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Board Direction No 18

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Board Direction No 18 Powered By Docstoc
					1    Board Direction No. 18
2
3    REFERENCE:                    2002-069 Page 84

4    “Notwithstanding, the Board is interested in exploring the merit of the development and
5    use of Cost Allocation Manuals in this jurisdiction. The development of Cost Allocation
6    Manuals could be beneficial in conjunction with the Code of Conduct. However, the
7    Board cannot make that determination at this time, in the absence of evidence with
8    respect to the ongoing costs and benefits associated with the development and use of
9    Cost Allocation Manuals. The Board directs ATCO, at its next GRA, to file its
10   assessment with respect to the ongoing costs and benefits of the development of Cost
11   Allocation Manuals.”
12
13   Response to Board Direction No. 18
14
15   ATCO Gas has reviewed the National Association of Regulatory Utility Commissioners
16   guidelines (the guidelines) with respect to cost allocation manuals (CAM), which were
17   provided in the evidence of Mr. Vanderveen in Exhibit No. 301 of the Affiliate
18   Transactions proceeding.
19
20   The guidelines define a Cost Allocation Manual as an indexed compilation and
21   documentation of a company’s cost allocation policies and related procedures. The
22   guidelines indicate that at a minimum CAM’s should contain the following information:
23    An organization chart of the holding company, depicting all affiliates and regulated
24       entities.
25    A description of all assets, services and products provided to and from the regulated
26       entity and each of its affiliates.



ATCO Gas 2003/2004 General Rate Application                                   Application No. 1275466
Board Direction No. 18                           1                                  November 8, 2002
1     A description of all assets, services and products provided by the regulated entity to
2        non-affiliates.
3     A description of the cost allocators and methods used by the regulated entity and the
4        cost allocators and methods used by its affiliates related to the regulated services
5        and products provided to the regulated entity.
6
7    Although ATCO Gas has not specifically developed a CAM, the components identified
8    above are available, and many have been provided in previous regulatory proceedings.
9    An organization chart is available on the ATCO Group internet site, and was provided in
10   the Affiliate Transactions Application. The Master Service Agreements identify the
11   services and products between ATCO Gas and its affiliates. ATCO Gas provides very
12   few services to non-affiliates that are not regulated. The attached accounting policy
13   80.04 (Performance of Work for Affiliates) sets out the guidelines for the pricing and
14   accounting of services to affiliates.
15
16   With respect to the pricing of services provided by ATCO Gas to its affiliates, the
17   majority of services relate to head office rent and office services. These services are
18   charged on an actual cost basis. With respect to the services provided to ATCO
19   Pipelines, the majority of the services also use the tracking of actual costs to determine
20   the charge to ATCO Pipelines for services provided. There is therefore very little cost
21   allocation that has to be done by ATCO Gas in the provision of service to its affiliates.
22
23   The Board noted in Decision 2002-069 at Page 83 that the amount of services being
24   provided to non-regulated affiliates is usually not material. The Board has provided
25   direction with respect to the pricing of services for transactions between affiliates in
26   Decision 2002-069. ATCO Gas has a policy with respect to the pricing of services to
27   affiliates, and the Master Service Agreements set out what services are provided and
28   how they will be priced. The majority of services provided by ATCO Gas are based on

ATCO Gas 2003/2004 General Rate Application                                     Application No. 1275466
Board Direction No. 18                            2                                   November 8, 2002
1    the tracking of actual costs to provide the service, so the use of cost allocations is
2    minimal. A greater level of formalization through the development of a CAM would seem
3    to only increase administrative work and potentially costs. On this basis ATCO Gas
4    believes that the development of a more formalized CAM would not provide any further
5    benefits to customers.




ATCO Gas 2003/2004 General Rate Application                                 Application No. 1275466
Board Direction No. 18                         3                                  November 8, 2002
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