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September 19, 2013 Via Email Original via Mail British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, B.C. V6Z 2N3 Attention: Ms. Erica M. Hamilton, Commission Secretary Dear Ms. Hamilton: Re: FortisBC Energy Inc. (FEI)

Section 71 of Utilities Commission Act (UCA) Filing of Biomethane Purchase Agreement Between FEI and Greater Vancouver Sewerage and Drainage District (GVS&DD) (the Application)

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

On August 16, 2013, FEI filed the Application as referenced above. In accordance with Commission Order G-130-13 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 by: Shawn Hill

For: Diane Roy Attachments

cc (e-mail only): Registered Parties

Diane Roy Director, Regulatory Affairs

FortisBC Energy 16705 Fraser Highway Surrey, B.C. V4N 0E8 Tel: (604) 576-7349 Cell: (604) 908-2790 Fax: (604) 576-7074 Email: [email protected] www.fortisbc.com Regulatory Affairs Correspondence

Email: [email protected]

B-2

mailto:[email protected]

http://www.fortisbc.com/

mailto:[email protected]

markhuds

FEI GVS DD Biomethane

FortisBC Energy Inc. (FEI or the Company)

Biomethane Purchase Agreement between FortisBC Energy Inc. and the Greater Vancouver Sewerage and Drainage District (GVS&DD) (the

Application)

Submission Date:

September 19, 2013

Response to British Columbia Utilities Commission (BCUC or the Commission)

Information Request (IR) No. 1 Page 1

1.0 Reference: APPROVALS SOUGHT 1

Exhibit B-1, Section 1, p.2; Exhibit B-1, Section 2, p. 3 2

Supply Cap Under Biomethane Pilot 3

On page 2 of the FortisBC Energy Inc. (FEI) and Greater Vancouver Sewerage and 4

Drainage District (GVS&DD) Biomethane Application (Application), FEI states 5

“Additionally, the amount of Biomethane supply under the Agreement fits within the 6

Biomethane supply cap set by Commission Order G-45-13, which increased the 7

Biomethane supply cap to accommodate 40,000 G annually from the GVS&DD.” 8

On page 3 of the Application, FEI states “In Order G-29-13 and G-45-13, the 9

Commission determined that the supply cap for the Biomethane pilot program set by 10

Order G-194-10 is increased by an amount sufficient to accommodate up to an 11

additional 280,000 GJ of supply annually from four suppliers, one of which being the 12

GVS&DD. This additional annual supply in combination with the previously approved 13

maximum supply of 250,000 GJ now totals 580,000 GJ.” 14

1.1 Please confirm that the total approved maximum supply is now 530,000 GJ 15

rather than 580,000 GJ as stated by FEI. If not confirmed, please explain. 16

17

Response: 18

Confirmed. 19

20

21

22

1.2 Please confirm that the increase in the total approved maximum supply under the 23

biomethane pilot program accommodates no more than 40,000 GJ annually from 24

the GVS&DD. If not confirmed, please explain. 25

26

Response: 27

Confirmed. 28

29



Application)

Submission Date:

September 19, 2013



2.0 Reference: REGULATORY BACKGROUND 1

Exhibit A2-1; Exhibit A2-2; Exhibit A2-3 2

Confirmation of Previous IR Responses Regarding GVS&DD 3

Contract 4

In the FEI Biomethane Service Offering: Post Implementation Report and Application for 5

Approval of the Continuation and Modification of the Biomethane Program on a 6

Permanent Basis (2012 Biomethane Application), FEI responded to a number of 7

Information Requests (IR) that were specifically in regard to the GVS&DD Biomethane 8

Purchase Agreement. These IR responses have been extracted and filed by 9

Commission staff as Exhibits A2-1, A2-2 and A2-3 for this proceeding. 10

2.1 Please confirm that the responses provided in the extracted IR responses in 11

Exhibits A2-1, A2-2 and A2-3 remain unchanged. 12

13

Response: 14

Confirmed. FEI‟s IR responses as filed in Exhibits A2-1, A2-2 and A2-3 remain unchanged. 15

16

17

18

2.1.1 For those IR responses that FEI does not confirm as unchanged, please 19

identify the IR and provide the revised response. 20

21

Response: 22

As per BCUC IR 1.2.1, FEI does not have any revisions. 23

24

25

26

2.2 If there is any evidence from the 2012 Biomethane Application in addition to what 27

has been extracted in Exhibits A2-1, A2-2 and A2-3, or evidence from the FEI 28

2013 Biomethane Third Party Supplier proceeding that FEI believes should be 29

considered in the review of the FEI GVS&DD Biomethane Application, please 30

provide copies of the relevant evidence. 31

32



Application)

Submission Date:

September 19, 2013



Response: 1

FEI does not have any additional evidence to file at this time for this proceeding. 2

3



Application)

Submission Date:

September 19, 2013



3.0 Reference: REGULATORY BACKGROUND 1

Exhibit A2-3, 2012 Biomethane Application, BCUC IR 2.33.3, 2.35.5, 2

2.35.5.1 3

Confirmation of Previous IR Responses Regarding GVS&DD 4

Contract 5

In Exhibit A2-3 in response to BCUC IR 2.33.3, FEI was asked: 6

“In the case of the GVS&DD supply contract, where a portion of the biomethane 7

supply will not be purchased as part of the biomethane program, can this 8

contract be accepted for filing under the current criteria for the Pilot Biomethane 9

Program? Please explain the response.” 10

FEI provided the following response to BCUC IR 2.33.3: 11

“The current criteria for the Pilot Biomethane Program are not designed for the 12

review and approval of the purchase of natural gas in excess of 40,000 GJ under 13

the GVS&DD contract that would be outside of the biomethane program. FEI will 14

address this issue when the GVS&DD supply contract is before the Commission 15

for approval.” 16

3.1 Please confirm that FEI believes it has addressed this issue in the FEI GVS&DD 17

Biomethane Application. If not confirmed, please explain. 18

19

Response: 20

Confirmed. FEI believes it has addressed this issue in Section 6 of the GVS&DD Biomethane 21

Application. Please also see the response to BCUC IR 1.12.2 which discusses the supply 22

above 40,000 GJ in respect to the factors that the Commission must consider under section 23

71(2) of the UCA. 24

25

26

27

28

In Exhibit A2-3 in response to BCUC IR 2.35.5, FEI confirmed that clause 5.4 of the 29

GVS&DD Biomethane Purchase Agreement (GVS&DD Agreement) provides the ability 30

for GVS&DD to sell volumes of biomethane to other parties. 31

In Exhibit A2-3, BCUC IR 2.35.5.1, FEI was asked: 32



Application)

Submission Date:

September 19, 2013



“Does this provision allow for the sale of biomethane from GVS&DD to other 1

parties such that the volume will be transported through the FEI system?” 2

In Exhibit A2-3, BCUC IR 2.35.5.2, FEI was asked: 3

“If so, what FEI transportation rate schedule(s) would the biomethane be 4

transported under?” 5

In Exhibit A2-3, BCUC IR 2.35.5.3 , FEI was asked: 6

“If the current transportation rate schedules do not accommodate the transport of 7

this biomethane, please describe the amendments that would be required to 8

accommodate the transportation of such biomethane on the FEI system.” 9

FEI provided the following response to BCUC IR 2.35.5.1 (and by reference to BCUC IR 10

2.35.5.1, also provided the same response to BCUC IR 2.35.5.2 and BCUC IR 2.35.5.3): 11

“This level of detail of review of the GVS&DD supply contract is not within the 12

scope of this proceeding. The GVS&DD supply contract will be subject to 13

Commission review and approval in a future process, during which FEI will be 14

pleased to respond to questions of this nature.” 15

3.2 Please now respond to these 2012 Biomethane Application IRs, specifically 16

BCUC IR 2.35.5.1, BCUC 2.35.5.2 and BCUC 2.35.5.3. 17

18

Response: 19

Clause 5.4 of the GVS&DD Biomethane Purchase agreement was developed to clarify that the 20

biomethane is exclusively for FEI. However, GVS&DD could propose to use the biomethane for 21

other purposes (such as co-gen or own use), but this would only be after consultation with FEI 22

and assuming all contract volumes are met. There was not any discussion regarding 23

transporting biomethane on FEI‟s system. 24

In order to develop a biomethane transportation rate schedule for biomethane suppliers, there 25

would be several amendments, process and IT changes that would be required to 26

accommodate the transportation of biomethane on the FEI system. If there is a supply source 27

such as GVS&DD that wishes to transport their biomethane from their site, the site itself would 28

have to sign up for Transportation service (Rate Schedule 22, 23, 25 or 27) and they would also 29

need to be their own marketer or shipper agent (ie- GVS&DD could appoint a marketer to 30

manage the business). They could have a marketer as their shipper agent but FEI would need 31

GVS&DD segregated to their own shipper pool. FEI would then need to link their Biogas supply 32

to their shipper pool and any traditional gas supply purchases to their pool as well. Regular 33



