fei sec 71 filing biomethane purchase agreement gvsdd r1 … · these agreements contain...

August 16, 2013 Via Email Original via Mail British Columbia Utilities Commission 6th Floor, 900 Howe Street Vancouver, BC V6Z 2N3 Attention: Ms. Erica M. Hamilton, Commission Secretary Dear Ms. Hamilton: Re: FortisBC Energy Inc. (FEI or the Company)

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)

FEI files the following Application for approval of a Biomethane Purchase Agreement between FEI and GVS&DD dated October 16, 2012, pursuant to Section 71 of the UCA and acceptance of the related interconnection costs of FEI pursuant to Section 44.2 of the UCA.

1. APPROVALS SOUGHT

In this Application FEI is seeking approval of the Biomethane Purchase Agreement between FEI and the GVS&DD dated October 16, 2012 (the Agreement) pursuant to section 71 of the Utilities Commission Act. FEI is also seeking acceptance pursuant to Section 44.2(b) of the UCA of the capital expenditures related to the facilities required for this Biomethane supply Project.

The Agreement is for the supply of Biomethane as part of FEI’s Biomethane pilot project approved by Commission Order No. G-194-10 and the accompanying Commission Decision on FEI’s (formerly Terasen Gas Inc.) 2010 Biomethane Application (the 2010 Biomethane Decision). Biomethane supplied under the Agreement will be made available to FEI’s customers for purchase in accordance with the Biomethane rate schedules approved by the Commission as part of the Biomethane pilot program. FEI has filed for approval of a

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]

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Biomethane Purchase Agrmnt-GVS&DD

August 16, 2013 British Columbia Utilities Commission FEI – UCA Section 71 Filing of GVS&DD

permanent Biomethane program and is currently awaiting a Commission decision in that proceeding.

The Agreement meets the Section 71 filing criteria established by the 2010 Biomethane Decision. Specifically:

• The supply contract is at least 10 years in length;

• FEI has, by agreement, retained final control over injection location;

• FEI is satisfied that the selected upgrader is sufficiently proven;

• FEI has, by agreement, reserved the right to refuse gas if customer safety or asset integrity is at stake;

• The partner is public regional body, with a track record in dealings with FEI; and,

• The maximum price for delivered Biomethane1 on the system is below $15.28 per GJ.

Additionally, the amount of Biomethane supply under the Agreement fits within the Biomethane supply cap set by Commission Order G-45-13, which increased the Biomethane supply cap to accommodate 40,000 GJ annually from the GVS&DD.

FEI requests that the cost of service model and the Biomethane Purchase Agreement with GVS&DD contained in Appendices A and B, respectively, be held by the Commission on a confidential basis in accordance with the BCUC Practice Directive related to Confidential Filings. These Agreements contain commercially sensitive terms and negotiated rates, the disclosure of which will potentially impede FEI’s negotiations with other potential Biomethane suppliers on the best possible terms for customers. The confidential treatment is consistent with the one granted to the previous Biomethane supply contracts that were accepted by Commission Order G-194-10. (FEI notes that the three most recent Biomethane supply agreements were approved as rates pursuant to Section 61 of the UCA and therefore were required to be disclosed pursuant to the UCA.) FEI agrees to make the confidential appendices available to customer groups should they execute an undertaking of confidentiality.

2. REGULATORY BACKGROUND

The Agreement was originally submitted for approval by the Commission, along with three other Biomethane supply agreements, as part of FEI’s Biomethane Service Offering: Post Implementation Report and Application for Approval for the Continuation and Modification of the Biomethane Program on a Permanent Basis (2012 Biomethane Application). However,

1 The terms “Biomethane” and “Renewable Natural Gas” (“RNG”) are used interchangeably to refer to raw biogas

that has been purified (or upgraded) so that it is interchangeable with natural gas.


due to the need for more expedited approval of the supply contracts then would by the review process for the 2012 Biomethane Application, the Commission agreed to review the Biomethane supply agreements in a separate process. It was also determined that due to the findings of the AES Inquiry Report, until an exemption was granted for Biomethane suppliers, Biomethane supply agreements required approval as a rate under section 61 of the UCA. While the three other suppliers were willing to proceed with seeking approval under section 61, the GVS&DD chose to wait until an exemption was granted.

The key Commission orders relating to the review of the four Biomethane supply agreements originally included in the 2012 Biomethane Application are summarized below:

In Order G-29-13 and G-45-13, the Commission determined that the supply cap for the Biomethane pilot program set by Order G-194-10 is increased by an amount sufficient to accommodate up to an additional 280,000 GJ of supply annually from four suppliers, one of which being the GVS&DD. This additional annual supply in combination with the previously approved maximum supply of 250,000 GJ now totals 580,000 GJ.

In Order G-29-13, Appendix A, page 5, the Commission also stated:

The Commission Panel finds that a Streamlined Review Process is an appropriate regulatory process for the review of the additional contracts.

…

The Panel finds that the guidelines established in Order G-194-10 and the accompanying Decision, with respect to the criteria for supply contracts to meet the filing requirements in sections 71(1)(a) and 71(1)(b) of the Act, including the pilot price cap of $15.28 per GJ, will apply to the review of the four contracts for acceptance.

In Order G-18-13, Appendix A, page 10, the Commission, however, found that a CPCN is required for the GVS&DD project:

A CPCN is…required for the Greater Vancouver Sewerage and Drainage District unless it is exempt from regulation as a public utility as defined in the UCA. The Commission Panel further finds that approval of rates for a Biomethane project and acceptance of the energy supply agreements between FEI and the Biomethane supplier cannot precede the CPCN approval.

