Sovereign Development BCUC Streamlined Review Process August 20, - - PowerPoint PPT Presentation

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Sovereign Development BCUC Streamlined Review Process August 20, - - PowerPoint PPT Presentation

Jan 19, 2023 278 likes •539 views

FAES S OVEREIGN TES CPCN R ATES E XHIBIT B-5 Sovereign Development BCUC Streamlined Review Process August 20, 2014 1 Sovereign Development FAES Thermal Energy Service Public Utility Service in perpetuity 1. Own assets that produce heat and

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Sovereign Development

BCUC Streamlined Review Process

August 20, 2014

B-5 FAES SOVEREIGN TES CPCN RATES

EXHIBIT

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Sovereign Development

FAES Thermal Energy Service Public Utility Service in perpetuity

1. Own assets that produce heat and cold for the Sovereign Development 2. Meter thermal energy deliveries to Residential Strata, Hotel and Commercial/Retail Units in exchange for compensation

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Sovereign Development

Sovereign Thermal Energy System Project Description

  • Developer is BOSA Properties (Burnaby) Inc.
  • 45 story, 195 residential units (strata), a 169-unit hotel, and commercial /retail space
  • Occupancy scheduled for Q4 2014
  • Hybrid energy system comprised of heat recovery heat pumps, distributed heat pumps, and

high efficiency central natural gas boilers

  • Designed to serve heating and cooling needs of the Development
  • Metered thermal energy in exchange for compensation to: 1) Residential Strata, 2) Hotel, and

3) Commercial/Retail Units

Loads - Heat, Cool & DHW Costs - $6.3 M (FAES purchases for $3.9 M maximum price)

  • Total FAES investment is $4.15 M and includes $250k development costs
  • $135k per year for sustaining capital commencing in the 6th year of operation
  • $100k per year in Operations and Maintenance costs over the contract term
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Sovereign Development

Relationships

BOSA FAES Residential Strata Commercial/Retail Units Construction & Purchase Agreement $ Energy System Title $ Service Agreements $ Metered Thermal Energy

Public Utility Service

Hotel Component $ Suppliers & Contractors

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Sovereign Development

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Sovereign Thermal Energy System

Schematic

Fan Coils (Residential) Boilers DHW Tanks DHW Pre-Heat Tanks Cooling Tower Heat Recovery Units Water to Water Heat Pumps Make Up Air Units Make Up Air Units Water to Water Heat Pumps Heat Recovery Units Water to Water Heat Pumps Water to Air Heat Pumps (Hotel Rooms) Water to Air Heat Pumps (CRU’s) Heat Exchangers Dehumidification Unit Boilers Pool DHW DCW

~ ~

Heat Exchangers Heat Exchangers Hot Water Supply Hot Water Return Chlled Water Supply Chilled Water Return Heat Pump Loop Supply Heat Pump Loop Return

Key

FAES Thermal Energy System

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Sovereign Development

The Development

http://www.youtube.com/watch?v=Sgw3nwQHOE4

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Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Negotiations

TES Scaled Framework

Sovereign Development

Regulatory/Business Development Context

SRP Strata

Delta SD

Excavation Occupancy

Marine Gateway Kelowna DES Tsawwassen Springs TELUS Garden

Service

Sovereign Project TES Regulation

FEI Transition AES Inquiry/Report SOLO Artemisia Sovereign FAES

Ownership by FAES

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Sovereign Development

Approvals & Light-Handed Regulation

FAES filed on June 18, 2014 and TES Regulatory Framework Guidelines (TES Guidelines) still pending Project is transitioning between two regulatory regimes Approvals sought:

1. CPCN to purchase, own and operate the energy system pursuant to ss. 45-46 of UCA 2. Rates established in the Service Agreements for the Residential Strata, the Hotel, and the Commercial/Retail Property pursuant to ss. 59-61 of the UCA. (corrected from the version distributed at the SRP) 3. Exemption from long-term resource planning requirements pursuant to s. 44.1 of the UCA 4. Ongoing regulatory oversight on a complaint basis, consistent with BCUC Order G-54- 14 for SOLO

Decision Needed by September 30, 2014

(per the Thermal Energy System Construction and Purchase Agreement)

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Sovereign Development

Stream A TES System Meets the Stream A TES System Characteristics

1. On-Site thermal energy system designed to serve:

  • Thermal load located on the same site
  • Three customers on the site but no shared or common thermal generation
  • r distribution facilities beyond the boundaries of the site
  • No use of public rights of way or public streets

2. New construction approved under City of Burnaby’s building permit

process 3. Total capital costs of $6.3M

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Sovereign Development

Regulatory Context of the Application SOLO Regulatory Construct

1. In Order C-3-14 (February 25), the BCUC granted the CPCN pursuant to ss. 45-46 of the UCA and noted:

“The Panel is satisfied that the evidence provided by FAES in its Application, information request responses and Streamline Review Process is adequate given the specific circumstances of the Application.”

