~ FORTIS Be- 16705 Fraser Highway Surrey, B.C. V4N 0E8 · 2019. 10. 30. · Variance from Plan as a...

Doug Slater Director, Regulatory Affairs

Gas Regulatory Affairs Correspondence

Email: [email protected]

Electric Regulatory Affairs Correspondence Email: [email protected]

FortisBC

16705 Fraser Highway

Surrey, B.C. V4N 0E8

Tel: (778) 578-3874

Cell: (778) 214-3842

Fax: (604) 576-7074

Email: [email protected]

www.fortisbc.com

October 30, 2019 British Columbia Utilities Commission Suite 410, 900 Howe Street Vancouver, B.C. V6Z 2N3 Attention: Mr. Patrick Wruck, Commission Secretary and Manager, Regulatory Support Dear Mr. Wruck: Re: FortisBC Energy Inc. (FEI)

2019-2022 Demand Side Management Expenditure Plan – Request for Acceptance of Budget Transfer

Response to the British Columbia Utilities Commission (BCUC) Information Request (IR) No. 1

On September 18, 2019, FEI filed the Application referenced above. In accordance with BCUC Order G-254-19 setting out the Regulatory Timetable for the review of the Application, FEI respectfully submits the attached response to BCUC IR No. 1. If further information is required, please contact the undersigned. Sincerely, FORTISBC ENERGY INC. Original signed:

Doug Slater Attachments cc (email only): Registered Parties

B-2

~ FORTIS Be-

mailto:[email protected]



http://www.fortisbc.com/

YLAPIERR

2019-2022 DSM Industrial Expenditures Budget Transfer

FortisBC Energy Inc. (FEI or the Company)

2019-2022 Demand Side Management Expenditure Plan – Request for Acceptance of Budget Transfer (the Application)

Submission Date:

October 30, 2019

Response to British Columbia Utilities Commission (BCUC) Information Request (IR) No. 1

Page 1

1.0 Reference: APPLICATION 1

Exhibit B-1, Table 1, p. 2 2

Impact on Portfolio TRC & Adequacy 3

of FEI’s 2019-2022 Demand Side Management (DSM) Industrial Expenditure 4

Budget Transfer application (Application) provides the following table: 5

6

1.1 Please provide an updated Table 1 with columns for the projected expenditures 7

as of October 31, and at year end. 8

9

1.1.1 Please include in the table a breakdown of projected residential and 10

commercial expenditure by sub-program, and clearly identify 11

expenditure on the rental program. 12

13

1.1.2 Please include a column for the amounts to be transferred in and out of 14

the affected programs and sub programs. 15

16

Response: 17

Table 1.1 below provides the updated information requested in BCUC IR 1.1.1, 1.1.1.1, and 18

1.1.1.2. FEI interprets the BCUC reference to programs and sub programs to correspond to 19

FEI’s program areas and programs respectively as identified in the 2019-2022 DSM Plan. Due 20

to the filing deadline of these information requests, the requested updated information is current 21

as at October 28, 2019. The program level information for the Residential and Commercial 22

program areas shows how the spending projection by program sums to leave room in these 23

~F'ORTISBC" 1---------------------------1

Table 1: 2019 Program Area Spending - Projection versus Plan as at August 311 2019

2019 DSM Plan 2019 Year-end Plan vs Projection as Expenditures1 Expenditure Projection a Percent of

Program Area (SOOOs) Projection• (SOOOs) (SOOOs) Plan

Residential 23,521 20,547 -2,974 87%

Commercial 13,837 11,435 -2,402 83%

Industrial 3,103 6,543 +3,440 211%

Low Income 6,630 6,563 -67 99%

Cum;.1::1 valiou, 7,155 7,096 .59 99% Education & Outreach

Innovative Technologies 2,043 2,043 0 100%

Enabling Activities 8,426 9,272 +1,446 117%

Portfolio Level Activities 1,635 1,500 -135 92%

All Programs 66,350 64,999 -669 98%



Submission Date:

October 30, 2019


Page 2

program areas to be transferred into the Industrial program area. FEI notes that the BCUC’s 1

directive concerning transfers between program areas does not require FEI to designate or 2

specify which programs the spending amounts are being transferred out of or into. 3