As a consequence of these Orders, until an exemption was granted, the GVS&DD’s biomethane project required a CPCN from the Commission and the Agreement required approval as a rate under section 61 of the UCA.

On August 1, 2013, an exemption was approved by the Lieutenant Governor in Council (attached as Appendix C to this Application).


Following the approved exemption, FEI is now filing the current Application to seek approval of the Agreement and the capital expenditures for the related interconnection facilities in accordance with Orders G-29-13 and G-45-13.

3. PROPOSED REGULATORY PROCESS

In FEIs view, this Agreement conforms to previously accepted criteria, and therefore the review could be accomplished in a brief written process.

Since FEI has had to wait until exemption is in place before seeking approval of this Agreement, the timeline for receiving approval of the Agreement has been necessarily delayed. However, the GVS&DD informs FEI that approval of the Agreement is needed by the end of September 2013. FEI understands that GVS&DDs partners are under strain due to the length of time it has taken to put in place all formal approvals in place and a decision beyond the end of September may put the project in jeopardy. FEI is therefore respectfully requesting an approval by that September 30, 2013. Based on the experience with the review and approval of the previous three Biomethane supply contracts, FEI anticipates that this timeline can be accommodated.

4. PROJECT OVERVIEW

The GVS&DD forms part of what is known as ‘Metro Vancouver’. The GVS&DD was created and exists pursuant to the Greater Vancouver Sewerage and Drainage District Act (British Columbia) and, amongst other responsibilities, owns, operates and maintains the network of trunk sewers, pumping stations and waste water treatment plants that convey and treat sewerage from GVS&DD’s 18 member municipalities and one electoral area. Metro Vancouver also includes the Greater Vancouver Water District, which was created and exists pursuant to the Greater Vancouver Water District Act (British Columbia), the Greater Vancouver Regional District, a regional district pursuant to the Local Government Act (British Columbia), and the Metro Vancouver Housing Corporation, a subsidiary of the GVRD.

The GVS&DD owns and operates the Lulu Island Wastewater Treatment Plant (Lulu Island Plant), located in Richmond, BC. Currently, GVS&DD recovers raw biogas from digesters on-site and uses that gas for heating the digestion process.

In order to supply Biomethane to FEI, a portion of the biogas from the Lulu Island Plant will be directed from digesters on-site to an upgrading plant where it will be purified and injected as Biomethane into the FEI system (the Project). Under the Agreement, FEI will purchase up to a maximum of 40,000 GJ of Biomethane from GVS&DD annually, and provide interconnection facilities. In order to avoid the potential waste of methane gas, GVS&DD may inject up to 100,000 GJ of methane per year. For methane gas above the annual volume of 40,000 GJ, FEI will only pay a rate equivalent to the current natural gas rates at


the time of the transaction. This mechanism is described more fully below (Section 4.2 and 4.3). The Project will provide environmental benefits in the form of reduced GHG emissions. Assuming the 40,000 GJ of Biomethane produced annually displaces natural gas, an estimated 20,000 tonne CO2e

2 of GHG emissions can be avoided over ten years.

Key data regarding this Project and the Agreement, including price and expected volume are provided in Table 4-1 below.

Table 4-1: GVS&DD Agreement Highlights

Item Amount Comment

Wastewater Treatment Plant Location – Richmond BC

Volume 40,000 GJ Maximum Biomethane Volume

+60,000 GJ Maximum Volume Purchased @ Sumas rate

Start date (first gas delivery) 2015 Revised from original Application

Contract Term 10 Years Auto Renewal Clause

FEI Capital ($000s) $739.2

Total Capital (GVS&DD) $13.1 Million Project Cost Estimate by Metro Vancouver

Price $13.40/GJ First 40,000 GJ (Up to 275 GJ/day)

$10.68/GJ Minimum Price

$0.135/GJ Adjustment per $100,000 below Metro Vancouver budget

Sumas Rate Volumes above 40,000 GJ/year

Inflation Factor on price 1.5% Will not reach $15.28 until 2022

4.1 BACKGROUND The Lulu Island Plant has been in operation for since approximately 1973. Currently, GVS&DD uses much of the raw biogas produced for wastewater treatment process heating on-site. In 2009, Paradigm Environmental (Paradigm) was awarded Provincial Innovative Clean Energy (ICE) funding to demonstrate a technology that could increase raw biogas production and reduce the solid waste residue of the current wastewater treatment process. In cooperation with the GVS&DD, Paradigm planned to put technology in place to increase biogas production, while the GVS&DD would be responsible for putting electricity generation in place. However, after further evaluation by the GVS&DD, it was determined that it was not economical to generate electricity. The GVS&DD then approached FEI to negotiate a Biomethane purchase agreement as an alternative to producing electricity by using the residue gas.

2 Assuming combustion of natural gas emits 0.050 tonneCO2e per GJ

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As with previously designed interconnection equipment, FEI will build this equipment onto a skid to maximize removability and portability.

All the proposed interconnection facilities are necessary to connect the GVS&DD project to FEI’s distribution system and facilitate the injection of Biomethane for use by FEI’s customers in accordance with the terms of FEI’s Biomethane program.

4.4 ESTIMATED INTERCONNECTION CAPITAL COSTS FEI has estimated the total capital cost for the interconnection pipe and facility. The capital costs for the interconnection were included in the 2012-2013 RRA. The summary of costs is provided below (Figure 4-3):

Figure 4-3: Lulu Island WWTP Interconnection Capital Cost Estimate

When estimating the capital costs provided above, FEI used a method consistent with the three other three Biomethane projects approved by Order G-45-13.

