Topic:"Cost Deferral" in M12412

1 NOVA SCOTIA ENERGY BOARD 2 3 the More Access to Energy Act, 1998, SNS IN THE MATTER OF 2024, c 2, Sch B, (the "Act"); 4 5 6 7 8 AND IN THE MATTER OF an application by the Nova Scotia Independent Energy System Operator ("NSIESO") for an O...

AI summary The Nova Scotia Independent Energy System Operator (NSIESO) has applied for approval of its revenue requirement for the fiscal year ending March 31, 2026. The NSIESO is a new not-for-profit corporation tasked with administering the bulk power system and wholesale electricity markets in Nova Scotia. It is seeking approval for ongoing operational, maintenance, and administrative expenses and will use provincial funding to cover part of these costs.

- application. - The NSIESO is not yet in a position to propose a mechanism for rate recovery. It is the NSIESO's - proposal to defer the approval of a rate recovery mechanism until a future application. Further, as - a newly constituted c...

AI summary The NSIESO is requesting approval for a revenue requirement and the creation of a Net OM&A Deferral and Variance Account. It is deferring the approval of a rate recovery mechanism due to its new status and lack of historical data. The revenue requirement reflects ongoing OM&A costs before and after government funding.

approach, we expect that the annual 13 expenditure forecast and revenue requirement of the NSIESO will increase over the first three 14 fiscal years reflecting the increasing scope during this period. 15 As part of this Application, the NS...

AI summary The NSIESO is seeking approval from the Nova Scotia Energy Board for its ongoing OM&A expenses forecast of $6.75M, with $5.3M expected to be recovered in rates. The difference is attributed to a provincial grant funding one-time transition costs. The focus is on ongoing expenses, while one-time costs are fully funded by the province and not subject to regulatory approval.

12 Table 2: Net OM&A Deferral and Variance Account – Sub-Accounts Sub-Account Name Description of recorded funds Net OM&A Deferral Account, Sub-Account No. 1 Records the approved forecast Net Ongoing OM&A costs for the period ending March...

AI summary The document outlines the structure and purpose of three sub-accounts related to Net OM&A (Operating, Maintenance and Administration) deferral and variance, including how they track forecasted, approved, and actual expenses, as well as the implications of variances. It also mentions a section on rate and bill impacts.

A. Operating, Maintenance and Administration (OM&A) Overview 3 The NSIESO's initial OM&A budget for the period ending March 31, 2026, is comprised of both 4 ongoing OM&A expenses ("Ongoing OM&A") and one-time transition OM&A expenses. In t...

AI summary The NSIESO's OM&A budget for the period ending March 31, 2026, includes ongoing and one-time transition expenses. The NSIESO seeks approval for ongoing OM&A costs of $6.75M, but expects to recover only $5.30M after using provincial funding for transition costs. The difference will be recorded in a deferral account for future disposition.

7 As noted in the Notice of Application, while the NSIESO is forecast to incur costs of $7.98M for 8 the period ending March 31, 2026, it is not seeking approval of total costs. NSIESO has the benefit 9 of Provincial funding in the amount...

AI summary The NSIESO is seeking approval for ongoing OM&A costs of $6.75M and the recording of $5.31M in a deferral account. It notes that one-time transition costs are fully funded by the province and that internal labour costs are allocated to specific categories.

- 3 proposal to defer the approval of a rate recovery mechanism until a future application. In addition, - 4 the NSIESO developed its OM&A forecast using a detailed bottom-up approach. However, the - 5 NSIESO does not have historical organ...

AI summary The NSIESO is proposing to defer the approval of a rate recovery mechanism until a future application. It uses a bottom-up approach for its OM&A forecast but lacks historical data. A new account is proposed to record forecasted and actual OM&A costs, as well as one-time transition costs.

rral and variance, the difference between the deferred amount ($100 in Account #1) and the variance of approved Net Ongoing OM&A ($10 in Account #2) is recorded as a balance of $90 in Account #3 and will be sought for rate - recovery. - b....

AI summary This text discusses the accounting treatment of deferred amounts and variances in Ongoing OM&A costs. It outlines two scenarios where differences between deferred amounts and approved variances are recorded in specific accounts and may be subject to rate recovery.

Response IR - 12 - a) Benchmarking data from specific independent public agencies was not shared at the time - of budgeting. To clarify referenced evidence, the estimate of $0.03M was informed by - general market knowledge of premiums for...

