Series 2013-4 4-Nov-13 3.67% 6-Nov-23 500.0 - 500.0 100.00 3.67% 500.0 18.3 0.2 18.6 3.72%838485868788 Subtotal Senior & Subordinated Debt 2,700.0 - 2,700.0 2,700.0 116.0 - 0.5 116.6 89 Bank Credit Facility 1.44% 44.7 44.7 100.00 1.44% 44.7 0.6 1.44%90 Total 2,744.7 2,744.7 2,744.7 116.0 - 0.5 117.2 4.27%91 Prior Year 1,829.7 84.0 4.59%92 Total 4,574.4 201.2 4.40%93 Mid Year 2,287.2 100.6 4.40%94 Cross95 Allocation to Business Units Reference96 Transmission S. 28-1 2,287.2 100.6 4.40%97 Distribution S. 28-1 - - 98 Total Mid Year 2,287.2 100.6




RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


99 Senior & Subordinated Debt100 $150M Medium Term Notes Series2006-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%101 $100M Medium Term Notes Series 2008-1 29-May-08 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.34%102 $100M Medium Term Notes Series 2008-1 (Additional) 14-May-09 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 (0.2) 5.0 5.02%103 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%104 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%105 $275M Medium Term Notes Series 2011-1 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%106 $300M Medium Term Notes Series 2012-1 29-Jun-12 3.99% 30-Jun-42 300.0 - 300.0 100.00 3.99% 300.0 12.0 0.0 12.0 4.00%107 $275M Medium Term Notes Series 2012-2 27-Nov-12 2.98% 28-Nov-22 275.0 - 275.0 100.00 2.98% 275.0 8.2 0.1 8.3 3.03%108 $250M Medium Term Notes Series 2013-1 12-Jul-13 4.45% 11-Jul-53 250.0 - 250.0 100.00 4.45% 250.0 11.1 0.0 11.1 4.45%109 $125M Medium Term Notes Series 2013-2 17-Sep-13 3.62% 17-Sep-20 125.0 - 125.0 100.00 3.62% 125.0 4.5 0.1 4.6 3.69%110 $350M Medium Term Notes Series 2013-3 17-Sep-13 4.92% 17-Sep-43 350.0 - 350.0 100.00 4.92% 350.0 17.2 0.0 17.3 4.93%111 $500M Medium Term Notes Series 2013-4 4-Nov-13 3.67% 6-Nov-23 500.0 - 500.0 100.00 3.67% 500.0 18.3 0.2 18.6 3.72%112 $350M Medium Term Notes Series 2014-1 6-Jun-14 3.40% 6-Jun-24 350.0 - 350.0 100.00 3.40% 350.0 11.9 0.2 12.1 3.44%113 $130M Medium Term Notes Series 2014-2 6-Jun-14 4.27% 6-Jun-64 130.0 - 130.0 100.00 4.27% 130.0 5.6 0.0 5.6 4.28%114 $225M Medium Term Notes Series 2012-1A (Reopener) 12-Sep-14 3.99% 30-Jun-42 225.0 - 225.0 100.00 3.99% 225.0 9.0 0.1 9.1 4.04%115 $295M Medium Term Notes Series 2014-3 21-Nov-14 4.05% 21-Nov-44 295.0 - 295.0 100.00 4.05% 295.0 12.0 0.0 12.0 4.07%116117118119120121122 Subtotal Senior & Subordinated Debt 3,700.0 - 3,700.0 3,700.0 154.4 - 0.8 155.3 123 Bank Credit Facility 2.04% 86.5 86.5 100.00 2.04% 86.5 1.8 2.04%124 Total 3,786.5 3,786.5 3,786.5 154.4 - 0.8 157.0 4.15%125 Prior Year 2,744.7 117.2 4.27%126 Total 6,531.2 274.2 4.20%127 Mid Year 3,265.6 137.1 4.20%128 Cross129 Allocation to Business Units Reference130 Transmission S. 28-1 3,265.6 137.1 4.20%131 Distribution S. 28-1 - - 132 Total Mid Year 3,265.6 137.1

Schd 28-2


Prior Yr. 22015Forecast Net Capital Employed


RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


133 Senior & Subordinated Debt134 $150M Medium Term Notes Series2006-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%135 $100M Medium Term Notes Series 2008-1 29-May-08 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 0.1 5.3 5.34%136 $100M Medium Term Notes Series 2008-1 (Additional) 14-May-09 5.24% 29-May-18 100.0 - 100.0 100.00 5.24% 100.0 5.2 (0.2) 5.0 5.03%137 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%138 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%139 $275M Medium Term Notes Series 2011-1 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%140 $300M Medium Term Notes Series 2012-1 29-Jun-12 3.99% 30-Jun-42 300.0 - 300.0 100.00 3.99% 300.0 12.0 0.0 12.0 4.00%141 $275M Medium Term Notes Series 2012-2 27-Nov-12 2.98% 28-Nov-22 275.0 - 275.0 100.00 2.98% 275.0 8.2 0.1 8.3 3.03%142 $250M Medium Term Notes Series 2013-1 12-Jul-13 4.45% 11-Jul-53 250.0 - 250.0 100.00 4.45% 250.0 11.1 0.0 11.1 4.45%143 $125M Medium Term Notes Series 2013-2 17-Sep-13 3.62% 17-Sep-20 125.0 - 125.0 100.00 3.62% 125.0 4.5 0.1 4.6 3.69%144 $350M Medium Term Notes Series 2013-3 17-Sep-13 4.92% 17-Sep-43 350.0 - 350.0 100.00 4.92% 350.0 17.2 0.0 17.3 4.93%145 $500M Medium Term Notes Series 2013-4 4-Nov-13 3.67% 6-Nov-23 500.0 - 500.0 100.00 3.67% 500.0 18.3 0.2 18.6 3.72%146 $350M Medium Term Notes Series 2014-1 6-Jun-14 3.40% 6-Jun-24 350.0 - 350.0 100.00 3.40% 350.0 11.9 0.2 12.1 3.45%147 $130M Medium Term Notes Series 2014-2 6-Jun-14 4.27% 6-Jun-64 130.0 - 130.0 100.00 4.27% 130.0 5.6 0.0 5.6 4.28%148 $225M Medium Term Notes Series 2012-1A (Reopener) 12-Sep-14 3.99% 30-Jun-42 225.0 - 225.0 100.00 3.99% 225.0 9.0 0.2 9.1 4.06%149 $295M Medium Term Notes Series 2014-3 21-Nov-14 4.05% 21-Nov-44 295.0 - 295.0 100.00 4.05% 295.0 12.0 0.0 12.0 4.07%150 $350M Medium Term Notes Series 2015-1 30-Jun-15 4.09% 30-Jun-45 350.0 - 350.0 100.00 4.09% 350.0 14.3 0.0 14.4 4.10%151152153154155156 Subtotal Senior & Subordinated Debt 4,050.0 - 4,050.0 4,050.0 168.7 - 1.0 169.7 157 Bank Credit Facility 0.85% 7.6 7.6 100.00 0.85% 7.6 0.1 0.85%158 Total 4,057.6 4,057.6 4,057.6 168.7 - 1.0 169.8 4.18%159 Prior Year 3,786.5 157.0 4.15%160 Total 7,844.1 326.8 4.17%161 Mid Year 3,922.0 163.4 4.17%162 Cross163 Allocation to Business Units Reference164 Transmission S. 28-1 3,922.0 163.4 4.17%165 Distribution S. 28-1 - - 166 Total Mid Year 3,922.0 163.4


Prior Yr. 12016Forecast Net Capital Employed


RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost



Schd 28-2


Test Period 2017Year 1 Net Capital Employed


RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost




Test Period 2018Year 2 Net Capital Employed


RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


235 Senior & Subordinated Debt236 $150M Medium Term Notes Series2006-1 21-Sep-06 5.25% 22-Sep-36 150.0 - 150.0 100.00 5.25% 150.0 7.9 0.0 7.9 5.27%239 $125M Medium Term Notes Series 2010-1 25-Mar-10 5.38% 26-Mar-40 125.0 - 125.0 100.00 5.38% 125.0 6.7 0.0 6.7 5.39%240 $150M Medium Term Notes Series 2010-2 15-Nov-10 4.87% 15-Nov-40 150.0 - 150.0 100.00 4.87% 150.0 7.3 0.0 7.3 4.89%241 $275M Medium Term Notes Series 2011-1 8-Nov-11 4.46% 8-Nov-41 275.0 - 275.0 100.00 4.46% 275.0 12.3 0.0 12.3 4.47%242 $300M Medium Term Notes Series 2012-1 29-Jun-12 3.99% 30-Jun-42 300.0 - 300.0 100.00 3.99% 300.0 12.0 0.0 12.0 4.00%243 $275M Medium Term Notes Series 2012-2 27-Nov-12 2.98% 28-Nov-22 275.0 - 275.0 100.00 2.98% 275.0 8.2 0.1 8.3 3.03%244 $250M Medium Term Notes Series 2013-1 12-Jul-13 4.45% 11-Jul-53 250.0 - 250.0 100.00 4.45% 250.0 11.1 0.0 11.1 4.45%245 $125M Medium Term Notes Series 2013-2 17-Sep-13 3.62% 17-Sep-20 125.0 - 125.0 100.00 3.62% 125.0 4.5 0.1 4.6 3.69%246 $350M Medium Term Notes Series 2013-3 17-Sep-13 4.92% 17-Sep-43 350.0 - 350.0 100.00 4.92% 350.0 17.2 0.0 17.3 4.93%247 $500M Medium Term Notes Series 2013-4 4-Nov-13 3.67% 6-Nov-23 500.0 - 500.0 100.00 3.67% 500.0 18.3 0.2 18.6 3.72%248 $350M Medium Term Notes Series 2014-1 6-Jun-14 3.40% 6-Jun-24 350.0 - 350.0 100.00 3.40% 350.0 11.9 0.2 12.1 3.44%249 $130M Medium Term Notes Series 2014-2 6-Jun-14 4.27% 6-Jun-64 130.0 - 130.0 100.00 4.27% 130.0 5.6 0.0 5.6 4.28%250 $225M Medium Term Notes Series 2012-1A (Reopener) 12-Sep-14 3.99% 30-Jun-42 225.0 - 225.0 100.00 3.99% 225.0 9.0 0.1 9.1 4.04%251 $295M Medium Term Notes Series 2014-3 21-Nov-14 4.05% 21-Nov-44 295.0 - 295.0 100.00 4.05% 295.0 12.0 0.0 12.0 4.07%252 $350M Medium Term Notes Series 2015-1 30-Jun-15 4.09% 30-Jun-45 350.0 - 350.0 100.00 4.09% 350.0 14.3 0.0 14.4 4.10%253 $350M Medium Term Notes Series 2018-1 1-Jun-18 4.40% 1-Jun-28 350.0 - 350.0 100.00 4.40% 350.0 15.4 0.2 15.6 4.45%254255256257258 Subtotal Senior & Subordinated Debt 4,200.0 - 4,200.0 4,200.0 173.7 - 1.2 174.8 259 Bank Credit Facility 2.50% 55.2 55.2 100.00 2.50% 55.2 1.4 2.50%260 Total 4,255.2 4,255.2 4,255.2 173.7 - 1.2 176.2 4.14%261 Prior Year 4,062.1 169.8 4.18%262 Total 8,317.4 346.0 4.16%263 Mid Year 4,158.7 173.0 4.16%264 Cross265 Allocation to Business Units Reference266 Transmission S. 28-1 4,158.7 173.0 4.16%267 Distribution S. 28-1 - - 268 Total Mid Year 4,158.7 173.0

Schd 28-4


Schedule of Subordinated Debt$Millions

Line No. Net ProceedsAnnual Interest &

Amortization

Embedded Cost of Subordinated

Debt(a) (b) (c)

1 Forecast - Year End2 Dec 31st, 2011 - - 3 Dec 31st, 2012 - - 4 Dec 31st, 2013 - - 5 Dec 31st, 2014 - - 6 Dec 31st, 2015 - - 7 Dec 31st, 2016 350.0 16.3 4.65%8 Dec 31st, 2017 800.0 40.5 5.06%9 Dec 31st, 2018 800.0 40.5 5.06%

1011 Forecast - Mid Year12 Mid-Year 2011 - - 13 Mid-Year 2012 - - 14 Mid-Year 2013 - - 15 Mid-Year 2014 - - 16 Mid-Year 2015 - - 17 Mid-Year 2016 175.0 8.1 4.654%18 Mid-Year 2017 575.0 28.4 4.935%19 Mid-Year 2018 800.0 40.5 5.058%

Note: Effective January 1, 2011, all debts are used in financing regulated activities.

