Decision 2002-057: 2000 Pool Price Deferral Accounts ... · as defined in the Deficiency Correction...

Decision 2002-057

2000 Pool Price Deferral Accounts Part T- Securitization Financing June 24, 2002

Alberta Energy and Utilities Board

ALBERTA ENERGY AND UTILITIES BOARD Decision 2002-057: 2000 Pool Price Deferral Accounts – Part T: Securitization Financing Application No. 1272223 Published by Alberta Energy and Utilities Board 640 – 5 Avenue SW Calgary, Alberta T2P 3G4 Telephone: (403) 297-8311 Fax: (403) 297-7040 Web site: <www.eub.gov.ab.ca>

CONTENTS 1 INTRODUCTION ................................................................................................................. 1

2 BACKGROUND.................................................................................................................... 2

3 SECURITIZATION APPLICATION OVERVIEW ......................................................... 3

4 DETAILS OF THE SECURITIZATION APPLICATION .............................................. 5 4.1 General......................................................................................................................... 5 4.2 Securitization Overview .............................................................................................. 5 4.3 Program Costs.............................................................................................................. 6 4.4 Funding Costs .............................................................................................................. 7 4.5 Additional Matters ....................................................................................................... 7 4.6 Conditions Precedent ................................................................................................... 8

5 BOARD APPROVED COLLECTIBLE AMOUNTS AND RATE RIDERS.................. 8 5.1 AE DISCO................................................................................................................... 8 5.2 ANCA........................................................................................................................ 10

6 VIEWS OF INTERESTED PARTIES .............................................................................. 11 6.1 Registered Parties ...................................................................................................... 11 6.2 Securitization Proposal .............................................................................................. 11 6.3 Balancing Pool Involvement...................................................................................... 12

7 VIEWS OF THE BOARD .................................................................................................. 12 7.1 Is Securitization in the Public Interest? ..................................................................... 12 7.2 Ownership of Deferral Accounts ............................................................................... 14 7.3 Securitization Agreements......................................................................................... 18 7.4 Deferral Account Balances ........................................................................................ 18 7.5 Prescribed Rates......................................................................................................... 19 7.6 Other Deferral Account Matters ................................................................................ 20 7.7 Rate Riders................................................................................................................. 22 7.8 Servicing .................................................................................................................... 22 7.9 True-up Processes...................................................................................................... 23

8 SUMMARY OF CONFIRMATIONS AND APPROVALS ............................................ 24

9 SUMMARY OF DIRECTIONS......................................................................................... 28

10 ORDER................................................................................................................................. 28

ATTACHMENT 1 – SECURITIZATION TRANSACTION SUMMARY .......................... 31

ATTACHMENT 2 - CUSTOMER SAVINGS ARISING FROM SECURITIZATION FINANCING ............................................................................................................................... 33

ATTACHMENT 3 - RELEVANT DECISIONS - 2000 DEFERRAL ACCOUNTS ............ 35

EUB Decision 2002-057 (June 24, 2002) • i

List of Tables Table 1: Remaining Balance per Applicants as of July 1, 2002............................................. 5

Table 2: Estimated Program Costs (per Application) ............................................................ 6

Table 3: Applicants’ Share of Program Costs......................................................................... 6

Table 4: Board Approved AE DISCO 2000 PPDA Collectible Amounts and Rate Riders 9

Table 5: Board Approved ANCA 2000 PPDA Remaining Collectible Amounts and Rate Riders ......................................................................................................................... 10

Table 6: List of 2000 Deferral Account Related Decisions................................................... 35

ii • EUB Decision 2002-057 (June 24, 2002)

ALBERTA ENERGY AND UTILITIES BOARD Calgary Alberta Decision 2002-057 2000 POOL PRICE DEFERRAL ACCOUNTS Application No. 1272223 PART T: SECURITIZATION FINANCING File Nos. 1108-10 & 1900-12 1 INTRODUCTION

On June 13, 2002, the Alberta Energy and Utilities Board (Board) received a Securitization Financing Application (Application) jointly filed by ATCO Electric Ltd. (AE or AE DISCO) and Aquila Networks Canada (Alberta) Ltd. (ANCA)1 (Applicants) requesting approval of a transaction for the securitization of outstanding year 2000 Pool Price Deferral Account (Deferral Account or PPDA) balances (Securitization or Securitization Transaction). The Applicants requested that the Board issue a Decision on the Securitization Transaction by June 24, 2002 in order that securitization can be implemented July 1, 2002. In a letter dated June 14, 2002, the Board notified all interested parties of the details of the Application. In the same letter, the Board advised interested parties that if the Board did not receive any objections to the Application by Tuesday June 18, 2002, the Board would proceed with its review of the Application, which could lead to the approval of the Application as filed. The Board received no objections to the Application, but did receive a number of letters of support on or before June 18, 2002. The Board also received a letter from ENMAX on June 19, 2002, requesting that it be specifically registered as an interested party in relation to the Application. Given the public interest in having the Securitization implemented on July 1, 2002, and given the unique circumstances of this Application, the Board decided that parties expressly interested in the Securitization should have an opportunity to comment on the final wording of the confirmations, approvals and orders to be made in the Decision. Therefore, on June 20, 2002, the Board circulated an electronic copy of the complete draft Decision to the interested parties on the PPDA Proceeding list with the request that only those directly interested in this Application provide comments.2 Any comments were to be provided by close of business on Friday, June 21, 2002. The Board received comments from the Applicants and EPCOR Distribution Inc. (EDI) on June 21, 2002. The comments of EDI were also supported by ENMAX Power Corporation and ENMAX Energy Corporation (both wholly owned subsidiaries of ENMAX Corporation). After

1 Effective May 31, 2002, ANCA became the new name UtiliCorp Networks Canada (Alberta) Ltd. (UNCA).

Originally, the 2000 Distribution Pool Price Deferral Accounts Application referred to below was submitted under the name of UNCA or UNCA DISCO. Except in the Background section, the Board has usually referred to ANCA. However, references to UNCA or UNCA DISCO and ANCA are effectively interchangeable.

2 I.e., the Applicants, the Securitization Group, parties submitting letters of support for the Application and parties requesting to be registered in relation to the Application.

EUB Decision 2002-057 (June 24, 2002) • 1

SECURITIZATION FINANCING 2000 Pool Price Deferral Accounts Proceeding

careful consideration of the comments, the Board amended the wording of the confirmations, approvals and/or orders where appropriate and necessary. Accordingly, for purposes of this Decision, the Board considers the record to have closed on June 21, 2002. (Click here to Return to the Table of Contents) 2 BACKGROUND

On March 30, 2001, AE DISCO and UNCA DISCO3 filed applications (the DISCO Applications) with the Alberta Energy and Utilities Board (Board) in which they submitted for approval the closing balances of their 2000 pool price deferral accounts (Deferral Accounts or PPDAs) as of December 31, 2000, and sought a determination of the amount payable to AE DISCO and UNCA DISCO in respect of the cost of financing the amounts in their Deferral Accounts. The AE DISCO Deferral Accounts were established in the Alberta Power Limited 1999/2000 Tariff Application Phase 1 Negotiated Settlement (1999/2000 Settlement) approved by the Board in Decision U99046.4 UNCA DISCO’s Deferral Account was originally established by the Board for TransAlta in Decision U99099 and clarified in Decision 2000-3. Pursuant to the conditions attached to the Board’s approval of the sale by TransAlta to UNCA of TransAlta DISCO, UNCA DISCO inherited TransAlta DISCO’s Deferral Account as established by the Board.5 These Board-approved Deferral Accounts comprise the “deferral accounts” for AE DISCO and UNCA DISCO as defined in the Deficiency Correction Regulation, 2002 (Deficiency Regulation).6 The Board heard the DISCO Applications of AE and UNCA, as well as applications from four municipally owned DISCOs and three GENCOs, in an omnibus hearing that commenced June 4, 2001 and ended July 30, 2001 (2000 Pool Price Deferral Accounts Proceeding or PPDA Proceeding). A number of Board decisions have dealt with issues arising from the PPDA Proceeding. Those material to the present Decision are referred to in the following sections. The Board also dealt with a number of non-pool price related deferral account matters outstanding from year 2000 pursuant to a written proceeding. These Outstanding Matters Deferral Accounts (OMA) Applications were initially dealt with by the Board in Decision 2001-82 (GENCOs) and 2001-83 (DISCOs), with refilings dealt with in Decisions 2001-114, 2002-003, 2002-006, 2002-007 and 2002-023. 3 Now ANCA (see Note 1) 4 The 1999/2000 Settlement was made under AE’s former name of Alberta Power Limited (APL). 5 See Decision 2000-41, TransAlta Utilities Corporation, Sale of Distribution Business (July 5, 2000). 6 AR 53/2002. The Deficiency Regulation repealed and replaced a number of existing regulations, including the

Deferral Accounts Deficiency Regulation, AR 240/2000, pursuant to which the Deferral Account Applications were originally made.

2 • EUB Decision 2002-057 (June 24, 2002)

http://www.eub.gov.ab.ca/bbs/documents/decisions/2000/2000-3.pdf

http://199.214.173.37/bbs/documents/decisions/2001/2001-82.pdf











A complete list of PPDA and OMA related Decisions is set out in Attachment 3. In this Decision, references to other Board Decisions are to the hard copy rather than the electronic version of the particular Decision. In some instances, the hard copy pagination differs by one page from the pagination of the electronic version. The Board provided its initial disposition of the AE DISCO and UNCA DISCO Deferral Accounts in Decision 2001-93, dated December 22, 2001. In Decision 2001-93, the Board determined the amounts in the DISCO Deferral Accounts to be recovered from customers starting in 2002. The Board also provided its determination regarding the amounts payable to AE DISCO and UNCA DISCO in respect of the cost of financing the amounts in their Deferral Accounts for the year 2000.7 In Decision 2001-92, the Board provided its determinations regarding the carrying cost rates to be used by AE DISCO and UNCA DISCO to calculate the cost of financing the amounts in their Deferral Accounts for the years 2001 and beyond. In Decision 2001-93, the Board concluded that a further Decision would be required to determine the allocation of DISCO balances to customer classes following approval of the refiling arising from that Decision. The Board addressed these matters in Decision 2002-026 issued on April 18, 2002. The Board initially addressed the GENCO Deferral Accounts in Decision 2001-95 and determined their final balances in Decision 2002-008 dated January 24, 2002. Final balances, which effectively represented offsets to the DISCO Deferral Account balances, were approved for AE GENCO, TransAlta GENCO and EGI. Board-approved GENCO PPDA final refunds to the DISCOs and the Transmission Administrator are summarized in Schedules 1-4 of Decision 2002-008.8 These “final balances” were subject to the Board’s determination of the so-called GENCO “harm” issues, which were dealt with in Decision 2002-025 dated April 16, 2002. In Omnibus Decision 2002-054, dated June 19, 2002, the Board approved rate riders, by customer class, effective July 1, 2002 to recover the approved balances in the AE DISCO PPDA and the UNCA DISCO PPDA. (Click here to Return to the Table of Contents) 3 SECURITIZATION APPLICATION OVERVIEW

During the 2000 PPDA proceeding held in 2001, securitization was identified as an option to finance the deferral account carrying costs for 2002 and beyond. On July 30, 2001, the Board ruled that an investigation into securitization should commence as soon as possible. In response 7 In the case of AE DISCO, the Board determined that it would not approve carrying costs for the year 2000:

Decision 2001-93, page 65. The Board reached a similar conclusion in relation to AE’s OMA Applications in Decision 2001-83.

