k!Ork G Cnfftff af December 5, 2018 FORTIS BC" ~ Agenda - - PowerPoint PPT Presentation

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FE FEI Rate Schedule 46 Exp xpedited Temporary ry Tarif iff Changes to Curtailm lment t Prio iority

December 5, 2018

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FORTIS BC"

FEI RS 46 – EXPEDITED TEMPORARY TARIFF CHANGES EXHIBIT

SLIDE 2

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Agenda

Context and Overview of Gas Supply Situation FEI’s Efforts to Date Review Proposed Tariff Changes Sought Issues Raised Conclusion ~

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Part rt 1:

CONTEXT AND CURRENT SITUATION

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Precip ipitatin ing Events

• October 9, 2018: Enbridge 36” pipeline rupture incident
• Enbridge declaration of Force Majeure
• Current NEB Order limiting operating pressure on both the

repaired 36” pipeline and the adjacent 30” pipeline (Westcoast T-South system) to maximum 85 percent

• perating pressure
• FEI may not be able to meet its obligations to serve

customers over Winter 2018/2019

• October 9 and 10 – unprecedented emergency situation
• Ongoing critical gas supply constraint
• FEI declared Force Majeure to large firm customers

including RS 46 customers

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Physical l Su Supply ly/Demand Con

• ndit

itions in in th the I-5 5 Cor

• rrid

idor

• Enbridge T-south line is essential

to customers in British Columbia, Washington and Oregon.

 Limited gas deliverability

available to meet winter demand

 Base gas supply (before

incident) - T-South 1.6 Bcf/day (1.8 PJ/Day) and NWP Gorge 0.550 Bcf/day (.615 PJ/day)

 On-call gas supply options

(JPS/Mist/LNG) help with colder than normal weather

 On-call assets cannot replace

Base pipeline capacity for the winter, therefore region at risk for curtailing customers

A.

Third party storage Trading hubs Alliance Foothills BC Foothills Saskatchewan FortisBC Gas Transmission Northwest (GTN) NOVA Gas Transmission Ltd (NGTL) Northwest Pipeline Pacific Northern Gas TransCanada Canadian Mainline (TCPL) Westcoast Energy

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Crit itic ical Factors and Uncertainties

• Westcoast T-South capacity on a given day
• Colder weather
• Time of year
• Status of on-call resources (JPS/MIST/LNG)
• Customer demand / gas use

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2018/19 Lower Main inland Win inter Supply

• TSouth capacity: 1.6 Bcf
• FEI contracted 30% of the TSouth capacity (0.5 Bcf)

1,200,000 1,000,000

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Winter Supply & De1 mand (100% TSouth)

JP}" Mist & LING

1.3 Bd (80%) } 0.9 Bcf (56%) Winter Days 2018/19

LNG

JP

• Mist

TSouth Supply

• - LML Design Load
• - LML Normal Load
• - 1. 3 Bcf (80%}
• - 0. 9 Bcf (56%}

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20 2018/19 Lo Lower Mainland Win inter Su Supply ly

• 80% TSouth capacity available 2018/19 winter
• Additional Sumas purchases make up loss of TSouth capacity

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1,200,000 1,000,000 800,000 600,000 400,000 200,000

LML Winter Supply & Demand (80% TSouth)

80% TSouth 1.3 Bcf (1.5 PJ)

FEI 30% LNG

JP

• Mist
• Sumas Supply

TSouth Supply

• - LML Design Load
• - LML Normal Load

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Westcoast T-South Proje jected Deli livery ry Capacity

Source: Westcoast Curtailment Notice #51146 Revision #0 https://noms.wei-pipeline.com/notices/ci_notice.show?id=51146

December 2018 – Huntingdon Delivery Area Capacity

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Westcoast T-South Proje jected Deli livery ry Capacity

Source: Westcoast Curtailment Notice #51146 Revision #0 https://noms.wei-pipeline.com/notices/ci_notice.show?id=51146

January 2019 – Huntingdon Delivery Area Capacity

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Huntingdon Delivery Area capacities are for informati'on purposes onl y

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expected to be used for authorizations and subject to INEB approval of engineeninR assessments.

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Part rt 2:

FEI’S EFFORTS TO DATE

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Supply Activ ivit ities

• 1. Obtained BCUC approval for amendment to

Annual Contracting Plan (ACP)

 L-28-18 Amendment to ACP (120 TJ/day) –

Report on activities due November 15

 L-30-18 Additional Huntingdon Supply for

Transport Service (120 TJ/day)

• 2. Increased levels of LNG in storage
• 3. Secured LNG from third parties
• 4. Secured CNG injection options

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Demand Activ ivities

• FEI’s public communications have

encouraged conservation from all customers

• Many media used

 New media – direct customer contact,

twitter, emails, website, etc.

