corporation ‘power · ntpc 2016/19 general rate application-costs phases i and ii nwt public...

NORTHWEST TERRITORIES

‘POWER• CORPORATION

Empowering Communities

4 Capital Drive, Hay River, NT XOE 1G2 • Tel: (867) 874-5200 • Toll-free fax: 1-888-332-9640

January 15, 2018

Mr. Gord Van Tighem, ChairmanNWT Public Utilities Board#203-62 Woodland DriveBox 4211Hay River, NT XOE IGI

Dear Mr. Van Tighem,

Re: Northwest Territories Power Corporation 2016119 Phase I and II Cost ClaimInformation Requests

Please see attached NTPC’s response to the Information Requests as per the Public

Utilities Board’s letter dated December 28th

Please feel free to contact me at (867) 874-5200 if you have any questions on this

matter.

Respectfully,

Brad BudgellActing Manager, Budget and Regulatory Affairs

Information Request

NTPC 2016/19 General Rate Application-Costs Phases I and II

NWT Public Utilities Board

BR.NTPC-1

January 15, 2018 Page 1 of 8

Topic: Intergroup Regulatory Consultants

Reference: Intergroup Cost Claim included in NTPC’s claim for costs

Preamble:

The Phase I and Phase II cost claims by Intergroup includes costs for a number of consultants

and employees; while Messrs. Bowman, McLaren and Mahmudov are known to the Board, the

Board is not able to fully assess the nature and value of the contribution by different individuals

with respect to the Phase I and Phase II proceedings. The following questions are intended to

understand the respective contributions of different Intergroup individuals to the proceedings.

Requests:

a) Please provide a summary of the hours, rates and fees included in the Intergroup cost

claim, for each consultant/employee showing their evidence/application preparation

hours, responses to information requests, preparation and attendance at technical

meeting, rebuttal, preparation for hearing, hearing appearance hours, Argument and

Reply hours; this information is to be provided separately for Phase I and Phase II, by

consultant/employee, in Excel format. The fees by consultant/employee should be

reconciled to the total fees for Intergroup reflected in the claim for costs. Note: this

further breakdown by consultant/employee need be provided only where the individual’s

costs are material and exceed $5000 in total; items less than $5000 per individual may

be aggregated.

b) Please summarize the qualifications of each of the consultants/employees (subject to

the materiality threshold in a) above) other than Messrs. Bowman, McLaren and

Mahmudov and describe the nature of services provided by each (general description)

during the various stages of the proceedings and explain why their services were

required in addition to the expertise provided by Messrs. Bowman, McLaren and

Mahmudov.

c) Please provide an analysis of the disbursements included in the Intergroup claim for

costs by consultant/employee and by date of transaction (date of travel, for example)

and explain why the transaction was considered reasonable and necessary in each case

Information Request



BR.NTPC-1


considering other available alternatives, if any. The disbursements by consultant should

be reconciled to the total disbursements included in the claim for costs.

d) Please provide an estimate of costs incurred by Intergroup for Phase I and Phase II

(separately) in responding (through IRs, Rebuttal etc.) to the redacted/removed NTFL

evidence. Note: only direct hours involved in responding to the NTFL evidence should be

considered.

Responses:

(a)

Table 1 (excel version attached) provides a breakdown of hours and fees by employee broken

out into GRA preparation, hearing and argument for Phase I and Phase II consistent with Form

2 of the Board’s cost award guidelines. Information is provided by employee where total fees

are $5,000 or more. The table reconciles to the summary of total costs provided on page 2 of

NTPC’s November 2, 2017 cost award application. Hourly rates for all InterGroup professional

staff are well below the maximum allowed under the Board’s cost award guidelines. In addition,

rates for InterGroup staff working on NTPC’s 2016/19 GRA have been frozen since 2016 with

the exception of Mr. Mahmudov and Ms. Davies whose rates were increased to reflect merit

salary increases.