Subordinated Debt

Schd 28-4

Schedule 28-4 Feb 15/16Schedule of Subordinated Debt



RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-11Annual

Interest


Discount (Premium)


CarryingCost


13 Subordinated Debt14 -NONE-1516 Subtotal Subordinated Debt - - - - - - - - 17 Prior Year - - 0.00%18 Total - - 0.00%19 Mid Year - - 0.00%20 Cross21 Allocation to Business Units Reference22 Transmission S. 28-1 - - 0.00%23 Distribution S. 28-1 - - 24 Total Mid Year - -

Schedule 28-4Schedule of Subordinated Debt



RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost






RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-12Annual

Interest


Discount (Premium)


CarryingCost


37 Subordinated Debt38 -NONE- - 0.00%3940 Subtotal Subordinated Debt - - - - - - - - 41 Prior Year - - 0.00%42 Total - - 0.00%43 Mid Year - - 0.00%44 Cross45 Allocation to Business Units Reference46 Transmission S. 28-1 - - 0.00%47 Distribution S. 28-1 - - 48 Total Mid Year - -

Schd 28-4




RateMaturity

Date



ExpenseTotal

Amount


EffectiveCost Rate


31-Dec-14Annual

Interest


Discount (Premium)


CarryingCost



Schedule 28-4 Mar 31, 2015Schedule of Subordinated Debt

Prior Year 22015Forecast Net Capital Employed

Line No. Description Series Issue DateDividend

RateMaturity

Date



ExpenseNet

Proceeds


EffectiveCost Rate


31-Dec-15Annual

Interest


Discount (Premium)


CarryingCost


69 Subordinated Debt70 Sub Debt Series 201571 - 72 Subtotal Subordinated Debt - - - - - - - - 73 Prior Year - - 0.00%74 Total - - 0.00%75 Mid Year - - 0.00%76 Cross77 Allocation to Business Units Reference78 Transmission S. 28-1 - - 0.00%79 Distribution S. 28-1 - - 80 Total Mid Year - -


Prior Year 12016Forecast Net Capital Employed


RateMaturity

Date



ExpenseNet

Proceeds


EffectiveCost Rate


31-Dec-16Annual

Interest


Discount (Premium)


CarryingCost


89 Subordinated Debt90 $350M Subordinated Debt Series 2016-1 1-Jul-16 4.65% 1-Jul-76 350.0 - 350.0 100.00 4.65% 350.0 16.3 0.0 16.3 4.65%919293 Subtotal Subordinated Debt 350.0 - 350.0 350.0 16.3 - 0.0 16.3 94 Prior Year - - 0.00%95 Total 350.0 16.3 4.65%96 Mid Year 175.0 8.1 4.65%97 Cross98 Allocation to Business Units Reference99 Transmission S. 28-1 175.0 8.1 4.65%

100 Distribution S. 28-1 - - 101 Total Mid Year 175.0 8.1

Schd 28-4


Test Year 12017Forecast Net Capital Employed


RateMaturity

Date



ExpenseNet

Proceeds


EffectiveCost Rate


31-Dec-16Annual

Interest


Discount (Premium)


CarryingCost


110 Subordinated Debt111 $350M Subordinated Debt Series 2016-1 1-Jul-16 4.65% 1-Jul-76 350.0 - 350.0 100.00 4.65% 350.0 16.3 0.0 16.3 4.65%112 $450M Subordinated Debt Series 2017-1 1-Jul-17 5.37% 1-Jul-77 450.0 - 450.0 100.00 5.37% 450.0 24.2 0.0 24.2 5.37%113114 Subtotal Subordinated Debt 800.0 - 800.0 800.0 40.4 - 0.0 40.5 115 Prior Year 350.0 16.3 4.65%116 Total 1,150.0 56.8 4.94%117 Mid Year 575.0 28.4 4.94%118 Cross119 Allocation to Business Units Reference120 Transmission S. 28-1 575.0 28.4 4.94%121 Distribution S. 28-1 - - 122 Total Mid Year 575.0 28.4


Test Year 12018Forecast Net Capital Employed


RateMaturity

Date



ExpenseNet

Proceeds


EffectiveCost Rate


31-Dec-16Annual

Interest


Discount (Premium)


CarryingCost


131 Subordinated Debt132 $350M Subordinated Debt Series 2016-1 1-Jul-16 4.65% 1-Jul-76 350.0 - 350.0 100.00 4.65% 350.0 16.3 0.0 16.3 4.65%133 $450M Subordinated Debt Series 2017-1 1-Jul-17 5.37% 1-Jul-77 450.0 - 450.0 100.00 5.37% 450.0 24.2 0.0 24.2 5.37%134135 Subtotal Subordinated Debt 800.0 - 800.0 800.0 40.4 - 0.0 40.5 136 Prior Year 800.0 40.5 5.06%137 Total 1,600.0 80.9 5.06%138 Mid Year 800.0 40.5 5.06%139 Cross140 Allocation to Business Units Reference141 Transmission S. 28-1 800.0 40.5 5.06%142 Distribution S. 28-1 - - 143 Total Mid Year 800.0 40.5

Dec 31st, 2016 350.0 16.3 4.65%Dec 31st, 2017 450.0 23.9 5.30%Dec 31st, 2018 - - 5.53%

40.1



29. NO COST CAPITAL Section 29 of AltaLink’s Application addresses the following:

29.1 Summary

29.2 Self Insurance Reserve

29.3 Future Income Tax

29.4 Pension/Post Retirement Benefit

29.5 Rainbow Reserve

29.6 Hearing Cost Reserve

29.7 No Cost Capital Schedules



Summary Schedule 29-1 lists the component accounts treated as No Cost Capital included in this

Application. The item that accounts for the largest amount of change relative to prior years is the Future Income Taxes account. Total mid-year balance of No Cost Capital decreases by $87.4M in the 2017 forecast over the 2016 Management Update and decreases by $44.9M in 2018 over the 2017 forecast.

Self-Insurance Reserve A copy of AltaLink’s SIR Policy is provided in Appendix 3-B. There have been no changes to the

SIR policy subsequent to the 2015-2016 GTA.

• Funding — AltaLink forecasts funding for the SIR of $1.5M for each of 2017 and 2018 (to fund individual losses in excess of $0.1M which meet the SIR eligibility criteria). Refer to Schedule 29-2 for further details. Losses are expected to be $1.5M in each of 2017 and 2018;

• Charges to SIR — Losses which meet criteria for SIR eligibility; • Target Balance — The EUB in Decision 2007-012 directed AltaLink to target a zero balance;

and • Mechanics — If the balance of the SIR reserve at the end of the year is below negative

$0.5M or above $0.5M, AltaLink will make application to the AUC to have the balance restored to zero at the time of the next GTA.

A threshold of $5M must be met before a separate application for funds can be made to bring the balance in the SIR to zero.

AltaLink’s SIR continuity schedule is provided as Schedule 29-2.

Future Income Tax Future Tax Liability account mid-year balance decreases by $88.0M in the 2017 forecast over the

2016 Management Update, and decreases by another $45.5M in 2018 over the 2017 forecast. The balance in this account at the end of 2018 is expected to be zero dollars. The decreases in 2017 and 2018 are due to AltaLink’s proposal to discontinue the collection of Federal and Provincial FIT in 2016, and to refund the remaining balances in 2016 and 2017.

Pension/Post Retirement Benefit DB Pension Plan

In 2014, AltaLink discontinued the DB Pension Plan and in 2015 the remaining $0.2M balance in the DB Plan Liability account was refunded to ratepayers in its 2015-2016 GTA. A full description of the disposition of the Pension Plan was included in the 2015-2016 GTA. Accordingly, the DB Pension Plan Liability balance for the 2017 and 2018 test years is zero.

Post Retirement Benefit AltaLink’s Post Retirement forecast expense increase reflects FTE additions and salary increases.

These are set out in Schedule 29-4.

Rainbow Reserve This Application treats Rainbow Eligible Expenditures in the same manner as AltaLink’s 2013-

2014 GTA. In EUB Decision 2005-19, the Board directed AltaLink not to capitalize the four



programs which would otherwise be capitalized as rainbow expenses, but treat them as operating expenses. In AUC Decision 2009-151, the Commission found that as long as AltaLink deems its Federal taxes according the FIT method, it is satisfied with this approach.

Hearing Cost Reserve Refer to Schedule 29-7 for the HCR Funding. The details for the payments and the funding

requirements are provided in Section 25.2.8.

