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Gas RRR 2.1.1 Net Present Value (“NPV”) and Profitability Index (“PI”) for Rolling Project Portfolio EBO 188 Reporting and Monitoring - Rolling Project Portfolio Approach On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. Requirement This reporting requirement is filed quarterly as directed by the EBO 188 and reads as follows:
A utility shall provide in the form and manner required by the Board, quarterly,
on the last day of the second month following the quarter end for the first three quarters and the last day of the fourth month following the quarter end for the last quarter, a detailed economic evaluation including Net Present Value and Profitability Index of the rolling distribution system expansion project portfolio for a 12 month period, referenced in EBO 188, section 6.3.15 and in Appendix B, section 1.2.
Purpose Data under the Gas RRR 2.1.1 have been reported to the Board quarterly by Union and Enbridge. The purpose of the filing is to put on the record that Union and Enbridge comply with the standards as set in the EBO 188.
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited.
DATA REPORTED 2006-2008 Interpretation Original data were filed by Enbridge quarterly, from the third quarter of 2005 to the last quarter of 2008, in the format required by the Board. In the reporting period from 2005 to 2008, Enbridge’s Rolling Project Portfolio was always reported to have a positive NPV and a PI above 1.0. The Average PI is 1.9. This adheres to the EBO 188 requirements. The following charts show the NPV and the PI values over the reporting years.
Net Present Value (NPV) of a Rolling Portfolio on a 12-month period
Gas RRR 2.1.1
-
10
20
30
40
50
60
2005-Q3
2005-Q4
2006-Q1
2006-Q2
2006-Q3
2006-Q4
2007-Q1
2007-Q2
2007-Q3
2007-Q4
2008-Q1
2008-Q2
2008-Q3
2008-Q4
Mill
ion
s
$
Enbridge
Profitability Index (PI) of a Rolling Portfolio on a 12-month period
Gas RRR 2.1.1
1.0
1.2
1.4
1.6
1.8
2.0
2.2
Ra
tio
Enbridge
Enbridge 1.9 1.9 1.9 1.8 1.8 1.8 1.7 1.9 2.0 1.9 1.9 2.0 2.0 1.9
2005-Q3
2005-Q4
2006-Q1
2006-Q2
2006-Q3
2006-Q4
2007-Q1
2007-Q2
2007-Q3
2007-Q4
2008-Q1
2008-Q2
2008-Q3
2008-Q4
Action
No action is required.
Gas RRR 2.1.1 Net Present Value (“NPV”) and Profitability Index (“PI”) for Rolling Project Portfolio EBO 188 Reporting and Monitoring - Rolling Project Portfolio Approach On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. Requirement This reporting requirement is filed quarterly as directed by the EBO 188 and reads as follows:
A utility shall provide in the form and manner required by the Board, quarterly,
on the last day of the second month following the quarter end for the first three quarters and the last day of the fourth month following the quarter end for the last quarter, a detailed economic evaluation including Net Present Value and Profitability Index of the rolling distribution system expansion project portfolio for a 12 month period, referenced in EBO 188, section 6.3.15 and in Appendix B, section 1.2.
Purpose Data under the Gas RRR 2.1.1 have been reported to the Board quarterly by Union and Enbridge. The purpose of the filing is to put on the record that Union and Enbridge comply with the standards as set in the EBO 188.
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited.
According to the EBO 188, utilities are not allowed to conduct an expansion project and include it in a portfolio if it brings the PI below 1.0. A portfolio PI above 1.0 and a positive NPV ensure that the existing customers will not cross-subsidize these expansion projects through rate increases. DATA REPORTED 2006-2008 Interpretation Original data filed by Union quarterly, from the third quarter of 2005 to the last quarter of 2008, in the format required by the Board. In the reporting period from 2005 to 2008, Union’s Rolling Project Portfolio was always reported to have a positive NPV and a PI above 1.0. The Average PI is 1.7. This compiles with the EBO 188 requirements. The following charts show the NPV and PI values over time.
