February 6, British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, B.C. V6Z 2N3

Transcription

1 Scott A. Thomson VP, Finance & Regulatory Affairs and Chief Financial Officer February 6, 2006 British Columbia Utilities Commission Sixth Floor 900 Howe Street Vancouver, B.C. V6Z 2N Fraser Highway Surrey, B.C. V3S 2X7 Tel: (604) Fax: (604) Attention: Mr. Robert J. Pellatt, Commission Secretary Dear Sir: Re: Terasen Gas (Whistler) Inc. ( TGW ) and Terasen Gas (Vancouver Island) Inc. ( TGVI ) TGW 2005 Resource Plan Update, and TGW Application to convert Propane Grid to Natural Gas, and TGVI Application to construct Natural Gas Pipeline from Squamish to Whistler February 2, 2006 Workshop Presentation On February 2, 2006, a workshop was held in respect of the above noted applications, during which TGW and TGVI made a presentation to the Commission and to Registered Intervenors. This presentation has been attached and is submitted to the Commission as an exhibit in this proceeding. Should you have any questions or comments, please contact Tom Loski at (604) Yours truly, TERASEN GAS (VANCOUVER ISLAND) INC. TERASEN GAS (WHISTLER) INC. Original signed by Tom Loski For: Scott A. Thomson Cc: Registered Intervenors

2 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Workshop February 2,

3 Workshop Purpose Commission Order No. G-6-06 Set out Regulatory Timetable including Workshop Workshop is intended to clarify the Application Presentation materials developed based on Application mindful of Staff Information Requests and comments from Stakeholders By-product of Workshop Issues List development 2

4 Workshop Agenda 1. Introduction & Background Tom Loski (15 min) 2. Project Overview Cynthia Des Brisay (15 min) 3. Whistler 2020 Dietz Kellmann (20 min) 4. Stakeholder Consultations Bruce Falstead (20 min) 5. Pipeline Project Description Gareth Jones (30 min) Break (10:40 am 10:55 am) (15 min) 6. Whistler Natural Gas Conversion Activities Kiem Diep (20 min) 7. Propane vs Natural Gas Commodity Pricing & Logistics Tania Specogna (30 min) 8. Whistler Demand Forecast Ken Ross (30 min) Lunch Break (12:15 pm 1:00pm) (45 min) 9. Presentation of Financial Analyses / Business Case David Perttula (25 min) 10. Preferred Portfolio and Summary of Project Benefits Cynthia Des Brisay (20 min) 11. Questions and Issues Identification Cynthia & Tom (40 min) 3

5 Overview of Applications 3 Submissions TGW 2005 Resource Plan Update TGW - Conversion of Propane Distribution System to Natural Gas TGVI IP Natural Gas Pipeline from Squamish to Whistler Concurrent Regulatory Review requested 4

6 Specific Items in Applications Terasen Gas (Whistler) Inc. Conversion of existing propane system to natural gas Payment of capital contribution made to TGVI and include in TGW rate base to be amortized over 50 years NBV of propane facilities, net of salvage and proceeds to be recovered over 20 yrs Recovery of pre-2004 natural gas feasibility study costs in addition to Pre-Approval development costs incurred in 2005 &

7 Specific Items in Applications Terasen Gas (Vancouver Island) Inc. Construction of IP Natural Gas Pipeline from Squamish to Whistler Capital Costs to be included in rate base offset by Capital Contribution from TGW Transportation Service Agreement to serve TGW 6

8 Regulatory Timetable Commission Order No. G-6-06 ITEM DATE Workshop Thursday, February 2 Intervenors Issue IR#1, BCUC Issues IR#2 Wednesday, February 8 Commission IR#1 issued to Squamish Nation TGW/TGVI Respond to Intervenor IR#1 and Commission IR#2 Squamish Nation responds to Commission IR#1 Wednesday, February 8 Friday, February 17 Friday, February 17 Intervenors File Evidence and Issue IR#2 Friday, February 24 Information Requests To Intervenors Thursday, March 2 Intervenor and TGVI/TGW Responses to Information Requests Thursday, March 9 Second Procedural Conference (if required) Tuesday, March 14 Commission Oral Public 9:00 AM Thursday, March 23 7