2. The BCUC denied the rates but found the rates would be just and reasonable if FAES amended its Service Agreements to address the issues raised in Order C-3-14 and accompanying Decision. 3. On March 27, FAES filed an application for the approval of the rates established in the Amended Service Agreements to comply with BCUC Order C-3-14. In Order G-54-14 (April 15), the BCUC approved the rates as just and reasonable under ss. 59-61 of the UCA.

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Sovereign Development

Regulatory Context of the Application

  • For Sovereign, FAES proposes to use a rate design and Service

Agreement identical as those approved in Order G-54-14 (i.e., amendments made for SOLO were also made for Artemisia).

  • In light of Orders C-3-14 and G-54-14 for SOLO, FAES submits that

the completed Registration Form for Sovereign, the cover letter and the appendices supply the necessary information for the BCUC to grant the approvals sought.

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Sovereign Development

Appropriate for Light-Handed Regulation

The proposed TES System meets the description of an On-Site TES System, as defined in the TES Guidelines. The proposed TES System is associated with an approved single development / building permit. The proposed TES System capital cost is $15 M or less.

(Appendix A to June 12, 2014 TES Regulatory Framework Guidelines, page 4)

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Sovereign Development

Customer Disclosure Meets the SOLO Requirements (C-3-14) FAES has provided disclosure of:

  • Service Agreements
  • Costs that customers may face through time
  • Plain language explanation of Service Agreement
  • BCUC Notice of Public Hearing

Avenues of disclosure:

  • BOSA providing directly to pre-purchase unit holders (notice of public hearing, summary of

service agreement)

  • FAES Website

Ongoing Disclosure (Clause 20)

  • FAES will provide an information package to its customers at least 6 months prior to

implementing a rate change to explain the calculation behind the rate changes

  • Within 4 weeks of sending this package, FAES will give notice to its customers and convene a

meeting to allow them to ask questions on the new rates

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Sovereign Development

Capital Replacement & Service Continuity

  • 1. FAES currently has a growing portfolio of TES Systems and plans for

replacement capital in the forecast costs to provide the service:

  • Replacement of assets that might fail or require replacement is estimated at $135k

per year starting in 6th year ($2.025M over 20 years)

  • 2. FAES has access to capital (wholly-owned subsidiary of Fortis Inc.)
  • 3. FAES provides 24-hour service 7 days a week and is responsible for

the operation and maintenance for all FAES-owned equipment.

  • FAES has access to contracted qualified contractors able to provide emergency

response respecting the operation of all thermal energy systems.

No Capital Reserve Fund is necessary

  • Provisions are adequate to cover the requirements
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Sovereign Development

TES System is Cost Effective Design and Construction - Maximum purchase price of $3.9M

  • BOSA Properties Inc. constructs and pays the difference between $3.9M and actual costs
  • Prior to purchase, system must be fully functioning as designed

Operation - Five-Year Performance Terms

  • Predictable rates for customers for five-year periods
  • Create incentives for FAES to reduce costs in each performance term
  • Enable customers to share in efficiencies gained over the long run
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Sovereign Development

Rate Design Components of the Rate Design:

1. Levelizing mechanism (20-year analysis term) 2. Initial rate in $/kWh ($0.110/kWh in 2014) 3. 2% annual escalation rate (inflation target) 4. 5-year performance terms 5. Performance ratio 6. Fuel deferral account & rate rider 7. Single variable rate for thermal energy 8. Minimum Annual Charge

“The initial rate will be $0.110/kWh (in 2014) escalated at 2% each year and adjusted every five (5) years by the Performance Ratio and will include the fuel Rate Rider which will be adjusted positively or negatively each year.”

