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Pinter Electrical Consulting Inc. 7229 Heritage Court Lake Country, British Columbia V4V 2L3 [email protected]

Via Electronic Submission

Oct 3, 2019

British Columbia Utilities Commission ATTN: Mr. Patrick Wruck, Commission Secretary 900 Howe Street Sixth Floor Vancouver, British Columbia V6Z 2N3

RE: Project No. 1599020 Application of CB Powerline Ltd. for an exemption from Part 3 of the Utilities Commission Act, pursuant to section 88(3) Response to Fortis BC IR No. 1

Dear Mr. Wruck,

Further to the June 13, 2019 filing of the above-noted application, and in accordance with the regulatory timetable established by Order G-151-19, please find enclosed CB Powerline’s response to the Fortis BC Information Request No. 1

For further information contact Jim Pinter at 403-701-1563 or by email at [email protected]

Regards,

Jim Pinter

B-3

ylapierr

Exemption Application

CB Powerline Ltd. (CBP) Application for an Exemption from Part 3 of the Utilities

Commission Act, pursuant to section 88(3) (Application) Submission Date:

September 5, 2019

FortisBC Inc. (FBC

Information Request (IR) No. 1 to CBP Page 1

CB Powerline Ltd. Response to FBC Information Request No. 1 BCUC Project 1599020

1.0 Rate for Power Supply 1

1.1 Has CB Powerline Ltd. (CBP) confirmed with the British Columbia Hydro and 2

Power Authority (BC Hydro) the tariff rate that would be applicable to the energy 3

delivered to CBP via the proposed Primary Service Connection? 4

5

Response: 6

BCH has indicated which rate schedule may apply to the Project. 7

8

If yes, under which BC Hydro rate schedule will CBP be billed? 9

Response: 10

As shown in response to BCUC IR 18.1.1, BCH has indicated the Project could expect either the 11

Medium General Service or Large General Service rates, schedules 1511 and 1611 respectively, 12

to be applied. 13

14

15

If no, which BC Hydro rate schedule does CBP consider applicable to its 16

service? 17

Response: 18

n/a 19

1.1.2.1 Please provide the rationale for the conclusion reached in the 20

response to question 1.2. 21

Response: 22

n/a 23

24

2.0 Power Purchase Agreement 25

2.1 Please explain what portion of the Power Line (as defined in Schedule “D” to the 26

Power Purchase Agreement) could be on the Buyer’s property as contemplated at 27

clause 3(d) of the Power Purchase Agreement. 28

Response: 29

The only physical asset that will be on a Buyers’ property is the meter. CBP's responsibility is to 30

install the Power Line to the edge of a Buyers’ property. 31

32

33



September 5, 2019

FortisBC Inc. (FBC



2.2 Please confirm that the reference to Section 6(c) in Preamble D of the Power 1

Purchase Agreement should actually be to Section 5(c) of the Power Purchase 2

Agreement. 3

Response: 4

Confirmed. 5

6

7

2.3 Please confirm that the “Procurement Price” as defined in Schedule “D” to the 8

Power Purchase Agreement includes all costs levied by BC Hydro to CBP that will 9

be passed on to CBP’s customers, including any Basic Charge, Demand, Charge 10

or any other charge that may be assessed by BC Hydro for service to CBP. If not 11

confirmed, please explain. 12

Response: 13

Confirmed. 14

15

2.4 Please confirm that the Contract Price will be the sum of the Procurement Price, 16

and O&M Fee and the Recovery Amount. 17

Response: 18

Confirmed. 19

20

21

2.5 Please confirm that the O&M fee does not include any elements that will be 22

retained by CBP other than the $15,000 reserve fund. 23

Response: 24

Confirmed. 25

26

2.6 Please confirm that the Contract Price payable by Buyers may exceed the BC 27

Hydro residential rate. 28

Response: 29

Confirmed as shown in response to Fortis IR 2.4. However, the Procurement Price component 30

of the Contract Price will not exceed the BCH rate as committed to in paragraph ‘D’ on page 1 of 31

the PPA. 32

2.7 Please provide an estimate of the annual administrative, reporting and compliance 33

costs as referenced at section 3.3 of the Application that would arise if the CB 34

Powerline project were the subject of ongoing regulation by the BCUC. 35



September 5, 2019

FortisBC Inc. (FBC



Response: 1

At this stage of the Project (i.e., design/development), CBP has not estimated the cost of 2

administrative, reporting, and compliance associated costs with on-going regulation by the BCUC. 3