8 Schedule 1 – AE GENCO PPDA Final Refund; Schedule 2 – EGI GENCO PPDA Final Refund; Schedule 3 – TransAlta GENCO PPDA Final Refund; Schedule 4 – TransAlta GENCO PPDA Wab 4 TSR Interest True-up Payment.










to the Board direction, a Securitization Investigation Group (Securitization Group) was established, including the Applicants, EDI, ENMAX Power Corporation (ENMAX), customer representation and Board staff observer, Greig Sproule. The ongoing status of the securitization investigation was communicated to the Board in letters and refilings of the Applicants. The Securitization Group filed an interim report with the Board on November 29, 2001 (Interim Report). After a review of the Interim Report, the Board continued to encourage parties to pursue securitization. In Decision 2001-92, dated December 12, 2001, the Board stated:

Moreover, in light of this Interim Report, the Board considers it prudent for AE and UNCA, as members of the Securitization Investigation Group, to vigorously pursue the investigation of the securitization option.9

Having investigated various alternative methods of securitization, the Securitization Group concluded that the proposal contained in the Application was the most appropriate. The Securitization Transaction is a sophisticated financial transaction, as reflected in the draft Deferral Account Purchase and Servicing Agreement (Securitization Agreement) attached to the Application. It will require certain orders and/or approvals of the Board to become effective. The Board made further comments on its role in the securitization effort in Decision 2001-92:

With respect to Decisions from the Board, the Board is prepared to support the securitization approach with all reasonable orders and directions to provide the necessary certainty to the financial community.10

The Applicants now seek the necessary Orders to put the agreed upon arrangements in place. As noted in the Introduction, the Applicants requested that the Board issue a decision on the Securitization Transaction by June 24, 2002 in order that securitization can be implemented July 1, 2002. The Application was filed requesting the recovery of all costs for the Securitization through the Deferral Account balances of AE DISCO and ANCA. However, EDI and ENMAX are considering entering into similar securitization transactions. If EDI or ENMAX participates in the securitization, they will remit their proportionate share of the Program Costs (as defined below) to the Applicants for refunding to customers.11 (Click here to Return to the Table of Contents)

9 Decision 2001-92, page 119 10 Decision 2001-92, page 120 11 Because the Board is not the regulatory authority of EDI and ENMAX, their participation in securitization is not

subject to Board approval. However, since their potential participation may affect costs of the Securitization for AE and ANCA, the Board has taken it into account later in this Decision.



4 DETAILS OF THE SECURITIZATION APPLICATION

4.1 General With the exception of AE, the other DISCOs initiated collection of the PPDAs in January 2002. The Applicants expected that the amounts outstanding in the PPDAs at the proposed implementation date of July 1, 2002 would equal $336 million. The amounts are comprised of the following: Table 1: Remaining Balance per Applicants as of July 1, 2002

Company Deferral Amount

at July 1 Collection

Term ANCA $255 million 1.5 years AE $ 81 million 1 year TOTAL $336 million

(Click here to Return to the Table of Contents) 4.2 Securitization Overview The Applicants proposed that a Royal Bank of Canada (RBC) Canadian asset-based commercial paper conduit (RBCC12) would enter into nearly identical deferral account purchase agreements with each of the Applicants. A draft form of these agreements was attached to the Application (Securitization Agreements). Under these Agreements, the Applicants will sell to RBCC their 2000 Deferral Accounts and all of their present and future rights to the collection of the 2000 rate rider in return for cash equal to the principal balance of their respective 2000 Deferral Accounts. Each of the Applicants will service the accounts for and on behalf of RBCC and will be required to bill, collect and, between settlement dates, hold the revenue from the 2000 rate riders in trust prior to remitting to RBCC on a monthly basis. The Applicants have, over the course of various refilings, in accordance with Decisions 2001-92, 2001-93, 2002-24 and 2002-26, developed rate riders at levels sufficient to recover the principal amount of the Deferral Accounts plus forecast expenses to complete the securitization (Program Costs) and a forecast of the securitization costs of financing (Funding Costs) over their respective collection periods. The Board finalized the riders in Decision 2002-054 after receipt of the Applicants’ Fourth Refilings. Amortization of the 2000 Deferral Accounts, Funding Costs and Program Costs will be through the application of net monthly collections after deducting RBCC’s actual Funding Costs for that period. Any remaining balance due to variance in Funding Costs or Program Costs would be recovered through a true-up mechanism as contemplated in the Applicants’ Terms Sheets accompanying the Deferral Account riders, which were also approved in Decision 2002-054.

12 RBCC is defined in the Securitization Agreement to be the “Purchaser” and is referred to as such in some parts of

this Decision.








4.3 Program Costs

The Program Costs, including all costs of the Securitization Group during the investigative phase of the Transaction, were estimated in the Application to total $1.975 million, based upon the following forecast expenses to complete the Transaction: Table 2: Estimated Program Costs (per Application)

Item $

RBC Securitization Fee 425,000 Letter of Credit Fees 240,000 Legal Fees:

Royal Bank of Canada 400,000 Utilities 600,000 Balancing Pool 175,000

EUB Consultant 50,000 Consumers Representation 17,000 Utilities Expenses 18,000 Balancing Pool Expenses 50,000 TOTAL 1,975,000

(Click here to Return to the Table of Contents) The Board recognizes that in the comments filed by the Applicants on June 21, 2002, the Applicants have advised the Board that the program costs have increased as a result of the cost of the letter of credit increasing by $80,000 to $320,000 from $240,000. While this represents a change from the submitted costs, the Board recognizes that there may be further adjustments in the final program costs as well as changes in the share of costs between the DISCO utilities, depending on whether ENMAX or EDI participate in the Securitization. Accordingly, the Board has not adjusted the amount in the above table and has retained the original value submitted in the Application. The Board considers that the differences can be reconciled in the true-up process. The Applicants requested that each Applicant bear its proportionate share of the Program Costs according to the following table. Each Applicant’s share of the Program Costs will be included in the Deferral Account balances established by the Board. Table 3: Applicants’ Share of Program Costs

Company

Pool Price Deferral Account Amount

$000 Allocation

%

Estimated Program

Costs $000

ANCA 255,000 76% 1,501 AE 81,000 24% 474 $ 336,000 100% $ 1,975



(Click here to Return to the Table of Contents) The final Program Costs will not be determined until several months after the closing of the Securitization Transaction. The Applicants will file a reconciliation between these estimated Program Costs and the actual Program Costs at the time of the "true-up" filing. In their Fourth Refilings, the Applicants forecast their Deferral Account balances based upon total Program Costs of $2.0 million allocated to all four DISCOs (AE, ANCA, EDI & ENMAX). Since this amount will be trued-up, the Applicants submitted that it was not necessary at this time to revise the riders approved in Decision 2002-054 to reflect the new estimate of $1.975 million allocated to the two Applicants. 4.4 Funding Costs The Funding Costs are primarily the financing costs of the Securitization. As explained in Attachment 1 to the Application (Securitization Transaction Summary),13 RBCC will enter a Swap Transaction, which will substantially fix the Funding Costs. As this swap will be executed only after the Board’s Decision has been issued, it was not possible to definitively establish the Funding Costs in the Application. The estimate in the Application was 3.80% for AE and 4.05% for ANCA. These estimates were provided on June 7, 2002 and were based on a swap start of June 28, 2002. The difference between the two rates is the result of the differing amortization periods of the Securitization for each Applicant. The actual Funding Costs will be different from these estimated costs for the reasons explained in Attachment 1. The actual Funding Costs will be reconciled to these estimated Funding Costs at the time of the "true-up" filing. In their Fourth Refilings, the Applicants forecast the Funding Cost to be 3.50%. Since the Funding Cost is subject to a true-up, the Applicants submitted it was not necessary to revise the approved riders at this time. 4.5 Additional Matters The Applicants raised two additional matters as part of the Securitization Transaction:

(a) If there is an increase in the approved balance in the Deferral Accounts as a result of the Applicants’ applications for review and variance of the relevant Board Decisions,14 then the Applicants requested that the Board not directly adjust the Deferral Account balances. Instead, the Applicants requested that any such increases should be through a separate rate rider to ensure that the increased balance is not considered part of this Securitization Transaction.

(b) It is possible that not all of the approved balances will be collected during the initial

period scheduled for collection, due to costs that are unknown at July 1, 2002. The

13 Attachment 1 is also attached to this Decision as Attachment 1 for the convenience of the reader. 14 AE DISCO and UNCA DISCO have both filed applications for review and variance of Decisions 2001-92 and

2001-93.



Applicants maintain a right to collect all such outstanding amounts and seek approval to do so beyond the end of the formal collection period.

4.6 Conditions Precedent

The Applicants listed five conditions precedent, all of which must be completed in order to permit the implementation of Securitization:

1. Board orders for AE and ANCA must be received in a form that, in the opinion of both RBC and the Applicants, provide the necessary regulatory assurances as set out in Appendix 1 of Attachment 1.15

2. The Balancing Pool must provide all necessary authorities; approvals and indemnities in

a form satisfactory to both RBC and the Applicants.

3. Dominion Bond Rating Service must rate the securitization plan at R-1 (high).

4. Treatment of the payment of GST (if any payment is due) upon the sale of the Deferral Accounts to RBCC must be determined in a manner satisfactory to both RBC and the Applicants.

5. All required third party consents and approvals have been obtained.

The Applicants indicated that in order to implement the securitization on July 1, 2002, all conditions precedent must be met by June 24, 2002. In the response to the Board filed on June 21, 2002, the Applicants stated that they now do not anticipate that conditions 2 (Balancing Pool matters) and 4 (GST treatment) will be satisfied in a timely manner to permit a closing on July 1, 2002. However, the Applicants stated that the closing would be later in July or early August, 2002. Notwithstanding that closing is delayed, the Applicants propose to begin to collect and administer rate riders on the assumption that the Securitization will be closed in the near future and that all rate riders billed and collected after July 1, 2002 will be subject to the Securitization and for the account of the Purchaser. (Click here to Return to the Table of Contents) 5 BOARD APPROVED COLLECTIBLE AMOUNTS AND RATE RIDERS

5.1 AE DISCO

In Decision 2002-054, the Board approved a 2000 PPDA total collectible amount of $82,669 million on the Terms Sheet for AE DISCO.16

15 As noted in Section 3 (Regulatory Assurances Required), proposed wording for each of these approvals is set out

in Appendix 1 to Attachment 1. 16 Total Collectible Amount shown on Terms Sheet approved for AE DISCO in Decision 2002-054, Schedule B.




The Board approved the following 2000 PPDA collectible amounts and rate riders by rate class, effective July 1, 2002, for AE DISCO in Decision 2002-054: Table 4: Board Approved AE DISCO 2000 PPDA Collectible Amounts and Rate Riders

Rate Class Rate Description17

Board Approved

PPDA Collection Amount ($ 000)

July 2002 – June 2003 Forecast Energy (MWh)

2000 PPDA Rate Rider

(¢/kWh) D11 Residential 6,813 770,000 0.885 D21, D22 Commercial 4,948 600,000 0.825 D25, D26 Irrigation 3 2,800 0.112 D31 ≥ 2 MW D-connect industrial 17,725 2,227,550 Individual

$/customer D31, D32 < 2 MW D-connect industrial 23,012 2,800,000 0.822 T31 ≥ 2 MW T-connect industrial 21,251 2,000,000 Individual

$/customer T31 < 2 MW T-connect industrial 151 16,000 0.947 D41 Oilfield 3,634 400,000 0.909 D51, D52 REA Farm 1,547 170,000 0.910 D56 Company Farm 2,649 290,000 0.913 D61 Street Lighting 260 19,400 1.339 D63 Private lighting 57 4,250 1.338 39D, 39T, 49

DAT 617 N/A Individual $/customer

82,669 9,300,000 The Board notes that the total collectible amount of $82.67 million includes $1.63 million18 of forecast securitization carrying costs at a rate of 3.5% for the period July 1, 2002 to June 30, 2003. Accordingly, the principal amount to be securitized is $81.04 million (i.e., $82.67 million - $1.63 million = $81.04 million). The Board has rounded this number down to arrive at $81 million to be securitized for AE DISCO. The Board approved collectible amount is also shown on the Terms Sheet approved for AE DISCO in Decision 2002-054. (Click here to Return to the Table of Contents) (Click here to go to the text where Table 4 is referenced)

17 AE DISCO Fourth Refiling, Schedule 1.5 18 Decision 2002-054, Table 1: July 1, 2002-Dec. 31, 2002 carrying costs of $1.281 million plus Jan 1, 2003-June

30, 2003 carrying costs of $0.345 million for a total of $1.626 million in securitization carrying costs.