Application)

Submission Date:

September 19, 2013



balancing rules would apply in this case and they would be charged the regular delivery rate per 1

GJ whether it was biogas or regular natural gas. However, additional supply balancing rules will 2

need to be considered and changed as discussed below. 3

Currently, WINS (FEI‟s gas supply nomination and tracking system) is set up to track 4

biomethane supplies through pulling metered data directly from the automatic meter reader 5

installed at the site. When biomethane sales occur, quantities of biomethane gas is transferred 6

to the Shipper Agent‟s group . WINS is not set up to handle biomethane nominations as it does 7

for natural gas. 8

Traditionally in WINS, a shipper inserts a nomination for natural gas supplies at a receipt point 9

on our system, such as at the Lower Mainland/Huntingdon. 10

At that receipt point, WINS interconnects with the interconnecting pipeline, Spectra. Spectra 11

would then authorize the quantity of gas to be received by that shipper and all others requesting 12

gas at that point. 13

A biomethane supplier, such as Fraser Valley Biogas for example is not set up to authorize 14

quantities of biomethane, like Spectra, based on requests from the shipper. The process of 15

nominating biomethane supplies is not currently supported by WINS. 16

In the case where a biomethane supplier delivered less biomethane than was 17

requested/expected by the shipper, a process would need to be defined for balancing this 18

shortfall as well as other rule changes such as: 19

Balancing shortfall rules / costs. Would FEI replace the shortfall with natural gas 20

supplies? 21

At what cost? 22

Would FEI allow a negative inventory? 23

Would the customer need to be set up as their own marketer or shipper agent? 24

Would they need a segregated shipper pool? 25

How would biogas supply and traditional natural gas be balanced in their pool? 26

Modifications to WINS to handle nominations of biomethane 27

Modifications to receipt point and interconnect definitions and authorizations for 28

nominations 29



Application)

Submission Date:

September 19, 2013



In summary, there are multiple areas that would need to be reviewed in detail and an end to end 1

assessment of the impacts throughout the system including IT upgrades and gas supply 2

impacts as well as RNG program rule changes. FEI would develop this process and 3

appropriate transportation rate schedule and business rules should there be a requirement to do 4

so in the future. 5

6

7

8

3.3 In addition, please comment on the validity of the GVS&DD Agreement in the 9

event that FEI does not currently have a transportation rate schedule in place to 10

accommodate the sale of biomethane from GVS&DD to other parties. 11

12

Response: 13

The GVS&DD Agreement is valid. Please refer to the response to BCUC IR 1.3.2. 14

15

16

17

3.4 If there are any additional IRs in the 2012 Biomethane Application where FEI 18

indicated that the IR was not within the scope of the FEI 2012 Biomethane 19

Application and/or would be more appropriately dealt with in FEI GVS&DD 20

Biomethane Application, please indicate either where the question has been 21

dealt with in this Application or provide the response at this time. 22

23

Response: 24

FEI believes that it has now answered all the IRs that had been indicated were out of scope in 25

the 2012 Biomethane Application. 26

27



Application)

Submission Date:

September 19, 2013



4.0 Reference: PROJECT OVERVIEW 1

Exhibit B-1, Section 4, p. 5 2

Environmental Benefits 3

On page 5 of the Application, FEI states that “The Project will provide environmental 4

benefits in the form of reduced GHG emissions. Assuming the 40,000 GJ of Biomethane 5

produced annually displaces natural gas, an estimated 20,000 tonne CO2e2 of GHG 6

emissions can be avoided over ten years.” 7

4.1 Please confirm that, to the extent FEI purchases quantities beyond 40,000 GJ 8

annually under the GVS&DD Agreement, these incremental purchases will also 9

displace natural gas and result in additional avoided GHG emissions. If not 10

confirmed, please explain. 11

12

Response: 13

Confirmed. Any additional biomethane injected into FEI‟s pipeline network would result in 14

additional GHG benefits, however, the ownership of these additional GHG reductions would be 15

attributed to GVS&DD. 16

17



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.1, p. 6 2

Project Design Factors Limiting Supply 3

On page 6 of the Application, FEI states: 4

“For the Project, GVS&DD will divert a portion of its waste through the Paradigm 5

sludge technology prior to digestion. The treated sludge will be more readily 6

digested with the effect of increased raw biogas production. The increased gas 7

flow will allow the GVS&DD to divert more gas to be used for energy (in this case 8

Biomethane production) in addition to its own-use requirements. 9

The GVS&DD will purchase, install and own a gas upgrading plant on its own site 10

to purify the raw biogas to pipeline quality Biomethane. In addition to generating 11

revenue from the sale of Biomethane, GVS&DD will also avoid almost all flaring 12

at the plant and reduce the total amount of solid waste that is currently disposed 13

of off-site.” [emphasis added] 14

5.1 Please identify the specific facility design factor that FEI understands limits the 15

total amount of upgraded biomethane available for sale to FEI. 16

17

Response: 18

The GVS&DD has provided the following response: 19

The capacity of the gas upgrader installed for the project will present the physical limit for the 20

amount of upgraded biomethane that is available for sale. 21

22

23

24

5.1.1 Describe the extent to which the GVS&DD upgrader will limit the total 25

quantity of biomethane that can be sold to FEI. 26

27

Response: 28


The gas upgrader will be sized to process all of the surplus gas that Metro Vancouver is 30

expected to have available to the design year 2027. 31



Application)

Submission Date:

September 19, 2013



1

2

3

5.1.2 To what extent does the Paradigm Environmental Technologies Inc. 4

(Paradigm) activated sludge facility limit the total amount of biogas that 5

will be available to upgrade to biomethane? Please discuss. 6

7

Response: 8


The Paradigm equipment activated sludge processing facility is sized to handle all of the 10

activated sludge produced by the plant to the design year 2027, with the exception of short term 11

peaks that would be bypassed directly to the digester. 12

The Paradigm equipment is not designed to pre-treat and will not receive primary sludge. 13

Primary sludge is fed directly to the digesters. 14

15

16

17

5.1.3 Is there the potential to increase the supply of biogas available for 18

GVS&DD for upgrading to biomethane if the Paradigm activated sludge 19

facility was expanded to treat an increased portion of the waste stream? 20

Please discuss. 21

22

Response: 23


As noted in response to BCUC IR 1.5.1.2, the Paradigm equipment is designed to pre-treat all 25

of the treatable sludge produced at the Plant to the design year 2027. There are options to 26

increase production capacity beyond 2027. These would be evaluated at that time. 27

28



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.2, p. 6 2

Projected Supply Quantities 3


“the Biomethane supply is expected to be 30,000 to 50,000 GJ annually based 5

on estimates by Paradigm. As stipulated in the Agreement, the maximum annual 6

Biomethane purchase by FEI from GVS&DD will be limited to 40,000 GJ 7

annually, even if the amount of Biomethane produced exceeds this amount. Gas 8

volumes produced above 40,000 GJ annually up to 100,000 GJ will be injected 9

into the FEI system, but will be purchased by FEI as conventional natural gas…” 10

6.1 Which party determined the limit of 40,000 GJ and what was the rationale for 11

selecting this particular quantity? 12

13

Response: 14

The annual limit of 40,000 GJ was agreed upon after open discussions between GVS&DD and 15

FEI. 16

This amount is based on GVS&DD‟s best conservative estimate of how much extra biomethane 17

(not required for its own plant use) the project would deliver. 18

FEI understands that the high end of the projections for available biomethane would be in the 19

range of 50,000 GJ per year. 20

21

22

23

6.2 Describe any third party review or verification, if any, of the estimates provided by 24

Paradigm. 25

26

Response: 27

FEI is not aware of any specific verification of the estimates. However, FEI understands that the 28

GVS&DD reviewed gas volume estimates provided by Paradigm. Based upon the range of 29

volume projected, GVS&DD chose to use more conservative, lower estimates. As mentioned in 30

response to BCUC IR 1.6.1, FEI understands that the higher end of the range for biomethane 31

production could be approximately 50,000 GJ annually. 32



Application)

Submission Date:

September 19, 2013



In addition, GVS&DD understands that the provincial Innovative Clean Energy Fund, who are 1

contributing funds to this project, are also satisfied with GVS&DD‟s technical and economic 2

assessments of the project. 3

4

5

6

6.3 To the extent that the GVS&DD upgrading facility has available capacity, does 7

FEI agree that one would expect GVS&DD to prefer to upgrade biogas to 8

biomethane and sell to FEI regardless of whether the 40,000 GJ annual 9

threshold had been reached if it meant GVS&DD could avoid flaring the biogas? 10

If FEI does not agree, please explain. 11

12

Response: 13

FEI generally agrees with this assertion. 14

GVS&DD has consistently indicated a desire to find a beneficial use for the biogas it produces 15

rather than flaring it. In general GVS&DD wishes to be environmentally and economically 16

responsible for its operations. 17

Upgrading raw biogas to biomethane and ensuring it is injected into the FEI system is one way 18

to beneficially use energy that would otherwise be wasted. 19

20



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.1, p.5; Exhibit B-1, Section 4.3, p. 7; 2

