DECISION 2016 NSUARB 95 M07176 NOVA SCOTIA UTILITY AND ... - Board Decision.pdf · DECISION 2016 NSUARB 95 M07176 NOVA SCOTIA UTILITY AND REVIEW BOARD IN THE MATTER OF THE PUBLIC

DECISION 2016 NSUARB 95 M07176

NOVA SCOTIA UTILITY AND REVIEW BOARD

IN THE MATTER OF THE PUBLIC UTILITIES ACT

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IN THE MATTER OF AN APPLICATION by NOVA SCOTIA POWER INCORPORATED for approval of its Annual Capital Expenditure Plan for 2016

BEFORE: Roberta J. Clarke, Q.C., Panel ChairKulvinderS. Dhillon, P.Eng., Member Murray E. Doehler, CPA, CA, P.Eng., Member

COUNSEL: NOVA SCOTIA POWER INCORPORATEDBrian Curry, LL.B.Mark Peachey, LL.B.

CONSUMER ADVOCATEWilliam L. Mahody, Q.C.

SMALL BUSINESS ADVOCATEE. A. Nelson Blackburn, Q.C.Melissa MacAdam, LL.B.

INDUSTRIAL GROUPNancy Rubin, Q.C.

PORT HAWKESBURY PAPER LPJames MacDuff, LL.B.

BOARD COUNSEL: Richard J. Melanson, LL.B.

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HEARING DATE:

FINAL SUBMISSIONS:

DECISION DATE:

DECISION:

April 5, 2016

April 22,2016

June 8, 2016

Terms of Consensus approved. Directives summarized at Paragraphs [141] to [144]

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Table of Contents

I INTRODUCTION....................................................................................................................4II 2015 ACE PLAN STATUS.....................................................................................................7III 2016 ACE PLAN.....................................................................................................................9

1. Content of the 2016 ACE Plan.................................................................................... 112. Items for Which Board Approval is Sought...............................................................13

Findings................................................................................................................................. 153. Items Which NSPI Intends to Submit for Later Approval......................................... 154. Carryover Projects.........................................................................................................165. Items Less Than $250,000......................................................................................... 167. Routine Capital Expenditures/Program.......................................................................17

Findings................................................................................................................................. 18IV TERMS OF CONSENSUS.................................................................................................. 19

Findings.................................................................................................................................20V OTHER MATTERS.............................................................................................................. 20

1. ACE Plan Compliance with Capital Expenditure Justification Criteria...................20Finding...................................................................................................................................21

2. Outstanding Issues from the Stakeholder Engagement Process...........................21a) Economic Analysis Model........................................................................................ 21b) Revenue Requirement Model..................................................................................22Finding................................................................................................................................... 22

3. Issues from Board ACE Plan Directives.....................................................................23a) Integrated Resource Plan (“IRP”)............................................................................ 23b) Reliability.....................................................................................................................23Findings.................................................................................................................................26

4. Vegetation Management/Transmission Right-of-Way Widening............................26Findings.................................................................................................................................28

5. Quarterly Capital Reports.............................................................................................28Finding................................................................................................................................... 29

6. Consultative Process and Transparency....................................................................29Findings.................................................................................................................................33

VI SUMMARY............................................................................................................................34

Schedule “A” Status of the 2015 ACE Plan ProjectsSchedule “B” 2016 ACE Plan Approved ProjectsSchedule “C” 2016 ACE Plan Projects NSPI Intends to Submit LaterSchedule “D” 2016 ACE Plan Projects Set Aside for Individual Review

Attachment 1 - Terms of Consensus

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I INTRODUCTION

[1] Nova Scotia Power Inc. (“NSPI”, “Company”, and “Utility”) filed an application

(“Application”) with the Nova Scotia Utility and Review Board (“Board”) for approval of its

2016 Annual Capital Expenditure Plan (“ACE Plan”). The Application was filed electronically

on November 12, 2015.

[2] The Application included responses to previous Board directives, and reports

on discussions with stakeholders.

[3] In its covering letter, NSPI requested that the Board:

1. Establish a hearing process for the review of NSPI's 2016 ACE Plan.2. Approve the Confidentiality Undertaking, and confidential treatment of certain information

filed in support of the 2016 ACE Plan, as described in the application, and in accordance with Board Rule 12.

3. Approve 73 capital items with 2016 budget spending of $59,589,833, and total project spending of $92,452,908.

4. Approve capital routine programs with 2016 budget spending of $81,990,925.5. Approve 2016 AFUDC Rate of 7.23% for capital purposes.

[4] As required in the November 24, 2015 Hearing Order, a Notice of Public

Hearing was published in the Halifax Chronicle Herald on November 28 and December 1,

2015, and in the Cape Breton Post on November 28, 2015. Notices of Intervention were

filed by the Industrial Group, the Small Business Advocate (“SBA”), the Consumer Advocate

(“CA”), and Port Hawkesbury Paper LP (“PHP”).

[5] In its letter of December 8, 2015, NSPI provided comments on the Preliminary

Issues List, which the Board issued on December 4, 2015. In the same letter NSPI also

withdrew its request for approval of the Allowance For Funds Used During Construction

(“AFUDC”) rate as part of the 2016 ACE Plan proceeding. The Board notes that NSPI made

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a separate Application on December 18, 2015, for approval of both the AFUDC and

Weighted Average Cost of Capital (“WACC”) rates (M07215).

[6] The following Final Issues List was issued by the Board on December 11,

2015:

1. ACE Plan compliance with the Capital Expenditure Justification Criteria (“CEJC”);

2. Outstanding issues from the Stakeholder Engagement Process:a) Economic Analysis Modelb) Revenue Requirement Model

3. Issues from Board ACE Plan directives, including but not limited to:a) Alignment of Sustaining Capital with the Integrated Resource Planb) Reliability Directive

[7] The Board reviewed and approved NSPI’s revised Confidentiality Undertaking

for this Application on December 2, 2015.

[8] In its letter of November 26, 2015, the Board asked NSPI to justify confidential

treatment of certain information, and in general, to explain the criteria used to identify

commercially sensitive cost information. NSPI’s response, received on December 9, 2015,

included a revised 2016 ACE Plan application and confidentiality matrix, which resulted in

the Board’s approval of NSPI’s request for confidential treatment of certain portions of the

2016 ACE Plan Application, as revised.

[9] Information Requests (“IRs”) to NSPI were issued on December 22, 2015, by

Board staff, the SBA, and the CA. The Industrial Group and PHP did not file IRs. NSPI

provided its responses to the IRs on January 22, 2016, and also asked the Board to approve

its request for the confidential treatment of information filed in support of the 2016 ACE Plan

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IR responses. The Board approved the above noted request in its letter of January 28,

2016.

[10] On February 12, 2016, evidence was filed by Mary Neal, of Daymark Energy

Advisors, on behalf of the SBA, and by Paul Chernick, of Resource Insight Inc., on behalf

of the CA. No IRs were issued to Intervenors. Reply evidence was received from NSPI on

March 22, 2016. The Board received no letters of comments, and no requests to speak.

[11] NSPI filed Terms of Consensus (“Consensus document”) with the Board on

April 1,2016, signed by the CA, the SBA, the Industrial Group, and NSPI.

[12] The SBA, NSPI, and the CA filed opening statements on April 1,2016.

[13] The public hearing took place at the offices of the Board in Halifax on April 5,

2016. As no requests to speak were received, an evening session was not held.

[14] NSPI was represented at the hearing by Brian Curry, LL.B., and Mark

Peachey, LL.B. The witness panel for NSPI comprised of Mike Sampson, Director of

Generation Asset Management; Jamie MacDonald, Senior Director of Power Production;

Paul Casey, Senior Director of Transmission and Distribution; Craig Flemming, Acting

Senior Manager, Fuels Planning and Performance; Tim Wood, Director of Regulatory

Affairs; and Mark Sidebottom, Chief Operating Officer.

[15] William Mahody, Q.C., appeared at the Hearing on behalf of the CA.

Nelson Blackburn, Q.C., and Melissa MacAdam, LL.B., appeared on behalf of the SBA.

Nancy Rubin, Q.C., appeared on behalf of the Industrial Group. Richard J. Melanson, LL.B.,

acted as Board Counsel.

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[16] NSPI provided responses to Undertakings U-1 to U-4 on April 7, 2016. Written

closing submissions were received on April 14, 2016, from the CA, and on April 15, 2016,

from the SBA, NSPI, and the Industrial Group. A reply to closing submissions was filed by

NSPI on April 22,2016.

II 2015 ACE PLAN STATUS

[17] In its 2015 ACE Plan Decision dated May 5, 2015 [2015 NSUARB 92], the

Board approved certain capital expenditures and issued a number of directives to NSPI.

The Board also approved a Terms of Consensus filed by NSPI on February 18, 2015, and

signed by the CA, the SBA, the Industrial Group, and NSPI.

[18] In accordance with the 2015 ACE Plan Decision directives, NSPI continued

its consultations with stakeholders on a number of issues, and on June 30, 2015, submitted

its 2015 ACE Plan Stakeholder Engagement Report (“Report”). NSPI’s submission included

a detailed summary of its consultations with the 2015 ACE Plan stakeholders, and copies

of the revised Capital Expenditure Justification Criteria (“CEJC”) documents for Board

information and approval.

[19] Following a review of the Report (M06963), in its letter of November 17, 2015,

the Board approved the revised CEJC Summary document and accepted the revised

Detailed CEJC document. The Board also advised NSPI it intended to further review certain

issues discussed in the Report during the 2016 ACE Plan Hearing.

[20] As a part of the 2015 ACE Plan approval process, the Board approved 84

individual capital projects with the total 2015 budgeted amount of $65,638,037, and

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$72,397,621 for routine capital expenditures. NSPI advised it had completed or initiated 82

individual capital projects, while the remaining two projects were deferred, one of them to

2016, and another to 2017.

[21] According to information provided in Section 1.5 of the Application, “2015 ACE

Capital Items Deferred/Cancelled”, NSPI has cancelled or deferred 27 projects that were

originally included in the 2015 ACE Plan, with a forecasted total spending of $21.4 million.