The detailed breakdown requested by employee for specific tasks including responding to

information requests, attendance at technical meetings, rebuttal, preparation for the technical

meeting, argument and reply argument cannot be provided. As the Corporation noted in its April

13, 2017 submission on the Board’s revised scale of costs, the changes represent a significant

departure for NTPC and will require NTPC to make administrative and/or process changes to

ensure cost claims can be submitted in the form and manner required by the PUB. Requiring

NTPC to adjust its processes in the middle of regulatory proceedings including adjusting

retroactively would impose significant burden on NTPC. The Corporation notes that the Board’s

initial letter on the scale of costs dated March 27, 2017 occurred after:

the Corporation had filed its Phase I and Phase II rate applications

prepared and filed responses to Phase I information requests

prepared for, attended and completed undertakings related to the technical workshop

Information Request



BR.NTPC-1


Therefore, costs and invoices were not componentized at the requested level of detail. The

Corporation can provide an approximate estimate of fees included in the Phase I preparation

components based on invoice dates as follows:

Phase I Application preparation (February 2016 through July 2016): $179,000

Phase I Information Requests (September and October 2016): $33,000

Phase I Technical Workshop including undertaking responses, updating IR responses

and refiling Phase I schedules to update for actuals (November 2016 through February

2017): $41,000

Phase I Hearing Preparations (March through July 2017): $32,000

Preparation of Phase I rebuttal evidence (June 2017): $15,000

Total Phase I preparation costs: $300,000

The Corporation’s estimated breakdown of fees included in the Phase II preparation

components based on invoice dates is as follows:

Phase II Application Preparation (July 2016 through March 2017): $222,000

Phase II Information Requests (April and May 2017): $87,000

Phase II Hearing Preparations (June and July 2017): $15,000

Phase II Rebuttal Evidence (June 2017): $2,000

Total Phase II preparation costs: $326,000

Information Request



BR.NTPC-1


Table 1

Breakdown of InterGroup Fees by Employee and Hearing Component

GRA Argument GRA Argument

$ hours Fees ($) hours Fees ($) hours Fees ($) hours Fees ($) hours Fees ($) hours Fees ($) hours Fees ($)

P. Bowman 195 47.00 9,165.00 3.00 585.00 - 26.00 5,070.00 - 1.00 195.00 77.00 15,015.00

A. McLaren 180 622.50 112,050.00 30.00 5,400.00 10.50 1,890.00 479.00 86,220.00 16.50 2,970.00 13.25 2,385.00 1171.75 210,915.00

H. Mahmudov 143-147 985.25 141,854.75 25.00 3,675.00 - 771.50 112,824.50 21.00 3,087.00 2.00 294.00 1804.75 261,735.25

M. Davies 99-114 26.50 2,724.75 20.25 2,308.50 - 319.50 36,258.00 11.25 1,282.50 - 377.50 42,573.75

H. Najmidinov 99 155.25 15,369.75 - - 19.50 1,930.50 - - 174.75 17,300.25

H. Senyk 99 42.00 4,158.00 3.00 297.00 - 452.75 44,822.25 - - 497.75 49,277.25

J. Olson 95 47.75 4,536.25 - - 117.00 11,115.00 - - 164.75 15,651.25

M. Braun 90 83.50 7,515.00 - - 264.50 23,805.00 - - 348.00 31,320.00

Other Staff 30.00 2,226.50 0.50 77.50 0.75 33.75 31.00 3,830.25 - 0.50 50.00 62.75 6,218.00

Total 2,039.75 299,600.00$ 81.75 12,343.00$ 11.25 1,923.75$ 2,480.75 325,875.50$ 48.75 7,339.50$ 16.75 2,924.00$ 4,679.00 650,005.75$

RatePhase I Phase II

TotalGRA Prep Hearing Attendance GRA Prep Hearing Attendance

Information Request



BR.NTPC-1


(b)

InterGroup uses research staff at lower billing rates than consultants or principals to complete

research and analysis assignments. In particular, the overlapping timelines between Phase I

information requests and the Phase I technical workshop and developing the Phase II

application required the use of additional research time. Resumes for InterGroup staff with more

than $5,000 of fees included in the cost award claims are attached. A brief outline of

qualifications and responsibilities is provided below.

Melissa Davies

Ms. Davies holds an MBA in finance and sustainability and has worked at InterGroup since

2010. While at InterGroup she has worked on electricity regulation files for clients including the

Manitoba Industrial Power Users Group, Saskatchewan Rate Review Panel, Utilities Consumer

Advocate of Alberta, Association of Major Power Consumers of British Columbia and the

Industrial Customers of Newfoundland and Labrador Hydro.

Ms. Davies was the lead researcher and analyst on the rate design portion of the Phase II

application. She assisted with preparing responses to information requests related to rate

design and attended the hearing in Yellowknife where she assisted with witness support

including drafting responses to undertakings at the hearing.

