[email protected] January 29, 2016 c/o Owen …...FortisBC Midstream Inc. (FMI or the Company)...

31
Tariq Ahmed Direct +1 604 631 4983 [email protected] January 29, 2016 File No.: 240149.00170/16550 BY ELECTRONIC FILING Commercial Energy Consumers Association of British Columbia c/o Owen Bird Law Corporation P.O. Box 49130 Three Bentall Centre 2900 595 Burrard Street Vancouver, BC V7X 1J5 Attention Mr. Christopher P. Weafer Dear Sirs/Mesdames: Re: Project No. 3698861 FortisBC Midstream Inc. (“FMI”) - Application (the “Application”) for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC “ACGS” In accordance with the Regulatory Timetable for the above-noted Application established in British Columbia Utilities Commission Order G-210-15, FMI submits the enclosed responses to the Commercial Energy Consumers Association of British Columbia (CEC) Information Request No. 1. If further information is required, please contact Justin Cha at FortisBC Holdings Inc. at (604) 443-6543. Email communications with respect to this Application can be directed to [email protected]. Yours truly, FASKEN MARTINEAU DuMOULIN LLP [original signed by Tariq Ahmed] Tariq Ahmed Enclosures cc (email only): Commission Secretary Registered Parties B-7

Transcript of [email protected] January 29, 2016 c/o Owen …...FortisBC Midstream Inc. (FMI or the Company)...

Page 1: tahmed@fasken.com January 29, 2016 c/o Owen …...FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the Application)

Tariq Ahmed

Direct +1 604 631 4983 [email protected]

January 29, 2016

File No.: 240149.00170/16550

BY ELECTRONIC FILING

Commercial Energy Consumers Association of British Columbia

c/o Owen Bird Law Corporation

P.O. Box 49130

Three Bentall Centre

2900 – 595 Burrard Street

Vancouver, BC V7X 1J5

Attention Mr. Christopher P. Weafer

Dear Sirs/Mesdames:

Re: Project No. 3698861

FortisBC Midstream Inc. (“FMI”) - Application (the “Application”) for

Approval to Acquire the Shares of Aitken Creek Gas Storage ULC “ACGS”

In accordance with the Regulatory Timetable for the above-noted Application established

in British Columbia Utilities Commission Order G-210-15, FMI submits the enclosed

responses to the Commercial Energy Consumers Association of British Columbia (CEC)

Information Request No. 1.

If further information is required, please contact Justin Cha at FortisBC Holdings Inc. at

(604) 443-6543. Email communications with respect to this Application can be directed

to [email protected].

Yours truly,

FASKEN MARTINEAU DuMOULIN LLP

[original signed by Tariq Ahmed]

Tariq Ahmed

Enclosures

cc (email only): Commission Secretary

Registered Parties

B-7

markhuds
FMI Aitken Creek
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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 1

1. Reference: Exhibit B-1, Pages 1 and 2 1

2

1.1 Please confirm that the Commission does not have authority to alter the 3 agreement, and that the Commission’s jurisdiction is limited to either approving 4 or not approving the transaction. 5

6 Response: 7

Confirmed. The agreement is between FMI and CCPL. The Commission does not have 8 authority to alter the agreement, but the Commission’s approval is required for the Transaction 9 to complete. 10

11 12

13 1.1.1 If not confirmed, please explain why not, and provide a discussion of the 14

Commission’s option in altering this agreement. 15 16

Response: 17

Please refer to the response to CEC IR 1.1.1. 18

19 20

21 1.2 Could the Commission make the approval of the transaction conditional upon 22

certain undertakings of either FMI or FEI? 23

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 2

1 Response: 2

Section 54(9) of the Act provides that the Commission may give its approval under this section 3 subject to conditions and requirements it considers necessary or desirable in the public interest. 4 However, FMI notes that pursuant to the Share Sale and Purchase Agreement, Commission 5 approval of the Transaction must be on terms and conditions satisfactory to the parties to the 6 Agreement. 7

8 9

10 1.2.1 If not, please explain why not. 11

12 Response: 13

Please refer to the response to CEC IR 1.1.2. 14

15

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 3

2. Reference: Exhibit B-1, Page 1 1

2

2.1 Are there other related assets in the vicinity owned by ACGS which are not 3 included in the definition of Storage Facility and are not being included in the 4 transaction? 5