AI summary The response indicates that benchmarking data from independent public agencies was not available during budgeting. The estimate of $0.03M is based on general market knowledge and informal discussions with insurance providers. Final premium quotes will be obtained through a market process, and any variance will be reconciled through the Net OM&A Deferral and Variance Account.

Response IR - 14 - a) To clarify referenced evidence, the estimate of $0.005 million was informed by general - market knowledge of typical property insurance premiums for leased office space in - Nova Scotia and informal discussions with i...

AI summary The NSIESO estimates a property insurance premium of $0.005 million based on market knowledge and informal discussions with insurers. The organization plans to obtain market quotes to confirm actual costs and will reconcile any variances through the Net OM&A Deferral and Variance Account.

Response IR - 29 - a) The Control Center Planning expenses of $0.05 million are separately identified in Exhibit B-2, Table 13 (p. 27) and are not included in the "Other Facilities and Technology" forecast of $0.050 million. For clarity, t...

AI summary The response clarifies that the Control Center Planning expenses of $0.05 million are separate from the $0.050 million 'Other Facilities and Technology' forecast. It also explains that any variance between forecast and actual costs will be reconciled through the Net OM&A Deferral and Variance Account.

NON-CONFIDENTIAL 1 Request IR - 32 2 Reference: Exhibit B-2 (page 29 of 36, line 5, Table 15) 3 a) Please provide the supporting calculations showing the breakdown of how the following 4 One-Time Transition Costs were forecasted: 5 a. HR T...

AI summary The document outlines a request for detailed calculations and assumptions regarding one-time transition costs, including HR planning, program management, and technology expenses. The response references a financial forecast document and indicates that estimates were solicited from the market for various services.

- The NSIESO states it "…has requested the approval of the total forecast Ongoing OM&A costs - of $6.75M and the approval of the recording of the Net Ongoing OM&A approved amount of - $5.31 [million] in the deferral account proposed". - a)...

AI summary The NSIESO requests approval to defer $5.31 million in Net Ongoing OM&A costs into a deferral account. Questions are raised about whether the deferral will occur immediately or upon actual incurrence of costs, and the appropriateness of recovering unincurred costs, as well as the identification of associated financing and carrying costs.

Response IR - 12 - a) The NSIESO is intending to record a deferral of the $5.31 million immediately upon - approval of the OM&A costs (Exhibit C-1, Table 16). - b) The NSIESO will not recover OM&A costs that have not actually been incurred...

AI summary The NSIESO plans to defer $5.31 million in OM&A costs upon approval, and will only recover costs that have been incurred. Unspent amounts will be captured in Sub account #2. Finance and carrying costs include interest at Prime + 0.75% and 1% of the transaction value, assuming a line of credit is required.

Request IR - 20 2 Reference: Exhibit N-1(i), pp. 25-26 of 36 3 Under procurement and project management, the NSIESO states: 4 "The costs under this cost category represent 50% of the total costs pertaining to these activities, 5 as the NSI...

AI summary The NSIESO explains that 50% of procurement and project management costs are capitalized due to estimates from service providers. These costs relate to site development for a 300MW powerplant, aimed at de-risking and advancing the schedule in parallel with the RFP. A capitalization policy for these assets is to be developed as part of the NSIESO's broader organizational policies.

NON-CONFIDENTIAL 1 Request IR - 10 2 Refer to the Application and Exhibit C-1 – Deferral and Variance Accounts, on pages 32-36 of 3 36 and respond to the following: 4 a) Table 2 on Page 10 of 36, contains language different from Table 16 o...

AI summary The document requests clarification on the treatment of unfunded amounts in Sub Account No. 2, interest accrual in deferral and variance accounts, and the distinction between NSPI and NSIESO revenue requirements during the transition period.

- 4 Figure 1 Summary of findings, observations and conclusions # Section title Findings, observations, and conclusions 7. Deferral account Overall, the implementation and use of deferral accounts and mechanisms is a common practice among u...

AI summary The document discusses the implementation of deferral accounts and mechanisms by utilities and ISOs across Canada, emphasizing their role in rate stabilization and compliance with regulatory frameworks. It notes that the NSIESO's proposal to implement a Net OM&A Deferral and Variance Account aligns with standard industry practice but highlights key findings and recommendations for consideration before NSIESO operations.

