superior propane responses to the ir #1 from seascapes a. cost … · 2016. 4. 20. · superior...

Superior Propane Responses to Seascapes IR No. 1

SUPERIOR PROPANE Responses to Seascapes Information Request #1

Superior Propane Responses to the IR #1 from Seascapes

A. Cost of Gas

1.0 Subject: Cost of Gas Exhibit B-1, Section 3.0, pp. 3-4 Superior Propane (Superior) states that it sources propane gas from Superior Gas Liquids through the bulk (SGL Langley) facility located in Port Kells, BC. 1.1 It is assumed that Superior Gas Liquids is a sister company. What steps does

Superior take to ensure that the price it is paying is competitive with the best available market rate? Superior Propane’s Response: Superior Gas Liquids provides Superior Propane with posted pricing from several refineries on a daily basis. Superior Propane works closely with SGL to ensure we are getting a reliable supply of propane at a competitive price.

1.2 Please explain why the pricing charged to Seascapes and presumably other

grid customers is based on the SGL Langley posted price (plus a margin) rather than the actual cost paid? Superior Propane’s Response: Superior Propane lifts propane from the SGL Langley site. It is standard practice to include a margin when delivering propane to an end user. The margin is similar to other like customers of Superior Propane with similar annual volume.

1.3 Please confirm that the SGL Langley is based on the daily spot price which is subject to daily volatility. Superior Propane’s Response: Superior Propane confirms this statement.

1.4 What other options has Superior considered or possibly employed to

determine a fair and reasonable gas pricing methodology? Superior Propane’s Response: Superior Propane can offer fixed pricing options to the residents of Seascapes on an annual basis. There are costs (storage or equivalent and other financial costs) and risks associated with a fixed price arrangement that must be approved by the BCUC and be included in the price of propane

B-6

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Superior Propane Seascapes Rates


delivered. It is generally accepted that a fixed price arrangement over the long term is more expensive than market based propane.

1.5 Please explain why Superior does not prepare an annual contracting plan

affording its customers the benefits of Superior’s buying expertise thereby reducing price volatility. Superior Propane’s Response: Superior Propane can offer fixed pricing options to the residents of Seascapes. Please see the response to question 1.4.

B. Cost of Service Model

2.0 Subject: Item 2 – Basic Charge Exhibit B-1, Section 4.2, pp. 5-6 Superior states that it proposes to charge affixed monthly fee that recovers a portion of the fixed cost of the propane grid infrastructure located at Seascapes. 2.1 Please provide a chronology of changes to the basic charge starting with the first Seascapes customer bill.

Superior Propane’s Response: A review of Superior Propane’s records shows the following monthly fees:

2.1 Please provide the total amount in basic charges that have been collected from Seascapes customers since the propane grid was developed.

Superior Propane’s Response: Based on the fee history shown in question 2.1 and Superior Propane’s records, the total estimated revenue collected from Seascapes customers would be approximately $191,000.

2.2 Are there items included in the basic charge that are also included in

Year Monthly Fee Notes:

2016 $15.78

2015 $15.78

2014 $15.78

2013 $15.78

2012 $15.78

2011 $15.78

2010 $15.78

2009 $15.78

Superior Propane and Seascapes agree to combine

Hazmat fee with infrastructure charge

2008 $10.83 Plus a Hazmat fee of $4.95

2007 $10.83 Jan Hazmat adjusted to $4.95

2006 $10.83 Plus a Hazmat Fee of $3.95

2005 $10.31

2004 $10.31


the Annual Operating Costs and the Annual General and Administrative costs? If so please detail them?

Superior Propane’s Response: No, there are no items in the basic charge that are already included in the Annual Operating Costs and the Annual General and Administrative costs.

2.3 With reference to the table on Page 5 of the application. Why has the revenue from the basic charge been deducted from what is described as the “total revenue requirement based on cost of service”?