2012 Biomethane Application Exhibit B-4, Workshop Materials, p.40 3

Gas Quality 4

On page 5 of the Application, FEI notes that the Paradigm technology “could increase 5

raw biogas production and reduce the solid waste residue of the current wastewater 6

treatment process.” 7

On page 7 of the Application, FEI states “These facilities include equipment that serves 8

the following basic functions: 9

• Gas Composition analysis (Methane, Oxygen, Carbon Dioxide, Hydrogen 10

Sulphide)…” 11

In the workshop materials presented by FEI on January 17, 2013 (2012 Biomethane 12

Application, Exhibit B-4), page 40 states one FEI lesson as “Increase diligence on gas 13

sampling ahead of project” 14

7.1 Has FEI conducted gas sampling or reviewed gas sample analyses from the 15

GVS&DD? 16

17

Response: 18

No. However, GVS&DD is responsible for the removal of all contaminants from the raw biogas. 19

In the case of this project, FEI is monitoring gas quality only. 20

FEI‟s reference in the workshop materials to increasing due diligence on gas sampling is only 21

applicable to cases where the FEI would be responsible for upgrading the raw biogas. 22

Differences in the raw gas composition can affect both the capital cost and ability of upgrading 23

equipment to function properly. 24

In contrast, there is no risk that FEI equipment will not function in cases where FEIs 25

responsibility is limited to monitoring gas composition. And therefore, by extension, there is no 26

risk of escalating or unexpected costs. 27

28

29

30

7.2 Has any sampling and analysis for other potential contaminants such as 31

siloxanes been performed that FEI is aware of? 32



Application)

Submission Date:

September 19, 2013



1

Response: 2

Yes. As a matter of course the GVS&DD conducts regular gas sampling of the raw biogas. 3

According to the GVS&DD, the biogas has been tested for other contaminants including 4

siloxanes and sulphides. 5

6

7

8

7.3 Describe any anticipated changes to the gas composition that will result once the 9

Paradigm Environmental technology is implemented and the raw biogas 10

production increases as a result. For instance, would it be reasonable to 11

anticipate that increasing the amount of biogas produced from the same 12

feedstock stream would concentrate or otherwise increase the relative 13

percentage of any potential contaminants in the biomethane delivered to FEI? 14

Please explain the response. 15

16

Response: 17

The following response has been provided by the GVS&DD: 18

Increasing the digestibility of the sludge is expected to increase the amounts of biogas, in the 19

same ratio of CO2 to CH4. The volatiles would already have been produced, and no additional 20

volatiles would be produced by using the Paradigm Environmental technology in absolute terms. 21

Therefore, increasing the overall biogas production will have the net effect of lowering the 22

percentage of contaminants. Existing volatiles would be removed from the biomethane by 23

GVS&DD in preparation for pipeline injection. 24

25



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.4, Page 8, Figure 4-3; 2

Exhibit A2-3, 2012 Biomethane Application, BCUC IR 2.35.4; 3

2012 Biomethane Application, Exhibit B-4, Workshop Materials, 4

pp.41-42; 5

FEI 2013 Biomethane Third Party Suppliers Proceeding, Exhibit B1-6

4, BCUC IR 1.1.7 7

Comparison with Actual Costs of Completed Projects 8

In Exhibit A2-3, in response to BCUC IR 2.35.4, where FEI was asked the maximum 9

volume that FEI will size the GVS&DD interconnection facilities to accommodate, FEI 10

states: 11

“FEI will size the facilities to accommodate the maximum flow of 300 GJ per day. 12

FEI notes that the standard interconnection station design used for both Salmon 13

Arm and Fraser Valley Biogas will accommodate this full range of flows without 14

modification. FEI intends to use the same design for the interconnection station 15

at the GVS&DD plant. 16

The expected size of interconnecting pipe will likewise be the same as that used 17

for Fraser Valley Biogas. The costs associated with additional engineering are 18

not warranted to change the design of the interconnection station and piping, but 19

rather, it is more cost effective to re-use the same design wherever possible.” 20

In the 2012 Biomethane Application workshop materials presented by FEI on January 21

17, 2013 (2012 Biomethane Application, Exhibit B-4), page 41 shows Total Interconnect 22

Costs for Salmon Arm Landfill, “Projected Jan 2013” as $577,700 ($45,100 pipeline + 23

$532,600 Other Interconnection Facilities). The same workshop presentation on page 24

42 shows Total Direct Costs for Salmon Arm Landfill of $508,000 and Total Direct Costs 25

for Fraser Valley of $504,000. 26

In the FEI 2013 Biomethane Third Party Suppliers proceeding, FEI provided the 27

following in response to BCUC IR 1.1.7: 28



Application)

Submission Date:

September 19, 2013



1 (FEI 2013 Biomethane Third Party Suppliers Proceeding Exhibit B1-4, BCUC IR 1.1.7) 2

8.1 Please complete, and correct if necessary, the following comparing actual 3

Salmon Arm and Fraser Valley Interconnect Facilities Costs with the proposed 4

Project Interconnect Facilities Costs. 5

6



Application)

Submission Date:

September 19, 2013



1

2

3

Response: 4

The actual capital costs for the Salmon Arm Landfill and the Fraser Valley Biogas are as of June 5

30, 2013. 6

Salmon Arm (Actual) Fraser Valley (Actual) GVS&DD (Estimate)

Design Gas Flow (GJ/Year) 40,000 500,000 100,000

Pipe Description (length, diameter, material) 700m x 114mm PE Pipe 670m x 114mm PE Pipe 300m x 114mm PE Pipe

Pipe Cost $33,667 $73,653 $100,000

Interconnect Station $448,119 $275,550 $538,000

Structures $35,623 $136,986 $91,000

Meter $2,964 $29,114 $10,000

Total Direct Cost for Interconnect $520,373 $515,303 $739,000

7

For an explanation of GVS&DD interconnection costs compared to the Salmon Arm and Fraser 8

Valley projects see the responses to BCUC IR 1.8.1.1 and 1.10.1. 9

As indicated on page 75 of the 2012 Biomethane Application, Table 5-7, the actual known cost 10

as at December, 2010 for the Fraser Valley Biogas project was $504 thousand. Subsequently, 11

in 2011 additional labour charges of $11 thousand were charged to the project for design and 12

project management. Of the $11 thousand, an additional $4 thousand was charged to the Pipe 13

cost and $7 thousand was charged to Interconnect Station costs. 14

The most recent updated projected cost for the Salmon Arm project was $577,700 per page 41 15

of the workshop materials presented on January 17, 2013. The variance from $578 thousand to 16

Salmon Arm (Actual) Fraser Valley (Actual) GVS&DD (Estimate)

Design Gas Flow (GJ/yr)

Pipe Description (length,

diameter, material) 300m x 114mm PE Pipe

Pipe Cost $100,000

Interconnect Station $538,000

Structures $91,000

Meter $10,000

Total Direct Cost for

Interconnect $739,000



Application)

Submission Date:

September 19, 2013



the actual cost of $520 thousand was due to lower Project Management and Installation costs 1

charged to the Interconnection Facilities. 2

3

4

8.1.1 Please explain for each item where the GVS&DD interconnect cost 5

estimate is higher than the actual Salmon Arm and/or Fraser Valley 6

costs. 7

8

Response: 9

As a category by category comparison of the first two projects will not show similar costs, the 10

most relevant figure when comparing the projects will be the total cost excluding mains. 11

The difference in the GVS&DD budget versus the actuals of the other two projects can primarily 12

be attributed to the timing of the estimate and the method of preparing the estimate. 13

The budget for GVS&DD was developed in the fall of 2012 at the same time as the budgets for 14

the three most recently approved biogas projects (Earth Renu, Dicklands, Seabreeze) and is 15

consistent with those three budgets. The budget was developed prior to finalizing costs for the 16

Salmon Arm project and FEI did not take into account any efficiency or cost savings that could 17

be realized by duplicating the design. Since that time, the budget has not been revised. 18

To create the budget, FEI used a detailed equipment list based on the expected final design and 19

not the actual costs of the FVB project. This item by item budget was done using conservative 20

costs and includes a contingency of 10%, price inflation for certain components and an 21

allowance for labour cost inflation. As discussed in response to BCUC IR 1.10.1 and 1.10.2, a 22

site visit was conducted and the cost per meter of pipe is higher than the two existing projects 23

due to site conditions. 24

For these reasons, FEI expects the actual costs to be in the range of -20% to +5% of the 25

budgeted amount. 26

27

28

29

8.1.2 Do the direct costs above include engineering, project management, 30

design and design reviews? 31

32



Application)