NSPI provided a list, and a short justification for their deferral or cancellation. Of these

projects, two were included in the 2015 ACE Plan for approval, 12 were to be filed separately

as individual capital items, and the remaining 13 were projects under $250,000.

[22] The Board, during the hearing, questioned the accuracy of information

provided in the “2015 ACE Capital Items Deferred/Cancelled” list. NSPI’s explanations

provided in Undertaking U-3 confirm that a number of capital items that had been deferred

from the 2015 to the 2016 ACE Plan were incorrectly omitted from the “2015 ACE Capital

Items Deferred/Cancelled” list. While continued improvement in clarity and accuracy of

information presented in NSPI’s ACE Plan applications has been widely acknowledged and

appreciated by all stakeholders, further improvements may result from discussions with

stakeholders.

[23] Prepared by the Board, and attached as Schedule “A” to this Decision, for

information purposes only, is a status report as of April 22, 2016, of all 2015 ACE Plan

capital items that NSPI had intended to submit after the 2015 ACE Plan submission, and

therefore not approved as a part of the 2015 ACE Plan hearing process.

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III 2016 ACE PLAN

[24] The Public Utilities Act, R.S.N.S. 1989, c. 380, as amended (“Act’), gives the

Board broad regulatory oversight over public utilities and their capital expenditures.

Sections 35 and 35A (1) of the Act read as follows:

Approval of improvement over $250,00035 No public utility shall proceed with any new construction, improvements or betterments in or extensions or additions to its property used or useful in furnishing, rendering or supplying any service which requires the expenditure of more than two hundred and fifty thousand dollars without first securing the approval thereof by the Board.

35A (1) Notwithstanding Section 35, a public utility may submit to the Board for approval an annual capital expenditure program.

[25] NSPI, in its Application, described the main guiding objectives and goals in

preparing the 2016 ACE Plan:

Nova Scotia Power is making every effort to reduce upward pressure on future electricity rates while providing safe, reliable service and abiding by all environmental and regulatory obligations. Our customers and stakeholders have consistently told us through recent regulatory proceedings, including prior General Rate Applications (GRA) and Annual Capital Expenditure (ACE) Plan proceedings, and through direct conversations with customers, that this is what they expect of Nova Scotia Power. Our ACE Plans, including the 2016 ACE Plan, are developed to meet our customers’ expectations.

[Exhibit N-1, p. 4]

[26] Mr. Sidebottom, in his opening remarks, noted:

As with prior years, the projects included in this plan have undergone a stringent ranking process. We feel comfortable that each project submitted to the Board for approval represents a responsible investment, and that the plan overall provides an appropriate balance between spending restraint and the investment that is needed to maintain a reliable system. It also enables us to carry out compliance work while adjusting to an evolving power system, one that runs on the greatest amount of variable renewable electricity ever produced in Nova Scotia.

[Transcript, p. 26]

[35] NSPI’s 2016 ACE Plan has been presented in a public forum with participation

by stakeholders, which the Board believes provides interested parties and the public with

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greater transparency regarding processing NSPI's capital work orders, including the ACE

Plan.

[36] NSPI’s continued discussions with stakeholders regarding a wide range of

issues have significantly improved the quality of NSPI’s ACE Plan filings, and allowed for

their more efficient review. As in previous years, this continued improvement was noted by

participants.

[37] In her direct testimony, Ms. Neal stated:

NSPI has collaborated with stakeholders and is committed to improve the ACE Plan. Most recently, we collaborated to update the CEJC with NSPI's new project ranking methodology and expand information provided in the ACE Plan regarding reliability, asset management, and consistency with NSPI's most recent IRP. In addition, NSPI is now providing stakeholders with a database of ACE Plan projects in Excel and a list of projects from the third quarter capital report. We look forward to continuing this collaboration in the future.

[Exhibit N-6, pp. 4-5]

[38] In his opening statement the CA noted:

Following the filing of NSPI's reply evidence on March 22nd, Consumer Advocate and other interested parties held discussions with NSPI in an attempt to reach a common position regarding the recommendations of consultants to the Consumer Advocate and the Small Business Advocate.

The Consumer Advocate is pleased that discussions with NSPI and interested parties have led to a Terms of Consensus that has been filed with the Board and is available for review.

The Board will note that many of the outstanding issues have been addressed by an agreement to refer the items to a consultative process. Subject to the Board's direction, this consultative process will begin shortly after the final Order in this matter. In the past, this consultative process has led to better understanding and many improvements in annual ACE filings. The Consumer Advocate is hopeful that the suggested consultative process will yield similar results for implementation commencing in 2017.

[Exhibit N-13]

[39] NSPI shares the view that the continued discussions with stakeholders have

had a positive influence on the ACE Plan proceedings. Mr. Sidebottom stated:

I would also like to express thanks to our stakeholders for their valued and constructive input into the ACE Plan process. The 2016 ACE Plan has benefitted greatly from the continued collaboration and consultation with our stakeholders. This is evident by the fact that Nova Scotia Power was able to arrive at a Terms of Consensus with the Consumer Advocate, the

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Small Business Advocate, and the Industrial Group, which was filed with the Board. The Terms of Consensus serves to resolve all outstanding issues on specific capital projects and defers some issues to subsequent discussions.

We look forward to continuing this collaboration in future ACE Plans.[Transcript, p. 27]

[40] The Board encourages the parties to continue this approach in order to find

mutually acceptable solutions for outstanding issues.

1. Content of the 2016 ACE Plan

[41]

[42]

NSPI’s 2016 ACE Plan submission included the following:

• A list of capital projects for which NS Power is seeking approval.• A list of capital Routines for which NS Power is seeking approval.• A list of capital projects to be submitted at a later date for subsequent

approval.• Responses to stakeholder engagement commitments and UARB ACE

Plan Decision directives from prior proceedings.

The proposed 2016 ACE Plan spending amounts to $279.9 million. The

Application provides a summary of proposed spending by category:

Previously

2016 UARB Approval Request

($M)

UARB Capital Items Approved

2016 ACE Plan SpendApproval

WotRequired

($M)

Forecast for Later Filing in 2015/2016

($M)

Capital Projects

with 2016 Carryover

2016 ACE Plan ($M)

($M)Capital Item Approval Sought through the 2016 ACE Process{Including Routine Capital

Projects*!

141.6 141.6

Capital Items Forecast forLater Filing in 2015/2016

56.3 56.3

Carryover Projects 56.7 56,7

Capital Items Less Than $250K 15.3 15.3

Point Aconi Capital Spend 10.0 10.02016 ACE Plan $141.6 $25.3 $56.3 $56.7 $279.9

[Exhibit N-1, p. 23]

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[43] The Board observes that the proposed 2016 ACE Plan budget is similar in

amount to the actual annual spending in recent years.

[44] The Board notes that, as part of this Application, NSPI is requesting Board

approval for 2016 capital expenditures in the amount of $141.6 million. This figure includes

capital spending of $59.6 million for new 2016 ACE Plan individual capital projects, and

$82.0 million for routine capital projects.

[45] The budgeted amount of $56.3 million covers the estimated cost for capital

items that were not ready for submission to the Board at the time of filing. NSPI anticipates

that these capital items will be filed for approval throughout 2016. There are 50 such

projects and, if approved, the total forecasted spending on these items would amount to

$230.6 million.

[46] The Application included $56.7 million for carryover spending in 2016, $15.3

million for individual capital items less than $250,000, and capital expenditures associated

with Point Aconi of $10.0 million, which do not require Board approval.

[47] The following is an overview from NSPI’s Application of the proposed 2016

capital expenditures segregated by the investment type:

Investment Type Amount

Sustaining Capital $188.9 million

Regulatory / Compliance $ 43.3 million

Customer Growth $ 30.6 million

Automated Metering Infrastructure $ 7.0 million

LED Streetlight Replacement $ 4.7 million

Metro Transmission Upgrades $ 4.7 million

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Maritime Link Transmission $ 0.8 million

Total 2016 ACE Plan Budget $279.9 million

[48] NSPI provided an overview of capital expenditures anticipated for years 2016

to 2020. Information provided indicates a large increase in spending for years 2017 and

2018. The main contributors for this increase in 2017 are the Maritime Link Transmission,

Metro Transmission Upgrades, and the Automated Metering Infrastructure project. An

overhaul of the Wreck Cove Hydro generating station, and an investment in the Mersey

Hydro System, are the main factors for a budget increase in 2018.

[49] In its Application, NSPI notes that investments in sustaining its assets,

customer driven investments, and investments required by regulatory or environmental

standards, are forecasted to be “reasonably stable”. However, NSPI also notes that

strategic capital investments may create larger capital expenditures in future years.

2. Items for Which Board Approval is Sought

[50] As part of the 2016 ACE Plan approval process, NSPI requested Board

approval for the amount of $174,443,832. This amount includes $92,452,908 for 73

individual capital items. NSPI plans to spend $59,589,833 on these projects in 2016, and

an additional $32,863,074 in 2017, and beyond. NSPI also requested approval of the

amount of $81,990,925 for routine capital expenditures in 2016.

[51] Mr. Chernick in his direct testimony did not dispute the justification for any of

these projects:

...My comments are directed toward the computation of economic justification of projects, and more meaningful presentation of the effects of capital expenditures on revenue requirements.I have not identified any specific projects that should be deferred.

[Exhibit N-7, p. 5]

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[52] The Board notes that the issues raised by Mr. Chernick are addressed in the

Consensus document.

[53] Ms. Neal recommended that the Board reject the following three transmission

related projects due to lack of adequate justification, or need:

• Cl# 46587 - Metro Voltage Support Add Capacitor• Cl# 46811 - 2H Armdale Transformer Addition• Cl# 48061 - New Mobile Substation 69-25/12-4kV, 6MVA

[54] NSPI in its Reply Evidence submitted additional information to justify these

projects. The Consensus document stated that the SBA was satisfied with NSPI’s response

regarding Cl# 46587, and that the Intervenors do not oppose the approval of this project.

