NORTHWEST TERRITORIES PUBLIC UTILITIES BOARD · 19844403v4 northwest territories public utilities...

19844403v4

NORTHWEST TERRITORIES

PUBLIC UTILITIES BOARD

IN THE MATTER OF:

2019 REVIEW OF MINIMUM FILIING REQUIREMENTS

- SUBMISSION ON BEHALF OF

TOWN OF INUVIK

VILLAGE OF FORT SIMPSON

TOWN OF NORMAN WELLS

(Referred to as "TGC")

September 16, 2019

TGC submission Review of Minimum Filing Requirements September 16, 2019

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TABLE OF CONTENTS

1 INTRODUCTION AND BACKGROUND......................................................................4

2 DIFFERENTIATED SCOPE OF GENERAL RATE APPLICATION OR GENERAL RATE REVIEW ............................................................................................5

2.1 NATURE AND DEPTH OF REVIEW PRIOR TO APPROVAL OF FINAL RATES ................................................ 6

2.1.1 GENERAL ........................................................................................................................................... 6

2.1.2 A COMPLETE AND COMPREHENSIVE RESPONSE TO ALL PHASE 1 OUTSTANDINGDIRECTIONS IN PRIOR PUB DECISIONS ................................................................................... 7

2.1.3 QUALITY OF SERVICE REPORTS ............................................................................................... 8

2.1.4 NATURE OF REVIEW .................................................................................................................... 8

2.1.4.1 Variance Analyses .................................................................................................................... 8

2.1.4.2 Depreciation Study and Rates .................................................................................................. 9

2.1.4.3 Major Capital Additions ........................................................................................................... 9

2.1.4.4 Return on Equity and Capital Structure ................................................................................... 9

2.1.4.5 Other Tools ............................................................................................................................... 9

2.2 UNDER A GRR SHOULD THE MFR AND PROCESS STEPS BE DIFFERENT? ................................................ 10

2.2.1 SHOULD THE MFR APPLICABLE TO A HIGH-LEVEL REVIEW BE DIFFERENT? ..................................... 10

2.2.2 TYPICAL GRR PROCESS STEPS ........................................................................................................ 13

2.3 MONITORING AND REPORTING REQUIREMENT FOR RELIABILITY AND QUALITY OF SERVICE IN A GRR

HIGH LEVEL REVIEW ............................................................................................................................... 14

2.4 HIGH LEVEL REVIEW IF SECTION 65 REVIEW INDICATES UTILITY EARNINGS ARE GREATER (OR LESS)THAN ALLOWED RATE OF RETURN ......................................................................................................... 15

2.5 INCENTIVES FOR UTILITIES TO CHOOSE HIGH LEVEL REVIEW.............................................................. 16

3 INCREASED USE OF NEGOTIATED SETTLEMENT PROCESS ........................18

3.1 USE OF TECHNICAL MEETINGS PRIOR TO NS PROCESS ........................................................................ 18

3.2 TECHNICAL MEETING PROCESS STEPS ................................................................................................. 20

3.2.1 USE OF COMMENT MATRICES TO FOCUS ISSUES, CONCERNS AND VIEWS, PRIOR TO COMMENCEMENT

OF THE TM [ATTACHMENT 1] AND AFTER THE CONCLUSION OF THE TM [ATTACHMENT 2]; ........... 20

3.2.2 TMS TO BE HELD AFTER THE INITIAL EXCHANGE OF INFORMATION REQUESTS TO ENSURE ALL

PARTIES HAVE THE REQUISITE INFORMATION TO PRESENT ON (IF THEY SO DESIRE) AND EXPLAIN

THEIR VIEWS ON SPECIFIC ISSUES AT THE TM; ................................................................................. 22

3.2.3 OPPORTUNITY FOR ALL PARTIES TO MAKE SHORT PRESENTATIONS ON ISSUES OF CONCERN AND TO

PROVIDE EXPLANATIONS AS MAY BE REQUESTED; ........................................................................... 22

3.2.4 FOLLOWING THE TM, PARTIES TO COMMENT ON WHETHER TO PROCEED TO NEGOTIATED

SETTLEMENT OR A LIMITED HEARING ON SELECTED ISSUES; ............................................................ 22


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3.2.5 BOARD STAFF TO BE INVOLVED IN THE TM DISCUSSIONS TO ENSURE ALL ISSUES OF INTEREST TO

THE REGULATOR ARE DISCUSSED AND TO ENSURE THE PROCEEDINGS RECORD IS COMPREHENSIVE,RELEVANT AND COMPLETE; ............................................................................................................. 22

3.2.6 THE COMMENT MATRIX TEMPLATES AS WELL AS PRESENTATION MATERIAL FROM THE TM WOULD

FORM THE ENTIRE RECORD OF TMS. ................................................................................................ 22

3.3 COMMENTS ON BOARD’S PROPOSED COMMENTS MATRIX TEMPLATES ............................................. 23

3.4 NO WRITTEN RECORD OF TM INFORMAL DISCUSSIONS ........................................................................ 24

3.5 THIRD-PARTY INDEPENDENT MODERATOR ............................................................................................ 24

3.6 BOARD PANEL MEMBERS ATTENDANCE AT TM AS OBSERVERS .......................................................... 25

3.7 BOARD STAFF ATTENDING AS OBSERVERS AT NS MEETINGS ............................................................... 26

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1 INTRODUCTION AND BACKGROUND

1. The TGC provide the following submissions further to a process initiated by the

Northwest Territories Public Utilities Board (Board) for a review of the Minimum Filing

Requirements (MFR) previously approved in Decision 13-2014. In comments received

from Northwest Territories Power Corporation (NTPC) on February 15, 2019, NTPC

identified the following two possible paths to improve overall process efficiencies.