28 4.3.2.2 Overview of OM&A budget Per the Application, the NSIESO is seeking approval for its ongoing Operations, Maintenance, and Administration ("OM&A") expenses forecast for the test period of $6,750,000 ( "Ongoing OM&A"). Subject to a...

AI summary The NSIESO is seeking approval for its ongoing OM&A expenses of $6,750,000, with a net amount of $5,300,000 expected to be recovered in rates. The remaining $1,440,000 is from a provincial grant covering one-time transition costs, which the NSIESO does not seek NSEB approval for.

7.3.1.4.1 US Generally Accepted Accounting Principles ("US GAAP") – ASC 980 - ASC 980 applies to entities whose rates are established or approved by an independent regulator and allows for the - deferral of costs or revenues that will be r...

AI summary ASC 980 applies to entities with rates set by independent regulators, allowing deferral of costs/revenues recoverable via future rates. Key policies include recognizing regulatory assets/liabilities when recovery/refund is probable, amortizing deferred amounts over recovery periods, and annual reasonableness reviews.

16 Figure 32 – NSIESO's proposed deferral sub-accounts Sub-account name Description of recorded funds per the Application Net Ongoing OM&A Deferral Account ("Sub-Account No. 1") Records the approved forecast Net Ongoing OM&A costs for the...

AI summary The document outlines NSIESO's proposed deferral sub-accounts, which include Net Ongoing OM&A Deferral Account, Net OM&A Variance Account, and Actual Net OM&A Account. These accounts track forecasted and actual OM&A costs, as well as variances and one-time transition costs.

- Reasoning for bifurcating costs into multiple accounts instead of recording in one account and comparing to the approved amount – Per the NSIESO, the account was structured to enhance tracking 5 and transparency given that actual balance...

AI summary The NSIESO explains the need to bifurcate costs into multiple accounts for better tracking and transparency, citing the need to defer approved OM&A costs and manage variances. A deferral sub-account is proposed to recover costs in the event of a final order from the NSEB, ensuring ratepayers are not unfairly impacted and allowing for prudence reviews.

- Figure 33 NSIESO's proposed deferral amount Deferral summary ($millions) Amount Total OM&A expenses 6.75 Remaining Provincial funding to be applied after one-time transitional costs (2.68M-1.23M) (1.44) Deferral upon approval of OM&A cos...

AI summary The NSIESO provided a deferral summary of OM&A expenses, indicating a total of $6.75 million, with $1.44 million allocated for remaining provincial funding after transitional costs. The NSIESO confirmed they will not recover unincurred OM&A costs, with any unused amounts captured in Sub-Account #2.

- 7.3.2.3 Cost overruns - 7.3.2.3.1 Deferral limitations and thresholds - Given the NSIESO is seeking approval from the NSEB for its ongoing OM&A expenses forecast for the test period, it is important to understand what happens if actual e...

AI summary The NSIESO is seeking approval for its OM&A expenses forecast, but there are no thresholds or caps for overruns that would trigger a separate review or limit cost recovery through the Net OM&A Deferral and Variance Account. The NSIESO tracks actual costs against forecasts but lacks specific controls for managing one-time transition costs.

HEARING ORDER The Nova Scotia Independent Energy System Operator (NSIESO) applied to the Nova Scotia Energy Board on August 5, 2025, under s. 29 of the More Access to Energy Act , for approval of its proposed expenditure and revenue requir...

AI summary The NSIESO applied to the Nova Scotia Energy Board for approval of its OM&A expenses and revenue requirement for the initial test year ending March 31, 2026, including the establishment of a Net OM&A Deferral and Variance Account.

ropose a rate recovery mechanism. It proposed to defer the approval of a rate recovery mechanism until a later application for its revenue requirement for the period April 1, 2026, to March 31, 2027. - [4] The Board considered the matter i...

AI summary The Board approved the IESO's initial test year expenditure and revenue requirement for the period ending March 31, 2026, but deferred the approval of a rate recovery mechanism until a later application. Specific guidelines and accounting policies for the Net OM&A Deferral and Variance Account must be developed and filed before recovery can occur.

3.3 Deferral and Variance Account [33] This Net OM&A Deferral and Variance Account is being requested to defer the recovery of the IESO's approved and forecasted Net Ongoing OM&A costs (i.e., net of provincial funding). [34] The IESO defer...