NSPI agreed to withdraw its approval request for the remaining two projects, and to resubmit

them as subsequent capital work order applications.

[55] The CA noted, in his closing submission:

On April 8, 2016, following the close of the hearing in this matter, the government amended the Renewable Electricity Regulations. One of these amendments had the effect of removing “must run” designation on the Port Hawkesbury biomass plant.

In the circumstances, the Consumer Advocate requests the Board direct NSPI to cease any capital spending at the Port Hawkesbury biomass plant until such time as the spending can be justified according to the usual economic criteria.

[CA Closing Submission, April 14, 2016, p. 2]

[56] The Industrial Group supported this position in its closing submission. In light

of this amendment, the Board directs NSPI to review all capital projects related to this plant.

As a consequence, the capital approval for two projects (Cl#47613 and #47614) is withheld,

and they are set aside for separate review. The Port Hawkesbury project that is less than

$250,000, and the related Routine, should also be reviewed for prudency.

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[57] As a result of the agreed adjustments noted above, NSPI’s revised request is

for the approval of 71 individual capital items with 2016 ACE Plan spending of $58,124,227,

and total project spending of $88,179,078. These amounts have been further adjusted to

2016 ACE Plan spending of $57,223,473, and total project spending of $87,278,325, after

removal of the Port Hawkesbury biomass capital projects.

Findings

[58] The Board approves the projects and capital expenditures set out in Schedule

“B”. Should any of them be either cancelled or deferred, NSPI is required to resubmit them

for Board approval.

[59] The Board considers that those projects and capital expenditures set out in

Schedule “D” are items where the Board requires further information. Approval for those

items is withheld until NSPI submits a request for approval for each of the capital

expenditures and provides the Board with appropriate justification.

[60] Routine capital expenditures are discussed separately in this decision.

3. Items Which NSPI Intends to Submit for Later Approval

[61] In its Application, NSPI identified projects that were not ready for submission

to the Board, and anticipated they would be filed for approval throughout 2016.

[62] The Board has prepared Schedule “C”, which lists the projects NSPI intends

to submit later. The 2016 budget for these projects is $56,322,449, while the total

forecasted spending would amount to $230,554,091. The Board makes no findings with

respect to projects listed in Schedule “C”.

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[63] The Board observes there are a number of projects that NSPI intends to

submit later with an estimated total cost of $5 million or more. The Board notes that, based

on the nature and cost of these projects, all, or some, of them may be subject to a hearing

process.

4. Carryover Projects

[64] Carryover projects are those which have already received Board approval in

previous capital expenditure filings, but have not yet been completed. Board approval is

not required for these items as part of the 2016 ACE Plan, although the expenditures will

be made during this and following years.

[65] In 2016 NSPI expects to spend $56,692,463 on capital items that have been

already approved by the Board, and an additional $40,191,580 in following years.

5. Items Less Than $250,000

[66] In accordance with s. 35 of the Act, Board approval is not required for capital

expenditures of less than $250,000. The proposed spending on such projects in 2016 is

$15,312,668.

6. Point Aconi Generating Station

[67] Pursuant to s. 36 of the Act, the Board has no jurisdiction to consider

expenditures related to the Point Aconi Generating Station. Details of these costs provided

in the 2016 ACE Plan are for information purposes only.

[68] The proposed 2016 capital spending on the Point Aconi Generating Station

includes $6,043,836 for new individual projects, $461,031 for Routines, and $3,513,800 on

carryover spending, for a total of $10,018,667.

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7. Routine Capital Expenditures/Program

[69] Routine capital expenditures include:

...recurring annual expenditures for replacement of equipment (like-for-like replacement), additions to existing equipment base resulting from system growth, and addition of customers to the system.


[70] The four major categories of Routines are Generation, Transmission,

Distribution and General Plant. The Company provided details of Sub-Routines in each

category, including the type and estimated budget.

[71] NSPI requested Board approval for its routine capital program in the amount

of $81,990,925, exclusive of Point Aconi Routine spending of $461,031.

[72] The Board notes that the proposed 2016 Routine capital expenditures budget

is over $10 million higher than actual Routine spending seen in the past few years. This is

due to the transmission right-of-way widening project, discussed elsewhere in this Decision,

in amount of $5,999,956 under T010. As discussed elsewhere in this Decision, due to its

nature, the Board directs that this project be shown as a separate capital project rather than

a Routine in future ACE plans.

[73] In addition to the transmission right-of-way widening work, there is $2,994,461

in distribution right-of-way widening work contained within distribution Routines (D010). In

its Application, NSPI noted:

NS Power is seeking approval as part of the 2016 ACE Plan of $3 million for the distribution widening routine, D010, in 2016. The $3 million comes from the portion of the annual $10.4 million that is spent on managing the vegetation in distribution ROWs to a sustainable state.This work will expand the ROW to the standard width and will reduce the future operating costs for the ROW asset as the vegetation will no longer need to be reclaimed; the new ROW width will only need to be sustained. [Emphasis added]


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Findings

[74] NSPI has stated that it is transferring $3 million from the current $10.4 million

budget for distribution vegetation management. In its supplemental decision on the review

of NSPI’s state of preparedness and response to Post-Tropical Storm Arthur [2015

NSUARB 221], the Board treated expenditures for vegetation management for transmission

and distribution differently. For transmission, it directed that the proposed expenditure be

approved either in a GRA or as part of a capital expenditure application. It rejected NSPI’s

proposed increase of the distribution vegetation management budget by $10 million to $20.4

million. The Board was not prepared to increase this expense item outside a general rate

proceeding because it would have resulted in an increase in rates.

[75] From the explanation offered by NSPI, noted above, the Board assumes that

NSPI has increased the distribution Routine budget by an amount of $2.4 million from the

operating budget over the $600,000 in the 2015 ACE Plan. This means that NSPI is

reducing its operating expenses by $2.4 million in 2016, thus increasing profits, with a

corresponding increase in its rate base. This action will only increase rates which the Board

does not approve. Accordingly, the Board reduces the Routine budget for D010 to

$600,000, to be in line with the 2015 ACE Plan amount.

[76] With the distribution right-of-way widening Routine revised as noted above,

the Board approves NSPI’s 2016 Routine capital expenditures in the revised amount of

$79,596,464.

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IV TERMS OF CONSENSUS

[77] The parties have come to an agreement which was filed as Exhibit N-10. The

Consensus document was signed by all parties except Port Hawkesbury Paper who advised

that, as it was not an active participant in the hearing, it did not consider it appropriate or

necessary to sign.

[78] The Consensus document, which is Attachment 1 to this Decision, settles all

matters related to the 2016 ACE Plan.

[79] NSPI has agreed, within 30 days of the Board issuing its decision, to start a

stakeholder consultation process on several matters. These matters are attached as

Appendix A to the Consensus document.

[80] Mr. Sidebottom, in NSPI’s opening statement, stated as follows:

...Nova Scotia Power was able to arrive at a Terms of Consensus with the Consumer Advocate, the Small Business Advocate and the Industrial Group, which was filed with the Board. The Terms of Consensus serves to resolve all outstanding issues on a specific capital project and defers some issues to subsequent discussions. We look forward to continuing this collaboration in future ACE Plans.


[81] Mr. Mahody, in his opening comments, noted:

The Consumer Advocate is pleased that discussions with NSPI and interested parties have led to a Terms of Consensus that has been filed with the Board and is available for review.

[Exhibit N-13]

[82] Mr. Blackburn in his opening statement acknowledged the SBA acceptance

of the Consensus document and referred to two issues that need further clarification. These

issues are incremental spending over depreciation, and replacement energy costs. Echoing

comments from the CA and the Industrial Group, he stated:

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The SBA is satisfied that this issue is better dealt with through stakeholder discussions, and is in agreement with the proposal, as set out in Appendix A to the Terms of Consensus, to undertake those discussions within 30 days of the Board issuing a decision in this matter.


[83] Ms. Rubin on behalf of the Industrial Group stated:

The Industrial Group did not retain a consultant in this process, as we perceived our interests to be fully aligned with those of the two Advocates. And we were afforded the opportunity to fully participate in the collaborative process and we observed NSPI to be quite responsive to the concerns raised by consultants for the Advocates.

[Transcript, p. 13]

Findings

[84] The Board, in many previous decisions, has set out the principles that apply

in consideration of settlement agreements/consensus documents [2008 NSUARB 140].

[85] The Consensus document represents the resolution of all the issues identified

in the Final Issues list. It is a negotiated agreement between all the parties represented at

the hearing.

[86] The Board has considered the evidence and the Consensus document. The

Board accepts the recommendations of the signatories and approves the Consensus

document as filed.

V OTHER MATTERS

1. ACE Plan Compliance with Capital Expenditure Justification Criteria

[87] In the 2015 ACE Plan Application, NSPI used a new ranking system to place

the generation projects in a priority order. The Board directed NSPI to discuss with

stakeholders any changes to the CEJC, including the change in ranking for generation

projects used in the 2015 ACE Plan, and any changes to future ACE Plan methodologies,

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before submitting them to the Board. The Board further directed NSPI to make application

to the Board on or before June 15, 2015, for amendment of the CEJC regarding the change

in ranking for generation projects.

[88] After consultation with stakeholders, an updated CEJC was submitted to the

Board for approval. After Board comments were incorporated into the document, the

revised Summary CEJC was approved.

Finding

[89] The Board finds that the 2016 ACE Plan Application is in compliance with the

revised CEJC, and directs NSPI to continue the process of discussing any future changes

with stakeholders prior to submitting them to the Board.

2. Outstanding Issues from the Stakeholder Engagement Process

[90] As noted previously in this Decision, NSPI and stakeholders engaged in a

consultative process to deal with issues that were not decided as part of the terms of

consensus in the 2015 ACE Plan hearing. The following two issues were left unresolved in

the stakeholder engagement process:

a) Economic Analysis Model

[91] The CA and SBA both submitted evidence which questioned NSPI’s

methodology in calculating replacement energy costs in the Economic Analysis Model

(“EAM”). The CA took issue with numerous other elements of the EAM including: useful life

and analysis period used; projected capacity factors; projected increases in failure rates;

and timing of capital projects.

