IN THE MATTER OF
the Utilities Commission Act, R.S.B.C. 1996, Chapter 473
and
Generic Cost of Capital Proceeding
BEFORE: D.A. Cote, Panel Chair / Commissioner
M.R. Harle, Commissioner December 10, 2012
L.A. O’Hara, Commissioner
R. Giammarino, Commissioner
O R D E R
WHEREAS:
A. By Order G-20-12 dated February 29, 2012, British Columbia Utilities Commission (Commission) established a Generic Cost of Capital (GCOC) Proceeding to review: (a) the setting of the appropriate cost of capital for a benchmark low-risk utility; (b) the possible return to an Return on Equity Automatic Adjustment Mechanism (ROE AAM) for setting an ROE for the benchmark low-risk utility; and (c) the establishment of a deemed capital structure and deemed cost of capital methodology, particularly for those utilities without third-party debt;
B. By Order G-47-12 dated April 18, 2012, the Commission set out the final scoping document for the GCOC Proceeding. One of the purposes of the Proceeding as stated in the Scoping Document is to establish a method to determine the appropriate cost of capital for a benchmark low-risk utility in B.C. commencing January 1, 2013;
C. By Order G-148-12 dated October 11, 2012, the Commission ordered that the GCOC Proceeding would continue by way of an Oral Hearing commencing on December 12, 2012. Order G-148-12 also ordered that (a) FortisBC Energy Inc. (FEI) in its present pre-amalgamation state will serve as the benchmark utility, and (b) a Stage 2 will be added to the GCOC Proceeding with the schedule to be determined prior to the end of Stage 1 to deal with the determination of an appropriate Return on Equity (ROE) and capital structure for each utility in the Affected Utilities’ group;
D. The
Commission Panel considers that a decision resulting from Stage 1 of this
hearing will likely be issued after
January 1, 2013, and that the rates for the benchmark utility as well as other
regulated entities that use the benchmark to establish rates should be made interim
effective January 1, 2013;
E. The Commission Panel considers that the ROE premiums and capital structures of the other affected utilities would be addressed in Stage 2 of the GCOC Proceeding;
F. By letter dated November 20, 2012, the Commission requested submissions from Affected and Other Utilities and Interveners with respect to a Commission order that would set (i) the current ROE and capital structure for FEI the benchmark utility as interim until a decision on a new ROE and capital structure is issued; and (ii) that all regulated entities that use the benchmark to establish rates will also have their ROE and capital structure made interim effective January 1, 2013 (Interim Order);
G. The Commission has received submissions from the following four utilities: FortisBC Utilities; Corix Utilities Inc.; Pacific Northern Gas Ltd.; and British Columbia Hydro and Power Authority (BC Hydro). All are in support of an Interim Order although BC Hydro also states that the order should not be applicable to BC Hydro because it would be inconsistent with Order G-77-12A;
H. By November 30, 2012, the Commission received submissions from three Interveners: British Columbia Pensioners’ and Seniors’ Organization (BCPSO), the Association of Major Power Customers of British Columbia (AMPC) and the Industrial Costumers Group. None of these Interveners opposes the Interim Order. BCPSO and AMPC agree with the position taken by BC Hydro that the Interim Order should not be applicable to BC Hydro;
I. No Reply Submission has been received by December 7, 2012.
NOW THEREFORE pursuant to section 60 of the Utilities Commission Act, the Commission orders as follows:
1. The current ROE and capital structure for FortisBC Energy Inc., the designated benchmark utility, are to be maintained and made interim, effective January 1, 2013.
2. The current ROE and capital structure for all regulated entities in B.C. that rely on the benchmark utility to establish rates are to be maintained and made interim, effective January 1, 2013.
3. This Interim Order is not applicable to British Columbia Hydro and Power Authority.
4. Any determinations of the premiums on the benchmark ROE and capital structure of regulated utilities that depend on the benchmark utility for rate setting will be made following the decisions in Stage 2.
DATED at the City of Vancouver, in the Province of British Columbia, this 10th day of December 2012.
BY ORDER
Original signed by:
D.A. Cote
Panel Chair / Commissioner