5.2 ANCA

In Decision 2002-054, the Board approved a 2000 PPDA total collectible amount of $439.39 million on the Terms Sheet for ANCA.19 Of this amount, $92.90 million20 was collected by way of an interim rider put in place in the year 2000, leaving an outstanding balance of $346.49 million as of December 31, 2001. In Decision 2001-113 dated December 18, 2001, the Board allowed ANCA to commence collection of this outstanding amount on January 1, 2002. ANCA estimated that $85.54 million would be collected from January to June 2002 leaving a remaining balance of $260.94 million to be collected over the period July 1, 2002 to December 31, 2003. In Decision 2002-054, the Board approved the following 2000 PPDA collectible amounts and rate riders by rate class, effective July 1, 2002, for ANCA, formerly UNCA DISCO: Table 5: Board Approved ANCA 2000 PPDA Remaining Collectible Amounts and Rate Riders

Rate Class

Rate Description Class A

Non Site-Specific21

Board Approved Remaining PPDA

Collection Amount ($ 000)

July 2002-December 2003 Forecast Energy

(GWh)

2000 PPDA Rate Rider

(¢/kWh) 11XX-12XX Residential 18,177 2,951.8 0.616 21XX-23XX UNCA Farm 6,179 919.2 0.697 24XX-25XX REA Farm 4,671 637.1 0.697 26XX-27XX UNCA Irrigation 1,158 294.3 0.393 28XX-29XX REA Irrigation 9 2.5 0.393 3XXX Exterior Lighting 1,376 102.9 1.33622 41XX-43XX Small General Service 7,210 1687.3 0.427 44XX-46XX Pumping 8,800 1203.6 0.73123 61XX-62XX General service 51,993 7,939.6 0.655 Total 99,571 15,738.4

Class B

Site-Specific Rate Classes24

Actual 2000 Consumption

(GWh) 6300, 6400 Large General Time-of-Use 33,393 2,624.4 2.026 6310, 6410 Direct Connected Service 111,234 9,006.3 1.928 66XX Temporary Energy - 340.1 - 68XX Direct Access Tariff 6,512 558.8 1.165 Option G Option G 8,711 1159.5 1.018 81XX Wholesale Service (Closed) 942 108.8 1.976 Total 161,371 13,797.7 Grand Total 260,942

19 Total Collectible Amount shown on Terms Sheet approved for UNCA DISCO in Decision 2002-054, Schedule F. 20 $84.305 million was collected in 2000 and $8.599 million of unbilled revenue was collected in 2001. 21 UNCA DISCO Fourth Refiling, Schedule PPDA-7-A 22 Rider in ¢/W; (0.563 ¢/W/mo.) 23 Rider in $/kW/mo; ($2.517/kW/mo.) 24 UNCA DISCO Fourth Refiling, Schedule PPDA-7-B



http://www.eub.gov.ab.ca/BBS/documents/decisions/2001/2001-113.pdf


The Board notes that the total collectible amount of $260.94 million includes $6.70 million25 of forecast securitization carrying costs at a rate of 3.5% for the period July1, 2002 to June 30, 2003. Accordingly, the principal amount to be securitized is approximately $254.24 million (i.e., $260.94 million - $6.70 million = $254.24 million). The Board has rounded this number up to arrive at $255 million to be securitized. (Click here to Return to the Table of Contents) (Click here to go to text where Table 5 is referenced.) 6 VIEWS OF INTERESTED PARTIES

6.1 Registered Parties The following parties requested to be specifically registered for the Securitization module of the 2000 Pool Price Deferral Account Proceeding:

• Alberta Association of Municipal Districts & Counties • Alberta Federation of REAs Ltd. • Alberta Irrigation Projects Association • Consumers’ Coalition of Alberta • ENMAX Power Corporation and ENMAX Energy Corporation • Public Institutional Consumers of Alberta

6.2 Securitization Proposal

The Board received letters from the following interested parties representing customer groups, expressing support for the Securitization proposal:

• Alberta Association of Municipal Districts & Counties • Alberta Co-Generators Council • Alberta Federation of REAs Ltd. • Alberta Irrigation Projects Association • Consumers’ Coalition of Alberta • First Nations and Aboriginal Communities • Industrial Power Consumers and Cogenerators Association of Alberta • Public Institutional Consumers of Alberta • Senior Petroleum Producers Association

These parties were not opposed to the proposed Securitization Transaction as they considered that it would provide benefits to consumers through lower PPDA carrying costs. In addition, all of these parties indicated that they either had the opportunity to discuss the Securitization Transaction with the Securitization Group, the Balancing Pool, and RBCC or received summary

25 Decision 2002-054, Table 14: July 1, 2002-Dec. 31, 2002 carrying costs of $3.746 million plus Jan 1, 2003-Dec.

31, 2003 carrying costs of $2.957 million for a total of $6.703 million in securitization carrying costs.



materials in order to sufficiently understand the benefits to consumers of the Securitization Transaction. On June 18, 2002, the Board also received a letter from TransAlta Utilities Corporation (TransAlta) expressing support for the Application.26 6.3 Balancing Pool Involvement These parties were also supportive of the indemnifying role of the Balancing Pool in the Securitization Transaction to minimize the political/regulatory risk associated with the scheme. The Board does not have any jurisdiction over the method used by the Balancing Pool to allocate funds to Customer groups. However, these interested parties expressed their view that, although the risk of a political event was unlikely, it was their desire and understanding that the intent of the Balancing Pool (should the Balancing Pool be required to payout any portion of the securitized amounts under a change in law or regulation event as described in the Application summary), was not to recover these amounts equally from all consumers of electricity in Alberta, but to try to approximate the collection from those consumers paying the rate riders under a securitization scheme. (Click here to Return to the Table of Contents) 7 VIEWS OF THE BOARD

7.1 Is Securitization in the Public Interest? As noted in the Introduction, the Board received no objections to the Application, but did receive a number of letters of support for the Application from representatives of interested customer groups as well as TransAlta. Nevertheless, the Board has reviewed the Application to satisfy itself that the securitization rates (or Prescribed Rates as defined in the Securitization Agreement) are just and reasonable, and that the Securitization Transaction is otherwise in the public interest. In the Application, the Board notes that AE DISCO has forecast a securitization rate of 3.8025% for the period July 1, 2002 to June 30, 2003, and ANCA has forecast a securitization rate of 4.0525% for the period July 1, 2002 to December 31, 2003. In Attachment 2 to this Decision, the Board has compared these forecast rates under the Securitization Transaction with the carrying costs that would have resulted if the original carrying cost rates requested by AE DISCO and ANCA had been allowed by the Board. In this event, gross consumer savings would have been approximately $19 million. However, in Decision 2001-92, the Board did not grant AE DISCO and ANCA the carrying costs that they requested and instead granted a lesser amount consistent with the risks associated with deferral account operations. Therefore, the savings resulting from Securitization would be more modest in relation to those approved carrying costs. As noted earlier, AE DISCO and UNCA DISCO have each applied for a review and variance of Decision 2001-92 (R&V Applications).

26 As noted in the Introduction, TransAlta DISCO was the prior owner of ANCA’s Deferral Accounts.



Therefore, the benefits of the Securitization Transaction cannot be determined more precisely until the ultimate disposition of the R&V Applications. The Board also notes that these gross benefits are before consideration of the total Program Costs of approximately $2 million. The Board also notes that if EDI or ENMAX complete a securitization, they will remit their proportionate share of the Program Costs (i.e., $0.6 million) to the Applicants. In this event, the Program Costs to be borne by AE DISCO and ANCA would be approximately $1.4 million. In Decision 2002-054, the Board has allowed AE DISCO and ANCA to recover the estimated $1.4 million of Program Costs. If AE DISCO and ANCA are required to bear the additional $0.6 million due to the non-participation by EDI and ENMAX, the Board will allow this additional amount to be recovered from customers in the true-up process discussed below. Regardless of this possible increase in Program Costs, to be recovered from AE DISCO and ANCA customers, the Board considers that approval of the Securitization Transaction will result in significant savings to the utilities under the Board’s jurisdiction and their customers. From a public interest perspective, the Board considers that approval of the Securitization Transaction for AE DISCO and ANCA will also provide the opportunity for EDI and ENMAX to participate in the scheme, which could potentially result in further savings to Alberta consumers. Further, the Board considers that the Securitization Transaction promotes greater fairness for the utilities (including both EDI and ENMAX, should they participate) by accelerating the recovery of company equity and debt financing.27 In the Board’s view, this accelerated recovery is a positive outcome for the regulatory environment in the electrical restructuring process.

27 As a result of the Deferral Accounts Deficiency Correction Regulation (now the Deficiency Regulation), the

utilities were unable to recover the principal balance of their Deferral Accounts in 2001.




For all of these reasons, the Board is satisfied that the rates resulting from the all-in funding costs for AE DISCO and ANCA as provided for by their respective Securitization Agreements are just and reasonable and in the public interest. Accordingly, the Board approves the implementation of Securitization for AE DISCO and ANCA for the following periods:

• for AE DISCO, the period July 1, 2002 to June 30, 2003 • for ANCA, the period July 1, 2002 to December 31, 2003

and the Board confirms the right of AE DISCO and ANCA for and on behalf of the Purchaser to collect the full, approved balances of the respective Deferral Accounts, plus interest at the rates determined in accordance with their respective Securitization Agreements, from all of the customers in their respective service areas.28 The Board understands that it is possible that Securitization may not start on July 1, 2002 but rather the Securitization may start at some point in July, or on August 1, 2002, or shortly thereafter.29 The Board approves this minor delay in the implementation date of Securitization. (Click here to return to the Table of Contents) 7.2 Ownership of Deferral Accounts As noted in the Application, the Securitization Transaction requires AE DISCO and ANCA to sell their Deferral Accounts and Related Rights (as defined in the Securitization Agreement) to RBCC (the Purchaser). The Application also specifically requests an assurance that the Deferral Accounts and Related Rights are “transferable assets”30 as well as approval of the Securitization Transaction pursuant to section 101(2)(d) of the Public Utilities Board Act (PUB Act).31 Some discussion of these particular requests is required. Because the Deferral Accounts are receivables of AE DISCO and ANCA, they are assets in respect of which Board approval of their disposition is required pursuant to section 101(2)(d) of the PUB Act) if the disposition is outside the ordinary course of the utility’s business. Similarly, to the extent that the Related Rights are transferable, their disposition requires Board approval under section 101(2)(d) of the PUB Act. The Board is satisfied that, as receivables, the Deferral Accounts are assets that are transferable by a public utility, subject to Board approval. In the Board’s view, the transfer of the Deferral Accounts themselves does not raise any question respecting the relative rights and duties of AE DISCO and ANCA vis-à-vis their end-use customers and retailers.

28 See the discussion of “customers” in Section 7.2 (Ownership of Deferral Accounts). 29 In their letter dated June 21, 2002, in which the Applicants provided comments on the Board’s draft Securitization

Decision Report, they stated that they did not anticipate that conditions 2 (Balancing Pool matters) and 4 (GST treatment) would be satisfied in a timely manner to permit a closing on July 1, 2002. The Applicants expected that the closing would be later in July or early August.

30 Attachment 1, page 3 of 6 31 RSA 2000, c. P-45. Section 101 applies only to public utilities designated by regulation. AE and UNCA have

both been designated by the Designation Regulation, AR 236/2000, as amended. Because ANCA is only a name change for UNCA, the Board considers ANCA to be designated for purposes of section 101 of the PUB Act.