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1. Initial Rate set so that, over a 20-year analysis period: PV(Revenues from Rates) = PV(Forecast Cost)

  • using a rate that escalates each year by 2% (inflation)
  • and FAES WACC as the discount rate

2. The result is a rate that is level throughout the 20-year analysis term on a real basis

  • Identical rates throughout the term of service ensures

intergenerational equity

Sovereign Development

Initial Rate Setting (Same as SOLO)

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  • 1. 5-Year Performance Terms
  • 2. After each 5-year term, rates will be adjusted for the

upcoming 5-year term using a Performance Ratio:

  • Ratio of the actual cost of thermal energy ($/kWh) in the previous 5

years to the originally forecast cost of thermal energy ($/kWh) for the same period

  • FAES will multiply the rates originally forecast for the upcoming 5-year

term by this Performance Ratio

  • 3. Formula-based mechanism does not require any judgment
  • r review to administer

Sovereign Development

Future Rate Adjustments (Same as SOLO)

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Sovereign Development

Fuel Costs (Same as SOLO)

Deferral Account Treatment

  • natural gas and electricity
  • price and volume

Rate Rider

  • Annual reset to minimize intergenerational

concerns

  • Smaller component of cost of service
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Sovereign Development

Minimum Annual Charge Provision (Same as SOLO)

Service Agreement includes a Minimum Annual Charge:

  • Calculated by multiplying the applicable Energy Rate by 80% of the

Annual Demand

  • Initially, the Annual Demand is equal to the load forecast (MWh),

but once actual data is available, it will be adjusted to equal the weather normalized average annual demand for the previous 3 years

  • If the actual annual consumption is less than 80% of the Annual

Demand (in MWh), the difference would be multiplied by the applicable Energy Rate and added to the next bill.

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Sovereign Development

Forecast Productivity

Particulars 2014 2015 2016 2017 TOTAL Revenue Requirement Cost of Natural Gas 78 78 81 83 320 Cost of Electricity 152 160 166 172 650 Operation and Maintenance 121 123 126 128 499 Property Taxes

  • Depreciation Expense

234 173 173 173 752 Amortization Expense1

  • Income Taxes

79 8 13 19 119 Earned Return 244 240 229 217 930

  • Annual Revenue Requirement

908 783 788 792 3,270 MWh 6,754 6,754 6,754 6,754 27,014 Forecast cost $/kWh 0.134 $ 0.116 $ 0.117 $ 0.117 $ 0.121 $ First Performance Term

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Sovereign Development

Actual Productivity

Particulars 2014 2015 2016 2017 TOTAL NOTES Revenue Requirement Cost of Natural Gas 78 78 81 83 320 1 Cost of Electricity 152 160 166 172 650 1 Operation and Maintenance 100 150 130 130 510 2 Property Taxes

  • 2

Depreciation Expense 234 173 173 173 752 2 Amortization Expense1

  • 2

Income Taxes 79 8 13 19 119 2 Earned Return 244 240 229 217 930

  • Annual Revenue Requirement

887 809 792 793 3,281 MWh 7,000 7,500 6,754 6,500 27,754 Actual cost $/kWh 0.127 $ 0.108 $ 0.117 $ 0.122 $ 0.118 $ First Performance Term

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Sovereign Development

Performance Ratio & Rate Adjustment

0.121 $ Performance Ratio 102.4% 0.118 $ 2014 2015 2016 2017 2018 Forecast Rates 0.110 $ 0.112 $ 0.114 $ 0.117 $ 0.119 $ Actual Rates 0.110 $ 0.112 $ 0.114 $ 0.117 $ 0.119 $ 2019 2020 2021 2022 2023 Forecast Rates 0.121 $ 0.124 $ 0.126 $ 0.129 $ 0.131 $ Actual Rates 0.119 $ 0.121 $ 0.123 $ 0.126 $ 0.128 $ Second Performance Term First Performance Term

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Sovereign Development

Benefits of the Rate Design

  • 1. Provides an equitable balance of risks & rewards between FAES and

customers

  • 2. Meet the need for efficient regulation
  • 3. Short-term efficiency incentive for FAES as it keeps the savings if

performing better than forecast

  • 4. Long-term benefit for customers as rates in future performance

terms are reduced if FAES performs better

  • 5. FAES takes risk on costs and energy deliveries within each 5-year

performance term (except fuel costs)

  • 6. Level rate throughout the contract term ensures intergenerational

equity