(i) Where the requested increase in the Revenue Requirement is equal to or less than

the rate of inflation, utilities should be allowed to file a General Rate Review

Application (GRR Application) in compliance with Section 65 of the PUB Act.

NTPC stated:

In NTPC’s view, the use of some form of this more streamlined GRR process may be a useful and more efficient alternative to a full General Rate Application in certain circumstances. For example, if a utility requires an increase in Revenue Requirement equal to or less than the rate of inflation, then NTPC suggests that utilities should be allowed to file a GRR in compliance with Section 65 of the Act. NTPC believes this would significantly streamline the Phase I regulatory process without compromising transparency in the process. This would allow rates to be rebalanced as required with a Phase II application, and allow for a full review of revenue requirement by the PUB. Further, the PUB could still direct the utility to file a full General Rate Application (“GRA”) if it determined a full GRA review process was required.1

(ii) Use of Negotiated Settlement process rather than the more traditional hearing

process. NTPC stated:

The negotiated settlement process can be an efficient and effective tool for utilities and interveners to discuss issues on a without prejudice basis. The negotiated settlement process can increase regulatory efficiency by reducing the hearing time, written argument and reply arguments.

To increase transparency, NTPC remains of the view that negotiated settlement proceedings should only include registered

1 NTPC Letter dated February 15, 2019, Page 1 and 2 of 9.


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interveners and the utility. To address the Board’s concern that all issues it considers important are addressed, NTPC suggests that the Board can hold a conference call round table with all parties prior to the negotiation settlement. This would allow the Board to identify potential issues that it believes should be addressed during the negotiated settlement proceedings and seek input from interested parties as to additional issues. After the conference call round table, the utility could provide an issue list to the Board and registered interveners to identify key elements on which discussions would focus.2

2. By letter dated August 29, 2019, the Board expressed the desire to further examine the

above-noted proposals; it stated it wished to “engage in further consultations, with a view

to defining the details of the above approaches.”3 The Board’s August 29, 2019 letter

outlined several topics for both of the above-noted proposals and requested parties to

respond and comment. In the submissions that follow, the TGC will provide its

comments on the topics outlined in the Board's August 29, 2019 letter.

2 DIFFERENTIATED SCOPE OF GENERAL RATE APPLICATION OR GENERAL RATE REVIEW

3. NTPC proposed that where a utility requires an increase in Revenue Requirement equal

to or less than the rate of inflation, utilities should be allowed to file a GRR Application

in compliance with Section 65 of the Public Utilities Act (PU Act). Section 65 of the PU

Act states:

65. (1) The Board shall every three years and may at any other time review the affairs, earnings and accounts of each public utility.

(2) The secretary to the Board shall make available for public inspection the results of the review.

4. In its August 29, 2019 letter, the Board outlined five issues for parties to provide

comments on. The TGC will address each of these issues.

2 NTPC Letter dated February 15, 2019, Page 3 of 9. 3 PUB Letter dated August 29, 2019, Page 2 of 5.


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2.1 NATURE AND DEPTH OF REVIEW PRIOR TO APPROVAL OF FINAL RATES

5. The Board sought comments as follows:

Is there merit in differentiating the depth of review undertaken prior to approval of rates by the Board, in a GRA or GRR, based on the quantum of requested rate increase (as suggested by NTPC) or some other criteria? A high-level review contemplates reduced granularity of information and compressed process steps as opposed to a traditional GRA filed in conformity with the existing MFR including typical GRA process steps. If so, what criteria should be used to determine whether an application or Board initiated review should be subject to high level review or, the traditional GRA process followed by hearing or negotiated settlement?4

2.1.1 General

6. In our view, a “high-level” Section 65 statutory review by the Board contemplates a

review of the extent to which the utility’s actual Return on Equity has deviated from that

approved in the most recent GRA, using tools such as the utility’s Annual Filing of the

Report of Finances and Operations. A Section 65 statutory review, in our view, was never

intended to be used as a surrogate to the filing of a General Rate Application (GRA) or

General Rate Review (GRR). A GRA or GRR provides data in respect of future Test

Years, whereas a Section 65 review, using the Annual Report of Finances and

Operations, is in respect of actual or historical results of past year(s).

7. Accordingly, NTPC's suggestion that the utilities should be allowed to “to file a GRR in

compliance with Section 65 of the Act”5 is not contemplated by Section 65. NTPC is not

clear about what such a filing would look like. For example, is it suggesting it would only

file its Test Year forecasts based on the schedules and the very limited variance analyses

similar to what is filed in its Annual Report of Finances and Operations? If so, this fails

recognize that the Board's determination that the Annual Report of Finances and

Operations is only “one component” of the Section 65 review process.6 The Board is well

within its right to use tools other than the Annual Report of Finances and Operations;

4 PUB letter dated August 29, 2019, Page 2 of 5. 5 NTPC Letter dated February 15, 2019, Page 3 of 9. 6 PUB Decision Letter 001-2017, dated June 26, 2017.


