2020 02 20 exhibit b 5 bch ires 1 to intv...sh/ma enclosure c) bchydro power smart british columbia...

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

Fred James

Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 [email protected]

February 20, 2020 Mr. Patrick Wruck Commission Secretary and Manager Regulatory Support British Columbia Utilities Commission Suite 410, 900 Howe Street Vancouver, BC V6Z 2N3 Dear Mr. Wruck: RE: Project No. 1599053

British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Transmission Service Market Reference-Priced Rates Application Responses to BCUC and Interveners Information Request No. 1

BC Hydro writes in compliance with BCUC Order No. G-327-19 to provide its responses to Round 1 information requests as follows:

Exhibit B-4 Responses to Commission IRs (Public Version)

Exhibit B-4-1 Responses to Commission IRs (Confidential Version)

Exhibit B-5 Responses to Interveners IRs

BC Hydro is filing a number of IR responses and/or attachments to responses confidentially with the BCUC. BC Hydro confirms that in each instance, an explanation for the request for confidential treatment is provided in the public version of the IR response. BC Hydro seeks this confidential treatment pursuant to section 42 of the Administrative Tribunals Act and Part 4 of the BCUC’s Rules of Practice and Procedure.

For further information, please contact Anthea Jubb at 604-623-3545 or by email at [email protected].

Yours sincerely,

Fred James Chief Regulatory Officer sh/ma

Enclosure

B-5C) BCHydro Power smart

mailto:[email protected]

mailto:[email protected]

Yvonne.Lapierre

Transmission Service Market Reference-Priced Rates

British Columbia Old Age Pensioners’ Organization et at. Information Request No. 1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1

British Columbia Hydro & Power Authority Transmission Service Market Reference-Priced Rates Application

Exhibit: B-5

1.0 Reference: Exhibit B-1, page 2

The Application states: “The proposed Freshet Rate and Incremental Energy Rate Pilot have been designed to: (a) Provide opportunities for transmission service customers to operate

their idle and/or flexible production capacity that in the absence of these rates would be underutilized;”

1.1.1 Please outline what adjustments, if any, would be made to a Freshet Rate customer’s eligibility or baselines if the customer expands its production capability after commencing service under the rate.

RESPONSE:

If the customer sought to utilize existing flexible production capacity that was previously idle, or underutilized, BC Hydro would not expect to adjust the customer’s RS 1892 baselines for this temporary operational change. This is because BC Hydro considers such a change to be a desired outcome of the rate.

Any consideration of the customer’s eligibility, or adjustment to RS 1892 baselines, for a permanent expansion of the customer’s site production capability would be made in accordance with RS 1892 as follows:

• Per Special Condition No. 4 of RS 1892, if BC Hydro and the customer agree that the historical freshet electricity consumption used to determine the customer’s RS 1892 baselines is not representative of expected future freshet period electricity consumption, and the parties agree to alternative baselines, then BC Hydro will file the agreed to baselines with the BCUC; and

• Per Special Condition No. 5 of RS 1892, BC Hydro will consider any requested adjustments to the customer’s RS 1892 baselines that are consistent with the principles and criteria set out in TS 74.

For example, if the customer undertakes capital investments to permanently increase plant production capacity and makes a request to BC Hydro in accordance with TS 74 for its RS 1823 Energy CBL to be increased, BC Hydro would make a corresponding adjustment to the customer’s RS 1892 baselines to reflect this change.

BC Hydro and the customer might also agree to use an alternative freshet period for RS 1892 baseline determination that incorporates the incremental load from the customer’s permanent expansion of plant production capacity. In all cases where BC Hydro and the customer agree to an alternative baseline, or baseline adjustment, BC Hydro will apply to the BCUC to review and approve the change.

BC Hydro further notes that the customer would take significant risk if it invested in permanent plant capacity expansion without firm electricity supply.


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Exhibit: B-5


The Application states:

“The proposed Freshet Rate and Incremental Energy Rate Pilot have been designed to: (a) Provide opportunities for transmission service customers to operate

their idle and/or flexible production capacity that in the absence of these rates would be underutilized;”

1.1.2 Please outline what adjustments, if any, would be made to an Incremental Energy Rate Pilot customer’s eligibility or baselines if the customer expands its production capability after commencing service under the rate.

RESPONSE:

If the customer sought to utilize existing flexible production capacity that was previously idle, or underutilized, BC Hydro would not expect to adjust the customer’s RS 1893 baselines for this temporary operational change. This is because BC Hydro considers such a change to be a desired outcome of the rate.

Any consideration of the customer’s eligibility, or adjustment to RS 1893 baselines, for a permanent expansion of the customer’s site production capability would be made in accordance with RS 1893 as follows:

• Per Special Condition No. 7 of RS 1893, the customer must have at least two years of historical electricity consumption to be eligible for baseline determination;

• Per Special Condition No. 8 of RS 1893, if BC Hydro and the customer agree that the historical electricity consumption used to determine the customer’s RS 1893 baselines is not representative of expected future period electricity consumption, and the parties agree to alternative baselines, then BC Hydro will file the agreed to baselines with the Commission;

• Per Special Condition No. 9 of RS 1893, BC Hydro will consider any requested adjustments to the customer’s RS 1893 baselines consistent with the principles and criteria set out in TS 74; and

• Per Special Condition No. 11 of RS 1893, the customer’s incremental load, as measured by peak kVA demand, cannot exceed 2.0 times the Monthly Reference Demand applicable to that Billing Period.


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Exhibit: B-5

For example, if the customer undertakes capital investments to permanently increase plant production capacity and makes a request to BC Hydro in accordance with TS 74 for its RS 1823 Energy CBL to be increased, BC Hydro would make a corresponding adjustment to the customer’s RS 1893 baselines to reflect this change.

BC Hydro and the customer might also agree to use an alternative annual period for RS 1893 baseline determination that incorporates the incremental load from a permanent expansion of plant production capacity.

BC Hydro further notes that the customer would take significant risk if it invested in permanent plant capacity expansion without firm electricity supply.


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Exhibit: B-5

2.0 Reference: Exhibit B-1, pages 2 & 5 and Appendix D, page 10 of 296

At page 2, the Application states:

“Minimize risk to all ratepayers by not requiring BC Hydro to undertake system reinforcements”


“Over the four-year pilot period the Freshet Rate:

-Had participation from approximately 30 per cent of eligible RS 1823 customers.”

1.2.1 Please clarify what is meant by “eligible” RS 1823 customers.

RESPONSE:

Over the four-year pilot period, the term “eligible” RS 1823 customers refers to all customers served electricity under RS 1823 as set out in the “Availability” provision of the RS 1892 rate schedule. Each RS 1823 customer also needed to have calendar 2015 freshet period electricity consumption or an agreed-to alternative historical freshet period for RS 1892 baseline determination.

In the Application, BC Hydro is proposing to also require the customer to have at least one year of historical electricity usage to be eligible for RS 1892 service.

British Columbia Old Age Pensioners’ Organization et at. Information Request No. 1.2.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

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Exhibit: B-5







1.2.1 Please clarify what is meant by “eligible” RS 1823 customers.

1.2.1.1 What was the total number of RS 1823 customers during the Freshet Rate Pilot and how many were “eligible” in each year?

RESPONSE:

The total number of customer sites taking service under RS 1823 during each year of RS 1892 pilot is set out in the table below. For each year, BC Hydro has identified the total number of RS 1823 customer sites, including the number of customer sites that were eligible or ineligible for RS 1892 service, and the total number of RS 1892 participant customer sites.

BC Hydro notes that ineligible RS 1823 customer sites were new customers that did not have sufficient historical freshet period electricity consumption from which electricity baselines could be determined in accordance with RS 1892.

Year 1 - F2017 Year 2 - F2018 Year 3 - F2019 Year 4 - F2020

Total number of RS 1823 customers 140 138 139 139

Eligible RS 1823 customers 138 135 135 136

Ineligible RS 1823 customers 2 3 4 3

Number of RS 1892 participant customers 39 44 45 37


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Exhibit: B-5







1.2.2 During the period of the Freshet Rate Pilot were there any RS 1823 customers that were unable to participate on the basis that system reinforcements would have been required for them to do so?

RESPONSE:

No, during the four-year period of the Freshet Rate Pilot, no RS 1823 customer was unable to participate on the basis that system reinforcements would have been required to serve their RS 1823 baseline load, plus any incremental RS 1892 load.

For greater certainty, per Special Condition No. 1 of RS 1892, BC Hydro will not be required to construct a system reinforcement to provide incremental RS 1892 service.


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Exhibit: B-5







1.2.2 During the period of the Freshet Rate Pilot were there any RS 1823 customers that were unable to participate on the basis that system reinforcements would have been required for them to do so?

1.2.2.1 If yes, how many customers were there?

RESPONSE:

Please refer to BC Hydro’s response to BCOAPO IR 1.2.2.


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Exhibit: B-5



“For greater certainty, BC Hydro does not propose to interrupt these non-firm services for economic reasons”.

1.3.1 Please explain why BC Hydro is not proposing to interrupt either service for economic reasons.

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.9.4.


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Exhibit: B-5




1.3.2 Has BC Hydro considered an option whereby the service would be interrupted for “economic reasons” if the difference between the Freshet Rate and the actual marginal cost to provide the service was materially higher than the energy adder?

RESPONSE:

BC Hydro did not consider the option of interrupting service based on our actual system marginal cost.

Please also refer to BC Hydro’s response to BCUC IR 1.9.4.


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Exhibit: B-5





1.3.2.1 If yes, why was it rejected?

RESPONSE:



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Exhibit: B-5





1.3.2.2 If not, please comment on the pros/cons of such an approach.

RESPONSE:



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Exhibit: B-5


Exhibit B-1, Appendices D (page 15 of 296) and E (page 18 of 21)

The Application states that the referenced $5.8 M in net revenue gain “has not been adjusted for implementation costs and any verified load shifting impacts”.

1.4.1 Please explain why the evaluation of the year 4 results did not include adjustments similar those made in Table 3 of Appendix D for each of the first three years.

RESPONSE:

As described on in section 3.1.7.1 of Appendix D of the Application, to complete an analysis of all the adjustments in Table 3 of Appendix D for Year 4, BC Hydro would first need to complete its RS 1823 CBL annual review process for participant customers and verify the energy consumption impact of specific customer actions taken during the freshet period. This analysis is time consuming and resource-intensive. Further, the required information was not available at the time of submitting the Year 4 Evaluation Report. BC Hydro completed a full evaluation, inclusive of all adjustments, for each of Year 1 and Year 2.


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Exhibit: B-5




1.4.2 Based on the results reported in Appendices D and E, please confirm that the net revenue gain (after adjusting for implementation costs, load shifting, etc. for the first three years) for the four year period is $3.2 M (i.e., reported three year benefits of $3.725 M per Table 3 of Appendix D less the loss in year four of $0.543 M per Appendix E).

RESPONSE:

The estimated net revenue gain (described as Adjusted Ratepayer Benefit) identified in Table 3 of Appendix D of the Application is $3.7 million for the first three years of the Freshet Rate Pilot. This value was adjusted for BC Hydro’s implementation costs and the estimated revenue impacts of load shifting impacts that include: customer-reported load shifting; unexplained load variance; natural load growth; and RS 1880 replacement service for Years 1 to 3.

The revenue loss for Year 4 of the Freshet Rate Pilot identified in Table 5 of Appendix E is $0.5 million. This value has not been further adjusted for Year 4 implementation costs or load shifting impacts.

Please also refer to BC Hydro’s response to BCOAPO IR 1.4.1.


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Exhibit: B-5




1.4.2 Based on the results reported in Appendices D and E, please confirm that the net revenue gain (after adjusting for implementation costs, load shifting, etc. for the first three years) for the four year period is $3.2 M (i.e., reported three year benefits of $3.725 M per Table 3 of Appendix D less the loss in year four of $0.543 M per Appendix E).

1.4.2.1 Please confirm that the net revenue gain for the four year period will be less than $3.2 M if adjustments for implementation costs, load shifting, etc. were also included for year 4.

RESPONSE:

The net revenue gain in the four years may be less than $3.2 million after adjusting for BC Hydro’s implementation costs and the estimated revenue impacts of verified load shifting impacts for all four years that include: customer-reported load shifting; unexplained load variance; natural load growth; and RS 1880 replacement service.

Please also refer to BC Hydro’s response to BCOAPO IRs 1.4.1 and 1.4.2.


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Exhibit: B-5


The Application states that for the Incremental Energy Rate Pilot:

“BC Hydro will not construct system reinforcements to enable Service”.

1.5.1 Given that service under the Incremental Energy Rate Pilot is available on a year-round basis and the fact BC Hydro will not construct system reinforcements to enable service, how many of the current RS 1823 customers would not be able to take service under the proposed rate?

RESPONSE:

Some RS 1823 and RS 1828 customers are currently operating their plants at less than their historical peak operating levels, such that their plants have idle capacity that the customer may be able to cost-effectively use with access to incremental energy at market-referenced pricing. In most cases, there is also available capacity in the local transmission system used to serve the RS 1823 or RS 1828 customer.

Accordingly, BC Hydro considers that with currently available transmission capacity and under normal system operating conditions, the existing system will have sufficient energy and capacity available to serve expected incremental RS 1892 and RS 1893 load.

Per Special Condition No. 2 of RS 1893, BC Hydro will not be required to construct a system reinforcement under TS 6, for example to reinforce local transmission, to provide RS 1893 service. This means that a customer’s acess to RS 1893 service will be limited by currently available local transmission capacity.

Also, per Special Condition No. 2 of RS 1893, BC Hydro will only provide service to customers under RS 1893 to the extent it has available energy and capacity to do so. As discussed in the response to BCUC IR 1.9.6, in the event that BC Hydro does not have sufficient energy and capacity to serve load due to planned or unplanned transmission or generation constraints, BC Hydro will curtail non-firm interruptible loads first (including RS 1892, RS 1893 and other non-firm services) in order to balance the system before curtailing firm loads (including RS 1823 and other firm services) if additional actions are required.


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Exhibit: B-5

6.0 Reference: Exhibit B-1, page 12 (lines 21-25)

1.6.1 Has BC Hydro received letters of support from any customers other than RS 1823 and RS 1828 customers? If so, please provide.

RESPONSE:

BC Hydro received letters of support from the following customers and stakeholders:

1. Association of Major Power Customers;

2. Ministry of Energy, Mines and Petroleum Resources;

3. Copper Mountain (RS 1823 customer);

4. ERCO Worldwide (RS 1823 customer); and

5. Canfor Pulp Ltd. (RS 1828 customer).

BC Hydro notes that the letter of support from Canfor Pulp Ltd. was not included in Appendix F to the Application because it was received after the filing date. This letter is provided as Attachment 1 to this IR response.

BCOAPO IR 1.6.1 Attachment 1

Transmission Service Market Reference-Priced Rates Application

Page 1 of 1

Cantor Pulp Ltd.

Intercontinental Pulp Mill

November 1, 2019

Sent by Email

BC Hydro 333 Dunsmuir., 4th Floor Vancouver, BC V6B SR3

Attention David Keir, Senior Manager, Transmission Rates and Large Customer Rate Operations

Dear Mr. Keir,

I am writing to express Canfor Pulp Ltd.'s support for BC Hydro's application seeking BC Utilities Commission approval of:

• An amended Freshet Rate (RS 1892) effective April 1, 2020

• The Incremental Energy Rate Pilot (RS1893) on a pilot basis beginning January 1, 2020

These programs provide Canfor Pulp Ltd. with an optional interruptible electricity service that provides flexibility in the operation of our plants. Allowing for a lower cost of incremental production for Canfor Pulp Ltd. and increased revenue for BC Hydro.

Canfor Pulp Ltd. has attended BC Hydro's workshops on both applications and has met with BC Hydro to provide feedback. Canfor Pulp Ltd . has participated in the Freshet pilot for the last 4 years and is familiar with the mechanics of the proposed programs.

Best Regards.

~zz~g Director, Capital, Reliability and Assets

2533 Prince George Pulpmill Road, Post Office Box 6000, Prince George, British Columbia V2N 2K3 Telephone 250-563-0161 Fax 250-561 -3921 [email protected] www.canforpulp.com


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Exhibit: B-5

7.0 Reference: Exhibit B-1, pages 16-17 and Appendix D (page 13 of 296)

In Appendix D (page 13 of 296) BC Hydro uses the RS 1823 Tier 1 unit energy price to estimate the cost reduction for incremental sales.

1.7.1 Please explain why the Tier 1 unit energy price was used as opposed to the Tier 2 unit energy price.

RESPONSE:

It is BC Hydro’s understanding that customers typically compare their cost of incremental electricity under RS 1892 to the cost of purchasing incremental electricity under RS 1823 using the prevailing Tier 1 energy charge and associated kVA demand charge.

Accordingly, BC Hydro used the RS 1823 Tier 1 unit energy price and associated kVA demand charge (as opposed to the RS 1823 Tier 2 unit energy price) in its analysis of the estimated benefits for participant customers, as shown in Table 2 of Appendix D of the Application.


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Exhibit: B-5



1.7.2 During the pilot, for how many of the RS 1823 customers also taking service under RS 1892 was the HLH baseline lower than 90% of the customer’s CBL?

RESPONSE:

BC Hydro is unable to complete the requested comparison as the two baselines are not comparable, because, for example:

• The annual 90 per cent of RS 1823 Energy CBL energy volume (in kWh) in any given Billing Year has no relationship to the RS 1892 hourly HLH baseline (in KWh/hr) in any given freshet period;

• The RS 1892 HLH baseline represents an average of historical hourly HLH energy consumption during a prior freshet period (in kWh/hr), whereas the Energy CBL under RS 1823 represents 365 days of normal historical annual energy purchases (in kWh); and

• Not all RS 1823 customers taking service under RS 1892 have an Energy CBL – that is, some RS 1823 customers are served under RS 1823 Energy Charge B (and have an Energy CBL) and some are served under RS 1823 Energy Charge A (and do not have an Energy CBL).


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Exhibit: B-5



1.7.3 During the pilot, for how many of the RS 1823 customers also taking service under RS 1892 was the LLH baseline lower than 90% of the customer’s CBL?

RESPONSE:



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Exhibit: B-5



1.7.4 With respect to Appendix D (Table 2), please confirm that the fourth row under “Energy” is meant to refer to the total RS 1892 volumes and not the total RS 1823 volumes.

RESPONSE:

Confirmed, the referenced description in Table 2 of Appendix D of the Application should read “RS 1892 energy” as opposed to “RS 1823 energy”. This is a typographical error.


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Exhibit: B-5

8.0 Reference: Exhibit B-1, Appendix D (pages 14 & 15; 25 & 26 and 36-41

of 296)

Appendix D states:

“BC Hydro has further adjusted this estimate to remove the impact of additional verified costs which it considers to reduce ratepayer benefits. These costs include: (1) implementation costs; and (2) verified load shifting costs. BC Hydro has expanded its definition of load shifting to include customer-reported events of load-shifting, unexplained load variances, natural load growth and use of RS 1892 as a replacement service for RS 1880 during events of forced generator outage”.

1.8.1 With respect to Appendix D (page 40 of 296) was the Tier 1 or Tier 2 rate used to determine the revenue that would have been collected under RS 1823/1880?

RESPONSE:

BC Hydro understands the question to refer to the estimated financial impacts arising from load shifting that are shown in Table 11 of Appendix D of the Application.

BC Hydro calculated the estimated financial impacts on a customer-specific basis to determine the revenue that would have been collected.

The estimated financial impacts represent the prevailing RS 1823 Energy Charge A (flat rate) or RS 1823 Energy Charge B (Tier 1 and/or Tier 2 rate mix) and/or RS 1880 energy charge that would have applied to that specific customer in each specific Billing Year.


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Exhibit: B-5


of 296)

Appendix D states:


1.8.1 With respect to Appendix D (page 40 of 296) was the Tier 1 or Tier 2 rate used to determine the revenue that would have been collected under RS 1823/1880?

1.8.1.1 If the Tier 1 rate was used, how would the results change if the Tier 2 rate had been used instead?

RESPONSE:

The Tier 2 rate would not produce an accurate representation of the revenue impact of load shifting. An accurate representation of revenue impacts should consider the actual rate paid by customers.

Hypothetically, if the RS 1823 Tier 2 rate was used to calculate the revenue impact in all cases of load shifting - instead of the actual energy rate that applied to each customer - the aggregate revenue impact would be higher because the RS 1823 Tier 2 rate is higher than both the RS 1823 Tier 1 rate and the RS 1823 Energy Charge A rate for the same volume of load shift energy.



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Exhibit: B-5


of 296)

Appendix D states:


1.8.2 Is it possible that load shifting or natural load growth occurred beyond that reported by customers/calculated by BC Hydro?

RESPONSE:

BC Hydro has completed a thorough analysis of load shifting as shown in Appendix D of the Application. BC Hydro is unaware of any additional load shifting and/or natural load growth that might have occurred beyond that reported by customers and calculated by BC Hydro.


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Exhibit: B-5


of 296)

Appendix D states:



1.8.2.1 If not, why not?

RESPONSE:



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Exhibit: B-5


of 296)

Appendix D states:



1.8.2.2 If yes, what is the degree of uncertainty associated with the reported ratepayer benefits?

RESPONSE:

BC Hydro has not assigned an estimate of uncertainty to the reported ratepayer benefits. BC Hydro considers the load shifting analysis to be extremely complex. It requires a detailed understanding of the many dynamic factors that impact electrical load at each unique customer site. This can be difficult to separately identify and verify with certainty. BC Hydro’s analysis in Appendix D of the Application is based on the best available information.


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Exhibit: B-5

9.0 Reference: Exhibit B-1, Appendix D (pages 23 – 25 and 93 of 296)

1.9.1 Under Conditions 1 and 2, what is the relevance of the qualifier – “holding market price constant”?

RESPONSE:

‘Holding market price constant’ is the assumption that the market price would not be any different whether the incremental load occurred or not.


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Exhibit: B-5


1.9.1 Under Conditions 1 and 2, what is the relevance of the qualifier – “holding market price constant”?

1.9.1.1 Are there circumstances under which the relevant market price to be used in the evaluation of actual ratepayer impacts would change from the day ahead market price used to set the RS 1892 energy rate? If yes, please describe what they are.

RESPONSE:

No. Please refer to BC Hydro’s response to BCOAPO IR 1.9.2.


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Exhibit: B-5


1.9.2 Please clarify whether the revenues received by BC Hydro for exports or the amounts paid for imports are based on day ahead market prices (i.e., those used to set the RS 1892 energy rates) or real time market prices.

RESPONSE:

Under the Transfer Price Agreement, BC Hydro purchases and sells energy from and to Powerex at the applicable Mid-C day-ahead index price with adjustments for transmission costs and losses on the BPA system.


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Exhibit: B-5


1.9.2 Please clarify whether the revenues received by BC Hydro for exports or the amounts paid for imports are based on day ahead market prices (i.e., those used to set the RS 1892 energy rates) or real time market prices.

1.9.2.1 If in either case the revenues received/amounts paid are not based on the day ahead prices used to set the RS 1892 energy rates, please provide schedules that compare the day ahead vs. real time market prices for the 2016-2019 Freshet Periods.

RESPONSE:



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Exhibit: B-5


1.9.3 If Powerex is involved in effecting the exports that would have been made without the RS 1892 sales or the imports that could be required due RS 1892 sales, please clarify whether the prices that would have been received by Powerex for exports avoided by RS 1892 or the prices paid for imports by Powerex required to support RS 1892 are based on day ahead or real time prices.

RESPONSE:

BC Hydro purchases imports to the system from Powerex and sells exports from the system to Powerex at the applicable day ahead Mid-C price, as explained in BC Hydro’s response to BCOAPO IR 1.9.2. For BC Hydro, the incremental load from RS 1892 is not treated any differently than other customer load. BC Hydro forecasts the expected load and inflow conditions in the day ahead timeframe and in real time, and uses this information to make system dispatch decisions and to convey system availability and limitations to Powerex. Therefore, it is not possible to attribute an increase in load due to RS 1892 to specific imports or exports in the real-time or day ahead periods.

Further, Powerex transacts in a variety of geographic and temporal markets. Likewise, it is not possible to attribute an increase in load due to RS 1892 to specific imports or exports in the real-time or day ahead periods.


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Exhibit: B-5


1.9.3 If Powerex is involved in effecting the exports that would have been made without the RS 1892 sales or the imports that could be required due RS 1892 sales, please clarify whether the prices that would have been received by Powerex for exports avoided by RS 1892 or the prices paid for imports by Powerex required to support RS 1892 are based on day ahead or real time prices.

1.9.3.1 If in either case the revenues received/amounts paid are not based on the day ahead prices used to set the RS 1892 energy rates, please provide schedules that compare the day ahead vs. real time market prices for the 2016-2019 Freshet Periods.

RESPONSE:



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Exhibit: B-5


1.9.4 Please explain why BC Hydro ratepayers are typically worse off under Condition 2.

RESPONSE:



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Exhibit: B-5


1.9.5 For each of the years 2016-2018, please indicate for what percentage of the freshet period did each of the three conditions described on pages 23-24 exist.

RESPONSE:

The system constraints in any given year are confidential and commercially sensitive, because their disclosure could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers. BC Hydro therefore declines to provide this information.

However, over the four-year trial period, Condition No. 1 occurred approximately 13 per cent of the time, Condition No. 2 occurred approximately 29 per cent of the time, and Condition No. 3 occurred approximately 58 per cent of the time.


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Exhibit: B-5


1.9.6 With respect to Condition 1, please explain more fully why the revenue increase that BC Hydro will see is “equal to the difference between the CAD $3/MWh wheeling rate and 5 per cent rate rider collected under RS 1892 and the avoided US $5.16/MWh wheeling charge paid for energy delivery from the BC border to the Mid-C market (converted to Canadian dollars daily) plus 1.9 per cent transmission losses”.

RESPONSE:

Please refer to the attachment to BC Hydro’s response to BCUC IR 1.13.3 for an example of a calculation of the ratepayer impact by condition.


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Exhibit: B-5



1.9.6.1 In doing so, please explain why BC Hydro’s Open Access Transmission Tariff wheeling rate for non-firm point-to-point transmission service of C$8.05 per MW of reserved capacity per hour does not factor into the calculation.

RESPONSE:

For clarity, BC Hydro first notes that none of our domestic load customers, including Freshet Energy Rate customers directly take service under the Open Access Transmission Tariff (OATT). All take service under the Electric Tariff. The BPA wheeling rate referred to in the Application was used as an analytical input only, and does not refer to actual transmission reservations to serve domestic load customers.

BC Hydro does not anticipate that the Freshet Energy Rate or the Incremental Energy Rate will impact our costs under the OATT. BC Hydro’s costs under the OATT related to market imports to serve load, and market exports for trade are further described below.

For market imports to serve domestic load, BC Hydro reserves transmission capacity under Network Economy Service (OATT Attachment Q-2 and Tariff Supplement No. 80). Network Economy service is secondary network service under section 28.4 of the OATT. The costs of network service, including network economy service, are recovered from Electric Tariff customers through the Network Integration Transmission Service charge (OATT Rate Schedule 00).

For market exports for trade, BC Hydro makes use of our existing Point-to-Point Transmission Service reservations under the OATT. All transmission reservations, including Point-to-Point service, are for a given amount of transmission capacity, not energy. BC Hydro does not expect the Freshet or Incremental Energy Rates to impact the amount of transmission capacity reservations required. Existing Point-to-Point reservations have adequate capacity to schedule the amount of energy associated with the Freshet Energy Rate and the Incremental Energy Rate.


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Exhibit: B-5



1.9.6.2 In doing so, please explain why, if the US $5.16/MWh wheeling charge paid for energy delivery from the BC border to the Mid-C market is avoided by the domestic sale of freshet energy it serves to reduce the margin received.

RESPONSE:

When the wheeling charge and transmission losses are avoided then the cost of those services are included in the ratepayer benefit calculation. The term ‘equal to the difference’ in the preamble refers to the difference between the avoided cost and the revenue from the RS 1892 rate. The language was clarified in Appendix E of the Application.

Please also refer to BC Hydro’s response to BCOAPO IRs 1.9.7 and 1.19.1.


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Exhibit: B-5


1.9.7 With respect to Condition 2, please explain more fully why the revenue decrease that BC Hydro will see is “equal to the difference between the CAD $3/MWh wheeling rate and 5 per cent rate rider collected under RS 1892 and the US $5.16/MWh wheeling charge paid for energy delivery from the Mid-C market to the BC border (converted to Canadian dollars daily) plus 1.9 per cent transmission losses”.