Net Present Value (NPV) of a Rolling Portfolio on a 12-month period
Gas RRR 2.1.1
-
5
10
15
20
25
30
2005-Q3
2005-Q4
2006-Q1
2006-Q2
2006-Q3
2006-Q4
2007-Q1
2007-Q2
2007-Q3
2007-Q4
2008-Q1
2008-Q2
2008-Q3
2008-Q4
Mill
ion
s
$
Union
Profitability Index (PI) of a Rolling Portfolio on a 12-month period
Gas RRR 2.1.1
1.0
1.2
1.4
1.6
1.8
2.0
2.2
Ra
tio
Union 1.5 1.5 1.5 1.6 1.5 1.5 1.9 1.9 1.8 1.6 2.0 1.9 2.0 1.8
2005-Q3
2005-Q4
2006-Q1
2006-Q2
2006-Q3
2006-Q4
2007-Q1
2007-Q2
2007-Q3
2007-Q4
2008-Q1
2008-Q2
2008-Q3
2008-Q4
Action
No action is recommended
Gas RRR 2.1.11- Customer additions, costs and revenues: actual vs. forecast for selected projects EBO 188 Reporting and Monitoring - Rolling Project Portfolio Approach On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. Requirement This reporting requirement is filed annually for a sample of projects as directed in the EBO 188. The requirement reads: A utility shall provide in the form and manner required by the Board, annually, by
the last day of the fourth month after the financial year end, a report on actual cumulative customer additions compared to forecast, and costs and revenues cumulative to the end of the third year from the in-service date, for projects in the rolling distribution system expansion project portfolio referenced in EBO 188, Appendix B, section 3.2A.
In the Appendix B, section 3.2A the Board specified the requirement for reporting:
“In consultation with Board Staff2, the utilities shall select projects from their Rolling Project Portfolios on an annual basis and shall file the following with respect to the sample: (a) the cumulative number of customers attached at the end of the 3rd full year and the associated revenues and costs; and
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited. 2 Projects have been selected by utilities without direct input of Board Staff. This may be considered acceptable as long as projects satisfy the criteria to be included in Rolling Project Portfolio.
(b) the corresponding year 3 customer attachment forecasts and associated revenues and cost ”
Purpose Union and Enbridge annually file data for selected projects within the Rolling Project Portfolio. The purpose of the data review is to determine if there are discrepancies between forecasts and actuals for customer additions, revenues and costs. If there are considerable variances (e.g. 10%) between actual and forecast numbers the utilities are required to file an explanation to the Board. DATA REPORTED 2006-2008 Annually, Enbridge filed data with the Board on actual vs. projected number of customer additions, associated costs and revenues for 3 different selected distribution expansion projects in each of the following reporting years 2006, 2007 and 2008. These projects have been in-service for 3 years at the time of annual reporting on Gas RRR 2.1.11. The original data was filed in the format required by the Board. Interpretation The explanation of the variance from the projected number of customer additions, costs and revenues is provided where the variances are greater than 10%.
ENBRIDGECustomer Additions
Gas RRR 2.1.11
0
100
200
300
400
500
600
700
2006
Sou
th U
nion
ville
2006
Wes
ton
Village
2006
Lan
tern
Fly
Hollow
2007
Tow
path
Villa
ge
2007
Wes
t Wind
Far
ms
2007
Sug
arbu
sh
2008
Map
le W
oodla
nds
2008
JT-C
ottre
lle B
lvd
2008
Mar
ch R
d
Projects
Nu
mb
er o
f C
ust
om
ers
Forecast Actuals
ENBRIDGEProject Costs
Gas RRR 2.1.11
-
200
400
600
800
1,000
1,200
1,400
2006
Sou
th U
nion
ville
2006
Wes
ton
Village
2006
Lan
tern
Fly
Hollow
2007
Tow
path
Villa
ge
2007
Wes
t Wind
Far
ms
2007
Sug
arbu
sh
2008
Map
le W
oodla
nds
2008
JT-C
ottre
lle B
lvd
2008
Mar
ch R
d
Th
ou
sa
nd
s
Projects
$
Forecast Actuals
ENBRIDGEProject Revenues
Gas RRR 2.1.11
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2006
South
Unio
nville
2006
Westo
n Villa
ge
2006
Lan
tern
Fly
Hollow
2007
Tow
path
Villa
ge
2007
Wes
t Wind
Far
ms
2007
Suga
rbus
h
2008
Maple
Woo
dlands
2008
JT-C
ottre
lle B
lvd
2008
Marc
h Rd
Mil
lio
ns
Projects
$Forecast Actuals
As may be seen from the above charts the actual values follow closely the projected values. The reported variances are explained in a meaningful way. Action No action is recommended.