Submission Date:

September 19, 2013



Response: 1

The actual costs from the table above do include engineering, project management, design and 2

design review. 3

4

5

6

8.1.3 Please confirm that the GVS&DD interconnection station use the same 7

or substantially similar “standard interconnection station design” as the 8

Fraser Valley and Salmon Arm project interconnection skids. 9

10

Response: 11

FEI confirms that for the interconnection station skid FEI will use substantially the same design 12

for the GVS&DD as for Fraser Valley and Salmon Arm projects. 13

14

15

16

8.1.3.1 If confirmed, please explain the amount of cost savings 17

included in the GVS&DD estimate for this. If no cost savings 18

are included, please explain why not. 19

20

Response: 21

FEI anticipates that there may be cost savings associated with the interconnection station in 22

some areas such as design and the budgets include a 10% contingency. The potential savings 23

were not estimated and therefore not included in the budget. 24

Conversely, since the completion of the Fraser Valley Biogas and Salmon Arm facilities there 25

has been some inflation in certain components and labour. These changes would partially offset 26

any of the potential savings noted above. 27

28

29

30

8.1.3.2 If not confirmed, please explain why a standard 31

interconnection station design is not being used. 32

33



Application)

Submission Date:

September 19, 2013



Response: 1

Please refer to the responses to BCUC IRs 1.8.1.3 and 1.8.1.3.1. 2

3

4

5

8.1.4 Why did FEI choose to justify the interconnection capital costs estimate 6

by providing the range of lowest and highest cost estimates for Fraser 7

Valley Biogas and Seabreeze Farm instead of comparing to the actual 8

costs of the recently completed Salmon Arm project? 9

10

Response: 11

FEI compared the projects on a “cost per GJ” basis because FEI believes that that it is a 12

reasonable means of evaluating interconnection costs. It is consistent with FEI‟s proposed 13

Interconnection Test described in the 2012 Biomethane Application IR responses (specifically 14

BCUC IR 2.34.1). In summary, the FEI proposed interconnection test would provide a cut-off 15

point based on average capital costs and the total energy flowing through the interconnection 16

station. The proposed cut-off point was $1.50 per GJ, above which FEI would require a 17

contribution in aid of construction. 18

Further, FEI wanted to demonstrate that costs of the interconnection facility of this project 19

versus the amount of useable biomethane received is reasonable when compared to the other 20

three projects that were approved as part of the “Third Party Supplier” review completed earlier 21

this year. 22

Please also refer to the responses to BCUC IRs 1.8.1.1 and 1.10.1. 23

24



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.3, p. 8; 2

Sizing of Interconnection Station 3

9.1.1 What amount of the total interconnect cost can be attributed to the design being 4

capable of handling a design flow of 100,000 GJ/yr (60,000 GJ/yr greater) rather 5

than the 40,000 GJ/yr biomethane design flow? 6

7

Response: 8

The cost of the interconnection facility would be the same at either biomethane design flow. The 9

design for the interconnection station is intentionally as flexible as possible to allow for a wide 10

range of flows. The primary design consideration that affects the interconnect cost is the 11

pressure at which it operates. In this case, the design pressure would be the same regardless of 12

the flow rate. 13

14

15

16

9.1.1.1 Would it be reasonable to require a Contribution in Aid of Construction 17

from GVS&DD for this incremental cost of the Interconnect Facilities to 18

handle the amount above the approved 40,000 GJ/yr biomethane limit? 19

Please explain. 20

21

Response: 22

No. Please refer to the responses to BCUC IRs 1.9.1.1 and 1.9.1.2. 23

24

25

26

9.1.2 How would the Interconnect station design and estimated cost change for an 27

Interconnect station designed to handle a flow of 40,000 GJ per year? 28

29

Response: 30

The Interconnect station design and estimated cost would not change. Please refer to the 31

response to BCUC IR 1.9.1.1. 32

33



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 4.3, pp. 7-8; 2

FEI 2013 Biomethane Third-Party Suppliers Proceeding, Exhibit B1-3

4, BCUC 1.1.3 4

Interconnection Pipe 5

On page 7 of the Application, FEI states “FEI will install, own and operate approximately 6

300m of 144mm PE interconnection pipe from the interconnecting facility which is 7

adjacent to the upgrade plant…” 8

In the FEI 2013 Biomethane Third Party Suppliers Proceeding, in response to BCUC IR 9

1.1.3 FEI provided the following: 10

11

12 (Biomethane Third-Party Suppliers Regulatory Process, BCUC 1.1.3) 13

10.1 FEI forecasts a Cost/Meter of $333/m ($100,000/300m) for the 300 m of 144 mm 14

PE interconnection pipe. Please explain why the unit cost of installing the 15

GVS&DD interconnection pipe is higher than four of previous interconnection 16

pipe installations? 17

18

Response: 19

The cost per meter is higher due to the site conditions. 20

In this case, the GVS&DD has provided space on the property adjacent to the proposed 21

upgrading plant, which is located near the digesters approximately 250 m from the edge of the 22

property. The preferred route of the new biomethane piping is along a corridor specified by 23

GVS&DD and it requires cutting and repair of pavement. In addition to the pavement-related 24

costs, FEI has included some contingency to allow for variation in the final tie-in location – which 25

will be determined in cooperation with GVS&DD during the final design phase of the project. 26



Application)

Submission Date:

September 19, 2013



1

2

3

10.1.1 Was a site visit conducted to determine if pavement cutting and repair 4

would be required? 5

6

Response: 7

Yes. 8

9



Application)

Submission Date:

September 19, 2013



11.0 Reference: PROGRAM OPERATING AND MAINTENANCE COSTS FOR 2012 AND 1

ONWARDS 2

2012 Biomethane Application, Section 5.4, pp. 74-75, Exhibit B-1, 3

Appendix B 4

Operating and Maintenance Costs 5

On pages 74-75 of the 2012 Biomethane Application, FEI states: 6

“The ongoing operating and maintenance costs for the interconnection facilities 7

are expected to be approximately $10 thousand per supply point. This means 8

that once the first three supply points are providing Biomethane (expected at the 9

end of 2013), the forecast O&M for interconnection facilities will be approximately 10

$30 thousand annually. The costs in any given year will be dependent on the 11

required activity, but would follow general inflation rates in the future.” 12

11.1 Please confirm that the ongoing GVS&DD interconnection facility operating and 13

maintenance (O&M) costs are expected to be approximately $10 thousand as 14

anticipated in the 2012 Biomethane Application. 15

16

Response: 17

Confirmed. 18

19

20

21

11.1.1 If not confirmed, please provide the estimated ongoing O&M costs for 22

the GVS&DD interconnection facility. 23

24

Response: 25

Please refer to the response to BCUC IR 1.11.1. 26

27

28

29

11.1.2 If the costs are anticipated to be different than $10 thousand per year, 30

please explain the reason for the difference. 31

32



Application)

Submission Date:

September 19, 2013



Response: 1


3



Application)

Submission Date:

September 19, 2013



12.0 Reference: TREATMENT OF NATURAL GAS SUPPLY 1

Exhibit B-1, Section 6, p.12; Utilities Commission Act, section 71 2

Section 71 Criteria and Regulatory Process 3

On page 12 of the Application, FEI states “FEI recognizes that the approval of the supply 4

above 40,000 GJ is not contemplated by the filing criteria for Biomethane supply 5

contracts. FEI is therefore seeking approval of this aspect of the agreement 6

independent of the Biomethane supply criteria…” 7

Section 71(2.1) of the Utilities Commission Act (UCA) states as follows: 8

“In determining under subsection (2) whether an energy supply contract filed by a 9

public utility other than the authority is in the public interest, the commission must 10

consider 11

a) the applicable of British Columbia's energy objectives, 12

b) the most recent long-term resource plan filed by the public utility under 13

section 44.1, if any, 14

c) the extent to which the energy supply contract is consistent with the 15

applicable requirements under sections 6 and 19 of the Clean Energy Act, 16

d) the interests of persons in British Columbia who receive or may receive 17

service from the public utility, 18

e) the quantity of the energy to be supplied under the contract, 19

f) the availability of supplies of the energy referred to in paragraph (e), 20

g) the price and availability of any other form of energy that could be used 21

instead of the energy referred to in paragraph (e), and 22

h) in the case only of an energy supply contract that is entered into by a public 23

utility, the price of the energy referred to in paragraph (e).” 24

12.1 Please confirm that section 71 (2.1) of the UCA sets out the criteria that would 25

apply for purchase of supply over 40,000 GJ. If not confirmed, please explain. 26

27

Response: 28

The factors in section 71(2.1) of the UCA would apply to the purchase of supply over 40,000 GJ. 29



Application)

Submission Date:

September 19, 2013



1

2

3

12.2 Please provide an analysis on a criteria-by-criteria basis of how the purchase of 4

the supply over the 40,000 GJ threshold under the GVS&DD Agreement meets 5

or does not meet each of the criteria set out in section 71(2.1). 6

7

Response: 8

For clarity, it may be useful to note that items (a) through (h) in section 71(2.1) are not criteria 9

per se, but are factors that the Commission must consider. FEI discusses each factor below, 10

with the interests of customers discussed last. 11

1. The applicable of British Columbia’s energy objectives. The purchase of supply over the 12

40,000 GJ threshold is consistent with British Columbia‟s energy objectives (g), (h), (i) 13

and (j) to reduce GH emissions, to encourage switching to an energy source that 14

decreases GHG emissions, to encourage communities to reduce GHG emissions and 15

use energy efficiently and to reduce waste by encouraging the use of biogas. FEI‟s 16

purchase of the supply over the 40,000 GJ helps advance GVS&DD‟s biomethane 17

project, enables the GVS&DD to use the related carbon credits to offset its own GHG 18

emissions and ensures that this gas is not flared or otherwise wasted. 19

2. The most recent long-term resource plan filed by the public utility. The purchase of 20

supply over the 40,000 GJ is not material enough to have any bearing on FEI‟s long-21

term resource plan. 22

3. Sections 6 and 19 of the Clean Energy Act. Sections 6 and 19 of the Clean Energy Act 23

are not relevant to FEI. 24

4. The quantity of the energy to be supplied under the contract. The quantity of energy 25

supplied above 40,000 GJ is at this time uncertain and not material enough to impact 26

FEI‟s Annual Contracting Plan. As discussed in the Application, FEI would treat the 27

supply as spot supply that would otherwise be required to meet demand. Typically, spot 28

supply is contracted for on a short duration. 29

5. The availability of supplies of the energy. There are available alternate supplies of the 30

natural gas. The closest alternate location for spot purchases of natural gas is the 31

Sumas Hub. Compared to the Sumas Hub, the supply above 40,000 GJ under the 32

GVS&DD Agreement has the advantage of being closer to FEI‟s load. Generally, local 33

supply improves the reliability of the overall natural gas system by reducing dependence 34

on traditional supply and the infrastructure to move it to where it is consumed. 35



Application)

Submission Date:

September 19, 2013



6. The price and availability of any other form of energy that could be used instead. FEI 1

does not believe there is any relevant sense in which there is another form of energy 2

that could be used instead. The spot purchase of natural gas at the Sumas Hub is the 3

alternative to purchasing the supply over 40,000 GJ under the GVS&DD Agreement. 4

7. The price of the energy. FEI has agreed to purchase the gas at the Sumas index price. 5

The purchase price is reasonable as it is based on a market cost for natural gas and will 6

keep non-bypass customers whole in terms of costs. 7

8. The interests of persons in British Columbia who receive or may receive service. As 8

indicated by the review of the factors above, the purchase of the supply above 40,000 9

GJ has several benefits and will have no negative impacts on FEI customers. The 10

purchase of the supply of 40,000 GJ helps advance the GVS&DD‟s low carbon energy 11

project and provides a way to avoid wasting natural gas at the Wastewater Treatment 12

Plant. The supply above 40,000 GJ will displace some of the need for FEI to make spot 13

purchases at the Sumas Hub. The purchase of the supply of 40,000 GJ is at the same 14

price as gas purchased at the Sumas Hub, but has the advantage of being closer to 15

load, which has the benefits described above and on page 13 of the Application. 16

17

Please also refer to section 6, pages 12 to 14, of the Application for a discussion of these 18

issues. 19

In summary, FEI submits that a consideration of the factors listed in section 71(2) of the 20

UCA lead to the conclusion that the purchase of supply above 40,000 GJ in the GVS&DD 21

Agreement is beneficial and is therefore in the public interest and should be approved. 22

23

24

25

26

Section 71(2) of the UCA states: 27

“The commission may make an order under subsection (3) if the commission, 28

after a hearing, determines that an energy supply contract to which subsection 29

(1) applies is not in the public interest.” 30

12.3 Please discuss whether the FEI GVS&DD Biomethane Purchase Agreement 31

regulatory process would qualify as a hearing under section 71(2) in which the 32

Commission could make an order determining that the GVS&DD Agreement is 33

not in the public interest. 34



Application)

Submission Date:

September 19, 2013



1

Response: 2

FEI believes that the current regulatory process is a hearing under section 71(2) of the UCA. 3

4

5

6

7

Section 71(3) of the UCA states: 8

“If subsection (2) applies, the commission may 9

a) by order, declare the contract unenforceable, either wholly or to the extent the 10

commission considers proper, and the contract is then unenforceable to the 11

extent specified, or 12

b) make any other order it considers advisable in the circumstances.” 13

12.4 Please discuss what options FEI understands the Commission has under section 14

71(3) of the UCA. For instance, can the Commission approve the GVS&DD 15

Agreement in part? Can the Commission deny acceptance and advise FEI as to 16

the nature of the amendments that might result in a supply contract that could be 17

accepted? 18

19

Response: 20

The words of section 71(3) indicate that the Commission can, in effect, approve the GVS&DD 21

Agreement in whole or in part. For example, the Commission could approve the whole 22

GVS&DD Agreement or declare that the GVS&DD Agreement is unenforceable with respect to 23

the provision of natural gas above 40,000 GJ. 24

The words of section 71(3) also indicate that the Commission may make any other order that is 25

considers advisable in the circumstances. FEI believes that the Commission can therefore 26

choose to reject the contract, but advise FEI as to the nature of the amendments that might 27

result in a supply contract that could be accepted. 28

29

30

31



Application)

Submission Date:

September 19, 2013



12.5 What does FEI anticipate are the likely commercial consequences if the 1

GVS&DD Agreement was not found to be in the public interest as filed? 2

3

Response: 4

If the GVS&DD Agreement was not found to be in the public interest, then the GVS&DD advises 5

that it would almost certainly cancel the project. The contribution agreements from federal and 6

provincial agencies (UBCM and Provincial ICE fund) would consequently also be cancelled. 7

For FEI, biomethane supply from the GVS&DD is needed to serve large volume projects 8

anticipated in the demand forecast scenarios. Cancellation of the GVS&DD project would 9

therefore make it more difficult for FEI to meet anticipated demand. In addition, in the event the 10

GVS&DD agreement is not approved, it would be more difficult for FEI to provide certainty of 11

supply to its prospective large demand customers. 12

13



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 6, p.12 2

Value of Renewable Natural Gas Purchased as Natural Gas 3

FEI states on page 12 of the Application that in agreeing to purchase quantities of supply 4

over 40,000 GJ annually that would not be treated as biomethane for the purposes of 5

FEI‟s biomethane program, that: 6

“FEI has sought to advance the generally understood objective of advancing low 7

carbon energy projects and by providing a way to avoid wasting natural gas at 8

the Wastewater Treatment Plant. Using the gas rather than flaring makes use of 9

a renewable resource and reduces waste. FEI therefore believes that it is in the 10

public interest to approve the potential for natural gas supply above 40,000 GJ 11

pursuant to the Agreement. The gas contemplated above the 40,000 GJ per year 12

is referred to as Excess Gas in the Agreement.” 13

13.1 Does FEI agree that to the extent the purchase of Excess Gas displaces 14

purchases of non-renewable natural gas that even though the purchase of 15

Excess Gas does not include the environmental attributes, the price paid for the 16

Excess Gas may justify a premium over the market price that would typically be 17

attracted by non-renewable natural gas purchased under equivalent terms? 18

Please explain the response. 19

20

Response: 21


23

24

25

13.2 If so, what does FEI believe might be an appropriate market premium for 26

renewable gas purchased as conventional natural gas? 27

28

Response: 29


31

32

33



Application)

Submission Date:

September 19, 2013



13.3 Does FEI intend to track and record these volumes of renewable natural gas 1

purchased as conventional natural gas separately from purchases of non-2

renewable natural gas? If not, why not? 3

4

Response: 5

Yes, FEI intends to track and record these volumes of renewable natural gas purchased as 6

conventional natural gas separately from purchases of non-renewable natural gas. 7

8

9

10

13.4 If the Commission directed FEI to report the purchases of renewable natural gas 11

purchased as conventional natural gas as a separate line item in the MCRA, 12

would this result in any significant incremental regulatory reporting burden for 13

FEI? If so, please describe the extra resources and system enhancements that 14

would be required. 15

16

Response: 17

No, FEI does not expect that reporting purchases of renewable natural gas purchased as 18

conventional natural gas as a separate line item in the MCRA would result in any significant 19

incremental regulatory reporting burden for FEI. 20

21



Application)

Submission Date:

September 19, 2013





Value of Balancing Attributes 3


“GVS&DD has its own GHG reduction objectives as an entity that is part of Metro 5

Vancouver. By using Biomethane for its own use, rather than selling it to FEI, the 6