9 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Project Overview Cynthia Des Brisay 8

10 Overview Proposal to extend natural gas service to Whistler: TGVI will construct 50 km pipeline lateral between Squamish and Whistler as part of its system TGW will convert existing propane distribution system to natural gas TGVI & TGW will enter into a transportation arrangement for transport service from Huntingdon to Whistler Terasen Inc. A Kinder Morgan Company Terasen Gas Inc Terasen Gas (Vancouver Island) Terasen Gas (Whistler) Terasen Gas (Squamish) Page 9

11 Cost Distribution $000s Direct Costs As Spent (2005$) Capital TGVI Costs 33,700 35,500 AFDUC 1,700 TGW P/L Capital Contribution -16,200 TGVI Net Rate Base Addition 21,000 TGW Costs 5,800 6,000 AFDUC 150 TGW P/L Capital Contribution 16,200 TGW Gross Rate Base Addition 22,350 Combined Rate Base Addition $43,350 Pipeline costs +/- 20% due to S2S uncertainty Land and propane equipment sales salvage expected to offset TGW capital by $1.5 to $2.0 million Transportation revenues to TGW from TGVI average approximately $2.2 million per annum Page 10

12 TGVI Customers Residential & Commercial Core market LDC TGS Terasen & Terasen Gas (Squamish) Gas (Whistler) Industrial customers (VIGJV) Generation (BC Hydro) 11

13 Existing Whistler Distribution System Piped propane system typically used for remote or small communities where natural gas is not economically available Original Whistler system installation in 1980 TGW has owned and operated system since 1986 Propane delivered by rail and truck Currently largest piped propane system in Canada & largest end use storage site Existing Nesters Plant Site Page 12

14 Whistler Propane System Year Average No. Customers Propane Deliveries (1000 s L) Length of Distribution Pipe (km) No. of Storage Tanks Annual (GJs) Normalised ,024 n/a , ,260 19, , ,486 21, , ,680 24, , ,860 26, , ,979 27, , ,90 27, , ,211 28, , ,297 29, , ,335 30, ,100 Page 13

15 Whistler Propane System Current Issues 1. Community concerns with propane infrastructure and environmental and sustainability issues 2. Size of propane system resulting in more complex supply logistics 3. Rail and road traffic issues putting upward pressure on costs and reliability 4. Increased gap between propane and natural gas commodity prices 5. Current system operating at design capacity Page 14

16 2004 TGW Resource Plan Propane system at capacity RMOW community planning process in final stages Proposed increase in development cap limit Load additions expected from 2010 Olympic sport facilities and athlete village RMOW supporting NGV Strategy Conclusion TGW could best serve existing and new load requirements by converting to natural gas and construction of pipeline TGW will work with RMOW and stakeholders to confirm to confirm energy load and seek approval of pipeline Page 15

17 2005 Developments RMOW completes community plan Whistler 2020 based on sustainability principles Terasen and RMOW develop Sustainable Energy Strategy in consultation with Whistler 2020 Energy Strategy Task Force Conversion of existing propane system to natural gas Implementation of NGV strategy GSHP systems for greenfield developments, in particular for 2010 Legacy developments Conversion of some existing loads to GSHP over time as economically and technically feasible Page 16

18 2005 Resource Plan Updated demand scenarios based on Whistler 2020 Moving Toward a Sustainable Future Re-examination of resource alternatives Conversion to natural gas Maintain existing propane system Expand the propane system Conversion to natural gas continues to be the best option to meet community sustainability goals consistent with Terasen Gas resource planning objectives Page 17

