Craig P. Donohue Director, Regulatory Affairs & Gas Supply

Pacific Northern Gas Ltd. Suite 950 1185 West Georgia Street Vancouver, BC V6E 4E6 Tel: (604) 691-5673 Tel: (604) 697-6210 Email: cdonohue@png.ca

Via Courier and E-Mail January 14, 2010 B.C. Utilities Commission File No.: 4.2.7(2010) 6th Floor - 900 Howe Street Vancouver, B.C. V6Z 2N3 Attention: Erica M. Hamilton Commission Secretary Dear Ms. Hamilton: Re: Project No. 3698578

PNG-West 2010 Revenue Requirements Application Response to BCUC IR No. 2, Question 1.1 At the request of Commission Staff PNG is filing additional information in response to BCUC IR No. 2, Question 1.1. For ease of reference the question and original response is provided below. 1.1 Please file Tabs 1-6, Tab-Rates, and Tab Application p. 3, calculated under the

currently approved WACC. Please do not update for any adjustments made as a result of IR No. 1 or 2.

Response: PNG understands the question to be asking PNG to reproduce all of its supporting numerical schedules from its 2010 revenue requirements application amended to reflect the currently approved weighted average cost of capital (“WACC”). PNG’s application is not based on the currently approved WACC and to file all of its numerical schedules to reflect those parameters is considered unnecessary at this time. PNG has already provided information in response to BCUC IR No. 1, question 56.1 regarding its estimated 2010 revenue deficiency assuming the currently approved WACC. The revenue deficiency is estimated to be $6.870 million or $832K less than the applied for 2010 revenue deficiency of $7.702 million.

B-5-1

PNG notes that $808K of the $832K reduction is comprised of income taxes ($388K lower), return on common equity ($950K lower) and short term debt interest ($530K higher). The remaining $24K reduction is due to lower standby fees for short term debt with the resulting amortization expense declining from $47K in the application to $23K assuming the currently approved WACC. Enclosed are ten copies of selected pages from the PNG-West 2010 revenue requirements application reflecting the changes resulting from assuming the currently approved WACC. The interim rates effective January 1, 2010 are based on recalculating the 2010 revenue deficiency using 40 percent common equity and a 65 basis points premium relative to the forecast low risk benchmark utility return of 8.45 percent. This is the basis for determining the “currently approved WACC” as referenced in the information request. PNG has marked the enclosed pages “Interim” to differentiate them from the corresponding pages in PNG’s original application. However, the Tab and Page references are the same as provided for in the original application. A copy of this letter and one set of the enclosed pages have been e-mailed to the registered intervenors. Yours truly, C.P. Donohue cc. Registered Intervenors