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[92] The issues, which have been partially resolved, are further deferred to a

consultative process to take place subsequent to the Board’s decision, as agreed to by the

parties to the Consensus document.

b) Revenue Requirement Model

[93] The CA and SBA raised issues with the Revenue Requirement Analysis

contained within the ACE Plan, relating to: treatment of incremental spending over

depreciation; treatment of the administrative overhead credit; and treatment of the AFUDC

credit.

[94] As part of the Consensus document, NSPI agreed to revise the Revenue

Requirement Analysis to: move the incremental revenue requirement of 5 year plan lines to

the bottom of the table; amend the calculation of new incremental regulated capital assets

to the total of capital spending in the five year capital plan less depreciation of all assets;

and treat the entire amount of spending in the final year of the revenue requirement directive

as an addition to property, plant and equipment.

[95] The parties to the Consensus document also agreed that there would be a

second table included as part of the next ACE Plan application which addresses some of

the other issues. As per the Consensus document, the details of the additional table were

deferred to the consultative process to take place subsequent to the Board’s decision.

Finding

[96] The Board directs that the remaining outstanding issues on these two items

should be first dealt with in the stakeholder consultative process.

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3. Issues from Board ACE Plan Directives

a) Integrated Resource Plan (“IRP”)

[97] In the Application, NSPI stated:

...The 2016 ACE Plan was derived using the same asset management practices used for the sustaining capital forecast assumptions for the 25 year planning period of the 2014 IRP. As a result the sustaining capital investments in NS Power’s thermal and combustion turbine fleet are well aligned with the assumptions used throughout the 2014 IRP...


[98] There were no submissions about the alignment of the 2016 ACE Plan with

the IRP. The Board accepts this filing as satisfaction of item 3(a) of the Final Issues list.

b) Reliability

[99] In past ACE Plan applications, reliability of the electricity system has been

discussed at some length. It has been referred to as an important focus by NSPI. In the

2015 application (M06514), the impact of deferral of projects on reliability was identified on

the Final Issues List.

[100] The 2015 Terms of Consensus provided:

4. As part of the reliability directive in future ACE Plans, NS Power will provide additional information regarding its plans for replacement of aging transmission and distribution equipment in accordance with the following recommendation on this matter made by the SBA's consultant, Mary Neal, at page 12 of her evidence in this proceeding dated January 16, 2015:

"I recommend NSPI provide more information regarding its plans for replacement of aging transmission and distribution equipment to better show how it justified the target investments. This should include (where possible):• Descriptions of assets to be replaced and their ages,• Goals for strategic replacement programs, such as targets for age profiles of different asset classes,• Expected improvements in asset age profiles due to each ACE Plan project involving replacement of transmission and distribution equipment considered at end-of-life,• More detailed descriptions of how NSPI targets specific assets every year, whether based on age, performance degradation, or other factors, and• Any recent, relevant inspection data."

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5. As part of the reliability directive in future ACE Plans, NS Power will provide an update on its storm performance and related capital investment strategies to improve storm performance.

[Board Decision, 2015 NSUARB 92, pp. 16-17]

[101] The Board accepted the proposed consultative process and NSPI’s intention

to provide more detailed information in future ACE Plans.

[102] In this Application, NSPI stated that the ACE Plan:

...continues to be an important part of reducing upward pressure on rates through timely investments to strengthen system reliability and preserve our existing assets.”

[Exhibit N-1, p. 6]

[103] NSPI confirmed that, as part of stakeholder consultations, it had agreed to

include “more detailed information regarding [its] reliability investment strategy” and storm

performance updates, as well as related capital investments in a format ultimately agreed

upon with stakeholders.

[104] This information appeared in section 8.1.7 of the 2016 ACE Plan. The tables

provided were updated to the end of calendar year 2015 in response to Undertaking U-4.

[105] The tables show improved results over the past several years with the

exception of 2014, when Post-Tropical Storm Arthur had a severe impact.

[106] Throughout its evidence, NSPI referred to its focus on transmission and

distribution projects to ensure overall system reliability. Reliability is given a high ranking in

the prioritization of projects.

[107] Ms. Neal, the SBA’s consultant, noted improvement in the information

regarding reliability in the ACE Plan, as well as improved reliability performance with the

exception of storm performance.

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[108] Two of the projects which the SBA had recommended not be approved at this

time, and which were subsequently withdrawn in the Consensus document, had aspects

relating to reliability which NSPI addressed in its Reply Evidence.

[109] Mr. Chernick, on behalf of the CA, noted that the benefits of most projects

include increased reliability.

[110] The Board explored the issue of storm performance reliability with the NSPI

panel at the hearing:

CHAIR: ...Does the company consider that its current strategies and level of investment will be sufficient to improve its storm performance reliability indices? And if not, what does the company propose to do to make improvements?

MR. CASEY: We - I’ll talk of both sides of that. So the two leading causes being defective equipment and tree contacts.

Defective equipment lies predominantly in our asset management strategy. So we have a very robust asset management strategy where every year we look at the worst performing [feeders], we look at the most outages caused by certain types of equipment and we focus on those for improvements. So I feel like we have a really good line of sight and a good investment strategy on deteriorating equipment and what we would call defective equipment, which is the CEA classification of it. But it’s basically equipment that’s failing, for one reason or another.

Predominantly storm-related outages, for the vast majority of outages are caused by trees. And, in particular, it’s trees falling from outside of our right-of-ways. Not a lot of trees that grow up into the line are going to cause an outage in a storm. They don’t exist, for the most part, and it’s the wind -- strong winds blowing trees falling from outside our right-of-way. We had a storm event a couple of days ago, pretty strong winds, very strong winds in Port Hawkesbury area and we saw several instances of trees falling from outside our right-of-way. That’s very typical of what we would see.

So that's really the intent of our increases in both DO&O and TO&O that’s in the 2016 application is around making a step change in the way that we manage our right-of-ways.

I always say the - we have two strategies: one is to get trees away from the lines and the other is to get lines away from the trees. So we have made some investments moving lines that were built. When they were originally built they were built to go through the woods. We’ve made some investments to move those out to roadside. And then the second phase of that is just simply making our right-of-ways wider. You will still have trees falling, but the probability decreases that one of those trees that will fall will hit the line if you widen the right-of-way.

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So we know that that’s a strategy that works. We’ve seen it work in areas where we’ve made those investments. And the work of Liberty in the post-tropical storm Arthur review really indicated that the program was good. It was a sound program but it wasn’t going fast enough. We needed to do more of it. And that’s really the application that we’re putting forward is to do more, both on the distribution as well as the transmission system. So we know that when we make those investments we will absolutely be storm-hardening our system and see less outages during storms.

CHAIR: So Mr. Casey, you believe that this effort is going to be sufficient to meet the challenges that Liberty identified?

MR. CASEY: Absolutely. Again, we have some lines on our system where we have the widened right-of-way and we see improved performance in those areas. So we know that this works and it’s a matter of doing more of it.

[Transcript, pp. 111-113]

Findings

[111] The Board observes that reliability continues to be a focus of NSPI’s capital

spending, which the Board considers appropriate. The Board also notes, with approval, the

commitment to improved performance, as outlined by Mr. Casey in the hearing.

[112] The Board is satisfied that NSPI has improved, and is committed to continue

with improving the information regarding reliability, as previously directed and discussed

with stakeholders. The Board expects NSPI to provide similar information in future ACE

Plan applications.

4. Vegetation Management/Transmission Right-of-Way Widening

[113] The Application includes a Routine item Transmission Right-of-Way (“ROW”)

widening at an estimated cost of $5,999,956 for 2016. This amount is much higher than the

budgeted amount of $600,000 in the 2015 ACE Plan. The 2016 ACE Plan also included a

list of transmission lines whose ROW is planned to be widened in 2016.

[114] NSPI noted the Board’s Decision related to the Post-Tropical Storm Arthur in

which tentative approval was granted to widen transmission ROWs at an estimated cost of

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$36 million over 8 years. In that Decision, the Board directed NSPI to include an annual

amount of $4.5 million in its annual ACE Plan filings for final approval. NSPI stated that it

has included this amount plus the administrative overhead in the 2016 ACE Plan and similar

amounts will be included in future ACE Plans.

[115] The Board asked NSPI during the hearing why, given the size and unusual

nature of the project, it had not been identified as an individual stand-alone project:

MR. DHILLON: ... Page 58, which is routine 2010, and it’s a transmission right-of waywidening.

And I note that it has been increased substantially, and that's part of the -- what Board has approved in principle as upgrading the line because of reliability and widening of the right-of- way for transmission line.

... I think this is part of $36 million plus administrative overhead and over [8] years' period.

The question I have is that this is such an amount, and it's going to go for [8] years. Should this be as a separate project instead of putting in routine that particular part of the widening of the transmission right-of-way?

I know that the answer in one of the IRs that is routine, and it's a routine, but I think it's a little more than routine.

So do you have any comment on that?

MR. CASEY: We kept it as a routine in 2016 where it was a routine in the past just for -just to make sure that we could see sort of the trend, I guess, if you will, that we could see that we made previous investments in widening our transmission right-of-ways. This is a continuation of that program, but to a much larger scale.

So we just felt it was easier to follow, if you will, that where it was a routine, it continues to be a routine, although larger, and then it will return back to a lower level in the future.

MR. DHILLON: But if the Board has to decide should it be separate because we want tomonitor the progress as particular projects -- more like a project, over 10 -- over [8] years' period, you won't have any objection to that?

MR. CASEY: We would have no objections to that.[Transcript, pp. 92-93]

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Findings

[116] The Board has reviewed the Application and NSPI’s testimony outlining the

reason for not setting up a separate stand-alone project for the transmission widening

project. The Board in its Post-Tropical Storm Arthur Decision approved in principle the

transmission vegetation management project based on NSPI’s plan to improve reliability

which was prepared in response to The Liberty Consulting Group’s recommendations. It is

important that NSPI follows this plan as closely as possible to achieve the intended results

from this investment as outlined in the plan.