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such tools include, as discussed in Section 2.2.1 of this submission, inclusion of financial

schedules similar to those prescribed by the Board in its MFR Decision 13-2014 and any

other information necessary to ensure the level of the Test Year revenue requirement is

reasonable.

8. Notwithstanding the foregoing, the TGC submit there is some merit in NTPC’s proposal

to filing a GRR Application, in lieu of filing a comprehensive GRA, particularly under

the very limited circumstance identified by NTPC, i.e. when the requested increase in the

utility revenue requirement is equal to or less than the rate of inflation. In the sections

that follow, the TGC will discuss the supplemental information required for a GRR

Filing.

2.1.2 A COMPLETE AND COMPREHENSIVE RESPONSE TO ALL PHASE 1 OUTSTANDING DIRECTIONS IN PRIOR PUB DECISIONS

9. In our view, where a high-level review in lieu of a comprehensive GRA filing is

warranted, it will be important for the utility to provide a full and complete response to

all prior outstanding directions. In the absence of filing such responses, and assuming that

the Board undertakes a Section 65 high-level review three years after the last GRA

Filing, as many as six years would pass before the Board and Intervenors were able to

review the utility’s responses to prior outstanding directions. This period is unduly long.

Issues which were determined to be sufficiently important for the Board to issue a

direction to the utility to comply with at its next GRA may remain unresolved for several

years.

10. Furthermore, if conditions which warranted the issuance of the Board direction have

changed, the Board and intervening parties should be apprised of these changed

conditions in the context of the GRR, much the same as they would have been in a GRA

filing. In brief, it is better for all concerned that the adverse finding(s) of the Board,

which led to the Board direction, should not be allowed to fester.


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2.1.3 QUALITY OF SERVICE REPORTS

11. The TGC's comments on Quality of Service Reports are provided in Section 2.3 of this

submission.

2.1.4 NATURE OF REVIEW

12. The Board states that a “high-level review contemplates reduced granularity of

information”.7

13. As discussed in Section 2.2.1, the TGC submit a GRR should provide financial schedules

consistent with Board’s MFR Decision 13-2014. However, the level of detail supporting

the forecasts filed in a GRR Application can be significantly less than in a GRA process.

The following are some suggested areas where reduced granularity of information may be

acceptable for purposes of a GRR.

2.1.4.1 Variance Analyses

In the context of the Annual Report of Finances and Operation, NTPC and Northland

Utilities Limited (NUL) are required to provide variance analyses using the following

thresholds:

NTPC: Explanations are to be provided as follows:

Capital additions-explanations for variances exceeding $200K, by project

O&M Expenses- explanations for variances exceeding $125K at the function level

NUL: Explanations are to be provided as follows:

Capital additions-explanations for variances exceeding $75K, by project

O&M Expenses- explanations for variances exceeding $50K at the function level8

7 PUB letter dated August 29, 2019, Page 2 of 5. 8 Decision 13-2014, Page 14-15.


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14. The foregoing thresholds may be expanded for a GRR,9 and, in so doing, this would

greatly reduce the need to provide narrative explanations of variance analyses.

2.1.4.2 Depreciation Study and Rates

15. Another area where the utility could introduce “reduced granularity of information” is in

the area of depreciation. More specifically, the utility would not make any changes to

depreciation parameters, and, instead, continue to use the depreciation rates approved in

the most recent GRA. There would therefore be no need for a depreciation study.

2.1.4.3 Major Capital Additions

16. Rather than use the current thresholds for providing business cases, these thresholds10

could be relaxed for a GRR. The utilities would have to provide rationale in support of

the increased thresholds.

2.1.4.4 Return on Equity and Capital Structure

17. There would be no Return on Equity (ROE) evidence filed by utilities; instead, utilities

would recommend a simplified methodology to determine ROE, using a rate which is

similar or lower than other industry benchmarks, including ROE approved in other

Canadian jurisdictions. For capital structure, the use of the most recently Board-approved

capital structure may be suitable for a GRR.

2.1.4.5 Other Tools

18. As noted in Section 2.1, the detail supporting forecasts filed in a GRR Application can be

significantly less than in a GRA process. However, to compensate for this lack of detail,

the TGC submits the utilities should provide the following information to provide

assurance and comfort to the Board and intervenors that its costs are reasonable:

(i) Details of all changes in accounting principles and/or accounting methods for rate-

making purposes and the impact on revenue requirements;

9 The utility would have to provide rationale for its choice of a different threshold. 10 $400,000 for NTPC and $100,000 for NUL (NWT).


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(ii) Whether the forecasts were done on a “top-down” basis or “bottom up” basis and the

rationale for the basis selected;

(iii) Narrative of all controls in place since the last GRA to ensure its Operating &

Maintenance (O&M) costs, in particular, Corporate and Regional “Common” costs,

are contained and controlled; and

(iv) Express major O&M expense accounts using the most appropriate metric (e.g. costs

per KWh, cost per KW, costs per customer), by zone, for all of the years shown in the

GRA/GRR.

2.2 UNDER A GRR SHOULD THE MFR AND PROCESS STEPS BE DIFFERENT?


To the extent a GRA or GRR meets the criteria for a high- level review, as opposed to the typical detailed GRA review, in what respects should the MFR and process steps applicable to a high-level review be different? It is to be noted that the information filed as part of a high level review must enable the Board to approve rate changes in accordance with the Public Utilities Act which requires, among others, the establishment of rates based on the rate base/ rate of return method of regulation. Please discuss with reasons.11

2.2.1 Should the MFR applicable to a high-level review be different?

20. To ensure completeness of the GRR Application, the TGC submit the high-level

schedules and information provided in the Annual Report of Finances and Operations is

not sufficient or appropriate to review either the Test Year forecasts or prior years’

actuals.