Superior Propane’s Response: The total revenue from the basic charge has been deducted from the total revenue requirement in order to calculate the required facility fee charge. If the basic charge were not removed, Superior Propane Facility Fee requirement would be overstated.

2.4 Please explain the reasons that justify an increase in the basic charge from $15.75 to $18.00 (a 14.2% increase) in 2016. Example: Sunpeaks.

Superior Propane’s Response: Superior Propane has not implemented an increase to the basic charge since 2009. Superior Propane proposes that the basic charge is aligned to a level similar to other grid systems that operate as utilities in BC.

2.5 Please explain exactly what is included in the basic charge and demonstrate how it is not double charging?

Superior Propane’s Response: The basic charge is $18 per unit per month in the rate application. Please see the response to question 2.3 for the comment on double charging.

3.0 Subject: Item 5 – Meter Testing and Change Out Costs Exhibit B-1, Section 4.2, pp. 5&7, Appendix B This is described as a meter verification program allowing for the costs to change out 10% of the meters as per regulatory requirement. 3.1 Please confirm that this charge is for a new cost item and there have been no charges to Seascapes residents for meter testing and charge out costs previously. Has there been meter testing at Seascapes in the past? Please explain

Superior Propane’s Response: Superior Propane has tested or replaced meters at the Seascapes site on a one-off basis. Superior Propane has incurred costs related to meters at other grid sites throughout the Pacific Region. Due to the age of other grid systems compared to Seascapes, the focus of the meter change out program has been on grid systems in other areas of BC.


The Seascapes grid commenced operation in several phases from 2004-2008 with brand new meters, as such these meters did not require immediate testing and reconditioning. Due to the current age of the meters, it is now time to implement Superior Propane’s meter change out program at Seascapes to comply with regulatory requirements and Superior Propane standards to ensure that the meters are correctly recording the amount of gas delivered.

3.2 Why has Superior introduced this program at this time?

Superior Propane’s Response: Please see the response to question 3.1.

3.2 a) What is the expected life of a meter?

Superior Propane’s Response: There is no set life expectancy of a meter as long as it passes inspection. Superior Propane – Pacific Region’s meter change out and compliance program is in alignment with the EGI Act. Superior Propane’s program is to change out 10% of the meters on an annual basis. This is an ongoing process throughout the Pacific Region.

b) Have any meters ever been exchanged out previously?

Superior Propane’s Response: Superior Propane has changed meters at the Seascapes site on a one-off basis, but has not implemented the full change out program at this grid system.

c) Please provide a listing of the 100 Seascapes meters detailing the length of time each has been in service.

Superior Propane’s Response: Please see the attachment labelled Seascapes Meter list (Document 5).

3.3 What is the practice for meter testing and changes at other Superior B.C. propane grid operations?

Superior Propane’s Response: Superior Propane – Pacific Region’s compliance program is to change out 10% of the meters on an annual basis. This is an ongoing process throughout the Pacific Region.

3.4 Given the cost of changing and testing meters would it not be more cost effective to test meters on a complaint basis only and plan for a for full replacement of all meters at or near the end of their average service life and capitalize them over the average expected life of the new meters?

Superior Propane’s Response: This approach does not meet the requirements of Superior Propane and the EGI act.


3.5 What evidence has Superior relied upon to support the assertion that meters are not accurate and 10 units need to be replaced annually?

Superior Propane’s Response: Superior Propane is following the Electricity and Gas Inspections act. Please see the answer to 3.1 for further detail on the meter program at Seascapes.

4.0 Subject: Item 6 - Grid/Tank Maintenance Exhibit B-1, Section 4.2.2, pp. 5 &7 This has been described as the cost of annual maintenance at Seascapes including service technician labour, tank painting, valve replacement, dysfunctional meter replacement and regular wear and tear. 4.1 Please provide a description of all maintenance activity undertaken on behalf of Seascapes customers in 2015 describing: a) what was done. b) where it was done. c) the time spent completing the work.