However, it is not immediately apparent to the Board that the Related Rights are all rights that can similarly be transferred. Specifically, the Board must consider whether any of these rights have been dealt with by applicable legislation−in this case, the Electric Utilities Act32 and its regulations−in such a way that they cannot, even with Board approval, be transferred or conferred on a person other than the owner of an electric distribution system or a retailer. In the Board’s view, this question arises in this context because of the particular roles and responsibilities of owners of electric distribution systems (i.e., DISCOs), wire services providers and retailers (as those terms are legislatively defined) under the EU Act and its regulations.33 In particular, when an end-use customer is served by a retailer who is not the customer’s DISCO, the retailer has the obligation to bill and collect from customers on behalf of the DISCO for amounts owing to the DISCO under its Distribution Tariff. In the absence of an agreement between the retailer and the DISCO, the retailer must, according to the Billing Regulation and related provisions of the Roles, Relationships and Responsibilities Regulation, bill and collect from customers on behalf of the DISCO. “Related Rights” are defined in the Securitization Agreement as follows:34

“Related Rights” means, in respect of the Deferral Account:

(a) all present and future rights and benefits accruing to the Seller under or in respect of the Deferral Account, including all present and future right, title and interest in and to the Rate Riders and all amounts payable in respect thereof by End Use Customers, Retailers and any other Persons;

(b) all present and future rights and benefits accruing to the Seller under the

Act in respect of the Deferral Account and the Rate Riders, including pursuant to the Securitization Decision and any other legislative orders of any Electricity Regulator made in respect thereof;

(c) all of the Seller’s present and future rights pursuant to the Act or

otherwise to ask, demand, sue for, collect, receive and enforce any and all monies payable under or in respect of the Deferral Account and the Rate Riders and to enforce all other covenants, obligations, rights and remedies with respect thereto;

(d) all of the Seller's present and future right, title and interest in, to and

under all guarantees, indemnities, insurance policies (and proceeds and premium refunds thereof) and other agreements or arrangements of whatsoever character from time to time specifically supporting or securing payment of the Rate Riders (including supporting or securing payments from Retailers), and the benefit of all insurance, if any, relating thereto; provided, however, to the extent that any such

32 RSA 2000, c. E-5 33 RSA 2000, c. E-5. See, in particular, the Roles, Relationships and Responsibilities Regulation, AR 86/2000, as

amended, and the Billing Regulation, AR 290/99, as amended. 34 All emphasis added.



guarantees, indemnities, insurance policies or other agreements or arrangements are not assignable or support or secure payment of amounts other than Rate Riders, the Seller shall, to the extent not prohibited by applicable Law, hold its interest therein and all proceeds thereof in respect of Rate Riders in trust (provided that in the case of cash collateral the Seller may, subject to Section 6.2, commingle and apply such cash as and with its other operating funds) for and at the direction of the Purchaser;

(e) all rights to recover from Retailers amounts representing or on account

of Rate Rider collections; and

(f) all Rate Rider Collections and Proceeds of or relating to the Deferral Account and the Rate Riders or to any of the foregoing,

provided that, for greater certainty, Related Rights shall not include surcharges in respect of the Deferral Account, which have been invoiced prior to the Cut-Off Date.

The Board notes that the Securitization Agreement defines “End Use Customer” in terms that generally conform to the term “customer” as it is defined and used in the EU Act and its regulations. The definition of End Use Customer specifically excludes a Retailer, which is defined in the Securitization Agreement as follows:

“Retailer” means any Person licensed by an Electricity Regulator to collect Rate Riders from End Use Customers and remit such amounts to the Seller.

In the Board’s view, this definition of Retailer is consistent with the definition of “retailer” in the EU Act and its regulations. The Board’s concern in this respect is whether the purported transfer of the Related Rights would involve any interference in the legislated roles of the DISCO and retailers in relation to customers. However, having considered the definition of Related Rights in the Securitization Agreement, and the related definitions of End Use Customer and Retailer, the Board is satisfied that what will be transferred from the DISCOs to the Purchaser are only those rights accruing to AE DISCO and ANCA pursuant to the EU Act and its regulations and relevant Board decisions in relation to the collection of their Deferral Account balances from (end-use) customers.35 To the extent that the DISCOs’ rights to bill and collect from customers may be circumscribed or otherwise affected by applicable legislation, and/or to the extent that amounts and collection methodology are affected by Board decisions, the Board is of the view that the Related Rights are similarly circumscribed. Moreover, the assurance sought in the Application is as follows:

35 The Board is expressly included in the definition of “Electricity Regulator” in the Securitization Agreement.



the Purchaser shall have the same rights and benefits with respect to the Deferral Accounts and Related Rights as did AE and ANCA prior to the purchases.36

If the rights and benefits of AE DISCO and ANCA were subject to the provisions of the applicable legislation and relevant Board decisions, the Board is of the view that the Purchaser can only take those rights and benefits subject to the legislation and the Board’s decisions. Therefore, the Board is of the view that, subject to any limitations arising from the EU Act, its regulations or relevant Board Decisions, the Related Rights are transferable assets. Accordingly, the Board considers that it may approve, pursuant to section 101(2)(d) of the PUB Act, the transfer of both the Deferral Accounts and the Related Rights, subject to any limitations arising from the EU Act, the relevant regulations or relevant Board Decisions, if that approval is required in the circumstances of the Securitization Transaction and the criteria for the exercise of the Board’s discretion under that provision are met. The Board considers the Securitization Transaction to be outside the ordinary course of the business of AE DISCO and ANCA. Therefore, the sale of the Deferral Accounts and Related Rights to RBCC requires Board approval pursuant to section 101(2)(d) of the PUB Act. As to the criteria for the exercise of the Board’s discretion, in a number of Decisions, the Board has established and applied the so-called “no harm” test in applications pursuant to this provision of the PUB Act.37 This test requires the Board to be satisfied that the proposed asset disposition will at least leave customers no worse off – i.e., that they will suffer “no harm” as a result of the transaction. For the reasons set out in the previous section, the Board is satisfied that customers will not be harmed by the sale of the Deferral Accounts and Related Rights (as defined in the applicable Securitization Agreements) by AE DISCO and ANCA to RBCC. In fact, the Board has concluded that customers are likely to realize significant benefits if the Securitization Transaction is allowed to proceed. Therefore, the Board concludes that approval of the Securitization Transaction for each of AE DISCO and ANCA pursuant to section 101(2)(d) of the PUB Act would be in the public interest and will so order. Pursuant to this approval,38 upon the purchase of each Deferral Account and the Related Rights (as defined under the applicable Securitization Agreement) pursuant to the terms of the Securitization Agreements, the Board will recognize the Purchaser as the owner of the Deferral Accounts and the Related Rights and the Purchaser shall have the same rights and benefits with respect to the Deferral Accounts and Related Rights as did AE DISCO and ANCA prior to the purchases.

36 Attachment 1, Appendix 1 (x.1.3 Ownership of Deferral Accounts) [emphasis added] 37 Most recently in Decision 2002-038, TransAlta Utilities Corporation, TransAlta Energy Corporation, and

AltaLink Management Ltd., Sale of TransAlta Transmission Assets and Business to AltaLink (March 28, 2002). 38 Pursuant to section 15(3)(d) of the Alberta Energy and Utilities Board Act, RSA 2000, c. A-17, the Board may

attach any conditions to an approval that it considers in the public interest.




The Board also agrees that it is appropriate for the Purchaser to be given standing before the Board to request any relief or assert any right that would otherwise have been available to AE DISCO and ANCA, regarding:

(a) the amount of the Deferral Accounts; (b) the amount or rate of carrying charges related to any Deferral Account; (c) the period and method of collection of any Deferral Account and the carrying

costs related thereto; and (d) any other matter related to any Deferral Account and the carrying costs thereof,

for which the Purchaser requires Board clarification or assistance. (Click here to Return to the Table of Contents) 7.3 Securitization Agreements The Application requests express approval for AE DISCO and ANCA to enter separate Securitization Agreements (AE Securitization Agreement and ANCA Securitization Agreement, respectively)39 substantially in the forms attached to the Application. For the reasons set out in the previous two sections, the Board has concluded that it is in the public interest for AE DISCO and ANCA to complete the Securitization Transaction in relation to their respective Deferral Accounts, including the transfer to the Purchaser of the Deferral Accounts and Related Rights. To the extent that the Board’s further approval may be necessary to allow AE DISCO and ANCA each to enter a Securitization Agreement substantially in the form attached to the Application, the Board considers such approval to be in the public interest and will so order. (Click here to Return to the Table of Contents) 7.4 Deferral Account Balances As noted in the Application, for purposes of establishing the total amounts to be securitized, the Securitization Agreement defines the Deferral Account Balance initially to be the amount fixed by the Board as of the Cut-Off Date for each of AE DISCO and ANCA, but subject to periodic adjustment over the collection period in accordance with the terms of the Securitization Agreements. For that purpose, the Application requests that the Board approve a Deferral Account Balance for each of AE DISCO and ANCA as of July 1, 2002. The Board notes that the Application submitted Deferral Account balances of $81 million for AE DISCO and $255 million for ANCA.40 In Section 5 of this Decision, the Board set out Tables indicating the Board approved amounts and rate riders in respect of the outstanding Deferral Account balances for AE DISCO and ANCA as of July 1, 2002, in accordance with the Board’s findings in Decision 2002-054. According to Table 4, AE DISCO’s Deferral Account balance, including forecast securitization costs, for rate rider purposes is approximately $83 million as of

39 Where necessary and appropriate, the AE Securitization Agreement and the ANCA Securitization Agreement are

referred to in this Decision collectively as the “Securitization Agreements”. 40 See Table 1 of this Decision.



July 1, 2002.41 According to Table 5, ANCA’s Deferral Account balance, including forecast securitization costs, for rate rider purposes is approximately $261 million as of July 1, 2002.42 The Board considers the balances derived according to Tables 4 and 5 to be reflective of the actual balances for rider purposes. The Deferral Account Balances for AE DISCO and ANCA of $83 million and $261 million, respectively, include future carrying costs for periods after July 1, 2002 at the rate of 3.50% per annum. As RBCC is only purchasing the principal amount of the Deferral Accounts as at July 1, 2002, these future carrying costs should not be included in the balance for securitization. Based on the amounts set forth in Decision 2002-054 for securitization carrying costs ($1,626,000 for ATCO as per table 1 at page 9 and $6,703,000 for ANCA as per table 14 at page 44), the Deferral Account Balances for AE DISCO and ANCA should be $81 million and $255 million respectively. Accordingly, for purposes of the Securitization Agreements, the Board approves a Deferral Account Balance as of July 1, 2002, of $81 million for AE DISCO and $255 million for ANCA, as per the Application. Finally, having considered the definition of Deferral Account Balance in the Securitization Agreements, the Board approves the calculation of the Deferral Account Balances for AE DISCO and ANCA from time to time in accordance with the terms of the applicable Securitization Agreement. (Click here to Return to the Table of Contents) 7.5 Prescribed Rates The Board notes that the Prescribed Rates for AE DISCO and ANCA are defined in the Securitization Agreements to be equal to the sum of the fixed rate under the Swap Transaction (as defined in the Securitization Agreements) plus 0.425% per annum. The Board acknowledges that the Swap Transaction will be entered into on the closing date of each transaction for AE DISCO and ANCA. The Board notes that the June 21, 2002 response by the Applicants indicated that there has been a reduction by RBC in program fee rate from 0.4625% to 0.425% as a result of a reduction in the Balancing Pool letter of credit facility. The Board is using the most recent value of 0.425% in this Decision. Having regard to the reasons set out earlier in this Decision, the Board is satisfied that the Prescribed Rates that will result for AE DISCO and ANCA under their respective Securitization Agreements are just and reasonable and in the public interest. Accordingly, the Board approves a Prescribed Rate (as defined under the Securitization Agreements) for each of the Securitization Agreements, which is equal to the sum of the fixed rate under the Swap Transaction (as defined under the applicable Securitization Agreement) plus 0.425% per annum. Furthermore, the Board directs AE DISCO and ANCA to notify the Board of the Prescribed Rates for their respective Securitization Agreements forthwith following the closing date of each transaction. (Click here to Return to the Table of Contents) 41 $82.669 million in Table 4 42 $260.942 million in Table 5