[117] Based on the above, the Board directs that this project be identified as an

individual project in the ACE Plan for future years. In addition, NSPI should also provide an

annual progress report on the expenditure, works undertaken, results achieved and future

plans as part of the annual ACE Plan submissions.

5. Quarterly Capital Reports

[118] In accordance to its commitments arising from the 2015 ACE Plan Terms of

Consensus, NSPI, in its 2016 ACE Plan Application, provided an updated Third Quarter

Capital Report.

[119] During the Hearing, Board Counsel asked a number of questions regarding

NSPI’s revised Fourth Quarter 2015 Capital Reports. NSPI, in its responses, provided

clarifications for a number of issues.

[120] Board Counsel expanded on two specific groups of projects, “Preliminary

Spending”, and “Spending on projects started prior to 2015, not in ACE”. Mr. Sidebottom,

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in his response, agreed to provide, in future quarterly filings, more detailed information on

these two groups of projects.

Finding

[121] The Board accepts that more detailed information will be provided, as stated

by Mr. Sidebottom.

6. Consultative Process and Transparency

[122] The Consensus document provides that a number of matters which were

raised by parties, either through IRs or the evidence of Ms. Neal and Mr. Chernick, are

referred to a stakeholder consultation process. It states:

3. For the issues the Parties have agreed to review through a subsequent consultation process, if a consensus cannot be achieved among the Parties through such consultation process,NS Power will advise the UARB in writing of such lack of consensus (with copy to the remaining Parties) by no later than August 1, 2016. [Emphasis in original]


[123] In the ACE Plan proceedings for 2014 and 2015, similar, although not

identical, provisions appear.

[124] The Board canvassed the trend of deferring matters to stakeholder

consultation with the NSPI panel at the hearing:

CHAIR: My last question, I guess, relates to the ACE Plan proceedings as a whole and how they've evolved over the last number of years...

In the last several years, there have been settlement agreements or Terms of Consensus reached in ACE Plan applications, and while I think this is likely partly, at least, due to improved information in the plans themselves and the application, and while the Board generally has a favourable view of settlements, I was considering that it appears that each year we're leaving matters to stakeholder discussions to take place after the hearing.

And I'm wondering if the panel has any concerns that this might in some way be considered a lack of transparency in leaving matters for stakeholder discussions rather than addressing them in the course of the hearing. And depending on whether you have concerns or not, do you have any suggestions for how any such concerns might be countered?

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MR. SIDEBOTTOM: So I think the consultive [sic] process actually lends itself to even better transparency because you get to have a thorough examination through conversation of the types of issues that stakeholders might have with capital plans.

So I found that process not only is helping the -- us present the information more clearly so as we look at complex issues, it's easier to understand, it's allowing a two-way dialogue amongst the stakeholders around, you know, everything from affordability, presentation, information, and particular, projects.

The process itself has the full written discovery process that allows any form of question to be -- to be provided as well, so I think we've -- we've got a thorough vetting of the issues. And one of my desires is that we do have that interaction so that stakeholders understand where we'd like to go and we're addressing their concerns going forward.

And so as a company, we find that very helpful. And again, we invited that collaboration again for consideration for the Board through the Consensus Agreement because I believe it does lend itself to providing the transparency sought by stakeholders as well.

It's — there's complexities to the business that really do benefit from a face-to-face discussion.

CHAIR: I guess, in a way, perhaps some of the concerns that I have about transparency are perhaps more appropriately directed to the Consumer Advocate and the Small Business Advocate in the sense that, you know, you have individuals representing large class of customers, and the Industrial Group as well, who are involved in those stakeholder discussions, but they are not taking place in some sort of open forum and the public has to rely, I guess, on their representatives to ensure that their concerns are being met.

So it was just something that I started thinking about after the Terms of Consensus were filed and, you know, is it -- are we getting back now almost to the system before we had the public hearing; in other words, you know, the company comes in and tells the Board what they need to spend and the Board says, "Yes, okay," and away you go.


[125] Ms. Rubin, Mr. Blackburn and Mr. Mahody followed up on this exchange as

follows:

MS. RUBIN: There are a number of items which have been deferred for consultation and collaboration among the signatories and any other interested party who cares to participate.

In the event that there is a consensus reached, will NSPI bring forward those items, whether they're procedural or specific items, to the Board for approval in the following ACE Plan?

MR. SIDEBOTTOM: I think the way we'd look, there's a report due, I think, by the 1st of August which I think talks about not reaching consensus. But I think we'd be happy to report to the Board where we have reached, so, you know, basically where we've reached consensus and where we haven't. And I think we'd be very happy to do that for the August 1st date, if that meets the expectation.

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MR. BLACKBURN: That last question by Ms. Rubin, that's very helpful. I think it's important, not only if we don't reach consensus, to -- for the Board to know where we did reach consensus, and so I think that's very useful and very helpful.

Just the process itself, it's not just about the ACE Plan, but other applications and matters before the Board where we have settlement meetings to see if we can reach, say, some form of a settlement or understanding with respect to certain aspects of the application is very beneficial.

And it's -- doesn't take away at all from the transparency. As Mr. Sidebottom indicated, we go through the discovery process, through written IRs, so the applications are fleshed out fully.

I don’t know what the --1 don’t know where you kind of cut it off to say everything should be -- have a full-blown hearing on all matters. It can be done. It’ll certainly add to the cost of hearings because if we don’t reach settlements on certain aspects of an application it’s just going to protract the hearing itself, and whether that’s going to add to better transparency I don't know. I think it’s working, I guess, is what I’m trying to get at.

MR. MAHODY: ...On the issue of the consultation process that would unfold after this hearing, and I can do this byway of questioning, but certainly from the Consumer Advocate’s perspective, to the degree to which those discussions do not involve confidential information, I think the parties ought to strongly consider providing some updates of the positions that are being discussed.

If the concern regarding disclosure of information relates to any confidential data, that can be addressed, but I don’t see any reason, certainly from the Consumer Advocate’s perspective, of why as these discussions occur -- and they are limited in number -- why there could not be some update of positions that are being advanced, and the Board and the public could have some idea of the progress that is being made or not being made as opposed to reporting back simply with an end date there’s been no agreement reached.

These issues result from an application that NS Power makes, the intervenors file evidence. It is for the public to view what the varying views is on each of these items that are now being referred on to further discussions. There’s nothing private associated with the discussion of those issues.

And there may be room, certainly there is from our perspective, for the parties to consider more frequent updates simply as opposed to going away and coming back in two months and telling the Board whether or not we’ve been able to achieve additional consensus.

MR. DOEHLER: So, Mr. Mahody, you’d suggest something like Minutes of these various meetings, the technical meetings?

MR. MAHODY: Mr. Doehler, whether they would be able to be as formal as Minutes I don’t know, but it would certainly be some type of update of the topics discussed and whether or not there’s been some progress on it.

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These matters are as -- they’re known, and they ought to be known better, and if that lends itself to it, we would certainly be in favour of that.


[126] Mr. Curry responded, in particular to Mr. Mahody’s comments regarding

updates on behalf of NSPI:

MR. CURRY: Just with respect to Mr. Mahody’s comments, I think in this case I think he’d have to bear in mind some of the timelines. In terms of what Mr. Sidebottom’s indicated, is the company is more than happy to provide a fulsome report by the August 1st timeline.

I just think you want to be careful about the amount of process that’s put into place with very short limited timeframes. In this particular case, I think we had 30 days to commence the consultation process once a decision’s reached and then a full reporting to the Board by August 1st.

So I think we’re open to as much transparency as the Board would like in its process but I think we have to be mindful of the timeframes that are involved.

[Transcript, p. 126]

[127] In his closing submission, the CA said:

At the hearing, the Board Chair raised a question as to whether the consultative process furthered or frustrated the Board’s goal of transparency in relation to capital spending applications.

It is to be noted that the consultative process is often comprised of telephone conferences during which parties discuss their positions in relation to various issues in an attempt to identify common ground. The issues discussed during the consultative process have been well documented (see evidence sponsored by the Consumer Advocate and the evidence sponsored by the Small Business Advocate, as well as NSPI’s reply evidence).

To insure the process is transparent the Consumer Advocate proposes that the parties provide interim updates to the Board following each of the telephone conferences that would comprise the consultative process. These updates could be filed as part of the proceeding and be available for public review. These interim updates would be in addition to the final status report due in August, 2016.

The Consumer Advocate proposes the first agenda item for the consultative process be the form and content of interim updates, should the Board approve the terms of consensus.

[CA Closing Submission, April 14, 2016, p. 2]

[128] The SBA noted, in his closing submission, that a report on any agreements

reached, and any outstanding matters will be provided by NSPI to the Board by August 1,

2016.

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[129] On behalf of the Industrial Group, Ms. Rubin stated, in her closing submission:

With respect to the proposal of the Consumer Advocate that the parties provide interim updates to the Board following each of the telephone conferences comprising the consultative process, the Industrial Group submits that this is an unnecessary step. In the consultative process, parties should be able to freely express opinions and views without necessarily having those views, opinions or any compromise positions being made public until such time as there is agreement (or agreement to disagree).

It is noted that the teleconferences or any meetings which may take place with respect to these matters are not limited to the signatories to the Agreement but are open to any interested party in the ACE proceedings.

[Industrial Group Closing Submission, April 15, 2016, p. 2]

[130] NSPI made the following observations in its closing submission on this issue:

... NS Power notes that all matters in the 2016 ACE Plan have been open to an IR process and a thorough review by the Intervenors and their consultants. Moreover, as noted above, the matters being deferred to stakeholder discussion are directed at improvements to future ACE Plans and are not tied to any specific capital project for which the Company is seeking approval. The Advocates and their consultants will also have the ability to question and engage in further discussion with the Company on these issues and use that knowledge in future ACE Plan proceedings...

NS Power welcomes the involvement of Board staff in the process and confirms the Company is in agreement with providing the Board and stakeholders with a report on the outcome of the process by August 1, 2016.

