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]]> http://ablawg.ca/2009/06/08/a-rock-and-a-hard-place-a-false-dilemma/#comment-63554 Alice Woolley Mon, 08 Jun 2009 15:20:38 +0000 http://ablawg.ca/2009/06/08/a-rock-and-a-hard-place-a-false-dilemma/#comment-63554 I appreciate the opportunity to continue this debate regarding the proper treatment of disposition of utility assets. I have a few questions arising from this posting. Mr. Kay states that "A proposed rate base is fully scrutinized with each new rate case, every few years. An asset cannot be kept in rate base after its usefulness has expired." This statement is surprising to me. Specifically, I am not aware of any normal process within general rate applications for scrutinizing assets within rate base for which no proposed change is made. My understanding is that the process focuses on proposed capital additions, not the rate base as currently constituted. That this would be the case is not surprising - the normal rate base for a utility in Alberta runs into the hundreds of millions of dollars, and consists of thousands (tens of thousands?) of individual assets. I do not know of any review - through information requests, the introduction of evidence or otherwise - of the continued usefulness of those thousands of assets. Until there is, the ability of the utility to leave assets within rate base, whether or not used or required to be used, remains undisturbed. That this is the case appears to be self-evident from the Harvest Hills land: why did this asset not get removed from rate base as soon as it was evident that most of it was not required for utility service? Mr. Kay states that "no thought [was] given to subdivision and sale of the surplus portion until an unsolicited offer was made in 2006". Why not? Perhaps because the only outcome of such thought would be the exclusion of the land from rate base, without the certainty of profit that arose once the unsolicited offer was received. I appreciate the opportunity to continue this debate regarding the proper treatment of disposition of utility assets. I have a few questions arising from this posting. Mr. Kay states that “A proposed rate base is fully scrutinized with each new rate case, every few years. An asset cannot be kept in rate base after its usefulness has expired.” This statement is surprising to me. Specifically, I am not aware of any normal process within general rate applications for scrutinizing assets within rate base for which no proposed change is made. My understanding is that the process focuses on proposed capital additions, not the rate base as currently constituted. That this would be the case is not surprising - the normal rate base for a utility in Alberta runs into the hundreds of millions of dollars, and consists of thousands (tens of thousands?) of individual assets. I do not know of any review - through information requests, the introduction of evidence or otherwise - of the continued usefulness of those thousands of assets. Until there is, the ability of the utility to leave assets within rate base, whether or not used or required to be used, remains undisturbed. That this is the case appears to be self-evident from the Harvest Hills land: why did this asset not get removed from rate base as soon as it was evident that most of it was not required for utility service? Mr. Kay states that “no thought [was] given to subdivision and sale of the surplus portion until an unsolicited offer was made in 2006″. Why not? Perhaps because the only outcome of such thought would be the exclusion of the land from rate base, without the certainty of profit that arose once the unsolicited offer was received.

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