7.6 Other Deferral Account Matters As noted earlier, AE DISCO and UNCA DISCO each have outstanding R&V Applications in relation to Decision 2001-92 relating to PPDA carrying costs. They also have outstanding R&V Applications in relation to Decision 2001-93 respecting the determination of their Deferral Account balances. Any one of these R&V Applications, if successful, could result in Board approval of an increase in the approved balance of the Applicants’ Deferral Accounts. However, the Application specifically requests that if such an increase occurs, the Board will not directly adjust the approved balance of the affected Deferral Account and that the increase will be dealt with by way of a separate rate deficiency rider to ensure that the increased balance is not considered part of this Securitization. In the Board’s view, this request is reasonable. Accordingly, any increase in the Board-approved balances of the Deferral Accounts as a result of the Applicants’ R&V Applications will not result in a direct adjustment of the approved balances of the Deferral Accounts. Instead, to the extent required, any such increase will be dealt with by way of a separate rate deficiency rider so that the increase is not considered part of the Securitization. However, the Board would be prepared to consider including these amounts in Securitization, if requested by both the Purchaser and the Applicants. In addition, the Application notes the possibility that not all of the approved Deferral Account Balances will be collected during the initial period scheduled for collection pursuant to the Securitization due to costs that are unknown at July 1, 2002. The Applicants maintain the right to collect all such outstanding amounts and seek approval to do so beyond the end of the formal collection period. This request appears to be in addition, or supplementary to the requests for a true-up mechanism to accommodate actual Program Costs and “Funding Costs” once they are determined following closing of the Securitization Transactions. Specifically in this regard, the Securitization Transaction Summary (Attachment 1) indicates that the following assurance is required from the Board:

There is a mechanism in place for the EUB or municipal regulator to periodically adjust the level of the rate rider (a “true-up mechanism”) to accommodate changes in the projected level of collections, or changes in expected funding costs, in order to ensure full payout of the deferral accounts (plus actual funding costs incurred) within a maximum three-year term. [Emphasis added.]

The Board notes that this statement of the assurance is somewhat different than the specific Board order/approval requested at page 9 of the Application itself:

(iv) an order approving a “true-up” mechanism and/or ability to extend or shorten the collection period to accommodate changes in the level of collection or changes in expected funding costs.





As the Board understands it, the references to “changes in the level of collection” would encompass both those changes in the Deferral Account Balances resulting from Board-approved increases and any changes in Program Costs. As the Board also understands it, the references to “changes in expected funding costs” are to variances from 3.50% of the Purchaser’s actual funding costs in a particular period. The difference between the two statements of requested assurance is that the Securitization Transaction Summary encompasses only changes in the level of the rate rider whereas the specific order requested in the Application includes both this kind of true-up (i.e. changes in the level of the rate riders) and the extension or shortening of the collection period. In that respect, the order actually requested appears to blend the request for a true-up mechanism in the Transaction Summary and the Applicants’ request for approval to collect beyond the end of the collection period on page 7 (line 12) of the Application. The Board has approached the request on this basis. In addition, the language used in both the Transaction Summary (Attachment 1) and the Application itself is somewhat unclear as to the nature of the “true-up” mechanism that is being sought. In Decisions 2001-93 and 2002-024, the Board has already approved a true-up process for both AE DISCO and ANCA that will occur at the end of the approved collection periods. It isn’t clear to the Board, however, whether the Applicants are also requesting an opportunity to seek an “intra-period” adjustment to the rate riders should such an intra-period adjustment be considered necessary. In either case, the Board does understand that the true-up may involve a request for approval to collect amounts beyond the end of the currently approved collection periods. The Board has dealt with the true-up process in Section 7.9 of this Decision. Although the Board approved collection periods for both AE DISCO and ANCA in Decision 2001-92, which are reflected in the Securitization Transaction, the Board notes that actual costs of the Transaction (including variances from the Prescribed Rate, Program Costs and Deferral Account Balances) may result in changes in the actual amounts to be collected from customers. The assurance requested in the Application limits the actual period over which the amounts collected pursuant to the Securitization Transaction may be collected to a maximum three-year term. In the Board’s view, this maximum term is consistent with the requirement of the Deficiency Regulation that the Deferral Account balances be collected over a term ending no later than December 31, 2004.43 In the Board’s view, having regard to the nature of the Securitization Transaction and the unique circumstances of this Application, in the event that collection of any amounts ultimately owing pursuant to the terms of the Securitization Agreement cannot be completed within the initial collection period, the Board agrees that the Applicants are entitled to collect these amounts. Any request for an extended collection period can, in the Board’s view, be dealt with as part of the true-up process established in Section 7.9 of this Decision. (Click here to Return to the Table of Contents)

43 Deficiency Regulation, section 13(1)



7.7 Rate Riders

As requested in the Application, the Board hereby confirms the rate riders in respect of the Deferral Accounts of AE DISCO and ANCA approved by the Board in Decision 2002-054. The Board also confirms that, as provided for in this Decision, the Purchaser or a DISCO may from time to time apply to the Board for an adjustment to the rate riders in respect of the Deferral Accounts or the period of time over which the rate riders may be collected in accordance with the true-up mechanism approved by the Board in Decision 2002-054. (Click here to Return to the Table of Contents) 7.8 Servicing According to the terms of the Securitization Transaction, while the Deferral Account Balances will be sold by AE DISCO and ANCA to RBCC (the Purchaser), AE DISCO and ANCA will remain responsible for collecting amounts from customers on behalf of the Purchaser. The Application requests confirmation that AE DISCO and ANCA and their successors in interest will remain obligated to bill and collect these amounts from their respective customers. Subject to one clarification, the Board considers this confirmation to be appropriate and reasonable. In the Board’s view, clarification is required in this context because of the particular roles and responsibilities of DISCOs, wire services providers and retailers under the EU Act and its regulations noted earlier in this Decision in connection with the transfer of the Deferral Accounts and Related Rights.44 In particular, pursuant to this legislation, when an end-use customer is served by a retailer who is not the customer’s DISCO, the retailer has the obligation to bill and collect from the customer on behalf of the DISCO for amounts owing to it by that customer.45 As the Board noted earlier, the definitions of End Use Customer and Retailer in the Securitization Agreements appear to be consistent with the terms “customer” and “retailer” as defined in the EU Act and regulations. The Board emphasizes its view that the references to “customer” or “customers” in this Decision, particularly this section of the Decision, must be taken as references to “End Use Customer” (as defined in the Securitization Agreement) and “customer” (as defined in the EU Act). The Board does not consider a retailer to be a “customer” of the DISCO. Similarly, the Board determined in Decision 2001-38 that a so-called “self-retailer” is still a “customer” for purposes of the EU Act and regulations.46 Having regard to these considerations and to the extent necessary, therefore, the Board emphasizes that its confirmations in this section of the Decision must be read subject to the applicable provisions of the EU Act and its regulations as they relate to the rights and obligations of DISCOs and retailers vis-à-vis end-use customers. 44 See Section 7.2 45 To this end, the DISCO is obliged by the Act and regulations to provide certain necessary information to the

retailer to allow it to meet its billing and collection responsibilities. 46 Decision 2001-38, ATCO Electric Ltd., 2001-2002 Distribution Tariff, Part C: Phase II (May 16, 2001), page

141.


http://www.eub.gov.ab.ca/BBS/documents/decisions/2001/2001-38.pdf


Accordingly, the Board confirms that, notwithstanding the purchase of the Deferral Accounts and the Related Rights by the Purchaser and subject to the EU Act and regulations, the DISCOs and any legal or natural person claiming by, through or under the DISCOs, including but not limited to any successors in interest to a DISCO, or any receivers of a DISCO (collectively “successors in interest”), will remain obligated to bill and collect, from the customers of the applicable DISCO and its successors in interest, for and on behalf of the Purchaser, all amounts relating to the Deferral Accounts and the Related Rights. The Board also confirms that all customers of the DISCOs and their respective successors in interest shall be obligated to pay the full amount to be collected by the rate riders related to the Deferral Accounts sold by the DISCOs to the Purchaser as approved in Decision 2002-054 and as may be subsequently modified in accordance with this Decision and the terms of the applicable Securitization Agreement. Non-payment by any customer of a DISCO or its successors in interest will be recovered in subsequent billings from other customers of the DISCO and its successors in interest subject to the Terms Sheets approved in Decision 2002-54. Finally, the Board confirms that the rate riders related to each of the Deferral Accounts sold by the DISCOs to the Purchaser are components of the DISCOs’ respective Distribution Tariffs, which obligates Retailers (as defined under the Securitization Agreements) to remit amounts collected pursuant to rate riders in respect of their customers to the DISCOs or their successors in interest. (Click here to Return to the Table of Contents) 7.9 True-up Processes In Decisions 2001-93 and 2002-024, the Board established true-up processes for AE DISCO and ANCA to accommodate a number of outstanding issues, including a true-up to accommodate the rates set out in the anticipated final proposal of the Securitization Group. In the Application, those rates are estimated at 3.80% for AE DISCO and 4.05% for ANCA and a request is made for a true-up mechanism to accommodate the final rates once they are known following closing of the Securitization Transaction. However, noting the estimate of 3.5% in the Fourth Refilings, the Applicants’ have submitted that an adjustment of the rate riders at the present time to accommodate the rates estimated in the Application is not required because they will be subject to further true-up. The Board used the rate of 3.5% for the purposes of determining the rate riders in Decision 2002-054. The Board agrees that it is unnecessary to adjust the riders approved in Decision 2002-054 at the present time to reflect the June 7, 2002 estimated securitization rates for AE DISCO and ANCA set out in the Application. However, the Board agrees that differences between the forecast rate of 3.5% and the Purchaser’s actual funding costs determined pursuant to the Securitization Transaction in each case should be included in the respective true-up process for AE DISCO and ANCA. Finally, having regard to the Board’s earlier views with respect to changes in the Deferral Account Balances and the collection period, the Board considers it reasonable to approve a “true-up” mechanism to provide AE DISCO and ANCA with the ability to collect Board-approved



changes in the Deferral Account Balances to be collected from customers according to the terms of the Securitization Agreements, including changes in Program Costs. At the conclusion of the initial recovery period, the Applicants may apply in the true-up process for collection of any unrecovered portion of the approved securitization amount as well as any approved additional costs over a period of time approved by the Board. Further, in accordance with the term sheets approved in Decision 2002-54, the Applicants will be required to apply in the true-up process to refund any over-collections over a period of time approved by the Board. In addition, if necessary, the Board will consider a true-up before the end of the collection period (i.e. an “intra-period” true-up) under the Securitization Agreements upon application by AE DISCO, ANCA or the Purchaser. The Board notes the example forecast amortization, swap fixed rate and swap floating base rate forecast monthly amounts provided in the June 21, 2002 clarification filing by the Applicants. The Board notes that this information will be used as the basis for making Adjustment Amounts during the recovery period. Accordingly, the Board directs AE DISCO and ANCA, within 15 days of the closing date of Securitization, to each file with the Board and interested parties, schedules summarizing the amortization, swap fixed rate and swap floating base rate forecast monthly amounts. The schedules should be in the same form as that provided in the June 21, 2002 clarification filing. (Click here to Return to the Table of Contents) 8 SUMMARY OF CONFIRMATIONS AND APPROVALS

This Summary is provided for the convenience of readers. In the event of any difference between this Summary and the body of the Decision, the wording in the body of the Decision shall prevail. Furthermore, the inclusion or omission of particular findings in this Summary should not be construed as an indication of the Board’s view of the relative significance of any of the findings in this Decision.