The CA suggested consideration of interim updates during the process. However, given the short timelines involved and the fact that the Company has agreed to provide a report at the end of the process, NS Power requests that such a requirement not be adopted. While NS Power will abide by any direction the Board provides in its decision, in the circumstances, the Company sees little value to be derived from an additional layer of reporting over such a short period of time, particularly given the Advocates and their consultants are direct participants in the process.

[NSPI Closing Submission, April 15, 2016, pp. 7-9]

Findings

[131] The Board has, earlier in this Decision, noted that its views of settlement

agreements (or Terms of Consensus) have been expressed in previous decisions. The

Board has accepted such agreements where it has been satisfied that it is properly

supported and in the public interest.

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[132] In this Application, the Board notes that the matters deferred to stakeholder

consultation are complex and broad topics which lend themselves to detailed discussion

and dialogue that may not be possible in the course of a hearing. Indeed, if such matters

were pursued in the hearing, as the SBA suggests, costs may increase.

[133] The Board is satisfied that transparency of its proceedings is not compromised

by such a process.

[134] NSPI has committed to reporting on the matters where agreement is achieved,

as well as those which remain outstanding, by August 1,2016.

[135] Given this commitment, and in light of the timing of the release of the Board’s

Decision and commencement of the stakeholder engagement, the Board does not consider

it necessary for interim updates. Further, the Board considers it would not be appropriate

for it to receive details of specific discussions on an interim basis, as this could potentially

hamper a free exchange between stakeholders.

[136] The Board directs NSPI to provide a report, as promised, on the status of the

consultations, by August 1, 2016.

VI SUMMARY

[137] NSPI filed its 2016 ACE Plan Application seeking approval of capital

investment spending of $141.6 million in 2016, which includes individual and Routine capital

projects and with forecast spending of $56.3 million.

[138] Prior to the public hearing held on April 5, 2016, NSPI and the Intervenors,

with the exception of Port Hawkesbury Paper LP, filed a Consensus document with the

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Board which outlined an agreement resolving the issues. The Consensus document

provided that NSPI would withdraw two projects for later submission. It also provided that

the parties will engage in a consultative process regarding project justification; revenue

requirement analysis; and, replacement energy costs, projected capacity factors, projected

failure rates, and project timing in economic analysis modelling.

[139] The Board has prepared Schedule "A" which shows the status of the 2015

ACE Plan projects which NSPI intended to submit later. Schedule "C" lists the projects for

2016 which NSPI intends to submit for later approval. Both of these Schedules are for

information purposes only.

[140] The Board approves the projects and capital expenditures set out in Schedule

"B". Should any of them be cancelled or deferred, NSPI is required to resubmit them for

Board approval.

[141] The Board also approves the 2016 Routine capital expenditures, with the

exception of the Distribution ROW widening (D010) which it has reduced to $600,000. The

Board directs that the Routine for Transmission ROW widening be treated as a separate

project, and not a Routine, in future ACE Plan applications. In addition to identifying this

project individually, NSPI is to provide an annual progress report on the expenditure, works

undertaken, results achieved and future plans as part of the annual ACE Plan submissions.

[142] In light of the recent regulatory amendment which changed the designation of

the Port Hawkesbury biomass plant as a “must run” facility, the Board has considered the

recommendation of the CA and the Industrial Group relating to capital projects for the plant.

The Board directs that the two items over $250,000 relating to the Port Hawkesbury biomass

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plant be set aside for individual review, as per Schedule “D”. The Board expects that the

two other projects, one of which is under $250,000, and the second of which is a related

Routine, will be reviewed by NSPI for prudency.

[143] The Board directs NSPI to discuss any changes to the CEJC with

stakeholders before submitting them to the Board.

[144] The Board approves the Consensus document as filed. NSPI should lead the

consultative process, and Board staff and Counsel will participate as appropriate. Any

outstanding issues on economic analysis and revenue requirement are to be included in the

stakeholder discussions. NSPI is to provide a report to the Board on August 1, 2016,

advising on the status of stakeholder discussions, including matters where agreement has,

and has not, been achieved.

[145] An Order will issue accordingly.

DATED at Halifax, Nova Scotia, this 8th day of June, 2016.

Roberta J. Clafile '

KulvinderJS; Dhilion

"f^Lirray'E. Doehler

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SCHEDULE“A”

Projects NSPI Intended to Submit Later (2015 Schedule “C”)

Cl Number Title Status

Generation

41142 HYD - St. Margaret's Fish Passage APPROVED

44978 HYD-Wreck Cove Automation APPROVED

40283 HYD - Wrights Lake Dam Refurbishment APPROVED

41130 HYD - Avon #2 Generator Stator Rewind APPROVED

45171 HYD-Avon 1 Pipeline Replacement APPROVED

46232 HYD - WHR Pipeline Replacement APPROVED

33142 CT- Burnside #4 Unit Restoration APPROVED

44775 CT - TUC#4 LM6000 Generator Rotor Re-wedge Deferred to 2016

46506 LM6000 - Noise MitigationSubmission no longer

required

46483 CT - Tusket Control System Upgrade Deferred to 2017

44752 BGT1 - Generator Rotor Retaining Ring Replacement Deferred to 2017

29065 CT - BGT Replace Halon Fire Protection SystemSubmission no longer

required

46507 LM6000 - Fuel Nozzle Rotable Kit APPROVED

45117 BGT1 - PLC and Field Device Control Upgrade Deferred to 2017

46068 UN CW Debris Removal System APPROVED

46300 TRE6 - Air Heater Refurbishment APPROVED

44536 LIN3 HP Rows 1&2 Replacement Cancelled

46466 TUC2 - Rotary Airheater Refurbishment Deferred to 2017

46655 ICP Mile 10.1 Bridge Repairs Deferred to 2018

Transmission

46591 88S Lingan Replace 230kV GIS Deferred to 2016

43324 L6513 Rebuild/upgrade line terminals Not approved at this time

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43678Separate L8004/L7005 on Canso Crossing Double Circuit Tower(DCT)

Deferred to 2016

41519 Harbour East 138 kV Transmission Line Deferred to 2016

44987 L7003 Lidar Upgrades APPROVED

45053 69KV Structure Replacements West Deferred to 2017

45306 George Street Substation Addition APPROVED

45066 Upgrade L6511 and L7019 Thermal Rating Not approved at this time

46587 Metro Voltage Support Add Capacitor Deferred to 2016

46586 2015 PCB Removal - Substation APPROVED

46333 L6538 Replacements APPROVED

45795 L6503 Upgrade APPROVED

46332 L6539 Replacements APPROVED

41438 85S Cable Termination Replacement Wreck CoveSubmission no longer

required

Distribution

40320 LED Street Light Conversion APPROVED

44749 Tiverton Tower Refurbishment Deferred to 2016

44836 Halifax 4kV Conversion Part 2 APPROVED

46651 23H-303G Rockingham Conversion Part 1 APPROVED

46398 20H Spryfield Voltage Conversion APPROVED

43218 88W-323HA Tusket Islands Phase 3 Deferred to 2017

General Plant

46552 Backbone Communications System Upgrade APPROVED

46075 IT - Maximo Upgrade Deferred to 2016

46739 IT - Outage Map Technology Upgrades APPROVED

41425 IT - Cognos Upgrade APPROVED

46411 AMO Hydro Asset Management PE APPROVED

46073 IT - Lotus Notes Applications Replacement Submitted

46671 CIP v5 Cyber System Systems Submitted

Document: 246839

-39-

SCHEDULE“B”

Cl Number Title 2016 Budget Project Total

Generation

46298 HYD Five Mile Lake Dam Refurbishment $1,793,260 $2,209,018

47397 HYD Gisborne Dam D4 and Spillway S4 Refurbishment $1,669,320 $2,050,519

47396 HYD Nictaux Powerhouse Dam Refurbishment $1,437,731 $1,792,968

47172 HYD Tidewater 1 Overhaul $962,136 $1,418,532

47332 HYD Methals Overhaul $1,216,083 $1,392,927

47432 HYD Ridge Overhaul $869,304 $869,304

47552 TRE5 Boiler Refurbishment 2016 $1,204,387 $1,204,387

47664 LIN4 Division Wall Replacement $619,243 $619,243

47666 LIN4 Boiler Refurbishment 2016 $571,859 $571,859

47663 LIN4 - SH5 Boiler Tube Replacement $538,776 $538,776

46352 TRE5 Air Heater Refurbishments $530,139 $530,139

47689 LIN4 - Air Heater Refurbishment $521,951 $521,951

47761 LIN1 Boiler Refurbishment $506,845 $506,845

47690 LIN4 Burner Front Refurbishment $480,349 $480,349

47658 LIN4 L-0 Blade Replacement $3,550,915 $4,597,152

47755 LIN4 Turbine High Temperature Fasteners Replacement $1,073,877 $1,073,877

47911 TUC1 High Temperature Fastener Replacement $828,968 $828,968

46465 TUC2 Turbine Valve Refurbishment $651,362 $651,362

48018 TUC1 IP Blading Refurbishments $1,137,208 $1,137,208

47673 LIN4 Generator Rotor Rewind $2,602,159 $2,602,159

43170 LIN4 AVR Replacement $418,432 $842,207

47657 LIN4 High Voltage Bushing Refurbishment $724,395 $822,570

47762 LIN4 Analytical Panel Replacement $401,658 $401,658

47961 LIN1 Condenser Tube Coating $333,944 $333,944

Document: 246839

-40-

47704 POT - Replace Polisher Chemical Skid $321,950 $321,950

47945 TUC Electrode-ionization (EDI) Unit Replacement $275,154 $275,154

47611 POT - Demolish Unit 1 Stack $1,732,346 $1,732,346

47505 LIN Coal Mill Refurbishment 2016 $749,183 $749,183

47661 POT - Asbestos Management 2016 $721,551 $721,551

47869 LIN4 Bottom Ash $616,599 $616,599

47554 TRE5 5-1 FD Fan Refurbishment $494,802 $494,802

41505 TRE5 - 5F Conveyor Structural Refurbishment $484,801 $484,801

47872 LIN E Gallery Structural Steel Protective Coating $481,492 $481,492

47555 TRE5 Coal System Upgrades $414,085 $469,942

47510 LIN Coal Plant Structural Refurbishment Phase 2 $359,425 $359,425

47662 POT Coal Mill Overhauls 2016 $324,874 $324,874

47617 TRE6 Elevator Controls Upgrade $320,704 $320,704

47668 POT - Plant Siding 2016 $287,926 $287,926

47596 TRE6 ID Fan Damper Upgrades $272,239 $272,239

47507 LIN CW Pump Rebuild 2016 $441,560 $441,560

47506 LIN CW Screen Refurbishment 2016 $349,743 $349,743

Transmission

46591 88S Lingan Replace 230kV GIS $1,351,406 $14,249,882

480662016/2017 Substation Polychlorinated Biphenyl (PCB) Equipment Removal Program