RESPONSE:

Under Condition No. 2, BC Hydro is purchasing the energy at Mid-C and paying the transmission cost to transport that energy from Mid-C to the B.C. border.

The transmission cost is the US $5.16/MWh wheeling charge, plus 1.9 per cent for transmission losses. Based on current exchange rates, the cost to BC Hydro for transmission and losses is approximately CAD $7/MWh.

In contrast, under RS 1892, BC Hydro charges the customer the Mid-C price plus an energy charge adder of CAD $3/MWh and the Deferral Account Rate Rider.1

As the Mid-C price is common to both calculations, there is a revenue difference (loss) of approximately CAD $4/MWh because the CAD $7/MWh cost to BC Hydro to transport the energy to the B.C. border is higher than the CAD $3/MWh of adder revenue received from the RS 1892 customer.

Please refer to Tab 1 of Attachment 1 to BC Hydro’s response to BCUC IR 1.13.3, which contains a detailed spreadsheet of Condition No. 2 scenarios as set out in BCUC IR 1.13.3.

1 BC Hydro notes that the Deferral Account Rate Rider (RS 1901) was previously 5 per cent and is now 0 per cent as proposed in the F20/F21 Revenue Requirements Application.


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Exhibit: B-5


1.9.7 With respect to Condition 2, please explain more fully why the revenue decrease that BC Hydro will see is “equal to the difference between the CAD $3/MWh wheeling rate and 5 per cent rate rider collected under RS 1892 and the US $5.16/MWh wheeling charge paid for energy delivery from the Mid-C market to the BC border (converted to Canadian dollars daily) plus 1.9 per cent transmission losses”.

1.9.7.1 In doing so, please explain why BC Hydro’s Open Access Transmission Tariff wheeling rate for non-firm point-to-point transmission service of C$8.05 per MW of reserved capacity per hour does not factor into the calculation.

RESPONSE:

Please refer to BC Hydro’s response to BCOAPO IR 1.9.6.1.


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Exhibit: B-5


1.9.8 With respect to Condition 3, please explain more fully how the System Marginal Value is determined. In doing so please explain whether/how wheeling rates are taken into account in the calculation.

RESPONSE:

The system marginal value is calculated as part of the monthly Energy Studies. The Energy Studies includes the wheeling fee for delivery to the B.C. border, presently equal to US$5.16/MWh, plus a 1.9 per cent energy loss adjustment for transmission.


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Exhibit: B-5


1.9.8 With respect to Condition 3, please explain more fully how the System Marginal Value is determined. In doing so please explain whether/how wheeling rates are taken into account in the calculation.

1.9.8.1 Please provide a schedule that, for those days during the 2016-2019 Freshet Periods when Condition 3 was in effect, compares the System Marginal Values with the Mid-C market prices.

RESPONSE:



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Exhibit: B-5


1.9.9 Please explain why Condition 3 contributes most of the ratepayer benefit (per Table 8).

RESPONSE:

Over the four-year trial period Condition No. 3 occurred approximately 58 per cent of the time, and during the freshet months, the combination of the daily Mid-C market price and the energy charge adder are often higher than the system marginal value. Condition No. 3 provided the majority of the benefit to ratepayers.


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Exhibit: B-5


1.9.10 Are the calculations underlying Table 8 all based on day ahead prices for purposes of valuing lost exports and additional imports?

RESPONSE:

The Mid-C market prices used in the calculations of ratepayer benefit, as shown in Table 8 of Appendix D, are the day-ahead prices.


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Exhibit: B-5



1.9.10.1 If yes, will the difference between the day ahead and real time prices have any impact on the net margin received by BC Hydro or Powerex’s net income?

RESPONSE:



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Exhibit: B-5



1.9.10.2 If not, where and how are the real times prices used in the analysis and how does the difference between the day ahead and real time prices impact the results presented in Table 8?

RESPONSE:



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Exhibit: B-5

10.0 Reference: Exhibit B-1, Appendix D, (page 27 of 296)

The Appendix states:

“On most days during the Pilot, BC Hydro was typically in an export position. Accordingly, the wheeling rate under RS 1892 provided a margin to BC Hydro equal to the difference between the wheeling rate collected under RS 1892 and the wheeling rate that would have been paid for a market energy sale.”

“BC Hydro collected $1.44 million in total wheeling rate revenue for the Pilot under RS 1892 (includes rate rider, excludes taxes)”

1.10.1 With respect to the first reference, given that the “margin” is based on the difference, please confirm: i) that the “wheeling rate that would have been paid for a market energy sale” represents revenue that BC Hydro would have received from the market sale, ii) what the basis for the wheeling rate is and iii) what the dollar value per kWh is.

RESPONSE:

Not confirmed. The “wheeling rate that would have been paid for a market energy sale” (i.e., a BC Hydro Surplus Sale) in the reference would represent a cost to BC Hydro, not revenue.

When BC Hydro is exporting from the system, BC Hydro receives from Powerex the applicable Mid-C price minus the wheeling cost of US$5.16/MWh and deemed transmission losses for energy delivery from the B.C. border. The basis for this wheeling cost is the Bonneville Power Authority (BPA) Transmission Rates Schedules, effective October 1, 2017.

For RS 1892 energy sales, as described in section 4.3 on page 49, starting on line 20 of the Application, “BC Hydro proposes to replace the term ‘wheeling rate’ with ‘adder’ for clarity and to avoid confusion. As there is no direct physical transaction for procurement or delivery of market energy under RS 1892, the term ‘wheeling rate’ is not accurate.”


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Exhibit: B-5





1.10.1 With respect to the first reference, given that the “margin” is based on the difference, please confirm: i) that the “wheeling rate that would have been paid for a market energy sale” represents revenue that BC Hydro would have received from the market sale, ii) what the basis for the wheeling rate is and iii) what the dollar value per kWh is.

1.10.1.1 During the Freshet Periods in 2016-2019 when BC Hydro was in an export position, what was the “difference” on a $/MWh basis?

RESPONSE:

Holding market price constant, the difference (i.e., margin) is comprised of the sum of the avoided wheeling fee and losses that would have been paid on market exports ($5.16 USD/MWh plus 1.9 per cent of the Mid-C price) as compared to the $3 CAD/MWh adder on RS 1892 energy.


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Exhibit: B-5





1.10.2 For the same period that the $1.44 M is based on, what was the revenue associated with the wheeling rate(s) that would have been paid for a market energy sale?

RESPONSE:

For the same period, if the energy was sold to market rather than to domestic customers under RS 1892, there would have been no revenue associated with the wheeling rate that BC Hydro would have paid for a market energy sale (i.e., BC Hydro Surplus Sale) as this transaction represents a cost.


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Exhibit: B-5

11.0 Reference: Exhibit B-1, Appendix D (pages 28 & 84 of 296)

1.11.1 For each of the years 2016, 2017, 2018 and 2019 how many RS 1892 customers had baselines that were not established using the customer’s electricity consumption billed under RS 1823 of the 2015 Freshet Period?

RESPONSE:

For each year of the Freshet Rate Pilot, the table below shows:

(i) The total number of RS 1892 participant customers;

(ii) The number of participant customers with RS 1892 baselines determined using 2015 freshet period electricity consumption;

(iii) The number of participant customers with RS 1892 baselines determined using electricity consumption from an alternate freshet period; and

(iv) The number of participant customers for which baselines were determined using the 2015 freshet period, but for which adjustments were subsequently made in accordance with RS 1892 and approved by the BCUC.

Year 1 - F2017

Year 2 - F2018

Year 3 - F2019

Year 4 - F2020

Total number of RS 1892 participant customers 39 44 45 37Total number of participant customers with RS 1892 baselines determined using 2015 freshet period electricity consumption; 37 42 45 37

Total number of RS 1892 participant customers with RS 1892 Baselines determined using freshet period other than 2015 2 2 - -

Total number of RS 1892 participant Customers with baselines determined using the 2015 Freshet period but further adjusted 5 2 5 -


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Exhibit: B-5

11.0 Reference: Exhibit B-1, Appendix D (pages 28 & 84 of 296)

1.11.2 Without getting into specific customer details, what were the reasons for not using the usage during the 2015 Freshet Period to set the baselines?

RESPONSE:

Per Special Condition No. 4 of RS 1892, BC Hydro and the customer agreed that RS 1823 electricity consumption for the 2015 Freshet Period was not representative of expected future electricity consumption during the forthcoming freshet period.

The reasons are set out in BC Hydro’s applications to the BCUC for approval of alternate RS 1892 baselines, as listed below:

• Year 1: BC Hydro Rate Schedule (RS) 1892 – Transmission Service Freshet Energy Baselines Application dated April 29, 2016, approved by BCUC Order No. G-76-16 on May 27, 2016;

• Year 2: BC Hydro Rate Schedule (RS) 1892 – Transmission Service Freshet Energy Baselines Application dated April 25, 2017, approved by BCUC Order G-77-17 on May 18, 2017; and

• Year 3: BC Hydro Rate Schedule (RS) 1892 – Transmission Service Freshet Energy Baselines Application dated April 19, 2018, approved by BCUC Order No. G-94-18 on May 17, 2018.


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Exhibit: B-5

12.0 Reference: Exhibit B-1, Appendix D (page 35 of 296)

1.12.1 With respect to Table 10, what does BC Hydro expect to be the ongoing annual implementation costs for 2020 and subsequent years if the Freshet Rate is made permanent?

RESPONSE:

If the Freshet Rate is made permanent, BC Hydro expects that ongoing annual implementation costs for RS 1892 will be lower than the annual costs reported in Table 10 of Appendix D of the Application for the Freshet Rate Pilot. This assumes that no changes are made to BC Hydro’s proposed RS 1892 design, no evaluation reporting is required, and future regulatory proceedings will be limited to annual filings to the BCUC for RS 1892 baseline adjustments.

BC Hydro has estimated $66,000 for external legal and regulatory costs related to the current Application. This figure represents a 50 per cent allocation of expected external legal and regulatory costs as between RS 1892 and RS 1893 for the Application.


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Exhibit: B-5


1.12.1 With respect to Table 10, what does BC Hydro expect to be the ongoing annual implementation costs for 2020 and subsequent years if the Freshet Rate is made permanent?

1.12.1.1 Will these costs vary with the number of customers participating and, if so, how?

RESPONSE:

No, these costs are generally fixed. Please also refer to BC Hydro’s response to BCOAPO IR 1.12.1.


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Exhibit: B-5



“A load shift is deemed to occur when a customer changes the timing of electricity consumption to buy more during freshet months and less in non-freshet months for no net change in total annual energy consumption”.

“Natural load growth is defined as year-over-year growth in electrical load that has occurred over time at the customer site and which is independent of the Freshet Rate”.

1.13.1 If the Freshet Rate is made permanent, does BC Hydro plan to continue to monitor and report the impact of load shifting (as defined in the above quote) on the net revenues attributable the rate?

RESPONSE:

BC Hydro does not plan to continue to monitor and report on net revenues attributable to the Freshet Energy Rate.



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Exhibit: B-5







RESPONSE:

BC Hydro has monitored and reported on the Freshet Energy Rate net revenues four times, covering each of the four years of the Freshet Energy Rate Pilot. BC Hydro considers the results included in these reports to provide conclusive information on the performance of the Freshet Energy Rate over a variety of conditions. Please refer to Appendices D and E of the Application for these reports.

Monitoring and reporting on net revenues for individual rate schedules is resource intensive and is not standard practice for all rate schedules. Given the extensive analysis of the Freshet Energy Rate already completed and included as evidence in this proceeding, BC Hydro does not propose to complete additional monitoring and reporting on Freshet Energy Rate net revenues.


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Exhibit: B-5






1.13.1.2 If yes, what actions would BC Hydro anticipate taking if there was a material deterioration in the net margin/net revenues attributed to the rate?

RESPONSE:

As described in BC Hydro’s response to BCOAPO IRs 1.13.1 and 1.13.1.1, BC Hydro does not plan to continue to monitor and report on the net revenues attributable to RS 1892.

BC Hydro considers the results of the four previously completed RS 1892 Evaluations to provide sufficient evidence on the Freshet Energy Rate performance.

However, given the possibility of future unforeseen changes that could result in a deterioration in net revenues attributed to the rate, BC Hydro would be amenable to considering revisiting the economics of RS 1892, after a period of at least ten years from the effective date of an approved rate schedule. This may include preparing a report on how the rate has performed, what the market conditions are like, and a determination as to whether or not the rate should continue.

BC Hydro does not support a review earlier than ten years from the effective date of an approved rate schedule for the reasons below:

• We expect to have a capacity and energy surplus in a planning view until the mid-2030s;

• There are costs and resources required to prepare and file ongoing monitoring and evaluation reports; and


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Exhibit: B-5

• It would be difficult for the participating customers to plan if BC Hydro were

to unilaterally be able to curtail service under unusual market and system conditions.


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Exhibit: B-5





1.13.2 If the Freshet Rate is made permanent, does BC Hydro plan to continue to monitor and report the impact of natural load growth on the net revenues attributable the rate?

RESPONSE:



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Exhibit: B-5







RESPONSE:



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Exhibit: B-5






1.13.2.2 If yes, what actions would BC Hydro anticipate taking if there was a material deterioration in the net margin/net revenues attributed to the rate?

RESPONSE:



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Exhibit: B-5

14.0 Reference: Exhibit B-1, Appendix D (pages 37-40 of 296)

1.14.1 With respect to Step 3 and Step 5, please confirm that the identification of natural load growth is based on year over year changes in RS 1823 energy sales.

RESPONSE:

Confirmed.


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Exhibit: B-5


1.14.1 With respect to Step 3 and Step 5, please confirm that the identification of natural load growth is based on year over year changes in RS 1823 energy sales.

1.14.1.1 Is it not possible that, even in cases where there was no increase in RS 1823 energy sales, some of the RS 1892 energy sales may have occurred anyways (i.e., even in the absence of RS 1892)? If not, please explain why?

RESPONSE:

Industrial customer site operations are dynamic and complex. It is difficult to establish a correlation between changes in annual energy sales under RS 1823 with changes in incremental seasonal energy sales under RS 1892.

RS 1892 energy sales volumes are determined on a net freshet period basis relative to the RS 1892 baselines established for each participant customer in accordance with RS 1892. In contrast, the mix of annual RS 1823 energy sales is determined over the 365 days of the customer’s Billing Year.

BC Hydro does not have sufficient information to ascertain whether, in cases where there was no increase in annual RS 1823 energy sales, some portion of a given customer’s incremental energy use during any given freshet period might have occurred anyways (i.e., in the absence of RS 1892) and for what reasons.

BC Hydro considers that its analysis of load shifting impacts in section 3.1.7 of Appendix D of the Application provides a prudent assessment of these unique customer-specific considerations based on the best available information.


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Exhibit: B-5


1.15.1 It is noted that the Year 3 values in Table 12 are forecast values. Has BC Hydro determined what the actual values were for Year 3?

RESPONSE:

BC Hydro confirms that the Year 3 values in Table 12 of Appendix D of the Application are forecast values only. We have not conducted further evaluation to determine actual values for Year 3.


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Exhibit: B-5



1.15.1.1 If yes, please provide.

RESPONSE:



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Exhibit: B-5




RESPONSE:

Please refer to BC Hydro’s response to BCOAPO IRs 1.4.1 and 1.15.1.


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Exhibit: B-5


1.16.1 With respect to the written feedback received following the October 2018 workshop, for each of the Yes, No and Unsure categories of response, please indicate the proportion of respondents that were either RS 1823 customers or groups representing these customers.

RESPONSE:

Please refer to the table below for the breakdown of responses in Figure 6 of Appendix D to the Application as between: (i) existing RS 1823/1828 customers; (ii) interveners/stakeholders; and (iii) prospective new customers.

YES NO UNSURE NO RESPONSEExisting customers 29 0 4 1Intervenors/stakeholders 1 0 0 2Prospective new customers 5 1 0 2Total 35 1 4 5

78% 2% 9% 11%


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Exhibit: B-5


1.17.1 Please clarify what is meant by “customers with aggregated operating plants under RS 1823” (e.g., does it mean customers where the metered quantities for different plants are aggregated for purposes of billing?).

RESPONSE:

A RS 1823 customer having one or more operating plants under common ownership may elect to have a single aggregated Energy CBL determined for all (or any combination) of its operating plants for RS 1823 energy billing purposes in accordance with section 5.0 of TS 74.

For aggregated plants, BC Hydro will issue a single master bill that comprises the aggregated energy consumption and energy charges payable relative to the aggregated Energy CBL. However, the RS 1823 demand charge continues to be determined and billed separately for each unique operating plant.


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Exhibit: B-5


1.17.2 If the Freshet Rate is made permanent, does BC Hydro plan to monitor and report whether or not there is any load shifting between plants/accounts owned by the same customer (i.e., shifting of load from a plant billed solely under RS 1823 to one also billed under RS 1892)?

RESPONSE:



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Exhibit: B-5




RESPONSE:



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Exhibit: B-5



1.17.2.2 If yes, what actions would BC Hydro anticipate taking if there was a material deterioration in the net margin/net revenues attributed to such actions?

RESPONSE:



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Exhibit: B-5


1.18.1 Please clarify whether the market prices presented on these pages are the day ahead prices used to set the RS 1892 rates or the actual real time market prices.

RESPONSE:

None of the Mid-C market energy index prices referenced in the question are actual real time market prices.

Figure 15 in Appendix D charts the daily average Mid-C market energy index price in both HLH and LLH for the 2018 freshet period in $CAD/MWh. The daily Mid-C index prices in $US/MWh were adjusted using the daily Bank of Canada exchange rate.

Figure 16 in Appendix D charts the prevailing RS 1823A, RS 1823 Tier 1 and RS 1823 Tier 2 energy prices against the daily average Mid-C market energy index price (in $CAD/MWh and including the $3/MWh adder and RS 1901 Deferral Account Rate Rider of 5.0 per cent).


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Exhibit: B-5

19.0 Reference: Exhibit B-1, Appendix E (pages 15-17 of 21)

Exhibit B-1, Appendix D (page 23 of 296)

With respect to Condition 1, Appendix E states:

“BC Hydro will see an approximate revenue gain equal to the sum of the CAD $3.00/MWh energy adder (wheeling rate) collected under RS 1892 and the avoided USD $5.16/MWh wheeling fee plus 1.9 per cent transmission loss charge for avoided energy delivery from the BC border to the Mid-C market (converted to Canadian dollars)”. (emphasis added)

With respect to Condition 1, Appendix D states:

“BC Hydro will see a revenue increase equal to the difference between the CAD $3/MWh wheeling rate and 5 per cent rate rider collected under RS 1892 and the avoided US $5.16/MWh wheeling charge14 paid for energy delivery from the BC border to the Mid-C market (converted to Canadian dollars daily) plus 1.9 per cent transmission losses.” (emphasis added)

1.19.1 Please explain why in Appendix E the revenue gain is the sum of the values described whereas in Appendix D it is the difference between the values described.

RESPONSE:

Both statements are considered equivalent and describe the following equation:

Revenue Gain = Adder (CDN $3/MWh) + Avoided Cost (US $5.16/MWh + 1.9% x Mid-C price)


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Exhibit: B-5

19.0 Reference: Exhibit B-1, Appendix E (pages 15-17 of 21)

Exhibit B-1, Appendix D (page 23 of 296)

With respect to Condition 1, Appendix E states:

“BC Hydro will see an approximate revenue gain equal to the sum of the CAD $3.00/MWh energy adder (wheeling rate) collected under RS 1892 and the avoided USD $5.16/MWh wheeling fee plus 1.9 per cent transmission loss charge for avoided energy delivery from the BC border to the Mid-C market (converted to Canadian dollars)”. (emphasis added)

With respect to Condition 1, Appendix D states:

“BC Hydro will see a revenue increase equal to the difference between the CAD $3/MWh wheeling rate and 5 per cent rate rider collected under RS 1892 and the avoided US $5.16/MWh wheeling charge14 paid for energy delivery from the BC border to the Mid-C market (converted to Canadian dollars daily) plus 1.9 per cent transmission losses.” (emphasis added)

1.19.2 Please explain why the rate payer impact analysis in Appendix E does not include any further adjustments to the benefits to non-participants as was provided in Section 3.1.1.3 of Appendix D.

RESPONSE:



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Exhibit: B-5

20.0 Reference: Exhibit B-1, page 17 (line 9)

1.20.1 The Application claims that the design of the freshet rate “minimized load shifting”. What aspects of the design minimized load shifting (where load shifting is defined per Appendix D, page 36 of 296 (lines 6-16))?

RESPONSE:

BC Hydro considers that the following Special Conditions of its proposed RS 1892 design, prudently applied to each unique customer circumstance, will minimize load shifting by ensuring that each customer’s RS 1892 baselines are set and adjusted appropriately:

• Per Special Condition No. 2, the customer must provide an estimate to BC Hydro of the amount of incremental energy that it expects to take, together with a description of the operational and/or production changes that the customer plans to make at its plant to increase load;

• Per Special Condition No. 4 of RS 1892, if BC Hydro and the customer agree that the historical freshet electricity consumption used to determine the customer’s RS 1892 baselines is not representative of expected future freshet period electricity consumption, and the parties agree to alternative baselines, then BC Hydro will file the agreed to baselines with the BCUC;

• Per Special Condition No. 5, BC Hydro will file with the BCUC any baseline adjustments consistent with the principles and criteria set out in TS 74;

• Per Special Condition No. 6, RS 1892 service will not be available to a customer with an Electricity Purchase Agreement (EPA) that is entitled to financial payment under the EPA for generator turndown during the current freshet period;

• Per Special Condition No. 8, RS 1892 service will be cancelled if there is a change in site ownership during any current freshet period and site RS 1892 baselines will be re-determined in accordance with Special Condition No. 4 if the new site owner expects to operate the site differently than the prior site owner; and

• Per Special Condition No. 9, RS 1892 service will be cancelled if a customer with self-generation requests RS 1880 service during the current freshet period.

Further, the risk of RS 1823 Energy CBL annual reset under TS 74 acts as an additional safeguard to any customer who might seek to shift a portion of load


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Exhibit: B-5

from RS 1823 to RS 1892. The risk of annual RS 1823 Energy CBL reset increases if the customer’s RS 1892 baselines are set too low.

BC Hydro considers the prospective cost risk to the customer for RS 1823 Energy CBL reset to be significantly higher than any prospective cost benefit under RS 1892 that might arise for a given volume of load shift energy.


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Exhibit: B-5


1.20.2 Given that some load shifting has occurred (per Appendix D, Table 11), did BC Hydro consider any design changes to further minimize load shifting?

RESPONSE:

As shown in Table 11 of Appendix D, the most significant load shifting impacts arise from natural load growth and from the use of RS 1892 service as a replacement for RS 1880 service.

Special Condition Nos. 2, 4, and 5 of RS 1892 provide BC Hydro with the ability to mitigate prospective risks of natural load growth by ensuring that the customer’s RS 1892 baselines are set appropriately.

To the extent that BC Hydro identifies changes in the customer’s site operations that reflect natural load growth, such that baseline re-determination or adjustment is required, BC Hydro will review these changes with the customer and file alternate RS 1892 baselines with the BCUC for review and approval.

The use of RS 1892 service as a replacement for RS 1880 service is specific to customers with self-generation. The revenue impact arises from the difference in energy pricing between RS 1892 and RS 1880 when the customer’s self-generation is forced out of service.

Special Condition No. 9 of RS 1892 provides for the automatic cancellation of RS 1892 service if the customer requests RS 1880 service during the current freshet period. This prevents customers having the ability to switch back and forth between the rates to obtain the lowest cost service for any specific event of generator curtailment.

BC Hydro also considered changes to RS 1892 to further restrict the availability of RS 1892 service to customers with self-generation. However, BC Hydro considers that this prospective change is not warranted at this time as it was not supported by customers during consultation.


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Exhibit: B-5



1.20.2.1 If yes, what were they and why were they adopted/rejected?

RESPONSE:

The RS 1892 design elements described in BC Hydro’s response to BCOAPO IR 1.20.2 were developed and assessed through internal review and analysis and in consultation with customers.


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Exhibit: B-5




RESPONSE:



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Exhibit: B-5


1.21.1 Which of the intervener groups noted in Footnote 21 attended either the October or November industrial rate design workshops?

RESPONSE:

The following intervener groups attended either, or both of, the October 2018 or November rate design workshops in Vancouver:

• Association of Major Power Customers of BC (AMPC);

• BC Sustainable Energy Association (BCSEA);

• Clean Energy Association of BC (CEABC);

• Zone II Ratepayer Group;

• Commercial Energy Consumers Association of BC (CEC);

• Canadian Association of Petroleum Producers (CAPP);

• City of New Westminster; and

• MoveUp (COPE 378).


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Exhibit: B-5


1.22.1 With respect to Figure 7, for each of the Yes, No and Unsure categories of response, please indicate the proportion of respondents that were either RS 1823 customers or groups representing these customers.

RESPONSE:

Please refer to the table below for the breakdown of responses in Figure 7 of the Application as between: (i) existing RS 1823/1828 customers; (ii) interveners/stakeholders; and (iii) prospective new customers.

YES NO UNSURE NO RESPONSEExisting customers 23 2 6 2Intervenors/stakeholders 1 0 0 2Prospective new customers 4 1 1 4Total 28 3 7 8

61% 7% 15% 17%


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Exhibit: B-5


1.23.1 If a customer has only two years of consumption history what historical period will be used to determine the baselines?

RESPONSE:

In accordance with Special Condition No. 7 of RS 1893, a customer will require at least two years of historical electricity usage to be eligible for baseline determination. Where the customer does not have historical annual electricity consumption for fiscal 2019, the most recent 12 Billing Periods will be used.


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Exhibit: B-5


1.23.1 If a customer has only two years of consumption history what historical period will be used to determine the baselines?

1.23.1.1 Given the typical time required for new plant start-up an commissioning to achieve normal operations, how will BC Hydro determined that the baseline determined using this data is representative of normal operations?

RESPONSE:

The intent of the Special Conditions in RS 1893 is to ensure that the customer’s RS 1893 baselines are representative of normal expected RS 1823 electricity consumption from which incremental energy use under RS 1893 can subsequently be determined.

As described in BC Hydro’s response to BCOAPO IR 1.23.1, in accordance with Special Condition No. 7 of RS 1893, a new customer plant will require at least two years of historical electricity usage to be eligible for baseline determination. This provision is intended to provide sufficient time for new plant start-up and commissioning to achieve normal operations.

In practice, BC Hydro expects that the most recent 12 Billing Periods of RS 1823 electricity consumption would typically be used as the starting point for baseline determination for a new plant. BC Hydro notes that any new plant could only take service under RS 1823 (i.e., RS 1828 would not apply).

Pursuant to Special Condition Nos. 8 and 9 of RS 1893, BC Hydro and the customer will review the baselines determined in accordance with Special Condition No. 7 to ensure they are representative of the customer’s normal expected RS 1823 electricity consumption.

If BC Hydro and the customer agree that the most recent 12 Billing Periods are not representative of the customer’s normal expected RS 1823 electricity consumption, and agree to alternative baselines (including any adjustments), these will be filed with the BCUC for review and approval. If BC Hydro and the customer cannot agree to alternative baselines, the BCUC will determine them.


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Exhibit: B-5


1.24.1 With respect to Figure 15, for each of the Yes, No and Unsure categories of response, please indicate the proportion of respondents that were either RS 1823 customers or groups representing these customers.

RESPONSE:

The responses shown in Figure 15 of the Application were provided by workshop participants through a live polling software solution.

The responses were anonymous and BC Hydro did not capture the unique identity of each respondent. Accordingly, BC Hydro is unable to show the allocation as requested.


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Exhibit: B-5

25.0 Reference: Exhibit B-1, pages 39-40

1.25.1 Is it the Incremental Energy Rate Pilot participants or BC Hydro that is taking the risk that actual market prices for imports will vary from the market price used to set the rate?

RESPONSE:

BC Hydro is responsible for managing our cost of energy, including associated risk, and recovering these costs in rates. The RS 1893 energy charge adders proposed by BC Hydro are designed to mitigate the forecast risk of under recovering marginal costs from participant customers and to incorporate a reasonable margin to address uncertainties.


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Exhibit: B-5


1.25.2 Is it the Incremental Energy Rate Pilot participants or BC Hydro that is taking the risk that actual market prices that could be received from exports will vary from the market price used to set the rate?

RESPONSE:

Please refer to BC Hydro’s response to BCOAPO IR 1.25.1


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Exhibit: B-5


1.25.3 Is it the Incremental Energy Rate Pilot participants or BC Hydro that is taking the risk that actual C$/US$ exchange rates will differ from those used in setting the rate?