No Cost Capital Schedules Schedule 29-1 Schedule of Mid-Year No Cost Capital

Schedule 29-2 Schedule of Reserve for Injuries and Damages (SIR)

Schedule 29-3 Schedule of Future Income Taxes

Schedule 29-4 Schedule of Pension/Post Retirement Benefits

Schedule 29-5 Schedule of Rainbow and Capitalized G&A Tax Reserve

Schedule 29-7 Schedule of Rate Hearing Costs - Total

Schd 29-1


General Tariff ApplicationSchedule of Mid-Year No Cost Capital

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 201 Transmission02 Self Insurance Reserve Schedule 29-2 (1.2) 0.7 (3.7) (3.3) (0.0) (0.0) (0.0) 03 Future Income Taxes Schedule 29-3 39.7 57.9 90.4 142.9 133.4 45.4 (0.0) 04 Deferred Pension/Post Retirement Benefits Schedule 29-4 7.6 8.6 8.8 8.6 9.0 9.5 10.1 05 Rainbow Reserve and G&A Capitalized Schedule 29-5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 06 Hearing Cost Reserve Schedule 29-7 0.8 0.7 (0.2) (0.4) (0.0) (0.0) 0.0 07 Total Schedule 28-1 47.2 68.3 95.6 148.2 142.7 55.3 10.4

Schd 29-2


General Tariff ApplicationSchedule of Reserve for Injuries and Damages (SIR)

$Millions


Line Description Reference Actual Actual Actual Forecast 3 Forecast 3 Year 1 Year 20102 Opening Balance (4.7) 2.3 (0.8) (6.6) (0.0) (0.0) (0.0) 0304 Forecast Provision 1.2 (1.2) 1.1 0.3 1.5 1.5 1.5 05 Settlement of account 5.9 - - 2.6 - - -

06 Insurance Proceeds (Southern Alberta Flood) 1 - - - 3.6 - - -

07 Insurance Proceeds (Southern Alberta Grass Fire) 2 - - - 0.4 - - - 0809 Claims - - - - - - -

10 526L Flood (2012) 3 (0.1) - (6.5) - - - -

11 Southern Alberta Flood (2013) 4 - (1.8) (0.4) - - - -

12 Southern Alberta Grass Fire (2012) 5 - (0.2) - (0.1) - - 13 Windstorm (August 2015)14 General Provision - - - (0.3) (1.4) (1.5) (1.5) 1516 Closing Balance 2.3 (0.8) (6.6) (0.0) (0.0) (0.0) (0.0) 1718 Mid Year Balance S. 29-1 (1.2) 0.7 (3.7) (3.3) (0.0) (0.0) (0.0)

Notes:Forecast of Settlement of Account on Line 05 is included in Revenue Requirement on Schedule 3-1.The 2015-2016 forecasts will be trued up to actuals in the future General Tariff Application.

1 Insurance proceeds exclude a $0.50M deductible.2 Insurance proceeds exclude a $0.25M deductible.3 Amendments to the 2015 and 2016 GTA Updates will be made in the 2015-2016 Compliance Filing to the GTA.

Schd 29-3


General Tariff ApplicationSchedule of Future Income Taxes

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Open Balance 34.4 44.9 70.8 110.0 175.9 90.9 (0.0) 03 Current Year Future Taxes 10.4 26.0 39.1 65.9 (85.0) (90.9) -

Account Receivable IFRS Deferral - 05 Closing Balance 44.9 70.8 110.0 175.9 90.9 (0.0) (0.0) 06 Mid Year Future Income Taxes 39.7 57.9 90.4 142.9 133.4 45.4 (0.0) 0708 Transmission09 Open Balance 34.4 44.9 70.8 110.0 175.9 90.9 (0.0) 10 Current Year Future Taxes 10.4 26.0 39.1 65.9 (85.0) (90.9) - 11 Account Receivable IFRS Deferral - 12 Closing Balance 44.9 70.8 110.0 175.9 90.9 (0.0) (0.0) 13 Mid Year Future Income Taxes Schedule 29-1 39.7 57.9 90.4 142.9 133.4 45.4 (0.0) 1415 Distribution16 Open Balance - - - - - - - 17 Current Year Future Taxes - - - - - - - 18 Closing Balance - - - - - - - 19 Mid Year Future Income Taxes - - - - - - -

Schd 29-4


General Tariff ApplicationSchedule of Pension/Post Retirement Benefits

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Opening Balance 7.1 8.1 9.1 8.5 8.7 9.2 9.8 03 Cash Contribution (2.3) (6.7) (9.4) (2.9) (3.0) (3.1) (3.0) 04 Pension and Benefit Expense 2.3 7.8 8.7 3.2 3.5 3.7 3.6 05 Closing Balance 8.1 9.1 8.5 8.7 9.2 9.8 10.4 06 Mid Year Pension/Post Retirement 7.6 8.6 8.8 8.6 9.0 9.5 10.1 0708 Details by Plan0910 Defined Benefit Pension Plan11 Opening Balance 2.4 2.0 2.0 0.2 - - - 12 Cash Contributions/Wind-up Cost (0.4) - (1.8) - - - - 13 Pension Expense/Refund to Customers (0.2) 14 Closing Balance 2.0 2.0 0.2 - - - - 15 Defined Contribution Pension Plan16 Opening Balance - - - - - - - 17 Cash Contributions (2.0) (2.4) (2.6) (2.9) (3.0) (3.1) (3.0) 18 Pension Expense 2.0 2.4 2.6 2.9 3.0 3.1 3.0 19 Closing Balance - - - - - - - 20 Supplemental Pension Plan 21 Opening Balance 0.2 0.3 0.4 0.4 0.5 0.6 0.7 22 Cash Contributions23 Pension Expense 0.1 0.1 0.1 0.1 0.1 0.1 0.1 24 Closing Balance 0.3 0.4 0.4 0.5 0.6 0.7 0.8 25 Other Post Employment Benefits26 Opening Balance 3.1 3.3 3.7 4.1 4.5 4.9 5.4 27 Cash Contributions28 Benefit Expense 0.3 0.4 0.4 0.4 0.4 0.5 0.5 29 Closing Balance 3.3 3.7 4.1 4.5 4.9 5.4 5.9 3031 Allocation to Business Units:32 Transmission 7.6 8.6 8.8 8.6 9.0 9.5 10.1 33 Distribution - - - - - - - 34 Total Mid Year Pension/Post Retirement 7.6 8.6 8.8 8.6 9.0 9.5 10.1

Note:These amounts reflect only the operating expense portion. They exclude the amounts capitalized to the fixed assets.

Schd 29-5


General Tariff ApplicationSchedule of Rainbow and Capitalized G&A Tax Reserve *

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Transmission03 Open Balance 0.4 0.4 0.4 0.4 0.4 0.4 0.4 04 Current Year Provision - - - - - - - 05 Adjustments - - - - - - - 06 Closing Balance 0.4 0.4 0.4 0.4 0.4 0.4 0.4 07 Mid Year Balance 0.4 0.4 0.4 0.4 0.4 0.4 0.4

* Originally titled Schedule of Rainbow Reserve

Schd 29-7


General Tariff ApplicationSchedule of Rate Hearing Costs - Total

$Millions


Line Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 20102 Opening Balance 0.5 1.0 0.4 (0.8) (0.0) (0.0) 0.0 0304 Forecast Funding Provision 0.9 (0.1) 1.2 2.8 2.4 3.9 1.5 05 1.4 0.9 1.6 2.0 2.4 3.9 1.5 06 Cost Orders and Assessments07 Cost Decision 2012-030 2011 GCOC - Applicant (0.3) 08 Cost Decision 2012-030 2011 GCOC - Interveners & AUC (0.0) 09 Cost Decision 2013-077 2011-12 GTA Compliance - Applicant (0.0) 10 Cost Decision 2012-312 2013-234 - 2013-2014 GTA Interveners (0.5) 11 Cost Decision 2013-216 - R&V Decision 2011-474 (0.1) 12 Cost Decision 2013-179 - 2013 Interim Rate (0.0) 13 Cost Decision 2014-052 2013-2014 GTA Applicant & Int (2.1) 14 Cost Decision 2014-013 UAD (0.2) 15 Cost Decision 2014-235 - 2014 Interim Rate - 16 Cost Decision 2014-302 2013-2014 GTA Compliance - Applicant (0.1) 171819 Forecast Payments20 2013 GCOC - AltaLink Expense - (0.5) - - - 21 2013 GCOC - Interveners - (0.1) - - - 22 Deferrals 2012 & 2013 Applicant - (1.0) - - - 23 Deferrals 2012 & 2013 Interveners - (0.4) - - - 24 2015-2016 GTA - Applicant Expense - - (1.3) - - 25 2015-2016 GTA - Interveners (Anticipated 2015) - - (0.5) (0.5) (0.5) 26 2015 GCOC - AltaLink Expense - - (0.5) (0.5) (0.5) 27 2015 GCOC - Interveners - - (0.1) (0.1) (0.1) 28 2017-2018 GTA - Application Expense - - - (1.3) - 29 2017-2018 GTA - Interveners - - - (1.6) (0.4) 30 Deferrals 2014 Applicant & Interveners - - - - - 313233 Total Payments (0.4) (0.5) (2.4) (2.0) (2.4) (3.9) (1.5) 3435 Closing Balance 1.0 0.4 (0.8) (0.0) (0.0) 0.0 0.0 3637 Mid-Year Balance Schedule 29-1 0.8 0.7 (0.2) (0.4) (0.0) (0.0) 0.0



30. AFFILIATE TRANSACTIONS Section 30 of AltaLink’s Application addresses the following:

30.1 Summary

30.2 Affiliate Transaction Schedules



Summary AltaLink is not aware of any Inter-Affiliate Code of Conduct compliance issues at this time.

AltaLink’s Compliance Report for the 2014 reporting compliance period was filed with the AUC on May 1, 2015 and is included in this Application at Appendix 15.

Affiliate Transaction Schedules Affiliate Transaction Schedules do not apply to AltaLink.



31. SUPPLEMENTARY INFORMATION Section 31 of AltaLink's Application addresses the following:

31.1 Summary

31.2 Annual Report of Finances and Operations

31.3 Operational Statistics of Report on Finances and Operations

31.4 Refunding FortisAlberta Customer Contributions

31.5 Accounting Policies

31.6 Reserve Accounts

31.7 Deferral Accounts

31.8 Supplemental Information Schedules



Summary This Section provides information with respect to reference and other supplemental material

that supports this Application.

31.1.1 Intervener Engagement Process During the February 2016 time period, AltaLink engaged various external parties in order to

provide them with a draft cursory high level overview of AltaLink’s 2017-2018 GTA. The parties engaged in such discussions were as follows:

• UCA (Utilities Consumer Advocate) • ADC (Alberta Direct Connect Consumer Association) • The City of Calgary • IPCAA (Industrial Power Consumers Association of Alberta) • Consumers’ Coalition of Alberta

These meetings also provided an opportunity for these interveners to ask questions and engage in discussions with respect to the high level 2017-2018 GTA drivers presented in the meeting. Refer to Appendix 16 for a copy of the draft 2017-2018 GTA Overview.

Annual Report of Finances and Operations Refer to Appendix 6-A2 and 6-A4 for the Report on Finance and Operations for 2013 and 2014.

Operational Statistics of Report on Finances and Operations For AltaLink’s equivalent report, refer to Appendix 6-A1 and 6-A3, AltaLink’s 2013 and 2014

Operational Statistics of Report on Finances and Operations.

Refunding FortisAlberta Customer Contributions 31.4.1 Summary

AltaLink is proposing that commencing in the 2017 Test Year, AltaLink will fully refund back to FortisAlberta those customer contributions in aid of construction that FortisAlberta made for interconnection projects that are to be commissioned in this Test Period. As detailed below, AltaLink is proposing this change in order to address problematic issues and anomalies associated with the current FortisAlberta customer contribution funding model and, at the same time, provide a financial benefit to current FortisAlberta customers. Specifically, this proposal will result in the following:

• The proposed change will correct the long-standing incorrect pricing signals and unfair return principles associated with these transmission assets. FortisAlberta, as a regulated distribution company, continues to earn a regulated return on transmission assets which are owned and operated by AltaLink. All of the business risks associated with building, owning and operating these transmission assets rests with AltaLink whereas FortisAlberta bears no business risks associated with these transmission assets yet FortisAlberta earns a regulated return on these same transmission assets.

