Decision 3585-D03-2016 AltaLink Management Ltd. 2012 and 2013 Deferral Accounts Reconciliation Application June 6, 2016 The Alberta Utilities Commission Decision 3585-D03-2016: AltaLink Management Ltd. 2012 and 2013 Deferral Accounts Reconciliation Application Proceeding 3585 Application 1611090-1 June 6, 2016 Published by The Alberta Utilities Commission Fifth Avenue Place, Fourth Floor, 425 First Street S.W. Calgary, Alberta T2P 3L8 Telephone: 403-592-8845 Fax: 403-592-4406 Website: www.auc.ab.ca Contents 1 Decision .................................................................................................................................. 1 2 Introduction, procedural schedules and motions ............................................................... 2 3 Background to the application and structure of the decision ........................................... 4 4 Direct assign capital deferral account ................................................................................. 8 4.1 Common matters ............................................................................................................ 8 4.1.1 Inclusion of partially completed projects .......................................................... 8 4.1.2 Accuracy and purpose of baseline estimates .................................................. 10 4.1.3 Rate impact to customers ................................................................................ 13 4.1.4 Impact of disallowance ................................................................................... 15 4.1.5 Prudence test and burden of proof .................................................................. 19 4.1.6 Roles and responsibilities of the AESO, TFOs and Commission ................... 24 4.1.7 In-service date targets ..................................................................................... 30 4.1.8 Timing of DACDA and general tariff applications ........................................ 35 4.1.9 Filing requirements ......................................................................................... 39 4.1.10 Cost and performance audits ........................................................................... 51 4.1.11 Project cost escalation and related allowances ............................................... 57 4.1.12 Treatment of contingency allowances ............................................................ 63 4.1.13 Capitalized labour and E&S costs ................................................................... 65 4.1.14 EPCM agreement matters ............................................................................... 68 4.1.14.1 EPCM labour pricing under original SNC-ATP MSA ................. 69 4.1.14.2 EPCM costs and competitive procurement processes .................. 70 4.1.14.3 Risk Reward mechanism............................................................... 79 4.1.14.4 EPCM service provider obligation to provide fixed price ............ 82 4.1.14.5 Enforcement of EPCM contractual obligations ............................ 87 4.1.14.6 EPCM agreement contracted material/contracted labour surcharges ....................................................................................................... 91 4.1.15 Treatment of accruals ...................................................................................... 94 4.1.16 Line optimization and design issues ............................................................... 96 4.1.16.1 Professional practice requirements ............................................... 97 4.1.16.2 Tower selection and tower utilization ......................................... 100 4.1.17 Use of rig mats .............................................................................................. 114 4.1.18 Use of helicopters ......................................................................................... 119 4.1.19 ADC proposal ............................................................................................... 123 4.1.20 Other matters ................................................................................................. 124 4.1.20.1 Customer contributions ............................................................... 124 4.1.20.2 Land compensation ..................................................................... 125 4.2 System projects .......................................................................................................... 127 4.2.1 D.0305 – Cassils to Bowmanton (CB) .......................................................... 127 4.2.1.1 Recovery requested ..................................................................... 127 4.2.1.2 Project overview ......................................................................... 128 4.2.1.3 Key project variances .................................................................. 129 4.2.1.4 In-service date ............................................................................. 130 4.2.1.5 Use of rig mats ............................................................................ 132 4.2.1.6 Use of helicopters ....................................................................... 133 4.2.1.7 Pipeline mitigation ...................................................................... 134 Decision 3585-D03-2016 (June 6, 2016) • i 4.2.1.8 Analysis of change notices .......................................................... 138 4.2.1.9 Summary of findings................................................................... 139 4.2.2 D.0371 – Heartland ....................................................................................... 140 4.2.2.1 Recovery requested ..................................................................... 140 4.2.2.2 Project overview ......................................................................... 140 4.2.2.3 Key project variances .................................................................. 141 4.2.2.4 Inclusion of 2014 costs ............................................................... 143 4.2.2.5 Transmission line design............................................................. 146 4.2.2.6 EDTI charges .............................................................................. 150 4.2.2.7 Use of rig mats ............................................................................ 151 4.2.2.8 Use of helicopters ....................................................................... 151 4.2.2.9 Pipeline mitigation ...................................................................... 152 4.2.2.10 Delays attributed to monopole section ruling ............................. 161 4.2.2.11 12S substation project delays ...................................................... 164 4.2.2.12 Graham construction ................................................................... 167 4.2.2.13 Analysis of change notices .......................................................... 173 4.2.2.14 Land acquisition issues ............................................................... 175 4.2.2.15 Request for cost and performance audit ...................................... 178 4.2.2.16 Summary of findings................................................................... 179 4.2.3 Other major system projects ......................................................................... 180 4.2.3.1 D.0030.01 – Yellowhead Area Transmission Development Hinton- Edson Development .................................................................... 180 4.2.3.1.1 Recovery requested ..................................................................... 180 4.2.3.1.2 Project overview ......................................................................... 181 4.2.3.1.3 Key project variances .................................................................. 182 4.2.3.2 D.0030.03 – Yellowhead Area Transmission Development Cherhill Area Development ........................................................ 184 4.2.3.2.1 Recovery requested ..................................................................... 184 4.2.3.2.2 Project overview ......................................................................... 184 4.2.3.2.3 Key project variances .................................................................. 185 4.2.3.3 D.0108 – SE Development – Brooks Area ................................. 186 4.2.3.3.1 Recovery requested ..................................................................... 186 4.2.3.3.2 Project overview ......................................................................... 187 4.2.3.3.3 Key project variances .................................................................. 188 4.2.3.4 D.0213 – Edmonton Region 240-kV Lines Upgrades ................ 189 4.2.3.4.1 Recovery requested ..................................................................... 189 4.2.3.4.2 Project overview ......................................................................... 189 4.2.3.4.3 Key project variances .................................................................. 190 4.2.3.5 D.0238 – Athabasca Area Telecom Development ...................... 191 4.2.3.5.1 Recovery requested ..................................................................... 191 4.2.3.5.2 Project overview ......................................................................... 192 4.2.3.5.3 Key project variances .................................................................. 193 4.2.3.6 Hanna Region transmission system development projects ......... 194 4.2.3.6.1 D.0353 – Hanna Area Transmission