6 Response: 7

No, FMI is acquiring 100% of the shares of ACGS and as such is acquiring all the assets in the 8 vicinity owned by ACGS. 9 10 11

12 2.1.1 If yes, please provide a discussion of these assets and explain why they 13

are not being included in the transaction. 14 15

Response: 16

Please refer to the response to CEC IR 1.2.1. 17

18 19

20 2.2 Does FMI have any plans for modification or expansion of the natural gas 21

storage facility at this time or any time in the future? 22 23

Response: 24

Please refer to the response to BCSEA IR 1.3.1. 25

26 27

28

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 4

2.2.1 If yes, please provide a description of FMIs plans for modification or 1 expansion. 2

3 Response: 4

Please refer to the response to BCSEA IR 1.3.1 5

6 7

8 2.3 Will FMI/ACGS be able to expand or make beneficial modifications of the 9

Storage Facility or capabilities in the future? 10 11

Response: 12

Please refer to the response to BCSEA IR 1.3.1. 13

14 15

16 2.3.1 If so, please explain. 17

18 Response: 19

Please refer to the response to BCSEA IR 1.3.1. 20

21

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 5

3. Reference: Exhibit B-1, Page 5 1

2

3.1 Is FMI acquiring the rights to the undeveloped North Aitken Creek gas storage 3 site (North Aitken?) 4

5 Response: 6

As part of its acquisition of ACGS, FMI is acquiring the rights to the North Aitken site. 7

8 9

10 3.1.1 If no, please explain why not. 11

12 Response: 13

Please refer to the response to CEC IR 1.3.1. 14

15 16

17 3.1.2 If yes, does FMI have any plans for development of North Aitken in the 18

future? 19 20

Response: 21

Please refer to the response to BCSEA IR 1.3.1. 22

23 24

25 3.1.2.1 If yes, what would be the anticipated gas capacity at North 26

Aitken? 27

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 6

1 Response: 2

Any information FMI has to respond to this question was obtained through the confidential due 3 diligence process which it underwent as part of the Transaction. Therefore, FMI is unable to 4 provide a response to this information request. 5

6 7

8 3.2 How many customers does Aitken Creek currently serve in its storage leasing? 9 10

Response: 11

Any current information FMI has to respond to this question was obtained through the 12 confidential due diligence process which it underwent as part of the Transaction. However, 13 ACGS does file an annual report to the Commission in accordance with Appendix II to BCUC 14 Order No G-135-07 (see excerpt below) that contains customer name and contact information. 15 Please refer to Attachment 3.2 for the 2014 Annual Aitken Creek Report. FMI understands that 16 the 2015 Annual Aitken Creek Report has not yet been filed. 17

18

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 7

1 2

3 3.3 Please confirm that FMI will be a joint owner of the Aitken Creek gas storage 4

facility and has no plans to acquire the remaining 7.2% of the gas storage facility. 5 6

Response: 7

FMI is acquiring 100% of the shares of ACGS and ACGS owns a 93.8% share of Aitken Creek 8 gas storage facility. At this time, FMI has no plans to acquire the remaining 6.2% of the storage 9 facility. 10

Please also refer to the response to BCOAPO 1.1.1. 11

12 13

14 3.3.1 If not confirmed, please provide details of FMI’s plans to acquire the 15

remaining portion of the gas storage facility. 16 17

Response: 18

Please refer to the response to CEC IR 1.3.3. 19

20

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 8

4. Reference: Exhibit B-1, Page 5 and Page 11 1

2

4.1 What is the total number of employees dedicated to the management and 3 operation of the facilities being acquired? 4

5 Response: 6

There are 19 employees located in Fort St. John and the plant site dedicated to the 7 management and operation of the facilities being acquired. Please also refer to the response to 8 BCUC IR 1.14.1. 9

10 11

12 4.1.1 Please provide a breakdown by occupation for both the onsite and off-13

site employees. 14 15

Response: 16

The breakdown of occupations for the employees located in the Fort St. John office or at the 17 plant site is as follows: 18