• Given AltaLink’s lower cost of debt and equity, FortisAlberta customers can expect to realize a saving of approximately $1.0M over the 2017-2018 test year period. This saving is related to the approximately $108.3M forecast FortisAlberta contributions in the test year period, and this amount will increase in subsequent years as further contribution refunds are made



to FortisAlberta. These estimated savings would also be higher if all prior FortisAlberta contributions were treated in the same manner.

• The proposed change does not result in a net increase in the overall electric system Rate Base since the resultant increase in AltaLink’s Rate Base is offset by a corresponding decrease in FortisAlberta’s Rate Base.

• AltaLink’s billings to the AESO are not impacted by this change since the additional debt and equity related Revenue Requirement resulting from the contribution refunds will be deducted from AltaLink’s overall Revenue Requirement and instead these amounts will be recovered directly from FortisAlberta through a newly proposed Miscellaneous Revenue Offset Tariff (subject to deferral account treatment like other AESO DA Projects); FortisAlberta in turn will recover these amounts from its customers who, as noted above, will benefit by having to pay reduced amounts to FortisAlberta.

Further background information and detail on the rationale and mechanics of this proposal are as follows.

31.4.2 Background Since deregulation of the electric industry in Alberta and with the creation of the AESO, TFOs no

longer have any customer rate, investment policy decision making associated with customer contributions, or contracting with customers for customer tariffs. Prior to deregulation, the TFO had such accountability and customer contributions were properly included within the TFOs tariff.

Today, under the AESO’s terms and conditions of service and the AESO’s customer contribution policy, the distribution company may be required to make a contribution, as directed by the AESO, associated with requested construction of transmission facilities. The TFO, not party to any aspects of the DISCO or AESO decision making, ultimately receives the AESO directed contribution from the DISCO and includes the contribution as an offset to the TFO’s Rate Base.

This customer contribution approach creates a situation that:

• is more costly to FortisAlberta customers; • provides FortisAlberta, a DISCO, with a regulated return on transmission assets that it does

not build, own, operate or maintain; and • results in the TFO incurring all the business risk associated with building, owning, operating

and maintaining the transmission assets without any return to compensate for those business risks.

As shown in Table 31.4.2-1 below, over the period 2006 to 2016 FortisAlberta will have paid AltaLink approximately $320M in customer contributions with a further $108.3M forecast to be received from FortisAlberta in 2017-2018. Over the 11 year period, 2006 to 2016, the cumulative amount of FortisAlberta contributions have grown by an average annual rate of 53.3%.



Table 31.4.2-1 - FortisAlberta Contributions In Aid of Construction to AltaLink 2006 to 2016 ($M)

31.4.3 Rationale for Change AltaLink submits that there is an overriding principle of fairness, in the sense of appropriately

balancing the interests of the customers and investors in AltaLink, and at the same time ensuring just and reasonable rates for distribution customers.

FortisAlberta, and not AltaLink, presently contributes towards the capital investment in the transmission facilities that are ultimately constructed, owned, and operated by AltaLink and at AltaLink’s risk.

FortisAlberta, and not AltaLink, presently recovers the cost of this capital investment which has been made on AltaLink’s transmission system, by either expensing the amount through its deferral account or potentially adding the amount to the FortisAlberta Rate Base and earning a return.

From a regulated rate and cost recovery perspective, it is not appropriate for a regulated DISCO, FortisAlberta in this case, to be earning a return on transmission assets; and from a distribution ratepayer perspective, it is not appropriate for FortisAlberta to be incurring a higher tariff on these assets compared to what the tariff would be if these assets were more properly part of AltaLink’s asset base and subject to AltaLink’s lower cost of capital.

Refunding the customer contribution amounts to FortisAlberta in the manner described herein is made in recognition that FortisAlberta is a regulated DISCO and not a typical industrial customer as evidenced by Section 5 of the ISO which exempts owners of electric distribution systems, FortisAlberta in this case, from the customer financial security provisions for connection projects eligible for AESO investment.

The proposed change would result in no net increase in the overall electric system Rate Base in respect of the capital associated with the customer contributions notwithstanding that AltaLink has the ongoing ownership and operating risk associated with such capital facilities. For clarity, including this investment in AltaLink’s asset base would be offset by a corresponding reduction in the FortisAlberta’s Rate Base, and the resultant increase in AltaLink’s Rate Base Revenue

Year Annual Amount Cumulative Annual Increase 2006 Actual 9.6 9.6 - 2007 Actual 0.1 9.8 1.5% 2008 Actual 25.5 35.3 260.2% 2009 Actual 7.3 42.6 20.8% 2010 Actual 34.4 77.0 80.7% 2011 Actual 17.5 94.5 22.7% 2012 Actual 45.3 139.8 48.0% 2013 Actual 88.1 227.9 63.0% 2014 Actual 32.0 259.9 14.0% 2015 Forecast 36.7 296.6 14.1% 2016 Forecast 23.5 320.2 7.9%

53.3%Totals may not add due to rounding. Average Annual Increase 2006-2016



Requirement would be negated by a miscellaneous revenue offset that would be subsequently billed to FortisAlberta on a monthly basis.

As shown above, over 2006 to 2016, FortisAlberta will have paid AltaLink approximately $320M in customer contributions and in the Test Period, AltaLink anticipates that an additional $108.3M in FortisAlberta funded projects will be energized.

While it is perhaps understandable that this issue was largely ignored in the past when the customer contribution amounts in respect of FortisAlberta, a regulated DISCO, were small, AltaLink submits that this issue cannot be ignored given that the amounts in respect of such requests are significant.

31.4.4 Proposed Change In the 2017-2018 GTA covering the 2017 and 2018 test years, AltaLink proposes a process to

account for contributions made by FortisAlberta to AltaLink that will alleviate the issues identified by AltaLink and which will comply with the AESO’s terms and conditions of service. The first part of the process is no different compared to what currently takes place during a FortisAlberta interconnection. When AltaLink constructs a facility for FortisAlberta, FortisAlberta will provide a contribution in aid of construction to AltaLink according to the AESO’s terms and conditions of service. FortisAlberta will finance the contribution payment through debt and equity and FortisAlberta will collect this amount from its customers. AltaLink, in turn, will hold the contribution in a separate account until the project is energized and once energized, AltaLink will own and operate the asset. This represents no change from the current process with respect to FortisAlberta contributions.

Unlike the current process, AltaLink proposes that once a FortisAlberta project is energized, AltaLink will refund the contribution back to FortisAlberta and AltaLink, in turn, will finance this amount by issuing debt and equity. FortisAlberta will then make monthly Revenue Requirement payments to AltaLink based on AltaLink’s cost of capital applied to the unamortized refund amount over a 40 year period (refer to Section 6 and Schedule 10-6). FortisAlberta will collect this amount through its distribution tariff where FortisAlberta customers will pay a reduced amount since AltaLink’s cost of capital is presently lower than FortisAlberta’s cost of capital. For administrative ease, contribution based refunds, if any, will be provided to FortisAlberta by AltaLink every June 30 with monthly payments, calculated on a mid-year basis, from FortisAlberta to AltaLink commencing on July 31 of the same year.

31.4.5 Forecast Contribution Refunds and Estimated FortisAlberta Payments AltaLink’s proposed process change would be on a go-forward basis that would commence for

FortisAlberta projects commissioned in the 2017 test year. AltaLink has forecast refunds from AltaLink to FortisAlberta and payments from FortisAlberta to AltaLink for the 2017 and 2018 Test Periods as shown in Table 31.4.5-1 below.



Table 31.4.5-1 - Refund of Contribution Payments to FortisAlberta ($M)

31.4.6 Estimated Savings for FortisAlberta Ratepayers Given the currently approved debt/equity structures and cost of capital for AltaLink and

FortisAlberta, under this proposal FortisAlberta rate payers would save approximately $1.0M over the 2017-2018 Test Period. As shown in Table 31.4.6-1 below, this estimated savings is based on FortisAlberta’s combined cost of debt and equity which results in an estimated cost of $7.9M versus AltaLink’s combined cost of debt and equity which yields an estimated incremental cost of $6.9M.

Table 31.4.6-1 - FortisAlberta versus AltaLink’s Cost of Debt and Equity Based on Forecast Contribution Refunds ($M)

Totals may not add due to rounding

The proposed refunding of contributions made by FortisAlberta would continue as the other in-progress and new FortisAlberta projects are energized and brought forward for AESO approval. As this refunding by AltaLink continues in the subsequent years, the estimated savings to FortisAlberta rate payers can also be expected to increase.

AltaLink is prepared to consider refunding all unamortized FortisAlberta customer contributions which would further increase the savings to Fortis customers.

AltaLink has not included any Fortis customer savings related to any current treatment by FortisAlberta from an income tax perspective of the contributions provided to AltaLink.

31.4.7 Implementation Mechanics When AltaLink constructs a facility for FortisAlberta, FortisAlberta provides a contribution in aid

of construction to AltaLink according to the AESO’s terms and conditions. FortisAlberta finances the contribution payment made to AltaLink through issuance of debt and equity and FortisAlberta collects this amount from its customers.

Under the proposed new process, AltaLink will continue to hold the FortisAlberta contribution in a separate no-cost capital deferral account until the project is energized. Once energized, AltaLink will own and operate the asset like it does today, but unlike the current situation, once a FortisAlberta project is energized AltaLink will refund the contribution back to FortisAlberta and AltaLink in turn will finance this amount by issuing debt and equity.

With this change, FortisAlberta will then make monthly Revenue Requirement payments to AltaLink based on AltaLink’s cost of capital applied to the unamortized refund amount over the same period contributions are currently amortized which is 40 years. FortisAlberta will collect

Refunds and Payments2017

Forecast2018

Forecast Refunds from AltaLink to FortisAlberta -Paid June 30 67.8 40.5 Annual Payments from FortisAlberta to AltaLink - Commencing July 1.9 5.0

Description2017

Forecast2018

Forecast Total FortisAlberta's Cost of Debt and Equity 2.2 5.7 7.9 AML's Cost of Debt and Equity 1.9 5.0 6.9 Difference 0.3 0.7 1.0

~ !! ••a I 1a• !~ ~ ALiAi.ii1i\



this amount through its distribution tariff where customers will pay a reduced amount as Altalink's cost of capital is lower than FortisAlberta's cost of capital.

884. For administrative ease, contribution based refunds, if any, w ill be provided to FortisAlberta by Altalink every June 30 with the resultant monthly payments, calculated on a mid-year basis, from FortisAlberta to Altalink commencing on July 31 of the same year.

885. When Altalink refunds a contribution back to FortisAlberta, a corresponding increase will be made to Altalink' s Revenue Requirement Rate Base. Under this proposal, however, Alta link' s monthly Revenue Requirement billings to the AESO will not be impacted since the incremental Revenue Requirement associated with this Rate Base addit ion will be offset by a newly proposed FortisAlberta Miscellaneous Revenue Offset (MRO) Tariff (reference Section 8.1.4). For clarity, this new MRO Tariff represents the monthly payments that will be made by FortisAlberta to Alta link and these monthly payments will a llow Alta link to recover the incremental Revenue Requirement resulting from Rate Base addit ions based on FortisAlberta contribution refunds.