Superior Propane’s Response: Plant inspections (tank and vaporizer) are done annually and a visual inspection is done at every propane delivery. Plant inspections are done once per year and are approximately 4 hours per inspection. Vaporizer inspections are also done once per year and are approximately 5 hours per inspection. Follow up maintenance occurs on a bi-annual basis and is usually another 4 hours. The tracking and review of costs is a go forward examination for Superior Propane under new conditions, as a regulated utility.

4.2 Superior has included meter replacements as part of the explanation for this charge. Has this not already been captured under meter testing and change out (Item 5)?

Superior Propane’s Response: The meter change out program is a separate process than the annual maintenance and therefore these costs have not been captured in both places.

5.0 Subject: Item 7 - To swap out meters, vaporizer rebuild and parts Exhibit B-1, pp. 5 & 7, Appendix B 5.1 Has a vaporizer ever been rebuilt at Seascapes?

Superior Propane’s Response: A full vaporizer rebuild has not occurred at the Seascapes site; however inspections have occurred on an annual basis.


5.2 When did this occur?

Superior Propane’s Response: N/A

5.3 On what basis did Superior determine that vaporizers need to be rebuilt every 3 years?

Superior Propane’s Response: Superior Propane’s vaporizer maintenance program standard is to change certain vaporizers every three years. Manufacturer’s recommended maintenance guidelines also influence the time period for vaporizer maintenance and change outs. The vaporizer at Seascapes is not standard in nature and may require maintenance and/or a change out in the future. This will be determined through the annual inspection.

6.0 Subject: Item 8 - Grid Mapping Costs and Annual Leak detection Exhibit B-1, pp. 5 & 7, Appendix B, Appendix E 6.1 Please explain what annual leak detection entails? How does this compare with other gas utilities like Fortis? What steps were taken by Superior to meet regulatory requirements related to the Gas Utility Operating Permit prior to 2015?

Superior Propane’s Response: The Annual Leak Detection program is a leak survey conducted by qualified individuals. Superior Propane utilizes a third party whom specializes in leak surveys.

Superior Propane does not have firsthand knowledge of the requirements of Fortis. Superior Propane started working closely with the BC Safety Authority in 2002 to meet all gas grid requirements which are now known as gas utility operating permits. Superior Propane continues to work closely with the BC Safety Authority.

6.2 Was grid mapping not completed in 2015?

Superior Propane’s Response: Yes, grid mapping was completed in 2015.

6.2.1 If so why is it budgeted again in 2016 rather than part of 2015 actuals?

Superior Propane’s Response: 1/5th of the cost of grid mapping was put into the 2016F. Grid mapping will not occur every 5 years. Superior Propane will update the rate application to remove this cost.


6.2.2 Why is grid mapping required every 5 years at what is a static location?

Superior Propane’s Response: Grid mapping will not occur every 5 years. Superior Propane will update the rate application.

6.2.3 If grid mapping is to be done every 5 years, please advise whether prior grid mapping has been completed previously and when this occurred.

Superior Propane’s Response: See the response to 6.2.2.

6.3 Were any leaks identified in 2015 or to date in 2016?

Superior Propane’s Response: Superior Propane did not identify any leaks at the Seascapes grid in 2015 or 2016.

7.0 Subject: Item 11 - Insurance Costs Exhibit B-1, pp. 5 & 8, Appendix B 7.1 What is the rationale for changing the method of insuring Seascapes from what existed prior to 2016?

Superior Propane’s Response: Superior Propane’s position is that the rate application should reflect the true insurance costs of operating the Seascapes grid. The Seascapes grid is a standalone facility that is regulated as a utility. The standalone insurance cost is $22,500, Superior Propane recommends that the Seascapes Strata Management Company explore other insurance options to see if this is a reasonable insurance cost.

7.2 Is Superior adding similar charges to their other grid customers? If not why not?

Superior Propane’s Response: Superior Propane will review other propane grids that it manages in BC upon approval of the rate application at Seascapes.