Gas RRR 2.1.11- Customer additions, costs and revenues: actual vs. forecast for selected projects EBO 188 Reporting and Monitoring - Rolling Project Portfolio Approach On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. Requirement This reporting requirement is filed annually for a sample of projects as directed in the EBO 188. The requirement reads: A utility shall provide in the form and manner required by the Board, annually, by
the last day of the fourth month after the financial year end, a report on actual cumulative customer additions compared to forecast, and costs and revenues cumulative to the end of the third year from the in-service date, for projects in the rolling distribution system expansion project portfolio referenced in EBO 188, Appendix B, section 3.2A.
In the Appendix B, section 3.2A the Board specified the requirement for reporting:
“In consultation with Board Staff2, the utilities shall select projects from their Rolling Project Portfolios on an annual basis and shall file the following with respect to the sample: (a) the cumulative number of customers attached at the end of the 3rd full year and the associated revenues and costs; and
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited. 2 Projects have been selected by utilities without direct input of Board Staff. This may be considered acceptable as long as projects satisfy the criteria to be included in Rolling Project Portfolio.
(b) the corresponding year 3 customer attachment forecasts and associated revenues and cost ”
Purpose Union and Enbridge annually file data for selected projects within the Rolling Project Portfolio. The purpose of the data review is to determine if there are discrepancies between forecasts and actuals for customer additions, revenues and costs. If there are considerable variances (e.g. 10%) between actual and forecast numbers the utilities are required to file an explanation to the Board. DATA REPORTED 2006-2008 Annually, Union filed data with the Board on actual vs. projected number of customer additions, associated costs and associated revenues for 3 different selected distribution expansion projects in each of the following reporting years 2006, 2007 and 2008. These projects have been in-service for 3 years at the time of annual reporting on Gas RRR 2.1.11. The original data were filed in the format required by the Board. Interpretation Union provided explanations of the variance from the projected number of customer additions, costs and revenues where variances from the actual numbers were above or below the projections by 10%. The explanations are acceptable.
UNIONCustomer Additions
Gas RRR 2.1.11
0
1
2
3
4
5
6
7
2006
Bulk
e/Rea
ume
Subdi.
..
2006
Sou
thwoo
d Tr
ail S
ubd.
..
2006
Loe
bach
Driv
e
2007
Lyo
ns A
ve &
Lyo
ness
...
2007
Wyn
field
Subdiv
ision
2007
Que
en S
t/Nas
h Crt,
...
2008
Mon
arch
Bro
nte
Cree.
..
2008
Wel
lingt
on T
erra
ce 0
...
2008
War
bler W
oods
Wal
k ...
Hu
nd
red
s
Projects
Nu
mb
er o
f C
ust
om
ers Forecast Actuals
UNIONCustomer Additions
Gas RRR 2.1.11
0
100
200
300
400
500
600
700
Bulke-
06
South
wood-
06
Loeb
ach
Dr-06
Lyon
s-07
Wyn
field-
07
Queen
St-0
7
Mon
arch
-08
Wel
lingt
on-0
8
War
bler-0
8
Snyde
r-09
4041
N Ser
v -0
9
Mea
dowcr
eek-
09
Projects
Nu
mb
er o
f C
ust
om
ers
Forecast Actuals
UNIONProject Revenues
Gas RRR 2.1.11
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2006
Bulk
e/Rea
ume
Subdi.