1. For all of these reasons, the Board is satisfied that the rates resulting from the all-in funding costs for AE DISCO and ANCA as provided for by their respective Securitization Agreements are just and reasonable and in the public interest. Accordingly, the Board approves the implementation of Securitization for AE DISCO and ANCA for the following periods:

• for AE DISCO, the period July 1, 2002 to June 30, 2003 • for ANCA, the period July 1, 2002 to December 31, 2003

and the Board confirms the right of AE DISCO and ANCA for and on behalf of the Purchaser to collect the full, approved balances of the respective Deferral Accounts, plus interest at the rates determined in accordance with their respective Securitization Agreements, from all of the customers in their respective service areas. The Board understands that it is possible that Securitization may not start on July 1, 2002 but rather the Securitization may start at some point in July, or on August 1, 2002, or shortly thereafter. The Board approves this minor delay in the implementation date of Securitization. ................................................................................................................... 14



2. The Board is satisfied that, as receivables, the Deferral Accounts are assets that are transferable by a public utility, subject to Board approval. In the Board’s view, the transfer of the Deferral Accounts themselves does not raise any question respecting the relative rights and duties of AE DISCO and ANCA vis-à-vis their end-use customers and retailers.............................................................................................................................. 14

3. Therefore, the Board is of the view that, subject to any limitations arising from the EU Act, its regulations or relevant Board Decisions, the Related Rights are transferable assets. Accordingly, the Board considers that it may approve, pursuant to section 101(2)(d) of the PUB Act, the transfer of both the Deferral Accounts and the Related Rights, subject to any limitations arising from the EU Act, the relevant regulations or relevant Board Decisions, if that approval is required in the circumstances of the Securitization Transaction and the criteria for the exercise of the Board’s discretion under that provision are met........................................................................................................ 17

4. For the reasons set out in the previous section, the Board is satisfied that customers will not be harmed by the sale of the Deferral Accounts and Related Rights (as defined in the applicable Securitization Agreements) by AE DISCO and ANCA to RBCC. In fact, the Board has concluded that customers are likely to realize significant benefits if the Securitization Transaction is allowed to proceed. Therefore, the Board concludes that approval of the Securitization Transaction for each of AE DISCO and ANCA pursuant to section 101(2)(d) of the PUB Act would be in the public interest and will so order........ 17

5. Pursuant to this approval, upon the purchase of each Deferral Account and the Related Rights (as defined under the applicable Securitization Agreement) pursuant to the terms of the Securitization Agreements, the Board will recognize the Purchaser as the owner of the Deferral Accounts and the Related Rights and the Purchaser shall have the same rights and benefits with respect to the Deferral Accounts and Related Rights as did AE DISCO and ANCA prior to the purchases........................................................................ 17

6. The Board also agrees that it is appropriate for the Purchaser to be given standing before the Board to request any relief or assert any right that would otherwise have been available to AE DISCO and ANCA, regarding:

(a) the amount of the Deferral Accounts; (b) the amount or rate of carrying charges related to any Deferral Account; (c) the period and method of collection of any Deferral Account and the carrying costs related thereto; and (d) any other matter related to any Deferral Account and the carrying costs thereof, for which the Purchaser requires Board clarification or assistance............. 18

7. For the reasons set out in the previous two sections, the Board has concluded that it is in the public interest for AE DISCO and ANCA to complete the Securitization Transaction in relation to their respective Deferral Accounts, including the transfer to the Purchaser of the Deferral Accounts and Related Rights. To the extent that the Board’s further approval may be necessary to allow AE DISCO and ANCA each to enter a Securitization Agreement substantially in the form attached to the Application, the Board considers such approval to be in the public interest and will so order.............................................. 18

8. The Board considers the balances derived according to Tables 4 and 5 to be reflective of the actual balances for rider purposes. The Deferral Account Balances for AE DISCO and



ANCA of $83 million and $261 million, respectively, include future carrying costs for periods after July 1, 2002 at the rate of 3.50% per annum. As RBCC is only purchasing the principal amount of the Deferral Accounts as at July 1, 2002, these future carrying costs should not be included in the balance for securitization. Based on the amounts set forth in Decision 2002-054 for securitization carrying costs ($1,626,000 for ATCO as per table 1 at page 9 and $6,703,000 for ANCA as per table 14 at page 44), the Deferral Account Balances for AE DISCO and ANCA should be $81 million and $255 million respectively. Accordingly, for purposes of the Securitization Agreements, the Board approves a Deferral Account Balance as of July 1, 2002, of $81 million for AE DISCO and $255 million for ANCA, as per the Application. ....................................................... 19

9. Finally, having considered the definition of Deferral Account Balance in the Securitization Agreements, the Board approves the calculation of the Deferral Account Balances for AE DISCO and ANCA from time to time in accordance with the terms of the applicable Securitization Agreement. ......................................................................... 19

10. Having regard to the reasons set out earlier in this Decision, the Board is satisfied that the Prescribed Rates that will result for AE DISCO and ANCA under their respective Securitization Agreements are just and reasonable and in the public interest. Accordingly, the Board approves a Prescribed Rate (as defined under the Securitization Agreements) for each of the Securitization Agreements, which is equal to the sum of the fixed rate under the Swap Transaction (as defined under the applicable Securitization Agreement) plus 0.425% per annum..................................................................................................... 19

11. In the Board’s view, this request is reasonable. Accordingly, any increase in the Board-approved balances of the Deferral Accounts as a result of the Applicants’ R&V Applications will not result in a direct adjustment of the approved balances of the Deferral Accounts. Instead, to the extent required, any such increase will be dealt with by way of a separate rate deficiency rider so that the increase is not considered part of the Securitization. However, the Board would be prepared to consider including these amounts in Securitization, if requested by both the Purchaser and the Applicants. ......... 20

12. In the Board’s view, having regard to the nature of the Securitization Transaction and the unique circumstances of this Application, in the event that collection of any amounts ultimately owing pursuant to the terms of the Securitization Agreement cannot be completed within the initial collection period, the Board agrees that the Applicants are entitled to collect these amounts. Any request for an extended collection period can, in the Board’s view, be dealt with as part of the true-up process established in Section 7.9 of this Decision...................................................................................................................... 21

13. As requested in the Application, the Board hereby confirms the rate riders in respect of the Deferral Accounts of AE DISCO and ANCA approved by the Board in Decision 2002-054. The Board also confirms that, as provided for in this Decision, the Purchaser or a DISCO may from time to time apply to the Board for an adjustment to the rate riders in respect of the Deferral Accounts or the period of time over which the rate riders may be collected in accordance with the true-up mechanism approved by the Board in Decision 2002-054. ........................................................................................................... 22

14. Accordingly, the Board confirms that, notwithstanding the purchase of the Deferral Accounts and the Related Rights by the Purchaser and subject to the EU Act and



regulations, the DISCOs and any legal or natural person claiming by, through or under the DISCOs, including but not limited to any successors in interest to a DISCO, or any receivers of a DISCO (collectively “successors in interest”), will remain obligated to bill and collect, from the customers of the applicable DISCO and its successors in interest, for and on behalf of the Purchaser, all amounts relating to the Deferral Accounts and the Related Rights................................................................................................................... 23

15. The Board also confirms that all customers of the DISCOs and their respective successors in interest shall be obligated to pay the full amount to be collected by the rate riders related to the Deferral Accounts sold by the DISCOs to the Purchaser as approved in Decision 2002-054 and as may be subsequently modified in accordance with this Decision and the terms of the applicable Securitization Agreement. Non-payment by any customer of a DISCO or its successors in interest will be recovered in subsequent billings from other customers of the DISCO and its successors in interest subject to the Terms Sheets approved in Decision 2002-54............................................................................... 23

16. Finally, the Board confirms that the rate riders related to each of the Deferral Accounts sold by the DISCOs to the Purchaser are components of the DISCOs’ respective Distribution Tariffs, which obligates Retailers (as defined under the Securitization Agreements) to remit amounts collected pursuant to rate riders in respect of their customers to the DISCOs or their successors in interest. ................................................. 23

17. The Board agrees that it is unnecessary to adjust the riders approved in Decision 2002-054 at the present time to reflect the June 7, 2002 estimated securitization rates for AE DISCO and ANCA set out in the Application. However, the Board agrees that differences between the forecast rate of 3.5% and the Purchaser’s actual funding costs determined pursuant to the Securitization Transaction in each case should be included in the respective true-up process for AE DISCO and ANCA............................................... 23

18. Finally, having regard to the Board’s earlier views with respect to changes in the Deferral Account Balances and the collection period, the Board considers it reasonable to approve a “true-up” mechanism to provide AE DISCO and ANCA with the ability to collect Board-approved changes in the Deferral Account Balances to be collected from customers according to the terms of the Securitization Agreements, including changes in Program Costs. At the conclusion of the initial recovery period, the Applicants may apply in the true-up process for collection of any unrecovered portion of the approved securitization amount as well as any approved additional costs over a period of time approved by the Board. Further, in accordance with the term sheets approved in Decision 2002-54, the Applicants will be required to apply in the true-up process to refund any over-collections over a period of time approved by the Board. In addition, if necessary, the Board will consider a true-up before the end of the collection period (i.e. an “intra-period” true-up) under the Securitization Agreements upon application by AE DISCO, ANCA or the Purchaser. ................................................................................................... 23

(Click here to Hyperlink to the Table of Contents to material in this Decision.)



9 SUMMARY OF DIRECTIONS

This section is provided for the convenience of readers. In the event of any difference between the Directions in this section and those in the main body of the report, the wording in the main body of the Decision shall prevail.

1. Furthermore, the Board directs AE DISCO and ANCA to notify the Board of the Prescribed Rates for their respective Securitization Agreements forthwith following the closing date of each transaction. ....................................................................................... 19

2. The Board notes the example forecast amortization, swap fixed rate and swap floating base rate forecast monthly amounts provided in the June 21, 2002 clarification filing by the Applicants. The Board notes that this information will be used as the basis for making Adjustment Amounts during the recovery period. Accordingly, the Board directs AE DISCO and ANCA, within 15 days of the closing date of Securitization, to each file with the Board and interested parties, schedules summarizing the amortization, swap fixed rate and swap floating base rate forecast monthly amounts. The schedules should be in the same form as that provided in the June 21, 2002 clarification filing................................ 24

(Click here to Hyperlink to the Table of Contents to material in this Decision.) 10 ORDER

For and subject to the reasons set out in this Decision, and in addition to the confirmations and approvals otherwise set out in this Decision, the Board hereby orders as follows: 1. AE DISCO and ANCA may each enter a Deferral Account Purchase and Servicing

Agreement with the Purchaser substantially in the form of the applicable draft Agreement attached to the Application (Securitization Agreement).

2. The sales of the Deferral Accounts and Related Rights (as defined in the Securitization

Agreements) by AE DISCO and ANCA to the Purchaser are approved pursuant to section 101(2)(d) of the Public Utilities Board Act.

3. As of July 1, 2002, which date shall be the Cut-Off Date (as defined in the applicable

Securitization Agreement), the Deferral Account Balance, for purposes of Securitization, (as defined in the applicable Securitization Agreement) shall be:

(a) for AE DISCO - $81 million; and

(b) for ANCA - $255 million.

4. AE DISCO and ANCA shall have the right for and on behalf of the Purchaser to collect the full, approved balances of the respective Deferral Accounts, plus interest determined in accordance with their respective Securitization Agreements, from all customers within their respective service areas.



5. According to their normal billing and collection procedures, AE DISCO and ANCA shall bill and collect the approved amounts of the Securitization Rate Riders.

6. The Rate Riders shall be subject to true-up in respect of approved changes in the Deferral

Account Balances and the Purchaser’s actual funding costs under the respective Securitization Agreements of AE DISCO and ANCA, including, if necessary, the extension or reduction of the approved collection period.

