[PPT] - Greenhouse Gas Reductions (Clean Energy) Regulation Prescribed PowerPoint Presentation

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Greenhouse Gas Reductions (Clean Energy) Regulation

Prescribed Undertaking 1: Vehicle Incentives Streamlined Review Process

FortisBC Energy Inc. October 24, 2012

B-7 FORTISBC ENERGY – GREENHOUSE GAS REDUCTIONS (CLEAN ENERGY) REGULATION EXHIBIT

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Agenda

Approvals sought Background and Context The Greenhouse Gas Reduction (Clean Energy) Regulation Proposed Treatment of Prescribed Undertaking Costs and Recovery in Rates Proposed Programs under the Prescribed Undertakings Questions and Answers Submissions by FEI and Interveners

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BCUC Approvals Sought

Vehicle Incentives and Related Expenditures

Approval of the proposed accounting treatment for the

vehicle incentives

General Principle – Rate base deferral account + 10 year

amortization in rates of non-bypass customers

Deferral Account - the “NGT Incentives Account”
Non-rate base account attracting AFUDC until Jan 1, 2014
Net balance transferred to rate base on 2014/01/01 –

amortization starts

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Ministry Determinations

Approval of the spending or timing of spending
“Open and Competitive” process
Reporting Requirements

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640,000 660,000 680,000 700,000 720,000 740,000 760,000 780,000 800,000 80.0 85.0 90.0 95.0 100.0 105.0 110.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Residential Account UPC, Gj Annual UPC, Gj Accounts 66,000 67,000 68,000 69,000 70,000 71,000 72,000 73,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Energy Tjs

Decline in Traditional Demand

Residential Example

The growth in residential customers has not offset the decline in average residential UPC, which results in decline in residential demand.

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NGT Strategy & Stakeholder Benefits

Improved air quality
Reduces GHG

emissions

Customers Transmission/ Distribution Production Communities

Lower operating

costs for fleets

Lower delivery

charges for all gas customers

Incremental gas

load drives system and cost efficiencies

Creating new

markets for gas

Royalty revenue

for government

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NGT is an End Use for Natural Gas

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Natural Gas Transportation (“NGT”) Business Components

Gas Supply Compression & Fueling

(1) Natural Gas Supply

(2) Compression

&

Fueling (3) Vehicles Operating

n CNG

FEI CNG Service Offering Customer

(1) LNG Production & Storage (2) LNG Delivery (3) Fuel Storage & Fueling (4) Vehicles Operating

n LNG

FEI LNG Service Offering LNG Supply LNG Delivery and Fueling Station Customer

Prescribed Undertaking 1: Vehicle Incentives, Admin., Marketing Training & Education Safety/Maintenance Upgrades

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GGRR Background Timeline

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The Greenhouse Gas Reduction (Clean Energy) Regulation

Introduction and Definition

Regulation established pursuant to CEA sections 18 and 35(n)
Definitions
Eligible vehicles
Heavy Duty, Medium Duty, School Buses, Transit Buses
Marine vehicles
Tanker truck load-out
Undertaking period – to March 31, 2017

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Eligible Vehicle Examples

Waste Haulers Heavy Duty Trucks Transit Buses Ferries

LNG CNG

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GGRR Prescribed Undertaking 1

Demonstration Round, $5.6 Trucks & Buses, $38.3 Marine, $11 Safety & Maintenance, $4 Admin, Marketing, Training, $3.1

Unit: $ Millions

Funding Allowances - $62 million in total

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Proposed Treatment of Prescribed Undertaking 1 Costs and Recovery in Rates

Actual Costs Incremental to RRA Forecast Rate Base Deferral Account Amortization of 10 years Costs Recovered from all Non- Bypass Customers Delivery Margin Benefits to all Non- Bypass Customers

Reference: Application Section 5

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Actual Costs are Incremental to the RRA Forecast

Recovery of actual grants and actual incremental

administrative, marketing, training and education costs

Expenditures contemplated in the GGRR were not

included in the RRA forecasts

Timing of the RRA and GGRR
NGV Incentives Decision

Reference BCUC IR 1.6.5.1 and BCUC IR 1.4.4.1

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Rate Base Deferral Account The NGT Incentives Account

Why Rate Base Treatment?