..
2006
Sou
thwoo
d Tr
ail S
ubd.
..
2006
Loe
bach
Driv
e
2007
Lyo
ns A
ve &
Lyo
ness
...
2007
Wyn
field
Subdiv
ision
2007
Que
en S
t/Nas
h Crt,
...
2008
Mon
arch
Bro
nte
Cree.
..
2008
Wel
lingt
on T
erra
ce 0
...
2008
War
bler W
oods
Wal
k ...
Mill
ion
s
Projects
$ Forecast Actuals
As shown in the above charts the actual values follow closely the projected values. The reported variances have been explained in a meaningful way. Action No action is recommended.
Gas RRR 2.1.13 Environmental screening for selected projects BACKGROUND On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. REQUIREMENT GAS RRR 2.1.13
A utility shall provide in the form and manner required by the Board, annually, by the last day of the fourth month after the financial year end, an environmental monitoring report on completed natural gas system expansion projects of distribution pipelines and facilities not subject to leave to construct under the Ontario Energy Board Act, 1998, section 91, referenced in EBO 188, Appendix B, section 3.2B.
EBO 188 Appendix B, section 3.2B defines reporting requirements very specifically, as follows:
“In consultation with Board Staff2, the utilities shall select a set of completed projects and file data on those projects on an annual basis as described below. The projects chosen should be selected in a random, stratified manner, reflecting the range of environmental impacts encountered in the time period and the various levels of environmental planning, documentation and reporting required.
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited. 2 Projects have been selected within district areas. Board Staff agreed that this is the acceptable method to select a sample of projects for this reporting.
The selection should be reviewed by an independent auditing group within the utility, which group shall include (a) trained environmental auditor(s). The utility shall file the following with respect to each sample: 1. a description of how the project complied with the Board-approved environmental screening, planning, documentation and reporting requirements; 2. a table of significant features, how they were avoided or mitigated, and resulting impacts; 3. a table displaying the concerns raised by affected parties including member ministries of the Ontario Pipeline Coordination Committee, how they were addressed, and reasons for any outstanding concerns; 4. issues of significance arising from any post-construction monitoring; 5. where alternatives were investigated, a display of alternatives (routes/sites) which show the various trade-offs between customer attachments, and environmental, social and financial costs and a discussion of how the preferred alternative was chosen; 6. evidence that all necessary approvals (permits, licences) were obtained; and 7. forecast versus actual costs of the environmental planning.”
PURPOSE OF REPORTING In accordance with the EBO 188 Union and Enbridge annually file data on environmental screening for selected projects not subject to leave to construct. It should be noted that both Union and Enbridge developed environmental screening methodologies to implement the directions of the EBO 188. Union and Enbridge presented the screening methodologies to the Board after the EBO 188 was issued. Both methodologies are applied to implement the Gas RRR 2.1.13 environmental planning requirements to the system expansion projects. The purpose of the reporting is to ensure that the Board has on the record that Union and Enbridge consistently apply the environmental screening methodology to the system expansion projects as directed by the EBO 188. DATA REPORTED 2006-2008 In 2007 Enbridge filed data for 2 selected projects completed in 2006 construction year. In 2006 Enbridge filed data for 3 selected projects completed in 2005 construction year. Enbridge has note yet filed data for 2008.
The original data are filed in the format required by the Board and are available upon request. Interpretation The data filed are mainly descriptive and qualitative. The analysis of the data confirms that the environmental screening methodology has been implemented by Enbridge for planning and assessment of the selected projects. Enbridge provided an explanation of the rationale for the preferred alternative selection, comparison of alternative routes and impact identification and mitigation measures. The filing for 2006 and 2007 raise no concerns regarding the environmental screening. Action Board Staff contacted Enbridge to seek an explanation for filing no data for 2008. Enbridge stated it would provide an explanation.