This cost per GJ of the interconnection facilities for the GVS&DD Project is in the middle of the range of costs for approved projects. As indicated in the 2012 Biomethane Application proceeding, the average capital cost for interconnection facilities per GJ (for 20 year volume) for approved Biomethane and Biogas projects ranges from $0.34 per GJ to $1.48 per GJ. The average cost of the GVS&DD project is $0.92 per GJ using the Biomethane purchase volume of 40,000 GJ annually.

FEI has provided the highest and lowest average cost per GJ of the approved Biomethane and Biogas projects along with the estimated cost per GJ of the Project in Figure 4-4 below.

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Island

Year in Service (Estimated) 2015

472 Structures 91$ 474 Regulator & Meter Installation - 475 Mains 100 477 Mesuring & Regulating Equipment 538 478 Meter 10

Total Direct Costs 739$


Figure 4-4: FEI Average Cost per GJ of Project vs. Approved projects

Based on this analysis, FEI believes that the cost for the interconnection pipe and facility for the GVS&DD project is reasonable.

4.5 REQUIREMENTS OF SECTION 44.2 OF THE ACT FEI is requesting that the Commission accept the interconnection capital costs as being in the public interest pursuant to section 44.2 of the Act. With respect to the matters that the Commission is required to consider when accepting capital expenditures pursuant to section 44.2 of the Act, FEI notes the following:

1. Acceptance of the capital expenditures for the interconnection facilities is supported by British Columbia’s government energy objectives as set out in the Clean Energy Act. In particular, the GVS&DD project which will be facilitated by the interconnection facilities will:

(a) Foster the development in BC of innovative technology that supports the use of the clean and renewable resource of Biomethane, including the technology developed by Paradigm as part of the GVS&DD project.

(b) Reduce BC greenhouse gases by an estimated amount of 2,000 tonne CO2e annually assuming 40,000 GJ of Biomethane production per year. Biomethane has been mentioned in the Province’s most recently published Natural Gas Strategy. Specifically, in the section titled “Natural Gas is a Climate Solution” the Province of BC agrees to “Encourage biomethane opportunities…” as one way to address emission targets.

(c) Facilitate the displacement of the use of conventional natural gas with GHG-free Biomethane as the production from the GVS&DD project will be made available to FEI customers as part of FEI’s Biomethane program.

(d) Will make use of a resource that would otherwise be burned on-site (with a flare) and replace natural gas with biomethane.

ParticularsFraser Valley

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Minimum Approved

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Total Interconnection Cost ($000's) 504$ 1,189$ 739$

20 Year Expected Supply Volume (GJ) 1,485,555 801,000 800,000

Capital Cost $/GJ 0.34$ 1.48$ 0.92$


2. Acceptance of the capital expenditures for the interconnection facilities is consistent with FEI’s latest long-term resource plan, approved by Order G-14-11, which included increasing supply and sales of Biomethane as part of the Action Plan.

4.6 INCENTIVE FUNDING There is no external or incentive funding provided to FEI for the Project.

However, Paradigm and GVS&DD have secured funding from the Provincial ICE fund and the Union of BC Municipalities Infrastructure fund. The GVS&DD has indicated that its funding Agreements are subject to Commission approval of the Agreement between FEI and GVS&DD. If GVS&DD is unable to retain the funding, the project may not proceed. Over the past year, FEI has provided letters to the funding providers to confirm that it has a signed Agreement with GVS&DD and is seeking approval of this Agreement with the BCUC.

5. COMPLIANCE WITH BIOMETHANE SUPPLY CRITERIA

The 2010 Biomethane Decision established criteria necessary for Biomethane supply agreements to meet the filing requirements of section 71 of the UCA. As noted above, the supply cap, which is one of these criteria, was expanded by Order G-45-13 to accommodate the supply from the GVS&DD project.

The Agreement satisfies all of the criteria established in the 2010 Biomethane Decision as expanded by Order G-45-13.

Table 5-1 sets out the criteria established in the 2010 Biomethane Decision and the corresponding clauses in the Agreement that meet the criteria.

Table 5-1: Contract Criteria GVS&DD

Criteria Contract Clause Comment

The contract durations (terms) are at least 10 years in length providing reasonable period over which to recover equipment costs

Clause 2.1, 2.2 10 Year Contract with one automatic 2 Year renewals – Right for non-renewal

FEI has, by agreement, retained final control over injection location

Clause 3.2 Clause 3.6 Clause 3.8

Defines Facilities Confirms ownership Confirms FEI monitors Quality of Gas

FEI is satisfied that the selected upgrader is sufficiently proven;

N/A

FEI is satisfied the GVS&DD will engage in a fair and transparent process to select an upgrader that is sufficiently proven. GVS&DD has stated that it will impose criteria in its procurement process to select an upgrader that is sufficiently proven.


Criteria Contract Clause Comment

FEI has, by agreement, reserved the right to refuse gas if customer safety or asset integrity is at stake

Clause 5.1 Biomethane must meet pipeline specification prior to being accepted

The partner is a municipality, with a track record in dealings with FEI or it must provide security.

N/A

The GVS&DD forms part of what is known as ‘Metro Vancouver’ and is a government owned and operated utility, funded by taxpayers, which for practical purposes is a government body. Letter of Credit not required

The contracts provide FEI with appropriate security against stranding or the partner is a government body

N/A

The GVS&DD forms part of what is known as ‘Metro Vancouver’ and is a government owned and operated utility, funded by taxpayers, which for practical purposes is a government body.