$2,160,890 $3,500,427

46587 Metro Voltage Support Add Capacitor $2,960,916 $3,373,511

46757 88S Lingan 230kV BPS Upgrades $265,641 $3,218,221

47950 L5017 Replacements & Upgrades $1,175,785 $2,182,142

44981 2C Port Hastings Add 138-25kV Transformer $548,727 $2,053,799

47952 L-7001 Replacements (Phase 3 & 4) $1,617,933 $1,725,284

48114 2016 Steel Tower Life Extension - HRM $503,696 $1,477,739

47914 L-6537 Replacements and Upgrades $744,025 $1,382,705

47935 L5040 Replacements $668,692 $1,241,298

47949 L-5028 Replacements and Upgrades $598,866 $1,144,355

Document: 246839

-41-

47912 L-6552 Replacements and Upgrades $1,054,326 $1,054,326

48113 2016 Steel Tower Refurbishment $960,453 $1,032,578

48059 2016/2017 Transmission Switch & BreakerReplacements $470,933 $980,999

48116 2016 Sacrificial Anode Installation Program $452,034 $970,909

48067 2016 Oil Containment Program $245,199 $468,963

48063 2016/2017 Capacitor Bank Breaker Replacements $199,159 $385,850

48062 2016/2017 Reactor Breaker Replacements $201,038 $384,974

Distribution

47721 2016 PCB Phase-out for Pole Top Transformers $2,562,582 $4,409,579

48093 2016 Padmount Replacement Program $1,761,336 $1,911,470

47752 4S-333 Bentinck St. Rebuild $575,357 $575,357

48092 2016 Substation Recloser Replacements $529,270 $529,270

47765 58C-405 Belle Cote Phase 2 $477,154 $477,154

47766 70V-302 Centerlea Rebuild $456,314 $456,314

47734 1C-411 Highway 4 Reconductor $437,410 $437,410

47732 131H-424/137H-412 Hammonds Plains Feeder Tie $337,133 $337,133

47754 63V-313 Ward Rd Reconductor $308,994 $308,994

General Plant

48072 2016 ADMS Switch Order Management $305,469 $305,469

TOTAL APPROVED AMOUNT $57,223,473 $87,278,325

Document: 246839

-42-

SCHEDULE“C”

Cl Number Title 2016 Budget Project Total

Generation

29807 HYD - Tusket Falls Main Dam $257,292 $6,534,233

44595 HYD - Hollow Bridge Canal and Intake Refurbishment $2,907,602 $3,137,002

46254 HYD - Mill Lake Surge Tank Refurbishment $1,380,899 $1,421,366

47167 HYD - Sandy Lake Surge Tank Refurbishment $1,316,587 $1,358,796

47551 HYD - SHH Controls Upgrade $524,406 $1,092,851

48020 HYD - RUT3 Generator Refurbishment $774,422 $1,030,940

47163 HYD - Tusket Controls Upgrade $472,153 $880,570

44775 TUC#4 LM6000 Generator Stator Re-wedge $1,586,056 $1,722,180

46191 Tusket Fuel System Upgrade $606,082 $892,178

44788 BGT1 Vibration Monitoring & Protection System Upgrade $252,674 $252,674

48157 TUC Auxiliary Boiler Purchase $2,822,565 $2,822,565

47870 LIN Cofferdam Outer Cell Refurbishment $850,609 $850,609

47871 LIN Stack Re-Coating $707,696 $707,696

47953 LIN Rail Car Positioner Upgrade $507,812 $507,812

47687 POT Boiler Chemical Recondition $855,348 $855,348

47893 TUC3 Generator Hydrogen Panel Upgrade $301,806 $301,806

Transmission

48025 L7018 Upgrade to 345kV & Capacitor Bank Addition $1,982,135 $21,495,059

41519 Harbour East 138 kV Transmission Line $2,120,250 $11,672,021

43678Separate L8004/L7005 on Canso Crossing Double Circuit Tower (DCT)

$270,900 $10,767,280

48022 Spider Lake Substation Addition $1,093,651 $6,348,981

48154 L5527 Reconductor $297,828 $497,606

48024 90H - Sackville: Capacitor Bank Addition & L-6010/L6005 Breaker Upgrades

$794,131 $3,852,989

Document: 246839

-43-

48023 103H - Lakeside: Capacitor Bank Additions & L-6003 Breaker Upgrades $794,131 $3,231,190

43268 9W-B53 Tusket Replace Supporting Structure $354,151 $354,151

46811 2H Armdale Transformer Addition $1,292,601 $2,545,596

48061 New Mobile Substation, 69-25/12-kV, 6MVA $173,005 $1,728,234

Distribution

47124 Automated Metering Infrastructure $6,997,996 $100,000,000

47760 85S-402 Re-lnsulate $387,024 $1,855,988

47776 111S Prime Brook Feeder Exits & Feeders $1,474,738 $1,560,144

47787 2H Armdale New Feeders $451,838 $1,272,415

44749 Tiverton Tower Refurbishment $880,250 $1,157,069

47753 24C-442GB Highway 16 Reconductor Phase 2 $669,565 $1,154,302

47784 103H-Lakeside Feeder Reconfiguration $579,868 $579,868

47792 Distribution Automation Remote Communications $378,666 $415,762

48152 20H-Spryfield Voltage Conversion Phase II $375,848 $375,848

47403 Load Research Sample Update $286,872 $322,387

47786 129H Kearney Lake New Feeder $311,817 $311,817

48195 Halifax 4kV Conversion Phase 3 $250,336 $250,336

General Plant

44671 IT - Oracle Financials Upgrade $3,768,231 $9,891,170

46075 IT - Maximo Upgrade & GIS Integration $3,042,932 $7,937,644

48232 T&D Scheduling & Dispatch $2,012,050 $5,306,971

48251 T&D Field Design $2,012,050 $4,022,082

47477 IT - Security Enhancements $2,280,000 $2,536,182

48236 Customer Experience Self-Serve Development Phase 1 $1,802,719 $1,802,719

46671 NERC CIP Version 5 Implementation $552,227 $1,528,492

48254 IT - Outage Communication Technology Capacity Improvement

$1,500,000 $1,500,000

41425 IT - Cognos Upgrade $190,000 $1,431,257

46073 IT - Lotus Notes Applications Replacement $415,008 $744,698

Document: 246839

-44-

47751 Dynamic Transmission Limits $414,748 $552,560

48234 Customer Support System Enhancements $515,063 $515,063

48238 Customer Billing Experience Improvements $515,063 $515,063

48155 2016 SCADA Application Upgrade $426,355 $426,355

TOTAL AMOUNT $57,788,056 $234,827,925

Document: 246839

-45-

Cl Number 1 Title ' 2016 Budget Project Total

47613 PHB - Boiler Refurbishment 2016 $604,193 $604,193

47614 PHB - Fuel System Refurbishment 2016 $296,556 $296,556

TOTAL AMOUNT $900,749 $900,749

Document: 246839

Attachment 1

NOVA SCOTIA UTILITY AND REVIEW BOARD

IN THE MATTER OF Section 35A of The Public Utilities Act, R.S.N.S. 1989, c.380, as amended

- and -

IN THE MATTER OF an Application by Nova Scotia Power Incorporated for Approval of the 2016 Annual

Capital Expenditure ("ACE") Plan - M07176 (P-128.16)

TERMS OF CONSENSUS

WHEREAS:

A. On November 12, 2015, Nova Scotia Power Inc. ("NS Power") filed with the Nova Scotia Utility and

Review Board ("UARB") its 2016 Annual Capital Expenditure Plan under Matter No. M07176

("2016 ACE Plan").

B. The Consumer Advocate ("CA"), the Small Business Advocate ("SBA") and the group of companies

referred to in this proceeding as the Industrial Group ("IG") (which group is comprised of

Canadian Salt Company Limited, CFK Inc., Crown Fibre Tube Inc., Farnell Packaging Ltd., Irving

Shipbuilding Inc., Lafarge Canada Inc., Maritime Paper Products Ltd., Michelin North America

(Canada) Inc., Oxford Frozen Foods Limited, Compass Minerals Canada Corp., Nustar Terminals

Canada Partnership and P & H Milling Group) have agreed to an approach for resolution of issues

as among them related to the proceeding before the UARB for the approval of the 2016 ACE Plan,

as reflected in this Terms of Consensus (collectively, NS Power, CA, SBA and IG will be referred to

as the "Parties").

NOW THEREFORE, the Parties agree as follows:

1. The Parties have reached agreement on matters relating to the 2016 ACE Plan as represented by

the terms set out in Appendix "A" attached hereto.

2. Based on the terms set out in Appendix "A", and the record currently before the UARB, including

NS Power's responses to Information Requests from the CA, SBA and the UARB dated January 22,

2016, the evidence of the CA and the SBA, both dated February 12, 2016, and NS Power's Reply

Evidence dated March 22, 2016, the Parties do not oppose any of the projects submitted for

approval by NS Power in the 2016 ACE Plan.