Table 1.1: Program Area Spending Projections at October 28 compared to Projections at August 4 31 vs 2019-2022 DSM Plan. 5

6

Note: Minor differences due to rounding. 7

Since the Rental Apartment program (RAP) funding is partially under both the Residential and 8

Commercial program areas, Table 1.2 shows the total spending for the RAP program. The 9

Residential and Commercial portions of RAP funding correspond to those shown in Table 1.1. 10

Table 1.2: Rental Apartment Efficiency Program Total Spending Projections at October 28 vs the 11 2019-2022 DSM Plan 12

13

FEI also notes that it is not requesting approval for a specific amount of funding to be 14

transferred, but rather is requesting approval to transfer funds into the Industrial program area 15

that exceed 25 percent of the Industrial program area approved funding. Neither of the amounts 16

to be taken out of the Residential or Commercial program areas to facilitate this transfer will 17

Program Area

2019 DSM Plan

Expenditures1

($000s)

2019 Year-end

Expenditure

Projection2

($000s)

Plan vs

Projection

($000s)

Projection

as a

Percent

of Plan

Variance from

Plan as a

Percent of

Approved

Portfolio

2019 Year-end

Expenditure

Projection2

($000s)

Plan vs

Projection

($000s)

Projection

as a Percent

of Plan

Variance from

Plan as a

Percent of

Approved

Portfolio

Residential 23,521 20,547 -2,974 87% -4% 21,490 -2,031 91% -3%Home Renovation Rebate Program 16,300 17,613 1,313 108%

New Home Program 6,094 3,166 -2,928 52%

Rental Apartment Efficiency Program 432 401 -31 93%

Non-Program Specific Expenses 696 310 -386 45%

Commercial 13,837 11,435 -2,402 83% -4% 11,250 -2,587 81% -4%Prescriptive Program 8,418 6,193 -2,225 74%

Performance - Existing Buildings 2,429 2,372 -57 98%

Performance - New Buildings 1,028 939 -89 91%

Rental Apartment Efficiency Program 1,256 840 -416 67%

Non-Program Specific Expenses 706 907 201 128%

Industrial 3,103 6,543 3,440 211% 5% 7,278 4,175 235% 6%

Low Income 6,630 6,563 -67 99% 0% 6,461 -169 97% 0%

Conservation, Education & Outreach 7,155 7,096 -59 99% 0% 6,928 -227 97% 0%

Innovative Technologies 2,043 2,043 0 100% 0% 2,043 0 100% 0%

Enabling Activities 8,426 9,272 1,446 117% 2% 8,891 465 106% 1%

Portfolio Level Activities 1,635 1,500 -135 92% 0% 1,500 -135 92% 0%

All Programs 66,350 64,999 -669 98% -1% 65,841 -509 99% -1%

October 28August 31

Program Area

2019 DSM Plan

Expenditures1

($000s)

2019 Year-end

Expenditure

Projection2

($000s)

Plan vs

Projection

($000s)

Projection

as a Percent

of Plan

ResidentialRental Apartment Efficiency Program 432 401 -31 93%

CommercialRental Apartment Efficiency Program 1,256 840 -416 67%

Rental Apartment Efficiency

Total1,688 1,241 -447 73%

October 28

G FORTIS BC~ 1------------------------------1



Submission Date:

October 30, 2019


Page 3

exceed 25 percent of those respective program areas, thus that portion of the transfer does not 1

require BCUC approval under the funding transfer rules set out in Decision and Order G-10-19. 2

FEI also clarifies that until the costs are actually incurred, the portfolio and program area 3

amounts represent approved upper limits rather than amounts held in a physical account. The 4

actual amount to be transferred will not be exactly known until the spending actuals are 5

available after 2019 year-end. Table 1.1 is provided to show what FEI estimates the transfer 6

amount will be based on the performance of the portfolio to date. As such, if the year were to 7

finish as projected in Table 1.1, which shows a total of $4.6 million in projected expenditures 8

below the approved funding levels in the Residential and Commercial program areas combined, 9

any combination of remaining unspent amounts from these two program areas that matches the 10