886. Figures 31.4.7-1, 31.4.7-2 and 31.4.7-3, which fo llow below, are designed to show the key differences in the financia l flows and impacts result ing from the proposed refunding of FortisAlberta contributions by Altalink, using a $100M contribution as an example.

Figure 31.4.7-1- Current Situation for FortisAlberta Customer Contributions - Financial Flows and Impacts - Using Example based on $100M Fortis Contribution in Vear 1 ($M)

Project Approval &

Construction Phase

FortllAlberUllFA)DlrectAalped ,.,..,_,nec:tlon Project 11equ1r1,.

Fort11 I-of $lOllM

February 16, 2016

Project Energization

FARM9 ... • lnauHdwlth $lOllM c.pltll Addition

FA Issues Debt and Equity to Finance $11XM Investment

See t he "Forwa rd-looking Information Advisory" .

Utility Financial Impacts Customer Impacts

FA .... _ Requlre-nt FA Distribution

lnc:reaed$J.JM to - Tllfff ·$UM to reflect$lOllM t.pltll be recowred

Addition throulh llFO Tllfff

Annual Cost to FA DFO customers: $3.3M

31-7

~ !! ••a I 1a• !~ ~ ALiAi.ii1i\



Figure 31.4.7-2 - Refunding of FortisAlberta Customer Contributions - Financial Flows and Impacts -Using Example based on $100M Refund in Year 1 (SM)

Project Approval & Construction Phase

Fol1hAlbe""IFA) _._.,.dlonProjectllequlrl•

Fortl1 l-ntof$11JOM

FA Issues Debt and Equity to Finance $100M lnwstment

Project Energization

faltis .................. d -wlth-spondl .. ........... IDFA'1lle

Req .. rw-.

AML Refunds FA's $100M Contribution

Net Result · FortisAJberta customers benefit from lower distribution rates due to AltaUnk's lower cost of capital compared to FortlsAlberta. In this example with a $100M contribution refund, FortisAlberta's customers would save approlCimately $0.4M in the first year a lone.

February 16, 2016 See t he "Forwa rd-looking Information Advisory" .

Utilit y Financial Impact s

FA_nue....,lrwment lncnilMd 111.......,rAMl monthly bllll,,.; nolmpKt

onFA'u""'beM.

AML Invoices Fortis Monthly· Miscellaneous Revenue Offset (MRO) Tariff and Fortis Remits

Monthly to AML

Customer Impacts

FA Dlserlbutlon Tariff· $2.IM In 20171uddedlD

offset AM. monlhly bllllng.

Annual Cost to FA DFO Customers: $2.8M

(see Ne t Result be low)

Annual Cost to AML TFO custome rs: $0.0 M

31-8



Figure 31.4.7-3 - Proposed Refunding of FortisAlberta Contributions - Detailed Financial Flows and Impacts - Example based on $100M Refund in Year 1 ($M)

Accounting Policies The following general principles have been summarized as AltaLink’s accounting policies in the

Notes to AltaLink’s Financial Statements.

Financial Reporting AltaLink maintains financial accounting records that fully and accurately reflect all the

transactions and business in which AltaLink engages, in accordance with applicable accounting principles, policies and practices. AltaLink prepares its financial reports on a going concern basis in accordance with IFRS. The principal accounting policies adopted by AltaLink are set out below.

AltaLink’s financial statements are prepared on the historical cost basis except for provisions, accrued employment benefits liabilities and certain financial assets and liabilities related to regulated activities, which are measured initially at fair value. Financial assets and liabilities related to regulated activities are subsequently measured at amortized cost.

AltaLink’s financial statements are presented in Canadian dollars, which is its functional currency.

Approval / Construction / Energization

Fortis Project Total Cost

Less Fortis Contribution

Net Addition to Rate Base



Fortis Contribution


Cost Less Contribution 100.0 -100.0 0.0 Contribution to Project 100.0 100.0 100.0

Rate Base Impact 0.0 100.00.0 49.4

0.000 3.277

Revenue Requirement Revenue Requirement0.000 3.277none 3.277

100.0



Fortis Contribution




Fortis Contribution


Cost Less Contribution 100.0 -100.0 0.0 Contribution to Project 100.0 100.0 100.0Energization - In Service Energization - In ServiceContribution Refund 100.0 100.0 Contribution Refund -100.0 -100.0

Rate Base Impact 100.0 0.049.4 0.0

2.838 0.000

Revenue Requirement Revenue RequirementIncremental Revenue Requirement 2.838 Incremental Revenue Requirement 0.000

-2.838 2.8380.000 2.838

100.0

0.00.439

NOTES:

Rate Base Impact

Rate Base Impact

Proposed Contribution Refunding - FortisAlberta

Net Change to overall Electric System Rate Base resulting from Contribution Refund Proposal Estimated Savings to Fortis Ratepayers resulting from Contribution Refund Proposal - Year 1 with $100M Refund

1. This proposal assumes AML recovers the additional debt and equity related revenue requirement directly from FortisAlberta through a newly proposed Miscellaneous Revenue Offset Tariff; FortisAlberta in turn recovers these amounts through its distribution tariff.

Current Situation - AltaLink Current Situation - FortisAlberta

Less AML Total Billings to Fortis (See Note 1)

AML Total Billings to Fortis Fortis billings to Customers to recover Revenue Requirem

Plus Fortis billings to Customers to Offset AML Invoicing

Net Addition / Reduction to Overall Electric System Rate Base - AML Impact Plus Fortis Impact

Net Addition / Reduction to Overall Electric System Rate Base - AML Impact Plus Fortis Impact

Proposed Contribution Refunding - AltaLink

Net Increase in AML Revenue Requirement Net Increase in Fortis Revenue Requirement

Net Rate Base Impact Net Rate Base Impact

Cost of Capital - 6.638% WACost of Capital - 5.749% WANet Mid Year Contribution Net Mid Year Contribution

Additional Revenue Requirement

Cost of Capital - 5.749% WA Cost of Capital - 6.638% WA

Additional Revenue Requirement

Rate Base Impact - Fortis ContributionRate Base Impact - Cost less ContributionNet Mid Year Contribution Net Mid Year Contribution



Use of Estimates and Judgment The preparation of its financial statements in conformity with IFRS requires AltaLink to make

estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Judgements made by management that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

Accounting policies are selected and applied in a manner which ensures the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring the substance of the underlying transactions or other events is reported.

As a regulated utility, AltaLink records certain amounts at estimated values until these amounts are finalized. AltaLink bases its estimates and judgements on historical experience, including experience with regulatory processes, current conditions and various other assumptions that are believed to be reasonable under the circumstances. These factors form the basis for making judgements about the carrying values of assets and liabilities. They are also the basis for identifying and assessing AltaLink’s accounting treatment with respect to commitments and contingencies. Significant estimates include:

• expected regulatory decisions on matters that may impact revenue; • the recovery and settlement of financial assets and liabilities related to regulated activities,

including prudence reviews by the AUC of DACDA applications; • key economic assumptions used in cash flow projections; • the estimated useful lives of assets; • the recoverability of tangible and intangible assets, including estimates of future costs to

retire physical assets or the recoverability of costs associated with DA projects that have been delayed in the regulatory process;

• the recoverability of intangible assets with indefinite lives, such as goodwill; and • the accruals for capital projects and payroll.

AltaLink applies changes in estimates prospectively as they result from new information. To the extent that a change in accounting estimate gives rise to changes in assets or liabilities, or relates to an item of equity, AltaLink adjusts the carrying amount of the related asset or liability in the period of change.

AltaLink discloses the nature and amount of a material change in an accounting estimate that has an effect in the current period. It also discloses the nature and amount of a change in accounting estimate that is expected to have an effect in future periods, except when it is impracticable to estimate that effect, in which case AltaLink discloses that fact.

Regulation of Transmission Tariff AltaLink operates under cost of service regulation in accordance with the Electric Utilities Act.

The AUC provides AltaLink with a reasonable opportunity to recover its prudently incurred and forecasted costs, including operating expenses, depreciation, cost of debt, capital and taxes associated with investment, and a fair return-on-investment. Fair return is determined on the



basis of return on Rate Base and allowance for funds used during construction for projects included in construction work in progress. Since 2011 the AUC has authorized accelerated recovery of AFUDC for direct-assigned projects, which is referred to as “CWIP-in-Rate Base”. AltaLink applies for a Transmission Tariff based on forecasted costs of service. Once approved, the Transmission Tariff is not adjusted if actual costs of service differ from forecast, except for certain prescribed costs for which deferral and reserve accounts are established within the Transmission Tariff. The Transmission Tariff is received from the AESO in equal monthly installments. All tariff adjustments arising from deferral or reserve accounts relate to services provided to the AESO during the test years, and settlement of these accounts with the AESO is not contingent on providing future services.

If a reasonable estimate can be made regarding the impact future regulatory decisions may have on the current period’s financial statements, such an estimate will be recorded in the current period. When the AUC issues a decision affecting the financial statements of a prior period, the effects of the decision are recorded in the period in which the decision is issued.

Revenue Recognition Revenues from regulated activities represent the inflow of economic benefits earned during the

period arising in the ordinary course of AltaLink’s operating activities. Such revenues are recognized on the accrual basis in accordance with tariffs approved by the AUC, and estimates of revenues related to services provided but not yet billed to the AESO, including revenues arising from deferral accounts. AltaLink does not recognize revenue for any portion of tariffs received but not earned. Unearned tariffs are classified as financial liabilities related to regulated activities or deferred revenue in the financial statements.

Other revenue represents revenue received from third parties and includes, but is not limited to, cost recoveries for services provided to other utilities. Other revenue is recognized on the accrual basis as the costs are incurred. Rental income from third parties is recognized on a straight-line basis over the contract term.

Financial Assets and Liabilities Related to Regulated Activities The regulatory and legal rights and obligations under which AltaLink operates assign it the right

to bill and collect financial assets related to regulated activities from the AESO. The AESO is AltaLink’s single counterparty for regulated activities and amounts billed to it by AltaLink are based on specific amounts and timing approved by the AUC. There is no future performance required by AltaLink to recover these amounts. Long-term amounts due from the AESO earn a regulatory return and are discounted at a market rate of interest.

The regulatory and legal rights and obligations under which AltaLink operates also require it to refund to the AESO certain amounts that have been received in tariff revenue that are greater than its actual expenses. Such financial liabilities related to regulated activities due to the AESO within 12 months are not discounted. Amounts due to the AESO beyond the next 12 months are discounted at a market rate of interest.

Property, Plant and Equipment Property, Plant and Equipment (PP&E) are carried at deemed cost less accumulated

depreciation. The initial cost of an asset consists of its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, and for qualifying assets, borrowing costs that are eligible to be recovered over the estimated useful life of the asset. AltaLink capitalizes major replacements and upgrades if these costs extend the life of the asset



and AltaLink expects to use these items during more than one period. Maintenance and repair costs are recognized as expenses in the period in which they are incurred.

Depreciation is calculated over the estimated useful lives of assets on a straight-line basis, based on depreciation studies prepared by an independent expert. The expected useful lives of the assets are reviewed annually, and if necessary, changes in useful lives are accounted for prospectively.