The Parties reserve the right to amend their position based on any new evidence submitted in the

2016 ACE Plan proceeding.

Page 1 of 2

Document No. 246839

3. For the issues the Parties have agreed to review through a subsequent consultation process, if a

consensus cannot be achieved among the Parties through such consultation process, NS Power

will advise the UARB in writing of such iack of consensus (with copy to the remaining Parties) by

no later than August 1, 2016.

4. This agreement may be executed by the Parties in counterparts, each of which when so executed

and delivered shall be deemed to be an original and when taken together shall be deemed to be

one and the same instrument The electronic delivery, including, without limitation, by email or

facsimile transmission, of any signed original of this agreement shall be the same as the delivery

of an original.

All of which is hereby agreed to by the Parties effective as of the 31st day of March, 2016.

CONSUMER ADVOCATE SMALL BUSINESS ADVOCATE

Per: Per:

INDUSTRIAL GROUP NOVA SCOTIA POWER INC.

Per: Per:

O

a

o

CD

cszo

Page 2 of 2

Document No. 246839

3. For the Issues the Parties have agreed to review through a subsequent consultation process, if a consensus cannot be achieved among the Parties through such consultation process, NS Power will advise the UARB in writing of such lack of consensus (with copy to the remaining Parties) by no later than August 1,2016.

4 This agreement may be executed by the Parties in counterparts, each of which when so executed


one and the same instrument. The electronic delivery, including, without limitation, by email or facsimile transmission, of any signed original of this agreement shall be the same as the delivery of an original.



Per: Per: 6 A- i-Li.tr rJ T3 LAc/C st


Per: Per:

Page 2 of 2

Document No. 246839

3. For the issues the Parties have agreed to review through a subsequent consultation process, if a consensus cannot be achieved among the Parties through such consultation process, IMS Power will advise the UARB in writing of such lack of consensus (with copy to the remaining Parties) by no later than August 1, 2016.

4. This agreement may be executed by the Parties in counterparts, each of which when so executed and delivered shall be deemed to be an original and when taken together shall be deemed to be one and the same instrument The electronic delivery, including, without limitation, by email or facsimile transmission, of any signed original of this agreement shall be the same as the delivery of an original.



Per:

-a............................. ..........................- ,

John Merrick QC Per:


Per: Per:

Page 2 of 2

Document No. 246839

3. For the issues the Parties have agreed to review through a subsequent consultation process, if a

consensus cannot be achieved among the Parties through such consultation process, NS Power

will advise the UARB in writing of such lack of consensus (with copy to the remaining Parties) by

no later than August 1, 2016.

4. This agreement may be executed by the Parties in counterparts, each of which when so executed


one and the same instrument. The electronic delivery, including, without limitation, by email or

facsimile transmission, of any signed original of this agreement shall be the same as the delivery

of an original.



Per: Per:


; - _ * ^ y /Per: Per: •*>.> ,

Page 2 of 2

Document No. 246839

M07176 Appendix "A" to Terms of Consensus Page 1 of 6

Intervenor Issue NS Power Reply Evidence Reference - (Exhibit N-8)

Agreed Settlement Position

1. Cl 46587 - Metro Voltage Support - Add Capacitor Bank

SBA recommends the Board reject project due

to concerns related to 1) absence of historical information, 2) Plexos run based on only one

year, 3) need for further study on related subsequent submittal items.

Ref.: Exhibit N-6, 2016 ACE Plan SBA Evidence, February 12,

2016, pages 16-17.

Page 6 of 43 The SBA is now satisfied with the additional explanation provided for the project and withdraws its objection to Cl 46587 (Metro Voltage Support - Add Capacitor Bank). The Parties do not oppose the approval of this project.

2. Cl 46811 - 2H Armdale Transformer Addition

SBA recommends the Board reject project due to issues related to 1) load growth, 2) contingency, and 3) storm reliability.

Exhibit N-6, 2016 ACE Plan SBA Evidence, February 12, 2016,

pages 19-20.

Page 10 of 43 NS Power agrees to withdraw Cl 46811 from the 2016 ACE Plan and re-submit as a subsequent capital work order application with more detail on the contingency/reliability benefits of the project.

3. Cl 48061 - New Mobile Substation 6925/12-4kV, 6MVA

SBA recommends the Board reject project due

to issues related to 1) no historic loss of service, 2) relevant reliability criteria, 3) idle

usage of the new mobile substation, and 4)

existing 3P mobile substation.

Exhibit N-6, 2016 ACE Plan SBA Evidence, February 12, 2016,

pages 20-21.

Page 12 of 43 NS Power agrees to withdraw Cl 48061 from the 2016 ACE Plan and re-submit as

a subsequent capital work order application with more detail on the contingency/reliability benefits of the project and risks associated with non

completion of the project.

Document No. 246839


Intervenor issue NS Power Reply Evidence Reference - (Exhibit N-8)


4. CA concern regarding inconsistencies in Project Justifications

CA raised a concern regarding the ranking category of Business Sustainability in the table

of project rankings and the descriptions of the CIs for the following 4 generation projects:

• Cl 41505 - TRE5 5F Conveyor Gallery Refurbishments

• Cl 47555 - TRE5 Coal System Upgrades• Cl 46465 - TUC2 Turbine Valve

Refurbishments

• Cl 47911 - TUC1 High Temperature Fasteners Replacement

Ref.: Exhibit N-7, 2016 ACE Plan CA Evidence, February 12, 2016,

pages 10-13.

Page 14 of 43 The CA is satisfied with the Project Justifications and the Parties do not oppose

the approval of any of these 4 generation projects.

The Parties agree to consider improvements in NS Power's categorization of

project justifications, especially for projects with more than one justification (e.g., economics and safety) and for projects at units driven by capacity rather than energy (e.g., at Tufts Cove) in a subsequent stakeholder consultation process between NS Power and interested stakeholders, including the CA, the SBA and the IG. This stakeholder consultation process will begin within 30 days

of the Board issuing its decision in this matter.

Document No. 246839




5. Revenue Requirement Analysis

The SBA and CA have raised issues with NS Power's Revenue Requirement Analysis, namely:

• Treatment of Incremental Spend Over Depreciation

• Treatment of the Administrative Overhead Credit (AO)

• Treatment of the AFUDC Credit

• SBA's Recommendations Regarding the

Treatment of the AO and AFUDC Credits

Ref: Exhibit N-6, 2016 ACE Plan SBA Evidence, February 12, 2016,

pages 9-16.


pages 6-10.

Page 19 of 43 NS Power agrees to make the following revisions to NS Power's "Long-Term

Capital Planning & Revenue Requirement" table for future ACE Plans:

1. Move the incremental revenue requirement of five-year capital plan rows to the bottom of the table.

2. Amend the calculation of "New Incremental Regulated Capital Assets" to the

total of capital spend in the five year capital plan less depreciation of all assets.

3. Treat the entire amount of spend in the final year of the revenue requirement directive as an addition to property, plant and equipment.

In addition, the Parties have reached an agreement in principle to include an

additional revenue requirement table in the next 2017 ACE Plan to address issues raised by the CA and the SBA in their evidence with respect to NS Power's

Revenue Requirement Analysis. This new revenue requirement table will be in addition to (and not in substitution of) the existing "Long-Term Capital Planning

& Revenue Requirement" table which NS Power will continue to include in future ACE Plans.

The Parties agree to defer discussion of the details of this additional revenue requirement table to a subsequent stakeholder consultation process between NS Power and interested stakeholders, including the CA, the SBA and the IG. This stakeholder consultation process will begin within 30 days of the Board issuing its decision in this matter.

Document No. 246839




6. Replacement Energy Costs in NS Power's

Economic Analysis Model (EAM)

The SBA and the CA have raised issues with NS

Power's methodology for calculating the replacement energy costs in the EAM.

Recommendations include additional Plexos

runs and methods for modelling system dispatch specifically with respect to NS Power's hydro fleet.

Ref: Exhibit N-6, 2016 ACE Plan SBA Evidence, February 12, 2016,

pages 5-9.

Ref : Exhibit N-7, 2016 ACE Plan CA Evidence, February 12, 2016,

pages 6-10.

Page 31 of 43 The Parties agree to defer further discussion of the CA's and the SBA's recommendations on this matter (as presented in their evidence) to a subsequent stakeholder consultation process between NS Power and interested stakeholders, including the SBA, the CA and the IG. This stakeholder consultation

process will begin within 30 days of the Board issuing its decision in this matter.

7. CA concern regarding Useful Life and Analysis Period in EAMs

In the EAM, depreciation, return, and taxes continue past the retirement date of the asset.

Ref: Exhibit N-7, 2016 ACE Plan CA Evidence, February 12, 2016,

pages 13-14.

Page 36 of 43 The Parties agree to defer further discussion of this issue to a subsequent stakeholder consultation process between NS Power and interested

stakeholders, including the SBA, the CA and the IG. This stakeholder consultation

process will begin within 30 days of the Board issuing its decision in this matter.

Document No. 246839




8. CA concern regarding Projected Capacity

Factors in EAMs

The CA raised a question about a potential discrepancy between the capacity factors in NS

Power's EAMs and those provided in NS Power's response to NSUARB IR-44.


pages 14-15.

Page 38 of 43 The concern raised has been addressed to the satisfaction of the CA.

9. CA concern regarding the limited explanation of projected increases in failure rates over time in EAMs

The CA notes a lack of detailed descriptions of

the failure rates and assumptions in the backup tabs of the EAMs.


pages 21-23.

Page 39 of 43 NS Power agrees in principle to include additional information regarding failure rates and assumptions in the back up tabs of the EAMs in future ACE Plans.

Document No. 246839




10. CA raised a concern regarding how the timing of capital projects is factored into the EAM

The CA recommends incorporating the effect of delaying projects by a number of years in the EAM.


pages 23-24.

Page 40 of 43 The Parties have agreed to discuss the timing calculation in a subsequent stakeholder consultation process between NS Power and interested stakeholders, including the CA, the SBA and the IG. This stakeholder consultation process will begin within 30 days of the Board issuing its decision in this matter.

Document No. 246839

Documents

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