Volume of Biomethane Below Maximum Approved Volume

N/A

Volume of Biomethane in this contract when added to existing approved Agreements remains within Maximum approved by G-45-13 and the 40,000 GJ annually specifically approved for the GVS&DD by Order G-45-13. Also see Section 4.2, 4.3 of this Letter.

Price below $15.28 Schedule C,

Clause 1.1, 1.2, 1.3 1.4

Initial Price $13.40/GJ with inflation and price adjustment. Price adjustment may only decrease price of Biomethane. Price limited to BCUC approved Maximum at all times.

This Agreement is similar in structure to previous approved Biomethane supply agreements, with the exception of the biomethane price and the ability for GVS&DD to supply “natural gas” rather than biomethane to FEI. The Biomethane price is discussed immediately below. The supply of “natural gas” under the Agreement, which is not contemplated by the criteria set out above, is discussed in the following section.

The Biomethane price will not be finalized until the completion of the capital portion of the Project, but at no time will it exceed the price of $13.40/GJ. The starting point of $13.40 and the price adjustment mechanism were negotiated in an open book process where GVS&DD shared the budget for the Project with FEI and developed a price that provided a return suitable for a regional infrastructure project. FEI believes that this return is reasonable.

The final Biomethane pricing in this Agreement is set as follows:

1. The Biomethane price is initially fixed at a maximum of $13.40/GJ.

2. Upon completion of the capital work done by GVS&DD, the price may be adjusted.


3. The price per GJ of Biomethane will be reduced by a fixed amount for every $100,000 the Project is below the Project cost estimate provided by GVS&DD and excluding FEI capital costs. The price will not be adjusted upwards based on this calculation.

4. On a yearly basis, and after the initial Biomethane price determination, that price will be subject to an inflation factor.

5. At no time will the inflated Biomethane price exceed the BCUC approved maximum price for Biomethane.

This price setting takes into consideration that the Project cost estimate developed by GVS&DD for its facilities which may be overly conservative and therefore high. Thus, under this setting, FEI is provided with an opportunity to pay a lower price for Biomethane in the event that GVS&DD can execute its project below its cost estimate).

6. TREATMENT OF NATURAL GAS SUPPLY

The Agreement provides that GVS&DD may supply volumes in excess of the 40,000 GJ Biomethane supply cap. As the GVS&DD would own any GHG reduction credits for these volumes, these volumes would not be treated as Biomethane for the purpose of FEI’s Biomethane program. FEI recognizes that the approval of the supply above 40,000 GJ is not contemplated by the filing criteria for Biomethane supply contracts. FEI is therefore seeking approval of this aspect of the agreement independent of the Biomethane supply criteria discussed in the section above.

In agreeing to this aspect of the Agreement, FEI has sought to advance the generally understood government objective of advancing low carbon energy projects and by providing a way to avoid wasting natural gas at the Wastewater Treatment Plant. Using the gas rather than flaring makes use of a renewable resource and reduces waste. FEI therefore believes that it is in the public interest to approve the potential for natural gas supply above 40,000 GJ pursuant to the Agreement. The gas contemplated above the 40,000 GJ per year is referred to as Excess Gas in the Agreement.

GVS&DD has its own GHG reduction objectives as an entity that is part of Metro Vancouver. By using Biomethane for its own use, rather than selling it to FEI, the GVS&DD has the option of reducing its own emissions by assuming the benefits. Although the GVS&DD clearly had its own objectives with regard to emissions reduction, it recognized the value of supplying Biomethane to FEI thereby making Biomethane available to FEI customers within Metro Vancouver. The GVS&DD also recognized the value of having an available natural gas system where the gas can be injected – eliminating the need for balancing supply and demand on the WWTP site. The Agreement attempts to balance the conflicting objectives of GVS&DD to minimize its GHG emissions with FEIs desire to maximize the amount of Biomethane available for its customers.


There are three reasons why this approach is reasonable and does not add any burden to existing non-bypass natural gas customers. The likelihood of purchasing Excess Gas is low, the volume of Excess Gas is low when compared to non-bypass volume (or Midstream Volume) and the price of the Excess Gas is equivalent to a market price for natural gas that is consistent will gas supply purchases within the Midstream. Each of these will be discussed briefly below.

First, the amount Excess Gas, if any, is not certain at this time. According to GVS&DD, the Project ability to deliver more than 40,000 GJ of Biomethane annually depends on the ability of the Paradigm technology to increase raw biogas production. FEI has confirmed with the GVS&DD that it does not intend to supply significant amounts of Biomethane in excess of the annual 40,000 GJ contracted amount.

Secondly, the maximum annual volume of Excess Gas that could be purchased by FEI is immaterial when compared to the annual volume consumed by non-bypass customers (or volumes in the Midstream). The maximum volume of 60,000 GJ annually represents approximately 0.05% of the annual non-bypass customer core load3. FEI considers this volume insignificant considering that the variation in annual demand is greater than this amount.

Thirdly, the price for Excess Gas is equivalent to a market price and is reflective of costs that the Midstream would currently pay, and therefore it is a price that would be paid by FEI customers regardless of the source. Specifically, FEI has agreed to purchase Excess Gas at the Sumas index price. FEI would treat these as spot purchases of conventional natural gas with costs recorded in the MCRA. These volumes would not be sold by FEI under its Biomethane rate schedules, but as a conventional natural gas commodity to its customers. This is the same procedure that FEI employs to purchase conventional natural gas.

FEI believes that the purchase price is reasonable as it is based on a market cost for natural gas and will keep non-bypass customers whole in terms of costs. There are benefits to producing the gas closure to the point of customer consumption. As with other Biomethane projects, the local supply of biomethane, and in this case natural gas, improves the reliability of the overall natural gas system by reducing dependence on traditional supply and the infrastructure to move it to where it is consumed.