21. To allow for a comparison of the filed actuals and forecasts in a GRR Filing to the

corresponding numbers in prior GRAs and in the Annual Report of Finances and

Operations, the TGC submit a GRR Filing should include all the financial schedules

prescribed by the Board in its USA/MFR Decision 13-2014 dated November 24, 2014.12

11 PUB letter dated August 29, 2019, Page 3 of 5. 12 Decision 13-2014, Appendix 2 and 3; subject to any changes arising from the Board’s current review of MFR in the current proceeding.


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22. This would be in line with the Board’s view that “the MFR constitutes an essential

building block in the regulatory process”.13 {Emphasis added} In our view, the reference

to an “essential building block” implies the utility should include financial schedules in a

GRA/GRR that provide sufficient information to allow parties to understand how each

account is “built up” from year to year. This then ensures there is no break in a review,

for example, of year-over-year changes and trends in a utility’s accounts, and allows for

an assessment of changes in GRR forecasts to corresponding actual results for these

accounts.

23. The TGC also notes that as part of its direction to Northland Utilities (YK) Ltd (NUY) to

file a 2017 GRR Filing, the Board also emphasized the need for a GRR Application to

include historical information which reflects MFR, as follows:

The NUY filing for 2017 should include historical information consistent with the Board’s minimum filing requirements as well as clearly set out all forecast assumptions, including NUY’s recommended rate adjustment for 2017, if any.14 {Emphasis added}

24. As noted above, the Board in Decision 13-2014 approved MFR financial schedules which

should, at minimum, be included in a utility’s rate application. The Board did not draw a

distinction with respect to whether a rate application was a GRR or a GRA; nor is there

any indication that a GRR should contain a lesser number of financial schedules.

25. While the NUY 2017 GRR did not include all the MFR schedules prescribed in Decision

13-2014, it appears this was only because of the following special circumstances:

As the Northwest Territories Public Utilities Board ("Board") is aware, Northland Utilities (NWT) Limited is currently in the process of resolving the Town of Hay River franchise issues via an arbitration process, which is scheduled to conclude in December 2017. The outcome of this process has the potential to result in significant changes to Northland Utilities (NWT) Limited's business and revenue

13 PUB Letter dated August 29, 2019, Page 1 of 5. 14 PUB Decision Letter 001-2017, 26 June 2017, Page 3.


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requirement which likely will result in some form of restructuring of the two Northland Utilities entities. As a result, while Northland is not currently contemplating the filing of a GRA for 2017, it does anticipate filing a GRA commencing with the 2018 test period.

Northland is of the view that the filing of a GRA, at this time, could only be for the 2017 test period as the outcome of the arbitration process at the end of 2017 will necessitate a further filing. Filing a single year test period would be an inefficient use of the limited resources of both the Board and Northland, given the likely need that will arise to re-file in 2018 in order to account for the outcome of the Town of Hay River franchise arbitration process.

Furthermore, a decision or direction to file a GRA for 2017, at this point in time, would necessitate a filing late in the test year. In the submission of Northland, the timing of a filing coupled with the one year test period for which it would be applicable, would, notwithstanding section 51(2)(a) of the Public Utilities Act, infringe on the well-founded principle of prospectively. In effect, if Northland were to proceed with a GRA for 2017, rates would not be set based on the accuracy and reasonableness of forecasts, as actuals would be available for the majority, if not the entirety of the "test period". Such a process is not consistent with prospective regulation.15

Due to the time permitted to complete this GRR, NUY has not been able to include the full extent of support and documentation that is customary, and generally required, to be provided in a GRA.16

26. In Decision 15-2017, the Board concurred with NUY’s assessment of the special

circumstance:

The Board notes NUL YK’s view that this is a ‘Rate Review’ as opposed to a full rate application, which NUL YK interpreted to be due to the shortened time frame and notice provided by the Board and the Board’s appreciation for the time required to prepare a full General Rate Application. The Board concurs with this interpretation and will assess all information filed or requested to be filed accordingly.17

27. Accordingly, NUY’s 2017 GRR Filing should not be viewed as a template representing

the detail which should be provided in a typical GRR. While the level of review of a

15 Decision 15-2017, Para 2. 16 NUY 2017 GRR Application, Page 1. 17 Decision 15-2017, Para 21.


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GRR Application may appear limited in comparison to the detailed review normally

undertaken for a GRA, as discussed in Section 2.1.4 of this submission, a GRR

Application still should contain all of the financial schedules prescribed in the Board’s

MFR Decision 13-2014, as adjusted from time to time by the Board. Such schedules

should include a spreadsheet working model to establish a rate base, return, revenues and

revenue excess (shortfall) for the Test Year.

2.2.2 Typical GRR Process Steps

28. The TGC submit that a GRR should not obviate the need for the Board and Intervenors to

submit Information Requests (IRs). Due to the “high-level review” and the reduced level

of granularity of information contained within the GRR, it is expected that the number of

IRs would not be anywhere close to the number filed in the context of a GRA.

