Topic:"Prudency Review" in M13007

1 Figure 9 – Revenue Requirement True-Up Example Source: FTI Analysis.[13](#page-29-0) 3 2 5 11 4 Notes: (1) Year 2 is not shown as it is not relevant to the Year 1 true-up. 6 The example above contemplates under-recovery of revenue requir...

AI summary The document presents two options for revenue requirement true-up, with a focus on Option 2, which allows for earlier refunds or recovery of over- or under-recovered amounts by using a compliance filing process. This approach reduces carrying costs and benefits market participants and ratepayers sooner.

True-up design The true-up will resolve any over/under-forecast of IESO revenue requirement. As shown in [Figure 15](#page-26-0) [below,](#page-26-0) if the IESO's revenue needs are higher than forecast when setting the charge, it will inc...

AI summary The true-up mechanism adjusts the IESO's revenue requirement based on actual performance compared to forecasts. If revenue needs are higher than forecast, additional charges are collected in future years. If lower, charges are reduced. The adjustment is allocated based on each MP's actual load share for the year being trued up.

I recommends that this re-evaluation, including recovery through OATT schedules, form part of its first revenue requirement application after the Phase 2 transition, rather than a separate proceeding. - v. True-up application options, i.e....

AI summary LEI recommends integrating re-evaluation and recovery through OATT schedules into the first revenue requirement application post-Phase 2 transition. It also prefers a two-year lag via annual revenue requirement application for regulatory efficiency and finds the fee calculation methodology reasonable, aligning with cost allocation and rate design principles.

r of lag for Option 1 when calculating the incremental carrying costs. Employing this method, LEI found that the estimated carrying costs for Option 1 to be ~$15,000, compared to ~$7,000 for Option 2. 53 In response to IRs from the Consume...

AI summary The document discusses the review of a fee calculation methodology, including estimated carrying costs for different options and the response from IESO Nova Scotia to information requests from the Consumer Advocate. It also details the allocation of monthly fees among load serving entities based on annual load served.

II. Introduction and Summary - Q: Please summarize the scope of your evidence. - A: My evidence reviews the IESO Nova Scotia proposal for a fee recovery mechanism for costs - related to system planning, energy resource procurement, and int...

AI summary The evidence reviewed evaluates the IESO Nova Scotia fee recovery mechanism for system planning, energy resource procurement, and interconnection functions. It finds the mechanism reasonable except for the true-up process, which is recommended to be revised to align with budget cycles and prudency reviews. A unified proceeding is suggested to ensure timely and equitable cost recovery.

Q: Do you support the IESO NS proposal for a true-up mechanism? A: No. The IESO NS proposal for the true-up schedule neither aligns cost recovery with the IESO NS budget for up to six months, nor is it likely to be aligned with LSE's perio...

AI summary The response opposes the IESO NS proposal for a true-up mechanism, citing misalignment with the IESO NS budget and LSE rate adjustments, and the lack of prudence review during true-up setting. Concerns are raised about the implications of disallowance on the nonprofit entity's function.

Q: Why is a timely prudency review important? A: The IESO NS proposal to base its fees on the basis of a budget-based test year rather than a historical test year creates the need for a distinctive process for prudency review. Furthermore,...

AI summary A timely prudency review is important because the IESO NS proposal to use a budget-based test year requires a distinctive process. Disallowing cost recovery could create a deficit, necessitating alternative funding sources. A management directive from the Board is an alternative consequence for imprudent actions and must be implemented promptly to prevent repetition of imprudent behavior.

Q: Why might a calendar year fee change be more convenient for retail rate adjustments? A: While I have not conducted a survey of actual practices by all of Nova Scotia's retail electric utilities, it is my general experience that retail r...

AI summary A calendar year fee change is convenient for retail rate adjustments as it aligns with the common practice of implementing rate changes on January 1, simplifying the process of updating IESO NS fee allocations. The Board may also order provisional fees in complex prudence challenges, allowing proceedings to extend beyond December.

6 Request IR-11: - 7 Reference: Application, Section 4.3 (Revenue Requirement True-up Option 2), p.31-32; - 8 Section 5, p.39, footnote 17. - 9 Preamble: IESO-NS's preferred true-up methodology (Option 2) would see revenue - 10 requirement...

AI summary The text outlines a request for detailed information on IESO-NS's preferred true-up methodology (Option 2), including the process for compliance filings, stakeholder scrutiny, prudency review timelines, and the impact of carrying costs on fee amounts for different true-up options.

11 Request IR-2: 12 13 Regarding the proposal for Option 2, as described on p. 30-37 of the Application, please confirm 14 the following statements. If not confirmed, please explain. 15 16 (a) The compliance filing would include the follow...

AI summary The text requests confirmation of details related to a compliance filing for Option 2, including the inclusion of FY1 expenditure reports, recalculated fees, timing of the filing, assumptions required for reporting, and the handling of fees for FY2. It also notes that the filing will not undergo a hearing process and defers prudence review to the FY3 application.