The Sumas Price is the best comparable price based upon the location of the supply. The Biomethane is being directly injected onto the system within a major FEI load center.The next closest purchase location for the load center is the Sumas Hub and therefore the gas injected at the Lulu WWTP should be considered equivalent to gas purchased at the Sumas Hub with regard to price.

3 Assuming ~115PJ annual non-bypass customer consumption


Because there is no certainty that any gas above 40,000 GJ will be produced annually, and any such gas would be non-firm, FEI has not apportioned any capital or O&M costs to the interconnect facilities for gas produced above 40,000 GJs annually.

FEI does not foresee adjusting the Annual Contracting Plan (ACP) supply resource requirements for these spot gas purchases because the volume is not material and without a firm volume guaranteed each day. Until the volumes are material, reliable and consistent from day to day, the supply cannot be counted on to meet forecast core load requirements and meet the objectives of the ACP. Typically, spot supply is contracted for on a short duration and used to balance load on the system on daily basis. The volumes contemplated in the Agreement are small enough that typical spot purchases will not be affected on a daily basis. Regardless of FEI gas supply practice, there is the practical aspect of additional gas being added on system close to the load. This gas will displace traditional natural gas and therefore FEI will not need to purchase that gas from another source.

FEI submits that the supply of natural gas above 40,000 GJ annually under the Agreement is in the public interest and should be approved.

7. RISKS AND MITIGATION

As with other approved Biogas or Biomethane projects, the risks associated with FEI’s capital investment in the interconnection facilities and piping are low and many risks have been addressed in the Agreement. FEI addresses the key supply risks below.

7.1 POTENTIAL FOR STRANDED ASSETS FEI will be installing interconnection assets (metering, monitoring, odorizing, safety control and piping) at the site and will treat the risks consistently with previously accepted Biomethane and Biogas supply agreements as discussed below.

FEI has a relatively low risk of stranded asset as FEI’s risk is limited to the estimated cost of the below ground assets at under $100 thousand. FEI has taken appropriate steps to mitigate this risk contractually. More specifically:

• The Biomethane generated by this Agreement will be consumed based on the anticipated demand.

• FEI has the full control of its facilities and will have full access to them.

• The above ground facilities used may be removed and used for other projects. They will be designed to maximize the ability of FEI to relocate.

• The contract term is 10 years, which provides reasonable period over which to recover equipment costs.


• The supplier is a government owned and operated utility, funded by taxpayers, which for practical purposes is a government body.

FEI also believes that there is no incentive for the GVS&DD to terminate the Agreement before its assets have been fully depreciated because:

• By terminating the Agreement, GVS&DD would be foregoing significant revenue under the Agreement that would otherwise pay for the assets they have installed.

• GVS&DD has relatively high value of investment in Biomethane equipment at their site, resulting in a strong incentive to generate revenues under the Agreement to pay for that investment.

Additionally, the Agreement is subject to automatic renewal, which provides additional assurance that GVS&DD intends to cooperate with FEI into the future.

7.2 PROJECTS IS VIABLE FEI believes that this Project is viable and that the GVS&DD has the necessary funding in place to ensure project success. The GVS&DD has approached the budget and design in a very conservative manner and has the financial resources to ensure the Project is completed. The GVS&DD openly shared its financial model with FEI and FEI has confidence in the capital and operating budget as well as the projected Biomethane volumes. GVS&DD has had the full Project budget approved by its Board.

The plant, located in the City of Richmond, has the full support of that municipality. The City of Richmond has specifically indicated its desire to purchase Biomethane provided that this project successfully comes on line.

7.3 SECURITY OF SUPPLY From the perspective of the Biomethane program, one of the risks it faces is the risk of under-supply. FEI has addressed this issue on a program level by putting mechanisms in place to avoid under supply. For example, FEI intends to hold an inventory of Biomethane to ensure its renewable natural gas customers can be served at all times.

On the supply side of the program, it is important to diversify supply in order to improve the reliability of its supply pool. In the case of this Agreement, FEI will be reliant upon GVS&DD’s supply to meet customer demand in the future. The addition of the Biomethane supplied under the Agreement will further improve the diversity of the supply portfolio and support FEIs objective of meeting the demand of its customers.

FEI’s supply risk mitigation measures are currently within the scope of the Commission’s review of the 2012 Biomethane Application.


8. CONCLUSION

As the Commission determined in Order G-194-10, and subsequently in G-45-13, a biomethane purchase agreement that meets the criteria set forth in the 2010 Biomethane Decision satisfies the requirements under sections 71(1)(a) and 71(1)(b) of the Act. As explained above, the Agreement with GVS&DD satisfies the identified criteria and FEI therefore respectfully requests Commissions acceptance of the Agreement. FEI also requests that the Commission accept the capital cost required to interconnect the GVS&DD project as described above pursuant to section 44.2 of the UCA. These costs are necessary for the GVS&DD project to proceed and, in FEI’s submission, are reasonable and in the public interest. If you require further information or have any questions regarding this submission, please contact Scott Gramm, Business Development Manager at (604) 576-7242. Sincerely, FORTISBC ENERGY INC. Original signed by: Shawn Hill

For: Diane Roy Attachments cc (email only): 2012 Biomethane Application Registered Parties

Appendix A BIOMETHANE PURCHASE AGREEMENT

FILED CONFIDENTIALLY

Appendix B GVSDD INTERCONNECTION RATE BASE &

COST OF SERVICE

FILED CONFIDENTIALLY

Appendix C EXEMPTION ORDER IN COUNCIL

PROVfNCEOF BRITISH COLUMBIA

ORDER OF THE LIEUTENANT GOVERNOR IN COUNCIL

Order In Coum;il No. 347 , Approved and Orderod AUS'" 12013

~----::;---=-::=: --------. / Administrator .

