Topic:"Prudency Review" in M12663

NON-CONFIDENTIAL 1 Request IR - 9 2 Reference: Application, Exhibit C-1 3 If the Board approves IESO NS's requested Net Revenue Requirement Deferral and Variance 4 Mechanism, does IESO NS agree that any costs that exceed an approved budget...

AI summary The document requests clarification from IESO NS regarding the prudence review process for costs exceeding an approved budget under the Net Revenue Requirement Deferral and Variance Mechanism. The response directs the requester to refer to NSEB IR-28 parts e) and f) for details.

NON-CONFIDENTIAL 20 (b) Annually, in accordance with the More Access to Energy Act requirement under Section 21 29. 22 23 (c) IESO Nova Scotia agrees that all costs in a revenue requirement application are subject to 24 prudency review, wi...

AI summary The document discusses the prudency review process for revenue requirements and the need for third-party consulting in planning real-time dispatch operations. It references the NSEB's Decision and Order M12412 and requests documentation regarding the solicitation process and consultant's qualifications.

10 Figure 26 – Summary of IESO Nova Scotia's response to Intervenors Topic Intervenor concern IESO Nova Scotia's explanation/supporting evidence provided101 Prudency of costs Approving interim payments could amount to a premature prudency...

AI summary The IESO Nova Scotia responds to concerns about the prudency of interim payments, arguing that costs should be assessed as prudent at the time they are ordered, with deferral and true-up mechanisms to address any later findings of imprudence. It acknowledges that interim funding does not eliminate future prudency review and highlights that most costs reflect previously reviewed functions, reducing forecasting risk.

1 ("GUP"), and confirmation of mathematical accuracy. 2 (i) We generally relied on explanations provided by 3 management and supporting documents included in this 4 Matter. Evidence beyond management representation was 5 not reviewed throu...

AI summary The document outlines the scope of review conducted by DGT, noting reliance on management explanations and supporting documents, lack of independent corroboration, and absence of detailed quantitative testing. It clarifies that a prudence review was not conducted and that cost reasonableness was assessed based on industry expertise and GUP principles.

Response - IR-2: - (a) The level of financial statement review did not ultimately impact our ability to execute our reasonableness review of forecast operations, maintenance and administration ("OM&A") costs. However, any subsequent change...

AI summary The document discusses the financial statement review and reasonableness review of OM&A costs by DGT, emphasizing that the level of review did not impact the ability to execute the reasonableness review. It also raises questions about the distinction between reasonableness and prudence in cost assessments and the need for additional evidence for a prudence review.

Response - IR-3: - (a) We did not test or examine whether IESO selected the least-cost means of achieving its objectives. - (b) Yes, being satisfied that a cost is "reasonable" should be distinguished from a finding that it is optimal or n...

AI summary The response discusses the distinction between reasonableness and prudence reviews, noting that the current procedures did not assess management decisions or least-cost options. It also highlights deficiencies in the IESO-NS forecasting processes and the impact on transparency and risk of future variances.

Response - IR-10 - (a) Yes. Utilities typically own and operate transmission and generation assets and recover capital investments over time. This allows utilities to stabilize customer rates when expenses differ from forecasted amounts, m...

AI summary The response discusses the differences between utilities and ISOs regarding capital deferral practices, emphasizing the need for governance and control measures. It references prior Board direction for the IESO to develop guidelines and highlights the importance of prudence reviews and accounting policies.

2. Prudency Review IESO Nova Scotia has also asked that the Board approve the Financial Relief and confirm that the payments by NSPI are prudent. The Board may approve payments by NSPI to IESO Nova Scotia, similar to how NSPI makes monthly...

AI summary IESO Nova Scotia requests approval for Financial Relief and confirmation that NSPI's payments are prudent. The Board may approve such payments, similar to NSPI's payments to NSPML, but the SBA argues prudency cannot be assessed until IESO incurs costs. Payments under FAM are subject to audits.

ides no breakdown of monthly expenses, no cash flow projections showing timing of receipts and disbursements, no explanation regarding when certain liabilities become due, and no sensitivity analyses. Further, there is no explanation why p...

AI summary The Industrial Group argues that the proposed monthly assessment of $950,000 is not justified due to a lack of detailed financial information, including expense breakdowns, cash flow projections, and explanations for retroactive payments. They also question the prudence of using the Fuel Adjustment Mechanism as a financing source.

Questions: - a) How does IESO Nova Scotia propose to have the balances in the variance account reviewed for approval? - b) How often does IESO Nova Scotia anticipate such reviews to occur. - c) Does IESO Nova Scotia agree that all IESO Nov...