29. More importantly, a process which contemplates IRs and IR Responses would assist the

Board in determining, as NTPC states, whether, upon a review of the GRR Application,

“a full GRA review process was required.”18

30. The TGC also submit that unless a party can demonstrate a need to file evidence, a GRR

process would not entail the filing of any Intervenor evidence, and, accordingly, there

would be no need for the utilities to file rebuttal evidence.

31. Finally, to expedite the process, the TGC submit a “paper hearing” would suffice, i.e.

there should be no need for an oral hearing. Instead, parties can proceed directly to the

Argument and Reply stages of a GRR proceeding.

32. The TGC does not see the need for the other process steps typically seen in a GRA, such

as a Technical Meeting (TM). However, if all parties agree, a Negotiated Settlement (NS)

may be appropriate in lieu of a “paper hearing”, thereby obviating the Intervenor and

utility external costs associated with the filing of written Argument and Reply.

18 NTPC Letter dated February 15, 2019, Page 3 of 9.


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2.3 MONITORING AND REPORTING REQUIREMENT FOR RELIABILITY AND QUALITY OF SERVICE IN A GRR HIGH LEVEL REVIEW


If a utility were subject to high level review, should the monitoring and reporting requirements for reliability and quality of service be strengthened? If so why (or why not) and in what manner?

34. Section 76 (2) (c) of the PUB Act states:

(2) A public utility shall …. (c) file with the Board, within the times and in the form and manner required by the Board, a report of

(i) every interruption of service of the public utility, and (ii) every accident occurring to or on the plant, equipment or other

property of the public utility, where the accident might endanger the safety, health or property of any person;

35. The TGC recommend that, should the Board decide on a high-level review by way of a

GRR, the utility should, in compliance with Section 76 (2) (c) of the PU Act, provide

details of “every interruption of service” and “every accident occurring to or on the plant,

equipment or other property of the public utility, where the accident might endanger the

safety, health or property of any person”.

36. Such information should be for each of the years for which actual results are available,

commencing the first Test Year of the most recent GRA. In concert with such

information, the utility should also provide information with respect to remedial steps

undertaken, if any, to prevent a recurrence of service interruption and/or an accident

which could endanger the safety, health or property of any person.

37. As customers are concerned about the utility's ability to provide electric service in a safe

and reliable manner, the utility should also file the results of all other quality of service

indicators, similar to the report provided by NTPC in Appendix C of its most recent


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2016-2019 Phase 1 GRA.19 This report should be augmented to incorporate the direction

provided to NTPC in Board Decision 6-2017 in respect of NTPC’s 2016-2019 Phase

GRA. This direction required NTPC to provide a record of interruptions of duration less

than 1 minute, as follows:

The Board considers the increased use of electronic equipment by customers and the increasing reliance of such equipment on uninterrupted power supply means, momentary disturbances with duration less than 1 minute such as referred to by NTFL, are likely to impact service quality negatively. Accordingly, in the Board’s view NTPC should not only start monitoring such disturbances but also take corrective action as required. The Board expects NTPC to consider this as a quality of service requirement and implement any required changes. The Board directs NTPC to develop a suitable metric that would measure disturbances as referred to by NTFL and file the proposed metric at the time of the compliance filing.20

{Emphasis added}

2.4 HIGH LEVEL REVIEW IF SECTION 65 REVIEW INDICATES UTILITY EARNINGS ARE GREATER (OR LESS) THAN ALLOWED RATE OF RETURN


Following Section 65 review by the Board of the affairs earnings and accounts of a utility, if earning were found to be greater (or less) than the allowed rate of return by a certain threshold of basis points (based on review of report of finances) and, if the Board decides to conduct a GRR, should a high level review be undertaken in this instance?21

39. As noted in Section 2.2.1, following a Section 65 review for 2016, the Board noted NUY

had earned more than 300 basis points compared to its last approved rate of return22 and

determined that the then current 2013 rates may require adjustment through a GRR and

"requested NUY to indicate whether it intends to file a General Rate Application (GRA)

19 X001, NTPC 2016-19 Phase 1 GRA, Appendix C, PDF 542-577. 20 PUB Decision 16-2017, Para 228. 21 PUB letter dated August 29, 2019, Page 3 of 5. 22 2016 Actual ROE of 12.33% compared to approved ROE of 9.30%.


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for 2017."23 The Board subsequently approved NUY’s request to submit a GRR due to

the “special circumstances” cited by NUY, as noted in Section 2.2.1.24

40. In our view, the Board’s course of action in respect of NUY, as discussed above, is the

appropriate approach. That is, if a Section 65 review of the utility’s 2019 actual results,

undertaken in 2020,25 were to reveal that the utility had earned greater (or less) than the

most recently approved ROE, the Board would first ask the utility whether it intended to

file a GRA for the 2020 Test Year. Clearly, as rate regulation is on a prospective basis in

NWT,26 the Board could not order a GRR for 2019 as actual results for this year are not

available until 2020.

41. If the utility identifies some “special circumstances” (as was the case for NUY in 2017),

or the utility states it plans to file a GRA for 2020 where the proposed increase in utility

revenue requirement is less than or equal to the inflation rate, then the utility would file a

GRR. In all other cases, the utility would have to file a full GRA for 2020.