RESPONSE:



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Exhibit: B-5


Exhibit B-1, Appendix D, pages 23-25 of 296

1.26.1 For what portion of the non-freshet period is each of the three Conditions outlined in Appendix D expected to exist over the term of the Incremental Energy Rate Pilot?

RESPONSE:



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1.26.2 Using a $7/MWh energy charge adder and holding the market price constant, what is BC Hydro’s expected net revenue margin (in $/MWh) under each of the three Conditions?

RESPONSE:

Holding market price constant, the margin is comprised of the sum of the avoided wheeling fee and losses that would have been paid on market exports ($5.16 USD/MWh plus 1.9 per cent of the Mid-C price) as compared to the $7 CAD/MWh adder on RS 1893 energy. Attachment 1 to this IR response provides a working Excel spreadsheet showing example calculations of the ratepayer impact based on market price.

REFER TO LIVE SPREADSHEET MODEL

Provided in electronic format only

(Accessible by opening the Attachments Tab in Adobe)

BCOAPO IR 1.26.2 Attachment 1


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(I)BCHydro Power smart


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Exhibit: B-5



1.27.1 Is the proportion of the time that the Conditions 1, 2 and 3 exist in each of the non-freshet months of the year expected to vary in a predictable way by month?

RESPONSE:

Condition No. 3 is expected to dominate as the marginal resource condition in most non-freshet months. Condition Nos. 1 and 2 occur under System Minimum Generation condition. During non-freshet months Condition No. 1 has a low probability of occurring but could occur during high inflow events caused by rainfall that cause oversupply. Condition No. 2 would occur during low priced periods, which can occur when there is a lot of rain in the Pacific Northwest.

Specific occurrences of low priced periods in non-freshet months cannot be predicted in advance. However, BC Hydro does account for market price variability in the analysis of the $7/MWh adder. The price variability is based on econometrics and this modelling provided the variation in forecast annual net revenue gain/loss described in section 5.5.4 of the Application.


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Exhibit: B-5




1.27.1.1 If yes, using a $7/MWh energy charge adder and holding the market price constant, how is BC Hydro’s net revenue margin expected to vary across the non-freshet months? (Note: A qualitative response is acceptable if the necessary analysis for a quantitative response cannot be reasonably completed).

RESPONSE:



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Exhibit: B-5




1.27.1.2 If yes, did BC Hydro factor this into consideration in its decision to apply a flat energy rate adder of $7/MWh in all non-freshet months of the year?

RESPONSE:



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Exhibit: B-5


1.28.1 Apart from AMPC and CAPP (both of whom represent large industrial customers), what other intervenors’ view are reflected by the comments noted?

RESPONSE:

In addition to feedback from AMPC and CAPP, the intervener feedback referenced on pages 43 to 44 of the Application was provided by BCOAPO and MoveUp (COPE 378).


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Exhibit: B-5



“Freshet Rate energy pricing is based on the Mid-C market price, which is expected to be generally reflective of BC Hydro’s marginal cost of energy”.

1.29.1 Under what system conditions is the Mid-C market price not reflective of BC Hydro’s marginal costs?

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.11.1 for description of Mid-C market price as a proxy for the system marginal value.

Day to day the Mid-C market price and the system marginal value are typically different because of the volatility in market prices. Over a longer forecast horizon the two values track more closely. BC Hydro cannot forecast these day to day price fluctuations in advance. In addition, the system marginal values are commercially sensitive and confidential, because their disclosure could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers. As a result BC Hydro declines to provide a frequency of these conditions.


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Exhibit: B-5




1.29.2 Over the next five years, for what portion of the freshet period (i.e., May to July) are these system conditions expected to exist? If applicable, please also explain how the proportion will vary depending upon the level of water flows.

RESPONSE:

Please refer to BC Hydro’s response to BCOAPO IR 1.9.5 for the frequency of the marginal resource condition during the four year pilot period. A forecast of BC Hydro’s future marginal resource condition is confidential. Providing such data for multiple years could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers.

Regardless, the percentage of time under Condition Nos. 1, 2 and 3 can vary greatly each year depending in general on the water supply forecast and also on how the snow melts in any particular year. It is reasonable to assume that the marginal resource condition over the medium term (such as for the next five years) will be similar to what occurred during the four year pilot period.


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Exhibit: B-5




1.29.3 Based on BC Hydro’s most recent load/resource balance outlook, is this proportion expected to change over the next 20 years and, if so, when and how? Again, if applicable, please also explain how the proportion will vary depending upon the level of water flows

RESPONSE:

BC Hydro expects a number of changes may occur over the next 20 years, including potential changes to our marginal costs.

Given long-term uncertainty, we are unable to accurately identify and estimate all potentially relevant changes for the purposes of this proceeding.


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Exhibit: B-5

30.0 Reference: Exhibit B-1, pages 46 and 65

At page 46 the Application states:

“BC Hydro also has operating procedures in place to interrupt non-firm Freshet Rate service customer loads to mitigate the impact of actual or prospective system constraints and prioritize service to firm service customer loads.”

1.30.1 Please fully describe the conditions/circumstances under which non-firm Freshet Rate service customer loads would be interrupted.

RESPONSE:

Please refer to BC Hydro’s response to BCUC IRs 1.9.6 and 1.19.3.


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Exhibit: B-5



“BC Hydro also has operating procedures in place to interrupt non-firm Freshet Rate service customer loads to mitigate the impact of actual or prospective system constraints and prioritize service to firm service customer loads.”

1.30.2 For RS 1892 customers, will notification procedures for service interruption be set out in BC Hydro’s System Operating Order and incorporated into the Customer’s Joint Local Operating Order (similar to what is proposed for Incremental Energy Rate Pilot customers)?

RESPONSE:

BC Hydro has developed notification procedures specific to the curtailment and restoration of RS 1892 service for system constraints. These procedures will be incorporated into the System Operating Order.

In contrast to the IER Pilot, BC Hydro did not prescribe interruption criteria as Special Conditions in RS 1892 and does not currently plan to incorporate notification procedures specific to RS 1892 into the participant Customer’s Joint Local Operating Order. This is to minimize the technical and administrative burden for BC Hydro and customers associated with a short seasonal rate offer that has a low risk of interruption. For example, during the four-year RS 1892 Pilot, there were no events or conditions which required interruption of RS 1892 supply due to insufficient energy or capacity.

Instead, BC Hydro intends to utilize an internal daily operations plan for prospective RS 1892 service interruption that will be administered by its real time operating staff. In the event of a system constraint, real time operating staff will follow the notification procedures set out in the System Operating Order to request curtailment of RS 1892 customer loads.


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Exhibit: B-5

31.0 Reference: Exhibit B-1, pages 47 and 76-78


“In general, BC Hydro considers that the $3 per MWh adder provides a sufficient margin to cover any residual revenue shortfalls that may arise for energy imports over the entire freshet period and across multiple freshet periods”.

1.31.1 Please explain what is meant by “multiple freshet periods”.

RESPONSE:

“Multiple freshet periods” refers to the freshet period over multiple years.


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Exhibit: B-5




1.31.2 Has BC Hydro undertaken any quantitative analysis specific to the Freshet Rate/Period that supports this conclusion similar to that performed for the Incremental Energy Rate Pilot?

RESPONSE:

The analysis to support the $3/MWh adder for the freshet months was completed as part of the impact evaluation for each year of the Freshet Rate Pilot.



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Exhibit: B-5




1.31.3 If yes, please outline the analyses performed, the time periods considered and the results (e.g., provide a table similar to Table 7 but for the Freshet Months and a $3/MWh Adder).

RESPONSE:



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Exhibit: B-5




1.31.3 If yes, please outline the analyses performed, the time periods considered and the results (e.g., provide a table similar to Table 7 but for the Freshet Months and a $3/MWh Adder).

1.31.3.1 As part of the response please clarify whether any adjustments were made to account for load shifting (per Appendix D, page 36 of 296).

RESPONSE:

As described in section 2.2.2 of the Application, the design of the Freshet Rate Pilot minimized load shifting.

BC Hydro has confirmed in its Final Evaluation Report, provided as Appendix D to the Application, that the risk of load shifting from RS 1823 to RS 1892 was not substantial enough to offset ratepayer benefits. Please refer to section 3 of Appendix D of the Application for a detailed summary of the analyses performed for the 2016, 2017 and 2018 freshet periods and the results.



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Exhibit: B-5




1.31.4 If not, please undertake such an analysis and provide the results.

RESPONSE:

An analysis for the Freshet Rate has been undertaken using the model assumptions described in BC Hydro’s response to BCUC IR 1.7.1 and is specific to the forthcoming freshet periods of 2020, 2021 and 2022. The results are shown in the tables below for three energy adder conditions:

• Option 1: $0/MWh adder;

• Option 2: $3/MWh adder; and

• Option 3: $6/MWh adder.

BC Hydro notes that the model assumes that customer participation and aggregate incremental load demand potential (i.e., 30 MW.hr) would be the same for each adder option.

However, based on consultation with customers regarding RS 1892 adder pricing, BC Hydro observed strong opposition to the RS 1892 adder being priced higher than $3/MWh. Accordingly, a higher adder would likely result in lower levels of customer participation and expected RS 1892 energy sales, even though the modeled results suggest that expected incremental load would be similar.

Option 1: $0/MWh adder

RESULTS (all values on a per year basis):Expected Incremental Load Net Revenue -105 kCAD10th Percentile Net Revenue -503 kCAD50th Percentile Net Revenue -108 kCAD90th Percentile Net Revenue 259 kCADExpected Incremental Load 64 GWh10th Percentile Incremental Load 61 GWh50th Percentile Incremental Load 65 GWh90th Percentile Incremental Load 66 GWh


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Exhibit: B-5



RESULTS (all values on a per year basis):Expected Incremental Load Net Revenue 71 kCAD10th Percentile Net Revenue -314 kCAD50th Percentile Net Revenue 81 kCAD90th Percentile Net Revenue 436 kCADExpected Incremental Load 64 GWh10th Percentile Incremental Load 60 GWh50th Percentile Incremental Load 65 GWh90th Percentile Incremental Load 66 GWh

RESULTS (all values on a per year basis):Expected Incremental Load Net Revenue 240 kCAD10th Percentile Net Revenue -130 kCAD50th Percentile Net Revenue 242 kCAD90th Percentile Net Revenue 604 kCADExpected Incremental Load 63 GWh10th Percentile Incremental Load 58 GWh50th Percentile Incremental Load 64 GWh90th Percentile Incremental Load 66 GWh


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Exhibit: B-5



“The Customer notice must include an estimate of the amount of incremental energy that the Customer expects to take under the rate schedule and a description of their planned actions to increase load.”

“BC Hydro will only provide service where it has energy and capacity to do so. BC Hydro has the right to interrupt RS 1892 service for transmission and generation system constraints. RS 1892 load is not included in BC Hydro’s load forecast. BC Hydro will not advance any system investments to serve load.”

1.32.1 Does BC Hydro use the “estimate of the amount of incremental energy that the customer expects to take” in order to confirm that service can be provided without advancing system investments?

RESPONSE:

Special Condition No. 2 of the proposed RS 1892 requires the customer to provide an estimate to BC Hydro of the amount of incremental energy that the customer expects to take during each month of the freshet period, coupled with a description of the customer’s planned production and/or operational changes to increase load.

BC Hydro does not use this information to confirm that RS 1892 service can be provided without advancing system investments. Per Special Condition No. 1 of the proposed RS 1892, BC Hydro will provide service under RS 1892 only to the extent that it has sufficient energy and capacity to do so and will not be required to construct any system reinforcements.

However, BC Hydro does use this information in the following ways:

• To assess the reasonableness of the customer’s RS 1892 baselines, including alignment to the corresponding description of operational and/or production changes that the customer plans to make; and

• To inform our real-time operating staff as to the prospective magnitude of additional load, in aggregate, that BC Hydro might expect to see on the system during the forthcoming freshet period.


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Exhibit: B-5





1.32.1 Does BC Hydro use the “estimate of the amount of incremental energy that the customer expects to take” in order to confirm that service can be provided without advancing system investments?

1.32.1.1 If yes, why doesn’t BC Hydro also require the customer to indicate the maximum incremental demand the customer is expected to place on the system?

RESPONSE:



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Exhibit: B-5





1.32.2 During the Freshet Rate Pilot did any customer’s actual RS 1892 energy use in a given year exceed the estimate provided? If yes, how frequently did this occur?

RESPONSE:

BC Hydro has not prepared an analysis to compare the customer’s high-level monthly estimates of expected incremental energy use (as required under Special Condition No. 3 of RS 1892) with the seasonal reconciliation of net RS 1892 energy use for the freshet period. Completing this analysis is resource intensive and would require more time than is available during this IR process.


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Exhibit: B-5





1.32.3 Are there any “planned actions” (per the first reference) that would make a customer ineligible for service under RS 1892? If yes, what are they?

RESPONSE:

BC Hydro has not identified any instances of planned customer actions to increase load that might impact the customer’s eligibility for RS 1892 service on an expected basis.

BC Hydro notes that the proposed Special Condition Nos. 6, 7, 8 and 9 of RS 1892 describe the circumstances which, on an actual basis, could render a customer ineligible to continue taking service under RS 1892 during any freshet period.


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Exhibit: B-5


The Application describes the RS 1892 Baseline determination for existing and new customers.

1.33.1 Does the reference to an “existing/new“ customer mean an existing/new RS 1892 customer or an existing/new RS 1823 customer?

RESPONSE:

BC Hydro confirms that the reference to “existing customers” and “new customers” on pages 51 to 52 of the Application is specific to an existing or new customer taking service under RS 1823 or RS 1828, as applicable.


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Exhibit: B-5


The Application describes the RS 1892 Baseline determination for existing and new customers.

1.33.1 Does the reference to an “existing/new“ customer mean an existing/new RS 1892 customer or an existing/new RS 1823 customer?

1.33.1.1 If the reference is to an existing/new RS 1823 customer, why is RS 1823 usage during the 2015 Freshet Period the default when more recent data is likely available?

RESPONSE:

For RS 1823 customers that participated in the Freshet Rate Pilot over any of the prior four years, with an RS 1892 baseline that was determined using 2015 freshet period consumption, it would not be appropriate to re-determine their RS 1892 baselines using more recent freshet period data that includes their incremental load served under RS 1892. This would result in non-firm incremental load served under RS 1892 being incorporated into their firm baseline load served under RS 1823.

Proposed Special Condition Nos. 3, 4, 5 and 8 provide BC Hydro and the customer with the ability to consider whether a period other than the 2015 freshet period is appropriate for RS 1892 baseline determination, or if adjustments are required, to ensure that the RS 1892 baselines are representative of the customer’s normal expected electricity consumption during the forthcoming freshet period.


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Exhibit: B-5



““Freshet Rate energy pricing is based on the Mid-C market price, which is expected to be generally reflective of BC Hydro’s marginal cost of energy”.


“The Incremental Energy Rate Pilot energy pricing is referenced to daily ICE Index Mid-C market pricing BC Hydro expects this price, with appropriate adjustments to account for seasonal storage and wheeling, to generally reflect BC Hydro’s short-run marginal cost of energy under most expected conditions.”

1.34.1 With respect to the page 60 reference, please explain what the “appropriate adjustments to account for seasonal storage” are.

RESPONSE:

BC Hydro’s proposed energy charge adder of $3/MWh in the May, June and July Billing Periods and $7/MWh in all other Billing Periods for the Incremental Energy Rate is designed to address the “appropriate adjustments to account for seasonal storage and wheeling …” as referred to at page 60 in the Application.


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Exhibit: B-5






1.34.2 Are these adjustments included in the derivation of the energy price for the Incremental Energy Rate Pilot?

RESPONSE:

The applicable energy charge adder (i.e., $3/MWh in freshet months and $7/MWh in non-freshet months) is applied to net RS 1893 energy as determined in each Billing Period. The energy charge adder is independent of, and additive to, the daily Mid-C market index price applied to net RS 1893 energy in HLH and LLH.


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Exhibit: B-5







1.34.2.1 If yes, how?

RESPONSE:



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Exhibit: B-5







1.34.2.2 If not, what is the impact on the net revenue to BC Hydro?

RESPONSE:

The impact of the energy charge adder is to increase revenue for net RS 1893 energy sales by $3/MWh in freshet months and $7/MWh in non-freshet months.


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Exhibit: B-5






1.34.3 Why does the page 45 reference make no mention of the adjustments to account for either seasonal storage or wheeling?

RESPONSE:

BC Hydro acknowledges that the page 45 reference noted in the preamble to this IR could have included the reference to the adjustments to account for seasonal storage or wheeling through the Energy Charge Adder.

The Energy Charge Adder is priced to provide a margin for risk based on average system conditions. For the freshet period, the proposed adder is $3/MWh. For non-freshet periods, the proposed adder is $7/MWh.

Further, as described on page 49 of the Application, BC Hydro has proposed to replace the term, “wheeling rate” with “adder” for clarity and to avoid confusion. This is because there is no direct physical transaction for procurement or delivery of market energy under RS 1892.


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Exhibit: B-5






1.34.4 For the non-Freshet Period, under what system conditions does the adjusted Mid-C market price not reflect of BC Hydro’s short-run marginal costs?

RESPONSE:



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Exhibit: B-5







1.34.4.1 Over the next five years, for what portion of the non-freshet period are these system conditions expected to exist? If applicable, please also explain how the proportion will vary depending upon the level of water flows.

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.11.1 for description of Mid-C market price as a proxy for the system marginal value.

Day to day, the Mid-C market price and the system marginal value are typically different because of the volatility in market prices. Over a longer forecast horizon the two values track more closely. BC Hydro cannot forecast these day to day price fluctuations in advance. In addition, information on system conditions is commercially sensitive and confidential because its disclosure could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers. As a result BC Hydro declines to provide a frequency of these conditions.


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Exhibit: B-5







1.34.4.2 Based on BC Hydro’s most recent load/resource balance outlook, is this proportion expected to change over the next 20 years and, if so, when and how? Again, if applicable, please also explain how the proportion will vary depending upon the level of water flows

RESPONSE:



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Exhibit: B-5


1.35.1 Why do new customers require only one year of historical RS 1823 or RS 1828 electricity usage during the Freshet Period to be eligible for the Freshet Rate but require two years of consumption history to be eligible for the Incremental Energy Rate Pilot?

RESPONSE:

For RS 1893, BC Hydro considers that at least two years of electricity consumption history is required before RS 1893 baselines can be determined that represent normal expected electricity consumption over an entire year.

In contrast, for RS 1892, BC Hydro considers that only one year of electricity consumption history is required before RS 1892 baselines can be determined that represent normal expected electricity consumption over the shorter duration of the freshet period (i.e., May 1 to July 31 inclusive).

In either case, BC Hydro seeks to make clear that the established baselines are representative of the customer’s expected future electricity consumption under the applicable firm service rate (RS 1823 or RS 1828) during the forthcoming freshet period (for RS 1892) or forthcoming Billing Year (for RS 1893). BC Hydro also notes that there are well established processes for customer baseline determination in accordance with BCUC approved guidelines.


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Exhibit: B-5



“BC Hydro may apply to the BCUC to terminate the Incremental Energy Rate Pilot if conditions warrant such application”.

1.36.1 In BC Hydro’s view, what “conditions” would warrant such an application?

RESPONSE:

While it is true that BC Hydro may, at any time, apply to the BCUC to terminate a rate schedule, we intend to offer the Incremental Energy Rate for the full term of the pilot, if approved.


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Exhibit: B-5



“The Customer must also be able to satisfy BC Hydro that it can reduce load to its Monthly Reference Demand within one hour of receiving notice from BC Hydro. The one hour notice requirement is consistent with the eligibility criteria previously used for the RTP rate. One hour is generally considered to be the acceptable operational timeframe required for BC Hydro to mitigate the impact of an unplanned generation constraint.”

1.37.1 Please explain why one hour is “considered to be the acceptable operational timeframe required for BC Hydro to mitigate the impact of an unplanned generation constraint”.

RESPONSE:

BC Hydro is required to comply with the Mandatory Reliability Standards (MRS) enforced by the BCUC in British Columbia. The MRS define requirements for planning, maintaining and operating the Bulk Electric System such as transmission system planning and modelling, protection system maintenance, critical infrastructure protection and real-time operations.

Amongst those standards are requirements to maintain adequate contingency reserve to meet specified performance criteria following events such as unplanned loss of generation or a generation constraint.

Another requirement is that, within one hour of such an event, BC Hydro must be able to re-establish its contingency reserve requirements. During that hour, BC Hydro can take actions permitted under the MRS including curtailing any non-firm service loads.

One hour represents a sufficient time-frame to initiate customer curtailment to ensure BC Hydro can meet its obligations under the MRS.


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Exhibit: B-5



“The Customer must also be able to satisfy BC Hydro that it can reduce load to its Monthly Reference Demand within one hour of receiving notice from BC Hydro. The one hour notice requirement is consistent with the eligibility criteria previously used for the RTP rate. One hour is generally considered to be the acceptable operational timeframe required for BC Hydro to mitigate the impact of an unplanned generation constraint.”

1.37.2 It is noted (page 64) that BC Hydro also has the right to interrupt RS 1893 service for transmission system constraints. Is one hour considered to be an acceptable operational timeframe for BC Hydro to mitigate the impact of an unplanned transmission constraint? If yes, please explain why.

RESPONSE:

In the event of a transmission system constraint, BC Hydro’s real time operations staff will identify the location of the transmission system constraint and determine an appropriate response. Such events tend to be local or regional in nature as opposed to a system wide provincial constraint.

BC Hydro’s response may involve transferring customer load to an alternate transmission line (i.e., where there is N-1 system redundancy) and/or sectionalization of the system (i.e., isolation of the impacted portion of the system using automatic re-closers). BC Hydro can also take additional action such as curtailment of non-firm customer loads (including RS 1893 customers).

BC Hydro considers that one hour is a sufficient time-frame to initiate a restoration plan, including curtailment of non-firm RS 1893 customer loads, to mitigate the impact of an unplanned transmission constraint.


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Exhibit: B-5


1.38.1 Why does the limitation on RS 1893 usage focus on the customer’s highest kVA demand in the HLH of the Billing Period as opposed to the customer’s highest kVA demand at any time during the Billing Period?

RESPONSE:

Proposed Special Condition No. 11 of RS 1893 is designed to be consistent with the existing RS 1823 and RS 1828 pricing methodology for Billing Demand, which only considers the customer’s highest kVA demand during HLH.

Under RS 1823 and RS 1828, the customer’s highest kVA demand during the HLH of the Billing Period is used to determine Billing Demand. There is no consideration of the customer’s highest kVA demand during the LLH.

Under RS 1893, the customer’s Monthly Reference Demand is set based on actual Billing Demand in each Billing Period of the customer’s RS 1893 baseline determination year.

Subsequently, the limitation on RS 1893 usage set out in Special Condition No. 11 of RS 1893 uses Monthly Reference Demand as the basis for assessing whether the customer’s incremental take of electricity is within, or exceeds, the 2.0 multiplier before RS 1893 baseline adjustments are triggered.


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Exhibit: B-5


1.38.2 The limitation on RS 1893 usage focuses on the customer’s highest kVA demand in the HLH of the Billing Period and whether it exceeds twice the Monthly Reference Demand. Why is there not similar limitation requirement for energy usage under the Incremental Energy Rate Pilot?

RESPONSE:

The limitation on RS 1893 usage, as described in Special Condition No. 11 of RS 1893, will result in adjustments to both energy and demand baselines. The application of this special condition is described in more detail below.

Where peak kVA demand in HLH of any Billing Period exceeds 2.0 times the Monthly Reference Demand, all of the customer’s RS 1893 baselines are adjusted. That is, the customer’s Monthly Reference Demand and their HLH and LLH Energy Baselines will be automatically increased. In this respect, there is a similar limitation requirement for energy use under RS 1893.

For simplicity and administrative efficiency, BC Hydro has proposed to use the relationship of peak kVA demand in HLH to Monthly Reference Demand as the single trigger of this RS 1893 usage limitation, rather than also using the relationship of hourly HLH energy and/or hourly LLH energy use to the HLH Baseline and/or LLH Baseline, as applicable.

AMPC was consulted on this proposed approach and agreed that it was reasonable and pragmatic.


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Exhibit: B-5

39.0 Reference: Exhibit B-1, pages 54-55 and 70-72

It is noted that for the Freshet Rate BC Hydro uses a seasonal net to gross ratio, and seasonal billing, in part to reduce the potential for load shifting between Freshet Period months. However, for the Incremental Energy Rate Pilot monthly net to gross ratios and monthly billing will be used.

1.39.1 Under the Incremental Energy Rate Pilot, is there any potential for load shifting between months with no net increase in electricity use?

RESPONSE:

There may be some limited potential for load shifting under RS 1893 between months with no net increase in annual electricity use. In practice, this would take the form of the customer choosing to increase load in one month with a proportionate load decrease in a subsequent month.


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Exhibit: B-5



1.39.2 Please explain more fully how/why the prospect of the Energy CBL reset under TS 74 (per page 72) significantly mitigates this risk.

RESPONSE:

As noted at page 72 of the Application, subscribing RS 1823 customers remain subject to the terms and conditions of TS 74, including Energy CBL resets, for annual RS 1823 energy purchases. This Energy CBL reset mechanism acts to mitigate the load shifting risk in a single Billing Year by exposing the customer to prospective higher costs over multiple Billing Years, as explained below.

Consider an example whereby the customer:

• Has an RS 1823 Energy CBL of 100 GWh;

• Has annual RS 1823 energy purchases of 95 GWh (i.e., operates at 95 per cent of their Energy CBL) prior to participating under RS 1893;

• Purchases 90 GWh of RS 1823 Tier 1 energy (90 per cent of Energy CBL), which is priced at $45.35/MWh for fiscal 2020; and

• Purchases 5 GWh of RS 1823 Tier 2 energy (balance of annual energy use), which is priced at $101.60/MWh for fiscal 2020.

Over the entire Billing Year, holding annual energy consumption constant at 95 GWh, if the customer shifted 10 per cent of annual load from RS 1823 to RS 1893, their annual RS 1823 energy purchases would be 85 GWh and their annual RS 1893 energy purchases would be 10 GWh.

In this circumstance, the customer might see a price reduction for electricity in the current Billing Year, to the extent that the average RS 1893 price for energy is less than the RS 1823 Tier 2 price for 5 GWh of load shift energy and also less than the RS 1823 Tier 1 price for the 5 GWh balance of load shift energy.

However, the customer’s Energy CBL would be reset from 100 GWh to 85 GWh for the forthcoming Billing Year in accordance with section 4.3 of TS 74. This is


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Exhibit: B-5

because the customer’s annual RS 1823 energy purchases of 85 GWh are less than 90 per cent of its Energy CBL of 100 GWh.

So, in the forthcoming Billing Year:

• If the customer were to operate normally without any load shifting between months, annual RS 1823 energy purchases would be 95 GWh and annual RS 1893 energy purchases would be 0 GWh. Relative to the reset Energy CBL of 85 GWh, the customer would purchase 76.5 GWh of Tier 1 energy (equal to 90 per cent of the reset Energy CBL) and 18.5 GWh of Tier 2 energy. This RS 1823 energy price mix would represent a significant cost increase to the customer; or

• If the customer were to operate with the same load shifting pattern between months as it did previously, annual RS 1823 energy purchases would be 85 GWh and annual RS 1893 energy purchases would be 10 GWh. Relative to the reset Energy CBL of 85 GWh, the customer would purchase 76.5 GWh of Tier 1 energy (equal to 90 per cent of the reset Energy CBL) and 8.5 GWh of Tier 2 energy. All else being equal, this RS 1823 energy price mix would still represent a significant cost increase to the customer.

In both scenarios, the customer would be worse off due to increased exposure to the Tier 2 price in subsequent years.

For these reasons, BC Hydro considers that the Energy CBL reset mechanism under TS 74 significantly mitigates the prospective risk of load shifting between months.


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Exhibit: B-5



1.39.3 Will the Energy CBL reset capture any natural load growth (per Appendix D, page 36 of 296) that was billed under the RS 1893 rate but would have occurred in any event?

RESPONSE:

No, the RS 1823 Energy CBL reset will not capture any natural load growth that was billed under RS 1893. In accordance with TS 74, the Energy CBL reset determination can only consider RS 1823 energy purchases.


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Exhibit: B-5



1.39.3 Will the Energy CBL reset capture any natural load growth (per Appendix D, page 36 of 296) that was billed under the RS 1893 rate but would have occurred in any event?