19

Occupation NumberStorage Specialist 1Facilities Engineer 1Volumetric Analyst 1Health, Environment and Safety Specialist 1Field Team Leader 1Operations Supervisor 2Maintenance Mechanic 6Plant Operators 6Total 19

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 9

1 2

3 4.2 Please confirm there are no employees involved with management or operation 4

of the North Aitken gas storage site. 5 6

Response: 7

The North Aitken Creek gas storage site is managed by the same employees that manage the 8 Aitken Creek gas storage site. Please refer to the response to CEC IR 1.4.1.1. 9

10 11

12 4.2.1 If not confirmed, please provide the number of employees and 13

occupations associated with the North Aitken gas storage site. 14 15

Response: 16

Please refer to the responses to CEC IRs 1.4.1.1 and 1.4.2. 17

18 19

20 4.3 What are the total annual current costs of the employees associated with ACGS? 21 22

Response: 23

Any information FMI has to respond to this question was obtained through the confidential due 24 diligence process which it underwent as part of the Transaction. Therefore, FMI is unable to 25 provide a response to this information request. 26 27

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 10

5. Reference: Exhibit B-1, Page 7 1

2

5.1 Please confirm that FMI anticipates continuing on the same reporting and 3 complaint basis with the exemption from much of Part 3 of the Act. 4

5 Response: 6

Confirmed. 7

In its May 14, 2007 decision regarding the Storage Facility, the Commission noted that parties 8 entering bilateral negotiations have at their disposal price information concerning substitutes 9 and alternatives and that they base their decisions on whether or not to contract for service 10 based on their analysis of this information. 11

With respect to regulation the Commission concluded that1: 12

Accepting the position of TGI that regulating rates on a cost of service basis runs the risk 13 of creating mixed market conditions, recognizing that the summer/winter gas price 14 differential is a determinant of the value of the services provided by Unocal in its 15 operation of the Storage Facility, acknowledging the fact that the public interest in 16 regards to the safe operation of the facility is adequately preserved at this time by 17 regulation under the Petroleum and Natural Gas Act, and in the absence of specific 18 concerns regarding the availability and reliability of storage services, the Commission 19 Panel therefore finds that active regulation of Unocal in its operation of the 20 Storage Facility is not warranted at this time. Rather, regulation on a reporting or 21 complaints basis is the appropriate method of regulation. [Emphasis in original] 22

23

1 Appendix B to Order G-167-07, page 18-19.

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 11

The market environment described in the Commission’s reasons above will remain the case 1 under FMI ownership. Availability and reliability of safe storage services provided by ACGS will 2 be continued under FMI ownership on the same basis as has been the case under the 3 ownership of CCPL. Continuation of the existing reporting or complaints based regulation is 4 appropriate and anticipated by FMI. 5

Please also refer to the response to BCUC IR 1.5.1. 6

7 8

9 5.1.1 If not confirmed, please discuss the changes that FMI anticipates 10

occurring as a result of the transaction. 11 12

Response: 13

Please refer to the response to CEC IR 1.5.1. 14

15

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 12

6. Reference: Exhibit B-1, Page 8 1

2

6.1 What is the total capacity of the contracts that FEI holds with ACGS, and what is 3 that as a proportion of the total capacity of ACGS? 4

5 Response: 6

FEI currently leases approximately one third of the ACGS’s 93.8% share of the available 7 working gas capacity of approximately 77 BCF at the Aitken Creek facility. 8

9 10

11 6.2 Is the gas capacity of ACGS normally fully leased? 12 13

Response: 14

No, the gas capacity of ACGS is not normally fully leased. 15

Please refer to the response to CEC IR 1.6.2.1. 16 17 18

19 6.2.1 If no, please provide the average proportion of capacity leased over the 20

last 10 years. 21 22

Response: 23

Any information FMI has to respond to this question was obtained through the confidential due 24 diligence process which it underwent as part of the Transaction. Therefore, FMI is unable to 25 provide a direct response to this information request. 26

However, Unocal Canada did provide information regarding the volume of third party leased 27 capacity by Unocal Canada during the Exemption Application for the Aitken Creek Storage 28 Facility. The information was outlined in Exhibit B-12, which provided a response to BCUC IR 29

