D Barry Kirkham, QC• J~mes D Bums'+' Jeffrey B Lightfoot• Christopher P Weafer• Michael P Vaughan Heather E Maconachie Michael F Robson+ Zadlr\ry J Ans ley+ Pamela E Sheppard Katharina R Spotzl

Carl J Pines .. Associate CoWlsel+

Robin C Mada.tla1le+ Duncan J M311son• Daniel W Burnett, QC +

Ronald G Paton• Gregory J Tucker• Terence W Yu+ James H McBeath' Susan C Gild ,risl George J Roper

Rose-Mary L Basham, QC, Associate Cowtsei+ Hon Waller SOwen, OC, QC, LLD (1981) john I Bird, QC (2005)

August 28, 2014

VIA ELECTRONIC MAIL

Douglas R Johnson• Alan A Frydenlund' • Harvey S Delaney+ Paulj Brown• Karen S Thompson• Harley J Harris+ Paul A Brackstone"' EdithA Ryan Daniel H Coles

British Columbia Utilities Commission 6'h Floor, 900 Howe Street Vancouver, B.C. V6Z2N3

josephine M Nadel' Allison R Kuchta+ James L Carpick' Patrick J Haberl' Gary M Yaffe' Jonathan L W illiams+

Scott H Stephens+ lames W Zaitsoff Jocelyn M I.e Dr,..ay

+ Law Corporation Also of the Yukon Bar

O WEN •B IR D L Aw C oRPORA T I ON

PO Box 49130 Three Bentall Centre 2900-595 Burrard Street Vancouver, BC Canada V7X 1J5

Telephone 604 688-0401 Fax 604 688-2827 Website www.owenbird.com

Direct Line: 604 691 -7 557 Direct Fax: 604 632-4482

E-mail : cweafer@owenbird.com

Our File: 23841/0104

Attention: Ms. Erica Hamilton, Commission Secretary

Dear Sirs/Mesdames:

Re: FortisBC Inc. Application for Approval of the Residual Capacity Agreement Electric Tariff Supplement No. 10 and Rate Schedule 111, Project No. 3698792

We are counsel to the Commercial Energy Consumers Association of British Columbia (CEC). Attached please find the CEC's first set of Information Requests with respect to the above-noted matter.

A copy of this letter and attached Information Requests have also been forwarded to FortisBC and registered interveners by e-mail.

If you have any CJIUestions regarding the foregoing, please do not hesitate to contact the undersigned.

Yours truly,

OWEN BIRD LAW CORPORATION

~) 1\;;· {~v-t/'-..

1/ Christopher P. Weafer CPW/jlb cc: CEC cc: FortisBC cc: Registered Interveners

(00184962; 1} B INTERLAW MEMUR O F I N T ERI..t.W. AN FNTnN.t.TIONAI "'o;o;nnATIO N

\\::;V OF IN D EPENDENT LAW t-IRMS I N M.AJOK WORLD C ENTRES

C2-5

COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH COLUMBIA ("CEC")

INFORMATION REQUEST #1

FortisBC Energy Utilities ("FEU") Residual Capacity Agreement

Electric Tariff Supplement No. 10 and Rate Schedule 111, Project No. 3698792

1. Reference: Exhibit B-1, Page 2

19 During the eartier years of the WAX. CAP A's tenn. FBC capacity resources exceed its expected 20 requirements as shown in Ftgure 1 below. As envisioned when the WAX CAPA was entered 21 into, this surplus capacity will be managed through optimization of the overall portfolio. The RCA 22 is an important step in meeting this objective and mitigating the overall cost of the power supply 23 portfolio for the benefit of customers.

1.1. What would F ortisBC consider to be an 'optimized' portfolio? 1.2. Please provide a discussion of the additional steps that FBC has already or will

undertake to 'optimize' the portfolio.

2. Reference: Exhibit B-1, page 3

Figure 1: Annual System Capacity

1000 .---------------------------------------------------------------------------900 +---------------------------------------------------------------------------

i" 800 !. 700 f 600 Q. 500 ~ 400 J 300 0 200

100 0

20f5 2016 2017 2018 2019 2020 2021 2022 2023 2024 20251

- FortisBC - Brilliant (incl. Upgrade)

- Others -BCH3808

- wAX - Mer-savings Expected Peak

2.1. Please confirm that FBC is referring to DSM savings or otherwise provide an explanation as to what 'savings' FBC refers to with respect to the Expected Peak and how they are estimated.

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2.2. Please provide the above chart with the Expected Peak before savings. 2.3. Please identify 'Others.' 2.4. Please explain why capacity from 'Others' is expected to decline dramatically as of

2018.