1.39.3.1 If yes, how is this accomplished?

RESPONSE:



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Exhibit: B-5


1.40.1 Did the modelling assumptions include the cost of wheeling associated with exports and imports?

RESPONSE:

The modelling assumptions included the cost of wheeling associated with exports and imports.


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Exhibit: B-5


1.40.1 Did the modelling assumptions include the cost of wheeling associated with exports and imports?

1.40.1.1 If yes, what were the assumptions used?

RESPONSE:



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Exhibit: B-5


1.40.2 What the basis for using $55/MWh as the all-in customer strike price?

RESPONSE:



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Exhibit: B-5


1.41.1 For each of Tables 7, 9 and 11 – at what percentile do the net revenues become negative?

RESPONSE:

For Table 7 of the Application, net revenues become negative at the 10th percentile.




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Exhibit: B-5


1.41.2 How would the results set out in Table 9 vary if a higher or lower strike price was used? In particular, how would the percentile at which the net revenues become negative change? (Note: A qualitative response is acceptable if the necessary analysis for a quantitative response cannot be reasonably completed).

RESPONSE:

All else being equal, the expected incremental load and net revenue set out in Table 9 of the Application would increase with a higher strike price and decrease with a lower strike price. BC Hydro has revised the results in Table 9 below to show the impact of a strike price that was $10 higher (i.e., $65/MWh) and a strike price that was $10/MWh lower (i.e., $45/MWh), as compared to the strike price of $55/MWh used in the Application.

Revised Table 9 (Option 2A) with strike price of $65/MWh

RESULTS (all values on a per year basis): Expected Incremental Load Net Revenue 1572 kCAD

10th Percentile Net Revenue -170 kCAD

50th Percentile Net Revenue 1542 kCAD


Expected Incremental Load 280 GWh

10th Percentile Incremental Load 266 GWh



Revised Table 9 (Option 2A) with strike price of $45/MWh

RESULTS (all values on a per year basis): Expected Incremental Load Net Revenue 925 kCAD

10th Percentile Net Revenue -457 kCAD



Expected Incremental Load 237 GWh


Page 2 of 2


Exhibit: B-5

RESULTS (all values on a per year basis):





Page 1 of 1


Exhibit: B-5


1.41.3 It is understood that the analysis is based on the three year period F2020 to F2022. How would the results set out in Table 9 change if the analysis considered the period F2025 to F2028? (Note: A qualitative response is acceptable if the necessary analysis for a quantitative response cannot be reasonably completed).

RESPONSE:

BC Hydro’s analysis in the Application incorporated forward-looking data inputs for the three-year period of fiscal 2020 to fiscal 2022. BC Hydro does not have the same forward-looking data inputs for the requested period of fiscal 2025 to fiscal 2028 and so is unable to perform the requested analysis. On a qualitative and directional basis only, BC Hydro considers that the modelling results in Table 9 would vary as follows:

• If the system has a surplus of energy, BC Hydro expects that system marginal values would be lower relative to Mid-C prices (and so would increase expected net revenue for RS 1893 service); and

• If the system has a deficit of energy, BC Hydro expects that system marginal values would be higher relative to Mid-C prices (and so would decrease expected net revenues for RS 1893 service).


Page 1 of 1


Exhibit: B-5


1.41.4 With respect to Table 9, how would the results change if 5% or 10% of the incremental load was load that would have occurred under RS 1823 and the related loss in revenue is included in the calculations?

RESPONSE:

For illustrative purposes, if 5 per cent or 10 per cent of incremental load purchased under RS 1893 was deemed to be energy that would have been purchased under RS 1823 there would be, holding that volume of energy constant:

• A reduction in BC Hydro’s expected net revenue if RS 1893 was priced lower than RS 1823; and

• An increase in expected net revenue if RS 1893 was priced higher than RS 1823.

The revenue impact would also need to consider the prospective impacts of RS 1823 Energy CBL reset on the relative mix of each customer’s RS 1823 Tier 1 and Tier 2 energy volumes. Please also refer to BC Hydro’s response to BCOAPO IR 1.39.2.


Page 1 of 1


Exhibit: B-5


1.41.5 Are there any incremental billing or administrative costs associated with the Incremental Energy Rate Pilot?

RESPONSE:

Yes. Please refer to BC Hydro’s response to BCUC IR 1.3.2.


Page 1 of 1


Exhibit: B-5


1.41.5 Are there any incremental billing or administrative costs associated with the Incremental Energy Rate Pilot?

1.41.5.1 If yes, what are they and how would their inclusion impact the results shown in Table 9?

RESPONSE:

These estimated implementation costs are described in BC Hydro’s response to BCUC IR 1.3.2. Inclusion of these costs would reduce the expected net revenue shown in Table 9 of the Application.

BC Sustainable Energy Association Information Request No. 1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 5


Exhibit: B-5

1.0 Topic: Freshet Rate, Customer Participation by Industry Sector

Reference: Exhibit B-1, Appendix D, Preliminary Evaluation Report for Year 1, Figure 2, Customer Participation by Industry Sub-Sector (Year 1), pdf p.243; Appendix D, Preliminary Evaluation Report for Year 2, Figure 3-2, Customer Participation by Industry Sub-Sector (Year 2), pdf p.359; Appendix D, Freshet Rate Final Evaluation Report, Figure 14, Customer Participation by Industry Sub-Sector (Year 3), pdf p.212; Appendix E, Figure 1, Customer Participation by Industry Sector (Year 4), pdf p.431

1.1.1 Please provide a line graph and table showing the number (not percentage) of participating customer sites by industry sector for Years 1, 2, 3 and 4.

RESPONSE:

BC Hydro has provided the requested information regarding participant customers by industry sector for each year of the Freshet Rate Pilot in the tables below. BC Hydro has presented the table data in bar chart form, rather than the requested line graphs, for ease of reference.


Page 2 of 5


Exhibit: B-5

Pulp and Paper 7Solid wood 13Oil and Gas 6Chemicals 3Mining 8Cement 1Other 1Total 39

Freshet Customers by Industry Sector - Year 1

Freshet Vea1r 1 - 39 Pa1rticipants

Ot her 3%

cement 3%

Mining l 21%

Chemicals 8%

Oil and Gas 5%

Solid wood 1 33%

Pulp and Paper 8% I


Page 3 of 5


Exhibit: B-5

Pulp and Paper 9Solid wood 12Oil and Gas 6Chemicals 4Mining 10Cement 1Other 2

44


Freshet Year 2 - 44 Participants

■ Pu lp and Paper So lid wood Oi l and Gas Chemica ls Mining Cement other

I Other 5%

Cement ~ 2%

Mining 23%

I Chemica ls 9%

I Oi l and Gas 14%

I So li d wood 27%

I Pu lp and Paper 20%

I


Page 4 of 5


Exhibit: B-5

Pulp and Paper 8Solid wood 12Oil and Gas 6Chemicals 4Mining 13Cement 1Other 1

45



other

Cement

Mining

Chemica ls

Oi l and Gas

So li d wood

Pulp and Paper


Page 5 of 5


Exhibit: B-5

Pulp and Paper 8Solid wood 11Oil and Gas 4Chemicals 3Mining 9Cement 1Other 1Total 37



Other

Cement

Mining

Chemica ls

Oi l and Gas

So lid wood 30%

Pulp and Pape r


Page 1 of 1


Exhibit: B-5



1.1.2 Does BC Hydro observe any trends?

RESPONSE:

BC Hydro observes the following trends:

• There was excellent RS 1823 customer participation from a broad cross-section of industry sectors; and

• The mining, solid wood, and pulp and paper industry sectors consistently demonstrated the highest rates of participation.


Page 1 of 1


Exhibit: B-5



1.1.3 Does BC Hydro expect the number of participating customer sites by industry sector to change materially going forward (if the Freshet Rate is approved)?

RESPONSE:

BC Hydro expects the number of RS 1892 customer participant sites to be lower going forward for the following reasons:

• The recent downturn in the forestry sector is expected to reduce the number of customer sites from the solid wood, and pulp and paper sectors that could participate; and

• Some customers may choose to take service under RS 1893 if it is approved and available at the same time as RS 1892.


Page 1 of 2


Exhibit: B-5

2.0 Topic: Freshet Rate, Year 4 Net Revenue Loss

Reference: Exhibit B-1, Appendix E, Table 5, RS 1892 Monthly Ratepayer Impact by Marginal Resource for Years 1 – 4, pdf p.444

“As shown in Table 5 above, BC Hydro is reporting a revenue loss of approximately $0.5 million for Year 4. This is due primarily to the higher marginal price of BC Hydro’s system storage compared to the Mid-C marginal price used to price RS 1892 energy purchases. BC Hydro anticipated this outcome in advance, given the adverse hydrology conditions that BC Hydro faced leading into the 2019 Freshet Period, combined with an expectation of below normal inflows.” [pdf p.444, underline added]

“The outcome during the 2019 Freshet Periods was a strong bias of overall system operations towards market energy imports whereas the normal freshet period bias is to energy exports. These factors motivated BC Hydro to import market energy to support system storage levels.” [pdf p.446]

“As described in the Final Evaluation Report, the Freshet Rate produced benefits for participants and nonparticipant ratepayers over the initial three-year pilot term. These benefits were expected to continue unless conditions substantially changed.

In this respect, BC Hydro notes that Year 4 of the Freshet Rate pilot did represent a change in conditions compared to Years 1-3. As described above, conditions during the May-July 2019 freshet period were characterized by low reservoir levels, reduced thermal generation due to Enbridge pipeline explosion and below average inflows. This reduced the freshet energy surplus and contributed to higher system marginal prices and higher market energy imports. Even with these conditions, the 2019 Freshet Period revenue loss is modest when compared to the revenue gains over the prior three freshet periods. For the entire Freshet Rate Pilot period, the total revenue gain is $5.8 million.

BC Hydro considers this result to demonstrate that the Freshet Rate design is robust and, when assessed over multiple years, able to prudently and efficiently drive incremental energy sales from participant customers while protecting the interests of non-participant ratepayers.” [pdf pp.446-447]

1.2.1 Please define and explain the column headings, “Forced Export”; “Market Import”; and “System Basin” in Table 5.


Page 2 of 2


Exhibit: B-5

RESPONSE:

Three conditions are listed on pages 15 to 17 of Appendix E of the Application. The terms “Forced Export”, “Market Import”, and “System Basin” in Table 5 of Appendix E refer to the marginal resource Condition Nos. 1, 2 and 3, respectively. This classification is used to estimate the ratepayer impact by month.

For any given HLH or LLH block within a day, only one of the three conditions can be present. This leads to a calculable daily ratepayer impact. Summing the daily impacts by condition over the month, such as in Table 5 of Appendix E, shows that in some months all three conditions were present at one time or another, and in some months only one or two of the conditions were present.


Page 1 of 2


Exhibit: B-5








1.2.2 Please explain why BC Hydro is confident that, going forward, conditions that pertained in Years 1-3 will be more predominant that the conditions that pertained in Year 4. Is it a matter of ‘reversion to the mean’?


Page 2 of 2


Exhibit: B-5

RESPONSE:

The May-July system inflow for 2019 was among the lowest in the set of historical years used in the Energy Study. It has a low probability of occurring.


Page 1 of 1


Exhibit: B-5








1.2.3 Given that BC Hydro anticipated a revenue loss in Year 4 due to the adverse hydrology conditions that BC Hydro faced leading into the 2019 Freshet Period, please explain why BC Hydro did not interrupt the RS 1892 service in Year 4.

RESPONSE:

In accordance with Special Condition No. 2 of RS 1892, BC Hydro provided service in Year 4 because it had available energy and capacity to do so. Please also refer to BC Hydro’s response to BCUC IR 1.9.4 for further discussion.


Page 1 of 1


Exhibit: B-5

3.0 Topic: Financial risk to ratepayers

Reference: Exhibit B-1, p. 2, pdf p. 9

BC Hydro states:

“Minimize risk to all ratepayers by not requiring BC Hydro to undertake system reinforcements and not requiring BC Hydro to provide service if the electrical system is constrained for technical reasons such as forced or planned outages of its transmission or generation system. For greater certainty, BC Hydro does not propose to interrupt these non-firm services for economic reasons.”

BC Hydro also states that the Freshet Rate Pilot lost money in year 4.

1.3.1 Please confirm that under RS 1892 and 1893 BC Hydro has the right to curtail service for economic reasons.

RESPONSE:

Not confirmed. As described in RS 1892 and RS 1893 as proposed, BC Hydro will provide service to the extent it has energy and capacity available.


Page 1 of 1


Exhibit: B-5

3.0 Topic: Financial risk to ratepayers

Reference: Exhibit B-1, p. 2, pdf p. 9

BC Hydro states:

“Minimize risk to all ratepayers by not requiring BC Hydro to undertake system reinforcements and not requiring BC Hydro to provide service if the electrical system is constrained for technical reasons such as forced or planned outages of its transmission or generation system. For greater certainty, BC Hydro does not propose to interrupt these non-firm services for economic reasons.”

BC Hydro also states that the Freshet Rate Pilot lost money in year 4.

1.3.2 Are there any circumstances in which BC Hydro would consider changing its policy of not interrupting service for economic reasons?

RESPONSE:

BC Hydro is not considering proposing conditions to allow for interrupting service for economic reasons.



Page 1 of 1


Exhibit: B-5

4.0 Topic: Freshet Rate, clarification

Reference: Exhibit B-1, Appendix E, Transmission Service Freshet Rate Pilot, Evaluation Report for Year Four, Figure 3, RS 1823 and RS 1892 energy prices (May to July 2019), pdf p.436

In Figure 3, the RS 1823 Tier 2 price appears to be between $90 and $100 per MWh. The text on the next page refers to an RS 1823 Tier 2 energy price of $101.60/MWh.

1.4.1 Is the RS 1823 Tier 2 price in Figure 3 accurate?

RESPONSE:

BC Hydro confirms that the RS 1823 Tier 2 price in Figure 3 of Appendix E in the Application is not accurate and should be $101.60/MWh.


Page 1 of 1


Exhibit: B-5

5.0 Topic: Freshet Rate, Implementation Costs and Load Shifting

Impacts

Reference: Exhibit B-1, Application, p.16, pdf p.23

BC Hydro states in several places in the Application and appendices that for the four-year Freshet Rate Pilot period “There was an estimated net revenue gain of $5.8 million, before adjustment for implementation costs and/or verified load shifting impacts.” [Application, p.16, pdf p.23, underline added]

1.5.1 Please explain why BC Hydro emphasizes net revenue before adjustment for verified load shifting impacts? Wouldn’t a more useful measure of the financial impact of the pilot be net revenue after adjustment for verified load shifting impacts?

RESPONSE:

BC Hydro acknowledges that the reporting of net revenue would be more representative if the value could have been adjusted for all verified costs, including load shifting impacts.



Page 1 of 1


Exhibit: B-5


Impacts



1.5.2 Please explain “implementation costs.” Are these one-time start-up costs? If implementation costs are ongoing, shouldn’t they be subtracted from net revenue to give an accurate indication of the program’s financial impact?

RESPONSE:

As described in section 3.1.6 of Appendix D of the Application, implementation costs for the Freshet Rate Pilot include BC Hydro’s costs related to: rate design and regulatory proceedings; billing; customer and stakeholder engagement; and evaluation report preparation. These costs reflect both one-time start-up and ongoing costs.

BC Hydro agrees that the subtraction of implementation costs, and verified load shifting costs, from the estimated revenue gains for the entire period of the Freshet Rate Pilot would have provided a more accurate indication of net financial impact. However, not all of these costs were available. Specifically, BC Hydro does not have verified estimates of load shifting costs for Year 3 and 4 of the Pilot.



Page 1 of 1


Exhibit: B-5


Impacts



1.5.3 Quantitatively, are the implementation costs of the Freshet Rate Pilot considered immaterial? (Reference: “[Freshet] Rate design, implementation and management were achieved using existing staff resources.” [p.29, pdf p.36])

RESPONSE:

BC Hydro does not consider the implementation costs of RS 1892 to be immaterial.

BC Hydro has calculated total implementation costs of $205,000 for the first three years of RS 1892 (refer to Table 3 of Appendix D to the Application). Implementation costs for Year 4 of RS 1892 were $50,000 as provided in section 1.8.2 of Appendix E to the Application. These implementation costs are related to billing, customer and stakeholder engagement, regulatory proceedings and evaluation. All other staff and administrative costs were funded under existing operating budgets using existing staff.


Page 1 of 1


Exhibit: B-5

6.0 Topic: FACOS

Reference: Exhibit B-1, Application

1.6.1 If the Freshet Rate and the Incremental Energy Rate Pilot are approved, how will they be dealt with in future Fully Allocated Cost of Service studies?

RESPONSE:

BC Hydro’s Fully Allocated Cost of Service Studies allocates BC Hydro’s revenue requirements costs across the following eight rate classes: Residential; GS < 35 kW; MGS; LGS; Irrigation; Street Lighting – BC Hydro Owned; Street Lighting – Customer Owned; and Transmission. The proposed Freshet and Incremental Energy Rates are within the Transmission Service rate class.

While the load characteristics and revenues from each individual rate schedule within a rate class are used as inputs to the Fully Allocated Cost of Service Study, the outputs of the Study are calculated and reported for the eight defined rate classes, not for each individual rate schedule.


Page 1 of 1


Exhibit: B-5

6.0 Topic: FACOS

Reference: Exhibit B-1, Application

1.6.2 If Transmission Service customers utilize the Freshet Rate and the Incremental Energy Rate Pilot as intended will this have the effect of putting downward pressure on the revenue/cost ratio for that the Transmission Service customer class? If not, why not?

RESPONSE:

Holding all else equal, if transmission service customers utilize the Freshet Rate and the Incremental Energy Rate Pilot as intended, this may have the effect of putting downward pressure on the revenue to cost ratio for the Transmission service rate class as the revenues from these two proposed rates are likely to be below their fully allocated cost of service.

However, BC Hydro does not consider the embedded cost of service analytical framework to be relevant for assessing the economic impacts of these rates.

As explained in BC Hydro’s response to CEC IR 1.2.3, BC Hydro did not price the Freshet or Incremental Energy Rate on the expectation of recovering embedded costs. Rather, these rates were priced on the expectation that revenue from these rates will exceed our marginal energy costs in most years, thereby providing net benefits to all ratepayers.


Page 1 of 1


Exhibit: B-5

7.0 Topic: Freshet Rate, Minimum Generation with Imports


Regarding Condition 2: Minimum Generation with Imports, BC Hydro states:

“The revenue impact can also vary if BC Hydro uses lower cost market energy to serve incremental Freshet Rate load in real time rather than storing that energy in large reservoirs for later use. Where BC Hydro has to purchase replacement energy from market to serve load at some future point, the impact will be: (i) a revenue loss if the future market energy incremental import is priced higher than the freshet market energy import; or (ii) a revenue gain if the future market incremental energy import is priced lower than the freshet market energy import.”

1.7.1 Please explain the quoted paragraph in greater detail. Why would BC Hydro use lower cost market energy to serve incremental Freshet Rate load in real time rather than storing that energy in large reservoirs for later use? Couldn’t BC Hydro choose to acquire additional lower cost market energy in order to both serve incremental Freshet Rate load and store the energy in large reservoirs?

RESPONSE:

The quoted text in the preamble from page 47 of the Application does not refer to Condition No. 2.1 Rather, it refers to Condition No. 3, which assumes the system is not at System Minimum Generation. The main point of the quoted text is to highlight that under Condition No. 3, serving the incremental load by purchasing from Powerex may be a gain or a loss for all ratepayers depending on the forgone value that energy would have had in the future.

For a given volume of market energy purchases from Powerex, BC Hydro may either serve incremental load or store the energy.

1 The three system conditions are described at page 23 of Appendix D.


Page 1 of 1


Exhibit: B-5

8.0 Topic: Load Forecast

Reference: Exhibit B-1, Application, p.46, pdf p.53; p.60, pdf p.67

Regarding the Freshet Rate Pilot, BC Hydro states:

“The Freshet Rate is non-firm and interruptible. BC Hydro will provide energy and capacity under this rate schedule only to the extent it is available. No estimates of load under the Freshet Rate have been included in BC Hydro’s load forecast and BC Hydro is not required to undertake system reinforcements to serve load under this rate schedule. BC Hydro also has operating procedures in place to interrupt non-firm Freshet Rate service customer loads to mitigate the impact of actual or prospective system constraints and prioritize service to firm service customer loads;” [p.46, pdf p.53, underline added]

Regarding the Incremental Energy Rate Pilot, BC Hydro states:

“The Incremental Energy Rate Pilot is non-firm and interruptible. BC Hydro will provide energy and capacity under this rate schedule only to the extent it is available. BC Hydro is not required to undertake system reinforcements to serve load under this rate schedule. RS 1893 load is not included in BC Hydro’s load forecast. BC Hydro has the right to interrupt RS 1893 service for transmission and generation system constraints;” [p.60, pdf p.67, underline added]

1.8.1 Please describe how non-firm interruptible energy is dealt with in BC Hydro’s load forecast, for short-term purposes (i.e., rate setting) and for long-term resource planning. Are the quantities so small as to be immaterial?

RESPONSE:

Freshet Energy Rate and Incremental Energy Rate load is not included in either BC Hydro’s load forecast or long term-resource planning as BC Hydro is not obliged to build resources to serve this load.

A revenue forecast for the Freshet Energy Rate and Incremental Energy Rate was not part of BC Hydro’s Fiscal 2020 to Fiscal 2021 Revenue Requirements Application, although actuals for May 2019 were included in the Evidentiary Update to the Fiscal 2020 to Fiscal 2021 Revenue Requirements.

BC Hydro does not consider load and revenue from the Freshet Energy Rate and Incremental Energy Rate to be so small as to be immaterial.


Page 1 of 1


Exhibit: B-5

9.0 Topic: IERP and Freshet Rate


“The Incremental Energy Rate Pilot is similar in concept and design to the Freshet Rate, but would be offered on a year-round basis. BC Hydro expects that some customers will prefer the seasonal Freshet Rate, while others will prefer the annual Incremental Energy Rate Pilot. Having both rates available will provide transmission service customers with choice during the proposed pilot period. It will also permit direct observation of customer preferences and specific actions taken to increase load;” [p.7, pdf p.14]

BC Hydro proposes that the evaluation of the Incremental Energy Rate Pilot will include, among other things, “(v) Interactions and possible opportunities for synergies between the Incremental Energy Rate Pilot and the Freshet Rate.” [p.61, pdf p.68]

1.9.1 What is the proposed relationship between the Freshet Rate and the Incremental Energy Rate Pilot? Are they mutually exclusive, such that an eligible transmission customer could chose to participate in either optional rate but not both? Could a participant switch from one to the other?

RESPONSE:

Both rates are for optional, non-firm interruptible service. Per the “Availability” criteria of RS 1892 and RS 1893, eligible transmission customers could choose to participate in either rate, but not both, during the same Billing Year with the exception of the period ending March 31, 2021. Participants are not allowed to switch from one rate to the other during the Billing Year.



Page 1 of 1


Exhibit: B-5

9.0 Topic: IERP and Freshet Rate


“The Incremental Energy Rate Pilot is similar in concept and design to the Freshet Rate, but would be offered on a year-round basis. BC Hydro expects that some customers will prefer the seasonal Freshet Rate, while others will prefer the annual Incremental Energy Rate Pilot. Having both rates available will provide transmission service customers with choice during the proposed pilot period. It will also permit direct observation of customer preferences and specific actions taken to increase load;” [p.7, pdf p.14]

BC Hydro proposes that the evaluation of the Incremental Energy Rate Pilot will include, among other things, “(v) Interactions and possible opportunities for synergies between the Incremental Energy Rate Pilot and the Freshet Rate.” [p.61, pdf p.68]

1.9.2 What might be the synergies between the Incremental Energy Rate Pilot and the Freshet Rate?

RESPONSE:

Both RS 1892 and RS 1893 are for the provision of optional non-firm electricity service to transmission service customers supplied with electricity under RS 1823 or RS 1828, as applicable. In addition, both rates have the same energy charges during the freshet period. Given these similarities, the reasons why customers might choose to participate in one rate versus the other are described in BC Hydro’s response to BCUC IR 1.2.1.1.

Further to that response, BC Hydro considers that prospective synergies between the rates which could be reviewed in the proposed 2023 evaluation might include whether:

• The risks and benefits of participation in both rates are similar;

• The historical baseline determination period and baseline determination methodology should continue to be different, or align, and if so how;

• The proposed monthly billing settlement under RS 1893 might also be appropriate for RS 1892; and

• Customers desire to continue having both optional rates available to them, in spite of the similarities, is due to their experience and familiarity with one rate versus the other.


Page 1 of 1


Exhibit: B-5

10.0 Topic: Incremental Energy Rate Pilot

Reference: Exhibit B-1, Application p.72, pdf p.79

“Importantly, BC Hydro also notes that subscribing RS 1823 Customers remain subject to the terms and conditions of TS 74, including Energy CBL resets, for annual RS 1823 energy purchases. While BC Hydro acknowledges that some participating customers might have the capability to shift a portion of their load from RS 1823 to RS 1893, the prospect of Energy CBL annual reset under TS 74 significantly mitigates this risk. This is because Energy CBL annual reset could result in a material change to the mix of RS 1823 Tier 1 and Tier 2 energy purchases for the Customer’s baseline load. All else being equal, this would increase the cost of RS 1823 energy for participant customers who have made prior investments in conservation and operational efficiency. Accordingly, the prospective financial consequence of Energy CBL reset is a significant deterrent to load shifting. BC Hydro will consider the impact of load shifting and/or Energy CBL reset and any associated revenue impacts in its evaluation of the Incremental Energy Rate Pilot.” [p.72, pdf p.79]

1.10.1 Please provide an example to show how the Energy CBL reset would mitigate the risk of a customer shifting load between RS 1823 and the Incremental Energy Rate Pilot (RS 1893).

RESPONSE:



Page 1 of 1


Exhibit: B-5


Reference: Exhibit B-1, Application p.72, pdf p.79

“Importantly, BC Hydro also notes that subscribing RS 1823 Customers remain subject to the terms and conditions of TS 74, including Energy CBL resets, for annual RS 1823 energy purchases. While BC Hydro acknowledges that some participating customers might have the capability to shift a portion of their load from RS 1823 to RS 1893, the prospect of Energy CBL annual reset under TS 74 significantly mitigates this risk. This is because Energy CBL annual reset could result in a material change to the mix of RS 1823 Tier 1 and Tier 2 energy purchases for the Customer’s baseline load. All else being equal, this would increase the cost of RS 1823 energy for participant customers who have made prior investments in conservation and operational efficiency. Accordingly, the prospective financial consequence of Energy CBL reset is a significant deterrent to load shifting. BC Hydro will consider the impact of load shifting and/or Energy CBL reset and any associated revenue impacts in its evaluation of the Incremental Energy Rate Pilot.” [p.72, pdf p.79]

1.10.2 Does BC Hydro see a risk that Transmission Service customers using the Incremental Energy Rate Pilot (or the Freshet Rate) will forego increasing their base load as a result of the availability of these rates?

RESPONSE:

We do not expect this to be a material risk because the provisions of TS 74, RS 1892 and RS 1893, will be applied to each unique participant customer circumstance of increased load.


Page 1 of 1


Exhibit: B-5



“An additional scenario which could occur is if, in high load periods, BC Hydro has to reduce its sales of energy to market to serve Incremental Energy Rate Pilot load, there may be a revenue loss if the forgone export would have been at a higher price than the price of the Incremental Energy Rate. BC Hydro notes this risk may be low given the situation is more likely to occur during high priced periods, which may have lower customer participation as described in the final paragraph of section 5.2.” [p.81, pdf p.88, underline added]

1.11.1 Please explain how there could be a revenue loss if the forgone export would have been at a higher price than the price of the Incremental Energy Rate. Isn’t the price of the Incremental Energy Rate based on the Mid-C price?

RESPONSE:

The scenario referenced in the preamble assumes that the load is being met using system storage, and the forgone export would have occurred at a later date when the market price is higher.


Page 1 of 1


Exhibit: B-5

12.0 Topic: Freshet Rate and Incremental Energy Rate Pilot

Reference: Exhibit B-1, Application, p.2, footnote 2, pdf p.9

“As described in section 5.5.1, BC Hydro uses “system marginal value” as its marginal cost of energy for incremental sales. The system marginal value represents the estimated marginal value of energy in the system, which is typically the expected value of generation from one of BC Hydro’s large storage reservoirs. BC Hydro’s analysis takes into account uncertainties in various inputs such as forecasted inflows, electricity and gas prices, loads and operational constraints. The rates have been designed to cover the marginal cost of energy and provide a contribution to fixed costs on an expected value basis (determined by positive expected net revenue in the analysis), which is determined by the probability weighted average of all values.