 Traditional media - radio, newsprint, TV  Earned media – interviews, releases

• Coordination with all levels of government
• Limitations on service

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Lim imitations on Servic ice

• Customers currently subject to

limitations of service are:

 RS 46 Spot LNG Service customers due

to the suspension of Spot LNG Service; and

 Transportation service customers

(supply their own gas) – FEI has restricted the provision of Backstopping Gas and Balancing Gas

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Dir irect Communic ications wit ith Customers

• 1. Notices of Force Majeure sent
• 2. Ongoing conservation request
• 3. Ongoing communications regarding gas

supply status

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Part rt 3:

FEI’S PROPOSED AMENDMENTS TO RATE SCHEDULE 46

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Temporary Tarif iff Changes Proposed

• Curtailment Priority Sequence
• Minimum Monthly Take or Pay Commitment Relief

Section 5.2 – Curtailment of Dispensing Service

• LNG Facilities Owned and Operated by a Third Party

Section 5.4 – Title Transfer

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Se Section 5.2 – Curt rtailment t of f Dis ispensing Se Serv rvice

Existing Language

• Pro-rata curtailment

inflexible

• Pro-rata amounts may be

insufficient for any one customer to operate their business

• Creates more operational

challenges for more customers than may be necessary

• Contract Demand

adjustments for temporary LNG suppliers Proposed Language

• Allows for collaboration
• n voluntary curtailment
• Considers customers

ability to operate on alternative fuels

• Facilitates customer-by-

customer curtailment

• Contract Demand

adjustments for alternative fuels used

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Section 5.4 .4 – Tit itle le Transfer

Existing Language

• Title transfer

inconsistent with an LNG facility being owned and

• perated by a

third party

Proposed Language

• To be consistent

with third party LNG facilities under contract to FEI

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Ratio ionale le for Proposed Amendments

• Retain curtailment principle that Spot LNG Service is curtailed

first, followed by Short-Term LNG Service, and then Long-Term LNG Service

• Introduce the ability for FEI to work with customers who can

voluntarily agree to be curtailed (in whole or in part)

• Introduce the ability for FEI to curtail customers that have

alternate fuel or back-up systems before those who do not have that capability

• Change curtailment priority for Short-Term and Long-Term LNG

Service customers so customers with smaller volumes are curtailed first

• Provide adjustment to Contract Demand for curtailed customers

who use an alternative fuel

• Consistency in tariff language for contracted LNG supply from

third parties

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Part rt 4:

ISSUES RAISED

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Is Issue: Fair ir Treatment of RS 46 Customers

• FEI would seek out voluntary curtailments of RS 46

customers consistent with other conservation efforts

• FEI would begin non-voluntary curtailments of RS

46 if:

 Significant or emergency gas supply shortage  All gas supply procurement efforts exhausted  Public and direct appeals for conservation no longer

sufficient

 Holding transportation service customers to the gas

supply they can bring on the system

 Interruptible customers already curtailed  FEI seeking to avoid uncontrolled system failure, and

• utages to customers who rely on natural gas for heat in

the winter, for emergency or critical services

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Is Issue: F Fair ir Treatment of RS 46 Customers

• RS 46 Customers will be treated similarly to other firm

customers

• If necessary, FEI’s firm customers would be curtailed

largest to smallest

 BC Ferries and Seaspan are FEI’s largest firm service

customers

 In this situation, likely all large customers curtailed

• The benefit of curtailing large customers first is for the

stability, security and safety of the system

 Timely curtailment response  Most significant system benefit on a per customer basis  Easier and faster to restore service

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Is Issue: C Compensation for Curtailm lments

• FEI has broad rights under approved tariffs to

curtail customers due to Force Majeure or gas supply shortage without compensation

• Strong policy rationale for no compensation:

 Produces lower rates, than if utility had to estimate

and assume risk of outages

 Prevents subsidization of larger customers by

smaller customers

 Protects the utility from catastrophic loss, thereby

increasing security of system

 Allocates risk to entities most capable of managing

risk (e.g. through insurance)

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Is Issue: C Compensation for Curtailm lments

• Non-RS 46 customers may also be impacted



Other customers conserving or curtailing and incurring costs



Interruptible customers curtailed prior to RS 46



Other large firm customers will be curtailed with RS 46

• Cost to customers due to curtailment should not be

recovered in rates:



FEI would have to offer the same treatment to all customers, requiring a significant change to all of FEI’s rates schedules



Difficult to identify and contain the scope of costs that would be recoverable



Recovering costs due to curtailment in rates would result in a large and indefinite liability, and rate increases, for all customers

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Conclusion

• FEI’s Proposed Amendments improve the

existing curtailment priority by:

 Enabling FEI to work with customers to

voluntary curtail service

 Enabling FEI to curtail first those customers

with alternate fuel capability

 Enabling FEI to curtail on a customer-by-

customer basis

 Adjusting Contract Demand for curtailed

customers who use an alternative fuel

 Ensuring FEI is able to contract for additional

LNG supply

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Find FortisBC at: Fortisbc.com 604-576-7000 For further information, please contact: Gas.Regulatory.Affairs@fortisbc.com www.fortisbc.com

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