$4.175 million projected over spending in the Industrial program area could be used to complete 11

the transfer. FEI does not intend to place further limits or restrictions on any Residential or 12

Commercial program in order to facilitate the transfer, rather the available transfer amounts in 13

these programs are due to the trends and performance of these programs anticipated through to 14

the end of 2019. 15

For further context, FEI has added columns 6 and 10 to show that the projected transfer amount 16

is a small portion (6 percent as at October 28) of the overall approved portfolio expenditure. 17

Since the year-end projection is based on three quarters of calendar 2019 activity, FEI does not 18

expect the final expenditure to vary widely from these projections. 19

20

21

22

1.2 Please explain why expenditures for residential and commercial progams are 23

projected to be below plan. 24

25

Response: 26

The Residential Program Area proposed a 2019 expenditure target of 187 percent of 2018 27

achieved expenditures. The Home Renovation Program, representing 70 percent of the 28

approved Residential Program Area expenditures, is on track. However, the New Home 29

Program, representing 26 percent of the Residential Program Area is forecast to be below plan 30

(please refer to BCUC IR 1.1.1, Table 1.1). New Home program forecasting is reliant on a 31

number of unpredictable factors including builder uptake, the housing market and local 32

government policy. As discussed in FEI’s response to BCUC IR 1.22.3.1 in FEI’s 2019-2022 33

Demand Side Management Expenditures Plan, FEI identified that due to the infancy of the Step 34

Code, there could be challenges related to the rate at which municipalities, and therefore 35

builders, adopted Step Code. 36

G FORTIS BC~ 1------------------------------1



Submission Date:

October 30, 2019


Page 4

The Commercial Program Area 2019 expenditure target is a 9 percent increase over 2018 1

achieved expenditures. FEI projects to be below plan due to the slower than anticipated uptake 2

in new commercial prescriptive rebate offers, including commercial furnace, condensing unit 3

heater and steam boiler rebate offers. The new prescriptive rebate offers were introduced to the 4

market in Q2 of 2019. FEI anticipates uptake will grow as the market becomes more familiar 5

with these offers over time. 6

Finally, FEI undertook significant market effort in October 2019 to further increase participation 7

in the Rental Apartment Efficiency (RAP) program. One of the barriers identified was the lack of 8

engagement of property managers, which was addressed through the addition of a sign-up 9

bonus for property managers. The process from getting participants signed up to completing site 10

work typically requires one to two months and therefore, it is expected that increased 11

participation may fall into early 2020. 12

13

14

15

1.3 Please provide the updated TRC and mTRC scores at the portfolio level, 16

assuming the proposed transfer occurs. 17

18

Response: 19

The projected year-end Portfolio TRC and MTRC results that correspond to the year-end 20

expenditure projections in Table 1.1 as at October 28 are 0.9 and 1.5 respectively. 21

22

23

~F'ORTISBC" 1-------------------+---------1

2019-2022 DSM Plan 2019 Projected Year-end (as at October 28)



Submission Date:

October 30, 2019


Page 5


Exhibit B-1, Table 1, p. 2 2

Historic trend of residential and commercial applications/Impact on 3

overall portfolio 4

The final row of Table 1 shows that overall portfolio expenditure is projected to be at 5

98% relative to the approved portfolio total, a difference of approximately $669,000. 6

2.1 What contingency plans does FEI have in the event of greater than expected 7

applications in the latter portion of 2019 in the commercial and residential 8

programs? Please cite prior annual trends in applications in your response. 9

10

Response: 11

Annual trends indicate that FEI typically experiences an upswing in participation as the fall 12

heating season begins. The average expenditure between October and December for the 13

period of 2014 to 2018 in the residential program area was 42 percent, and commercial program 14

area was 44 percent. FEI considered these annual trends when developing the projected 2019 15

program expenditures as presented in its Application and in the response to BCUC IR 1.1.1, 16

Table 1.1. 17

Due to the year-end 2019 projections as described in BCUC IR 1.1.1 and 1.1.2, FEI believes 18

that there are sufficient funds available for fourth quarter Residential Program Area and 19

Commercial Program Area applications, as well as to support the funding transfers to Industrial. 20