2.5 INCENTIVES FOR UTILITIES TO CHOOSE HIGH LEVEL REVIEW


Could utilities be incented in some way to choose the high-level review approach for approval of rate changes instead of a full GRA through diligent planning and execution of their affairs designed to maximize long term efficiencies while maintaining reliability and quality of service. For example, utilities meeting the criteria for high level review could be eligible to recover their external hearing costs (to the extent considered prudent, just and reasonable by the Board) whereas, those utilities not meeting the criteria may only be eligible to recover a portion of their external hearing costs.27

43. Clearly, there are significant cost saving features of a GRR, as many of the procedural

work undertaken by Intervenors and the Board to review and assess a typical GRA are

23 Board Decision Letter 001-2017 dated June 26, 2017, Page 1 of 4. 24 NUL’s rationale: “Due to the time permitted to complete this GRR, NUY has not been able to include the full extent of support and documentation that is customary, and generally required, to be provided in a GRA.25 As the Board would only get the 2019 Annual Report of Finances and Operations in 2020. 26 PU Act, Section 51 (2). 27 PUB letter dated August 29, 2019, Page 3 of 5.


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absent from the GRR. The TGC welcome any steps which would result in cost savings in

the regulatory process, including incentive mechanisms where applicable and

appropriate.

44. However, the incentive mechanism example described by the Board above would have

provided NUY an undue preference in filing its 2017 GRR as the “special circumstances”

it cited in support of filing a GRR (for example, resolving the franchise issues with the

Town of Hay River by way of an arbitration process)28 were not of its own making, but

rather, externally imposed.

45. If, however, the utility proposed that its O&M, for example, would increase in the Test

Years, by an amount less than or equal to inflation (or potentially inflation less a

productivity factor), this may be appropriate grounds for an incentive mechanism. In this

case, the O&M piece could be a candidate for a high-level review within the context of

the utility’s filed GRA.

46. For example, if the utility can demonstrate: a material savings in long-term O&M costs

due to creative measures put into effect; or found non-diesel alternatives for generation

which will result in reduced generation costs in the current and future years compared to

the status quo method of generating electricity, these criteria could, in our view, be

grounds for a high-level review, within the context of a GRA and a discussion around the

eligibility for incentives. In our view, the discussion around the type(s) of incentives and

method of calculating such incentives is much broader than the scope contemplated by

the Board in its August 29, 2019 letter. The TGC submit therefore that creativity, which

results in significant cost savings to customers, should be rewarded. Such a reward would

be in the form of (i) reduced oversight, i.e. parties undertaking a high-level review, and

(ii) the utility being eligible for incentives.

47. To re-iterate, as discussed in Section 2.1.1 of this submission, the TGC would only

support a GRR or high-level review for the Test Years, as opposed to a full GRA, in the

28 See discussion in Section 2.2.1 of this submission.


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limited circumstances identified by NTPC, i.e. where the proposed increase in Test Year

revenue requirements is equal to or less than inflation.

3 INCREASED USE OF NEGOTIATED SETTLEMENT PROCESS

48. In its February 15, 2019 submission, NTPC suggested a NS process is an effective and

efficient tool for parties to discuss issues on a without prejudice basis and achieve

regulatory efficiencies.

49. The Board stated:

If a Utility chooses to apply for a full GRA, a Negotiated Settlement may help reduce hearing time and hearing preparation time and therefore help reduce regulatory burden. However, negotiated settlements sometimes lack transparency and may not be amenable to appropriate regulatory oversight to ensure the settlement is in the public interest. The following process design elements may help address the negatives involved in negotiated settlements.29

50. In the sections that follow, the TGC will provides its comments on the issues identified

by the Board.

3.1 USE OF TECHNICAL MEETINGS PRIOR TO NS PROCESS


Is it appropriate to hold Technical Meetings (TM) prior to a negotiated settlement process to enable the Board as well as the Parties to gain a full understanding of the issues prior to commencement of negotiations?30

52. As a NS process is in lieu of a public hearing, the TGC submit TM could perform an

important first step prior to entering into a NS process. In a TM, the utility could provide

important and relevant information over and above that provided in the GRA or GRR

Application and IR Responses, which would normally be sought in a hearing process.

29 PUB letter dated August 29, 2019, Page 3 of 5. 30 PUB letter dated August 29, 2019, Page 3 of 5.


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53. However, time spent at the TM held31 in advance of hearing NTPC’s most recent 2016/19

Phase 1 GRA was, for the most part, spent on addressing why NTPC had not adequately

or fully responded to the IRs filed by Intervenors. In addition, a significant amount of

time was spent debating with NTPC whether certain MFR-approved parameters (e.g.

materiality threshold, number of years for which actual results are required, etc.) should

be applicable in the context of a GRA. The Board addressed these matters succinctly in

Decision 16-2017 (Para 239), and the TGC hopes that the time spent on these issues will

be unnecessary in future GRAs.

54. Time was also spent at NTPC’s 2016/19 Phase 1 GRA TM on whether NTPC would

update its GRA which included 2015/16 forecasts with 2015/16 actual results. In our

view, if a GRA includes forecasts for a year prior to the Test Year and actual results are

subsequently available for that year prior to the actual hearing (or NS Process), the utility

should be required update its GRA as a matter of course. If the Board were to make this a

standard practice, it would likely end future debate on this matter and result in more

productive TM outcomes.