3. Reference: Exhibit B-1, page 4

3 BC Hydro is entitled to the fiJst 50 MN of Residual capacfty in each hour of the term of the 4 RCA. subject to certain potential adjustments spedfied in the Agreement If the Residual

5 Capacity is less than 50 WMI in any hour, BC Hydro is entitled to aU of the Residual capacity in 6 thatnour.

3.1. Is BC Hydro obligated to purchase all residual capacity up to the 50 MW in eaclh hour

for the term of the agreement? 3.1.1. If not, please explain why not. 3 .1.2. If not, please provide the terms/circumstances under which BC Hydro could

refuse to purchase the residual capacity. 3.2. Please provide a discussion of the 'certain potential adjustments' that are specified in

the agreement.

4. Reference: Exhibit B-1, page 4

13 The price BC Hydro has agreed to pay to FBC for the Pu-chased capacity is based on a 14 monthly '"Demand Charge·, indUding all rate liders and exduding any taxes, as determined 15 pursuant to the PPA, and set out from time to tine in Rate Schedule 3808. For the purposes of

16 the RCA, tne PPA monthly Demand Charge is converted to an equivalent$ per wr.N per hour

17 based on 730 hours a month. As such any payment from BC Hydro to FBC is based on the 118 Residual capacity being made available in each hour to a maximum of 50 WI.

4.1. Please confirm or otherwise explain that the price that BC Hydro has agreed to pay is

effectively the same price for which FBC is acquiring power under the PPA,

excluding taxes. 4.2 . Please explain why capacity is being sold on an average hourly basis versus being

priced to the peak use requirements.

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5. Reference: Exhibit B-1, page 4

11 T Olblt1: ~ Aviiiibbl@ to 8C Hydro under lhe Agreement (in IIWJMonlh) - - ... ,. ... ..... ... ~ -oct - Ole ...... 2111S 5I) .sa 511 5I) sa 5I) 511 5I)

-~ liiN 5I) 511 5I) 5I) 5I) 45..8 SIJ 5I) 511 5I) 5il 5I) 95.1

2l!f7 5I) so 5I) 5I) 5I) 68 511 5D 5D 5I) Sll 5I) 515.1

2l!1a 5I) so 5I) 5D 5I) .... 511 ~ 511 5D 5il 5I) SJU 2111~ 5I) !0 5I) 5I) 5I) ~ 511 50 511 5I) 5il 5I) 5'!5.8

llllD 5I) 5D 5I) sa Sl! ~ 511 5D 5D 9l 511 5I) SJU

2C1 5I) 50 5I) 5I: ~ ~ 511 5I: 511 511 5I 5I) 5'!5.8

= SD 50 5I) 5I) 511 aa 511 5D 511 9l 5iJ 5I) 5'!5.8

2iiZ) SD so SD 5t ~ C5.8 511 5I: 511 5I) 5::1 5I) 5'!5.8

2lC4 5I) so 5I) 5I) 5:1 <05.8 511 5D 511 9l 5il 511 5'!5.8

12 2lli5 5I) so 5I) 5D SJ E-8 5D so 511 o44U

5.1. Please explain why the capacity available to BC Hydro is expected to be only 45.8 MW in June of each year.

5.2. Please confirm that if there is additional capacity available in June, that BC Hydro would be entitled to the full amount up to 50 MW.

6. Reference: Exhibit B-1, page 6

8 F~gure 2, below, shows the monthly voltme of capacity to ·be purchased by FBC under the WAX

9 CAP A, which is the sum of the capacity required to sef\le load and the capacity that is surplus to 10 the Company's expected requirements in 2020 and 2024. The surplus capacity indudes the 11 amounts available to BC Hydro under the RCA plus any remaining capadty available for sale. 12 The up to 50 MW limit under the RCA is the preferred capacity block siZe. leaving small capacity 13 gaps in the month of June, begiming in June 2019, and the month of December, beginning in 14 December 2021. In those months, FBC expects to experience up to an 18 MtN capadty gap10

15 that wm have to be met wittl an alternative 18 MtN reS<Uce. Ttis capacity gap is temporary and 16 the value of the SlJPIUs sales in the other months more than offsets the temporary cost of the

17 capacity gaps.

18 Figure 2: WAX CAPA Capacity and Expected Use in 2020 and 2024

2020 2024 )5() )10

300 110

N.l

1 ••• 1 I ,..

I I = I <I'D

150 15C

•• 1 100 100 I 50 50

Jan reb M~ AOI 1.171 Ju~ JUI ... 1.!1 6tO Or( ~10'1 tole J•• r.c WQr ~II' wt,o ,lun J•J !ouQ ~'1> Oc1 1¥.11 tlio<

19 • ,\1.'\X lJo-1'11 t12 •1~tt Pnl.o i~"'J • lftloJ( 9J"'IJs9o~ ().M'J • JXAX LtDd'bM"QIIPi;iatr.(lJIW') • W.•.)( Burp~< E:olo (lC~.,

6.1. Please confirm or otherwise explain that the capacity gap refers to a capacity gap experienced by FortisBC in meeting its own requirements in the event that a 50 MW block is sold to a customer other than BC Hydro.