This is based upon the view that such regulation is unnecessary given that CBP is a Buyer owned, 4

not for profit, corporation where the Seller and Buyer are identical. 5

6

7

On what basis has CBP concluded that the Buyers have a “non-willingness” 8

to incur the costs of regulation. 9

Response: 10

The Buyers’ as a whole, being the shareholders of CBP, are interested in spending their money 11

only on necessary expenses to safely operate their small distribution utility. Given the 12

circumstances, the cost of regulation is seen as an unnecessary outlay regardless of its 13

magnitude. 14

15

16

2.8 Please describe and provide documentation if available that sets out the 17

information made available to Buyers regarding benefits and costs of Commission 18

regulation. 19

Response: 20

See response to Fortis IR 2.7. 21

22

23

2.9 Please explain whether the Seller described in clause 12(a) as having directors 24

and employees (if any) that are, “…volunteers from the Cosens Bay community 25

who may or may not have experience in the power distribution industry..” is the 26

same as the Seller described in clauses 3(a) and 3(b) as the party that will, “… 27

design, construct and own the Power Line”, and, “…maintain and operate the 28

Power Line…” 29

Response: 30

Confirmed. Seller will use third party experts as necessary in order to carry out its obligations 31

outlined in Section 3 of the PPA. Because the Seller and Buyers are, collectively, the same group 32

of landowners, Section 12 exists to provide volunteer directors from the Cosens Bay community 33

with an appropriate level of liability protection. – comfort that each and every Buyer has agreed 34

to in their respective PPAs upon execution. 35

36



September 5, 2019

FortisBC Inc. (FBC



2.10 Is it the case that only those parties that are “Buyers” will be able take service from 1

the Power Line? 2

Response: 3

Correct. 4

5

3.0 Reference: CB POWERLINE LTD. Exhibit B-1, pp. 1–2 6

On pages 1 and 2 of the Application, CBP states: Based on our understanding of the Act, 7

and as set out in additional detail in the attachment hereto, we believe the structure of 8

CBP addresses the primary regulatory concerns of BCUC: 9

• monopoly power risks, typically associated with many public utilities, do not exist for CBP 10

3.1 Please discuss in further detail the nature of the “monopoly power risks” to which 11

CBP refers. 12

Response: 13

See response to BCUC IR 3.1. 14

15

16

4.0 Reference: CB Powerline Ltd. Exhibit B-1, p. 4 17

18

4.1 What is the legal status of the community of Cosens Bay? 19

Response: 20

The Community of Cosens Bay has no legal status. 21

22

5.0 Reference: CB Powerline Ltd. Exhibit B-1, p.10 23

24

5.1 Other than the “formal crossing approval” Do any other agreements exist between 25

CBP and RDNO or any other public authority, with respect to the Project? If yes, 26

please provide. 27



September 5, 2019

FortisBC Inc. (FBC



Response: 1

At this stage of the Project (i.e., design/development), no other agreements exist with any public 2

authority. 3

4

Are any other agreements with RDNO or any other public authority required 5

or contemplated? 6

Response: 7

As shown in Attachment 10.1 to the BCUC IRs, the Project contemplates agreements with the 8

RDNO, BCH, and MOTI. 9

10


12

6.1 If CB Powerlines is “effectively operating as a not for profit”. Why is it structured 13

as a corporation rather than a not for profit society or other legal structure? 14

Response: 15

Having a corporate structure provides legal liability protection to its shareholders and was deemed 16

a prudent course of action by CBP. Further, and although not presently contemplated, should the 17

Project ever be sold or transferred to another entity such as BCH in the future, the sale of shares 18

would be more efficient than an asset sale. 19

20

Please confirm that there is no legal impediment to CBP earning a profit. If 21

not confirmed, please explain. 22

Response: 23

Confirmed, except that CBP is bound to its Buyers, who are the shareholders, by contract to 24

operate on a not-for-profit or cost-recovery basis. 25

26



September 5, 2019

FortisBC Inc. (FBC




2

3

7.1 How does the provision of service on a not-for-profit basis guarantee that the rate 4

at which service provided is “just and reasonable”. Please explain. 5

Response: 6

CBP believes this is intuitive. The lack of any mark-up on a price that consists simply as a cost-7

recovery of actual inputs is just and reasonable. This obviously assumes the price CBP is charged 8

by BCH is also just and reasonable. CBP has every reason to believe that the BCUC regulation 9

of the rates that BCH charges to all its customer classes is considered just and reasonable. 10

11

8.0 Reference: CB Powerline Ltd. Exhibit B-1, pp. 1-2, 4 12

13

14

8.1 Is CBP under a legal obligation to provide electricity service to community 15

members that do not initially participate in the project? Please explain why or why 16

not? 17

Response: 18

No – unless/until a community member executes a PPA and Shareholders' Agreement with CBP, 19

CBP has no legal obligation to provide electrical service. However, once a PPA and 20

Shareholders' Agreement are executed with CBP, then the obligation is present. 21