55. While the TGC recognize the fact that a TM offers the advantage that the needed

information-gathering process would take place in a more informal setting and allows for

a freer exchange of information, the experience at the TM held in connection with

NTPC’s 2016/19 Phase 1 GRA suggests that the time expended on discussions with

respect to deficient IR Responses was not a productive use of time. Instead, in our view,

issues related to deficient IR Responses should be settled prior to the commencement of

the TM. That is, where intervenors are not satisfied that the utility has provided fulsome

response(s), the Board should allow for a process step where the utility and Intervenors

can make their positions known and the Board can rule on these IRs in advance of the

TM.

56. Based on the foregoing, it is our view that a TM would be more productive if Intervenors

were satisfied that they have sufficient and adequate information and evidence to

complete the record. As well, it would help focus the TM discussions if (i) the Board

31 NTPC Technical meeting held in Yellowknife on November 30, 2016.


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provided broad objectives and/or Terms of Reference for the TM, similar to what it

provided its letters dated October 11, 201632 and November 9, 201633 in advance of the

TM for NTPC’s 2016/19 Phase 1 GRA, and (ii) Intervenors provided a list of issues it

wished to discuss at the TM.

3.2 TECHNICAL MEETING PROCESS STEPS


The primary purpose of a TM is to enable participation by registered parties in a fair efficient and open manner in the application review and discovery process in order to facilitate informed recommendations to the Board. A TM process as contemplated here, may involve formal and informal communications among parties which may address intervener concerns about information asymmetry. Please comment on each of the following process steps involved in a TM leading to a negotiated settlement:

58. The Board outlined six areas where it sought comment, In the sections that

follow, the TGC will provide comments on each of these six areas.

3.2.1 Use of Comment Matrices to focus issues, concerns and views, prior to commencement of the TM [Attachment 1] and after the conclusion of the TM [Attachment 2];

59. There may be some issues on which consensus agreement is reached on the need to

amend the forecast revenue requirement. The expectation is that such issues will be

included in Attachment 1 so as not to spend any time re-hashing these issues at the TM.

Further, the utility should re-file its MFR financial schedules prior to the commencement

of a TM, if the impact of the agreed-upon changes is material.

60. Attachment 1 states:

If Parties are of the view the Applicant has not adequately responded to information requests, an informed judgement must be made as to their position pending any clarifications at the technical meeting.

32 X012, NTPC 2016/19 Phase 1 GRA. 33 X022, NTPC 2016/19 Phase 1 GRA.


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61. As discussed in Section 3.1 above, for those IR Responses which the utility has not

responded to or has provided less than a fulsome response, a process step should be

introduced whereby the utility and Intervenors provide their respective positions to the

Board for it to adjudicate in advance of the TM. To make the TM process more efficient,

it is only after such adjudication, and subsequent receipt of updated IR Responses from

the utility, that a TM should commence. Discussion of any “disputed” IR Responses

during the TM is not a productive use of time as the unresolved “disputed” IR Responses

will have to go to the Board for adjudication in any event after the TM. It also eliminates

the need to exercise an “informed judgment…pending any clarifications at the technical

meeting.”

62. The Board notes the “primary purpose of a TM is to enable participation by registered

parties in a fair efficient and open manner in the application review and discovery process

in order to facilitate informed recommendations to the Board.”34 During this “review and

discovery process”, it has been our experience that while an IR Response may have been

adequately responded to, new evidence in that IR Response requires additional

clarification or a need for further information to “facilitate informed recommendations to

the Board.” The TGC expect Attachment 1 would include details of areas where further

clarification/information is needed from the utility.

63. There may be issues which a party wishes to discuss and resolve at the TM, but which

initially did not form part of Attachment 1. In our view, parties should not be denied this

opportunity and the Board should so confirm.

64. Since the templates in Attachments 1 and 2 are proposed to be part of a new process,

experience at the first TM and NS proceeding will provide input on further changes, if

any, to be made to these Attachments.

34 PUB letter dated August 29, 2019, Page 4 of 5.


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3.2.2 TMs to be held after the initial exchange of information requests to ensure all parties have the requisite information to present on (if they so desire) and explain their views on specific issues at the TM;

65. As noted in Section 3.2.1, the “initial exchange” should include fulsome response, either

voluntarily or pursuant to a Board ruling, to all disputed IR Responses. The TGC is in

agreement that a TM can only proceed after such an “initial exchange”.

3.2.3 Opportunity for all parties to make short presentations on issues of concern and to provide explanations as may be requested;

66. Attachment 1 allows for a party “to request time to present on the issue, at the TM.” The

TGC assume that where an intervening party seeks additional clarification or further

information on an issue, that party will require time to make a presentation at the TM.

Beyond that, it is not clear why an intervening party would make such a request.

67. In cases where a party has filed intervenor evidence, the benefit of “short presentations

on issues of concern…(and) provide explanations as may be requested” appears not to be

needed as all issues of concern would have been articulated in the Intervenor’s evidence

and IR Responses to that evidence.

3.2.4 Following the TM, Parties to comment on whether to proceed to negotiated settlement or a limited hearing on selected issues;

68. The TGC concur with this step and have no further comment at this time.

3.2.5 Board staff to be involved in the TM discussions to ensure all issues of interest to the Regulator are discussed and to ensure the proceedings record is comprehensive, relevant and complete;


3.2.6 The Comment Matrix templates as well as presentation material from the TM would form the entire record of TMs.



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3.3 COMMENTS ON BOARD’S PROPOSED COMMENTS MATRIX TEMPLATES


Please comment specifically on the Attachment 1 and Attachment 2 Comment Matrix templates.35

72. The TGC submit that the proposed Comment Matrix attachments are satisfactory subject

to the following comments.