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6.1.1. If so, please confirm or otherwise explain that such a scenario would not

occur with the capacity sale to BC Hydro under the RCA.

6.2. Please explain why there is a capacity gap of up to 18 MW in June and December that must be met with alternative resources.

6.3. Please provide a high level discussion of the monthly/seasonal variation in Wax

capacity used to meet peak and surplus capacity.

6.4. Please explain the reduction in surplus capacity occurring between October of2020

and October 2024.

7. Reference: Exhibit B-1, page 7

5 FBC has identified three options. sunvnarized belOw, to reaHze value from tne WAX CAPA 6 surplus capacJty:

7 1. Tlhe RCA. as proposed;

8 2. Managing residual WAX capacity in the Company's overall portfolio, including potential 9 short term sales; and

10 3. selling a similar long term block using Residual capacity to an alternate purchaser.

7.1. Has FBC received any interest from alternate purchasers for residual capacity?

7 .1.1. If so, how many potential purchasers have expressed interest?

7.2. Has FBC identified any utilities or operations which are likely to require this

capacity?

7.3. Please comment on BC Hydro's capacity need identified in its IRP.

8. Reference: Exhibit B-1, page 8

4 If FBC does not enter into the RCA, then 50 MW {less operating and regulating resecves} 11 of 5 WAX Residual capacity remain available to be used with Entitlement Energy to meet load, 6 reduce PPA purChases \Mlere feasible to do so. and, potentially, to support additional sales on a 7 short term basis. As described below. tile assessment of the value of this option is dependent 8 on future mar1cet condilions, the impact on the abifJty to mitigate any additiooal surplus 9 resources. and the amount of PPA capacity that could reasonably be displaced_

8.1. Please provide the circumstances/terms for when it would or would not be feasible to

reduce PPA purchases with the available WAX Residual capacity.

8.2. Please describe how the residual capacity would be used to support additional short

term sales.

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9. Reference: Exhibit B-1, page 8

22 Unlike under the RCA, daily sales that use the wAX Residual capacity also require large 23 volumes of energy to be both imported to and exported from the Province in order to support 24 such short term sales to the market Transmissioo limitations and sdledUing issues will restrict

25 daily energy transfers and potentially limit overall sales above the 50 MN proposed to be sold to 26 BC Hydro. Since the RCA option is only a transfer of Entitlement Capacity, these concerns do 27 not apply to the RCA option. other risks for this option include:

9.1. Please confirm CEC's interpretation that under the RCA, FBC would be potentially able to sell 50 MW capacity to BC Hydro plus short term sales to the market, whereas under Option 2, total sales could be limited to the 50 MW block as a result

of transmission limitations and scheduling issues. 9 .1.1. If not confirmed, please provide an estimate as to the extent of the

limitations (ie. maximum that might be sold over and above the 50 MW block).

9 .1.2. If confirmed, please also confirm or otherwise explain that the threshold would not be lower than the 50 MW. (ie. that the transmission and system limitations would not restrict the ability of FBC to sell the 50 MW at market).

10. Reference: Exhibit B-1, page 8 and 9

28 • market risk (i.e. the risk that, at times, the spread between the on-peak and off-peak 29 hours may not be suffident to support sales);

30 • exchange rate risk;

31 • scheduling risk induding potenlial liabfEity for non-delivery: and

1 • contract management risk as the energy to be matched with the WIV< CAPA capacity 2 Will need to be managed under the CPA storage accounts, as well as the Bigible Energy 3 accounts under the EEA.

10 .1. Please confirm or otherwise explain whether or not, and how the market risk and

exchange rate risk might also represent opportunities for greater revenues.

1 0.2. Please provide FBC's interpretation as to the likelihood of experiencing scheduling risk and the size of the potential liability.

1 0.3. Please provide further details as to 'contract management' risk and liability that is

attached to this risk.

{001868:;3;1}

11. Reference: Exhibit B-1, page 9 and 10

17 As snown in Figure 31~ market prices have moderated in recent years and mantet capacity 18 premiums for finn blocKs are therefore lower rn the short- to medium-term as well. As described 19 more tully in the Technical Analysis, Appendix D to ·this Application, FBC has examined the 20 forward mar1<ets and the cost of new construction and believes that a 50 MW energy block sale 21 into the mar1<et would not realize the value that FBC would realize through the RCA.

Figure 3: Recent Market Prices- 2010 Annual Forecast vs. Current ActuaUForecast

50.00

45 .00

40.00

35.00

.s::. 30.00

~ 25.00 ... 20.00

15.00

10.00

5.00

o_oo 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

• Average Monthly Price from 2010 Forecast • Average Monthly Actual Price /CUrrent FOfe<:ast

II .I . Please provide high load hour prices and low load prices for each year in the above

graphic. II.2. Please confirm or otherwise explain that it is FBC's position that it will not be able to

attain the same price in the market that it will effectively be attaining from BC Hydro for the 50 MW capacity .

{00186853;1)