AI summary The document raises three questions regarding IESO Nova Scotia's proposed process for reviewing variance account balances, anticipated review frequency, and whether all expenditures are subject to prudency review. The focus is on financial oversight mechanisms and regulatory compliance.

Questions: 2 1. a) How does IESO Nova Scotia propose to have the balances in the variance account 2. reviewed for approval? 3. b) How often does IESO Nova Scotia anticipate such reviews to occur. 4. c) Does IESO Nova Scotia agree that all...

AI summary The questions focus on how IESO Nova Scotia proposes to review and approve balances in the variance account, the frequency of these reviews, and whether all expenditures are subject to prudency review.

- 4 (d) Please describe what IESO NS means when it says "significant uncertainty remains 5 around the exact scope of Phase II and all the work that will be required." 9 Reference: Application, Exhibit C-1 11 If the Board approves IESO NS's...

AI summary The text includes questions directed at IESO NS regarding the uncertainty around Phase II, the approval of a Net Revenue Requirement Deferral and Variance Mechanism, and the justification for interim relief. It also asks for clarification on financial liabilities, lender reluctance, cost estimates, and alternative cost recovery options.

ons will not all be filled for the entire duration of the 26/27 fiscal year, then please confirm whether the budget takes that into account. Request IR-8: Reference: Application, Exhibit B-3 1. If much of the work to stand up IESO NS’s HR...

AI summary The text includes several requests for information regarding IESO NS's budget planning, remaining work on HR systems, change management costs, ongoing projects, and the implications of approving a Net Revenue Requirement Deferral and Variance Mechanism, including potential prudence reviews for cost overruns.

t to a prudence review? In the event such costs are deemed imprudent, what would be the appropriate mechanism to address any disallowances? Request IR-10: Reference: Application, Exhibit D-1 1. With respect to IESO NS’s justification for i...

AI summary The request seeks clarification on IESO NS's justification for interim relief, including the basis for its financial claims and alternatives to cost recovery through the FAM. It also asks about the prudence of certain costs and mechanisms for addressing disallowances.

C. CONCLUSION The circumstances described in this rebuttal demonstrate that temporary financial relief is urgently required to ensure IESO Nova Scotia can continue its operations during the transition mandated by the MAEA. Even with full u...

AI summary IESO Nova Scotia requests temporary financial relief to avoid insolvency during the transition mandated by the MAEA, citing inability to meet liabilities by May 2026. They propose using the FAM as a temporary tool and address intervenor concerns regarding prudency and evidentiary sufficiency. A minimum of $950,000 monthly is required to prevent insolvency during this period.

027. Instead, IESO Nova Scotia indicated its fee and cost recovery mechanism would be submitted for the Board's review and approval in "Q2 2026, with the goal of NSEB approval prior to year-end 2026." Instead of the expected fee recovery m...

AI summary IESO Nova Scotia requested temporary financial relief to meet liabilities, proposing a monthly payment of $950,000 from Nova Scotia Power Inc. recovered via the fuel adjustment mechanism. The Board ordered hearings, and intervenors opposed the request, citing concerns about ratepayer risk, prudence review needs, and the claimed monthly amount.

27 1 (iii) quantitative testing of underlying assumptions. 26 prudence review? Please explain. 27 (d) If not, what additional evidence and analysis would be required for DGT to 28 opine meaningfully on prudence? 1 Request IR-4: 2 Reference...

AI summary The text outlines requests for clarification regarding prudence review and forecasting processes, specifically addressing deficiencies in IESO-NS's forecasting that led to recommendations for more detailed forecasting. It also asks whether these deficiencies impacted the reasonableness of the 2026/2027 revenue requirement and the risk of future variances or reliance on deferral mechanisms.

But the important thing, I think, for 18 the stakeholders is that we're managing the whole and we're not sort of off 19 randomly spending costs on things that we haven't brought in front of the Board. 21 Q. Okay. I guess, you know, if the...

AI summary The discussion centers on the importance of forecast accuracy and the use of funds as approved by the Board. Concerns are raised about using allocated funds for purposes other than those approved, such as hiring consultants instead of employees. The witness acknowledges the need for accurate forecasting and explains that budget adjustments are made based on management judgment.

- Prudency Review Framework – Shifting Position: IESO-NS's position on how the prudency review of the Deferral Account will operate has been a moving target. On June 17, when first questioned by the Industrial Group, Mr. Johnston initially...