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 13

1.4.1 and included the amounts of Storage Facility capacity that were contracted to third parties 1 (in total) of the past five gas storage years and the then current year: 2

Year

Capacity contracted

to Third Parties (PJs)

Proportion of ACGS

Aiken Creek

Capacity* 2001/02 24.5 32% 2002/03 30 39% 2003/04 34.4 45% 2004/05 34.4 45% 2005/06 33.1 43% 2006/07 31.1 41%

*This column was calculated by FMI to determine the proportion of leased capacity as compared to 3 ACGS’ current share of the total working gas capacity of the Aitken Creek storage facility. 4

The remainder of this response is being filed confidentially with the Commission under separate 5 cover as it contains commercially sensitive information. 6 7 8

9 6.3 How much average trading capacity in Aitken Creek has ASCGS used for its 10

proprietary trading? 11 12

Response: 13

Any information FMI has to respond to this question was obtained through the confidential due 14 diligence process which it underwent as part of the Transaction. 15

However, FMI understand that ACGS does not reserve capacity for proprietary trading but does 16 extract value through optimization activities for any capacity that is not leased to customers. 17

18

19 20

21 6.4 Does FMI intend to maintain the current customer mix? Please explain. 22 23

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 14

Response: 1

FMI plans to continue to offer third party storage services based on negotiated contracts that 2 reflect market conditions and type of service required by those customers. FMI will then mitigate 3 any unleased capacity through its proprietary trading and optimization activities. FMI 4 recognizes that the overall customer mix could change over time depending on the overall 5 market conditions and requirements. 6 7

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 15

7. Reference: Exhibit B-1, Page 12 1

2

7.1 Please provide an overview of the trading and optimization activities that is 3 currently provided by CCPL and will be provided directly by FMI. 4

5 Response: 6

Any information FMI has to respond to this question was obtained through the confidential due 7 diligence process which it underwent as part of the Transaction. However, FMI can provide a 8 brief overview of the types of leasing, trading and optimization activities that are generally 9 associated with natural gas storage facilities: 10

• The storage owner can enter into leasing contracts with third parties for a negotiated 11 term with conditions related to injection and withdrawal rights. 12

• The storage owner can enter into fee based type deals whereby it can inject and hold a 13 customer’s gas and give it back to them in a future month or period and charge the 14 customer a fixed fee to hold that gas. These are known as park and loan transactions. 15

• A storage owner can purchase, store and sell natural gas in order to optimize storage 16 and injection and withdrawal capacity that is not contracted to customers. 17

• A storage owner will generally optimize capacity that is not contracted to customers by 18 physically purchasing and injecting low priced summer gas and withdrawing and selling 19 that gas in the winter when prices and demand are typically higher. The gas can be 20 bought in the less expensive summer months for injection and promptly sold into a 21 forward sale contract at a market based index price and financially hedged through the 22 use of financial derivatives. 23

• A storage owner can extract further value on shorter term transactions in response to 24 volatility in the day price of gas due to weather and other constraint related conditions 25 that cause price spikes. 26

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 16

1 2

3 7.2 Please discuss whether or not FEI would be able to undertake trading and 4

optimization activities using the storage facilities contracts? 5 6

Response: 7

As discussed in the response to BCUC IR 1.16.1, FMI understands that FEI contracts for ACGS 8 storage as part of its overall resource portfolio to meet its peak day and annual requirement of 9 its customers and recovers the costs of holding that capacity from customers through its rates. 10 However, although FMI and FEI could negotiate and put in place additional storage contracts, it 11 is not FMI’s expectation that FEI would contract for ACGS storage capacity that FEI did not 12 require to meet its customers’ requirements solely for the purpose of trading and optimizing 13 around those resources. 14

Also discussed in the response to BCUC IR 1.16.1 and as described in by FEI’s GSMIP term 15 sheet attached to Commission Letter L-15-15, FMI also understands that FEI actively mitigates 16 its gas supply resource portfolio on an overall basis by entering into market transactions on a 17 day to day or period to period basis. However, FMI understands FEI’s primary responsibility is 18 to meet customer requirements while maintaining reliability and security of supply for its 19 customers and therefore the range of any activity associated with its storage resources would 20 likely be more limited than if it were to contract for additional capacity that was not required to 21 serve customers. 22

