QULLIQ ENERGY CORPORATION 2018/19 General Rate Application October 2017 QEC 2018/19 General Rate Application October 2017 TABLE OF CONTENTS 1.0 INTRODUCTION AND APPLICATION ............................................................. 1-1 1.1 APPLICATION ............................................................................................................... 1-1 1.2 BACKGROUND ............................................................................................................. 1-1 1.3 OUTLINE OF THE APPLICATION ................................................................................ 1-3 CORPORATE OVERVIEW ............................................................................... 2-1 2.1 INTRODUCTION ........................................................................................................... 2-1 2.2 OVERVIEW OF THE CORPORATION ......................................................................... 2-1 2.3 CHALLENGES AND OPPORTUNITIES FACING THE CORPORATION .................... 2-2 2.4 MEASURES TAKEN TO MITIGATE IMPACTS ON CUSTOMERS .............................. 2-3 SYSTEM SALES AND GENERATION REQUIREMENTS ............................... 3-1 3.1 INTRODUCTION ........................................................................................................... 3-1 3.2 SYSTEM OVERVIEW AND DEVELOPMENTS SINCE 2014/15 GRA ......................... 3-1 3.2.1 FACILITIES ........................................................................................................................ 3-1 3.2.2 MAJOR FACILITY CHANGES SINCE 2014/15 GRA ....................................................... 3-2 3.2.3 SYSTEM TRENDS SINCE 2014/15 GRA ......................................................................... 3-4 3.2.4 NON-ELECTRICITY REVENUE ...................................................................................... 3-10 3.3 LOAD FORECAST METHODS ................................................................................... 3-11 3.3.1 CUSTOMER FORECAST ................................................................................................ 3-12 3.3.2 SALES FORECAST ........................................................................................................ 3-14 3.3.3 GENERATION FORECAST ............................................................................................ 3-15 3.3.4 FUEL REQUIREMENTS .................................................................................................. 3-16 3.3.5 NON-ELECTRICITY REVENUE FORECAST ................................................................. 3-16 REVENUE REQUIREMENT.............................................................................. 4-1 4.1 INTRODUCTION ........................................................................................................... 4-1 4.2 REVENUE REQUIREMENT CHANGES SINCE THE 2014/15 GRA ............................ 4-3 Page i QEC 2018/19 General Rate Application October 2017 4.3 NON-FUEL OPERATING AND MAINTENANCE EXPENSES ..................................... 4-4 4.3.1 SALARIES AND WAGES .................................................................................................. 4-5 4.3.2 SUPPLIES AND SERVICES ............................................................................................. 4-6 4.3.3 TRAVEL AND ACCOMMODATION .................................................................................. 4-7 4.4 PRODUCTION FUEL .................................................................................................... 4-8 4.5 AMORTIZATION EXPENSE ....................................................................................... 4-12 4.6 RETURN ON RATE BASE .......................................................................................... 4-13 4.6.1 CAPITAL STRUCTURE .................................................................................................. 4-14 4.6.2 AVERAGE COST OF LONG-TERM DEBT ..................................................................... 4-15 4.6.3 NO COST CAPITAL ........................................................................................................ 4-16 4.6.4 RETURN ON EQUITY ..................................................................................................... 4-16 VARIANCE FROM REVENUES AT EXISTING RATES ................................. 4-21 5.1 INTRODUCTION ........................................................................................................... 5-1 5.2 VARIANCES COMPARED TO 2014/15 REVENUE REQUIREMENT .......................... 5-1 5.3 VARIANCES COMPARED TO EXISTING BASE RATES PLUS RIDERS ................... 5-3 RATE BASE ...................................................................................................... 6-1 6.1 INTRODUCTION ........................................................................................................... 6-1 6.2 RATE APPLICATION ADJUSTMENTS TO AUDITED FINANCIAL STATEMENTS ............................................................................................................... 6-1 6.2.1 CUSTOMER CONTRIBUTIONS ........................................................................................ 6-2 6.2.2 GOVERNMENT TRANSFERS .......................................................................................... 6-2 6.3 GROSS PLANT IN SERVICE ........................................................................................ 6-3 6.4 ACCUMULATED AMORTIZATION .............................................................................. 6-4 6.5 WORKING CAPITAL ..................................................................................................... 6-5 COST OF SERVICE STUDY AND RESULTS .................................................. 7-1 7.1 INTRODUCTION ........................................................................................................... 7-1 Page ii QEC 2018/19 General Rate Application October 2017 7.2 CLASS REVENUE TO COST COVERAGE RATIOS AND UNIT COSTS .................... 7-3 7.3 ALTERNATIVE COST OF SERVICE STUDIES ........................................................... 7-5 RATE DESIGN .................................................................................................. 8-1 8.1 INTRODUCTION ........................................................................................................... 8-1 8.2 NUNAVUT RATE STRUCTURE REVIEW .................................................................... 8-1 8.2.1 COMPARISON OF EXISTING RATES TO COMMUNITY BASED COS RATES ............ 8-3 8.2.2 IMPACT OF HISTORICAL RATE ADJUSTMENTS ON COMMUNITY ENERGY RATES ............................................................................................................................... 8-6 8.2.3 IMPACT OF CAPITAL PROJECTS ON ENERGY RATES .............................................. 8-8 8.2.4 ALTERNATIVE ENERGY OPPORTUNITIES UNDER DIFFERENT RATE STRUCTURES .................................................................................................................. 8-9 8.2.5 SUMMARY ......................................................................................................................... 8-9 8.3 RATE DESIGN CRITERIA AND OBJECTIVES .......................................................... 8-11 8.4 2018/19 AND 2019/20 RATE PROPOSAL ................................................................. 8-14 8.5 FUTURE RATE TRANSITIONS .................................................................................. 8-16 TERMS AND CONDITIONS OF SERVICE ....................................................... 9-1 RESPONSE TO URRC RECOMMENDATIONS ............................................. 10-1 10.1 INTRODUCTION ......................................................................................................... 10-1 10.2 URRC REPORT 2014-02 GRISE FIORD MAJOR PROJECT PERMIT APPLICATION ............................................................................................................. 10-1 10.3 URRC REPORT 2014-4 2014/15 GRA ....................................................................... 10-2 10.4 URRC REPORT 2012-01 2010/11 PHASE II GRA ................................................... 10-19 10.4.1 COST FUNCTIONALIZATION ...................................................................................... 10-19 10.4.2 CLASSIFICATION STUDIES FOR POLES AND FIXTURES, OVERHEAD CONDUCTORS, UNDERGROUND CONDUITS, AND LINE TRANSFORMERS ....... 10-20 10.4.3 CLASSIFICATION OF COSTS ...................................................................................... 10-21 Page iii QEC 2018/19 General Rate Application October 2017 10.4.4 ASSIGN NON-ELECTRIC REVENUES ........................................................................ 10-21 10.4.5 CUSTOMER WEIGHTING FACTORS .......................................................................... 10-22 10.4.6 NUNAVUT WIDE RATE REBALANCING ..................................................................... 10-22 10.4.7 GOVERNMENT AND NON-GOVERNMENT CUSTOMER TYPE ................................ 10-23 10.4.8 RATE STRUCTURES FOR DOMESTIC, COMMERCIAL AND LIGHTING CUSTOMERS ................................................................................................................ 10-23 10.4.9 DEMAND METERS AND FIXED MINIMUM CHARGE BASED ON 5KW DEMAND ....................................................................................................................... 10-23 10.4.10 LEVELIZED MONTHLY CUSTOMER PAYMENT