September 5, 2019

FortisBC Inc. (FBC



1

If yes, how would that obligation be enforced? 2

Response: 3

n/a 4

8.2 Please confirm that CBP is incented to attract additional customers to its service 5

so as to, among other things, minimize the proportionate O&M, administrative and 6

other costs borne by its customers. 7

Response: 8

CBP is not directly incented to attract additional Buyers (i.e., beyond the 55 PPAs in hand), but 9

does expect the customer base to grow as existing land parcels get developed. 10

11


13

9.1 Please provide all correspondence with BC Hydro in respect of CBP’s application 14

for service and BC Hydro’s corresponding refusal. 15

Response: 16

See Attachment 4.10 of the BCUC IR response. 17

18

Did CBP appeal or escalate that refusal elsewhere within BC Hydro? Why 19

or why not? 20

Response: 21

CBP is continuing to focus its resources on the prudent development of the Project in order to 22

bring electrical service to the community of Cosens Bay. CBP does not have the resources and 23

time to escalate issues it deems as having a low probability of success. For these reasons CBP 24

did not escalate or appeal the refusal within BCH. 25



September 5, 2019

FortisBC Inc. (FBC



1

Did CBP discuss a cost-sharing arrangement with BC Hydro under which 2

some or all of the capital costs of the project would be borne by CBP? Why 3

or why not? 4

Response: 5

As shown in section 3.1 of the original application, and in response to BCUC IR 4.7, BCH declined 6

the option to acquire CBP assets, therefore no cost-sharing was discussed. 7

8

9.2 Has CBP sought any relief from the BCUC or other authority in respect of BC 9

Hydro’s refusal to provide service? For example, has CBP made an application to 10

the BCUC pursuant to sections 29 or 30 of the UCA? 11

Response: 12

Aside from this Exemption request to BCUC, CBP has not sought any other relief from the BCUC 13

or other authority in respect of BCH’s position to decline service to Cosens Bay. 14

15

9.3 Would CBP be amenable to an order pursuant to sections 29 or 30 of the UCA 16

under which BC Hydro is ordered to provide service to Cosens Bay, but the 17

customers in Cosens Bay are responsible for the capital costs of bringing service 18

to the community? 19

Response: 20

Based upon community efforts to find third-party electrical service providers to Cosens Bay, 21

including efforts with both Fortis and BCH, the community was singularly left to pursue the 22

provision of its own electrical service. This is, and remains, the path forward for CBP. 23

24

10.0 Reference: CB Powerline Ltd. Exhibit B-1, p.4 and p. 11 of Purchase Agreement 25

26



September 5, 2019

FortisBC Inc. (FBC



1

10.1 Is it a condition of receiving service that a customer be a shareholder in CBP? 2

Response: 3

Yes, the issuance of one common share occurs concurrently with the signing of a 4

PPA/Shareholders' Agreement. 5

6

7

Are there any non Buyer Shareholders of CBP, regardless of share class? 8

If yes, please identify all shareholders. 9

Response: 10

No, there are not any non-Buyer shareholders of CBP. For clarity, there is only one class of 11

shares. 12

13

14

10.2 Can any other person or entity that is not a Buyer be shareholders in CBP in the 15

future? 16

Response: 17

No. 18

19

20

10.3 Please discuss how shares in CBP, regardless of share class may be bought, sold 21

or transferred. 22

Response: 23

Shares are issued at a stated value of $1 each when a new PPA/Shareholders' Agreement is 24

signed. If a property with a PPA is sold, the existing share is transferred to the new Buyer. CBP 25

shares cannot be sold – each share certificate is legended accordingly. 26

27



September 5, 2019

FortisBC Inc. (FBC



11.0 Reference: CB Powerline Ltd. Exhibit B-1, p6 of Purchase Agreement 1

2

3

11.1 Please discuss the consequences to CBP should Buyers decline a Funding 4

Request? Are all other participating CBP Buyers then responsible for the 5

proportionate share of the non-participating Buyers’ requested funds? 6

Response: 7

Buyers have a legal commitment to pay a Funding Request (see PPA section 8 for example). 8

PPA section 11 defines what happens in the event of a default. 9

10

As shown in response to BCUC IR 17.7, CBP does not expect to have any defaulting Buyers of 11

a Funding Request. All Buyers paid a $25,000 Funding Request leading up to the legal closing 12

on August 15, 2019; when the original 5 shares were cancelled and replaced by 55 new common 13

shares representing the 55 executed PPAs. 14

15

16

Would CBP take legal action against its Buyers for an unfulfilled Funding 17

Request 18

Response: 19

Such action is not contemplated by CBP. 20

21



September 5, 2019

FortisBC Inc. (FBC



12.0 Reference: 1

12.1 Please confirm that CBP is seeking exemption both any Commission oversight 2

under the UCA, including the requirement that it obtain a CPCN and/or approval 3

of a privilege, concession or franchise for the project. 4

Response: 5

Confirmed, as set out in the original application, CBP is seeking exemption from Part 3 of the 6

UCA. 7

8

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