ExeeutlVG CttullelL ChnlllbGI'Ss Victoria

On me recommendation of the underslgned,tlhy and withfhe ttdvlce and oon~nt or the. Bxecutive Q:l\Ulcll. orders that approval!s giwn to' the Brltisll Columbia Utilities COlmnissioll to !}xempt blogas and blomethanQsnppHers. selling to a publIc utiHfy from Ute following provisions of the Utilllles CommissIon Ac( fOl' the plll'P'Os.es ohnd subje~t to the termsstlbsfantlaUy setont in too. attached draft order O.f the British CQlumbla utllities Commission: .

(a) Part;l other than sections 42 and 43 (1) (8.) and (b) (iJ and (2) to (5); (b) Seclion71,

Aftomey General and Minfsterof JusUce Proskllny Member of (he Executive Council

(1'lIk'JN1¥1 lsiOf' (U/Jl1hIbfmtll'lt JRIfPO'~;nm!J' and is 11<l(pai'1 of/lte 01lkr J . A\ltbllrlly under wlildl Oriltl' fs lIlll;lio;

Act and seetlo!1~ Utilities C(}m1ll1.~$foll Acl, R.S.B.C. 19%, c. 413, s. 8S (3)

Other.

June 10,2013 . page tofS

\.

SlJ<JHfl.<lM-,9tb Hollie srntlrr •• oX:is6 VNKOWfiI.8C VOUII3 OWIJA ""b-~hi;O'JJW.<m.~"'"

IliTflE MATTEij Of the, Utilities Commission' Ad, R,s. S.C: 1996, Chapter 4-73

,md , ,

BRrnSIf Cf{lUM8fA

UTiUTIES COMt.lISSIOI1,

OallER

NIJMt£~' DRAFT

JU£l'HOOE: ~ ~ro I!{ilottfRff: 1_~='

fAaIlili£: !OO'It $6().:ua2

ExemptiOn nom Certain Prmifsfmis of Part 3 of tlJe !ft1lities (cliuriisslon Act for , . B~ga:s and Biomethane Suppliers Selling to a ,p-ubliC Utllity ,

J, f:.Qmmissioner [Oat?] ,

WHEREAS:

A. On Aprl!10, 201~ by Order G:'54-13~ the Brllish Columbia Utilities Commi~lon (C?mmission) initiated an lnquiry;illto an Exemption fOf'Biogas, and Biomethaiie Suppliers;' '.

B. During Ule Inquiry the Com$lssiqn rece~ed from Reg(ster~q fnteryeners submissions on the'P(9!1Os~ Terms of the Exemption and aaompanyingOlmniission Questions; ,

. C. Pu(s.l!ant to Order&65-131:he C<lp'1,Tiiission receiVed from Intervener-: tesponse.submfssions 01} ~ubmlsslons made by of her Interveners; . '.

D. 'On MflY~, 2013, th~ C'lriffnisst6n i~ued a Reportin the l~qulryihtoalJ &~l'!iptl,Qn fOr ,Blogas and Blomethane Sup~liers (Inquiry Report). The Jiiqu-iry Report det~rn:iined that the C0rilmisSlonsoo\lld proceed with:1O exemption for blogas and bfCim¢lai'!e sUppliets .. vnen selling t9 a "PUPIl!: utilitY?' .

E. Th~ Utilities Commission Ad( Uo:!)' defines a "p~bliG utlJltyv,ln part, as ~a persori"or thepeTsall's ~ee, t(liste~, teceivi;r (l~ tiqti\dat~r, who (IWn,sor operates in ,British C-olunijjJa, ~ujptrientoffal:lIities: for the " pr04l.!ction, geri,?ra~n. sjorage"tral}Sin'/ss19n, Sale; i,feliv,eiy or prO\!lsjpn ot~f~clty, naw.ral gas;,st~ .. m, Of

, any ollie! agentfor the production otilgbt, heat, Cold Of power to or for.he pUblic or a corporation for compensationi' ' ' ' ,

, f.Appllcable perdons,wM ~nter into energy Stlpplvcori~~ctsas defined by~ction ~ ohhe UCA must file copIes ofth,:cOlltmck \YHh tlte ?=>minissiOn llftder s.."Cuon 71 rif the UO\; .. '"

,'6. 'S~bsection 82fl} of the DCA provideS that the Co~mlssion mayan itS own'inotion In<juire iti~, hear and 'deti;miillea'ma"ttetthat undeFtI!¢ UCA it,may illcjulre Into, hear or determine en appl(cation;

page 2 ()f~'

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I ! i -i

1-I I

I I' !