7.3 What coverage’s will these insurance costs provide? Why are they required?

Superior Propane’s Response: Please see the attached insurance quote for details on coverage (Document 6).


8.0 Subject: Item 12 - Propane Variances Exhibit B-1, Section 4.2, pp. 8-9, Appendix B 8.1 How do the propane variances at Seascapes compare to Superior’s other B.C. grid customers?

Superior Propane’s Response: Seascapes propane variances are higher than other grid systems that it operates in the BC Region. A review of two other grid sites showed a variance that was twice as high as the other grid sites. Implementing the meter testing and change out process may help lower the variances going forward.

8.2 How do the level of propane variances compare to other grid operators in BC ? What type of mitigation activities have other operators (big and small undertaken) to control the problem?

Superior Propane’s Response: Superior Propane does not have any information on other propane company’s inventory control practices.

9.0 Subject: Item 14 - Annual Meter Readings Exhibit B-1, pp. 5 & 9 Superior states that customer meters at Seascapes are read on a monthly basis. Specifically, each month a service technician travels to the property, reads meters and performs a number of other functions. Superior states that when travel time is included this takes approximately five hours per month. 9.1 Does the service technician handle readings in various locations in one day? How are the costs allocated among the locations?

Superior Propane’s Response: Several resources are dispatched across the region to conduct meter readings. A service technician may or may not do readings at other locations.

9.2 Please confirm that the person performing this function does so 12 times a year.

Superior Propane’s Response: Yes, the meter readings are done on a monthly basis. Various individuals are trained to take meter readings.

9.3 Please confirm that the technician is not also the same person delivering the gas.

Superior Propane’s Response:


Typically, Superior Propane Technicians perform service work and read meters. They may deliver propane on an exception basis.

9.4 Please confirm that Seascapes meters are grouped by building with duplexes having 2 meters in one place and quad units having either 2 or 4 meters in one place. Please confirm there are 10 quad units and 30 duplex units and the number of stops to read meters is approximately 45.

Superior Propane’s Response: Superior Propane confirms that there is one meter per unit at the Seascapes site.

9.4 Please provide the rationale for why customer meters are read monthly? Could this not be performed 6 times per year thereby significantly reducing meter reading, billing and other administrative costs?

Superior Propane’s Response: Superior Propane is a public company and needs to adhere to set internal policies and accounting standards. Superior Propane reconciles inventory on a monthly basis.

10.0 Subject: Item 15 - Billing/Pricing Administration Exhibit B-1, pp. 5 &9, Appendix C 10.1 Please confirm that Seascapes customers receive three separate billings per month; one for the basic charge, one for the meter propane bill and a monthly statement.

Superior Propane’s Response: Grid customers receive the three documents unless they opt out of the monthly statement or invoicing option. Superior Propane will adjust the rate application if all of the Seascapes customers opt out of the monthly statement option.

10.2 Please explain why Seascapes customers did not receive bill for July, 2015.

Superior Propane’s Response: After review of our records, Superior Propane confirms that here was a process error for the billing from July of 2015. Superior Propane has implemented a process so that this does not occur again.

10.3 Please provide a detailed description of the online billing program (my Superior) recently introduced by Superior.

Superior Propane’s Response:


For details on the benefits of mySUPERIOR, please see the website at: https://mysuperior.superiorpropane.com/, or visit the YouTube page at: https://www.youtube.com/watch?v=GYHg_pXaf34

10.3.1 How many Seascapes customers have signed up for this program?

Superior Propane’s Response: Based on Superior Propane’s records, there are 36 Seascapes customers signed up for mySUPERIOR.

10.3.2 Has Superior offered Seascapes customers the option of being billed online and forgoing billing by mail? If so, how many have taken advantage of it. If not, why not?

Superior Propane’s Response: Superior Propane is willing to discuss and review this option of utilizing mySUPERIOR as the source for customer invoicing and other historical customer data.

