FortisBC Inc. (FortisBC) Application for a Certificate of Public ...

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Response:
FortisBC Inc. (FortisBC or the Company)
Application for a Certificate of Public Convenience and Necessity
for the Advanced Metering Infrastructure Project
Response to British Columbia Utilities Commission (BCUC or the Commission)
Information Request (IR) No. 1
• CPCN Development / Approval
The justification for each is provided below:
System Integration
Submission Date:
October 5, 2012
Page 79
These costs are comprised of internal IT costs required to integrate the new AMI software with
existing FortisBC systems and for the creation of the Customer Information Portal. Under US
GAAP, Accounting Standards Codification (“ASC”) 360-10, Property, Plant & Equipment-
Overall, defines the historical cost of acquiring an asset as “including the costs necessarily
incurred to bring it to the condition and location necessary for its intended use”. In the case of
the AMI software, in order to install it in the condition required for its intended use there is
compliance and other integration testing that is necessary to occur. Without the proper
integration testing, the AMI system will not function as required. Therefore, System Integration
costs meet the definition of eligible capital costs.
Project Management
These costs are comprised of labour resources, design, testing and training. In other words,
this cost category includes all internal and contract labour involved in managing the design of
the system, software installation, configuration and initial testing of the system, and ultimate
rollout to the Company. Following the guidance in ASC 360-10, the Company believes these
are also costs that are necessarily incurred in order to bring the AMI system to the condition
necessary for its intended use, since without these dedicated resources actively managing the
AMI project the AMI system would not meet its intended use.
CPCN Development / Approval
These costs include the CPCN application development cost, including procurement, and the
forecast costs associated with the regulatory process. FortisBC has traditionally capitalized
preliminary project costs since CPCN development and approval is a necessary requirement in
the development of capital for a regulated utility. In other words, without BCUC approval to
proceed, a capital project does not proceed. Therefore, these costs are necessarily incurred in
order to bring the AMI system to the condition necessary for its intended use.