19 Evaluation of Alternatives TGW Planning Objective Least Delivered Cost Propane (No Expansion) Minimal capital investment Higher commodity costs but lower fixed costs Uncertainty related to rail and truck transport costs Natural Gas Pipeline Lowest delivered cost Improved competitiveness with electricity and GSHP Capacity to add new loads and further reduce average unit cost Security of Supply Rate Volatility Storage to meet short term supply disruptions Net customer additions suspended Lower fixed costs reduce impacts of lower demand growth Limited supply options Direct connection to supply Avoid impact of rail and truck transport interruptions Lower commodity costs reduces market volatility Benefit from TGI s diversified gas supply portfolio Socio- Economic Impacts More permanent employment Continued presence of storage and rail offloading facilities No new land impacts Broad support from RMOW and local stakeholders Improved air quality and reduced GHG emissions Supports NGV program Elimination of rail and truck traffic Construction jobs and investment Page 18

20 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Whistler 2010 Dietz Kellmann

21 PLANNING APPROACH Community-wide, comprehensive sustainability plan Highest level policy Recognized sustainable planning UNEP endorsed Livcom Award Award winning energy plan for 2010 Athlete s Village 20 THE RESORT MUNICIPALITY OF WHISTLER

22 Why Does it Exist? Guide decision-making RMOW budgeting, Council Partner budgeting, other Strategic, efficient resource use Align community direction Accountability 21 THE RESORT MUNICIPALITY OF WHISTLER

23 Proactive back-casting 22 THE RESORT MUNICIPALITY OF WHISTLER

24 Strategic Four Strategic Questions: 1 3 Does this action move Whistler toward our shared Vision? Does this action move Whistler toward our Sustainability Objectives? Is the action a good financial investment? Does the action present a flexible platform for further movement toward WHISTLER2020 in the future? THE RESORT MUNICIPALITY OF WHISTLER

25 WHISTLER THE RESORT MUNICIPALITY OF WHISTLER

26 Community-wide 25 THE RESORT MUNICIPALITY OF WHISTLER

27 SUSTAINABLE ENERGY PLAN Achieve Whistler2020 Achieve Kyoto, FCM Partners for Climate Change targets Showcase Canadian technology Support innovation and economic development 26 THE RESORT MUNICIPALITY OF WHISTLER

28 NATURAL GAS CONVERSION 1. Natural gas pipeline - Squamish to Whistler 2. Convert propane to natural gas 3. Natural Gas Vehicles Several fleet vehicles Lower emissions Canadian technology 27 THE RESORT MUNICIPALITY OF WHISTLER

29 ATHLETE / LEGACY VILLAGE 4. Athlete s Village District Energy System Fossil fuel free Demonstrate sustainability 28 THE RESORT MUNICIPALITY OF WHISTLER

30 WHISTLER VILLAGE 5. Whistler Village Retrofit District energy system Implementation of alternative heating sources 29 THE RESORT MUNICIPALITY OF WHISTLER

31 STEP-WISE TRANSITION Today Transition Sustainable Future Heating Cooking Fireplaces Electric/Propane Electric/Propane Propane District Energy Gas/GSHP Natural Gas Landfill Gas GSHP Fuel cells Other? Bio gas Transportation Gasoline Diesel Hybrids NGV Fuel cells Hydrogen Other? 30 THE RESORT MUNICIPALITY OF WHISTLER

32 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Stakeholder Consultations Dietz Kellmann & Bruce Falstead 31

33 Terasen s Public Consultation Model Conduct Research: identify audiences, gather views, identify interests and issues Develop a Public Consultation Plan: communication and consultation objectives, deploy human and financial resources to meet objectives Develop and Provide Information: develop and implement a program of information exchange to key audiences Consultation: face to face dialogue with target audiences, gathering stakeholder feedback Decision Making: incorporating local knowledge into decision making, seeking public understanding and acceptance 32

34 Stakeholders Engaged Terasen and its former entities have been engaging stakeholders on this pipeline and conversion proposal since its origin in 1996: Resort Municipality of Whistler Provincial Government (Highways, Energy and Mines, Environment, others) Public, local School district and environmental organizations First Nations (Squamish and Lil wat / Mt. Currie) Customers, planners and developers Industry (ex.: BC Hydro, BC Rail, CN Rail) Vancouver Olympic Organizing Committee Energy professionals and consultants Tourism industry (Whistler-Blackcomb Resort, hotels, others) 33

