August 6, 2019
AltaLink and its customers reach negotiated settlement to reduce costs by more than $80 million
CALGARY, ALBERTA (Globe Newswire – August 6, 2019) – A negotiated settlement between AltaLink and the groups representing Alberta’s industrial and residential customers will save customers more than $80 million during the 2019-2021 timeframe.
With this agreement, AltaLink will reduce operating expenses by $22.5 million and net sustaining capital expenditures by $58 million over the three-year period.
AltaLink and the customer groups negotiated the agreement for AltaLink’s 2019-2021 General Tariff Application (GTA), which the company submits every two to three years to cover its regulated operating and capital costs. The agreement was filed with the Alberta Utilities Commission (AUC) on July 10, 2019, and must be approved by the AUC through a public process.
"Reaching a negotiated settlement with our customers is a huge step in delivering on our commitment to keeping our rates at or below 2018 levels through to the end of 2023,” said Scott Thon, AltaLink President & CEO. “It’s going to be a challenge for us to meet the goal to save more than $80 million for customers but we’re committed to making it happen.”
"This is the first three years of our five-year commitment to not increase our costs while providing our customers with affordable and reliable transmission service.”
As negotiated by AltaLink and its customers, the agreement does not include AltaLink’s proposed change to the method of funding salvage and excludes certain capital programs. Those items will be tested in a future regulatory process with the AUC.
"Regulatory approval of our new salvage methodology is the final step to meet our objective of no rate increases for customers for five years,” said Thon. “With our proposal, customers would keep an estimated $267 million between 2019 and 2023, instead of paying in advance for future salvage activities.”
AltaLink continues to work closely with its customers to reduce costs. AltaLink is the only transmission company in Alberta who has reached a negotiated settlement with its customers. This agreement is the second of two back-to-back negotiated settlement agreements with customers, with the first being its 2017-2018 GTA.
AltaLink announces 2019 second quarter results
AltaLink continues to invest in transmission facilities to ensure the reliability of the electricity grid. During the second quarter of 2019, AltaLink invested $65.1 million in its transmission system.
Today, AltaLink, L.P. announced comprehensive income of $12.2 million for the three months ended June 30, 2019, compared to $81.7 million for the same period in 2018. The decrease is primarily due to the re-measurement of future income tax recovery of $58.0 million and the lower recovery of future income tax of $8.7 million for the first half of 2019. Revenue from operations for the three months ended June 30, 2019, was $224.0 million compared to $238.7 million during the same period in 2018, a decrease of $14.7 million. The change is primarily due to lower recovery of future income taxes, depreciation and salvage expenses.
As a partnership, AltaLink, L.P. reports its net income before income taxes; therefore its results are not directly comparable with net income reported by corporations that recognize income taxes in their financial statements.
Headquartered in Calgary, with offices in Edmonton, Red Deer and Lethbridge, AltaLink is Alberta’s largest electricity transmission provider. AltaLink is partnering with its customers to provide innovative solutions to meet the province’s demand for reliable and affordable energy. A wholly-owned subsidiary of Berkshire Hathaway Energy, AltaLink is part of a global group of companies delivering energy services to customers worldwide.
Significant highlights during the second quarter of 2019
During the three months ended June 30, 2019:
- AltaLink reached a partial negotiated settlement agreement with customer groups on our 2019 to 2021 tariff application. Under the agreement, AltaLink will reduce operating expenses by $22.5 million and sustaining capital expenditures by $58 million from the April 2019 GTA for 2019 to 2021 to help keep customer rates low. The agreement does not include AltaLink’s proposed change to the method of funding salvage and excludes certain capital programs, which will be part of a GTA hearing scheduled for September 2019. On July 10, 2019, AltaLink filed the agreement with the AUC for approval;
- On June 1, 2019, AltaLink and the Piikani First Nation operationalized a new limited partnership called PiikaniLink, L.P. The partnership, which was approved by the AUC in November 2018, results in the Piikani Nation’s 51% investment in the equity portion of the Southwest 240 kV transmission line and associated substation equipment on Piikani reserve lands;
- Customer satisfaction was 100%, which is an improvement compared to 98% in the same period in 2018;
- Reliability of service provided to customers improved compared to the same period in 2018. AltaLink’s year-to-date 2019 and 2018 customer outage times were 12 and 16 minutes, respectively;
- On July 12, 2019, the Canadian Electricity Association (CEA) notified AltaLink that the company’s application for the Sustainability Electricity CompanyTM re-designation had been approved. In 2014, AltaLink was the first transmission company in Canada to receive the designation and now becomes the first CEA member to be re-designated under this process;
- Our employee safety performance as measured by the total recordable injury frequency rate was zero, representing zero injuries (three months ended June 30, 2018 – zero injuries);
- We earned net and comprehensive income of $12.2 million (three months ended June 30, 2018 – $81.7 million). Our net income decreased year over year mainly due to a re-measurement of future income tax recovery as a result of the Alberta government reducing the corporate income tax rate in 1% increments from 12% for the first half of 2019 to 8% in 2022. The reduction of AltaLink’s recovery in future income taxes will benefit customers when AltaLink is deemed to start paying cash taxes and is offset by a corresponding decrease in income tax expense of AltaLink’s corporate owners. AltaLink’s adjusted quarterly net income normalized for the tax rate reduction for the three months ended June 30, 2019, and June 30, 2018, is $70.3 million and $73.2 million, respectively;
- On July 11, 2019, DBRS assigned an Issuer Rating of “A” to AltaLink and reaffirmed the rating on our Medium-Term Notes at “A” along with an “R1 (low)” rating on our commercial paper. An “A” rating allows us to continue to provide low-cost debt financing for our customers;
- We invested $65.1 million (three months ended June 30, 2018 – $96.9 million) in capital assets to ensure continued reliability of the electricity network; and
- On June 27, 2019, AltaLink initiated its 2016-2018 deferral account proceeding and on July 7, 2019, AltaLink filed its application with the AUC after a ruling on confidentiality. The application includes approximately $947 million in capital additions.
This news release does not constitute an offer to sell or the solicitation of an offer to buy AltaLink’s securities in any jurisdiction, including but not limited to, the United States. AltaLink’s securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.
Except for the historical and present factual information contained herein, the matters set forth in this news release, including words such as “expects”, “intends”, “projects”, “plans”, “anticipates”, and similar expressions, are forward looking information that represents management of AltaLink’s internal projections, expectations or beliefs concerning, among other things, future operating results and various components thereof or the economic performance of AltaLink. The projections, estimates and beliefs contained in such forward looking statements necessarily involve known and unknown risks and uncertainties, which may cause AltaLink’s actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward looking statements. These risks and uncertainties include, among other things, those described in AltaLink’s filings with the Canadian securities authorities. Accordingly, holders of AltaLink securities and potential investors are cautioned that events or circumstances could cause results to differ materially from those predicted. AltaLink disclaims any responsibility to update these forward looking statements.
FOR FURTHER INFORMATION
Vice President, Treasurer
AltaLink Management Ltd.
Vice President, Communications
AltaLink Management Ltd.