10.3.3 Please provide an estimate of the total cost savings if all Seascapes residents were to adopt online billing as opposed to the current mailing system.

Superior Propane’s Response: The estimated savings would be $3,600 per year.

10.3.4 What actions has Superior taken to promote this program?

Superior Propane’s Response: mySUPERIOR was launched in 2015, the Superior Propane Outside and Inside Sales Team promote the site to customers. mySUPERIOR is also promoted on the Superior Propane website and other media channels such as YouTube. Additional information on mySUPERIOR is also provided on the monthly propane invoice and the monthly meter invoice.

11.0 Subject: Item 17 – Rate Base and working capital interest Exhibit B-1, pp. 5, 10 and Section 2.0, 5.1 and 5.2 pp.14-15. 11.1 Please provide Superior’s justification for its proposed 15% ROE.

Superior Propane’s Response: Superior Propane’s return on equity requirement is 15%. This is Superior Propane’s required internal rate of return for projects.

11.2 Please explain and justify the large accounts receivable increase (from $6,956 to $15,146) in its working capital requirements when compared to 2015.


Superior Propane’s Response: The increase in the accounts receivable is directly tied to the changes in the proposed rate structure.

11.3 In Item 5 Superior has included the cost to purchase 10 meters in operational costs. Explain why this is also included as part of working capital?

Superior Propane’s Response: Superior Propane will remove the meters from the operating costs in the financial forecast.

11.3 If Superior were to bill Seascapes residents every two months rather than monthly what would be the impact on working capital requirements?

Superior Propane’s Response: This option does not align with Superior Propane’s month end inventory and accounting policies. Superior Propane cannot pursue this option.

11.4 The Seascapes development was built in stages. Please confirm dates in service for the various parts of the distribution system and the rate base (capital) additions at each stage.

Superior Propane’s Response: As per Superior Propane’s records the majority of units at Seascapes were installed in four phases, in 2004, 2005, 2006 and 2008. As the time period for the records retention policy has expired, Superior Propane would only be able to provide an estimate of the capital additions at each stage. As Superior Propane has been deemed a utility on a go forward basis, Superior Propane deems that this information is not necessary at this time. Superior Propane would like to indicate that any analysis such as this comes at a cost and would increase the facility fee accordingly.

11.5 As outlined in Section 2 of the application, Superior signed a Propane Supply and Installation of Grid Distribution Agreement with Seascapes Development on September 9, 2004. Please file a copy.

Superior Propane’s Response: A copy is filed with these responses (Document 7).

11.6 Please confirm that the $266,195 capital cost claimed for the Distribution System is based on an estimate agreed to by the developer (see Section 4.2 of the agreement) rather than an actual cost?

Superior Propane’s Response: Based on Superior Propane’s records the capital cost of the Seascapes site was approximately $266,195. As per Superior Propane’s record retention policy the documentation for the actual costs


is not on record. Superior Propane is utilizing the summary documents on hand to calculate the actual cost of the infrastructure. Superior Propane entered into this contractual arrangement as a non-utility; therefore it did not keep all records with regard to the capital rate base. Superior Propane will do a replacement value quote at the request of Seascapes and/ or the BCUC.

11.7 Please confirm that the developer agreed to pay $13,500 of the distribution system costs as per Section 6.5 of the agreement.

Superior Propane’s Response: This is outlined in section 6.5 of the Propane Supply and Installation of Grid Distribution Agreement.

11.8 Please confirm with documentation the actual costs to Superior for installation of the distribution system.

Superior Propane’s Response: Please see the response to 11.6.

11.9 Please provide the rationale for why Superior has chosen a 30-year amortization period for the grid when their contract with Seascapes is for 15 years as outlined in Section 2.

Superior Propane’s Response: Superior Propane’s accounting policies state a 30 year amortization period for these types of assets.