1.12.1 Would BC Hydro describe this analysis as existing within the operational framework, the long-term planning framework, or both?

RESPONSE:

The calculated benefit to all ratepayers is based on the system marginal value that comes from the Energy Studies modelling of the operational timeframe.


Page 1 of 1


Exhibit: B-5

12.0 Topic: Freshet Rate and Incremental Energy Rate Pilot

Reference: Exhibit B-1, Application, p.2, footnote 2, pdf p.9

“As described in section 5.5.1, BC Hydro uses “system marginal value” as its marginal cost of energy for incremental sales. The system marginal value represents the estimated marginal value of energy in the system, which is typically the expected value of generation from one of BC Hydro’s large storage reservoirs. BC Hydro’s analysis takes into account uncertainties in various inputs such as forecasted inflows, electricity and gas prices, loads and operational constraints. The rates have been designed to cover the marginal cost of energy and provide a contribution to fixed costs on an expected value basis (determined by positive expected net revenue in the analysis), which is determined by the probability weighted average of all values.

1.12.2 In BC Hydro’s view, what happens to the rationale for the Freshet Rate and the Incremental Energy Rate Pilot when the system approaches a deficit in energy or capacity for planning purposes?

RESPONSE:

As the annual energy surplus in the planning view decreases, the operational view of the annual surplus will also decrease. On average, RS 1892 and RS 1893 are expected to provide benefits to all ratepayers while BC Hydro has an operational annual surplus of energy. As the annual energy surplus decreases, the benefit to non-participating customers will generally decrease, all else being equal.

From an energy perspective, the economic impact on ratepayers of RS 1892 is expected to be less sensitive to whether or not BC Hydro is in an operational annual surplus or deficit because BC Hydro may experience energy oversupply in the freshet period even during a period of an annual deficit. RS 1893 is proposed for 51 months, and during this period BC Hydro expects to have an operational annual surplus under average water conditions of approximately 4,000 GWh.

BC Hydro’s planning view is that there will not be a capacity deficit within the next ten years. Therefore, the ratepayer economics of RS 1892 and RS 1893 when the system approaches a deficit are not expected to be an issue within the next ten years.

Please also refer to BC Hydro’s response to MOVEUP IR 1.3.1.

Clean Energy Association of British Columbia Information Request No. 1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 2


Exhibit: B-5

1.0 Reference: BC Hydro Transmission Service Rate Design Workshop,

October 11, 2018, and F20-21 RRA Exhibit B-6, BCH response to Ince IR 1.7.9.

In the Rate Design Workshop, BC Hydro provided the following chart of the Williston Daily Inflow hydrology for water year 2017:

And in its IR response to Ince IR 1.7.9 (in the F20-F21 RRA, Exhibit B-6), BC Hydro provided similar charts of the Williston and Kinbasket hydrology for water year 2018:

t-,v111 1ston Dally lnnow Hydrograph WillefYNr201f Upjn,dl)4-5eo-2Q11121931

- -----------------------,---- --------------------I "'"'

-------------------------..--------~---------------

--fiOOO ----------------------------------f,•-------------

~: [®

J ------------------------~---. ... Water inflow to

reservoirs is highest between May and July

-7'


Page 2 of 2


Exhibit: B-5

1.1.1 Please provide these same hydrology charts for both Williston and Kinbasket for each of the water years 2016 through 2019.

RESPONSE:

BC Hydro does not disclose multiple years of system inflow information for our reservoirs. Information on system inflow conditions is commercially sensitive and confidential because its disclosure could be used by third parties to model BC Hydro’s system inflows, to the disadvantage of BC Hydro and its ratepayers.

W.ll iston O.oily luflow Hydrogroph

r· ,OOXt ------------------------ ~---------------------· J

..,,

""'

Mica Daily h,f1ow Hydrograph


Page 1 of 2


Exhibit: B-5






- -----------------------,---- --------------------I "'"'

-------------------------..--------~---------------

--fiOOO ----------------------------------f,•-------------

~: [®

J ------------------------~---. ... Water inflow to


-7'


Page 2 of 2


Exhibit: B-5

1.1.2 Please provide whatever similar hydrology data is available for the southern Columbia River (U.S.) basin.

RESPONSE:

Historic observed hydrology data for the U.S. Columbia River basin is available from the National Weather Service Northwest River Forecast Center webpage, under Water Supply/Runoff. https://www.nwrfc.noaa.gov/ws/index.html?zoom=6&center=47.35371061951363,-117.0263671875&map_type=ro_status.

Williston Dally Inflow Hydrognpt,

r---------------------------------~---------------, ,..,.

-------------------------,..---------- - ~------------""' --"""

. (11..00 (II ...... ll'I-Ol:!t: lil'I__..,, tl-l'"dl (11-l,lill '-1.1,p' QII~ In~-.., QII-M Ill .... 111..S.,

https://www.nwrfc.noaa.gov/ws/index.html?zoom=6&center=47.35371061951363,-117.0263671875&map_type=ro_status

https://www.nwrfc.noaa.gov/ws/index.html?zoom=6&center=47.35371061951363,-117.0263671875&map_type=ro_status


Page 1 of 2


Exhibit: B-5





1.1.3 When is the freshet period for BC Hydro’s recent EPAs in northwestern B.C. (e.g. Forrest Kerr, McClymont, and Volcano Creek)?

...

--------------------------- - -3'------ -------

Water Inflow to reservoir• Is hlgheat

betwHn May and July

Wilhs.1cn Daily ll"tflow H)tdrograph

_,

r-


Page 2 of 2


Exhibit: B-5

RESPONSE:

The timing and duration of higher inflow hydrology will vary year to year and is dependent upon on weather conditions and location. Regional hydrometric data, covering regions where Independent Power Producers are located, may be available from Water Survey of Canada.

Some BC Hydro Energy Purchase Agreements recognize the months of May, June and July as a “freshet” period, but from an Energy Purchase Agreement perspective the freshet period does not vary on a regional basis.


Page 1 of 2


Exhibit: B-5





1.1.4 Please describe how the freshet periods differ between the following regions:

a) northwestern B.C. (e.g. Forrest Kerr, etc.); b) the Peace River system; c) the northern Columbia River system (i.e. B.C.); d) the southern Columbia River system (i.e. U.S.); and

Water Inflow to reservoirs is highest

between May and July

...... ~IQta:tll


Page 2 of 2


Exhibit: B-5

e) California.

RESPONSE:

Generally, the further south the basin, the earlier one can expect the freshet to occur. The timing and duration of when freshet actually occurs in any given year or basin is the result of a unique combination of snowpack accumulation over winter and weather conditions in the winter and spring. Please refer to the published literature on variability and trends in snowmelt runoff in Western North America.

Here is one overview reference that may be relevant (if slightly dated):

Lundquist et.al. Variability and Trends in Spring Runoff in the Western United States in Wagner, F. (ed.), 2009, Climate warming in western North America—Evidence and environmental effects, University of Utah Press, 63-76 https://depts.washington.edu/mtnhydr/publications/Lundquist_AAASbookchapter.pdf.

https://depts.washington.edu/mtnhydr/publications/Lundquist_AAASbookchapter.pdf

https://depts.washington.edu/mtnhydr/publications/Lundquist_AAASbookchapter.pdf


Page 1 of 3


Exhibit: B-5






- -----------------------,---- --------------------I "'"'

-------------------------..--------~---------------

--fiOOO ----------------------------------f,•-------------

~: [®

J ------------------------~---. ... Water inflow to


-7'


Page 2 of 3


Exhibit: B-5

1.1.5 Has BC Hydro seen a change in the hydrology of the B.C. basins and/or the U.S. basins over recent years? Does BC Hydro expect the freshet period to occur earlier in the future, due to Climate Change, in any or all of these basins?

Williston Dai ly Inflow Hydrograph Wa1«Verr2018 Upd:atcd 06-0ct 2018 00.02:-48

r~ -------------------------90r--------- --------------

10000

T''91 OJJB., 8000 -- - ------ - ------ - --------- - - - ----- o:,r - - - - - --------

6000 ________________________ .,.... ___ _

4000

0 1-NOY 01-0ec 01-.ilo 01-F«I 01-M;lr 01-Apr 01.May 01.Jun 01.Jul 0 1-Aug 01-Sep

Mica Daily Inflow Hydrograph Water'Ve;lr2019 Updaled05-0ct-201909:02.35

""'

2000

1500

1(0)

------------------------~------------------------.Jlr' .,.,

rl:'' i oo,

-------------------------a----------. _J"~ ---~ -----1

0l •Nov 01-Dec 01-Jall 01-Feti 0 1-Ma, 01-Apr 01-Mil)' 01-Jai 01-M 01-Auy 01-Sep


Page 3 of 3


Exhibit: B-5

RESPONSE:

Please refer to Attachment 1 to this response, which outlines BC Hydro’s understanding of recent and projected changes due to climate change to inflow in British Columbia.

Commercial Energy Consumers Association of British Columbia Information Request No. 1.14.1 Dated: May 2, 2019 British Columbia Hydro & Power Authority Response issued June 6, 2019

Page 1 of 2

British Columbia Hydro & Power Authority Fiscal 2020 to Fiscal 2021 Revenue Requirements Application

Exhibit: B-6

14.0 Reference: Exhibit B-1, Appendix 0, page 121 of 170 and page 122 of 170

1.14.1 Please discuss all the ways in which BC Hydro models uncertainties and/or accounts for ‘trends’ in climate, such as those related to climate change, in its load forecasting.

RESPONSE:

This answer also responds to: CEC IR 1.14.2, CEC IR 1.14.3, CEC IR 1.42.3.1, CEC IR 1.42.3.2, INCE IR 1.8.2, INCE IR 1.8.3, INCE IR 1.8.4, INCE IR 1.8.24, INCE IR 1.8.25, and WILLIS IR 1.7.1.

The direct input in our residential and commercial models that can account for climate trends is the temperature element which is measured in heating and cooling degree days.

The model forecasts are based on a normal temperature, which is defined as a ten-year rolling average of monthly heating and cooling degree days that are region-specific to BC Hydro’s service area. Using a ten-year rolling average reflects current trends relative to longer-term averaging periods. Our Monte Carlo model also reflects uncertainty in the impact of temperature on load through a random simulation of the heating degrees over the past ten years. Further information is provided in section 11.2.6 of Appendix O of the Application.

We assess future climate trend uncertainties by undertaking climate studies to assess the impacts of extreme weather events on future load, hydroelectric generation and system resiliency.

CEABC IR 1.1.5 Attachment 1


Page 1 of 2

11.2.6 Temperature uncertainty

Impact of Temperature Uncertainty: This source of uncertainty applies to the residential sector and to a lesser extent the

commercial /light industrial sector. In British Columbia , the impact of colder weather and temperatures on the residential sector results in

additional heating load during the winter months. As such, customer response to colder temperatures (i.e., heating sensitivity) is

modelled with a range of heating degree days (HDD)36 and elasticities of load to heating degree days.

The range of heating degree days is determined from the annual sales weighted total heating degree days over the last 1 0 years

ending fiscal 2018. To develop the range we first constructed a monthly sales weighted (i.e., a sales weighting of the monthly heating

degree days across our four services regions) heating degree day variable from actual monthly heating over the past 10 years. Next,

from the monthly data series, we found the annual sales weighted total heating degree days over past 1 0 years and calculated the

mean over the same period, which is 1,022 heating degree days.

The temperature impact factor does not cause the high and low band to increase over the forecast period because the impact of

variability of temperature on the load in a year does not impact the loads in the future years. As such, the impact of temperature is

independent amongst all the years over the forecast period. This property is different to the GDP and electricity rate impact factors

which have year to year cumulative effects over the forecast period.

Commercial Energy Consumers Association of British Columbia Information Request No. 1.14.1 Dated: May 2, 2019 British Columbia Hydro & Power Authority Response issued June 6, 2019

Page 2 of 2

British Columbia Hydro & Power Authority Fiscal 2020 to Fiscal 2021 Revenue Requirements Application

Exhibit: B-6

The most recent analysis of the impact of various climate change scenarios on load was provided in our response to BCUC IR 1.4.3.1, filed in the Previous Application. In addition, a discussion of how BC Hydro is assessing climate impacts was provided in the responses to AMPC IR 1.12.2 and CEABC IR 1.10.2 in the Previous Application. All of these materials are provided at this link.

In partnership with the Pacific Climate Impacts Consortium, new climate scenarios have been developed since the Previous Application. However, these scenarios have not yet been analyzed for potential impacts to future load. The Pacific Climate Impacts Consortium is completing an update of the projected hydrologic scenarios for key watersheds in British Columbia which will support assessment of possible future impacts to water supply for hydropower generation.

Based on a preliminary review of the updated climate projections from the Pacific Climate Impacts Consortium, the trends identified in the previous climate change scenario analysis completed in 2013 appear to be continuing. The Pacific Climate Impacts Consortium’s results are consistent with the recently published Canada’s Changing Climate Report produced by Environment and Climate Change Canada.

In addition, BC Hydro is undertaking a risk assessment of our grid vulnerability to storm events and severe weather as part of our climate change adaptation efforts. For more detailed information, please refer to BC Hydro’s response to BCUC IRs 1.131.1 and 1.131.2.

CEABC IR 1.1.5 Attachment 1


Page 2 of 2

http://www.bchydro.com/content/dam/BCHydro/customer-portal/documents/corporate/regulatory-planning-documents/reference-documents/F20_F21_RRA_CEC_1_014_01_LES_01.pdf


Page 1 of 2


Exhibit: B-5





1.1.6 Has there been an increase in air conditioning load over the last decade in July in the states of Washington, Oregon and/or Calilfornia?

!A'llllston D.'tilty ln1'1ow l+J(lmgr~pl'I

----- ---- ----- -- -- -- ---- --------,--.,..-- -------- --

{ I """' ----------------------------

water Inflow to reservoirs Is highest

between May and July

Mlu Dail)' Inflow Hydrognpt,


Page 2 of 2


Exhibit: B-5

RESPONSE:

BC Hydro respectfully declines to comment on the characteristics of the load in other jurisdictions.


Page 1 of 1


Exhibit: B-5

2.0 Reference: Workshop, October 11, 2018, and F20-F21 RRA Exhibit B-6,

BCH response to Ince IR 1.7.5.

In its Workshop presentation, BC Hydro presented a generic chart showing seasonal inflows vs. monthly energy loads. In its response to Ince IR 1.7.5 (in the F20-F21 RRA proceeding), BC Hydro provided the following updated chart which shows the actual values for the year 2018, with the addition of a line representing the Minimum Generation Including EPAs:

1.2.1 Please provide a similar updated charts showing the actual values for the additional years 2016, 2017 and 2019, including the Minimum Generation line.

RESPONSE:

The chart provided in the response to Ince IR 1.7.5 in the F20-F21 RRA proceeding includes information that should not have been reported publicly because it is commercially sensitive to BC Hydro. Providing such data for multiple years could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers. BC Hydro therefore declines to provide the requested additional years of actual information as it is likewise commercially sensitive and considered confidential.

14000 -,---------------------------------, BC Hydro 2018 Load, EPA Deliveries, System Inflow and Min Gen

12000 -r-----------~ ----------------------<

10000

4000

2000

- -Total load Including Coordination Obligations

--Total EPA<

--Total EPA5 + System Inflow

- • M in Gen lndudin EPAs

------------Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan


Page 1 of 1


Exhibit: B-5

2.0 Reference: Workshop, October 11, 2018, and F20-F21 RRA Exhibit B-6,

BCH response to Ince IR 1.7.5.

In its Workshop presentation, BC Hydro presented a generic chart showing seasonal inflows vs. monthly energy loads. In its response to Ince IR 1.7.5 (in the F20-F21 RRA proceeding), BC Hydro provided the following updated chart which shows the actual values for the year 2018, with the addition of a line representing the Minimum Generation Including EPAs:

1.2.2 Please also provide the Excel models containing the chart data for all the years from 2016 through 2019, including the lines “Total EPAs” and “Min Gen Including EPAs”.

RESPONSE:

BC Hydro declines to provide the requested information for the reasons outlined in BC Hydro’s response to CEABC IR 1.2.1.

14000 -,---------------------------------, BC Hydro 2018 Load, EPA Deliveries, System Inflow and Min Gen

12000 -r-----------~ ----------------------<

10000

4000

2000

- -Total load Including Coordination Obligations

--Total EPA<

--Total EPA5 + System Inflow

- • M in Gen lndudin EPAs

------------Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan


Page 1 of 1


Exhibit: B-5

3.0 Reference: Miscellaneous – BC Hydro Waneta 2017 Transaction -- Impact

of the Waneta Acquisition on System Minimum Generation

In its 2017 Waneta Transaction Application (Exhibit B-8-2, BCH response to BCUC IR 1.43.3) BC Hydro provided the following chart depicting the monthly energy generation from Waneta and Waneta Expansion, both of which are heavily weighted in the freshet period:

1.3.1 For the years 2016 through 2019, please provide the monthly MWh of generation from each of Waneta and Waneta Expansion, and describe how much of each month’s generation is included in the categories “Total EPAs” and “Min Gen Including EPAs” as given in the charts and table provided in the response to the previous IR (#3) above.

RESPONSE:

As discussed in the response to CEABC IR 1.2.1, the requested information is commercially sensitive to BC Hydro. The information could be used by third-parties to predict BC Hydro’s electricity import and export requirements to the disadvantage of BC Hydro and its ratepayers. BC Hydro therefore declines to provide the requested information as it is commercially sensitive and considered confidential.

""

.... • f

Figure 2 Monthly Average MW for Waneta Facilities

Monthly Average MW for Waneta racilities

I I ii ii ij ij ii ii

I I I I I I I I ------Figure 2 shows the average MW for the Waneta Faci lities over each month. This chart shows the seasonality of the generation with a peak typ ically occurring in the spring end summer due to the spring runoff, and the lowest averege generation occurring during the winter. The monthly average ranges from 119 aMW to 475 aMW. After the Waneta Expansion Project start-up the average range is lower from 59 aMW to 356 aMW.


Page 1 of 1


Exhibit: B-5

4.0 Reference: Exhibit B-1, Application, page 45, Introduction to BC Hydro’s

freshet Rate Proposal.

When discussing the elements of the proposal, BC Hydro states:

“Freshet Rate energy pricing is based on the Mid-C market price, which is expected to be generally reflective of BC Hydro’s marginal cost of energy.”

1.4.1 How does BC Hydro presently determine its “marginal cost of energy,” and why is the Mid-C market price expected to be “generally reflective” of this value?

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.11.1 for discussion on the System Marginal Value and the Mid-C price.


Page 1 of 1


Exhibit: B-5

4.0 Reference: Exhibit B-1, Application, page 45, Introduction to BC Hydro’s

freshet Rate Proposal.

When discussing the elements of the proposal, BC Hydro states:

“Freshet Rate energy pricing is based on the Mid-C market price, which is expected to be generally reflective of BC Hydro’s marginal cost of energy.”

1.4.2 If BC Hydro believes the Mid-C market is becoming increasingly illiquid, then why does BC Hydro continue to choose the Mid-C market price as its pricing point for this Freshet Rate or for the proposed Incremental Energy Pilot Rate?

RESPONSE:

BC Hydro does not believe that “the Mid C market is becoming increasingly illiquid.” BC Hydro made no reference to such in the Application. BC Hydro assumes CEABC is referring to statements made in the British Columbia Hydro and Power Authority (BC Hydro) and Powerex Corp (Powerex) 2019 Letter Agreement Application. In that application, BC Hydro specifically stated that there is an observed decline in the volume of wholesale electricity traded on a day-ahead basis in the Pacific Northwest. While there is observed declining liquidity in the Mid-Columbia day-ahead market, Mid-C is still the most liquid market in the Pacific Northwest, and there is a large amount of transmission capacity between B.C. and the Pacific Northwest. As such, the Mid-C market price remains the appropriate reference for wholesale market prices for BC Hydro’s rate making purposes.


Page 1 of 1


Exhibit: B-5

5.0 Reference: Exhibit B-1, Application, Appendix D, Freshet Rate Pilot Final

Evaluation Report, December 2018, page 19, Table 8.

In Table 8, BC Hydro presented the Monthly Ratepayer Benefit by System Condition, over the 3 years from 2016 to 2018:

1.5.1 Please provide the same table completed to include the Year 4 (2019), and also provide the working Excel model that calculates this table.

RESPONSE:


Table 8 Monthly Ratepayer Benefit by System Condition

Condition 1 Condition 2 Condition 3

$,000 $,000 $,000 $,000 Year 1 {2016) Export Import System Basin Ratepayer benefit

May $ 61 $ (6) $ 481 $ 536 June $ $ $ 806 $ 806 July $ $ $ 917 $ 917

$ 61 $ (6) $ 2,204 $ 2,259

Year 2 {2017) Export Import System Basin Ratepayer benefit

May $ 56 $ (93) $ 424 $ 387 June s 117 s (55) s 402 $ 464 July $ 38 $ $ 1,305 s 1,343

$ 211 $ (148) $ 2,131 $ 2,194

Year 3 (2018) Export Import System Basin Ratepayer benefit

May s 205 $ (78) $ $ 127 June s 170 s (77) s 50 $ 143

July $ 65 $ (4) $ 1,541 s 1,602

$ 440 $ (159) $ 1,591 $ 1,872

Total $ 6,325


Page 1 of 2


Exhibit: B-5


Evaluation Report, December 2018, Section 1.6, and Workshop slides from November 19, 2018.

Customer feedback from the November 19, 2018 Workshop session (available at https://www.bchydro.com/toolbar/about/planning_regulatory/regulatory.html ) showed a very significant concern that the inclusion of July was a “significant disincentive for customer participation” (as shown in slide 21):

Further customer feedback indicated a very strong preference for monthly reconciliation rather than seasonal (as shown in slide 22):

Nevertheless, in Recommendation 2 of Section 1.6, BC Hydro makes the following comment about the customer feedback it received in its Workshop sessions: [emphasis added]

RS1892 Freshet Rate

Do you support a stuus: quo approach to keep the Freshet Pt~od . , May-July?

13!1

13!1

34!1

• Ye:§ ■ No ■ Ull!iUU! ■ No Response

"Inclusion of July, with its highisk exposure to high prices is ignificant disincentive for

customer participation. AprilJune makes more sense . .. "

"The Freshet Period should be determined according to the hydrology data ... "

RS1892 Freshet Rate

Do you think that --■■IIIIIIII■------ 26!1 Freshet Raio (RS !31!,

18921 energy determination and billing should be

re,on<lled on l•I • 23!1

38!1

seasonal basis °" (smu,quo)

■ Ves ■ No ■ Unsur@ ■ NoR@spon!ie

''The risk and complexity of the easonal mechanism makes roduction decisions difficult to

make and can retroactively destroy any benefits realized early in the season ... "

"Allow loads to optimize based on their seasonal constraints and market pricing, particularly if the season is maintained as status quo .. "

https://www.bchydro.com/toolbar/about/planning_regulatory/regulatory.html


Page 2 of 2


Exhibit: B-5

“BC Hydro did receive participant customer feedback which targeted two specific aspects of the rate design: (1) seasonal billing methodology; and (2) timing of the freshet period. Customer feedback suggested moving to monthly billing settlement (rather than seasonal) and for the freshet period to either be expanded to include April, or modified to replace July with April. BC Hydro considers that seasonal billing reduces administrative burden and potential for load shifting, relative to monthly billing, and that BC Hydro’s system operations support maintaining the existing freshet period definition of May through July.”

1.6.1 How does BC Hydro define the beginning and end of the “freshet” period in hydrologic terms?

RESPONSE:

BC Hydro does not have a definition of the beginning or end of freshet that is used for operational purposes. As described in BC Hydro’s response to CEABC IR 1.1.3, typically BC Hydro’s Energy Purchase Agreements provide that the freshet period is for the months of May, June and July.

The term ‘freshet’ generally describes a significant increase in streamflows caused by either heavy rain or snowmelt.1 In more common terms, the freshet is defined as the seasonal rise of streamflows in spring as a result of snowmelt and, as such, is also called the ‘spring freshet’ or ‘snowmelt freshet’.

1 Demayo, A. and E. Watt 1993. Glossary of Water Terms, English – French. Environment Canada and Canadian Water Resource Association.


Page 1 of 2


Exhibit: B-5






RS1892 Freshet Rate

Do you support a status quo approach to keep the Freshet Period as May-July?

13%

13%

34%

40%

0% 5% 10% 15% 21m 25% lO'lt JS% 40% 45%

Yes ■ No ■ Un:s.ure ■ No Response

"Inclusion of July, with its highrisk exposure to high prices is a significant disincentive for customer participation. AprilJune makes more sense ... "

RS1892 Freshet Rate

Do you lhlnk that FrHhlt Rate (RS

1892)enorgy

determination and billing should be

reconciled on (a) a

"The Freshet Period should be determined according to the hydrology data .. . "

38"

seasonal basis 0% (status quo)

5% 10% 15% 1006 15" 30% 35% 4006 45%

Yes ■ No ■ Unsure ■ NoResponse

"The risk and complexity of the easonal mechanism makes roduction decisions difficult to


"Allow loads to optimize based on their seasonal constraints and market pricing, particularly if the season is maintained as status quo .. . "



Page 2 of 2


Exhibit: B-5


1.6.2 Using this definition, what is the difference in the freshet time periods between the following 5 regions:

a) northwestern B.C. (e.g. Forrest Kerr, etc.); b) the Peace River system; c) the northern Columbia River system (i.e. B.C.); d) the southern Columbia River system (i.e. U.S.); and e) California.

RESPONSE:

BC Hydro does not have a definition of the beginning or end of freshet that is used for operational purposes.

As described in BC Hydro’s response to CEABC IR 1.1.4, the timing, peak and duration of freshet are variable from basin to basin based on a number of conditions that may or may not be consistent between the geographic regions listed, and is dependent on the specific local weather conditions experienced in each region.


Page 1 of 2


Exhibit: B-5






“BC Hydro did receive participant customer feedback which targeted two specific aspects of the rate design: (1) seasonal billing methodology; and

RS1892 Freshet Rate

Do you support • statu.s quo appro;ich to keep the Freshet hood as Miy•July?

"Inclusion of July. with its highisk exposure to high prices is ignificant disincentive for

customer participation. AprilJune makes more sense ... "

RS1892 Freshet Rate

Do you think that Frt-.shet Ratt (RS

1892) energy determination and billing ,hould be

reconciled on (a) a

'°"

'The Freshet Period should be determined according to the hydrology data ... "

38%

23%

5ea50nal basts 0" (status quo)

Sl6 10% IS% 20% 2S% 30% 35'6 40% 4S%

Yes ■ No ■ Unsure ■ No ReSQOOse

"The risk and complexity of the easonal mechanism makes roduction decisions difficult o


''Allow loads to optimize based on their seasonal constraints and market pricing, particularly if the season is maintained as status quo ... "



Page 2 of 2


Exhibit: B-5

(2) timing of the freshet period. Customer feedback suggested moving to monthly billing settlement (rather than seasonal) and for the freshet period to either be expanded to include April, or modified to replace July with April. BC Hydro considers that seasonal billing reduces administrative burden and potential for load shifting, relative to monthly billing, and that BC Hydro’s system operations support maintaining the existing freshet period definition of May through July.”

1.6.3 Please explain why, and to what extent, the “administrative burden and potential for load shifting” would be increased by monthly billing.

RESPONSE:

The administrative burden related to monthly billing is primarily due to baseline re-determination. Under RS 1892, the HLH and LLH Energy baselines and Reference Demand are based on averages for the three months of a historical freshet period. Moving to monthly billing would require new monthly baselines to be prepared, reviewed, adjusted and approved for each participant customer.

The load shifting risk related to monthly billing is caused by the potential for load shifting between freshet months (e.g., if the customer was to increase load in one freshet month, but decrease load in another), with no net increase in load over the entire freshet period. Given the limited three month duration of RS 1892 availability, BC Hydro considers seasonal billing to be a prudent way to mitigate this risk.