Investment in the long term health of the system Long term program with long lasting benefits similar to a fixed asset (Contribution Agreement) Consistent with past treatment of similar items

Reference: Application Section 5, BCUC IR 1.4.1 and 1.4.2

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Ten Year Amortization Period

Considerations
Reasonable period for recovery of costs
Life of the vehicles
Expected duration of benefits associated with those vehicles
Rate volatility
Ten year amortization period provides the best balance of

all considerations

Reference : BCUC IR 1.10.1, CEC IR 1.1.3 and 1.1.5

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Ten Year Amortization Period Matches Costs with Benefits

2.5%
1.5%
0.5%

0.5% 1.5% 2.5% 2014 2016 2018 2020 2022 2024 2026 2028 2030

Rate Reduction from NGT Load Rate Impact from Incentive Cost of Service Net Rate Impact

Scenario 2 GGRR Load Growth Only: Rate Impact - 5 Year Amortization

2.5%
1.5%
0.5%

0.5% 1.5% 2.5% 2014 2016 2018 2020 2022 2024 2026 2028 2030

Rate Reduction from NGT Load Rate Impact from Incentive Cost of Service Net Rate Impact

Scenario 2 GGRR Load Growth Only: Rate Impact - 10 Year

Smoother impact throughout indicates alignment of costs and benefits Greater volatility in impact indicates misalignment of costs and benefits

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Estimated Vehicles Lives

Waste Haulers Heavy Duty Trucks Transit Buses Ferries

LNG CNG

10 Years 30 Years 15 Years 5-10 Years

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Cost Recovery From & Benefits To FEI Non-Bypass Customers

Appropriate to recover costs from all customers
Aligned with the intent of the GGRR
All customers benefit from the additional throughput on the system
All customers benefit from the reduction to GHG emission and air

contaminants

When delivery rate related costs and benefits are

considered, net delivery rate reduction of 5.6% expected

Reference : BCUC IR 1.2.2, BCPSO IR 1.1.9 and 1.7.2

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Proposed Programs under Prescribed Undertaking 1

Call processes for Vehicle

Incentives

Safety and Maintenance

Upgrades

Process to be determined
Administration, marketing,

training and education

Demonstr ation Round, $5.6 Trucks & Buses, $38.3 Marine, $11 Safety & Maintena nce, $4 Admin, Marketing Training, $3.1

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Current Funding Process:

Applications Received

19 applications received:
500+ invitations to participate
18 on-road-transportation
1 marine application

Funding Requested by fuel type (exclude Marine)

No. of Trucks requested by fuel

type (exclude marine)

$11.2 M $14.6M CNG LNG

258 165

CNG LNG

Total: 423 Total: $25.8M Marine Application

1 application from Marine
Asking $3.0 million (total price

differential 12.4 million)

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Preliminary Award List

Expected No. of Vehicles (Excl. Marine) Total: 401 vehicles

165 236

LNG CNG Expected Annual GJ Demand (Incl. Marine) Total: 1.25 PJ

847,545 247,906 154,440

LNG CNG Marine Expected Vehicle Incentive $

$10.98M $7.8 M $ 3M

LNG CNG Marine Total: $21.87 M

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Average Liters Displaced/Dollar Incentive

1.14 0.80 1.99 0.81

Proposal

LNG

Proposal

CNG

LNG CNG

Average Annual GJ Per Vehicle

2,500 1,000 5,137 1,050

Proposal

LNG

Proposal

CNG

LNG CNG

Actual Proposal

Avg: 1.50 Avg: 1.01

Avg: 2,732 Avg: 1,734

Preliminary Results on track with the S18 Proposal to the Government

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