Hamid Najmidinov

Mr. Najmidinov holds a Bachelor of Science degree in economics and has worked at InterGroup

since 2009. While at InterGroup he has worked on electricity regulation files for clients including

Qulliq Energy Corporations, Yukon Energy Corporation, the Industrial Customers of

Newfoundland and Labrador Hydro and New Brunswick Power.

Mr. Najmidinov assisted with the development of the load forecast chapter of the Phase I GRA

including responding to related information requests. He had a limited role in the Phase II

proceeding assisting with reconciling demand, energy and customer inputs in the cost of service

study.

Heather Senyk

Information Request



BR.NTPC-1


Mrs. Senyk holds a Master of Natural Resource Management and has worked at InterGroup

since 2008. While at InterGroup she has worked on utility regulation files for clients including the

Manitoba Industrial Power Users Group as well as environmental regulation processes for

clients including Manitoba Hydro and the KGHM Ajax mine.

Mrs. Senyk assisted with the research supporting the utility survey of cost of service

classification ratios requested by the PUB as well as research to support responses to other

PUB directive responses. She also assisted with the preparation of responses to information

requests on these topics.

Jennifer Olson

Ms. Olson holds a Ph.D. in Slavic languages and literature and has worked at InterGroup since

2011. Prior to working at InterGroup, Ms. Olson worked as a researcher and coder at Ipsos

Direct on quantitative and qualitative survey data collection and analysis for a variety of clients.

While at InterGroup she has worked on utility regulation files for clients including Yukon Energy

as well as environmental regulation processes for clients including Manitoba Hydro, the KGHM

Ajax mine, Stillwater Canada and Rio Tinto.

Ms. Olson contributed to the research supporting the utility survey of cost of service

classification ratios requested by the PUB. She also assisted with research related to other PUB

directive responses and responding to information requests on these topics.

Mitch Braun

Mr. Braun holds an MBA in finance and has worked at InterGroup since 2016. Prior to working

at InterGroup he worked as an environmental consultant for three years on energy,

infrastructure and mining projects. While at InterGroup he has worked on electricity regulation

files for clients including the Manitoba Industrial Power Users Group, Saskatchewan Rate

Review Panel, and Qulliq Energy Corporation.

Mr. Braun assisted with background research and analysis on topics including load forecasting,

revenue to cost coverage ratio targets in other jurisdictions in order to assist with the

preparation of responses to previous PUB directives. He also assisted with development and

updating of elements of the cost of service study and responding to information requests.

Information Request



BR.NTPC-1


(c)

Table 2 provides the requested information. The majority of the disbursements (94%) relate to

travel expenses. Detailed copies of receipts for travel incurred were provided in the attachments

to NTPC’s November 2, 2017 cost claim filing. Table 2 provides cross references to where the

supporting information can be found in the November 2, 2017 cost claim filing. Information on

each of the travel claims was also provided on pages 5 through 7 of NTPC’s November 2, 2017

cost claim application.

Table 2

Breakdown of InterGroup Disbursements

(d)

The Corporation cannot provide detailed information on the amount of effort on the rebuttal

evidence related to the redacted NTFL evidence. However, the Corporation estimates:

Approximately 1/3rd of InterGroup’s fees related to the Phase I rebuttal evidence

(approximately $5,000) was incurred to assist with the preparation of Concentric’s

rebuttal evidence, in particular the evidence on pages 9 through 13 that responded to

NTFL’s amortization expense evidence in the Phase I proceeding.

All of InterGroup’s fees related to the Phase II portion of the rebuttal ($2,000) related to

responding to NTFL’s redacted Phase II evidence.

On that basis, the Corporation estimates that approximately $7,000 of InterGroup’s fees related

to the rebuttal evidence were incurred to respond to NTFL’s withdrawn evidence. The

Employee Dates Month Invoiced Pages in Back up Cost ($)