Page 1 of 2


Exhibit: B-5






RS1892 Freshet Rate

Oo vou support a status quo approach to keep the Freshet Period as May•July1

"Inclusion of July, with its highisk exposure to high prices is

significant disincentive for ustomer participation. April

June makes more sense ... "

RS1892 Freshet Rate

Do you think that Fte.shet Rate (RS

1892)•n•rgy d@termlnation and

billing should be reconciled on (a} a

""

40!1

"The Freshet Period should be determined according to the hydrology data . .. "

23" 5ei1.$0llill bilsis °" lmtu, quo)

5" 10!< 15" lO!< 15" 30!1 35" 4°" 45"

■ Ye-s • No ■ unsur-t • No Atspoose

"The risk and complexity of the seasonal mechanism makes

roduction decisions difficult to make and can retroactively destroy any benefits realized early in the season ... "




Page 2 of 2


Exhibit: B-5


1.6.4 Please explain why “system operations support maintaining the existing freshet period definition of May through July.”

RESPONSE:

Referencing the chart in the preamble to CEABC IR 1.2.1, BC Hydro total load (including coordination obligations) is only somewhat higher in July than April, whereas the total EPAs plus system inflow is much higher in July than April.


Page 1 of 3


Exhibit: B-5





RS1892 Freshet Rate

Do you support a status quo approach to keep the Freshet Period as May-July?

13%

13%

34%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Yes ■ No ■ Unsure ■ No Response

"Inclusion of July, with its highrisk exposure to high prices is a significant disincentive for customer participation. AprilJune makes more sense ... "

"The Freshet Period should be determined according to the hydrology data ... "



Page 2 of 3


Exhibit: B-5



1.6.5 How would BC Hydro handle a freshet period that was not coincident with a month-end, such as April 15 to July 15?

RESPONSE:

BC Hydro considers that there would be substantial administrative complexity to the use of a freshet period that was not coincident with a month start or end (e.g., April 15 to July 15) rather than May 1 to July 31. Below are the steps that would be required:

RS1892 Freshet Rate

13%

26%

38%

23%

Do you think that

Freshet Rate {RS

1892) energy

determination and

billing should be

reconciled on (a) a seasonal basis 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

(status quo) Yes ■ No ■ Unsure ■ No Response

'The risk and complexity of the seasonal mechanism makes production decisions difficult to make and can retroactively destroy any benefits realized early in the season ... "



Page 3 of 3


Exhibit: B-5

• RS 1892 baselines for energy and demand are presently determined for the

freshet period of May 1 to July 31 inclusive, in accordance with the definitions and Special Conditions set out in RS 1892. BC Hydro would need to revise and file an updated RS 1892 with the BCUC for approval;

• Subsequently, new RS 1892 energy and demand baselines would need to be determined for each participant customer, and approved by the BCUC as applicable, to reflect the re-defined freshet period;

• Electricity purchases are currently invoiced to each customer on a Billing Period basis (e.g., May 1 – May 31). The energy charges and demand charges, including for different rates such as RS 1823 and RS 1892, are calculated during this period and shown on a single invoice;

• If the freshet period was to start and end mid-month, BC Hydro would need to render one invoice to show the portion of the Billing Period for which energy and demand charges were determined under RS 1823 only and a second invoice to show the portion of the Billing Period for which energy and demand charges were determined under both RS 1823 and RS 1892, including for the seasonal reconciliation of net RS 1892 energy after the freshet period ends;

• The revised RS 1892 would need to describe the methodology for pro-ration of the demand charges as between these invoices for the same Billing Period to account for the number of days of each invoice (e.g., to avoid a double-charge for demand); and

• Customers have developed monthly billing models to input hourly electricity consumption data and daily Mid-C prices and to monitor their expected RS 1892 energy volumes and expected costs. BC Hydro notes that the customer billing models would need to be revised to incorporate the Billing Period pro-ration.


Page 1 of 1


Exhibit: B-5

7.0 Reference: Miscellaneous – BC Hydro System Constraints.

At a Workshop in 2007, BC Hydro showed how it categorized the constraints on the operating system into 5 categories by operating hours each month, as depicted in the following chart:

1.7.1 Please provide BC Hydro’s charts showing this same breakdown of total hours by month for the years 2016 through 2019, and also the Excel model containing the charted data.

RESPONSE:

The details about real-time constraints contain commercially sensitive information. BC Hydro no longer provides this information publicly as it could enable third parties to model BC Hydro’s system and its potential import and export requirements. This could, in turn, harm our customers. As such BC Hydro respectfully declines to provide this information.

In general, the oversupply of freshet energy continues to bring about situations of System Minimum Generation and the inability to import energy if prices are favourable.

£ C 0 :I: a; a.

'C ~ 0 :c C -~ 1:1 0 u

Real Time System Constraints

200

180 ·

140

120

80

• ■ Insufficient capacity to mttt domNtic load or export sal6

■ Insufficient d.J.i1y energy to meet domestic l~d or exrx,rt 5.Jles

Sall!s p.-ice is atb"active,. but tTansmission limits exports


Page 1 of 1


Exhibit: B-5

8.0 Reference: Exhibit B-1, Application, page 92-93, Section 5.4, Rate Design

Elements for the Incremental Energy Rate

Under Availability, BC Hydro states: [emphasis added]

The rate is open to any RS 1823 or RS 1828 Customer that is not concurrently taking service under the Freshet Rate.

1.8.1 Is it true that a customer must choose between the Freshet Rate (1892) and the Incremental Energy Rate (1893)? Under what conditions can the customer switch from one rate to the other?

RESPONSE:

Yes, per the “Availability” criteria of RS 1892 and RS 1893, eligible transmission customers must choose to participate in either rate, but not both, during the same Billing Year with the exception of the period ending March 31, 2021.



Page 1 of 1


Exhibit: B-5





1.8.2 Is the pricing of the two rates identical during the freshet months of May to July? What, if any, are the differences between the two rates during the freshet months?

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.2.1.1.


Page 1 of 1


Exhibit: B-5





1.8.3 Is the reconciliation of Gross to Net Incremental Energy calculated monthly for the Incremental Energy Rate, but seasonally for the Freshet Rate?

RESPONSE:

Confirmed. For the freshet period of May 1 to July 31, the reconciliation of net RS 1892 energy is calculated on a seasonal basis, whereas the reconciliation of net RS 1893 energy is calculated on a monthly basis.

Commercial Energy Consumers Association of British Columbia Information Request No. 1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1


Exhibit: B-5

1.0 Reference: Exhibit B-1, page 1 and Appendix D page 29 of 296

1.1.1 Please confirm that BC Hydro is not opposed to offering similar pilots or tariffs, for both options, to commercial customers.

RESPONSE:

BC Hydro is open to exploring similar pilots or tariffs for commercial customers.

Bott, the Freshet Rate and Incremental Energy Rate Pilot are for the provision of

optional non-firm, interruptible electricity service to t ransmission service customers 1

supplied with electricity under Rate Schedu le 1823 (RS 1823) or Rate Schedule

1828 (RS 1828), as applicable. RS 1823 is BC Hydro's default rate or firm electricity

service supplied to transmission customers. RS 1828 is BC Hydro's rate for firm

electricity service suppl ied to transmission customers with self-generation who h11ve

entered into a contract with BC Hydro under its Biomass Energy Program.

3.1.4 Freshet Rate Engagement with Commercial and other Ratepayers

BC Hydro has not engaged commercial and other ratepayer groups on extending the

Freshet Rate to general service customers as diSCllssed in section 4 .1 of the

Commission's Reasons fo r Decision Transmission Service Freshet Rate Pilot

(Appefldlx A to Order No. G-17-16). BC Hydro anticipates that this V10uld require a

significant engagement process, as was required with tl1 e Transmission Service

Fr@sh@t Rat@, and is consid@ring advancing furth@r consultation with commercial

customers on this topic.

Commercial Energy Consumers Association of British Columbia Information Request No. 1.1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1


Exhibit: B-5



1.1.1.1 If confirmed, please comment on when BC Hydro expects to offer such pilots or tariffs, and if BC Hydro will offer both options to commercial customers.

RESPONSE:

Further work is required to develop rate design options and consult with customers and stakeholders prior to making a decision on whether to apply for BCUC approval of such pilots or tariffs to commercial customers. BC Hydro notes that to date there has been limited interest in such a rate from commercial customers.

















Page 1 of 2


Exhibit: B-5


1.1.1 Please confirm that BC Hydro is not opposed to offering similar pilots or

tariffs, for both options, to commercial customers.

1.1.1.2 If confirmed, please identify any conditions that BC Hydro considers relevant to introducing such pilots or tariffs and how they could most reasonably be met by commercial customers. Please provide separately for each pilot/tariff if necessary.

RESPONSE:

An important condition for customers to benefit from rate designs such as the proposed Freshet and Incremental Energy Rates is that they need to have flexible operations and the ability to manage their electrical load in response to electricity price variation. Further work is required to determine if and how commercial customers could meet this condition.

BC Hydro also notes that the Freshet Energy Rate has been resource intensive, due to the extensive monitoring, reporting and associated regulatory processes. In addition, this rate design requires complex billing and customer specific baselines, which is not currently standard practice for commercial customers. Developing and verifying customer-specific baselines, as required to differentiate incremental non-firm load, may be very challenging for commercial customers.

BC Hydro notes that the Freshet Energy Rate had approximately 45 customer participants per year from the Transmission class (from a total eligible customer pool of about 140 sites) whereas a similar rate design applied to Large General Service, for example, may result in an eligible customer pool of about 7500 sites. Accordingly,

Both the Freshet Rate and Incremental Energy Rate Pilot are for the provision of

optional non-firm, interruptible electricity serv ice to transmission service customers 1


182B (RS 1828), as applicable. RS 1823 is BC Hydro's defaul t rate for firm electricity

service supplied to transmission customers. RS 1828 is BC Hydro's rate for fi rm

electricity service suppl ied to transmission customers with self-generation who have


3.1.4 Freshet Rate Engagement w ith Commercial and other Ratepayers

BC Hydro has not engaged commeroial and other ratepayer groups on extending the

Freshet Rate to general service customers as discussed in section 4.1 of the

Commission's Reasons for Decision Transmission Service Freshet Rate Pilot

(Appendix A to Order No. G-17-16). BC Hydro anticipates that this would require a

significant engagement process, as was required with the Transmission Service

Freshet Rate, emd is considering advancing further consultation with commercial



Page 2 of 2


Exhibit: B-5

BC Hydro would need to consider how to manage the resource intensity of this type of rate design to a broader class of customers, as increased resources means added costs for all ratepayers.


Page 1 of 1


Exhibit: B-5



1.1.1.3 If not confirmed, please provide a detailed rationale for why BC Hydro is opposed to developing one or both pilots or tariffs for commercial customers. Please provide separately for each pilot/tariff if necessary.

RESPONSE:

Please refer to BC Hydro’s response to CEC IR 1.1.1.

















Page 1 of 1


Exhibit: B-5


1.2.1 Does BC Hydro use the ‘system marginal value’ as its marginal cost of energy in other assessments such as IPP renewals or other matters?

RESPONSE:

BC Hydro uses the system marginal value to inform the operation of the BC Hydro system for its three-year operational timeframe. BC Hydro has not used the system marginal value with respect to cost-effectiveness assessments pertaining to Independent Power Producer renewals.

The proposed Freshet Rate and lncreme:nta E1n,ergy Rale, P~ot have been designed

to;

(,a) Pr,ovide opportunities for transmission servioe cust,omers to operate their idle

and/or flexible production capacity that in the absence of these rates would be

underutiilized;

{b) Provide benefits to all ratepayers by setling pricing that is generalty sufficient to

cover, on an expected basis, BC Hydro's marginal cost of energy2 and make

some contribution, o fixed costs.;3

2 As l!escrl>eel, In secilon 5.5.1. IBC yilro uses ·sys m margin al value" as I margllal cost or eneroy ror incremen!al sales. The system margml allJe repre.sents Ille e.stirJaledl marginal value or energ,y in Ille system, 001e;n IS typleall\f ne e,cpectea vaiue o gener:mon rrom ooe or BC Hy(l'O's large s.torage resetVOll'S. BC H'((lro's anary,srs rat.es 1n10 aero1.m1 uBrena1nt1es iB ~ariOOs ripu~s ooe11 as IOrecastea inllO .. LS. e1ectr1 Cily anCI QiliS prf(eS .• t3aCls ano operaoon constrain s. Tne rates Mve ~ een Cl'eSlgnea to cover ne marg·na1 cos 01· erierg>' an<I provloe a coollltMJtion to axoo costs on eicpected Yal111e basis jdetemlilled r,y poslti\le e)(pectea ne re\ferlue In tne an lysls), Wil ton Is creterrnatecl IJ,' ne probaDl!lly welgn .eel average 01 al va!i.ies. Fllre(J cools are Ulose Illa! oo not ~ar)1 according to changes ·n elecbicil.y usage (anCI prodUCtiOn) •witnlri a penoo or ·me. fior a regUllitea elecirlc u1Jllly, mis may !nC!l.lile. ror e~ampl'e, he COSI. 01 aet!Vefy infrastructure.


Page 1 of 1


Exhibit: B-5



1.2.1.1 If yes, please provide examples of where BC Hydro uses the same calculations.

RESPONSE:



to;



underutiilized;






Page 1 of 1


Exhibit: B-5



1.2.1.2 If no, please explain why not and the rationale for having a different calculation for evaluating the impact of this tariff vs other methods.

RESPONSE:

When determining whether to implement a particular project, such as an Independent Power Producer renewal, an assessment will be undertaken for the need and cost-effectiveness of the project. In general, the assessment of cost effectiveness for Independent Power Producer renewals has considered a longer time horizon than the operational period that is relevant to the system marginal value. The assessment of cost effectiveness does consider the potential for revenue recovery associated with surplus sales which uses a forecast of Mid-C market prices.

Please refer to BC Hydro’s response to BCUC IR 1.11.1 for more information regarding the use of the Mid-C market price in the context of the system marginal value.

The proposed Freshet Rate and lncrementa'I Energy Rate Ptlot have been designed

to ;

(a) Provide opportunities for transmission service customers to operate their idle

and/or flexibl'e produc,tion capacity that in the absence of ttie.se rates would be

underuti lized;

{b) Provide benefits lo all ratepayers by setting pricing !hat is generally sufficient lo


some contribution to fixed oosts;3

As <resai>eO· In seoflon 1JU, 6C Hydro uses ·sys em ma!glnal value· as Its marg:nal cost ot energy tor lncremenlal sales_ The system marginal a!Ye reprl.'!!ffl1S lhe eslinalM marginal value or eoorQIY in lhe system, \\fllcn IS tyJ:tcalty ne expect ea va ue o gener:mon !rOm ooe 01 EiC Hy(l'O's large , torage reseivo1rs_ BC Hyaro'S analysi$ takes in10 aocoonl uncertainties in var,ous inputs suel'I as IOrecasted inllOws, eleclneily ancl ga-s prt<:es. bilds ana operat!lOna con,traln s. The rate, rt.ave tJ een cle5,1gned to cover he marg nal cost 01 energy ana provlae a coollloot,on to axe<1 cosls oo an expede<l value basis (detefll'Mned lly posn.ve expectea ne rel/ellue 1n me ill1 iys1s). wnIcn Is <retermnea :oy ne proDaDllly we1gn ea, average 01 at va'-les . FiXea costs are 1nose 111a.1 ao not vary accora1ng to cllallges in e1et111Cily u~e (ana proaucliOn) w11111n a penoo 01 me. For a regulated e1ectr1c urnlty. this may Inell.Ide. !or example, he cosl 01 dellVefy inrrastru,:,ture.


Page 1 of 1


Exhibit: B-5



1.2.1.3 If no, please explain how the ‘system marginal value’ is different from other cost of energy calculations.

RESPONSE:

Please refer to BC Hydro’s response to BCUC IR 1.11.1 for a description of how system marginal value is different from the Mid-C price.

The proposed Freshet Rate and lncreme.nta l Energy Rate Ptlot have been designed

to:

(a) Provide opportunitie!:l for transmission service customers to oper~.te their idle

and/or flexibl'e prod uction capacity that in the absence of these rates would be

underutilized;

{b) Provide benefits to all ratEtpayers by setting pricing th at is genera.Uy sufficient to


some contr ibution to fixed oosts :3

As <le5Cll>eO In seciion 1&1, BC Hyaro uses ·siwem ma1gIna1 value· as liS marg:nal oost or energy ror Incremental sales. Tl'le s)'Sle(n margillal ~awe represoots Ille e.stinateo marginal value or energty in Ille system. !Mllon ts typ!C<lllly ne expect ea va ue 01 genernuon 1r0m ooe or BC Hy(JO's Ia19e sror<1ge reservoirs. BC H)'<lro'S anarys;s lalteS 1n10 account unrena;nues in vaoous wiputs oocn as iorecasted inno .. ,s. e1eclrl~ity an<J gas prr<:es. iooos ana -operatJona constrain s. Tne rates riave Deen cresiigneo to cwf//f ne marg nal cost or energy ana prov1cle a conlllbulion lo fixed costs oo an expected ,.aiue basis iaelroTiioeo lly poslliVe e~pected net revenue IA tne anaiysls), wnlcn Is de ef!lWlea IJy tne probatJ411ty we1gn1ec1 average or al va'-les . FIXed costs are u1ooe Iha.I oo not vmy ae.:of<llng to changes n eleclllcity usage (ancl procluc~ n) within a pellOd or me. For a regul led electr1c u111I1y, this may lncil!O • !Or exampre, ne cost 01 Oelllrefy inrrastructure.


Page 1 of 1


Exhibit: B-5


1.2.2 Please confirm that the ‘system marginal value’ does not account for the full cost of service and identify what additional component costs would be included in a full cost of service analysis.

RESPONSE:

BC Hydro confirms that the system marginal value does not account for the full cost of service as it is defined for the purpose of our fully allocated cost of service studies. BC Hydro’s fully allocated cost of service studies use the embedded cost methodology. This methodology involves functionalizing, classifying and then allocating the costs described in our revenue requirements to the following eight rate classes: Residential; GS < 35 kW; MGS; LGS; Irrigation; Street Lighting – BC Hydro Owned; Street Lighting – Customer Owned; and Transmission.

Given that BC Hydro’s fully allocated cost of service studies encompass all revenue requirements costs, by definition they include costs that would not be captured by the system marginal value, such as transmission and customer care costs.


to;



underutiilized;






Page 1 of 1


Exhibit: B-5


1.2.3 Does BC Hydro expect the rate to recover its full cost of service at any point? Please explain.

RESPONSE:

It is possible that revenues from the Freshet and Incremental Energy Rates may exceed costs calculated on a fully allocated basis. However, BC Hydro did not price the Freshet or Incremental Energy Rate on the expectation of recovering such costs. Rather, these rates were priced on the expectation that revenue from these rates will exceed our marginal cost of energy in most years, thereby providing net benefits to all ratepayers.


to;



underutiilized;






Page 1 of 2


Exhibit: B-5


1.2.3 Does BC Hydro expect the rate to recover its full cost of service at any point? Please explain.


to;



underutiilized;




2 As l!escrl>eel, In secilon 5.5.1. IBC yilro uses ·sys m margin al value" as I margllal cost or eneroy ror incremen!al sales. The system margml allJe repre.sents Ille e.stirJaledl marginal value or energ,y in Ille system, 001e;n IS typleall\f ne e,cpectea value o gener:mon rrom ooe or BC Hy(l'O's large s.torage resetVOll'S. BC H'((lro's anary,srs rat.es 1n10 aero1.m1 uBrena1nt1es iB ~ariOOs ripu~s ooe11 as IOrecastea inllO .. LS. e1ectr1 Cily anCI QiliS prf(eS .• t3aCls ano operaoon constrain s. Tne rates Mve ~ een Cl'eSlgnea to cover ne marg·na1 cos 01· erierg>' an<I provloe a coollltMJtion to axoo costs on eicpected Yal111e basis jdetemlilled r,y poslti\le e)(pectea ne re\ferlue In tne an lysls), Wil ton Is creterrnatecl IJ,' ne probaDl!lly welgn .eel average 01 al va!i.ies. Fllre(J cools are Ulose Illa! oo not ~ar)1 according to changes ·n elecbicil.y usage (anCI prodUCtiOn) •witnln a penoo or ·me. fior a regUlatea elecirlc u1Jllly, mis may !nC!l.lile. ror e~ampl'e, he COSI. 01 aet!Vefy infrastructure.


to :

(,a) Pr,ovide opportunities for transmission service cust•omers to operate their idle

and/or lexible production capacity th at in the absence o these, rates wou ld be

underutii lized;

(b) Prmtide benefits to all ratepayers by setting pricing that is general~y sufficient to


some contri'bution to fixed costs.;3

As l!escrl>ea, In sec11on 5.5.1 IBC yelro uses ·sys em marginal va1u as I margl\al oost or eneroyror incremen!al sales. The system marginal allJe repre-Sfflts Ille e.sllma .eel marginal value or energy in Ille system, 1m1cn IS typ!C<!ll\f n e,cpectea value o generat!On rrom ooe 01 BC Hy(l'O!S I rge storage resetVOlre. BC H'((lro's analy,sis ~es ln.10 aecoonl uBrellainties B YariOOs Wlputs ooctl as IOrecasted inllO .. •s. e1ectrleit~1

an Cl gaaS prf(eS. t3ails a nil operllllOn constrain s. Tne rates Mve n een <1esa1gnea to cover tie marg nal cos 01 e11erm1 an<1 prov1oe a coolllt)Ull()n to axoo costs oo expected ;;a1111e 1>aS1s (Ce1ef1Wlea r,y posrwe e:,;pectea net re\ferlue In tne ana1¥S!s), wn1oh Is creterm"neil IJ,' lne probaD!!llyl' n eel average 01 al va!lJes. Fllre(J cools are Ulose tnal oo not ~ary according to cti:mges ·n elecbicil.y usage (anel production) wltnln a penoo or me. fior a regu1atea e1ectr1c u1Jllly, mis may !ntruile. ror e~ampce, he cosl 01 ael!Vefy inrrastruoture.


Page 2 of 2


Exhibit: B-5

1.2.3.1 If yes, please explain when BC Hydro would expect this to occur.

RESPONSE:



Page 1 of 1


Exhibit: B-5

3.0 Reference: Exhibit B-1, page 2 and 3

1.3.1 Please elaborate on the risk that is minimized for participating customers. What risk would accrue if the rates were different?

RESPONSE:

The reference in the preamble refers to the energy price volatility associated with the Freshet and Incremental Energy Rates, which have energy charges that vary with the Mid-C market price of energy.

As pricing to the Mid-C market is a fundamental aspect of the Freshet and Incremental Energy Rates, participating customer exposure to market price risk is unavoidable.

The proposed Freshet Aale and Incremental Energy R te F'ilot h ve been designed

to:

(d Mlinirn ,ze risk to participating ou,stomers lby making th,ese rat.es optional! and

continuing to provide partioipati g customers with firm service at stable pri:ciin,g

unde RS 1823 or RS 1828, i!IS applicable.


Page 1 of 1


Exhibit: B-5

4.0 Reference: Exhibit B-1, Appendix D page 23 and 25 of 296

1.4.1 What costs, if any, does BC Hydro incur as a result of increased system usage due to the implementation of the freshet rate? Please identify and quantify if possible.

RESPONSE:

BC Hydro does not add this non-firm service load to our load forecast in a planning view and will not build new resources to serve it. We will therefore not incur transmission or generation related costs as a result of the implementation of RS 1892. However, if required, BC Hydro would import to serve this load and may incur energy-related costs.


Condition 2: Minimum Qeneration with Imports

When BC Hydro is experiencing a minimum generation constraint, v..nh economic

matket imports, incremental domestic sales under RS 1892 will increa.se market

imports. Holding market price constant, BC Hydro wi ll see a revenue decrease equal

to the difference between the CAD $3/MWh wheeling rate and 5 per cenl rate rider

collec,!ed under RS 1892 and the US $5.16/MWh wheeling charge paid for energy

delivery from the Mid-C market to !lie BC border (converted to Canadian dollars

daily) plus 1.9 per cent transmission losses. On days Where the market price is

negative, the daily revenue loss is reduced by the difference between the actuall

market price and $0/MWh floor price under RS 1892.

Table 8 Monthly Ratepayer Benefit by System Condit ion

Cond ition 1 Condition 2 Condition 3 S,000 S,000 S,000 S,000

Year 112016) Export Import 5ystem Basin Ratepayer benefit

May $ 61 $ 16) $ 481 $ 536 June s $ s 806 $ 806

July s $ s 917 s 917 $ 61 $ 16) s 2,204 $ 2,259

Year Z 12017) Export Import 5ystem Basin Ral eJ)ayer benef it

May $ 56 $ 193) $ 424 $ 387

June $ 117 $ 155) $ 402 $ 464

July $ 38 $ $ 1,305 $ 1,343

s 211 $ {148) $ 2,131 $ 2,194

Y•ar 312018) Export Import System Basin Rat• payor h•noflt

May $ 20S $ P B) $ $ 127

June s 170 s 177) S 50 s 143 July s 65 s 14) S 1,541 $ 1,li02

$ 440 $ {1S9) $ 1,591 $ 1 ,872

Total s 6,325


Page 1 of 2


Exhibit: B-5


1.4.2 Are there other ratepayer costs or benefits that derive from different usage patterns as a result of the freshet rate? Please explain.

Condition 2: Minimum Generation with !Imports

When BC Hydro is experiencing a minimum g:eneration constraint, wfth economic

market imports, inor,emental domestic sales under RS 18'92 wi ll increase market

imports. Holding marlket price constant, BC Hydro wm see a revE!il'l.ue decrease equal

to the differene€i between the CAD $3JMW h wheeling rate and 5 par cent ra.te rider

col lee-led under RS 1892 and the US $5.16,IJ,,,1\Nh wheeling charge paid for energy

deliivery from the Mid-C market to the BC border converted to Canadian dollars

daiM pl us 1. 9 per cent transmission loss,es. On d1ays where he market prioe is

negat ive, the da1ily revenue loss is reduced by the d rrfer,ence between the actual

market price and $0/MWh floor prioe under RS 118-92.

Table 8 Monthly Ra tep.iyer Benefit by Sy:;tem Cond irtion

Condit ion 1 Condit ion 2 Condition 3 S,000 $,000 SiOOO $,000

Year I. ~2016) Expo rt Import System Basin Ratepayer benefit

May $ 61 $ 16) $ 481 $ S36 June s $ $ 806 s 806 J Iv s ,$ $ 917 s 917

$ 61 s (6) s 2,204 s 2,1 59

Year2~ 2.0l!.7) Ei,;port lmpe>rt System Basin Rat epayer benefit I ay $ 56 $ 19:1) $ 424 $ 387

June, s 117 $ 155) $ 402 $ 464

J ly $ 38 $ $ 1,305 $ 1,343

s 211 $ (148) s 2, 131 $ 2,194

Year 3 j 2018} Expo rt Import System Basin Ratepayer benefit I ay $ 2DS $ j78) $ $ 127

June s 170 s 177) $ 50 s 143 J ly $ 65 $ (4) $ 1,541 $ 1,602

$ 440 $ (~9) $ 1,591 $ 1,.8 72

Total $ 6,325


Page 2 of 2


Exhibit: B-5

RESPONSE:

BC Hydro has conducted four in depth evaluations of the ratepayer impacts of RS 1892 and these are presented in Appendices D and E to the Application.

As described in section 3.1.1.2 of Appendix D of the Application, ratepayer impacts arise from differences between the revenues received to serve load under RS 1892 and the value of the marginal resource used to serve RS 1892 energy.

BC Hydro is not aware of any direct ratepayer costs or benefits beyond those described in the Freshet Evaluation Reports. We acknowledge that societal benefits may arise from RS 1892 to the extent it promotes economic activity in the Province. For example, as noted in the letters of support from EMPR and customers included in Appendix F of the Application, the Freshet Energy Rate Pilot resulted in increased production and improved competitiveness for participants. BC Hydro considers that RS 1892 results in societal benefits in the Province.


Page 1 of 1


Exhibit: B-5


1.4.2 Are there other ratepayer costs or benefits that derive from different usage patterns as a result of the freshet rate? Please explain.

1.4.2.1 If yes, please provide quantification of such cost of benefits to the extent possible.

RESPONSE:


Condition 2: Minimum Generation with Imports

Wilen BC Hydro is experie.ndng a minimum generation constraint, with economic

market imports, incremental domestic sales under RS 1892 will increase market

imports. Holding market price constant, BC Hydro wi ll see a revenue decrease equal

to the difference between the CAD $31tv1Wh wheeling rate and 5 per cent rate rider

collected under RS 1892 and the US $5.16/MWt, wheeling otiarge paid for energy

delivery from tile Mid-C marketto the BC border (converted to Canadian dollars

dai'ly) plus 1.9 per cent transmission losses. On days Where he market plioe is

negative, the daily revenue loss is reduced by the drrference between the actuall

market price and $0/MWh floor price under RS 1892.