(Click here to Return to the Table of Contents) DATED in Calgary, Alberta on June 24, 2002. ALBERTA ENERGY AND UTILITIES BOARD (Original signed by) N. W. MacDonald, P. Eng. Presiding Member (Original signed by) A. J. Berg, P. Eng. Member (Original signed by) R. G. Lock, P. Eng. Member



ATTACHMENT 1 – SECURITIZATION TRANSACTION SUMMARY

"Attachment 1 Securitization Transac

(Includes Appendix 1 and consists of 8 pages)

It should be noted that the above Attachment 1 is per the Application. The Board recognizes that June 21, 2002 update from the Applicant has some revised information. (Click here to Return to the Table of Contents)



ATTACHMENT 2 - CUSTOMER SAVINGS ARISING FROM SECURITIZATION FINANCING

"Attachment 2 Consumer Savings.xls

(Consists of 1 page)

(Click here to Return to the Table of Contents)



ATTACHMENT 3 - RELEVANT DECISIONS - 2000 DEFERRAL ACCOUNTS

(Click here to Return to the Table of Contents) (Click her to return to Page 4 where Attachment 3 was referenced.) The following list of other relevant Decisions is provided for the convenience of readers and includes hyperlinks to those decisions on the EUB website. In some cases, the Decision may have been assigned a Decision number but may not have been issued yet. Table 6: List of 2000 Deferral Account Related Decisions

Issue Date Decision Number Part Applicant Decision Name

May 10 1999 U99046 AE 1999/2000 Electric Tariff Applications – Negotiated Settlement

Nov. 25, 1999 U99099 AE EPCOR TransAlta

1999/2000 Electric Tariff Applications

Jan. 8, 2000 Letter IL 2000-1

“General Policy for Payment of Interest”

Feb. 1, 2000 2000-2 AE 1999/2000 Electric Tariff Application Refiling

Feb. 1, 2000 2000-3 TransAlta 1999/2000 Electric Tariff Application Refiling

Feb. 1, 2000 2000-4 ETI 1999/2000 Electric Tariff Application Refiling

Feb. 1, 2000 2000-5 EPGI 1999/2000 Electric Tariff Application Refiling

May 30, 2000 2000-31 TransAlta Closure of 1999 Generation Deferral Accounts, Adj. Interest Refund Rider, 2000 Rate Reduction Rider and changes resulting from ESBI

July 27, 2000 2000-52 A TransAlta Interim Settlement of 2000 Distribution Deferral Account Part A: Initial Board Determinations

Aug. 31, 2000 2000-60 B TransAlta Interim Settlement of 2000 Deferral Accounts Part B: Interim Board Determination

Oct. 31, 2000 2000-65 AE 2001/2002 Transmission Facility Owner (TFO) Negotiated Settlement

Nov. 14, 2000 2000-69 C TransAlta Interim Settlement of 2000 Deferral Accounts Part C: Board Determination Regarding GENCO Interim Payments ordered in Decision 2000-60

Dec. 19, 2000 2000-78 D TransAlta Interim Settlement of 2000 Deferral Accounts Part D: Rescission of Interim


http://www.eub.gov.ab.ca/bbs/documents/decisions/1999/u99046.pdf

http://www.eub.gov.ab.ca/bbs/documents/decisions/1999/u99099-vol1.pdf

http://www.eub.gov.ab.ca/bbs/ils/ils/il2000-01.htm

http://www.eub.gov.ab.ca/bbs/ils/ils/il2000-01.htm












Issue Date Decision Part Applicant Decision Name Number Rate Riders Ordered in Decision 2000-60 effective January 1, 2001

Jan. 30, 2001 2001-7 A UNCA DISCO

Part A: Interim Approval of 2001 Financing Costs for the 2000 Distribution Pool Price Deferral Account

Feb. 6, 2001 2001-8 A AE DISCO Part A: Interim Approval of 2001 Financing Costs for certain 2000 Distribution Deferral Accounts

Feb. 9, 2001 2001-10 A EDI Part A: Interim Approval of 2001 Financing Costs for the 2000 Distribution Pool Price Deferral Account

Feb. 28, 2001 2001-12 A ENMAX Part A: Interim Approval of 2001 Financing Costs for the 2000 Distribution Pool Price Deferral Account

Apr. 24, 2001 2001-26 A Red Deer Part A: Interim Approval of 2001 Financing Costs for the 2000 Distribution Pool Price Deferral Account

Apr. 24, 2001 2001-27 A Lethbridge The City of Lethbridge Part A: Interim Approval of 2001 Financing Costs for the 2000 Distribution Pool Price Deferral Account

May 15, 2001 2001-36 B AE Part B: Interim Supplementary Approval of 2001 Financing Costs for the 2000 Distribution Deferral Account

May 25, 2001 2001-45 E IPCCAA Part E: IPCCAA Applications for review and Variance

Aug. 8, 2001 2001-70 F ALL GENCOs

Interim Disposition of GENCO Deferral Account Balances

Nov. 9, 2001 2001-82 A GENCOs AE, TAU, EGI

2000 GENCO Outstanding Matters Deferral Accounts (Non Pool Price)

Nov. 8, 2001 2001-83 B DISCOs AE UNCA

2000 DISCO Outstanding Matters Deferral Accounts (Non Pool Price)

Dec. 11, 2001 2001-83 Addendum

AE DISCO Addendum to 2000 DISCO Outstanding Matters Deferral Accounts (Non Pool Price)

Dec. 4, 2001 2001-88 G ENMAX Review of ENMAX DISCO 2000 Pool Price Deferral Accounts

Dec. 4, 2001 2001-89 H EDI Review of EDI DISCO 2000 Pool Price Deferral Accounts

Dec. 4, 2001 2001-90 I Red Deer Review of Red Deer DISCO 2000 Pool Price Deferral Accounts

Dec. 4, 2001 2001-91 J Lethbridge Review of Lethbridge DISCO 2000 Pool Price Deferral Accounts













http://www.eub.gov.ab.ca/bbs/documents/decisions/2001/2001-83-Addendum.pdf

http://www.eub.gov.ab.ca/bbs/documents/decisions/2001/2001-83-Addendum.pdf






Issue Date Decision Part Applicant Decision Name Number Dec. 11, 2001 2001-92 K ALL 6

DISCOs DISCO 2000 Pool Price Deferral Accounts - Carrying Costs, Collection and Hedging

Dec. 22, 2001 2001-93 L AE DISCO and UNCA DISCO

DISCO Deferral Account Balances

See above 2001-94 2001-94 has been retired as a valid number. This Previously Reserved Decision 2001-94 was Merged With Decision 2001-93. It now links to 2001-93

Dec. 22, 2001 2001-95 M GENCOs GENCO Deferral Account Balances Dec. 11, 2001 2001-102 F AE DISCO 2001-2002 General Tariff Application Part

F: 2002 Distribution Tariff Base Rates Dec. 18, 2001 2001-103 TransAlta Temporary Suspension Regulation Dec. 18, 2001 2001-113 UNCA

DISCO 2002 DT Interim Rates and Riders

Dec. 18, 2001 2001-114 C TransAlta Year 2000 Outstanding Matters Deferral Accounts (Other than Pool Prices) Part C: TransAlta GENCO Refiling

Dec. 27, 2001 2001-115 N GENCOs Amendment of Decision 2001-95 respecting EGI GENCO payment to DISCO’s/TA and EGI gas unit sharing

Jan. 22, 2002 2002-003 D AE GENCO & TRANSCO

Refiling GENCO and TRANSCO Outstanding Matters (Other than Pool Price) Deferral Accounts

Jan. 22, 2002 2002-006 E EGI GENCO

Refiling GENCO Outstanding Matters (Other than Pool Price) Deferral Accounts

Jan. 22, 2002 2002-007

F TransAlta GENCO

Supplemental Refiling GENCO Outstanding Matters (Other than Pool Price) Deferral Accounts

Jan. 22, 2002 2001-113 Errata

UNCA DISCO

Errata on 2002 DT Interim Rates and Riders

Jan. 24, 2002 2002-008 O47 GENCOs Refiling of GENCO Pool Price Deferral Accounts resulting from Decision 2001-95

April 2, 2002 2002-023 G DISCOs AE and UNCA DISCO Outstanding Matters Refilings resulting from Decision 2001-83, 2001-92 and 2001-93

April 2, 2002 2002-024 P AE and UNCA DISCOs

Refiling of DISCO Pool Price Deferral Accounts resulting from Decision 20011-92 and 2001-93

April 16, 2002 2002-025 Q GENCOs GENCO Offer Practices and the Need for a Year 2000 Market Review

47 This report was inadvertently issued as Part N.





















Issue Date Decision Part Applicant Decision Name Number April 18, 2002 2002-026 R AE and

UNCA DISCOs

Allocation of DISCO PPDA Balances to Customer Classes

To Come 2002-051 F AE 2001 Regulated Rate Option Tariff Part F: Outstanding Matters

To Come 2002-052 F EESAI 2001-2005 Regulated Rate Option Tariff Part F: 2001 Outstanding Matters

June 19, 2002 2002-054 S, H AE and UNCA DISCOs

2000 PPDA, 2000 OMA and Other DT Riders

June 24, 2002 2002-057 T AE and UNCA DISCOs

Securitization Decision

(Click here to Return to the Table of Contents) (Click here to return to Page 4 where Attachment 3 was referenced.)





2000 PPDA Attachment 1 Securitization Transaction Summary Page 1 of 8 This document has been prepared to provide a consolidated summary of the proposed securitization transaction involving the 2000 deferral account balances owned by the four Alberta-based distribution utilities. This document will provide the following:

• A description of the proposed securitization structure; and • A description of the Balancing Pool involvement in the securitization structure.

1. Transaction Background In December 2001 the EUB issued a series of orders setting out the remaining collectible amounts of the 2000 deferral accounts and the proposed term for collection. These were as follows: Company 2000 Deferral Amount Collection Term Aquila Networks Canada (Alberta) Ltd. $334 million 2 years ATCO Electric $ 81 million 1 year ENMAX Power Corporation $ 88 million 3 years EPCOR Distribution Inc. $ 56 million 2 years All of the utilities with the exception of ATCO initiated the collection of the deferral accounts in January 2002. Expected amounts outstanding of the 2000 deferral accounts as at the proposed closing date of July 1, 2002 will equal $336 MM comprised of the following: Company Deferral Amount at 07/02 Remaining Term Aquila Networks Canada (Alberta) Ltd. $255 million 1.5 years ATCO Electric $ 81 million 1 year 2. Securitization Overview • It is proposed that one of Royal Bank of Canada’s Canadian asset-backed

commercial paper conduits, (RBCC), will enter into nearly identical deferral account purchase agreements with each of Aquila Networks Canada (Alberta) Ltd., ATCO Electric, EPCOR Distribution, and ENMAX Power Corporation (collectively the “Electric Utilities”). Under these agreements, the Electric Utilities will transfer to RBCC their 2000 deferral accounts and all of their present and future rights to the collection of the 2000 rate rider in return for cash proceeds equal to the principal balance of their respective year 2000 deferral accounts (excluding future interest amounts owed).

• Each of the Electric Utilities will service their own accounts and will be required to bill,

collect and, between settlement dates, hold the 2000 rate riders in trust for RBCC. • The Electric Utilities will set the rate rider at an amount sufficient to repay the

principal amount of the deferral accounts plus funding costs. These funding costs will be based upon RBCC’s fixed rate, swapped cost of funds, which will include the following components, and which will collectively make up the “Prescribed Rate”:

EUB Decision 2002-057 (June 24, 2002)

2000 PPDA Attachment 1 Securitization Transaction Summary Page 2 of 8

• CDOR swap between RBCC and RBC under which RBCC pays a fixed rate to RBC each month and receives back a floating rate of interest equal to the floating CDOR rate over that period. This swap will amortize on a fixed schedule at a rate equal to the projected repayment rate for the deferral accounts of each Electric Utility.

• Program Fee of 41.25 bps, out of which RBC will pay the costs associated with

operating the securitization program, including commercial paper placement fees, administrative fees, fees for commercial paper back-up lines, and 11.25 bps for the letter of credit facility that supports the Balancing Pool indemnity.

• Spread of 5 bps to cover the spread between the CDOR rate paid to RBCC

under the swap arrangement, and RBCC’s actual cost of funds. From January 1999 to the present, the monthly average spread between CDOR and the 30-day funding cost of RBC’s Canadian conduits has been 4.72 bps.

• The following chart shows a breakdown of the all-in funding costs for the respective

Electric Utilities.

ATCO Electric

Aquila Networks Canada (Alberta) Ltd.