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I

:4

BRlT~SI1_Co_tUMBIA c',

Um.lTI£s COMMrssloN

-ORDER

NUMBER DRAFT

H. . Su~ction 88(1) of the UCA aJlows the-C~miSs!on to make an order, rule ';ffegulation apply -to alioseSr

, or to '3 partloofar case 0( ~ss 0{ ctiS{lS, or to lI. Wi~at person;

l. Sub5~~on &'lea} ofilia UC4 provides'that the O?mm!ss!pn may, ,vith the adVance approval of the .Ueut~n.allt Governorill Couli~1 (lGlq and on ccndltfons !tcQnsi,dets advis<!llle; exempt.i perSon, equipment or fatilitles,from the ,application clall or any of the pr<Nisiof)s ofthe u~ of may nmit orvary the applicatIon ohlle U~; , "

1. Part 3 ofthe ut4- i~,clud~svalious re!W!re~nts Including: settkin 4i -d~ to oIiey orders lmd section 43':' dutY to provideJIl~ormation; -

K. for the,purposes '* this Order, the'Co!llmlSsion t~si<!ers thedass of ta~ fOr exemptlol!l:o be that where a person'who owtis ~r operates equipment, equipment, fudlines, plant,'';r systems use~ for the productlon arid ~a!e of blogas 0( Dlomethane ti:. a public utility, :W®re the Comniission. can ieview ot has reviewed-the puichase of biogas or biomethane by a pub!\<: utility tnrough an energy supply contrad tinder sectkin 7i of fueUCA; '- ,

L'- By Order6~194-10~_the CommIssion accepted the orlginal Pur$se of Blogas Agreemen~ between FortisBe Energy Inc. {FEI} and Catalyst Po~vtir Inc. (CPI) fOf a blogas faoUty InJh~ vkinity'Qf AbbotsfOrd, Be. fraser . Valley Biogas ltd. (BIB) then subsequentlyaequiredthe GPlblogas facility. ByOrderf-1~12 \f<)ted March 22, ion, tlte Commission 'accepted theBlometh~ne Purdiase'Agreement mihveenfEl and fVB; ,

- • .' <' • • • -'

M. By Order G-79,13, dated May 14, ~,()13t 'the Comm ~lonaPP(oved rate~fur ea~h of fartlt' Renu Energy Corp., .. Dlcklarids i=:arms, and 5eahreeze farm ltd. under section 61 of the UOHorthe !>ale of biomettiane to "

FortisBC Energy Inc. (FB). AJso, t~ Commissfon in Directive :3 of 6-19-13 stated; "If, subse'quentto this "i.der,ll ~jome\b<.!ne suppli~r listed In Dlrec,tNe 2 abpyelsexlfmpted from section 61¢ the utA, then, pursuant tQ subsection:$O(l) ofthe (fC4,llie folio\,Vjnifdir~tive wiltapply_to that Blome-thane Supplier

, " effud:illetlle date I;heexemption comes into effeci! . , -, .. TheaPptoVat gTanted iR- DireCtive 2 above pursuant tosectkihs 59"to ~ IS Ca~led; and " .. _ PursUant triSection 71 oftJteUO\ aiW the <;ominiSsiofiJsRtil~s for Natur31 Gas Erler~ Supply

, COntracts, !he Cominlssion 'aCcepts f9t filing ~ Biometh,ane Purchase Agreement and any ',3l1len'dments betwe~n'FEl an~ that BlOlllet~eSuppner;" ' '

N.· Foi- the ~~eofthls'Order:_· .

,. "blogasUis define<J >IS rllwgas fr()ffi imy o!ganic:~ur~ ~h3t Is capable of b(:fng purified 'or upgraded tq , plpelin., q\lal1tyg'a~, well a;; 19\'1 gas substantially cO!l)poseih)f methane th<!t Is pr9ciuced ~y ~1)rganlc bJ:eakdown of matter hi the ~bserrre of ~xYgel'lJ and -

"biometh'lJle~is defiiied as !;llogas that is Pllrified pi upgraded to -meet 'tJre pubrtt utility'? s~cificatiOfJS fur Injection into its natu~1 gas pipeiine;· - . '- -,

,"

3

BRiTlSll COLUMBIA·

UTIUTtES COMMISSION

ORDER NUMBER

0, By Graef in Council No. [-I dated [-) a~d aj:ta.~edas AppendIX 1 'to this: Order, the lGjC g[an~ advance apP'roval to tfl.e (,klmmissiontq exemptl~toga~ and biomethime-supp/iers };elliog to a public utility from· certain provisfons Of the UCA for the ·purpose and subject to tile terms setout in-the drafl;Crimmlsslon Order attaCh-ed~ the Oroerin COuncil; and .. " . .

P. fhe Commisskm "as considered the issues in the Inquiry, cimsldere,i the submissions received from ' IhieN.eners~ a'nd has determl)led t1nit exemp~ a b10gas or b10mdhane SUpPlIer \WO sells t~ a public utfllt,y, where' tpe'Commlssl~~ wOljlcl revf~v~epu~~ of blogas pr bi6mllthane by a publlc utility through an energ'{.supply oontractunder ~tion 71 orthe UeA, from certabi prollisionsof the !lCA Is In the pubiic interest. " , , . ' .

'1. Subject to Directive 2 ofth~ order, the tommissiol1 hereby exemp~ fro~ the ptovislotlS pf Part 3 of th~ Utf1ities wmmisslO/l Act (UCA} with the exceptiOn of sections 42 an~ 43 btt not lndudlng subsecfion 43P.XbXii) of the UO\: . .' .

. . I. a person. wpa ·O\yns 9r operijtes-eqillpment, flicifities, plant, 'proj~cts, or ~Y.StellJs used for the

prodtktioll and sale of blogas Of hromethane to a public utility, where the Comtn.isslon·can re\llev/or : ha~ tev!e\~ the'purtfu!se of biogas or hiomethane by a public utiiity thrQugh an energy supply· ,contr;Jct under sectlon 71 of theUCA;· .

ii. subse~tiOfl {i} abOv~ shalf not ~pP!y to a ~rsonwbo; at the tI~e ~f entering lnto an agteementt~ produce al}dsel! bfegas or biomethane to a public utllitWl!;otheroise a puilU<l utilfty and not exempt Iri?m aa rate pr?Visions ofP.srt 3 of the UCA; .