Table 8 Month ly R;i tepayer Benefit by System Condit ion

Cond it ion 1 Condition 2 Cond it ion 3 S,000 S,000 $;000 s,ooo


May $ 61 $ (6) $ 481 $ 536

June s $ s 806 $ 806

July s $ s 917 s 917 $ 61 $ (6) $ 2, 204 $ 2,259

Year 2 (2017) Export Import System Basin Ratepayer benefit May s 56 $ (93) $ 424 $ 387

June s 117 $ (55) $ 402 $ 464

July $ 38 $ $ 1,305 $ 1,343

$ 211 $ [1.48) s 2,131 $ 2,194


May $ 205 $ PB) $ $ 127

June s 170 $ (77) $ 50 s 143

July $ 65 s (4) $ 1,541 $ 1,602

$ 440 $ (159) $ 1,5'11 $ 1,872

Total s 6,.325


Page 1 of 2


Exhibit: B-5


1.4.3 Please provide examples of rate design changes/characteristics that would prevent ratepayers from experiencing negative effects from Condition 2 situations.















$ 61 s (6) s 2,204 s 2,1 59


June, s 117 $ 155) $ 402 $ 464

J ly $ 38 $ $ 1,305 $ 1,343

s 211 $ (148) s 2, 131 $ 2,194


June s 170 s 177) $ 50 s 143 J ly $ 65 $ (4) $ 1,541 $ 1,602

$ 440 $ (~9) $ 1,591 $ 1,.8 72

Total $ 6,325


Page 2 of 2


Exhibit: B-5

RESPONSE:

BC Hydro’s view is that the proposed energy charge adder is the appropriate way to mitigate the risk to ratepayers of providing service under Condition 2 situations.

Both the Freshet Energy Rate and the Incremental Energy Rate include energy charge adders intended to minimize the risk of ratepayers experiencing negative effects from Condition 2 situations.

For additional discussion please also refer to page 74, section 5.5.2 of the Application.


Page 1 of 2


Exhibit: B-5


1.4.3 Please provide examples of rate design changes/characteristics that would prevent ratepayers from experiencing negative effects from Condition 2 situations.















$ 61 s (6) s 2,204 s 2,1 59


June, s 117 $ 155) $ 402 $ 464

J ly $ 38 $ $ 1,305 $ 1,343

s 211 $ (148) s 2, 131 $ 2,194


June s 170 s 177) $ 50 s 143 J ly $ 65 $ (4) $ 1,541 $ 1,602

$ 440 $ (~9) $ 1,591 $ 1,.8 72

Total $ 6,325


Page 2 of 2


Exhibit: B-5

1.4.3.1 Please explain whether or not BC Hydro would consider implementing these changes in order to improve benefits to non-participants.

RESPONSE:

Based on four years of experience with RS 1892, BC Hydro’s view is that the proposed Freshet Rate energy charge adder of $3/MWh is appropriate for ensuring benefits to non-participants.

BC Hydro consulted with customers and stakeholders on the appropriate value for the energy charge adder in freshet and non-freshet months. Based on the results of that consultation and our analysis, BC Hydro’s view is that the proposed value for the energy charge adder is appropriate for the Incremental Energy Rate Pilot.


Page 1 of 1


Exhibit: B-5

5.0 Reference: Exhibit B-1, Appendix D pages 41 and 35 of 296

1.5.1 Please confirm that there were not system improvements or other capital expenditures as a result of the implementation.

RESPONSE:

Confirmed. BC Hydro incurred no system improvements or other capital expenditures as a result of the RS 1892 Pilot implementation.

al>t., 12 E~lilm"t"' of Adju!lt..d R"t"'P"Y"'r B"'" .,·f.tt liyYHr

Ratepayer Bell~ - Adjustment D~scriptio n Yeu 1 VHr2 Year3 Total ($,000) ($.000) ($,000), !S.000)

Prelimi nary rali!p ayi,r bi!n i, fi l $ 2.259 $ 2,ll94 $ 1,S7i ~ 6,325

L@5S Imp!!! @ntait lo n rnsts s (L S) s (3 0) s l6/J) $ (2051 Less cus om e r•re po te,d lo ~d sh 1ft I mp act s (32) $ s l!iO) $ (821

less u @~ pla in@d load va rlanci; I mpa,ct $ $ s $ Li!!Ss natural load grnWI h I mpa,ct s (470) $ (340) s 1450) $ ,11,~01

Less RS 1880 rep I a cement service i mpacl $ (233) $ (820) $ $ ,11,0531 Adj u;t;,d R;:,tcpayer Ben ~fit $ 1 ,409 $ 1,004 $ 1 ,312 $ 3,725

•,re:11'11< fer Y~o·r 1 ""d Y~,rr Z; _flYttosr fer ~o, 3

For he Pilot, BC Hydro lhas determined an adjusted ratepayer benefit of

approximat - y $3. 7 ill ion,. Based on th is positive outcome, BC Hydro oo siders at

the Freshe Rate provides ,a et benefi ,o non-participant rate,payers.

Table 10 Pil ot Implementation, Co.sts by Year

l'mplementation Cost Desuiption Year 1 Vear 2 Year 3 Tota ls

Fres et rnte design / regulator; prooeeding:; $ 40,000 $ $ $ 40,000

Oustomer a,nd stal::e:hollder engagement $ 30,000 $ lS,000 $20,000 $ 65,000 Billing $ 20,000 $ 10,000 $30,000 $ 60,000

Eva l atio report prep.irnt1on $ 2.S,000 $ 5,000 $1:0,000 $ 40,000

Tota l $ ns,ooo, $ 30,000 $60,000 $205,000


Page 1 of 1


Exhibit: B-5

5.0 Reference: Exhibit B-1, Appendix D pages 41 and 35 of 296

1.5.2 Please explain if the implementation activities were conducted in-house or if BC Hydro employed additional outside expertise to assist in any of the implementation activities.

RESPONSE:

BC Hydro did employ some additional outside expertise. For example, external legal advice and consultants were used on occasion. The specifics of the implementation costs are described in Appendices D and E of the Application. Further, implementation costs related to the regulatory proceeding also include participant award and hearing costs.

al>t., 12 E~lilm"t"' of Adju!lt..d R"t"'P"Y"'r B"'" .,·f.tt liyYHr

Ratepayer Bell~ - Adjustment D~scriptio n Yeu 1 VHr2 Year3 Total ($,000) ($.000) ($,000), !S.000)

Prelimi nary rali!p ayi,r bi!n i, fi l $ 2.259 $ 2,ll94 $ 1,S7i ~ 6,325

L@5S Imp!!! @ntait lo n rnsts s (L S) s (3 0) s l6/J) $ (2051 Less cus om e r•re po te,d lo ~d sh 1ft I mp act s (32) $ s l!iO) $ (821

less u @~ pla in@d load va rlanci; I mpa,ct $ $ s $ Li!!Ss natural load grnWI h I mpa,ct s (470) $ (340) s 1450) $ ,11,~01

Less RS 1880 rep I a cement service i mpacl $ (233) $ (820) $ $ ,11,0531 Adj u;t;,d R;:,tcpayer Ben ~fit $ 1 ,409 $ 1,004 $ 1 ,312 $ 3,725

•,re:11'11< fer Y~o·r 1 ""d Y~,rr Z; _flYttosr fer ~o, 3

For he Pilot, BC Hydro lhas determined an adjusted ratepayer benefit of

approximat - y $3. 7 ill ion,. Based on th is positive outcome, BC Hydro oo siders at

the Freshe Rate provides ,a et benefi ,o non-participant rate,payers.

Table 10 Pil ot Implementation, Co.sts by Year

l'mplementation Cost Desuiption Year 1 Vear 2 Year 3 Tota ls

Fres et rnte design / regulator; prooeeding:; $ 40,000 $ $ $ 40,000

Oustomer a,nd stal::e:hollder engagement $ 30,000 $ lS,000 $20,000 $ 65,000 Billing $ 20,000 $ 10,000 $30,000 $ 60,000

Eva l atio report prep.irnt1on $ 2.S,000 $ 5,000 $1:0,000 $ 40,000

Tota l $ ns,ooo, $ 30,000 $60,000 $205,000


Page 1 of 1


Exhibit: B-5

6.0 Reference: Exhibit B-1, Appendix D page 9 of 296

1.6.1 Please confirm the Total RS1892 energy sales (excluding taxes) units are $million.

RESPONSE:

Confirmed.

T-,bll• 1 Summary of Ruults bv Vnr for th• frlil5h.-t Ratlil Pi.ot

RS 1892 SUMMARY OF RESU LTS YEAR 1 VEAR2 YEAR3 Total M~ • Jli'V101S M:l'f - Jlitj'10i7 M;l'f - JU!i'Wl.8

Total # of Pa Cipa ~ amcm Sit~ 39 44 45 ~ or Partldlpa nt Customer Sites w it h RS t 992 e nergy 2,6 32 2? RS .1892 e nergy sa:i'es (MWh} 139,064 168,400 150,,3&3 ifS?,347 Av, ras.e In ~ tal l,:,a<I (Ave. MW/h r) 63 76 68 Avera~e u m'I! cost ol mar~-i>riced Blleri!'I' !C$/Ml,Vh,) $ 2Ul8 s 19.50 s 23.31 RS 1892 e nel'jy revenue ($M) $ !l,04 s 3.28 s 3.Sl Plus ($l/M whe~lns Jeon n gvvolu me {$Ml $ 0.,42 $ O.Si $ MS $ 1..3? Pl us 5'% raterlder 1$"'1) $, 0 .17 $ 0.19 $ 0-20

Te>t I RS1892 enera, :1.11es,.(~xd11dirr!) tOJtt:s1 $, 3.63 $ 3.98 $ •US $ 11. 77


Page 1 of 2


Exhibit: B-5

7.0 Reference: Exhibit B-1, Appendix D, pages 13 and 21 of 296, and page 14

of 296

1.7.1 The total benefit to participants is in the order of $9.2 million for approximately 45 participants which BC Hydro considers to be conservative. In contrast, the adjusted ratepayer benefit for all non-participants over 4 years is in the order of $3.8 million. Please comment on the disparity and whether or not BC Hydro considers

llllusmnlv• Beri.rit for P~ rtielput Customtl'$

Estimai~ of uaii.imd total eRriricity ant reduciion

Eh e!l:'I' - e,lh-..ted unit ~Ost red<K11,oo

Ymrl

r2011

~ •• , ... AS18ilent! ct11ree(ll'leludes$ !Wll•,hf•' $ 24 $

11$:lllD lo t lo"'fff"' V S !9111 S E ctri< ,ria! ~dJ<lion v< R~ 1a23 - ., r I Ml S

Vear2

'F201S

Vm r~ Total

F.!0 19

s 26 ;1 J i~

~ 16.13 1 50,1!83 Tota R 1823 •nefl!'IYObme lMWt,) __ :::B:::,3 =.:.q _ __:::::::,_=._.....::;==-----

Esl: IINl:Nl•oern cost r,cl,ct;on _$~~2,07~ 6._W_~---~--~~~~ $ 2..425.430 $ 7,650,l7'

Demand - "s'limat u ni i;: ost red IJ("tiQB

Tc~ S. ,e9 errrvv.se-'.'esV.1-.•,nt Tota numbero'ho,,,;dJ ~Fr<shet Perbd(t-rs) .~ ... , . • "''"'"'""~ldffTl•nd.i..., POWer fKJX)r tkV~I 115 :.!1' dtm..,d chlfi fS/kVA)

i l64

E · ate d de,11ard coot reMt;on -'''-----==;.;...'--..;.;;;=---=;.;....;.;;..=_.::;....;;;t..;;;637"',66,~

fot.>1-.,.ti'l'lled dt!ctrl,llycost, u tion• •t i..d!S mt!- 111!-ro.na t.m:"t.s

cost ,eduction arises from lhe lower price for incremental energy sales and

18 pe:r cent of the cost reduction arises horn the avoided lkVAdemand charge for

non~ Irm service. BC Hydro considers his to b-e a oon,s.erva ·ve estimate of

participant customer oost reduotia as some customers t"Ould ave seen a price

higl'llerthan RS 1823 TI r 1 for incremental energy purchases. F1 rther, actual kVA

demand peaks during LH for iind1vidua! c1Jslomers may have been h"gher than the

aggregated average.

iable a. Adj usted Ratepayer Beriefit by PIiot Year

Ratepayer Benefit - Adjustment. De)cription Year l Year 2 Year 3 Total

lS.0001 lS,oooJ ($.000) ($,000)

Preli mi na r:y ratepayer bene•fit s 2,259 $ 2, 194 $ 1,872 $ 6,325

Less lmp,lementatlon costs $ (llS) $ (30) $ j60) $ (2051 le:$$ ct1..tomer-reported load ~hift impact s (32) $ s 50} s ,(821

Less une.x:p lained load variance i pact s s s s Less mH1.rnal load, growth i pact s (470) $ (340) $ (450) s (1,2601

less RS 1880 replacement service i pact s j233) s (820) s s (1,0S3! Adjusted Ratepayer Senefit $ 1,409 $ 1,004 $ 1,312 $ a,ns

"act,.,als fo.r Y(lar 1 and Y~r 1; forec,;,st fr:,r Year:.


Page 2 of 2


Exhibit: B-5

there could be room to make the benefits more equal between the participants and non-participants.

RESPONSE:

It is BC Hydro’s view that the pricing and design of RS 1892 is appropriate given the need to encourage customers to participate and to achieve benefits for all ratepayers.


Page 1 of 2


Exhibit: B-5


of 296

1.7.2 Does BC Hydro have evidence relating to the price elasticity for Freshet customers? Please explain and provide if available.




Ymrl

r2011



Vear2

'F201S

Vm r~ Total

F.!0 19

s 26 ;1 J i~





i l64









aggregated average.



lS.0001 lS,oooJ ($.000) ($,000)







Page 2 of 2


Exhibit: B-5

RESPONSE:

BC Hydro does not have price elasticity estimates for RS 1892 customers.

BC Hydro is aware that RS 1892 customers are price responsive, and some customers will change their operations in response to electricity price. For example, as described on page 74 of the Application, we generally expect customers to cease taking service under RS 1892 or RS 1893 when the average unit price exceeds $55/MWh.



Page 1 of 1


Exhibit: B-5


of 296


1.7.2.1 If yes, would it be reasonable for BC Hydro to change rates such that it increases the contribution from the participants and moderates the benefit going to the participants? Please explain.

RESPONSE:


IUY•irotlve Benefit for P•r11el?on1 Cu,-tome r-,;

&tinut~ afunit andto.tal eKtricity wst ~n 'fm r 1 Veu2

r.zo17 F"'111

Eneri:v - e5thNted unit cost reduictfoo ;:. .,rer..el! R5 l 892t:Mfe)' cti a,:t (lf'ICludf:s'S.3/MWh """' '(re.J " "' 22 50

i:t!i t8B fit t l t~1",' d'l!ii'_ge !9 81 .u.zo E.i! t:tr it:ity P'ia- f d.Jct~n ~!. RS 1823 - ai!r 1 S/'-'Wlli U '93 s 18 0

Tota RS182.3 e-r"E"m, vo l,me (MWh) 139,06,4 168, Esl: IIT'lilted t ne rn- cos: rtekKtiOn 2,076,138 • 3.1'!8."1ll

Demand · ~rtim■ tcduni1cm1 rsi 1Ktio11i Tot. S. E9 e~ rivsees (M-..'Jh) 139,0611 68,<00

Tota number o'" ho,rs ~Fresh!t Perbd(tv-s) 2.206 2.:00S Ave~ t t'lcf'tmtnt• l dtmand,1t, U'l(Vpowtrf..-tor (kvAI 62.9112 ?$.ZU ltS Ul3 dc-m.,d c htl'JC fS/k.V~ '6.l4 7.901

E sti"nate d deman:I c.ost reeltcUon •ao.soa 602,594

Ym r j Total

f,019

215 31

"1. 4.4

s 16. B

150,oll, 2,4 25,430 $ 7,65Q,11'S

50.~ ~

2.208

68.101 ..,,. SS4,26S i637,663

T'otl l Htlm1ted eiKIJlcty ,os.1 ,-f!duction• >.SS~ .. 2 $ ",J'S ~ ,02 s "'"'""'"

'i, 287,"38 .. i.tJ.u to~ tidi!r' ond tccl!'J

cost reduction arises from the lower price for incremental energy sales and

18 per cent of the cost reduction arises from the avoided kVA demand charge for

non-firm service. BC Hydro considers his to be a conservative estimate of

participant customer cost reduction as some customers would have seen a pric.e

higher than RS 1823 Tier 1 for incremental energy purchases. Further, actual KVA

demand peaks during HLH for individual customers may have been higher than the

aggregated average.

T• b l• 3 Adjusted Ratepayer B @nef lt by Pilot Y~ar

Ratepayer Bene fit - Adjustment Description Year 1 Year 2 Year 3 Total

15.0001 15,000) (S.OOOJ IS,OOOJ Preliminary ratepayer benefit $ 2,259 $ 2,194 s 1,872 $ 6,325

Less Implementat ion costs s (115) $ (30) s (60) $ (205)

Less customer-reported load sh ift impact $ (32) $ s (50) s (82)

less unexplained load variance impact s $ s s Less natu ral load growth impact s (470) $ (340) s (450) s (1 ,260)

Less RS 1880 rep lacement service impact s (233) $ (820) s s !1,053) Adjusted Rat epayer Benefit $ 1,409 $ 1,004 $ 1,312 $ 3,715

•actvoJs fo r Year j and Year l ; forecast for Year 3


Page 1 of 2


Exhibit: B-5


of 296


1.7.2.2 If no, please explain why not.




Ymrl

r2011



Vear2

'F201S

Vm r~ Total

F.!0 19

s 26 ;1 J i~





i l64









aggregated average.



lS.0001 lS,oooJ ($.000) ($,000)







Page 2 of 2


Exhibit: B-5

RESPONSE:

Conducting studies on price elasticity of demand for electricity is resource intensive analytical work that is most effective in cases where there is a large sample size (e.g., several hundred accounts or more), and consistent drivers of electricity use across the subjects for which reliable data are available (e.g., electricity usage for all accounts is sensitive to weather).

Price elasticity studies may not produce reliable results when attempted on small numbers of heterogeneous subjects, as is the case for RS 1892 customers.



Page 1 of 2


Exhibit: B-5


of 296

1.7.3 What analyses has BC Hydro undertaken to understand the optimal price to charge for energy under a Freshet rate that maximizes contribution to BC Hydro fixed costs? Please explain and provide any results that BC Hydro has available.




Ymrl

r2011



Vear2

'F201S

Vm r~ Total

F.!0 19

s 26 ;1 J i~





i l64









aggregated average.



lS.0001 lS,oooJ ($.000) ($,000)







Page 2 of 2


Exhibit: B-5

RESPONSE:

BC Hydro has not run an optimization analysis on fixed cost contribution. Please also refer to BC Hydro’s response to CEC IR 1.2.3.

BC Hydro completed extensive analysis of ratepayer impacts, customer participation and customer feedback on RS 1892, as documented in four evaluations conducted on the rate and included as Appendices D and E to the Application. This evaluation work demonstrates that the RS 1892 design and pricing has been successful in encouraging customer participation and providing ratepayer benefits over the four years of the pilot.


Page 1 of 1


Exhibit: B-5


1.8.1 Please confirm that rates for other customer groups are typically expected to recover their full cost of service and not just the marginal cost in an assessment of fairness.

RESPONSE:

BC Hydro confirms that cost allocation and cost recovery on a fully allocated or marginal basis may be used in the assessment of the Bonbright criteria regarding fair apportionment of costs.

Tsb le5 Freshet R:ate Bonhr lght AssesBment

Bon bright Cri!eriA 201 6 RDA Performance Rm,millts Group!M,{I

1. Plloo sign to Ecooomlie Goo(I me Qftllrgy ct1args sends an enoollfli!]e efficient Efficiency efficient pii:e si!lnal the - anel d.si:oornge Fresb8t Rillll customs 11& 111efficie11t use is based on IOE

Mld-Cdlurnbia nnmlle1 price index, which is expected to g800f ly r.illeot B H;'dro's margirnl cost of energy.

2. Fair appub:0m11ent FOlffi..S$ Gooel llle :Fr~MI Rate IS 8Jq)901M of ooSI amo119 to re<iO',lo,r the margi lllll c'OSt customer.. of ene,gy used to eive

fleshel ruslomers alild make some oon ution IO fi>: costs.

3. Avoxl undue Fairness Good The 1Freshe · Rate is avan ble discrimination to Ell RS 1823 and RS 1821!

CUSIOffters. 4. Customer Prad ic:alily l=si rFGood ~amers mdarstand the

11ndarsbanding and Ff8sll8t Rate am! arn In a eptanae; proclical rBIIOII" OHi$ opprnv.BI. llle and cost effoclive to Freshet Rate includes a m~ merrt baseline and 9BEisonal

reoon liaoon for billing. and dailymlllt:e1 pric:mg information. Which is more oomJjeX to 00ll1111'S(er lllfill o rnore lraiitiOOIII rate desian.

a. F~ m from Prad iCl!llily Fair/Good Same as Boobnighl crilerian 4 con1ro\/8rsl8S OS to above. proper imerpre11lti:m

o. Kecor.sery OI me S1B~il1y Gooel For lrlfflmlMtfil IIOM, it IS 1e·l/ell11e requiroo1 e)(pected to rec.over 11\e

mmgiml cosl of energy and make 5Qrnte cooiribution fuc.ed cosis. Far RS 1 B23 and RS 1828 besa ine load[ fhere-IS SlllblB 18CO'Y.Q!)' Of 1119 revenue requirernei;it.


Page 1 of 1


Exhibit: B-5



1.8.1.1 If not confirmed, please explain why not.

RESPONSE:
















Page 1 of 1


Exhibit: B-5



1.8.1.2 If confirmed, please explain why “Fair apportionment of costs among customes” is considered ‘Good’ in BC Hydro’s analysis.

RESPONSE:

BC Hydro assessed fair apportionment of costs as being good because RS 1892 resulted in an estimated net revenue gain over the four years of the Freshet Energy Rate Pilot. This revenue gain was to the benefit of all ratepayers.

Table 5 Ft-ea'het ~te Bonbrlght Assessment

Bon brigl'lt Cri .eri~ :201 6 RDA Perform~ nc6 Remml1ts Groupln~

·1. Pnoo slgnal!s lo Ecooomil: Goo<I llle W'Klrgy cnargg send~ an enoourage efficient Bf1tie111;y efficient i;tj(;e signel the use an<I discoomge FreStlet Rlltll custome osll llefficient i.ree is oosed oo ICE

Mid-Columbia ll1il11'B1 price index, whidl is expecled lo get'Klf ly rg/]eat B H1dro's mergir,al oosl of energy.

2. Feor eppabonnent Folffi<ISS Goo<I 1118 FresMI Role IS 811J)8C18<1 of costs among to rew1er 1he mar,iin&! c,x,t cuslome,r.;. of enefgy used serve

freshet cus!CMT1ers encl make some COrt ution to ti,; oosls.

3.. Avoo lftlue Fairness Good The Freshet Rale is aw~able discrimination to DD RS 1823 and RS 1828

ct1s1omers. 4_ Customer Prad ic:elily !=air/Good CUs,1□mers toderstand lhe

understanding <md FreSll8t Rate ancl are In acceptance; proct!t:81 ral/OII oms 11pprrrv111. -me and rost 8ffoctr\18 to Freshet Rate inciudes a ..-,..,_.,i baseline and 98asa ial

recoo i ial!On for billing, and daily mrute1 pricing infoonalion, 1"'hich i5 more oomJjeX to OOlllilliSt8r1tl all !I more tra:iti0011I rate des.ign_

5_ Freedom from Prad irnlily Fair/Good Same as Bonbriyht criterion 4 ron1ro.•ers1es as to above_ proper intaprelatb n

t;_ Reco,,-ery 01 tne Slftll y Goo<I For ltCJ'91TIOOlal lllO!I, [tis re.-oot1e JQQUiroonoot e~pected to recover the

morgir,al oosl of energy and make some ( OOlribulion to fixed cos.ts. Far RS 1 B2J and RS 1828 base ine load, fhere IS stalJIB 18CO'lfllry or 1119 rtwenue req1JWeme11t.


Page 1 of 2


Exhibit: B-5


1.8.2 Please explain why availability to all participants of only 2 particular Rate Schedules is considered ‘Good’ from a fairness perspective. Why does BC Hydro not examine ‘Undue Discrimination’ from the perspective of all Transmission customers, or all non- residential customers, or all customers?

RESPONSE:

Regarding the availability of RS 1892 and RS 1893 to transmission voltage service customers, please refer to BC Hydro’s response to BCUC IR 1.1.3.

BC Hydro considers that it has examined “Undue Discrimination” from the perspective of all customers and which include both participating and non-















Page 2 of 2


Exhibit: B-5

participating customers. It has not examined “Undue Discrimination” from the perspective of a sub-category of customers such as all transmission service customers or all non-residential customers, since a core rate design criteria is that all ratepayers should be held harmless, including these customer sub-categories.

In the Final Evaluation Report (Appendix D to the Application, page 6), BC Hydro states that “A core design objective of the Freshet Rate was that all ratepayers should be held harmless. BC Hydro confirms that this objective was achieved. The rate resulted in benefits to both participant and non-participant ratepayers in each year of the Pilot.”

BC Hydro has designed the IER Pilot using the same core rate design objective and includes benefits to both participant and non-participant ratepayers as a key measure of success. To the extent that there are benefits to all ratepayers, the proposed rates would result in lower rates than otherwise for all ratepayers.


Page 1 of 2


Exhibit: B-5


1.9.1 Please confirm that a revenue loss results in a net loss to non-participating ratepayers, but a continued benefit to participants.

RESPONSE:

BC Hydro confirms that the revenue loss described in the reference refers to a loss to all ratepayers in Year Four of the RS 1892 Pilot. We note, however, that this revenue loss was offset by revenue gains in the first three years of the RS 1892 Pilot.

BC Hydro has id ntifled that Year 4 of e Freshet Rae pilo represented a

substantial change in conditions compared to Years 1 to 3. As described in he

2019 Evaluation Report for Year 4 contained in Appendix E, condi ·o s during the

May to Ju ly 2019 freshe period were chara.cterized by a. electricity supply issue as a

result of the Enbridge gas pipeline issue a d low reservoir in lows. This reduced 1he

freshet energy surplus and con ributed to higher syste marginal prices and higher

marke energy imports. These conditions resul ed in a revenue loss of $0.5 million

for 2019. This compares lo revenue gains of S2.3 mlllion in 2016, S2.2 mi llion in

2017 and $1.9 million in 20 18.

Even · h hese conditions, the revenue loss in Y&ar 4 was odes! rela ·veto

revenue gains ,in prior years. Over the en ·re four-year period of he pi lo , the otal

revenue gain was positive at SS.8 million. Based o these results, BC Hydro

co side rs that the rate desig includes a number of elements hat minim ize risk to

BC Hydro ra epayers i!lnd pa.rticipa ing customers. Although there is a risk of loss to

ratepayers in any given year if adverse conditions arise, the rate design is expected

to provide net bene its to ratepayers over a multiyear ime period. , ese elements

include:

(a) Freshet :Rate energy pri cing is bas.ad on the Mid-C market price , which i.s

ex-_pected to be genera lly reflective of BC Hydro's marginal cost of energy . As a

result, load served under the Freshet Rate is expected to continue to reoover its

marg inal cost of energy;

(b) Wh ile energy pricing under the Freshet Rate is based on Mid-C market prices, it

also ii ndludes a price floor of $0/MWh and an adder of $3/MWh. The floor and

adder are expected to help ensure that customers taking incremental service


Page 2 of 2


Exhibit: B-5

As described in Table 3 of Appendix E to the Application, the applicable RS 1892 energy rate was lower than the relevant firm service rate (Rate Schedule 1823) on some days and higher on others. Therefore, RS 1892 customers would have benefited to the extent they were able to use more energy during lower priced periods, but would have seen higher costs if they used more energy during higher priced periods.


Page 1 of 2


Exhibit: B-5


1.9.2 What options were available to BC Hydro to prevent or mitigate losses in Year 4 under the rate plan? Given that the rate is for non-firm energy, interruptible energy, could BC Hydro have mitigated losses to non-participating ratepayers?