When an asset is retired or disposed of in the normal course of business, the gain or loss is recognized immediately in the statement of comprehensive income.

Losses or certain gains are recoverable from/repayable to the AESO through future Transmission Tariffs. AltaLink recognizes the related amounts in revenue and records the amount as financial assets or liabilities related to regulated activities. Construction work in progress, capital inventory and land are capitalized but not depreciated. These assets are valued at the lower of cost or net realizable value.

Reviews of PP&E to establish whether there has been any impairment are carried out when a change in circumstance is identified that indicates that an asset might be impaired.

Capitalization AltaLink capitalizes amounts in accordance with either IAS 16 – PP&E or IAS 38 – Intangible

assets. In accordance with these standards, AltaLink capitalizes an asset if it meets the recognition criteria and measures that asset at cost. AltaLink only recognizes an asset if it is probable that future economic benefits associated with the asset will flow to AltaLink, and the cost of the asset can be measured reliably. As required by IFRS, AltaLink capitalizes within the cost of an asset the following items as applicable.

• Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates;

• Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and

• The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

Goodwill Goodwill represents the excess of the purchase price over the fair value of the net identifiable

assets of operations acquired. AltaLink’s goodwill relates to the acquisition of assets in 2002 from TransAlta Energy Corporation. Goodwill is carried at initial cost less any write-down for impairment. Goodwill is assessed annually for impairment and more frequently if there is any indication of impairment.

AltaLink’s business represents one single cash-generating unit. Goodwill is assessed for impairment first and fully written down before any other assets are assessed for impairment.

Intangible Assets AltaLink’s intangible assets are non-monetary assets without physical substance that can be

individually identified and consist of the following:



• Land Rights — AltaLink pays fees to third parties to access, survey, build and maintain transmission facilities on third party land. Land rights are reported at cost less accumulated amortization and impairments, if any. Land rights are amortized on a straight-line basis at rates based on the estimated useful lives of tangible assets located on these lands. Changes to amortization rates are accounted for on a prospective basis.

• Computer Software — Computer software includes application software and enterprise resource planning software. Computer software is reported at cost less accumulated amortization. Amortization is calculated on a straight-line basis at rates based on the estimated useful lives of assets. Changes to amortization rates are accounted for on a prospective basis.

Third-Party Deposits Third party deposits are recognised as non-current assets with corresponding non-current

liabilities. These deposits have certain restrictions attached and can only be used for their intended purpose, as follows:

Contributions in Advance of Construction For certain projects, the AESO requires third parties wishing to interconnect to AltaLink’s

transmission facilities to contribute their share of capital project costs in advance of construction. AltaLink uses these cash contributions to fund capital expenditures as construction progresses. Third party contributions are recorded as deferred revenue when capital funds are expended and recognized into other revenue over the useful lives of the associated assets.

Operating and Maintenance Charges in Advance of Construction Certain third parties were required to provide advance funding for future operating and

maintenance costs of assets constructed with third party-contributed funds. After these assets were put into service, these contributions were recorded as deferred revenue and recognized into other revenue as operating costs are incurred over the useful lives of the associated assets.

The practice of collecting advance funding for future operating and maintenance costs of assets constructed with third party-contributed funds was stopped effective July 1, 2010. The unamortized portion of the funds collected prior to July 1, 2010 continues to be amortized over the useful lives of the associated assets.

Cash and Cash Equivalents Cash equivalents include investments that are readily convertible into a known amount of cash

and have an original maturity of three months or less.

Provisions Provisions are recognized when AltaLink has a present obligation (legal or constructive) as a

result of a past event, it is probable that an outflow of economic benefits will be required to fulfill the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the Statement of Financial Position date, taking into account the risks and uncertainties surrounding the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.



Employee Benefit Obligations The General Partner of AltaLink employs staff and provides administrative and operational

services to AltaLink on a cost- reimbursement basis. AltaLink bears all of the related expenses and also bears the risk and reward of staff-related programs which the General Partner establishes. AltaLink has indemnified the General Partner for all costs and liabilities associated with its employment of staff. As such, the employee future benefit plans of the General Partner are reported as if they were provided by AltaLink even though the legal sponsor of the plans and employer of the staff is the General Partner. Current service costs are expensed in the period in which they are incurred.

Defined contribution plan AltaLink’s defined contribution plan is a post-employment plan under which AltaLink and

employees pay fixed contributions into the plan and AltaLink has no legal or constructive obligation to pay further amounts. Obligations for contributions to the plan are recognized as an expense in the Statement of Comprehensive Income in the periods during which services are rendered by employees.

Other plans The cost of AltaLink’s post-retirement benefits plan is actuarially determined using the projected

benefit method, pro-rated on service and management’s assumptions to estimate discount rates and expected growth rate of health care costs. The liability discount rate is determined based on a portfolio of high-quality corporate bonds with cash flows that match the expected benefit payments under the plan.

Actuarial gains and losses in AltaLink’s post-retirement benefit plan arising from experience adjustments and changes in actuarial assumptions are charged to other comprehensive income in the Statement of Comprehensive Income in the period in which they arise.

Past service costs are recognized immediately in income.

Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed in the Statement of Comprehensive Income as the related service is provided.

A liability is recognized for the amount expected to be paid under the short-term incentive plan if AltaLink has a present legal or constructive obligation to pay this amount as a result of past service provided by employees, and the obligation can be estimated reliably.

Long-term employee benefits Long-term employee benefit obligations are measured on a discounted basis and expensed in

the Statement of Comprehensive Income as the related service is provided.

A liability is recognized for the amount expected to be paid under the long-term incentive plan if AltaLink has a present legal or constructive obligation to pay this amount as a result of past service provided by employees, and the obligation can be estimated reliably.

Short-Term and Long-Term debt Short-term and long-term debt are measured initially at fair value and subsequently at

amortized cost. Costs incurred to arrange long-term debt financing are offset against the debt amount and amortized using the effective interest rate method. The amortization of these charges is included in finance costs.



Accounting for Income Tax As a limited partnership, AltaLink does not pay income taxes directly. Instead, the tax

consequences of its operations are borne by its partners on a pro-rata basis in proportion to their interest in AltaLink. Accordingly, no income tax expense is recognized in the financial statements. Any reference to income tax in the financial statements relates to the recovery in Transmission Tariff revenue of tax expense borne by the partners.

For regulatory rate setting purposes, AltaLink applies the liability method to account for both federal and provincial income taxes.

The future income tax liability acquired from TransAlta in 2002 is classified as a regulatory liability on the Statement of Financial Position.

Foreign Currency Translation Monetary assets and liabilities denominated in foreign currencies are translated at exchange

rates in effect at the Statement of Financial Position date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenues and expenses are translated at the exchange rate prevailing on the date of the transaction except for depreciation and amortization, which are translated at the exchange rate prevailing when the related assets were acquired. Gains and losses on translation are reflected in income when incurred.

Deferred lease inducements Deferred lease inducements represent leasehold improvements paid for by the lessors. Deferred

lease inducements are amortized on a straight-line basis over the initial terms of the leases, and the amortization is recorded as a reduction of lease expense. The unamortized balance in deferred lease inducements is included in other liabilities.

Leases All of AltaLink’s leases are classified as operating leases. Payments made under operating leases

are recognized in the Statement of Comprehensive Income on a straight-line basis over the term of the lease.

Capitalized Borrowing Costs Borrowing costs are capitalized if they are incurred in connection with the acquisition or

production of a “qualifying asset” for which a considerable period of time is required to prepare the asset for its intended use.

AltaLink borrows funds to provide financing for its capital construction program. Borrowing costs eligible for capitalization are applied to capital expenditures unless the borrowing costs are eligible to be recovered through Transmission Tariffs in the year in which the costs are incurred. The capitalization rate is based on actual costs of debt used to finance the acquisition or construction of qualifying assets.

Transfer Pricing and Related Party Transactions Transfer pricing between affiliates of AltaLink is determined based on the standards and

conventions established in the Inter-Affiliate Code of Conduct. The Inter-Affiliate Code of Conduct requires that transactions are completed at fair market value that the activities of the affiliate cannot be cross-subsidized by AltaLink, that the affiliates do not have preferential access to AltaLink services, and that uncompetitive practices between AltaLink and its affiliates, which may be detrimental to the interests of AltaLink’s customers, cannot occur.



Reserve Accounts AltaLink is requesting the Commission to approve the continuation of the following reserve

accounts for 2017 and 2018:

• Commission Expenses (Hearing Costs) – USA Activity Code 928 (refer to Section 25.2.14); • DB Plan Liability – USA Activity Code 926 (refer to Section 25.2.1); and • Injuries and damages (Self Insurance Reserve) – USA Activity Code 925 (refer to Section

25.2.12).

Deferral Accounts In this Application, AltaLink requests the continuation of the following five previously approved

deferral accounts for 2017 and 2018;

• Taxes Other Than Income Tax; • Annual Structure Payments; • DA Capital; • Long- Term Debt; and • IFRS to the extent that future Canadian ASB pronouncements may impact upon the

Commission’s Rule 026.

As noted in Section 7 of this Application, AltaLink is also requesting the Commission to approve the establishment of a deferral account for potential changes in income tax rates over the Test Period. The creation of such a deferral account will ensure that AltaLink is able to recover in its Revenue Requirement the full amount of any income taxes levied, including any amounts arising from changes in income tax rates, during the Test Period.

Supplemental Information Schedules Schedule 31.1-A Schedule of Income Statements

Schedule 31.1-B Schedule of Balance Sheet Assets

Schedule 31.1-C Schedule of Balance Sheet liabilities and Shareholders’ Equity

Schedule 31.1-D Schedule of Cash Flows

Schedule 31.1-E Schedule of Credit Metrics

Schedule 31.2-A Schedule of AltaLink Total Net Mid-Year Base

Schedule 31.2-B Schedule of AltaLink Total Capital Expenditures

31.1-A Income

Schedule 31.1-A AltaLink Management Ltd.

Feb 15/16

General Tariff ApplicationSchedule of Income Statements

$Millions


Line No. Description Reference Actual Actual Actual Forecast Mgt Update Year 1 Year 2

1 Statement of Income

2 Revenue Requirement Schedule 3-1 380.4 488.5 645.4 809.4 901.5 944.1 989.5

3 Operating Expenses Schedule 3-1 102.6 115.6 140.5 151.6 160.9 175.7 180.1 4 Less: Miscellaneous Revenue Schedule 3-1 (9.6) (12.3) (13.3) (8.1) (7.9) (9.1) (12.2) 5 Depreciation and Amortization Schedule 3-1 104.0 137.3 172.0 294.2 354.1 350.3 372.8 6 Income Taxes Schedule 3-1 20.5 40.6 54.7 65.9 0.0 0.0 0.0 7 Total Operating Deductions 217.5 281.2 353.8 503.7 507.1 516.9 540.7 8 Operating Income 162.9 207.2 291.5 305.7 394.4 427.2 448.8 9 AFUDC Schedule 9-2 1.7 2.1 2.6 64.0 13.0 21.0 31.2

10 Income before financing charges 164.6 209.3 294.1 369.7 407.4 448.2 480.0 11 Financing Charges Schedule 28-1, 9-2 75.9 93.6 137.4 163.5 184.6 205.0 220.9 1213 Net Income 88.6 115.7 156.7 206.2 222.8 243.2 259.1


31.1-B Assets

Schedule 31.1-B AltaLink Management Ltd.