GVS&DD has the option of reducing its own emissions by assuming the benefits. 7

Although the GVS&DD clearly had its own objectives with regard to emissions 8

reduction, it recognized the value of supplying Biomethane to FEI thereby making 9

Biomethane available to FEI customers within Metro Vancouver. The GVS&DD 10

also recognized the value of having an available natural gas system where the 11

gas can be injected – eliminating the need for balancing supply and demand on 12

the WWTP site. The Agreement attempts to balance the conflicting objectives of 13

GVS&DD to minimize its GHG emissions with FEIs desire to maximize the 14

amount of Biomethane available for its customers.” 15

14.1 Is it accurate and/or fair to characterize GVS&DD‟s need to secure a mechanism 16

for balancing supply and demand on their own internal gas distribution system as 17

one of the key drivers for GVS&DD entering into the GVS&DD Agreement with 18

FEI? Please explain the response. 19

20

Response: 21

No. This was not a key driver for entering into this agreement. 22

In order to clarify what is meant by the concept of “balancing supply and demand on the WWTP 23

site” referred to above in the preamble, it is important to understand that prior to the execution of 24

this project, GVS&DD essentially had two options for handling raw biogas. It could either use 25

raw biogas for process heat or flare any not required for process heat. This approach permitted 26

GVS&DD to “balance” its own biogas needs on site. 27

Once the biomethane facilities are complete, GVS&DD will have a third option – supply to FEI. 28

By having the biomethane facilities in place, GVS&DD can avoid flaring when their own process 29

requirements for biogas are lower. Therefore, in the context of the paragraph, FEI is referring 30

to the GVS&DD‟s ability to now avoid flaring as the volume of gas produced and their process 31

needs vary. 32

FEI understands that for GVS&DD the primary drivers for this project and the Agreement reflect 33

their Board- and provincially-approved Integrated Liquid Waste and Resource Management 34



Application)

Submission Date:

September 19, 2013



Plan, which includes the goal to “Use liquid waste as a resource”. The Agreement with FEI 1

aligns with this goal by: 2

1. Championing renewable energy projects; 3

2. Making use of gas that would otherwise be flared (minimize GHG); and 4

3. Demonstrating a beneficial technology (Paradigm Technology). 5

6

7

8

14.1.1 Is it accurate to characterize the GVS&DD‟s balancing needs as a daily 9

balancing requirement rather than a monthly or annual requirement? If 10

not, please explain. 11

12

Response: 13

Yes. GVS&DD‟s balancing requirements are simply a matter of using some of its own 14

Biomethane as process heat and then shedding any excess not required in this process. The 15

process itself produces and uses a volume of gas that varies on a daily basis. In the past any 16

gas produced that is not required by this production process has been flared in order to 17

“balance” this process. The availability of the FEI system will enable GVS&DD to avoid flaring 18

any excess Biomethane that is available on a daily basis. 19

20

21

22

14.2 Does FEI agree that GVS&DD has effectively moved its balancing risk to the FEI 23

system? Please explain. 24

25

Response: 26

No. 27

The GVS&DD does not currently have a „balancing risk‟ and it would not have a „balancing risk‟ 28

once the project is complete. The GVS&DD uses the energy (in the form of raw gas) that it 29

needs and is obligated to dispose of the remainder safely and legally. Currently, the only option 30

available to GVS&DD in order to “balance” its production process is flaring. Once the project is 31

complete, GVS&DD will have another option that would contribute to environmental and societal 32

objectives, which will help to ensure that biogas is not wasted through flaring. 33



Application)

Submission Date:

September 19, 2013



From the FEI perspective, there is no balancing risk to the FEI system as the volumes of gas 1

anticipated under this project are not material to FEI in terms of its overall portfolio of resources 2

and its ability to balance the FEI system. 3

4

5

6

14.2.1 If so, given the value the GVS&DD Agreement provides to GVS&DD in 7

regard to the balancing mechanism, does FEI agree that a discount to 8

the Sumas index should apply to account for the fact that this is gas that 9

GVS&DD must either flare or sell to FEI on days when it cannot use the 10

biogas on site? 11

12

Response: 13


15



Application)

Submission Date:

September 19, 2013





Value of Supply Proximity to Load 3

On page 14 of the Application, FEI states “there is the practical aspect of additional gas 4

being added on system close to the load.” 5

15.1 Please describe the value of supply being close to load. 6

7

Response: 8

Generally speaking, the value of supply being close to the load is twofold. First, the costs of 9

transportation capacity to move the supply to the load are typically lower than for supply being 10

further away from the load. Second, the risk of transportation disruptions is lower the closer the 11

supply is to the load. 12

13

14

15

15.1.1 What costs are avoided? 16

17

Response: 18

Please refer to the response to BCUC IR 1.17.1.1. 19

20

21

22

15.1.2 What does FEI believe might be an appropriate market premium for 23

“additional gas being added on system close to the load”? 24

25

Response: 26


28



Application)

Submission Date:

September 19, 2013




Exhibit A2-1, 2012 Biomethane Application, BCUC IR 1.2.2, BCUC 2

1.2.3; 3

Exhibit A2-3, 2012 Biomethane Application, BCUC IR 2.4.2.3 4

Nature of the Renewable Natural Gas Spot Purchase 5

In Exhibit A2-1 in response to BCUC IR 1.2.2, FEI described the purchase of the 6

GVS&DD Excess Gas as “non-firm” and made on a “spot basis”. 7

In Exhibit A2-1 in response to BCUC IR 1.2.3, FEI describes the price to be paid for the 8

GVS&DD Excess Gas as “simply based upon the monthly Sumas index price regardless 9

of volume and timing of delivery within a given month.” 10

In Exhibit A2-3 in response to BCUC IR 2.4.2.3, FEI states that it “typically does not 11

enter into spot purchase agreements with terms longer than one month. Spot purchases 12

are usually supply purchases of a day, or several days if spanning a weekend, in 13

duration and are required to help balance core load requirements on the FEI system on 14

a daily basis…. All contracts entered into as part of the Annual Contracting Plan, 15

including those for spot purchases, have a requirement for firm physical supply.” 16

16.1 Please confirm that spot purchases are typically made at daily index market 17

prices rather than monthly indexed prices. If not confirmed, please explain. 18

19

Response: 20

Confirmed. 21

22

23

24

16.2 Please confirm that FEI purchases non-renewable natural gas under FEI‟s Rate 25

Schedule 30 Off System Sales and Purchases Rate Schedule and Agreement 26

(Canada and US). If not confirmed, please explain. 27

28

Response: 29

Confirmed. 30

31

32



Application)

Submission Date:

September 19, 2013



1

16.2.1 Please provide a copy of Rate Schedule 30. 2

3

Response: 4

Please refer to Attachment 16.2.1. 5

6

7

8

16.3 Please confirm that the deliveries of Excess Gas under the GVS&DD Agreement 9

would not be made in response to a need for FEI to balance daily load but would 10

instead be delivered by GVS&DD as determined by GVS&DD‟s requirements to 11

balance its load. If not confirmed, please explain. 12

13

Response: 14

Confirmed. 15

16

17

18

16.4 Please confirm that the duration of the spot purchase of Excess Gas from 19

GVS&DD would commence at a point in the year upon reaching the threshold of 20

40,000 GJ of biomethane purchase and continue to the end of that year. 21

22

Response: 23

Confirmed. 24

Importantly, the maximum volume of Excess Gas purchased on a spot basis in any calendar 25

year is capped at 60,000 GJ. These purchases would cease if this level was reached before the 26

end of the calendar year. The biomethane and Excess Gas volume thresholds would be reset 27

at the start of each new calendar year and purchases resumed. 28

29

30

31

16.4.1 Also confirm that, although not set out in the GVS&DD Agreement, 32

„year‟ is understood to be a calendar year. 33



Application)

Submission Date:

September 19, 2013



1

Response: 2

Confirmed. 3

4

5

6

16.5 Please discuss why a discount to the market price should apply, or not apply, to 7

account for the non-firm nature of the delivery of Excess Gas and the fact that it 8

is neither contracted for as part of the Annual Contracting Plan nor requested or 9

nominated by FEI for delivery in response to daily load requirements. 10

11

Response: 12


14



Application)

Submission Date:

September 19, 2013




Exhibit A2-1, 2012 Biomethane Application, BCUC IR 1.1.3 2

Interconnection Costs of the Renewable Natural Gas Spot Purchase 3

In Exhibit A2-1, in BCUC IR 1.1.3, the Commission asked if a price based on the Sumas 4

monthly index less the cost associated with the interconnection facilities would be a 5

more appropriate reflection of the value of the gas purchases in excess of 40 TJ 6

annually. 7

FEI responded: 8

“FEI does not believe that the price should be discounted from the Sumas 9

Monthly Index. Because the gas is being received on system and the cost of the 10

interconnection facilities are considered as part of the biomethane purchase 11

agreement, FEI did not factor the cost of interconnection facilities into this price 12