Finally, in the unlikely event of greater than expected applications in the commercial and 21

residential programs towards year-end, FEI would review the overall approved DSM budget to 22

determine whether a request to the BCUC for acceptance of additional expenditures in the 23

Industrial program is required, since unused funds from the commercial and residential 24

programs would no longer be available. 25

26

G FORTIS BC~ 1------------------------------1



Submission Date:

October 30, 2019


Page 6


Exhibit B-1, Table 1, p. 2; FEI Application for Acceptance of 2019‐2

2022 Demand Side Management Expenditures Plan, Order G-10-19, 3

p. 16 4

Underexpenditure in residential and commercial sectors 5

Page 16 of the Reasons for Decision attached to Order G-10-19 cited British Columbia 6

Old Age Pensioners’ Organization et al.’s (BCOAPO) concern about FEI’s requested 7

transfer rules: 8

BCOAPO does not oppose FEI’s proposal, but is concerned that the proposal 9

could lead to low DSM spending in the early years of the DSM Plan, that FEI 10

could choose to transfer funding out of the Low Income and Residential program 11

areas which would materially impact the public interest, and that FEI could hold 12

off investments in favour of ones that may only benefit a minority.63 In reply, FEI 13

responds that it intends to follow and roll out the DSM Plan that it has worked 14

hard to develop, that the proposed rules do not incentivise decreased spending 15

at the beginning of the plan, and that the rules do not allow FEI to make arbitrary 16

reductions to a program. 17

3.1 Please discuss FEI’s plans to increase expenditure in the residential and 18

commercial sectors over the remainder of the time period of the expenditure 19

schedule. 20

21

Response: 22

For added perspective, FEI notes that the requested budget transfer into the Industrial program 23

area in excess of 25 percent (currently forecast at $4.175 million as shown in Table 1.1 in 24

response to BCUC IR 1.1.1) represents six percent of the total portfolio funding envelope while 25

remaining well within the 25 percent funding transfer allowance for both the residential and 26

commercial program areas. In addition, the portfolio funding envelope continues to grow over 27

the remainder of the 2019-22 DSM Plan period, ensuring that there is adequate funding to serve 28

residential, commercial, and low income customers. 29

FEI’s plan to increase expenditures in the residential and commercial sector over the remainder 30

of the time period of the expenditure schedule includes the following: 31

The Residential program area is expected to reach 91 percent of its spending target by 32

year end. As illustrated in Table 1.1 in the response to BCUC IR 1.1.1 and as discussed 33

in the response to BCUC IR 1.1.2, FEI has identified that spending in the New Home 34

Program is currently below its planned expenditures, in part due to the infancy of the BC 35

Energy Step Code and its adoption by municipalities. FEI expects expenditures in this 36

G FORTIS BC~ 1------------------------------1



Submission Date:

October 30, 2019


Page 7

program to increase as it continues to work with builders, contractors, energy advisors 1

and other stakeholders to continuously improve the program and advance the 2

construction of high performance homes in BC. 3

The Commercial program area is expected to reach 81 percent of its spending target by 4

year end. As illustrated in Table 1.1 in the response to BCUC IR 1.1.1 and as discussed 5

in the response to BCUC IR 1.1.2, FEI launched new Prescriptive Program measures in 6

Q2 2019 and participation is expected to continue to increase. In addition, FEI plans to 7

expand the Prescriptive Program participation through the following related initiatives: 8

o Continued addition of new, cost-effective natural gas energy efficiency measures 9

in the Prescriptive Program; 10

o Re-design of the Commercial Energy Assessment (CEA) offer; 11

o Expansion of the existing Trade Ally Network to commercial contractors and 12

retailers; and 13

o Expansion of retail partners offering FEI commercial point-of-sale rebates. 14

15 Finally, FEI plans to review its overall DSM expenditure plan for the remainder of the plan period 16

to determine whether changes need to be made based on actual results in 2019. FEI will seek 17

BCUC acceptance of any changes to the accepted 2019-22 DSM Plan as required. 18

G FORTIS BC~ 1------------------------------1

~ FORTIS Be- 16705 Fraser Highway Surrey, B.C. V4N 0E8 · 2019. 10. 30. · Variance from Plan as a...

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