23 24 25

26 7.3 If yes, does FEI currently undertake these activities for the benefit of ratepayers? 27

Please explain. 28 29

Response: 30

Please refer to the responses to CEC IR 1.7.2 and BCUC IR 1.16.1. 31

32 33

34 7.4 If no, please explain why not. 35

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 17

1 Response: 2

Please refer to the responses to CEC IRs 1.7.2 and 1.7.3. 3

4

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 18

8. Reference: Exhibit B-1, Pages 12, 14 and 15 1

2

8.1 Please identify the number of positions by occupation and their costs that are 3 indirectly involved in ACGS’ operation and where they will be undertaken. 4

5

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 19

Response: 1

The following is being provided to respond to CEC IRs 1.8.1 through 1.8.4. 2

Please refer to the response to BCUC IR 1.14.1 for a discussion on how FMI currently expects 3 to meet its resourcing requirements once the Transaction is complete. In summary: 4

• All of the CPPL staff that are currently based in Fort St. John or at the plant site that are 5 dedicated to ACGS will become employees of FMI (currently 19 employees). There are 6 an additional 3-4 local dedicated contract workers that support the operation and 7 maintenance of the Storage Facility that are also expected to continue to work for ACGS 8 as contract workers or employees. 9

• FMI also will be putting in place a commercial team to manage all of the commercial 10 activities associated with ACGS storage. It is expected there will be 3-5 dedicated staff 11 to support this function that will become FMI employees. 12

• FMI expects to put in place two dedicated staff to provide leadership and oversight on 13 each of Commercial and the Engineering and Operations functions and to manage any 14 third party expert consultant and resources as required. 15

• FMI will put in place a shared services agreement with FHI to provide corporate services 16 including Taxation, Legal, Treasury, Financial Accounting and Reporting, Internal Audit 17 and other general administration and corporate governance services. It is not 18 anticipated that any FHI employees would be dedicated to FMI or ACGS, however there 19 may be an incremental staff requirement (1 -2 persons). 20

• FMI will put in place a shared services agreement with FEI to provide ongoing services 21 such as IT, Human Resources and Accounts Payable. This agreement will also cover 22 support services that may be required from time to time associated with engineering and 23 operations guidance, environmental, health and safety and other functions. There will 24 be no FEI employees dedicated to provide services to FMI or ACGS and it is not 25 anticipated that any new FEI staffing will be required. 26

27 At this time, FMI does not have any assets and does not have any employees. The above plan 28 will be implemented once the Transaction is complete and FMI becomes the owner of ACGS 29 and is expected to be fully functional within 4 to 6 months of closing. During the transition 30 period, there will be additional services provided by FHI and FEI to assist with the transition of 31 services from CCPL and to put in place the required resources and infrastructure to sustain the 32 business. The costs of FEI employees’ time incurred to provide the services to FMI will be 33 tracked and recovered from FMI according to the guidelines set out FEI’s Transfer Pricing 34 Policy. 35

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 20

As the resourcing requirements are still being developed, at this time FMI is not in a position to 1 identify the number of positions by occupation and their costs that will be indirectly involved in 2 ACGS’ operation through shared services agreements with FHI and FEI on an ongoing basis. 3 For the shared service agreement with FEI, FEI will charge FMI for the services in accordance 4 with FEI’s existing Transfer Pricing Policy. 5

6 7

8 8.2 Please confirm that FMI does not anticipate adding any employees to take over 9

the management. 10 11

Response: 12

Please refer to the response to CEC IR 1.8.1. 13

14 15

16 8.2.1 If not confirmed, please provide FMI’s expectations with respect to the 17

number of new employees and their occupations that will be involved in 18 the management and operation of ACGS. 19

20 Response: 21

Please refer to the response to CEC IR 1.8.1. 22

23 24

25 8.2.1.1 Please identify those indirectly supplied operation and 26

management employee positions which will be used and which 27 FHI owned company may provide them and compare it to the 28 current CPPL charges for the same functions. 29