(see also response to BCUC Confidential IR 1.1.4). It could be argued that FEI is 13

avoiding a transportation tariff required to receive equivalent gas at the Sumas 14

Hub and should pay a premium equal to these avoided costs. Therefore, the 15

price is reasonable.” (Exhibit A2-1, BCUC IR 1.1.3) 16

17.1 Please explain what “transportation tariff required to receive equivalent gas at the 17

Sumas Hub” is being avoided. 18

19

20

Response: 21

FEI incurs toll charges from Spectra and transmission pipelines to transport natural gas from 22

northern BC and Alberta to the Sumas Hub on firm service. For instance, a 2 year base price 23

toll for gas delivered from Station 2 to the Lower Mainland is $0.5226 per GJ. 24

25

26

27

17.1.1 Please describe the costs associated with this avoided transportation 28

tariff. 29

30

Response: 31


33



Application)

Submission Date:

September 19, 2013





Cumulative Impact of Potential Market Premiums and Discounts 3

In the IRs above Commission staff explored the potential applicability of a variety of 4

market premiums and discounts arising from the nature of the purchase of renewable 5

natural gas from GVS&DD as conventional natural gas including the following: 6

a. The potential for a premium to account for the positive benefits of displacing 7

conventional natural gas and avoiding the waste of biogas through flaring; 8

b. The potential for a discount to account for FEI assuming the balancing 9

requirement/risk from GVS&DD; 10

c. The potential for a premium for proximity of the supply to load; and 11

d. The potential for a discount to account for the volumes of Excess Gas that 12

are purchased on a day are not determined by FEI in response to customer 13

load. 14

18.1 Are there any other factors that FEI believes may warrant the consideration of a 15

potential premium or discount to market price that would apply to the purchase of 16

the Excess Gas? 17

18

Response: 19


21

22

23

18.2 Does FEI agree that it may be reasonable to conclude that the potential 24

premiums and discounts that may be considered applicable for the purchase of 25

the Excess Gas may offset each other to yield a net premium/discount of zero? 26

Please discuss. 27

28

Response: 29

Yes, FEI agrees. There are a number of factors that could justify either a purchase premium or 30

discount of Excess Gas. In its preamble to this question, the Commission correctly summarizes 31

the key factors that have an impact on determining a fair price for Excess Gas. Given that these 32



Application)

Submission Date:

September 19, 2013



factors may occur at the same time, it is reasonable at this time to assume they effectively offset 1

each other. This offsetting makes the Sumas monthly index price for natural gas the most 2

reasonable method for pricing Excess Gas at this time. 3

4



Application)

Submission Date:

September 19, 2013




Exhibit B-1, Section 6, p.14 2

Impact on the Annual Contracting Plan 3

On page 14 of the Application, FEI states “FEI does not foresee adjusting the Annual 4

Contracting Plan (ACP) supply resource requirements for these spot gas purchases 5

because the volume is not material and without a firm volume guaranteed each day.” 6

19.1 At what volume would FEI consider volumes of renewable natural gas sold as 7

conventional natural gas to be material with respect to the annual volume 8

consumed by non-bypass customers? 9

10

Response: 11

Volumes less than a few terajoules per day are not considered material for FEI. A key issue 12

associated with Excess Gas is that this supply is without a firm volume guaranteed each day. 13

Excess Gas supplied by a number of biomethane facilities would be required in order to be able 14

to assess it for reliability. This may then allow for a portion of this supply to be deemed firm and 15

an adjustment contemplated to the ACP. Until this occurs, this supply needs be treated much 16

like any other spot purchase that is used to manage the gas day to help balance load on the 17

system. 18

19



Application)

Submission Date:

September 19, 2013




Exhibit A2-2, 2012 Biomethane Application, BCUC 1.57.1; Rate 2

Schedule 30 3

Definition of Contract Year 4

In Exhibit A2-2, in response to BCUC IR 1.57.1 that asked how „year‟ is defined in the 5

GVS&DD Agreement, FEI states “It is not explicitly defined, but it is understood to be in 6

a calendar year with the first year pro-rated.” [emphasis added] 7

20.1 Please confirm that in the natural gas industry purchases of conventional non-8

renewable gas are traditionally made on the basis of a contract year that is 9

defined as commencing November 1 and ending October 31. If not confirmed, 10

please explain. 11

12

Response: 13

Confirmed. 14

15

16

17

20.2 Given the conventional understanding of „year‟ in the natural gas industry, what 18

assurance does FEI have that the „year‟ referred to in the GVS&DD Agreement 19

would always be understood to be a calendar year? 20

21

Response: 22

FEI and the GVS&DD will agree in writing, prior to accepting gas, that the 40,000GJ limit is 23

based on the calendar year. 24

25

Attachment 16.2.1

Order No.: G-197-11 Issued By: Diane Roy, Director, Regulatory Affairs Effective Date: November 28, 2011 BCUC Secretary: Original signed by Alanna Gillis First Revision of Page R-30

FORTISBC ENERGY INC.

RATE SCHEDULE 30 OFF-SYSTEM SALES AND PURCHASES

RATE SCHEDULE AND AGREEMENT (CANADA AND U.S.A.)

Effective July 20, 2001

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FortisBC Energy Inc. Rate Schedule 30

Order No.: G-197-11 Issued By: Diane Roy, Director, Regulatory Affairs Effective Date: November 28, 2011 BCUC Secretary: Original signed by Alanna Gillis First Revision of Page R-30 i

TABLE OF CONTENTS

Section Page

1. Cover Sheet ................................................................................................................. R-30.1

2. Standard Provisions ..................................................................................................... R-30.3

3. General Terms and Conditions .................................................................................... R-30.7

Section 1 Purpose and Procedures ......................................................................... R-30.7 Section 2 Definitions ................................................................................................ R-30.8 Section 3 Performance Obligation ........................................................................ R-30-12 Section 4 Transportation, Nominations and Imbalances ........................................ R-30.12 Section 5 Quality Measurement ............................................................................ R-30-13 Section 6 Taxes .................................................................................................... R-30-13 Section 7 Billing, Payment and Audit ..................................................................... R-30.14 Section 8 Title, Warranty and Indemnity ................................................................ R-30.15 Section 9 Notices................................................................................................... R-30.15 Section 10 Finance Responsibility, Defaults and Remedies .................................... R-30.16 Section 11 Force Majeure ....................................................................................... R-30-17 Section 12 Term ...................................................................................................... R-30.17 Section 13 Miscellaneous ........................................................................................ R-30.17 Section 14 Limitations ............................................................................................. R-30.18

4. Transaction Confirmation ........................................................................................... R-30.19

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Order No.: G-197-11 Issued By: Diane Roy, Director, Regulatory Affairs Effective Date: November 28, 2011 BCUC Secretary: Original signed by Alanna Gillis First Revision of Page R-30.1

GasEDI BASE CONTRACT FOR SHORT-TERM SALE AND PURCHASE OF NATURAL GAS

COVER SHEET Page 1 of 2 Copyright © 2000 by GasEDI, All Rights Reserved October 26, 2000


COVER SHEET

This Base Contract is entered into as of the following date: __________________________________ The parties to this Base Contract are the following:

PARTY A PARTY B

Party FortisBC Energy Inc. Address 1 16705 Fraser Highway Address 2

City Surrey

State / Province British Columbia

Zip / Postal Code V4N 0E8

Base Contract #

Duns # 249953860

US Federal Tax ID #

Canadian GST # R100431592

Bank The Toronto Dominion Bank

Branch Tower Branch, Vancouver BC

Account US$ Acct #0902-7302-311 Transit #94000

C$ Acct #0902-0305-700 Transit #94000

NOTICES

Contact VP, Energy Supply & Resources Development

Phone (604) 592-7837

Fax (604) 592-7895

Email

24 HOUR OPERATIONS

Contact Operations – Scheduling / Nominations

Phone (604) 592-7799

Fax (604) 592-7895

Email

INVOICES & PAYMENTS

Contact Gas Supply Accounting

Phone (604) 592-7869 / (604) 592-7861

Fax (604) 592-7420

Email [email protected]

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COVER SHEET Page 2 of 2 Copyright © 2000 by GasEDI, All Rights Reserved October 26, 2000 This Base Contract incorporates by reference for all purposes the General Terms and Conditions of the GasEDI Base Contract for Short-Term Sale and Purchase of Natural Gas as published by GasEDI. The parties hereby agree to the following provisions offered in said General Terms and Conditions (select only one from each box, but see “Note” relating to Section 3.2.):

Section 1: Confirm Deadline

2 Business Days after receipt (default)

________ Business Days after receipt

Section 6: Taxes

Buyer Pays At and After Delivery Point

Seller Pays Before and At Delivery Point

Section 1: Confirming Party

Seller

Buyer

________To be determined___________________

Section 7.2: Payment Date __25

th___date of Month following Month of delivery

Section 3.2: Performance Obligation

Spot Price Standard

Cover Standard

Note: The following Spot Price Publication applies to both of the immediately preceding Standards and must be filled in after a Standard is selected: ___________________________________________

Section 7.2: Method of Payment

Automated Clearinghouse - Credit Only (ACH)

Check

Electronic Funds Transfer (EFT)

Financial Electronic Data Interchange (FEDI)

Wire Transfer (WT)

Section 13.5: Choice of Jurisdiction: ____British Columbia__________________________

Section 13.10: Dispute Resolution:

Included (default) or Excluded

Special Provisions: Number of Sheets Attached: __________2____________

IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate.