BC Hyd110 has id ntified that Year 4 of tt, Freshet Rat p:i lo represen.t d a

substantial change in cond" ions compaire<:I to Years 1 to 3. As desc "bed in he

2019 IEvalua ·on Report for Ye.ar 4 contained in Appendix E, oondi ·o s dur1 g the

May o July 2019 freshe period were chairac eri~ed by a elec1ricity supp'ly issue as a

result of the E1nb11idge ,ga·s pipeline iiss1.1e-a , d low reservoir ii lows. Tliis red.uced 1he

freshet energy surplus and cootlibuted to hig'her syste marginal prices and higher

marrke energy iimports. These condi tons resulted in a revenue loss o $(1_5. mill ion

for 2019. This compares o revenue gains of 2 .3 m~lion in 2016, 2.2 million in

2017 end $1.9 million in 2018.

Even with hese conditions, tlhe rave u loss in Y& r 4 was mo · est rela ·ve to

revenue gains in prior years. Over the en ·re four-year period of he pilot, the total

revenue gain was pos· ive at 5.8 millio . Based o ~he result , BC Hyd110

oo , side rs that he rate desig in eludes a number o elements hat mjn i mize risk to

IBC Hydro ra epayers and paliticipa ing cus omers. Although there is a ris of loss to

ratepayers in any given year · · adverrse conditions arise, the rate design is expected

t.o pro "d'e net bene its to ratepayers over a multiyear time period. 1 ese elements

include:

(.a) Freshat Rate energy pricing is based on the Mid-C market pr&ce, which is

expected o be genera lly reflective o BC Hydro's ma_rgina l cost of energy. As a

re$ul , load served under the Fre.shet Rate is expected to continue o reoover its

marginal cost of energ,y;

(b) While energy pl"id ng under e Freslhet Rate is ba,sed on Micl-C market p~kes, it

a lso indudes a pl'lice oor of $0/MW h and an adder of $3/MWh. The floor and

adder are expected to help ensure that customers taking incremental servke


Page 2 of 2


Exhibit: B-5

RESPONSE:

Mitigating losses to ratepayers in Year 4 of the Freshet Rate would have required that either BC Hydro not offer the Freshet Energy Rate, or do so with an energy charge adder that was higher than the $3/MWh approved as part of RS 1892 by the BCUC. BC Hydro notes that the energy charge adder of $3/MWh was sufficient to provide ratepayer benefits in years one, two and three of the Freshet Energy Rate pilot.

On April 8, 2019, BC Hydro applied to the BCUC to offer the Freshet Energy Rate in 2019. As described in that application, BC Hydro initially decided to not offer the Freshet Rate in 2019 because of water conditions and the possibility of high Mid-C prices. However, in consideration of customer feedback and the strong performance of the Freshet Energy Rate in prior years, BC Hydro decided to file the application to offer the Freshet Energy Rate in 2019. That application was subsequently approved by BCUC Order No. G-106-19.


Page 1 of 1


Exhibit: B-5



1.9.2.1 Did BC Hydro take all possible actions available to mitigate the losses? Please explain what actions BC Hydro took.

RESPONSE:


BC Hydro has identified that Year 4 of Iha Freshet Ra a pi lot rapr sentad a

substantial change in conditions compared lo Years 1 to 3. As described in the

2019 Eva luation Report for Year 4 contained in Appendix E, conditions during Iha

May to July 2019 freshet period were characterized by a electricity supply issue as a

resul t of the Enbridge gas pipeline issue and low reservoir inflows. This reduced the

freshet energy surplus and C011tributed to higher system marginal prices and higher

market energy imports. These conditions resulted in a revenue loss o $0.5 mill ion

for 2019. This compares lo revenue gains of $2.3 million in 2016, $2.2 million in

2017 and $1 .9 mill ion in 2018.

Even · h hese conditions, the revenue loss in Year 4 was modest rela ·veto

revenue gains in prior years. Over the en ·re four-year period of the pilot, the total

revenue gain was positive at SS.8 million. Based on these results, BC Hydro

considers that the rate design includes a number of elements that minimize risk to

BC Hydro ratepayers and participating customers. Although there is a risk of loss to


to provide net benefits to ratepayers over a multiyear l ime period. These elements

include:

(a) Freshet Reta energy pricing is based on the Mid-C market price, which is

exp ected to be generally reflective of BC Hydro's marginal cost of energy. As a

result, load served under the Freshet Rate is expected to continue to racover its

margina.1 cost of energy;

(b) While energy pricing under the Freshet Rate is based on Mid-C market prices, it

also includes a price floor of $0/MWh and an adder of $3/MW h. The floor and



Page 1 of 1


Exhibit: B-5



1.9.2.2 If there were actions that BC Hydro could have taken, but did not, please explain why.

RESPONSE:


BC Hydro has identified that Year 4 of the Freshet Rate pilot represented a

substantial change in conditions compared to Years 1 to 3. As described in the

2019 Evaluation Report for Year 4 contained in Appendix E, conditions during the

May lo July 2019 freshet period were characterized by a electricity supply issue as a

result of the Enbridge gas pipeline issue and low reservoir inflows. This reduced the

freshet energy surplus and contributed to higher system marginal prices and higher

market energy imports. These conditions resulted in a revenue loss of $0.5 million

for 2019. This compares to revenue gains of S2.3 mill ion in 2016, $2.2 million in

2017 and $1.9 mill ion in 20 18.

Even · h hese conditions, the revenue loss in Year 4 was modest relative to

revenue gains in prior years. Over the entire four-year period of the pilot, the total

revenue gain was positive at SS.8 million. Based on these resu lts, BC Hydro

considers that the rate design includes a number of elements that min imize risk to

BC Hydro ratepayers and participating customers. Although there is a risk of loss to


to provide net benefits to ratepayers over a multiyear time period. These elements

include:

(a) Freshet Rate energy pricing is based on the Mid-C market price, w ilich is

e x.peeled to be genera lly reflective of BC Hydro's marg inal cost of energy. As a

result, load served under the Freshet Rate is expected to continue lo recover its

marg inal cost of energy;

(bl While energy pricing under the Freshet Rate is ba.sed on Mid-C market prices, it

a lso includes a price floor of $0/MWh and an adder of $3/MWh. The floor and



Page 1 of 1


Exhibit: B-5


1.10.1 Please comment on the conditions that BC Hydro is considering in its statement ‘most expected conditions’.

RESPONSE:


• The lnoremental E ergy Rate Pilot energy pricing is referen~d to daily ICE

Index Mid-C market pricfng BC Hydro expects this price, ¥1itjh appropriate

adjustm.en s to account for se.asonal s orage and wheeling, to generally reflect

BC Hydro's short-run marginal cost of energy u .der most expected con di ions.

As a result,. load served under til e lnaremental Energy Rate Pi1lot is expected to

recover BC ydro's margina'I cost ,of ener,gy;37

t ,;,11 lln c,e, (I) b S

~ r.J . U1 i .n or p

OC H e -


Page 1 of 1


Exhibit: B-5


1.10.2 Please discuss the types of conditions where the price and adjustments would not likely reflect BC Hydro’s short-run marginal cost of energy.

RESPONSE:








t ,;,11 lln c,e, (I) b S


OC H e -


Page 1 of 1


Exhibit: B-5



1.10.2.1 How often have such conditions occurred in the past?

RESPONSE:








t ,;,11 lln c,e, (I) b S


OC H e -


Page 1 of 1


Exhibit: B-5



1.10.2.2 How does BC Hydro expect to react to such conditions if they occur during the Pilot?

RESPONSE:








t ,;,11 lln c,e, (I) b S


OC H e -


Page 1 of 1


Exhibit: B-5


1.11.1 How did BC Hydro determine the appropriate level of ‘contribution to BC Hydro’s fixed costs and margin’ for the Incremental Energy Rate Pilot? Please provide the rationale.

RESPONSE:

Please refer to sections 5.5.2, 5.5.3 and 5.5.4 of the Application for a discussion of the analytical work, customer and stakeholder engagement that was undertaken to develop BC Hydro’s energy adder proposal for the Incremental Energy Rate Pilot. As described on pages 79 and 80, the adder was set to result in benefits to all ratepayers under almost all potential scenarios.

• While energy pricing under ; e lnc1remental Energy Rate Pilot is referenced to

Mid-C market prices , i also includes a price floor of $0/MWh a .d an energy

cliar,ge adder of $3.00/MWh in fre·shet months and $7.00/MWh iin non-freshet

montlis on net energy sales. e pmi oe floor a d adder are expec ed to ensi re

tliat customers ta irjng service under the lncrementa'I E .ergy Rate PIiot n.ot on ly

cover BC Hydro's marginal cost of ,energy.,. but also ake some contributio to

BC Hydro's fixed costs and marg·n 1.m.der a wide, range of market prices,

reservoir inflows and weather condit ions;


Page 1 of 1


Exhibit: B-5


1.11.2 Why did BC Hydro select a price floor of $0/MWh?

RESPONSE:

The price floor was set in consultation with customers and was part of a broader discussion that considered the prospective use of price caps. BC Hydro also considered using a price floor that was higher than $0/MWh as an alternative to, or to be used in combination with, the energy charge adder.

Ultimately, and consistent with customer feedback, BC Hydro proposed to set a price floor of $0/MWh to ensure that, if Mid-C market prices were negative, BC Hydro would not be potentially paying customers to take incremental energy.

• While energy pricing under ; e lnc1remental Energy Rate Pilot is referenced to

Mid-C market prices , i also includes a price floor of $0/MWh a .d an energy

cliar,ge adder of $3.00/MWh in fre·shet months and $7.00/MWh iin non-freshet

montlis on net energy sales. e pmi oe floor a d adder are expec ed to ensi re

tliat customers ta irjng service under the lncrementa'I E .ergy Rate PIiot n.ot on ly

cover BC Hydro's marginal cost of ,energy.,. but also ake some contributio to

BC Hydro's fixed costs and marg·n 1.m.der a wide, range of market prices,

reservoir inflows and weather condit ions;


Page 1 of 2


Exhibit: B-5

12.0 Reference: Exhibit B-1, page 37 and page 39

Figure 15

,it,o, l'l"'l"" .. d lntttmcntal &.91:71'

Rilto, di> yo,Hhlnt u, propo d tnO!'l'l'<l,1111 .111ddH lnini;m•

t'J'Kt.Qtroondi; [lbc!!I $i/MWh ~~

....... Pl 1, ·• f■lr .and prudot! n.tto

protact non■

portldpol\t m ieix,-,er.s.?

llll;!"etnerrntl E,mgy IR~.te • Polli ng ,Question 5 {Seplem~r 2D19)

Ffgure 15 above ·sho1.vs 1he consolidated pol respo se (t:o.tal 77 re.spond'en ) from

lh~ S~pt~mb~r 20'19 V/Qrk5hop5 r~g,,udi11g 1h~ ~ r~iv~ d faim~·55 of BC 1-fydro u1,ing

an e rgy charge adder of appro:i<!lmalely $8/MWh o average (in non4res et

months) t<, p otect non-participants. The p1.1rp0$e of lhe, propose adder is to ens re

lhal BC Hydro's margh al costs of proYiding service are-ade<i1.1a: e ly eovere u er

most expected conditions. his approach is eonsislent with the Bo bright princi le ot protecti11g non-parlicip&nt r21tep21yers from harm.

However, only 32 per oent of respond'enls agreed v,ith IBC Hydro's proposal.

BC Hydro, considered th~s. initial r@sponse to demonstrate a laok of support ·or its

proposed approach t<, pru ently and efficienUy protect non-participant tepayers.

However, after further consultation with customers and AMPC, BC Hydro

determined that thei principal fa:irness concern raised by customeirs is specific to lhe

locaijon of risk b'itvlH 11 particip,mt5 and 11011-p.irocipanlli ( a~ r.ifl~ci~d in thii> add~r

price). Tnis feeidback is discussed in morei detail below.


Page 2 of 2


Exhibit: B-5

1.12.1 Please confirm that only 35% of those surveyed were ‘against’ the $8/MWh proposal, whereas 33% were in favour.

RESPONSE:

Confirmed.

~ c,u~t~rr,..,~ ~ 11,., adder appr<>iich in ptin,;,iple, they are, of

th~ i1 $h,,.,.ld b• r,,w,,, , Cu~i=•r IHdl,~d<. inch.1d•d th• f<>lkrNin!.,

BC 1-tJdro is being reactive to &hort-temi low resaTVoir ililflk:r...a;

The, hi~h•r adder ii urr » ilw W<>r • c.oe ~alio ~ppli.,. in •·""'Y inslli!noe

{i,o., t BC 1-fyd,o v.ill nH<I to ill!f"'rt m rko1 •,-.g~ to _... ,.,.ry MWh of

incremental load); and

A S;M,IWh 0tdd r WO<Jld be, "'"' ' " ree~onoble.

1e Af!M furlh!r eonsull!!tion wilh eustom-@Jrs mnd AMPC, BC Hydro d8t@rmiM d lhmt

11 cus1omers would pre -· the energy charge a der In on-freshet mon s to be

18 $6.IM,Wh ralher than $8/MWh. Th. is consistent with BC Hydro's original rate des·gn

proposal in October andl November 201 8, but differs rrom 6C Hydro's fe ·se rate

2ll d~sign proposal in Septemb 20119.


Page 1 of 2


Exhibit: B-5


Figure 15





protact non■

















Page 2 of 2


Exhibit: B-5

1.12.2 What activities did BC Hydro pursue to understand the positions of the ‘Unsure’ customer group?

RESPONSE:

Both at, and subsequent, to the September 2019 workshops, BC Hydro consulted with its customers to better understand the positions of the “Unsure” customer group. Specific activities included:

• Engaging in verbal discussion with customers during the September 2019 workshops to explore their response (some of which was captured as verbal feedback in BC Hydro’s minutes of the September 2019 workshops);

• Reviewing written customer feedback provided in the feedback forms for the September 2019 workshops; and

• Follow-up meetings and consultation with AMPC and specific customers.














Page 1 of 2


Exhibit: B-5


Figure 15





protact non■

















Page 2 of 2


Exhibit: B-5

1.12.3 Please confirm that the results of the survey are generally from participant customers, who have already benefitted from the freshet rate.

RESPONSE:

Not confirmed. The survey results from the September 2019 workshops represent feedback from a mix of workshop participants as shown in the table below.


September 2019 Workshop # of participants %Existing customers that have participated in RS 1892 33 35%Existing customers that have NOT participated in RS 1892 42 45%Prospective new customers 17 18%Interveners and stakeholders 2 2%Total # of participants 94 100%














Page 1 of 2


Exhibit: B-5


Figure 15





protact non■

















Page 2 of 2


Exhibit: B-5

1.12.4 Can BC Hydro provide an estimate of the overall average annual anticipated benefits to participants under the $8/MWh proposal? If yes, please provide.

RESPONSE:

The estimated ratepayer impacts under RS 1893 for an $8/MWh adder in non-freshet months are shown in Tables 7 and 8 of the Application.













Movement of United Professionals Information Request No. 1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1


Exhibit: B-5

1.0 Determination of incremental use

It is very difficult to determine if any specific demand for electricity truly is incremental. Use of electricity during the freshet period may simply be a shift from demand that would otherwise have taken place at other times. The gain to the utility with the freshet sale would then be offset by the financial loss due to the reduction of demand at other times. Similarly, use of electricity under the incremental rate may replace or diminish purchases that would otherwise have taken place at the standard tariff, with the overall effect being a reduction in revenues the utility receives for that supply.

1.1.1 Please provide BC Hydro’s response to this comment and explain how BC Hydro will ensure that the demand that is served by the Freshet Rate and the Incremental Energy Rate is, in each case, truly incremental.

RESPONSE:

BC Hydro designed the rates to mitigate prospective risks of load shifting between BC Hydro’s firm service rates and BC Hydro’s optional non-firm service rates.

The determination of incremental load is made relative to the RS 1892 or RS 1893 baseline that applies specific to each customer site. BC Hydro considers that its baseline determination, adjustment and approval criteria for these rates, as set out in the Special Conditions for each, are robust.

Please refer to section 3.1.7 of Appendix D of the Application, starting at page 36 of 296, for a fulsome description of the load shifting analysis that BC Hydro undertook to verify incremental load from participant customers in Year 1 and Year 2 of RS 1892.


Movement of United Professionals Information Request No. 1.1.1.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1


Exhibit: B-5

1.0 Determination of incremental use

It is very difficult to determine if any specific demand for electricity truly is incremental. Use of electricity during the freshet period may simply be a shift from demand that would otherwise have taken place at other times. The gain to the utility with the freshet sale would then be offset by the financial loss due to the reduction of demand at other times. Similarly, use of electricity under the incremental rate may replace or diminish purchases that would otherwise have taken place at the standard tariff, with the overall effect being a reduction in revenues the utility receives for that supply.

1.1.1 Please provide BC Hydro’s response to this comment and explain how BC Hydro will ensure that the demand that is served by the Freshet Rate and the Incremental Energy Rate is, in each case, truly incremental.

1.1.1.1 What resources will BC Hydro require in order to achieve this?

RESPONSE:

BC Hydro does not expect that additional staff resources will be required to implement RS 1892 and RS 1893, as proposed, including baseline determination and rate administration. That is, BC Hydro plans to meet rate administration costs using existing operating budgets and existing staff.


Page 1 of 2


Exhibit: B-5

2.0 Availability of Freshet Rate to Other Rate Classes

Reference: APPENDIX A to Order G-17-16, BC Hydro 2015 Rate Design, page 12 of 15: Commission discussion

There appears to be agreement between CEC and BC Hydro to begin the process of discussing the potential for extending a freshet rate to general service customers at some future date. The Panel is supportive of these discussions being initiated in the shorter term as requested by CEC.

However, the Panel understands that it is unlikely a freshet rate solution will be achieved in the short term as desired by CEC. We accept that it is not simply a matter of applying the same rate to commercial customers as will be applied in the industrial customer pilot due the differences in rate schedules. In addition, the fact that medium and large general service customer rates are currently under review adds additional challenges in determining a freshet rate for this customer class.

And reference: BC Hydro 2020-21 Revenue Requirements, Transcript Vol. 7, from page 1027 line 1:

MS. FRASER: A BC Hydro has not proposed it for any other class of customer. Mr. O'Riley was correct, we have not really had a lot of interest from our commercial customers. Probably in the last few weeks we've had one commercial customer ask us about that rate. The Freshet rate depends on the ability of the facility to have flexibility. So I guess it's not as easy for some of the smaller industries as it is for the larger ones.

. . . .

MS. FRASER: A And as I said, if we have interest, we will explore it. With the industrial customers, we have regular meetings with the Association of Major Power Customers, and so we have a lot of dialogue with them. They are a lot more vocal in terms of approaching BC Hydro with bringing up issues or barriers.

And commercial customers, I mean, we do have a lot of contact with them. It's just their interest seems to be more on the energy efficiency programs as opposed to rate design. But like I said, we have had one recently that has come forward and we will explore it.

MR. QUAIL: Q Yes. And back in the BC Hydro 2015 Rate Design, when the freshet pilot emerged, I suggest that -- and this was recorded in the reasons for the order in that matter, that CEC did advocate expansion of the freshet rate pilot at that time. Hydro noted some complications because general rates were being redesigned in other ways at that time, but this is


Page 2 of 2


Exhibit: B-5

an issue that CEC did raise back at that time but I gather has not been pursued further?

MS. FRASER: A Correct. But again, we're definitely open if it's brought up and we are open to doing -- or proposing a pilot for that.

1.2.1 Please confirm the accuracy of this testimony.

RESPONSE:

BC Hydro understands this question to be in regards to the possibility of expanding the Freshet Energy Rate concept to non-transmission voltage service customers, in particular to commercial customers. Please refer to BC Hydro’s response to CEC IRs 1.1.1, 1.1.1.1 and 1.1.1.2 for this discussion.


Page 1 of 2


Exhibit: B-5

2.0 Availability of Freshet Rate to Other Rate Classes

Reference: APPENDIX A to Order G-17-16, BC Hydro 2015 Rate Design, page 12 of 15: Commission discussion

There appears to be agreement between CEC and BC Hydro to begin the process of discussing the potential for extending a freshet rate to general service customers at some future date. The Panel is supportive of these discussions being initiated in the shorter term as requested by CEC.

However, the Panel understands that it is unlikely a freshet rate solution will be achieved in the short term as desired by CEC. We accept that it is not simply a matter of applying the same rate to commercial customers as will be applied in the industrial customer pilot due the differences in rate schedules. In addition, the fact that medium and large general service customer rates are currently under review adds additional challenges in determining a freshet rate for this customer class.

And reference: BC Hydro 2020-21 Revenue Requirements, Transcript Vol. 7, from page 1027 line 1:

MS. FRASER: A BC Hydro has not proposed it for any other class of customer. Mr. O'Riley was correct, we have not really had a lot of interest from our commercial customers. Probably in the last few weeks we've had one commercial customer ask us about that rate. The Freshet rate depends on the ability of the facility to have flexibility. So I guess it's not as easy for some of the smaller industries as it is for the larger ones.

. . . .

MS. FRASER: A And as I said, if we have interest, we will explore it. With the industrial customers, we have regular meetings with the Association of Major Power Customers, and so we have a lot of dialogue with them. They are a lot more vocal in terms of approaching BC Hydro with bringing up issues or barriers.

And commercial customers, I mean, we do have a lot of contact with them. It's just their interest seems to be more on the energy efficiency programs as opposed to rate design. But like I said, we have had one recently that has come forward and we will explore it.

MR. QUAIL: Q Yes. And back in the BC Hydro 2015 Rate Design, when the freshet pilot emerged, I suggest that -- and this was recorded in the reasons for the order in that matter, that CEC did advocate expansion of the freshet rate pilot at that time. Hydro noted some complications because general rates were being redesigned in other ways at that time, but this is


Page 2 of 2


Exhibit: B-5

an issue that CEC did raise back at that time but I gather has not been pursued further?

MS. FRASER: A Correct. But again, we're definitely open if it's brought up and we are open to doing -- or proposing a pilot for that.

1.2.2 What if any initiatives is BC Hydro contemplating to explore the possibility of offering the Freshet Rate or some variant on this rate to other rate classes?

RESPONSE:

Please refer to BC Hydro’s response to CEC IRs 1.1.1.1 and 1.1.1.2.


Page 1 of 2


Exhibit: B-5

3.0 “Permanent” Freshet Rate – Risk of Change of Economic Justification

Reference Exhibit B-1 page 2:

The proposed Freshet Rate and Incremental Energy Rate Pilot have been designed to:

. . . .

(c) Minimize risk to all ratepayers by not requiring BC Hydro to undertake system reinforcements and not requiring BC Hydro to provide service if the electrical system is constrained for technical reasons such as forced or planned outages of its transmission or generation system. For greater certainty, BC Hydro does not propose to interrupt these non-firm services for economic reasons; . . .

1.3.1 What if any mechanism is preserved in the proposed Freshet Rate to enable BC Hydro to suspend its operation in the event that market conditions make its continuation materially disadvantageous to non-participating customers?

RESPONSE:

BC Hydro does not have any express provisions to suspend operations in the event of disadvantageous market conditions to non-participating customers. However, below are the mechanisms described in the Application that are expected to minimize the risk of materially disadvantaging non-participating customers:

• The energy charge adder is intended to minimize the risk of losses to all ratepayers (refer to BC Hydro’s response to BCUC IR 1.9.4); and

• The energy charge is based on the Mid-C market price index, which will result in natural customer curtailment and/or attrition from the rate in the event of market price increases, which the customer would seek to avoid for incremental energy use.

Given the potential for longer term unforeseeable changes to market conditions, BC Hydro would also be amenable to revisiting the economics of RS 1892, after a period of at least ten years from the effective date of an approved rate schedule. This may include preparing a report on how the rate has performed, what market conditions are like, and a determination as to whether or not the rate should continue.


Page 2 of 2


Exhibit: B-5

BC Hydro does not support a review earlier than ten years from the effective date of an approved rate schedule for the reasons below:

• We expect to have a capacity and energy surplus in a planning view until the mid-2030s;

• There are costs and resources required to prepare and file ongoing monitoring and evaluation reports; and

• It would be difficult for the participating customers to plan if BC Hydro were to unilaterally be able to curtail service under unusual market and system conditions.


Page 1 of 2


Exhibit: B-5



Evaluation results for the Freshet Rate pilot show that there have been ratepayer and participant benefits. The amended Freshet Rate is expected to continue to provide benefits to participants and ratepayers if Mid-Columbia (Mid-C) market prices and BC Hydro’s marginal cost of energy are similar to the conditions experienced over the four-year pilot period; . . .

. . . . (a) Freshet Rate energy pricing is based on the Mid-C market price,

which is expected to be generally reflective of BC Hydro’s marginal cost of energy. As a result, load served under the Freshet Rate is expected to continue to recover its marginal cost of energy;

1.3.2 Does BC Hydro consider that emerging policy and market conditions triggered by climate change, including electrification and the replacement of fossil fuel use with clean electricity, significantly complicate forecasting electricity demand and prices, both domestically and extra-provincially, over the coming decade? Please explain in detail.

RESPONSE:

Forecasting future demand for electricity already involves inherent uncertainty and the methodologies and processes BC Hydro uses to develop its forecasts are already relatively complex.

The potential impacts of future climate actions on future demand certainly increases the uncertainty in forecast future electricity demand since it adds to the variables that need to be considered. From a methodological perspective, some of BC Hydro’s existing methods forecast future demand for very discrete segments, such as light duty vehicles and the upstream natural gas sector. In these instances BC Hydro’s existing methods incorporate climate-related policies and market conditions affecting those discrete areas.

In other more broadly defined segments, such as residential, commercial and a portion of the light industrial sectors, BC Hydro relies on statistical (historical) relationships between load and load drivers (such as economic growth). In these areas, the impacts of future climate policies and actions could influence a broad range of relatively diffuse behavioural changes and purchase decisions across


Page 2 of 2


Exhibit: B-5

these sectors. The impacts of such actions will eventually be reflected in the statistical data that is subsequently used to project future demand. However, there will likely be a lag between the effects of climate actions on customer demand and when BC Hydro will be able to incorporate those effects, through its statistical models, in developing future forecasts. Given this lag effect, BC Hydro may consider developing adjustments to its existing methods in order to incorporate anticipated load impacts associated with specific climate policies. For example BC Hydro may develop a discrete forecast method for medium and heavy duty vehicles once policies specific to those segments are implemented and reflect those adjustments in the appropriate customer sectors.

Similarly, the electricity market price forecast that BC Hydro uses also considers future uncertainties associated with variables such as natural gas prices, resource buildout in the western interconnection, and carbon policy in North America. The impacts of these variables are reflected in the uncertainty band associated with the market price forecast.


Page 1 of 1


Exhibit: B-5






1.3.3 What is BC Hydro’s intended response in the event that “Mid-C market prices and BC Hydro’s marginal cost of energy” cease to be “similar to the conditions experienced over the four-year pilot period” or “generally reflective of BC Hydro’s marginal cost of energy”, to the extent that continued availability of the Freshet Rate becomes disadvantageous to non- participating customers for a material period of time?

RESPONSE:

Please refer to BC Hydro’s response to MOVEUP IR 1.3.1.

Movement of United Professionals Information Request No. 1.3.3.1 Dated: January 30, 2020 British Columbia Hydro & Power Authority Response issued February 20, 2020

Page 1 of 1


Exhibit: B-5






1.3.3 What is BC Hydro’s intended response in the event that “Mid-C market prices and BC Hydro’s marginal cost of energy” cease to be “similar to the conditions experienced over the four-year pilot period” or “generally reflective of BC Hydro’s marginal cost of energy”, to the extent that continued availability of the Freshet Rate becomes disadvantageous to non- participating customers for a material period of time?

1.3.3.1 What regulatory or other processes does BC Hydro contemplate in order to respond to such a circumstance?

RESPONSE:

Please refer to BC Hydro’s response to MOVEUP IR 1.3.1.


Page 1 of 1


Exhibit: B-5

4.0 Rate Design Evolution

1.4.1 Is BC Hydro looking at a more comprehensive re-examination of how its rates are structured under current and emerging conditions, rather than confine itself to small-scale, ad hoc innovations like these rates?

RESPONSE:

At this time, BC Hydro has no immediate plans for a broad rate design application covering all our rate classes.


Page 1 of 1


Exhibit: B-5

4.0 Rate Design Evolution

1.4.2 Is BC Hydro open to considering more comprehensive strategies to ensure recovery of fixed costs independently of recovery of energy costs, to facilitate selection by customers of rate structures more closely suited to their needs without shifting the burden of fixed cost recovery to other customers?

RESPONSE:

BC Hydro is open to exploring potential new rate designs.

2020 02 20 exhibit b 5 bch ires 1 to intv...sh/ma enclosure c) bchydro power smart british columbia...

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