30 Response: 31

Please refer to the response to CEC IR 1.8.1. 32

33 34

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 21

1 8.3 Please discuss the estimated annual costs of those services that will be provided 2

by FEI under a Shared Services Agreement. 3 4

Response: 5

Please refer to the response to CEC IR 1.8.1. 6

7 8

9 8.4 Will the technical or administrative services provided by FEI require incremental 10

and dedicated work with associated costs, or will they be absorbed by the current 11 FEI O&M? Please explain. 12

13 Response: 14

Please refer to the response to CEC IR 1.8.1. 15

16 17

18 8.4.1.1 If the services will be undertaken in the existing O&M 19

activities, how will the costs for those activities be charged to 20 ACGS? 21

22 Response: 23

FEI will charge FMI for the services in accordance with FEI’s existing Transfer Pricing Policy. 24 FMI in turn will charge ACGS for recovery of its costs through intercompany billing. 25

This is similar to the current arrangement between CCPL and ACGS where all employees 26 associated with ACGS are employees of CCPL (or affiliates) and costs are charged to ACGS 27 through intercompany billing. 28

Please also refer to the response to BCSEA IR 1.2.5. 29

30 31

32

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 22

8.5 Please confirm that FEI will receive revenue for the services provided under the 1 Shared Services Agreement. 2

3 Response: 4

Confirmed. 5

FEI will bill (i.e. receive revenues) FMI for the services provided under the Shared Services 6 Agreement. 7

8 9

10 8.5.1 If not confirmed, please explain why not. 11

12 Response: 13

Please refer to the response to CEC IR 1.8.5. 14

15 16

17 8.6 Please provide quantification of the anticipated revenue that will accrue to FEI 18

under the Shared Services Agreement. 19 20

Response: 21

Please refer to the response to CEC IR 1.8.1. 22

Any revenues will include recovery of the costs for services as outlined in the Shared Services 23 Agreement and applicable overhead as specified in FEI’s existing Transfer Pricing Policy. 24

25 26

27 8.7 Please confirm that there will be no billing, management, operation or other costs 28

that are currently being or will be undertaken in FEI that are not covered under a 29 Shared Services Agreement and could be associated with the management and 30 operation of ACGS and billed to ACGS. 31

32

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 23

Response: 1

All services provided by FEI will fall under a Shared Services Agreement with billing of the 2 services in accordance with FEI’s existing Transfer Pricing Policy. 3

For services not specifically identified and budgeted in advance, FEI’s Transfer Pricing Policy 4 provides for “As Required Service” work that may be required by the requesting organization 5 (i.e. FMI). When these situations arise, FEI will provide the services and bill the requesting 6 organization (i.e. FMI) in accordance with FEI’s Transfer Pricing Policy. 7

8 9

10 8.7.1 If not confirmed, please provide a detailed overview of the types of 11

activities and associated costs being conducted for ACGS that are 12 currently or may be undertaken in FEI and are not subject to the Shared 13 Services Agreement. 14

15 Response: 16

Please refer to the response to CEC IR 1.8.7. 17

18

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 24

9. Reference: Exhibit B-1, Page 14 1

2

9.1 Please outline any benefits that could accrue to FEI ratepayers as a result of the 3 acquisition of the ACGS by FMI. 4

5 Response: 6

Please refer to the responses to BCUC IRs 1.10.1 and 1.10.2.1. 7

8 9

10 9.2 Was the acquisition agreement developed pursuant to a competitive process? 11 12

Response: 13

Yes, the acquisition agreement was developed pursuant to a competitive process. This involved 14 an auction process whereby several potential purchasers were contacted to bid on ACGS. The 15 auction process had formal bid requirements which were provided by the seller and potential 16 purchasers had to submit their bids in the form and within the timelines outlined in the bid 17 requirements. Eventually the seller short-listed some of the potential purchasers and provided 18 them with the Share Sale and Purchase Agreement template to begin negotiations and then 19 finally, FMI was selected as the final bidder to complete negotiations and execute the Share 20 Sale and Purchase Agreement. 21