12.0 Subject: Item 20 - Postage and Courier Costs Exhibit B-1, Section 4.2, p.10; Appendix B Superior states that three documents are mailed to each customer on a monthly basis. 12.1 Please confirm for 2015 that all Seascapes customers receive 3 billings every month.

Superior Propane’s Response: Grid customers receive three mailings per month unless the customers opt out of receiving these items.

13.0 Subject: Standard Fees and Charges Schedule Exhibit B-1, Gas Tariff, pp. 8 and 9. 13.1 Please outline which of those fees outlined in the Standard Fees and Charges Schedule apply to the individual customer using them and


which, if any, are charged to the Seascapes ratepayer group as a whole.

Superior Propane’s Response: The Standard fees and charges apply to the individual Seascape ratepayer.

13.2 Item 9 outlines a $300 charge for removal and testing of a meter at the customers’ request. If the meter is found to be defective would this charge still apply?

Superior Propane’s Response: If a meter was found defective due to no fault of the resident, then this charge would not apply. If it were found defective due to damage, tampering etc., then a charge would apply.

14.0 Subject: Secondary Freight Charges Exhibit B-1, pp. 4, 16, Appendix A 14.1 Please confirm the amount of liquid propane gas in liters that can be stored in a 12,000 USWG Tank.

Superior Propane’s Response: A 12,000 USWG tank can hold up to approximately 38,000 litres.

14.2 What size truck tankers does Superior use to deliver propane to Seascapes and what is its capacity in liters?

Superior Propane’s Response: Superior Propane utilizes a tandem axle truck that holds approximately 16,000 litres.

14.3 Superior reports that it makes 24 deliveries to Seascapes per year with an average delivery of 8,333 liters. With a 12,000 USWG tank why are deliveries required every two weeks? Does the truck not make deliveries to other grid customers as well as Seascapes? If not why not?

Superior Propane’s Response: Superior Propane deliveries are scheduled on a non-static basis. Superior Propane ensures a consistent supply to ensure customers do not run out of propane. Superior Propane tries to maintain the tank inventory level above 20% to ensure there is no pressure issue with the grid system due to the large propane draw.

15.0 Subject: Item 24- Credit Card Charges Exhibit B-1, pp. 5, 11. Superior states that its current credit card fees range from 2-3.5 % of the customer transaction. It states that 30% of customers pay by credit card and it is using a 2%


rate for the purposes of the Cost of Service model. 15.1 Please provide an analysis of why 2% is justified given the cost per transaction and the relatively small number of customers participating.

Superior Propane’s Response: Superior Propane would like to clarify that in the 2016 forecast it applied a 2% credit card charge to 30% of the revenue, not the full 100% as assumed in this question. Approximately, 30% of Superior Propane residential customers use their credit card to pay account balances.

15.2 Is Superior aware of BC Hydro and Fortis Energy’s method for handling credit card payment of monthly bills?

Superior Propane’s Response: Superior Propane is not aware of the credit card billing practices of BC Hydro and/or Fortis Energy.

15.3 Has Superior considered using a third party for credit card payments which would charge a fee for use to customers choosing this bill payment method?

Superior Propane’s Response: Superior Propane has not considered this method and Superior Propane would incur significant costs if it wanted to implement a new credit card payment system across Canada.

16.0 Subject: Items 23 Bank Charges and Item 26 Bad Debts Exhibit B-1, pp. 5, 11-12. 16.1 What has been Superior’s bad debt experience at Seascapes over the past five years?

Superior Propane’s Response: Superior Propane’s bad debt experience has been satisfactory at the Seascapes grid over the past 5 years. Superior Propane has only put a nominal charge of $100 per year into the 2016 forecast.

16.2 What miscellaneous bank charges is Superior referring to at a cost of $10 per month?

Superior Propane’s Response: The $10 monthly amount was put in the 2016 forecast to cover off any miscellaneous bank charges not captured in the financial model.

superior propane responses to the ir #1 from seascapes a. cost … · 2016. 4. 20. · superior...

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