Feb 15/16

General Tariff ApplicationSchedule of Balance Sheet Assets

$Millions



1 CURRENT23 Accounts receivable and cash 133.8 115.0 108.5 67.4 75.1 78.7 82.5 4 Deferral Account - 46.6 5 Materials & supplies at cost 15.3 18.0 18.8 23.5 23.7 26.8 27.9 6 Prepaid expenses 8.3 9.5 11.8 11.8 11.8 11.8 11.8 7 Total current assets 157.4 142.4 139.1 149.3 110.6 117.2 122.2

8 DEFERRED CHARGES

910 Financing costs less amortization Schedule 11-2 9.0 15.9 20.9 25.5 26.9 30.2 34.7 11 Software, unamortized development costs Schedule 10-7 42.6 41.2 45.0 58.8 59.9 62.1 61.2 12 Other Costs - - - - - - - 13 Total deferred charges 51.6 57.1 65.9 84.3 86.8 92.4 95.9 14 PROPERTY ACCOUNTS15 Property, Plant and Equipment Schedule 10-2 3,604.4 4,948.4 6,024.8 9,094.5 9,699.9 10,400.6 10,933.7 16 Construction work in progress Schedule 10-4 1,162.0 1,629.8 2,403.1 422.3 551.1 555.9 784.9 17 Total property account 4,766.4 6,578.3 8,428.0 9,516.8 10,251.0 10,956.4 11,718.6 18 Less Accumulated depreciation Schedule 10-3 1,317.8 1,412.0 1,518.8 1,737.3 1,990.9 2,210.4 2,518.9 19 Net Property 3,448.6 5,166.3 6,909.2 7,779.5 8,260.1 8,746.0 9,199.7

20 TOTAL ASSETS 3,657.6 5,365.8 7,114.2 8,013.1 8,457.6 8,955.6 9,417.8


31.1-C Liabilities

Schedule 31.1-C AltaLink Management Ltd.

Feb 15/16

General Tariff ApplicationSchedule of Balance Sheet Liabilities and Shareholders' Equity

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test Period

Cross 2012 2013 2014 2015 2016 2017 2018


1 CURRENT2 Accounts Payable and accrued liabilities 230.0 372.6 411.6 396.8 244.0 192.3 173.3 3 Deferral Account payable 19.6 4.0 (46.6) - - - - 4 Funded Regulatory Payable - - - - 90.9 (0.0) (0.0) 5 Customer Funding of CWIP 56.9 94.0 93.7 69.6 168.2 180.7 206.4 6 Interest Payable 2.6 26.3 30.3 30.3 30.3 30.3 30.3 7 Total current liabilities 309.1 496.9 489.0 496.6 533.4 403.3 409.9

8 DEFERRED CREDITS9 Funded Future Tax Liability Schedule 29-3 44.9 70.8 110.0 175.9 - - -

1011 Other Liabilities 11.1 0.5 1.2 1.4 1.4 1.4 1.4 12 Hearing Cost Reserve Schedule 29-7 1.0 0.4 (0.8) (0.0) (0.0) 0.0 0.0 13 Pension Liability Schedule 29-4 8.1 9.1 8.5 8.7 9.2 9.8 10.4 14 Self Insurance Reserve Schedule 29-2 2.3 (0.8) (6.6) (0.0) (0.0) (0.0) (0.0) 15 Rainbow-type expense reserve Schedule 29-5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 1617 Customer & other contributions net amt. Schedule 10-6 377.3 499.9 596.2 678.4 692.5 698.7 842.1 18 Total deferred credits 445.0 580.3 708.8 864.7 703.5 710.3 854.3

19 LONG & SHORT TERM DEBT20 Longterm Debt Schedule 28-2 1,800.0 2,700.0 3,700.0 4,050.0 4,050.0 4,050.0 4,200.0

Subordinated Debt 350.0 800.0 800.0 21 Bank Loan Schedule 28-2 29.7 44.7 86.5 7.6 76.8 12.1 55.2 22 Total long and short term debt 1,829.7 2,744.7 3,786.5 4,057.6 4,476.8 4,862.1 5,055.2

23 SHAREHOLDER'S/PARTNER'S EQUITY24 Share Capital/Partner's Contributions 803.4 1,157.7 1,587.1 1,845.2 1,845.2 1,845.2 1,845.2 25 Retained Earnings Schedule 31.1-A Income 270.5 386.1 542.8 749.0 898.7 1,134.8 1,253.2 26 Subtotal 1,073.9 1,543.9 2,129.9 2,594.2 2,743.8 2,980.0 3,098.4 27 Preferred Shares - - - - - - - 28 Total shareholders'/Partner's equity 1,073.9 1,543.9 2,129.9 2,594.2 2,743.8 2,980.0 3,098.4

29 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,657.6 5,365.8 7,114.2 8,013.1 8,457.6 8,955.6 9,417.8

37.0% 36.0% 36.0% 39.0% 38.0% 38.0% 38.0%

NOTE: Totals may not add due to rounding. Sub Debt % of Capitalization (Total Debt and Equity) 4.8% 10.2% 9.8%

31.1-D CashFlow

Schedule 31.1-D AltaLink Management Ltd.

Feb 15/16

General Tariff Application

Schedule of Cash Flows

$Millions

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test Period

Cross 2012 2013 2014 2015 2016 2017 2018


1 INTERNAL SOURCE OF FUNDS2 Net Income Schedule 31.1-A Income 88.6 115.7 156.7 206.2 222.8 243.2 259.1 3 Payout of Earnings Schedule 31.1-A Income - - - - (73.2) (7.1) (140.8) 4 Depreciation & Amortization Schedule 31.1-A Income 104.0 137.3 172.0 294.2 354.1 350.3 372.8 5 Increase in Future Tax Liability Schedule 29-3 10.4 26.0 39.1 65.9 (85.0) (90.9) - 6 AFUDC - Equity Schedule 9-2 (0.8) (1.1) (1.4) (35.8) (7.2) (11.5) (16.9) 7 Total internal sources of funds 202.2 277.8 366.4 530.5 411.6 484.1 474.2 8 APPLICATION OF FUNDS9 Capital Expenditures Schedule 10-4 995.3 1,869.0 1,938.5 1,196.9 856.3 859.5 849.1

10 Less: AFUDC - Equity 0.8 1.1 1.4 35.8 7.2 11.5 16.9 11 Subtotal 994.5 1,867.9 1,937.0 1,161.1 849.1 848.1 832.2 12 Repayment of long term debt 85.0 325.0 - - - - 200.0 13 Customer contribution additions Schedule 10-6 (131.2) (137.4) (116.4) (100.8) (34.5) (27.3) (167.0) 14 Other Items 50.3 (183.2) 16.9 (0.7) 16.2 48.6 2.2 15 Total application of funds 998.6 1,872.2 1,837.5 1,059.6 830.8 869.4 867.4

16 Cash (surplus) deficiency for the year 796.4 1,594.4 1,471.2 529.1 419.2 385.3 393.1

17 EXTERNAL SOURCE OF FUNDS18 Longterm Debt Schedule 31.1-C Liabilities 575.0 1,225.0 1,000.0 350.0 - - 350.0

Subordinated Debt 350.0 450.0 - 19 Common shares 207.2 354.4 429.4 258.1 - - - 20 Preferred Shares - - - - - - - 21 Subtotal 782.2 1,579.4 1,429.4 608.1 350.0 450.0 350.0 22 Change in bank loan Schedule 31.1-C Liabilities 14.2 15.0 41.8 (78.9) 69.2 (64.7) 43.1

23 Total external source of funds 796.4 1,594.3 1,471.2 529.1 419.2 385.3 393.1

24

25

26 NOTE: Totals may not add due to rounding.

31.1-E Credit Metrics

Schedule 31.1-EFeb 15/16

AltaLink Management Ltd.General Tariff ApplicationSchedule of Credit Metrics

Prior Yr. 5 Prior Yr. 4 Prior Yr. 3 Prior Yr. 2 Prior Yr. 1 Test Period Test Period2012 2013 2014 2015 2016 2017 2018

Line # Actual Actual Actual Forecast Mgt Update Year 1 Year 21 Credit Metrics2 FFO % of Total Debt 10.3% 9.8% 13.2% 13.2% 13.0% 13.2%3 FFO Interest coverage 3.99x 3.68x 4.25x 4.06x 3.82x 3.77x4 Debt/EBITDA ratio 7.14x 7.32x 5.82x 5.73x 5.69x 5.59x5 EBIT Coverage Ratio 2.58x 2.48x 2.45x 2.14x 2.11x 2.08x67 FFO (incl. S&P Adjustments)8 EBITDA 386.3$ 519.6$ 701.7$ 755.7$ 789.0$ 838.5$ 9 Interest Expense (92.7) (136.3) (135.3) (178.7) (195.4) (206.6)

10 Capitalized interest (Debt AFUDC) (1.0) (1.1) (28.1) (5.9) (9.6) (14.3) 11 S&P Adjustment: Operating Lease 2.3 2.3 2.3 2.3 2.3 2.3 12 Post retirement benefit obligations/deferred compensation 1.2 1.2 1.2 1.2 1.2 1.2 13 Current Income Taxes (7.2) (9.2) (0.0) (0.0) (0.0) (0.0) 14 288.9$ 376.6$ 541.7$ 574.6$ 587.4$ 621.1$ 15 EBIT

16 Operating Income net of income taxes 207.2$ 291.5$ 305.7$ 394.4$ 427.2$ 448.8$ 17 Equity AFUDC 1.1 1.4 35.8 7.2 11.5 16.9 18 Income Taxes 40.6 54.7 65.9 0.0 0.0 0.0 19 248.9$ 347.6$ 407.5$ 401.5$ 438.7$ 465.7$ 20 EBITDA21 EBIT 248.9$ 347.6$ 407.5$ 401.5$ 438.7$ 465.7$

22 Depreciation and Amortization 137.3 172.0 294.2 354.1 350.3 372.8

23 EBITDA 386.3$ 519.6$ 701.7$ 755.7$ 789.0$ 838.5$

24 S&P Adjustment: Operating Lease 4.6 4.6 4.6 4.6 4.6 4.6

25 Post retirement benefit obligations/deferred compensation 1.6 1.6 1.6 1.6 1.6 1.6

26 392.5$ 525.8$ 707.9$ 761.9$ 795.2$ 844.7$ 27 Debt - (incl. S&P Adjustment)

28 Debt 2,744.7$ 3,786.5$ 4,057.6$ 4,301.8$ 4,462.1$ 4,655.2$

29 Accrued Interest 23.1 25.6 25.7 25.7 25.8 27.0 30 S&P Adjustment: Operating Lease 33.1 33.1 33.1 33.1 33.1 33.1 31 Post retirement benefit obligations/deferred compensation 2.7 2.7 2.7 2.7 2.7 2.7 32 2,803.6$ 3,848.0$ 4,119.1$ 4,363.3$ 4,523.7$ 4,718.1$ 33 Interest Expense 34 Interest expense 92.7$ 136.3$ 135.3$ 178.7$ 195.4$ 206.6$