35 Recent Events Events conducted or participated in over the past two years include: Stakeholder meetings: RMOW, MOT, VANOC, Whistler 2020, others Stakeholder Workshop Whistler, June 2004, Presentations to SLRD and Squamish Municipality June 2005 RMOW Sustainability Strategies Whistler, June 2005 Public Open House Squamish, July 2005, Public Open House Whistler, September 2005 Whistler 2020 Energy Task Force participation late 2004 through 2005, Joint Whistler energy meetings with BC Hydro late 2004, early 2005, First Nations Meetings Squamish and Mount Currie / Lil wat early 2004 through 2005 Key Customer meetings Whistler, March and May

36 First Nations Terasen has infrastructure within 71 First Nation communities throughout the Province mostly for Distribution mains and services. Terasen has Transmission plant crossing 11 First Nations Reserves. 35

37 Consultation strategy Terasen is committed to developing productive working relationships with all First Nations. As soon Terasen has a proposed project First Nation interests are identified. First Nations are immediately contacted and the process of consultation begins. 36

38 Squamish Nation & Lil wat Nation Initial meetings were held with Squamish Nation and Lil wat Nation early in 2004 to introduce the Whistler Pipeline Project. Initial funding has been provided both to assist with the capacity to interact with Terasen. Interaction is ongoing with Squamish Nation Lil wat Nation and Terasen have signed a Letter of Intent and a MOU is pending. 37

39 Terasen s First Nation Agreements in BC Lil wat Nation Chemainus First Nation Central Region Chiefs Cowichan Tribes Kamloops Indian Band Okanagan Nation Alliance Westbank First Nation Ktunaxa Kinbasket 38

40 Terasen, Cowichan Tribes & Central Region Chiefs Tripartite Agreement 39

41 Terasen, Chemainus, Cowichan Tribes sign agreements on LNG project 40

42 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Pipeline Project Description Gareth Jones

43 Whistler Natural Gas Project Overview Whistler Project is split into two distinct components: 1. TGVI Interconnect at Squamish, requiring station modifications, and IP pipeline from Squamish to Whistler ( TGVI IP Pipeline ) 2. TGW IP/DP station at Whistler, conversion of TGW distribution system to natural gas, upgrade of meter sets, retrofit of customer appliances, and decommissioning and sale of plant sites. ( TGW NG Project ) 42

44 TGVI IP Pipeline - Overview Long Development History Under development since 1996 originally as high pressure. Thorough technical design/due diligence process in Concept revised in 2005 to IP pipeline. Highway alignment proposed Least cost by a significant margin. Minimal environmental and traditional territory impact. Multiple scenario and estimate sources used for cost confidence. Must proceed now to realize highway upgrade coordination benefits Minimize costs and minimize traffic impact. 43

45 TGVI IP Pipeline Development History 1996 Solution to meet growing demand. 62 km, NPS 6, 885 psig steel pipeline with shoulder alignment Normal design review with MOT completed. December, due diligence stipulation imposed Thorough technical design and 3 rd party review. Technical basis for the current project MOT letter of intent to permit the pipeline in Highway 99 right-of-way to 2004 TGW pre-build of 10 km between Function Junction & Nesters. MOT plans evolve for highway; pipeline concept evolves to recognize benefits Re-defined to 50 km, NPS 8, 300 psig steel pipeline. Meets MOT policy for installation within road shoulders and bridges. 44

46 TGVI IP Pipeline Description 50 km, NPS 8, 300 psig IP Pipeline. 49 km within Ministry of Transportation ( MOT ) Highway 99 right of way balance within Squamish roads. Additional equipment for metering and regulating at existing Squamish station. Shoulder alignment and use of MOT bridges proposed to minimize cost within highway R/W. Pipeline to be constructed through 2006, 2007, and 2008 to coordinate with Highway 99 upgrade program ( S2S ). About 25 km new roads Balance existing roads with repaving program Entire highway between Horseshoe Bay and Whistler under traffic delay limitations. 45