22

23 24

25

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 25

9.2.1 If yes, how many competitors were involved in the acquisition? 1 2

Response: 3

FMI does not have access to this information as the number and identity of the other bidders in 4 this process was kept confidential as part of the process design. 5

6 7

8 9.3 Please outline any risks or benefits that could have accrued to FEI ratepayers if 9

another corporation had been successful in the purchase. 10 11

Response: 12

Any risks or benefits to ACGS customers would depend on who the purchaser is and what their 13 intended use of the Storage Facility was. To the extent that another purchaser maintained the 14 existing level of service, FMI does not believe that there would be additional benefits to ACGS 15 customers associated with one purchaser as compared to another. 16

17 18

19 9.4 If one of the risks managed by the FMI acquisition is the risk that the ACGS 20

owner might repurpose the Aitken Creek storage solely for proprietary trading, 21 please confirm that FMI will not do that and will make the Aitken Creek storage 22 available to FEI as a priority. 23

24 Response: 25

FMI cannot make a commitment to give any lease customer priority over another. However FMI 26 does plan to continue to offer third party storage services based on negotiated contracts that 27 reflect market pricing and then mitigate any unleased capacity through its proprietary trading 28 and optimization activities. Please also refer to the response to BCUC IR 10.2.1. 29

30

31 32

33

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FortisBC Midstream Inc. (FMI or the Company) Application for Approval to Acquire the Shares of Aitken Creek Gas Storage ULC (the

Application)

Submission Date: January 29, 2016

Response to Commercial Energy Consumers of British Columbia (CEC) Information Request (IR) No. 1

Page 26

9.5 If FEI risks of losing the Aitken Creek storage availability are diminished please 1 indicate if this will be made clear in a contract with FEI, and if not, please explain 2 why not. 3

4 Response: 5

Please refer to the response to CEC IR 1.9.4. 6

ACGS will negotiate future storage contracts with any current or future customers based on 7 market conditions and the nature of the service required by those customers at the time. 8 9

10 11

12 9.6 Would FMI object to a requirement to ensure FEI access to Aitken Creek storage 13

and avoid repurposing of this facility? 14 15

Response: 16

Yes, FMI would object to any requirements that would limit its ability to manage its business in 17 response to changes in the market as they arise. 18

FMI believes that the existing reporting or complaints based regulation of ACGS, and the 19 oversight of the Commission with respect to contracts for storage services between public 20 utilities and ACGS are sufficient to address any potential concerns of FEI or customers of FEI. 21

Please also refer to the responses to CEC IRs 1.9.4 and 1.9.5. 22 23

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Attachment 3.2

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Aitken Creek Gas Storage

2014 Annual Report As required by Appendix II to BCUC Order No G-135-07

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Facility Name:

Aitken Creek Gas Storage Location:

d-44-L/94-A-13 North East British Columbia

Function:

Natural Gas Storage Current Capacity:

77.3 BCF Working Gas

Throughput during the Year:

2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

BCF Withdrawals 10.1 11.4 5.2 - - - - - - - 7.4 7.01 41.1

BCF Injection - - - 3.7 5.1 4.4 4.2 4.1 5.2 4.3 - - 31

Names, Addresses Contact Name and Telephone Number for Aitken Creek Gas Storage:

Aitken Creek Gas Storage ULC Charlie Mertz, Canada Trading Manager 500 Fifth Avenue S.W. Calgary, Alberta, T2P 0L7 403-234-5033

Names, Addresses and Contact Name and Telephone Number for Each Storage Customer:

1. FortisBC Energy Inc. 16705 Fraser Highway Surrey, BC V3S 2X7 Bryan Lane 604-592-7892

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2. Westcoast Energy Inc. Suite 2600, 425 1st Street SW Calgary, AB T2P 3L8 Mel Thorp 403-699-1578 3. Tenaska Marketing Canada

320, 1122 Mainland Street Vancouver, BC V6B 5L1 Clarke Ross 604-685-7890

4. Powerex Corp. Suite 1400 666 Burrard Street Vancouver, BC

V6G 2X8 Kim Desante 604-891-5040

5. Iberdrola Canada Energy Services Ltd. 208, 5 Richard Way SW Calgary, AB T3E 7M8 Jim McArthur 801-456-2680