Swap Rate* 3.3400% 3.5900% Program Fee 0.4125% 0.4125% Basis Spread 0.0500% 0.0500% All-in Cost 3.8025% 4.0525% *Indicative as at 6/7/02.

• Amortization of the deferral account and related funding will be through the

application of net monthly collections after deducting RBCC’s actual funding costs for that period. While RBCC’s funding costs should approximate the Prescribed Rate, variances could occur under certain conditions. These include differences in the actual basis spread between CDOR and RBCC’s commercial paper issuance costs, variance between the actual amount of the deferral account balance and the notional amount of the amortizing swap, and the remote possibility that RBC would be required to fund RBCC’s ownership in the deferral accounts through drawings under (more expensive) bank lines of credit. This variance between the Prescribed Rate and RBCC’s actual cost of funds would be considered to be an Adjustment Amount.

• If the aggregate balance of the Adjustment Amount was positive at the end of the

collection period, it would imply that actual funding costs exceeded the Prescribed Rate for one of the reasons set out above. In absence of an intra-period true-up, this would translate into a remaining balance in the deferral account at the end of the collection period, as more funds were required to pay carrying costs on the deferral account than what was originally anticipated. This remaining balance would then be required to be recovered through an extension of the collection period.

• Upon a DBRS credit rating downgrade of the Seller/Servicer below BBB(low), the

Electric Utilities must remit collections to RBCC on a daily basis as received.


2000 PPDA Attachment 1 Securitization Transaction Summary Page 3 of 8 3. Regulatory Assurances Required Any securitization of future receivables requires the certainty that the performance of the service that creates the receivable will be completed, and the recipients of the service will then have an obligation to pay for that service at the price originally contemplated. RBCC’s purchase of these 2000 deferral accounts will be conditional upon formally receiving the following assurances from the EUB and the municipal regulators, as applicable. • The holder of the deferral account is entitled to rate riders from all of the electricity

users in a distribution utility’s specific area in order to recover the full amount of the deferral account with interest.

• The deferral accounts and the right to future rate rider payments is a transferable

asset. • The rate rider is non-bypassable, i.e. each Electric Utility has the right to collect the

rate rider from every customer in its service territory in order to recover the full amount of the deferral account with interest.

• Each Electric Utility and its successors are obligated to bill and collect the charges

on behalf of RBCC. • There is a mechanism in place for the EUB or municipal regulator to periodically

adjust the level of the rate rider (a “true-up mechanism”) to accommodate changes in the projected level of collections, or changes in expected funding costs, in order to ensure full payout of the deferral accounts (plus actual funding costs incurred) within a maximum three-year term.

Appendix 1 contains actual proposed wording for each of the assurances required.


2000 PPDA Attachment 1 Securitization Transaction Summary Page 4 of 8 4. Political Risk Protection There is a remote possibility that either the Government of Alberta or the regulator could pass a ruling subsequent to the closing of this transaction that could impair the value of the deferral accounts. If this were to occur, RBCC may not be able to recover the full amount of the original purchase price directly from the power users of the Province of Alberta. To protect RBCC from potential political risk, the Balancing Pool will enter into an indemnification agreement with RBCC that will cover the full amount of the purchased deferral account balances then outstanding. Under this indemnity RBCC would obtain compensation for any losses or potential losses arising from the following: • the cancellation or deferment of the rate riders; • a reduction in the amount of the deferral accounts; • an extension to the collection period; • an adverse change in the ownership of, or the interest in, the deferral accounts, or • an adverse change to the collectibility of the Purchased Assets. As a result of: • a change in law or regulation; • the enactment of a new law or regulation; • the interpretation of any applicable law or regulation; • the administrative practice of regulators and other governmental authorities, or • the introduction or passing of any order, decree or other government directive. A transaction diagram has been provided and an additional section to provide some background to the Balancing Pool’s involvement in the securitization structure.



Electricity Users

Electricity Retailers

Distribution Companies

Liquid Facility (RBC) RBCC

(

Electricity Bill (incl. DT & Rate Rider)

CP Notes

Note Proceeds (equal to the amount of the Utility’s Deferral Account)

Ownership of Deferral Accounts & Rate Riders collection

Distribution Tariff (DT) (incl. Rate Rider)

Bill Payments

CP Investors

EUB De

Political Risk Indemnity

Balancing Pool)

RRO Billing if provided by Distribution Companies (incl. Rate Rider)

25% Letter of Credit Facility

(RBC)

cision 2002-057 (June 24, 2002)

2000 PPDA Attachment 1 Securitization Transaction Summary Page 6 of 8 5. Balancing Pool Involvement in the Securitization Structure The method of addressing the political risk in the deferral account securitization structure was originally proposed to be through an indemnity from the Province of Alberta. While the Province acknowledged that they had no intent of interfering with the collection of the deferral accounts, they did not believe they should have a role in (what they considered to be) a private sector transaction. As an alternative indemnity provider, the Balancing Pool has an interest in supporting this transaction due to the cost savings that securitization of the deferral accounts provides to the Alberta power users. Their participation is also within the overall mandate of the Balancing Pool, which is to:

o Contribute to the development and evolution of a competitive market.

o Act in the overall, long-term interest of Alberta consumers in the competitive electric industry.

The Balancing Pool is in the process of obtaining a public credit rating from DBRS, and the present indication is that it will achieve a ‘AA’ rating. The strength of this entity as a risk counterparty is its legislated ability under the Balancing Pool Regulation to recover any cash shortfalls through requiring the Electric Utilities to add a surcharge to the monthly electricity bill of each Alberta power user. To confirm that the Balancing Pool has the power to enter into the indemnity agreement with RBCC, certain amendments to the Balancing Pool Regulation have been drafted and must be approved by the Government of Alberta prior to closing. The amendments will make it clear that the Balancing Pool has the ability to provide the required indemnity and recover any resulting cash shortfalls from the power users of the Province. Under the indemnity agreement with the Balancing Pool, upon the occurrence of a political or regulatory event that impacts the amount or collectibility of the deferral accounts, RBCC will assign its interests in the deferral accounts to the Balancing Pool in exchange for a payment obligation equal to the amount of RBCC’s outstanding funding. In the event that the Balancing Pool does not have sufficient cash at that time to make this payment, it will seek to recover this amount over time from the power users. This payment obligation from the Balancing Pool will implicitly have a AA rating, equal to the rating of the Balancing Pool. While payment is virtually undoubted, the rating of this obligation is less than the AAA/R- 1 (high) rating of the notes issued by RBCC to fund the deferral account balances. In order to meet the AAA standard required by DBRS for the assets owned by RBCC, the Balancing Pool’s AA-rated political risk indemnity will be required to be partially backed by letters of credit. DBRS has determined that the appropriate amount of backing is 25% of the indemnity. It is therefore intended that RBC or another major bank would arrange and underwrite a letter of credit facility on behalf of the Balancing Pool equal to 25% of the aggregate amount of the deferral account balances then outstanding. The cost of this facility will be paid out of the 41.25 bp. Program Fee received by RBCC.



Appendix 1 Regulatory Assurances Required

Views of the Board: Securitization x.1.1 Securitization Agreements The Board approves the entering into by ATCO Electric of a Deferral Account Purchase and Servicing Agreement with the Purchaser substantially in the form of the draft agreement filed by ATCO Electric with the Board (“ATCO Electric Securitization Agreement”). The Board approves the entering into by Aquila Networks Canada (Alberta) Ltd. of a Deferral Account Purchase and Servicing Agreement with the Purchaser substantially in the form of the draft agreement filed by Aquila Networks Canada (Alberta) Ltd. with the Board (“Aquila Networks Canada (Alberta) Ltd. Securitization Agreement”, and together with the ATCO Electric Securitization Agreement, the “Securitization Agreements”). x.1.2 Deferral Account Matters The Board approves a Deferral Account Balance (as defined under the ATCO Electric Securitization Agreement) for ATCO Electric of $● as of [July 1 2002], which date shall be the Cut-Off Date (as defined under the ATCO Electric Securitization Agreement) under and for the purposes of the ATCO Electric Securitization Agreement. The Board approves a Deferral Account Balance (as defined under the Aquila Networks Canada (Alberta) Ltd. Securitization Agreement) for Aquila Networks Canada (Alberta) Ltd. of $● as of [July 1, 2002], which date shall be the Cut-Off Date (as defined under the Aquila Networks Canada (Alberta) Ltd. Securitization Agreement) under and for the purposes of the Aquila Networks Canada (Alberta) Ltd. Securitization Agreement. The Board approves the calculation of the Deferral Account Balance (as defined under each of the Securitization Agreements) from time to time in accordance with the terms of the applicable Securitization Agreement. The Board approves a Prescribed Rate (as defined under the Securitization Agreements) for each of the Securitization Agreements which is equal to the sum of the fixed rate under the Swap Transaction (as defined under the applicable Securitization Agreement) plus 0.4625% per annum. The Board acknowledges that the Swap Transaction will be entered into on the closing date of each transaction. Each of the DISCOS shall notify the Board of the Prescribed Rate for their respective Securitization Agreements forthwith following the closing. x.1.3 Ownership of Deferral Accounts


2000 PPDA Attachment 1 Securitization Transaction Summary Page 8 of 8 Upon the purchase of each Deferral Account and the Related Rights (as defined under the applicable Securitization Agreement) pursuant to the terms of the Securitization Agreements, the Board will recognize the Purchaser as the owner of the Deferral Accounts and the Related Rights and the Purchaser shall have the same rights and benefits with respect to the Deferral Accounts and Related Rights as did the DISCOS prior to the purchases. The Purchaser will be given standing before the Board to request any relief or assert any right that would otherwise have been available to the DISCOS, regarding:

(a) the amount of the Deferral Accounts;

(b) the amount or rate of carrying charges related to any Deferral Account;

(c) the period and method of collection of any Deferral Account and the carrying costs related thereto; and

(d) any other matter related to any Deferral Account and the carrying costs thereof, for which the Purchaser requires Board clarification or assistance.

x.1.4 Rate Riders The Board confirms the rider rates in respect of the Deferral Accounts of the DISCOS approved by the Board in its decision of ● . From time to time, the Purchaser or a DISCO may apply to the Board for an adjustment to the rate rider rates in respect of the Deferral Accounts or the period of time over which such rate riders may be collected in accordance with the mechanics approved by the Board in its decision of ● . x.1.5 Servicing Notwithstanding the purchase of the Deferral Accounts and the Related Rights by the Purchaser, the DISCOS and any legal or natural person claiming by, through or under the DISCOS including but not limited to any successors in interest to a DISCO, or any receivers of a DISCO (collectively “successors in interest”), will remain obligated to bill and collect, from the customers of the applicable DISCO and its successors in interest for and on behalf of the Purchaser all amounts relating to the Deferral Accounts and the Related Rights. All customers of the DISCOS and their respective successors in interest shall be obligated to pay the full amount of the rate riders related to the Deferral Account sold by the DISCOS to the Purchaser. Non-payment by any customer of a DISCO or its successors in interest will be recovered in subsequent billings from other customers of the DISCO and its successors in interest. The rate riders related to each of the Deferral Accounts sold by the DISCOS to the Purchaser is a component of the distribution tariff, which obligates Retailers (as defined under the Securitization Agreements) to remit rate riders in respect of their customers to the DISCOS, or their successors in interest.


SECURITIZATION DECISION 2000 PPDAAttachment 2

Consumer Savings by Approving Securitization Proposal

Savings compared to Original Requested Carrying Cost Rates

PPDA Amount Remaining Term Pre-tax WACC Rate Carrying Costs Securitization Rate Carrying Costs Savings(Millions) (Millions) (Millions) (Millions)

Aquila $255.00 1.5 11.82% $22.61 4.02% $7.68 $14.93

AE DISCO $81.00 1 13.80% $5.59 3.77% $1.52 $4.06

Total $28.19 $9.20 $18.99

EUB Decision 2002-057 (June 24, 2002) Page 1 of 1

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Decision 2002-057: 2000 Pool Price Deferral Accounts ... · as defined in the Deficiency Correction...

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