H. Mahmudov Jan 31-Feb 18, 2016-Hay River Feb-18 31-54; 126 1,989.99

A. McLaren Mar 31-Apr 6, 2016-Hay River Apr-16 61-76 2,553.12

H. Mahmudov Mar 31-Apr 6, 2016-Hay River Apr-16 77-84 2,168.40

A. McLaren May 23-28, 2016-Hay River May-16 89-101 2,907.90

H. Mahmudov May 23-28, 2016-Hay River May-16 102-113 2,917.00

H. Mahmudov Nov 6-8, 2016-Calgary Nov-16 141-148 1,125.13

A. McLaren Nov 27-Dec 3, 2016-Yellowknife Dec-16 155-165 898.30

H. Mahmudov Nov 27-Dec 3, 2016-Yellowknife Dec-16 166-176 1,585.69

A. McLaren Jun 12-15, 2017-Calgary Jun-17 208-217 1,869.40

H. Mahmudov Jun 12-15, 2017-Calgary Jun-17 218-227 2,056.93

A. McLaren Jul 7-14, 2017-Calgary/Yellowknife Jul-17 234-240 890.27

H. Mahmudov Jul 7-14, 2017-Calgary/Yellowknife Jul-17 241-248 1,121.48

M. Davies Jul 7-14, 2017-Calgary/Yellowknife Jul-17 249-254 820.12

Printing and Copying 1,327.20

Other incidentals 121.07

Total 24,352.00$

Explanation

2016/19 GRA kickoff and development of initial revenue requirement.

Participated in sessions in Hay River to review and revise Phase I application.

Participated in sessions in Hay River to finalize Phase I revenue requirement figures.

Preparation and participation in Phase I technical workshop and Net metering workshop.

Participation in hearing preparation sessions.

Preparation and attendance at Phase I and Phase II public hearing.

Participation in prepartory session for Phase I technical workshop.

Information Request



BR.NTPC-1


Corporation also notes that a portion of hearing preparation time would also have related to

preparing to address issues raised in NTFL’s evidence that was later withdrawn.

Information Request



BR.NTPC-2


Topic: Chris Polselli

Reference: Chris Polselli Cost Claim included in NTPC’s claim for costs

Preamble:

NTPC’s Phase I cost claim includes costs for Mr. Chris Polselli. The Board requires further

support for the amount claimed with respect to Mr. Polselli’s services.

Requests:

a) Please describe the circumstances which resulted in NTPC retaining the services of Mr.

Polselli on September and October of 2016.

b) Please provide the approved terms of reference for the services provided by Mr. Polselli

and provide details of Mr. Polselli’s regulatory experience.

c) Please describe the internal procurement and approval process used by NTPC to

procure Mr. Polselli’s services.

d) NTPC indicates Mr. Polselli’s services were required for assistance with responses to

Phase I information requests in September and October 2016. Please indicate the exact

nature of the service provided by Mr. Polselli and explain why his services were

necessary in addition to the expertise provided by Intergroup.

Responses:

a) through d)

In NTPC’s December 5, 2017 letter to the PUB responding to TGC’s comments on NTPC’s cost

claim, NTPC described the need for external consultants. NTPC’s internal regulatory workgroup

consists of four employees who not only manage all regulatory aspects of NTPC but also the

budgeting processes which includes budget development, monthly variance reporting, forecast

updates and Board of Directors reporting requirements.

During the months of September and October 2016, in conjunction with replying to the 616

information requests, NTPC was developing the 2017/18 budget and 2016/17 monthly variance

Information Request



BR.NTPC-2


analyses. This combined work resulted in the need for additional resources to assist with

answering information requests.

The Corporation had an oral agreement with Mr. Polselli for the work he would complete for

answering IRs. The Corporation had an existing contract with Mr. Polselli and this contract was

used to provide the services in September and October 2016. Mr. Polselli is a Professional

Chartered Accountant with over 20 years’ experience working with NTPC providing accounting

expertise. The accounting expertise includes review and knowledge of all regulatory aspects of

NTPC’s operations including life amortization rates, net negative salvage rates, asset retirement

obligations, regulatory deferral accounts and fuel stabilization fund accounting. With Mr.

Polselli’s extensive experience, he provided responses to O&M questions, regulatory deferral

questions such as employee future benefits, reserve for injuries and damages and overhauls.

He also provided historical expertise when responding to information requests that required

historical analysis. Mr. Polselli has NTPC specific historical experience that neither InterGroup

consultants or employees in the internal regulatory workgroup at the time had. As discussed in

the December 5, 2017 letter during this period the regulatory workgroup experienced a period of

employee turnover and the new regulatory employees did not have the accounting or regulatory

experience that Mr. Polselli could offer.

Mr. Polselli’s average rate as shown in Form 2 was $141.81 which is slightly lower than

InterGroup’s average rate of $146.88. It was a cost benefit to have Mr. Polselli assist with

information request responses as his NTPC specific experience reduced the learning curve that

would apply to an external consultant or the new NTPC internal regulatory workgroup who were

not familiar with NTPC’s regulatory accounting parameters. NTPC notes his average rate of

$146.88 is lower than the consultants used by NTFL ($250/hr), TGC ($250/hr) and YK/HR

($200/hr).