AI summary The prudency review framework for the Deferral Account has been inconsistent, with IESO-NS changing its position on how variances would be tracked. There is also a lack of clarity on how the Deferral Account mechanics operate, including how balances would be tracked and managed.

22 23 IESO Nova Scotia submits that, based on the record provided to the Board under this matter to 46 the Board's role under section 29 of the MAEA is to review the proposed expenditures, • 47 revenue requirements, and fees and either app...

AI summary IESO Nova Scotia requests approval of a $14.85 million revenue requirement for the 2026/27 fiscal year. No evidence has been submitted challenging the prudence or reasonableness of the forecast, though issues regarding staffing, salary expenditures, and procurement costs were raised during the hearing.

5 ATCO Gas and Pipelines Ltd. v. Alberta (Utilities Commission) 2015 SCC 45 ("ATCO 2015"), para 38. 119 IESO Nova Scotia submits that, in its decision approving its 2025/26 Revenue Requirements (2026 120 NSEB 5), the Board has recognized t...

AI summary IESO Nova Scotia argues that the Board's prudence review is retrospective and that there is no distinction between prudent and reasonable costs in the context of revenue requirements. The discussion also covers staffing and compensation, with significant expenditures allocated to administration and system planning, including staff transferred from Nova Scotia Power Inc.

38 M12633 Transcript, June 25, 2026, page 507-508. 799 800 Reasonableness Review Thresholds 801 The nature of a reasonableness (or prudency) review for costs proposed for recovery through the 802 DVM was raised during the hearing. Mr. John...

AI summary The transcript discusses the reasonableness review thresholds for the DVM, with Mr. Johnston clarifying that the Board established a +/−10% variance threshold for prudency review. He notes that if variances exceed this threshold, further prudency review is required, but the financial implications for ratepayers remain undetermined at this point.

41 NSEB Decision, M12412, February 25, 2026, p.20. 875 that circumstance, the variance is subject to a further reasonableness review by the NSEB. IESO 876 Nova Scotia submits that the threshold balances operational flexibility for IESO Nov...

AI summary The NSEB decision discusses the reasonableness of the DVM variance thresholds in managing routine variances, acknowledging that while exceptional circumstances may arise, the thresholds provide a practical framework for variance management. Nova Scotia emphasizes the need for fiscal responsibility, while IESO Nova Scotia notes that actual expenditures may vary from forecasts.

1 3 REASONABLENESS, PRUDENCY, AND DISALLOWANCE 2 Reasonableness and Prudency 3 The IG provided the following regarding DGT's evidence and the prudency of IESO Nova Scotia's 4 revenue requirement application: 5 The Industrial Group therefor...

AI summary The Industrial Group (IG) argues that DGT's evidence does not show unreasonableness in IESO Nova Scotia's revenue requirement application. IESO Nova Scotia explains that reasonableness applies to prospective forecasts, while prudence is a retrospective standard, and asserts there is no distinction between a prudent and a reasonable cost.

rders otherwise. The Board is under no obligation to order otherwise, and if the IESO fails to follow the Board's recommendations, the Board is not obliged to approve the proposed revenue requirement. Once the revenue requirement is approv...

AI summary The document discusses the Board's revenue requirement approval and the interpretation of a +/- 10% variance threshold for cost categories. The IESO's interpretation is questioned by PHP, who argue that the threshold should apply to specific cost categories rather than the overall revenue requirement. Clarity from the Board is requested.

escooper.com category level." PHP believes clarity from the Board on its intention in regard to the application of the +/- 10% variance trigger would be helpful in its decision in the present matter. The IESO goes on at page 34 to state, i...

AI summary PHP requests clarity from the Board on the application of the +/- 10% variance trigger and advocates for an advance approval process for overspending to prevent imprudent expenditures. The IESO plans to provide relevant information in future revenue requirement applications, but PHP argues that this may not adequately address potential overspending concerns.

R ETROACTIVE I MPRUDENCE R EVIEWS A RE D IFFERENT IESO-NS has asked the Board to rule on the full scope of its jurisdiction under s. 29(4), including its ability to make prudence findings or order disallowances because of the implications...

AI summary The IESO-NS is seeking clarification on the Board's jurisdiction under s. 29(4) to conduct prudence reviews and order disallowances. The IG argues that the Board must distinguish between prospective revenue requirement setting and retrospective imprudence reviews, citing the deferral and variance mechanism and Board decision M12412.

3. The variance threshold assumes an approved baseline and enforceable conditions IESO-NS's current interpretation also does not align with the way the Board and IESO-NS have already treated the interim deferral and variance mechanism. In...