73. The TGC has provided some comments on these Attachments in Section 3.2.1 and

Section 3.2.2. In addition, the TGC submit clarity is needed with respect to whether these

templates should include issues and matters which are raised in Intervenor Evidence.

74. The Board states the “Comment Matrix templates as well as presentation material from

the TM would form the entire record of the TM”.36 While this is clear, the TGC is not

certain whether the outcome of the TM, in particular the Comment Matrix templates,

would become part of the public record. The TGC tend to agree with the observation

made by NTPC that “only written responses to undertakings should form part of the

proceeding record.”37

75. The Board’s proposed Attachment 1, Initial Comment Matrix, provides a column for

“Intervenors and Board Staff Concerns, Comments and Observations” If such concerns

and comments/observations are to be made part of the public record, parties may be

reticent to discuss these concerns in a free, frank and open manner. As well, the TGC

submit that any confidential information exchanged at the TM should be kept

confidential, unless the party from which the information originates consents to file it

with the Board on a confidential basis in order to assist the Board in its deliberations.

76. With respect to Attachment 2, Applicant’s Post Meeting Comment Matrix, it appears the

Board only seeks the Applicant’s understanding of the “Summary of TM Outcomes”. The

35 PUB letter dated August 29, 2019, Page 4 of 5. 36 PUB letter dated August 29, 2019, Page 4 of 5. 37 NTPC letter dated Feb 15, 2019.


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TGC suggest Attachment 2 should be a joint Applicant/Intervenor Summary of TM

Outcomes. In the alternative, parties should be allowed to comment on the Applicant’s

Summary of TM Outcomes to ensure it is an accurate summary of TM Outcomes.

3.4 NO WRITTEN RECORD OF TM INFORMAL DISCUSSIONS


Since the Comment Matrix templates as well as presentation material from the TM would form the entire record of the TM, there would be no other written record of the TM informal discussions. In the Board’s view informal discussions at TMs may facilitate free exchange of information and ideas among parties while allowing parties to retain control over what is distilled from the discussions and then captured in the record of the proceedings. Please comment on the pros and cons of this approach from a fair process point of view and from a cost perspective.38

78. As discussed in Section 3.3 above, the TGC submit the proposed Attachment 1 not

include all “concerns, comments and observations” to allow for a free, frank and open

exchange of information at the TM. More specifically, the column titled “Intervenors and

Board Staff Concerns, Comments and Observations” should not reflect any informal

discussions, unless the party which raises such concerns, comments and/or observations

concurs with such inclusion and approves the wording of the same.

3.5 THIRD-PARTY INDEPENDENT MODERATOR


TMs to be moderated by a third-party independent Moderator to ensure fairness of process and to ensure efficient conduct of the meeting. The Moderator would sum up the meeting outcomes at the conclusion of presentations on each issue and this would constitute input (among others) to the Applicant in preparing Attachment 2 which would be due one week following the TM. Please comment.39

38 PUB letter dated August 29, 2019, Page 4 of 5. 39 PUB letter dated August 29, 2019, Page 4 of 5.


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80. The TGC generally agree, in principle, with the concept of a moderator and the process

outlined above. The TGC's only concern is one of cost: the moderator would introduce a

new layer in the hearing process in an environment where the Board and all stakeholders

are showing concern about the costs of rate proceedings. In fact, the entire thrust of the

Board’s letter of August 29, 2019, including reviewing the concept of a GRR in lieu of a

GRA and the use of the NS process as opposed to a full hearing, is geared towards the

goal of cost reduction in rate proceedings.

81. However, considering there would be some cost savings in not pursuing a full public

hearing and assuming the cost of the moderator is reasonable, the moderator may be able

to perform a useful role.

82. The TGC note the Board has asked for comments about a third-party moderator in the

context of a TM, but not in the context of a NS process. The TGC assume this same role

would be required for the NS process as well. Having said that, it should be noted that

where the TGC legal counsel and technical consultant have been involved in the last 20

years or so, the parties have not seen it necessary to retain a moderator. Instead, the

Intervenors compile a Term Sheet, a document which identifies issues of concern, and

positions of the utility and customer group(s), including offers and counter-offers.

3.6 BOARD PANEL MEMBERS ATTENDANCE AT TM AS OBSERVERS


As noted in d) TMs may facilitate free exchange of information and ideas among parties while allowing parties to retain control over what issues flow into the record of the proceedings through the media of presentations and comment matrices. Given this approach, please indicate whether there are any concerns if Board panel members were to choose to sit as observers at the TM? If so, provide reasons.40

84. The TGC does not have any concerns if Board panel members were to sit as observers at

the TM. In our view, exposure to the free-flow of information and ideas exchanged at the



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TM would add to their overall knowledge base and enable a better understanding of

issues at hand in the rate application.

3.7 BOARD STAFF ATTENDING AS OBSERVERS AT NS MEETINGS


Having regard to the above noted design elements, please indicate whether there are any objections to Board staff being present as observers at the negotiated settlement meetings? If so, provide reasons.41

86. The TGC does not have any objections to the Board staff being present as observers at

the NS meetings. In fact, the role of the Board staff should be expanded beyond simply

acting as “observers” to allow staff to articulate issues of concern to the Board. These

issues, in our view would, encompass not only issues which have not been fully

canvassed by the Intervenors but issues which have a bearing on Board’s public interest

mandate.


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