Information Request



BR.NTPC-3


Topic: Gannett Fleming/Concentric Advisors

Reference: Gannett Fleming/ Concentric Advisors Cost Claim included in NTPC’s claim for

costs

Preamble:

The Phase I cost claim by Gannett Fleming/ Concentric Advisors includes costs for a

number of consultants/employees; while Messrs. Kennedy and Janow are known to the

Board, the level of professional assistance provided by the other consultants is not clear

to the Board. The Board also requires further support for the costs, based on time spent

on evidence preparation, response to information requests, rebuttal etc.

Requests:

a) Please provide a summary of the hours, rates and fees included in the Gannett Fleming/

Concentric Advisors claim for each consultant/employee showing, as applicable, their

evidence preparation hours, response to information requests, rebuttal, witness

preparation, technical meeting, hearing appearance, Argument and Reply hours in Excel

format. The fees by consultant/employee should be reconciled to the total fees for

Gannett Fleming/ Concentric Advisors in the claim for costs. Note: this further

breakdown by consultant/employee need be provided only where the individual’s costs

are material and exceed $5000 in total; items less than $5000 per individual may be

aggregated.

b) Please compare the costs claimed by Gannett Fleming for preparation and filing of the

depreciation evidence (evidence preparation costs only and this should not include

responses to information requests etc.) at the time of the 2012/14 GRA and in the

current GRA. Provide reasons for any increase or decrease in costs having regard to the

work undertaken in each case.

c) Please summarize the qualifications of each of the consultants/employees (subject to

the materiality threshold in a)) other than Messrs. Kennedy and Janow and describe the

nature of services provided by each (general description) during the different stages of

the proceedings and explain why their services were required in addition to the expertise

provided by Messrs. Kennedy and Janow.

Information Request



BR.NTPC-3


d) Please indicate whether the out of scale cost claim with respect to Mr. Kennedy were

backed out of the total claim. If so, please show how the out of scale costs were backed

out in the response to a) above.

e) Please provide an estimate of costs incurred by Gannett Fleming/ Concentric Advisors)

in responding (through IRs, Rebuttal etc.) to the redacted/removed NTFL evidence.

Note: only direct hours involved in responding to the NTFL evidence should be

considered.

Responses:

a) and d)

Please see attachment BR.NTPC-3(a). The out of scale costs are not included in the total

claim and the excel sheet shows the calculation.

b)

For the 2016/19 GRA the evidence preparation excluding information request responses

totaled $35,867.50. For the 2012/14 GRA the evidence preparation cost $49,303.27. The

cost for the 2012/14 GRA was higher as it was the first deprecation study conducted since

the 2000 study. Due to the length of time between studies more work was required to

complete the 2011 study for the 2012/14 GRA including an onsite visit, and more reviews

with management on operational changes and performance. The study for the 2016/19 GRA

was an update to the study used in the 2012/14 GRA and, as a result, was less expensive to

complete.

c)

Other than Messers. Kennedy and Janow, Ms. Amanda Nori was assigned to this project as

the project analyst and completed the statistical analysis for both the average service life

and net salvage estimates. Ms. Nori has 8 year of direct experience having worked for

Gannett Fleming/Concentric Advisors for the past 8years and has been actively involved in

over 30 depreciation studies. Ms. Nori has completed all the depreciation courses offered

by the Society of Depreciation Professionals.

Information Request



BR.NTPC-3


The use of Ms. Nori in this depreciation study reduced the overall costs as the

charge-out rate for Ms. Nori is less than the rates for Mr. Janow and Mr. Kennedy.

e)

NTFL did not ask information requests for Phase I but did provide rebuttal evidence. As per

attachment BR.NTPC-3(a) Gannett Fleming / Concentric Advisors spent $5,360.00 on

rebuttal evidence that was in reply to evidence provided by NTFL that was ultimately

redacted.

NTFL put forward evidence on March 13, 2017 that NTPC was required to test and respond

to, which resulted in the rebuttal evidence filed on June 30, 2017. NTPC acted diligently in

its efforts to provide the evidence required for the Board to review the amortization

components of Revenue Requirement. By letter dated July 6, 2017 NTFL withdrew evidence

on amortization two business days before commencement of the Phase I hearing on July

10, 2017. By this time, all the work to file rebuttal evidence had been completed.

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