AI summary The document discusses the variance threshold mechanism approved by the Board in M12412, emphasizing that it requires an approved baseline and enforceable conditions. It argues that the IESO-NS's current interpretation is inconsistent with the framework established in that proceeding, which allowed for a +/-10% variance threshold and binding conditions.

new evidence to acknowledge an issue and try to correct it. And I think in this particular case, what we have is IESO Nova Scotia effectively acknowledging that this Application is based upon the prior Application, which was, you know, wit...

AI summary The discussion centers on the accuracy of forecasts in a regulatory proceeding, with concerns raised about potential inaccuracies in prior applications. The Chair acknowledges the possibility of changes in forecasts and highlights the importance of avoiding single-issue ratemaking, ensuring the Board considers broader implications.

IESO NOVA SCOTIA PANEL 199 Cr-ex, (MacAdam) 1 call it the deferral account, the prudency review for the 2 2025/2026 spend, do you anticipate that will be as part of 3 the permanent fee and Cost Recovery Application or 4 okay, so it will be...

AI summary This excerpt from a regulatory proceeding discusses the deferral account and prudency review for the 2025/2026 spend, including how a provincial grant surplus will be offset against OM&A costs. The speaker confirms that the surplus has been accounted for in the estimated spending for 2025/2026.

IESO NOVA SCOTIA PANEL 239 Cr-ex, (Rudderham) 1 deal with it. 2 I believe you've indicated that Q. 3 you're open to the possibility of interim adjustments to a 4 deferral account; is that right? 5 A. (Johnston) So I mean, at least as 6 we...

AI summary The discussion centers on the possibility of interim adjustments to a deferral account and the process of reviewing prudence and reasonableness of expenses. The speaker questions the lack of interim reporting and how the Board can assess variances without a basis for comparison. The response outlines the revenue application process and quarterly reporting as mechanisms for transparency.

IESO NOVA SCOTIA PANEL 241 Cr-ex, (Rudderham) 1 application to say why we believe we need to continue to 7 UNDERTAKING U-6 - To provide the 8 confirmed WACC that the $5 9 million is being carried at 10 BY MS. RUDDERHAM: 11 And sorry, when...

AI summary The discussion revolves around the need for finalized accounting policies and the approval process by the organization's Board of Directors. There is a mention of prudency review and regulatory context, emphasizing the importance of finalized documents for regulatory decisions.

some sort of variance, and therefore putting in the mechanism that's going to work on an enduring basis is probably efficient for all people, versus trying to renegotiate a different mechanism every year. Q. Maybe not every year, but do yo...

AI summary The discussion centers on the need for a permanent mechanism for deferral accounts, with the IESO supporting a long-term solution. There is also a focus on the prudence review process and how costs in the deferral account will be reviewed annually as part of the revenue requirement process.

October and December, correct. Q. Okay. And so during any given Revenue Requirement Application, it will be both the revenue requirement for the forthcoming year along with a prudence review of actual expenditures under the deferral accoun...

AI summary The discussion focuses on the prudence review of actual expenditures under a deferral account during a Revenue Requirement Application. It explains how a true-up process would adjust the revenue requirement by offsetting discrepancies between the deferral account and the applied revenue, potentially resulting in a net revenue requirement.

IESO NOVA SCOTIA PANEL 277 Cr-ex, (Rudderham) 1 way, you would true-up where the variance account and the 2 revenue requirement lands, as approved by the Board, and 3 that would become the new revenue requirement for that 4 particular year...

AI summary The discussion revolves around the true-up mechanism for variance accounts and revenue requirements, as well as the potential for over or under recovery of fees from load-serving entities. The IESO NS is also questioned about whether the entire deferral account would be subject to a prudency review.

1 the Board's decision. When I had read it, it had said a 2 variance for any variance that exceeds plus or minus 10 3 percent. Am I now understanding that IESO NS interprets 4 that to mean the total of the budget versus the actual is 5 goi...

AI summary The discussion centers on the interpretation of a prudence review by the Board, specifically whether it considers total budget variances exceeding 10% or focuses on cost categories. The witness clarifies that the Board's decision was made after their proposal and that the prudence review is based on the total budget versus actual figures.

IESO NOVA SCOTIA PANEL 283 Cr-ex, (Rudderham) 1 (Johnston) So our Application A. 2 came in before the Board's decision. 3 Q. Yeah. 4 (Johnston) And our Application A. 5 was for the total. 6 I'm asking for what your evidence Q. 7 is today?...