PARTY A PARTY B

Party FortisBC Energy Inc.

Signature

Name

Title VP, Energy Supply & Resources Development

Date

DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of sale, purchase or exchange of natural gas. This Contract is intended for interruptible transactions or firm transactions of one year or less and may not be suitable for transactions of longer than one year. Further, GasEDI does not mandate the use of this Contract by any party. GasEDI DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO GasEDI’s DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT GasEDI KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL GasEDI BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT.

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Standard Provisions to The GasEDI Contract for Short-Term Sale and Purchase of Natural Gas

The General Terms and Conditions to the GasEDI Base Contract for Short-Term Sale and Purchase of Natural Gas dated October 26, 2000 are hereby amended as follows: 1. Insert the following additional sentence at the end of Section 3.1:

“All Transactions shall be deemed to be Firm unless expressly identified as EFP or Interruptible.”

2. Insert the following additional sentence at the end of Section 3.2:

“In addition to the above amount, the Party in breach shall reimburse the other party for all reasonable transportation costs incurred as a result of the breach by Seller or Buyer on the applicable day(s).”

3. Insert the following at the beginning of the first sentence in Section 7.1:

“On or before the 15th Day of each Month” 4 Change Section 7.2 “…payment is due on the next Business day” to “…payment is due on

the preceding Business day”. 5. Insert the following additional sentence at the end of Section 7.2:

“Upon resolution of the billing dispute, any underpayments or overpayments shall be paid or refunded with accrued interest at the rate specified in Section 7.4 for the period until such underpayments or overpayments are made.”

6. Insert the following clause as Section 10.1A after Section 10.1:

“For purposes of this Contract, “reasonable grounds for insecurity regarding the payment performance, or enforceability of any obligation under the Contract” with respect to a Party shall mean the downgrading of any unsecured, long-term, senior debt of such Party or any entity providing a guarantee or other form of credit support for the obligations of such Party, such that debt is rated below “BBB (low)” by Dominion Bond Rating Services (“DBRS”), “BBB-” by Standard & Poors, or “Baa3” by Moody’s Investors Service, Inc.”

7. Insert the following additional sentence at the end of Section 10.3

“The failure to give such notice contemplated shall not affect the validity or enforceability of the liquidation or give rise to any claim by the Defaulting Party against the Non-Defaulting Party.”

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8. Insert the following additional sentence at the end of Section 10.6:

“The Non-Defaulting Party’s rights under this Contract are in addition to and not in limitation or exclusion of any other rights the Non-Defaulting Party may have (whether by contract, operation of law, or otherwise).”

9. At the end of Section 10 insert the following clause as Section 10.7:

“The parties agree that this Contract and each Transaction made under this Contract constitutes an “eligible financial contract” under and in all proceedings related to the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or the Winding-Up and Restructuring Act (Canada), and the parties intend that this Contract and all Transactions will be treated similarly under any amendments, restatements, replacements or re-enactments of such legislation and under and in all proceedings related to any bankruptcy, insolvency, or similar law (regardless of the jurisdiction of application) or any ruling , order, directive pronouncement made pursuant thereto. The parties also agree that to the extent applicable, this Contract and each Transaction entered into hereunder constitutes a “forward contract” within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each “forward contract merchant” within the meaning of the United States Bankruptcy Code.”

10. Delete Sections 11.2, 11.3 and 11.4 and replace with the following:

“11.2 The parties intend that the term “Force Majeure” shall be restricted to mean an event or circumstance which directly prevents or restricts one party from performing its obligations at a Delivery Point specified under one or more Transactions, which event or circumstances was not anticipated as of the date the Transaction was agreed to, which is not within the reasonable control of the party providing notification of the Force Majeure to the other party, and which, by the exercise of due diligence, the party providing notification of the Force Majeure to the other party is unable to overcome or avoid or cause to be avoided. For greater certainty, if the Delivery Point is: 11.2.a NIT, or other similar inventory transfer account, “Force Majeure” is restricted to mean an interruption, curtailment or pro-rationing by a Transporter of firm inventory transfer service, which affects all shippers who had nominated for firm deliveries or firm receipts to take place by inventory transfer on that Day. On any Day or any portion of a Day that there is a Force Majeure, Seller shall deliver to Buyer, and Buyer shall receive from Seller, that percentage of the Contract Quantity which is equal to the percentage amount of Gas which according to the Transporter, had been nominated by all inventory transfer shippers and which the Transporter is not interrupting, curtailing or pro-rationing on the Day or that portion of a Day without regard to price;

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11.2.b Located at a producer’s, processor’s, distributor’s or consumer’s plant gate or a specified location on the gathering system for production from the wells in a particular geographic area, “Force Majeure” includes: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings that result in evacuation of the affected area, floods, washouts, explosions, breakage of or accident or necessity of repairs to machinery or equipment or lines of pipes; (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption of firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, terrorist acts, insurrections or wars; and (v) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, or regulation promulgated by a governmental authority having jurisdiction; and 11.2.c A Delivery Point other than 11.2.a or 11.2.b, “Force Majeure” is restricted to mean (i) a curtailment or interruption by a Transporter of firm service at the Delivery Point, regardless of the reasons therefore, or (ii) any governmental actions such as the requirement to comply with any court order or any law, statute, regulation or authorization of a governmental authority having jurisdiction.”

11. Replace Section 13.5 with the following:

“The interpretation and performance of this Contract shall be governed by the laws of the Province specified by the parties in the Base Contract, excluding, however, any conflict of laws rule which would apply the law of another jurisdiction, and the parties hereby attorn to the exclusive jurisdiction of the courts of the Province of British Columbia.”


“This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any Federal, Provincial, State, or local governmental authority having jurisdiction over the parties, their facilities, or Gas Supply, this Contract or Transaction Confirmation or any provisions thereof.”


“Any controversy or claim arising out of or relating to the Contract shall be determined by arbitration in accordance with the Domestic Commercial Arbitration Rules of the British Columbia Commercial Arbitration Centre in Vancouver, British Columbia.”

14. Insert the following as Section 13.11:

“The terms of this Contract, including but not limited to the purchase price, the Transporter(s), and cost of transportation, and the quantity of Gas purchased or sold, shall be kept confidential by the parties, except as required (i) in order to comply with any applicable law, order, or regulatory requirement, or (ii) for the purpose of effectuating transportation of Gas pursuant to this Agreement, or (iii) to the extent such information is delivered to a third party for the sole purpose of evaluation, compilation, establishment or editorial review of various gas price indices.”

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15. Insert the following as Section 13.12:

“Time is of the essence of this Contract and the terms and conditions thereof.” 16. Replace the definition of “Gas” with the following in Section 2:

““Gas” shall mean any mixture of hydrocarbons and non-combustible gases in a gaseous state consisting primarily of methane, including biomethane.”

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Order No.: G-197-11 Issued By: Diane Roy, Director, Regulatory Affairs Effective Date: November 28, 2011 BCUC Secretary: Original signed by Alanna Gillis Original Page R-30.18


Order No.: G-197-11 Issued By: Diane Roy, Director, Regulatory Affairs Effective Date: November 28, 2011 BCUC Secretary: Original signed by Alanna Gillis Original Page R-30.19

Transaction Confirmation

Transaction Confirmation to the Gas EDI between _________________________________ and FortisBC Energy Inc. entered into __________________________________. This confirms our Transaction on the following terms and conditions. The terms and conditions below will be final and binding in accordance with Terms and Conditions of the above referenced contract. Date: ________________ Transaction Type: Interruptible Transaction # __________

Buyer:

Marketing rep:

Seller:

FortisBC Energy Inc. Marketing rep:

Transaction Details

Start Date

End Date

Quantity Commodity Price Delivery Point

Delivery Pipe

_____ Mmbtu

_____$US/MMBTU

Huntington

DEGT-BC

Special Terms and Conditions:

Comments

FortisBC Energy Inc. certifies that the gas sold under this confirmation notice is BIOMETHANE (description may

need to be altered to conform to buyer’s regulatory requirement) Transportation to the delivery point is included in the Commodity Price.

FORTISBC ENERGY INC.

_________________________________

Date _____________________________

_________________________________ (Marketer)

_________________________________

Date _____________________________

Sixth Floor 900 Howe Street Vancouver, B.C. … · Sixth Floor . 900 Howe Street . Vancouver, B.C....

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