Gas RRR 2.1.13 Environmental screening for selected projects BACKGROUND On January 30, 1998 the Board issued a Report “EBO 188 In the Matter of the Ontario Energy Board Act and in the Matter of a Hearing to Inquire into, Hear and Determine Matters Relating to Natural Gas System Expansion for the Consumers’ Gas Company Ltd., Union Gas Limited and Centra Gas Ontario Inc1.” (“EBO 188” or “the Report”). This Report established a set of standards that the utilities were to adhere to for all distribution system expansion projects. EBO 188 directed:
a financial and environmental assessment of distribution expansions based on a portfolio approach;
Discounted Cash Flow method for financial feasibility analysis;
customer connection and contribution policies; and
environmental planning; monitoring and reporting requirements.
Enbridge and Union have been filing the required information on a regular basis since 2005. REQUIREMENT GAS RRR 2.1.13
A utility shall provide in the form and manner required by the Board, annually, by the last day of the fourth month after the financial year end, an environmental monitoring report on completed natural gas system expansion projects of distribution pipelines and facilities not subject to leave to construct under the Ontario Energy Board Act, 1998, section 91, referenced in EBO 188, Appendix B, section 3.2B.
EBO 188 Appendix B, section 3.2B defines reporting requirements very specifically, as follows:
“In consultation with Board Staff2, the utilities shall select a set of completed projects and file data on those projects on an annual basis as described below. The projects chosen should be selected in a random, stratified manner, reflecting the range of environmental impacts encountered in the time period and the various levels of environmental planning, documentation and reporting required.
1 On January 1, 1998 Union and Centra merged to form Union Gas Limited. 2 Projects have been selected within district areas. Board Staff agreed that this is the acceptable method to select a sample of projects for this reporting.
The selection should be reviewed by an independent auditing group within the utility, which group shall include (a) trained environmental auditor(s). The utility shall file the following with respect to each sample: 1. a description of how the project complied with the Board-approved environmental screening, planning, documentation and reporting requirements; 2. a table of significant features, how they were avoided or mitigated, and resulting impacts; 3. a table displaying the concerns raised by affected parties including member ministries of the Ontario Pipeline Coordination Committee, how they were addressed, and reasons for any outstanding concerns; 4. issues of significance arising from any post-construction monitoring; 5. where alternatives were investigated, a display of alternatives (routes/sites) which show the various trade-offs between customer attachments, and environmental, social and financial costs and a discussion of how the preferred alternative was chosen; 6. evidence that all necessary approvals (permits, licences) were obtained; and 7. forecast versus actual costs of the environmental planning.”
PURPOSE OF REPORTING In accordance with the EBO 188 Union and Enbridge annually file data on environmental screening for selected projects not subject to leave to construct. It should be noted that both Union and Enbridge developed environmental screening methodologies to implement the directions of the EBO 188. Union and Enbridge presented the screening methodologies to the Board after the EBO 188 was issued. Both methodologies are applied to implement the Gas RRR 2.1.13 environmental planning requirements to the system expansion projects. The purpose of the reporting is to ensure that the Board has on the record that Union and Enbridge consistently apply the environmental screening methodology to the system expansion projects as directed by the EBO 188. DATA REPORTED 2006-2008 Annually, Union filed data on environmental screening for 3 different selected projects in 2008; 2007 and 2006. The projects were completed between 2008 and 2005. The original data filed in the format required by the Board are available upon request.
Interpretation The information filed is descriptive and qualitative. The analysis of the data confirms that the environmental screening methodology has been consistently implemented by Union for environmental planning and assessment of the selected projects. All the data was filed as requested. The exception is the values for environmental mitigation and monitoring costs. Union noted that these costs are incorporated in project costs. This is deemed acceptable. Action There are no concerns regarding the environmental screening reports. No action is required.