Iii. subse<:tion {iiI above shall not apPly t~ a person who IS a biOgas or blornethanesupp/ier with a Comrnissbn 'appuw~ rate schedule under sectlan 61'01 tlie UDi tJ:!at isineifect 01'1 the date.of tilJs Ofder;Who $el!s bioga} or biomfthane t6;a pt,lbliC utll!ty~orl \.'iho ot!ie~ ~oqkl riot be apublle

.. ulifity •. If the supplier's flI!escbedule .tinder sectjon -01 ofttie UQ.\,ls cancelled, the person applicable under ,subsection(iiij doesqualifY fo~ ,:~mptl{)~ lrilaer subsettiqn (i) above; and

Ii'

4

BRiTISH CdLUMSIA

UTlllTI£S COMMISSIon

ORDER

NUMRER, DRAfT

2. The exemption 'w the' person r.~ferred to In Dlfej;Ove 1. of this Ordenemains Tn efteCt fur that person ulltil the Coml1liS~on, afu;r a be;lring Of} its qwri mo~OIi or after iI hearing on ;l CQlnpiaJntby ;1I1inte~eq , pl;TSoo, ()rders thatthe exemptlqn no '!Qnger'appl{es U; the pei'SOn refurred to in mrective 1 of this Order.

DAnD at-the Oty'ofVaneouver, 10 th~ Province ofBrltlsh Columbia, this day pf [month] 2013.

BYOIlQER

OrigifI(Jl signed by:

xxxx , CommissIoner

.:.."

page50fS

Appendix D DRAFT ORDER

SIXTHVAN

B

W

A

B

C

D

E

F

H FLOOR, 900 HOWNCOUVER, B.C. V6

web site: http://ww

BEFORE:

WHEREAS:

A. On AugusCouncil noBiomethaCommissi

B. On Augusunder secand Great

C. In the Apppurchase 13 where contempl

D. In the Appfacilities a

E. In the AppApplicationature; an

F. The Comm

WE STREET, BOX 256Z 2N3 CANADAww.bcuc.com

FoFortisBC

st 1, 2013, theo. 347 giving

ane suppliers on Act (the A

st 16, 2013, Foction 71 of theter Vancouve

plication, FEI agreements sthe Biomethated in the A

plication, FEI associated wit

plication, FEI on as Appendnd,

mission has re

50

the Utilities

or Approval oC Energy Inc. a

e Lieutenant Gpermission toselling biogas

Act) where the

ortisBC Energe Act, for acc

er Sewerage a

represented set out in Ordane supply cagreement;

also requesteth the Agreem

further requeices A and B

eviewed the A

IN THs Commission

A Filing by of the Biometand Greater V

Governor in Co the British Cs and biomete Commission

gy Inc. (FEI) fileptance of an

and Drainage

that the Agreder G-194-10 ap was increa

ed the approvment;

ested the Agrrespectively,

Application a

DRAFT

HE MATTER On Act, R.S.B.C

and

FortisBC Enerhane PurchasVancouver Se

(

Council of theColumbia Utilhane to a pubn can review

ed with the Cn executed BiDistrict (GVS&

eement compand related d

ased to specif

val of capital

reement and be held conf

nd is satisfied

F . 1996, Chapt

rgy Inc. se Agreemenewerage and

(Date)

e Province of lities Commisblic utility frothe supply co

Commission aiomethane Pu&DD) dated O

plies with the decision as wfically include

costs associa

the financial fidential due

d that the Agr

ter 473

nt Between Drainage Dist

British Columssion (the Co

om certain secontract under

an applicationurchase AgreOctober 16, 2

criteria for nwell as the cone the volume

ated with the

model, appeto their comm

reement is th

Order No. EPag

TELEPHONE: (604BC TOLL FREE: 1-8

FACSIMILE: (604)

trict

mbia issued anommission) toctions of the r section 71 o

n (the Applicaement betwe

2012 (the Agr

new biomethanditions in Orof Biomethan

interconnect

nded to the mercially sen

he public inter

E-XX-12 ge 1 of 2

4) 660-4700 800-663-1385 ) 660-1102

n Order in o exempt Utilities

of the Act;

ation), een FEI eement);

ane rder G-45-ne

tion

sitive

rest.

SIXTHVAN

N

D

H FLOOR, 900 HOWNCOUVER, B.C. V6

web site: http://ww

NOW THEREF

1. Pursubetwemode

2. Pursuinterc

DATED at the

WE STREET, BOX 256Z 2N3 CANADAww.bcuc.com

FORE the Com

uant to Sectioeen FortisBC el and Agreem

uant to Sectioconnection fa

City of Vanco

50

mmission orde

n 71 of the oEnergy Inc. a

ment that are

on 44.2 of thcilities requir

ouver, In the

ers as follows

f the Act, theand GVS&DDappended to

he Act, capitared for the GV

Province of B

s:

e Commission. The Comm

o the Applicat

al expenditurVS&DD supply

British Columb

B

n approves thmission will ketion.

res describedy project are

bia, this

BY ORDER

e Biomethaneep confident

d in the Appaccepted.

day of <mon

Order No. EPag

TELEPHONE: (604BC TOLL FREE: 1-8

FACSIMILE: (604)

e Purchase Atial the cost

lication relat

nth>, 2013.

E-XX-12 ge 2 of 2

4) 660-4700 800-663-1385 ) 660-1102

Agreement of service

ed to the

fei sec 71 filing biomethane purchase agreement gvsdd r1 … · these agreements contain...

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