AI summary The IESO NS is discussing its position on the prudency review and deferral account in the context of a regulatory proceeding. It clarifies that it has not changed its position from its Revenue Application and will follow the Board's position for '25/'26, but the '26/'27 Application is based on its current proposal. There is no proposal for a change in the prudency review at this time.

LIST OF UNDERTAKINGS NO. PAGE NO. Ms. Rubin is currently in B.C. watching a FIFA game. Well, 1 CHRIS MILLIGAN, Previously Affirmed: 2 JOHNNY JOHNSTON, Previously Affirmed: 3 MIKE McFETERS, Previously Affirmed: 4 CROSS-EXAMINATION BY MS. RU...

AI summary The text includes a list of undertakings and a portion of a cross-examination discussing the prudency review of a deferral account, referencing a specific regulatory matter (M12412) related to the 2025/2026 Revenue Requirement. The discussion centers on the level at which the prudency review would be conducted.

IESO NOVA SCOTIA PANEL 441 Cr-ex, (Rudderham) 1 Q. You've alluded to changes not of 24 SBA. And I quote. Question of the IG: 25 26 27 And I know we've talked about, you know or my friend [has] raised some questions about disallowances. Wha...

AI summary The discussion revolves around the Nova Scotia Energy Board's authority to disallow costs, particularly in cases of material unforeseen costs applied to a deferral account and deemed imprudent. The witness, Johnston, acknowledges a previous response regarding handling such costs at a later stage.

INTERNATIONAL REPORTING INC. CERTIFIED COURT REPORTERS 1 belief that the legislation provides for under section 29, 2 as you've framed your application? Obviously, there are 3 approvals, we've talked a lot about approvals, but what 4 are t...

AI summary The discussion revolves around the interpretation of legislation and its relevance to assessing the prudence of decisions made by the IESO. The panel is seeking the witness's understanding of the legislative provisions and their implications for the reasonableness of incurred costs.

INTERNATIONAL REPORTING INC. CERTIFIED COURT REPORTERS 1 And, of course, if it becomes a 2 position at the end of the year of how that all comes 3 together, but there isn't a you know, there's isn't a 4 weekly variance that's changing in s...

AI summary The discussion revolves around prudency reviews and the handling of variances in expenditures, specifically referencing a +/- 10% threshold set by the Board. The speaker is questioning whether imprudent spending below this threshold would be considered in the review process.

IESO NOVA SCOTIA PANEL 513 Questions, (Chair) 1 that the Board couldn't address those unless it fell 2 outside of the +/- 10% ban? 3 A. (Johnston) I would certainly never 4 want to lay out how the Board intends to undertake its 5 role. 6 I...

AI summary The discussion revolves around the Board's ability to review and disallow imprudent costs, even if they fall within the +/-10% budget range. The Board maintains the right to assess such decisions, but challenges arise if costs have already been incurred.

then go to page 5 of the PDF of that same Exhibit N-13, and we could look at the response to IG IR-3(d)? BY MR. FUREY: Q. And I'll let you read this for a moment, Ms. Brown. And it actually carries over onto the top of the next page, so pe...

AI summary The discussion revolves around a prudence opinion in the context of a Board decision in Matter M12412. The witness explains that a prudence review would examine specific decisions or events that deviate from the revenue requirement, such as hiring consultants instead of in-house labour, and how they affect costs.

as somewhat different, you would need to look at that particular decision or category of decision specifically, and that would be different than what I undertook in this particular Cr-ex, (Furey) INTERNATIONAL REPORTING INC. CERTIFIED COUR...

AI summary The text discusses prudence reviews and references a Board decision from February 25, 2026, highlighting the difference between reviewing a forecasted revenue requirement and a comprehensive prudence review. It also mentions a footnote referencing the Board's decision and an exhibit for review.

y particular questions about this, Ms. Brown. I just wanted to give you an opportunity to see it as I asked you this question. Would you agree with me that your description of good Cr-ex, (Furey) utility practice is not limited to a single...

AI summary The discussion revolves around the lack of specific standards referenced in evidence for assessing reasonableness and prudency, with the witness indicating reliance on common law definitions and NERC guidelines depending on the context of the review.

g on the level of assurance or opinion you're expecting that person to provide, within some of the other utility kind of guiding principles from NERC, there would be guidance BROWN Cr-ex, (Furey) INTERNATIONAL REPORTING INC. CERTIFIED COUR...

AI summary The discussion centers on the definition of prudency in regulatory reviews, emphasizing the use of hindsight and the importance of acting with appropriate care based on available information at the time. It also mentions that financial reporting standards do not apply to a prospective review.