AI summary The IESO is requesting the establishment of a Net OM&A Deferral and Variance Account to defer the recovery of its approved and forecasted Net Ongoing OM&A costs. The account includes three subaccounts to manage variances between forecasted and actual costs, as well as one-time transition costs. The IESO plans to file a future revenue requirement application in 2026-2027.

Request IR-12: - Reference: Exhibit N-1(i), p. 14 of 36 - The NSIESO states it "…has requested the approval of the total forecast Ongoing OM&A costs - of $6.75M and the approval of the recording of the Net Ongoing OM&A approved amount of $...

AI summary The NSIESO seeks approval to defer OM&A costs of $6.75M and record $5.31M in a deferral account. Questions are raised about the timing of the deferral, the justification for immediate deferral of unincurred costs, and the identification of financing and carrying costs associated with the deferral account.

Non-Confidential To: The Nova Scotia Independent Energy System Operator ("NSIESO") 30. Reference: Exhibit B-2 (page 28 of 36, line 1, Table 14 & lines 6-8)…"The NSIESO will address the Net OM&A Deferral and Variance Account for the 2025/20...

AI summary The NSIESO is required to address the Net OM&A Deferral and Variance Account for the 2025/2026 test year and to establish a revenue requirement and recovery mechanism for 2026 to 2027 to repay a line of credit. The request includes inquiries about the supporting calculations for financing costs and the structure of the line of credit.

18 1 2025 M12412 3 4 5 6 Preamble: In summarizing NSEB IR-10, DGT paraphrases the NSIESO's Response that the costs were bifurcated into multiple accounts to enhance tracking and transparency. And additionally, the deferral sub-account was...

AI summary This text outlines a regulatory inquiry regarding the bifurcation of costs into multiple accounts for tracking and transparency, as well as the creation of a deferral sub-account to comply with retroactive ratemaking rules and prudence reviews. The DGT is being asked for their views on the efficiency, transparency, and necessity of these actions, as well as the nature of the proposed Net OM&A Deferral and Variance Account.

Table 1 Summary of OM&A Cost Categories 4 OM&A Cost Category Total O:\l&A Cost,; ($)(Millions) One-Time Transitional Costs (S) (l\Iillions) Ongoing O&:\I Costs (S) Oiillious) Administration Salaries and Wages 1.57 0.00 1.57 NSPI Employee T...

AI summary The document outlines OM&A cost categories and proposes the deferral of Net Ongoing OM&A expenses of $5.3 million into a 'Net OM&A Deferral and Variance Account' due to the lack of a mechanism for IESO-Nova Scotia to recover funds from ratepayers. Provincial funding will cover one-time transition costs, but any shortfall will also be deferred for future recovery through a rate application.

January 29, 2026 Ms. Crystal Henwood Regulatory Affairs Officer/Clerk Nova Scotia Utility and Review Board 1601 Lower Water Street, 3rd Floor P.O. Box 1692, Unit "M" Halifax, NS B3J 3S3 Re: M12412 - IESO Nova Scotia 2025/2026 Revenue Requi...

AI summary The IESO Nova Scotia submitted a reply to the NSEB regarding its 2025/2026 revenue requirement application. The Consumer Advocate, Small Business Advocate, and Industrial Group did not object to the revenue requirement or the establishment of a deferral account but provided recommendations on cost control, future costs, and evidentiary requirements.

[25] The current application requests approval of the Net Ongoing OM&A costs, after accounting for the provincial funding of $2.68 million (i.e., $1.23 million applied to one-time transition costs and $1.44 million applied to initial OM&A...

AI summary The IESO seeks approval of a Net OM&A Deferral and Variance Account, deferring rate recovery until a future application. Doane Grant Thornton found the financial model mathematically sound but criticized the lack of formal evidence for budget assumptions, recommending stronger filing requirements. The IESO acknowledges these concerns and notes ongoing efforts to implement financial controls.

decision, the IESO expected to record a deferral of $5.31 million ($6.75 million less $1.44 million) in the variance account upon approval of its forecast OM&A costs in this decision (NSEB IR-12). [37] Doane Grant Thronton reviewed IESO No...

AI summary The IESO proposed a Net OM&A Deferral and Variance Account, which was reviewed by Doane Grant Thronton. The review found that while deferral accounts are standard practice, the IESO's proposal lacked cost management controls and accounting policies, leading to specific recommendations.