35 S&P Adjustment: Operating Lease 2.3 2.3 2.3 2.3 2.3 2.3

36 Post retirement benefit obligations/deferred compensation 0.7 0.7 0.7 0.7 0.7 0.7

37 Capitalized interest (Debt AFUDC) 1.0 1.1 28.1 5.9 9.6 14.3 38 96.6$ 140.4$ 166.5$ 187.6$ 208.0$ 223.9$

31.2-A

Schedule 31.2-A

Feb 15/16


Schedule of AML Total Net Mid-Year Rate Base$Millions


Description Actual Actual Actual Forecast Mgt Update Year 1 Year 2

Rate Base (Total)

1 Adjusted Prior Year Property, Plant and Equipment 3,690.2 4,581.2 6,222.4 6,024.8 9,094.5 9,699.9 10,400.6 2 Adjusted Prior Year Accumulated Depreciation (1,240.4) (1,317.8) (1,412.0) (1,518.8) (1,737.3) (1,990.9) (2,210.4) 3 Prior Year Net Property 2,449.8 3,263.4 4,810.4 4,506.1 7,357.2 7,709.1 8,190.2

4 Current Year Property, Plant and Equipment 4,581.2 6,222.4 8,025.7 9,094.5 9,699.9 10,400.6 10,933.7 5 Current Year Accumulated Depreciation (1,317.8) (1,412.0) (1,518.8) (1,737.3) (1,990.9) (2,210.4) (2,518.9) 6 Current Year Net Property 3,263.4 4,810.4 6,506.9 7,357.2 7,709.1 8,190.2 8,414.8

7 Mid-Year Net Property 2,856.6 4,036.9 5,658.7 5,931.6 7,533.1 7,949.6 8,302.5

8 Working Capital 68.2 83.8 94.6 116.7 132.3 149.4 158.0 9 No Cost Capital (47.2) (68.3) (95.6) (148.2) (142.7) (55.3) (10.4)

10 Net Mid-Year Customer Contribuntions (317.6) (438.6) (548.1) (637.3) (685.5) (695.6) (770.4) 11 Farms, Irrigation Transmission

12 Net Mid-Year Rate Base (Total) 2,560.0 3,613.9 5,109.6 5,262.9 6,837.2 7,348.1 7,679.7

13 % Increase over 2014 3% 34% 44% 50%

Rate Base (Direct Assigned)

14 Adjusted Prior Year Property, Plant and Equipment - - - 979.3 3,918.5 4,392.0 4,986.9 15 Adjusted Prior Year Accumulated Depreciation - - - (14.0) (100.8) (244.3) (388.3) 16 Prior Year Net Property - - - 965.3 3,817.6 4,147.7 4,598.7

17 Current Year Property, Plant and Equipment - - 979.3 3,918.5 4,392.0 4,986.9 5,286.5 18 Current Year Accumulated Depreciation - - (14.0) (100.8) (244.3) (388.3) (547.8) 19 Current Year Net Property - - 965.3 3,817.6 4,147.7 4,598.7 4,738.7

20 Mid-Year Net Property - - 482.6 2,391.5 3,982.7 4,373.2 4,668.7

21 Net Mid-Year Customer Contributions - - (56.7) (159.7) (218.4) (240.5) (280.4)

22 Net Mid-Year Rate Base (Direct Assigned) - - 426.0 2,231.7 3,764.2 4,132.6 4,388.3

Rate Base (CWIP)

23 Prior Year CWIP in Rate Base 557.5 976.8 1,274.0 - - - - 24 Current Year CWIP in Rate Base 976.8 1,274.0 2,000.8 - - - - 25 Mid-Year CWIP in Rate Base 767.1 1,125.4 1,637.4 - - - -

26 Rate Base (CWIP) 767.1 1,125.4 1,637.4 - - - -

Rate Base (Existing)




34 Working Capital 68.2 83.8 94.6 116.7 132.3 149.4 158.0 35 No Cost Capital (47.2) (68.3) (95.6) (148.2) (142.7) (55.3) (10.4) 36 Net Mid-Year Customer Contributions (317.6) (438.6) (491.4) (477.6) (467.0) (455.1) (490.0) 37 Farms, Irrigation Transmission

38 Net Mid-Year Rate Base (Existing) 1,792.8 2,488.5 3,046.3 3,031.1 3,073.0 3,215.5 3,291.4

Reconciliation with Balance Sheet




44 Mid-Year Construction work in progress 921.4 1,395.9 2,016.5 - - - - 45 Less Mid-Year Customer Contributed Fund (59.7) (75.5) (93.9) - - - - 46 Less Mid-Year CRU/IT/Facilities CWIP (16.9) (24.4) (32.6) - - - - 47 Mid-Year CWIP in Rate Base 844.7 1,296.0 1,890.0 - - - -

48 Working Capital 68.2 83.8 94.6 116.7 132.3 149.4 158.0 49 No Cost Capital (47.2) (68.3) (95.6) (148.2) (142.7) (55.3) (10.4) 50 Net Mid-Year Customer Contributions (317.6) (438.6) (548.1) (637.3) (685.5) (695.6) (770.4) 51 Net Mid-Year Construction Accurals (77.6) (170.6) (251.7) (259.4) (175.6) (95.8) (76.6) 52 Net Mid-Year Rate Base (Total) 2,560.0 3,613.9 5,110.5 5,262.9 6,837.2 7,348.1 7,679.7

(0.0) (0.9) - - - -

Line No.

31.2-B

Schedule 31.2-B

Feb 15/16


Schedule of AML Total Capital Expenditures$Millions


Description Actual Actual Actual Forecast Mgt Update Year 1 Year 2

Capital Expenditures (Loaded) ($millions)

1 DIRECT ASSIGNMENTS 866.9 1,708.1 1,744.2 960.7 537.3 586.0 620.6

TRANSMISSION CAPITAL MAINTENANCE2 Transmission Urgent Repairs 6.5 7.7 5.2 5.5 6.0 6.0 6.3 3 Transmission Planned Maintenance 16.5 32.0 40.4 36.7 41.8 48.6 51.3 4 Substation Planned Maintenance 34.4 46.2 45.5 40.7 47.4 51.3 54.5 5 Meter Replacements 1.6 1.7 2.7 2.3 2.1 1.2 1.2 6 Mobile Substation 0.1 - - 0.0 0.0 - - 7 Langdon SVC/Ring Road 0.9 0.0 6.0 6.8 68.2 12.8 9.4 8 Carry-Forward - - - 14.6 - - - 9 Transmission Line Moves 7.7 3.2 7.4 9.6 10.1 6.2 6.4

551 L Rebuild 2.9 9.6 22.7 23.6 10 Tools & Instruments 2.1 2.4 2.3 2.7 2.1 2.4 2.1 11 Vehicles 4.2 4.4 4.7 5.7 4.4 4.4 4.6 12 Total TRANSMISSION CAPITAL MAINTENANCE 73.8 97.6 114.1 127.6 191.9 155.6 159.5 13 Telecommunication 7.9 5.8 14.7 7.8 11.0 10.1 10.6 14 SCADA/EMS 1.6 1.8 2.3 2.9 3.1 3.2 3.3 15 TOTAL CAPITAL MAINTENANCE 83.4 105.2 131.1 138.3 206.0 168.9 173.3

GENERAL PLANT16 Information Technology Hardware 16.8 19.9 16.2 11.0 10.4 9.3 7.4 17 Information Technology Software - SAP 7.0 6.7 10.5 12.2 9.5 10.3 9.7 18 Information Technology Software - Non-SAP 5.6 3.7 5.3 11.7 9.8 11.3 9.5 19 Facilities 5.5 9.4 10.7 18.3 29.9 6.2 4.1 20 Total General Plant 34.8 39.6 42.6 53.2 59.7 37.2 30.8

Total Capital Maintenance and General Plant 118.2 144.8 173.7 191.5 265.7 206.2 204.1 TRANSMISSION ISOLATED GENERATIONOTHER TRANSMISSION

21 TOTAL CAPITAL EXPENDITURES ($millions) 985.1 1,852.9 1,917.9 1,152.2 803.0 792.1 824.8

CAPITAL ADDITIONS ($millions)

22 DIRECT ASSIGNMENTS 392.8 1,248.2 979.2 2,939.2 473.6 594.9 299.6

TRANSMISSION CAPITAL MAINTENANCE23 Transmission Urgent Repairs 6.3 7.0 5.5 6.2 6.0 5.7 6.3 24 Transmission Planned Maintenance 16.5 28.4 37.9 37.8 41.9 50.2 51.1 25 Substation Planned Maintenance 32.4 40.6 43.3 45.9 49.0 49.7 56.5 26 Meter Replacements 1.3 1.7 3.0 2.7 2.1 1.2 1.2 27 Mobile Substation 0.1 - - 0.0 0.1 0.0 - 28 Langdon SVC/Ring Road 1.0 - 5.5 - - - 97.5 29 Carry-Forward - - - 12.7 1.9 - - 30 Transmission Line Moves 4.3 6.2 6.5 13.0 11.1 5.4 6.6

551 L Rebuild - 5.0 22.7 23.6 31 Tools & Instruments 2.1 2.4 2.3 2.7 2.1 2.4 2.1 32 Vehicles 3.9 4.6 3.5 5.7 4.4 4.4 4.6 33 Total TRANSMISSION CAPITAL MAINTENANCE 67.9 90.9 107.5 126.7 123.7 141.8 249.5 34 Telecommunication 5.9 7.8 11.8 7.5 11.0 10.0 10.8 35 SCADA/EMS 1.6 1.8 2.3 2.9 3.1 3.1 3.3 36 TOTAL CAPITAL MAINTENANCE 75.4 100.4 121.5 137.0 137.8 154.8 263.6

GENERAL PLANT37 Information Technology Hardware 16.1 18.5 16.3 11.6 10.4 11.0 8.0 38 Information Technology Software - SAP 8.3 6.4 10.6 12.2 9.5 10.4 10.3 39 Information Technology Software - Non-SAP 6.0 2.8 5.2 15.6 9.8 10.2 10.2 40 Facilities 5.3 8.7 11.7 17.5 33.1 6.1 4.1 41 Total General Plant 35.7 36.4 43.8 56.9 62.9 37.6 32.6

Total Capital Maintenance and General Plant 111.1 136.8 165.3 193.9 200.7 192.4 296.2 TRANSMISSION ISOLATED GENERATIONOTHER TRANSMISSION

42 TOTAL CAPITAL ADDITIONS ($millions) 503.9 1,385.1 1,144.5 3,133.1 674.3 787.3 595.7

Construction Work in Progress (CWIP) - Year End43 DACDA CWIP in Rate Base 976.8 1,274.0 2,000.8 - - - - 44 DACDA CWIP not in Rate Base 387.9 451.6 442.7 763.7 45 Transmission Capital Maintenance 16.7 21.4 31.0 32.3 100.5 114.6 24.3 46 General Plant 3.8 7.0 5.8 2.1 (1.0) (1.4) (3.2) 47 Total 997.3 1,302.4 2,037.6 422.3 551.1 555.9 784.9

48 % increase over 2014 Not Applicable 0% 0% 0% 0%

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