FortisBC Energy Inc. Application for Approval of Biomethane Energy - - PowerPoint PPT Presentation

FortisBC Energy Inc.

Application for Approval of Biomethane Energy Recovery Charge Rate Methodology

Streamlined Review Process February 3, 2016

B-10

FEI BERC RATE METHODOLOGY

EXHIBIT

• 2 -

Agenda

• Introduction

 Purpose of the Application  Approvals Sought

• The Application

 Summary of Program Fundamentals & Changes  Market-Based Proposal  Level of Premium and Long Term Agreement

• Areas of Key Interest

 Customer Education & Awareness Spending  Alternatives  Transfer Mechanisms

• 3 -

Purpose of the Application

• Encourage voluntary participation in the program and

moderate the financial impact of the Program on non- RNG customers

• Address current challenges:

 Reduced customer additions  Increased customer drops  Premium of RNG over natural gas  The ability to attract higher volume long term customers

• 4 -

Approvals Sought

Rate

• BERC = Jan 1st CCRA Rate + $7 per GJ
• Maintain Existing Rate Schedules

Large Volume Customers

• Long Term Customer BERC Rate discount of $1 per GJ

Reporting

• Replace Quarterly with Annual Report

Accounting

• Transfer mechanisms for the Biomethane Variance Account (BVA)

Reference: Exhibit B-1, Section 1.2, Page 3

• 5 -

Renewable Natural Gas Program Structure

Raw Biogas 50% - 60% Methane +

• ther gases

Purify Remove other gases Only methane remains Biomethane

Meets NG standards and known as “RNG” Costs and Revenues captured in the BVA

• 6 -

Guiding Principles

Continuance of a voluntary

• ffering for

customers Costs recovered from voluntary customers to the extent possible Potential rate impact on non- RNG customers should be minimized Consistency with existing Program to the extent possible

Reference: Exhibit B-1, Section 6, Page 41

• 7 -

Basis for Proposal

FEI Commodity Rate as Base

Easy for customers to compare and understand Uses existing Rate Schedules

Level of BERC Premium

$7 premium supported by experience More aligned with other green energy programs

Discount for Long Term Contracts

$1 discount aligned with customer economics Acknowledges commitment for term and volume

Transfer Mechanisms

Reduces risk of growth in BVA for future recovery Use of principles outlined in Order G-210-13

• 8 -

Premium Analysis

(125) (75) (25) 25 75 125 175 225 275 325 375 $(4.00) $(2.00) $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00

2011 1-Apr-12 1-Aug-12 1-Dec-12 1-Apr-13 1-Aug-13 1-Dec-13 1-Apr-14 1-Aug-14 1-Dec-14 1-Apr-15

Rate Schedule 1B Net Monthly Adds & RNG Price

Net Adds BERCRate BERC Premium over NG

Premium reaches almost $9 per GJ Period of stable growth PREMIUM ~$7 per GJ 1118 584 583 1088

Reference: Exhibit B-1, Section 5.2.1, Figure 5-2, Page 33

• 9 -

Long Term Agreement

Tariff Supplement to 11B Well established regulatory approach Filed individually, review and approved by BCUC Term of Contract Minimum term of 10 years Minimum RNG Demand Minimum of 500 GJ per month, but may be greater Customer will take or pay for this amount Other May consider 5 Year provided demand is at least 60,000 GJ (Equal to 10 Year x 12 months x 500 GJ) Termination Subject to termination payment in event of early termination

• 10 -

Areas of Key Interest

• Customer Education and Awareness Spending
• Alternatives
• Transfer Mechanisms

• 11 -

Education & Awareness Spending

Generate awareness of renewable energy Generate awareness of RNG offering Stimulate interest in RNG

• ffering

Maintain participation and support of RNG program

• 12 -

Approximate Breakdown of Spending

• 50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Spending ($)

Research Print Digital Radio Trade Shows Direct Sales Costs

Actual Forecast

Reference: Spending-Exhibit B-5, Response to BCUC IR 1.9.1 and 1.43.1 Demand -Exhibit B-3, Attachment A and Exhibit B-1-1, Appendix E, Schedule 2

• 13 -

Measuring Effectiveness

 Costs to make customers aware of the Program are fundamental to

the Program

 Impact of spend is relatively minimal

• Total marketing spend equates to approximately $0.001/GJ over total

customer base

 Research costs to measure effectiveness would be proportionally

large in relation to total spend

Continue to evaluate based on direct customer feedback and available information:

• Website traffic flows
• Number of customer acquisitions
• Net customer additions
• Total RNG demand

• 14 -

FEI Considered Alternatives

Alternative Maintain Voluntary Low GHG Offering Costs Recovered from Voluntary Customers Lowest Rate Impact to Non-RNG Customers (Rank) Program Consistency Five Year Average Residential Non-RNG Annual Bill Impact Status Quo Partially 4 $21.69 Yearly Clearing Partially 2 $4.47 Universal ‘Green Portfolio’ 3 $7.06 Market-Based + Yearly Clearing Partially 1 $2.68

Reference: Appendix E of Exhibit B-1-1 as updated in Exhibit B-5, Response to BCUC IR 1.31.1

• 15 -

Alternatives Identified in BCUC IR 1.19.1

• 1. Additional levels of pricing on a $ per GJ basis with

discounts for RNG volume consumed (Options 1-3)

 Generally consistent with FEI proposed approach  FEI ranked these alternatives higher than a block rate but lower

than the FEI proposal.

• 2. Block based purchases of renewable energy (Option 6)

 Other utilities have been successful with this approach; however,

• Requires greater investment in IT & customer awareness
• Migration of customers more challenging
• Does not preserve per GJ environmental benefits

 Not recommend at this time

• 16 -

RNG Notional Bank (GJ)

Total Costs $

RNG Program Costs & Recovery

Project 1 Gas Costs Project 3 COS Marketing & Admin Costs

Deferral Account BVA ($)

 Capital  O&M  Gas Cost Total GJ

RNG Notional Bank (GJ)

Project 1 Volume Project 2 Volume ..ETC

BVA = Biomethane Variance Account COS = Cost of Service BERC = Biomethane Energy Recovery Charge

Project 2 Gas Costs ..ETC Project 4 COS ..ETC BERC Recoveries ($)

Aged(GJ)

Voluntary RNG Demand Remaining Balance in BVA if Costs <> Recoveries Value of Saleable Supply Aged Inventory Remaining Balance

BVA MCRA Delivery Rates

Demand (GJ)

• 17 -

Transfer Mechanisms

Opening January 1 BVA Balance GJ & $ Inventory Available For Sale (GJ) X January 1 BERC Rate December 31 BVA Balance GJ & $ MCRA GJ & $ Amortization Expense $ Aged Inventory (GJ) x CCRA Rate B A C = A-B-C Storage & Transport Rates Delivery Rates

• 18 -
• FEI will continue to seek

recovery of costs through relevant filings

• FEI will seek approval for BERC

rates aligned with Fourth Quarter Gas Cost Report

• All transfers will be subject to

Commission Review

• Annual Status Report will

continue

• FEI will continue to seek

acceptance of new supply agreements pursuant to section 71 of the UCA and the approved criteria for biomethane supply projects

Continued Program Oversight

• 19 -

Find FortisBC at: Fortisbc.com 604-576-7000 For further information, please contact:

Jason Wolfe, Jason.Wolfe@fortisbc.com Michelle Carman, Michelle.Carman@fortisbc.com