47 TGVI IP Pipeline Approval Status Comprehensive consultation including Squamish and Whistler Open Houses IP Pipeline has the endorsement of the RMOW LOI with Lil wat; consultation with Squamish 1 st Nation continues Crown R/W required only for separate aerial crossings. MOT Agreement in Principle specific to current project received September 2005 Confirms that project will be permitted over full 49 km route. Confirms that MOT bridge use will be considered on an individual exception basis only. Requires S2S project coordination. 46

48 TGVI IP Pipeline - S2S Overview S2S, awarded June 2005, is a design-build ( DB ) financeoperate project with discrete DB sections DB sections 8, 12, & 13 impact project and will be built from now through Peter Kiewit Sons ( PKS ) is the S2S design-build contractor Nov signed MOU with PKS on design, scheduling, and cost efficiencies. DB 12 design work is underway and TG is starting concurrent design work. 47

49 TGVI IP Pipeline - Capital Cost Due to timing of S2S, detailed alignment specific pipeline cost estimates not possible. Instead three sources used for estimates: Primary 3 rd party Integrated Pipelines (IPPI) estimates prepared using double blind method for both highway and x-country TG estimates based on historical costs and informal contractor feedback 3 rd party estimates with a directional drill focus 48

50 TGVI IP Pipeline - Capital Cost Description Low Base High $2005 (millions) $2005 (millions) Land Materials $2005 (millions) Construction (TGVI) Or Construction (Chinook) Or Construction (IPPI) Project Services Squamish M/R Station Total - IPPI Basis Total - Average Basis Total Lowest/Highest Basis To add cost certainty, the three different sources were used for construction estimates under three scenarios: Favorable permits and coordination (Low Cost) Unfavorable bridge outcome but reasonable coordination (Base Cost) Unfavorable bridge and unfavorable coordination (High Cost) Strong consistency between estimate sources. Achieving Base Cost is reasonable expectation. 49

51 TGVI IP Pipeline - Summary Highway alignment proposed AIP from MOT received Least cost by a significant margin Minimal environmental and traditional territory impact. Long Development History Thorough technical design/due diligence process in Multiple scenario and estimate sources used for cost confidence. Must proceed now to realize highway upgrade coordination benefits. Opportunity for TGVI to construct at costs that allow TGW to offer safe, reliable and affordable natural gas service to its customers. 50

52 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Whistler Natural Gas Conversion Activities Kiem Diep

53 Outline Key differences b/n propane and natural gas Conversion activities IP/DP Regulating Station Distribution System Conversion Customer Upgrades Disposal of Propane Facilities and Land Cost estimate Benefits of Natural Gas in Whistler 52

54 Propane vs. Natural Gas At ambient temperature, propane easily liquefies at relatively low pressures Operating pressure of distributed propane system is limited to 20 psig to prevent liquefaction in the pipeline network Heating value of propane is approximately 2.5 times that of natural gas Operating pressure of distributed NG system will be increased to 80 psig 53

55 Existing System Overview PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Two storage and vapourization facilities Nesters Function Junction Railcar offloading site at Mons siding (near Nesters) Nesters receives propane by railcar and tanker trucks Function Junction receives propane by tanker trucks 54

56 Nesters 55

57 Function Junction 56

58 Mons Siding 57

59 Conversion to Natural Gas Customers will be grouped by location and complexity Newsletters and door-to-door visits to coordinate conversion schedules 58

60 Conversion Pre-work Technical assessment and upgrade of distribution system To prepare existing system to operate at 80 psig with natural gas Detailed customer audit and communication plan For material procurement and development of community sectionalization plan Contractor conversion labour training To obtain large workforce of specially trained labour for conversion project 59

61 Conversion Description IP/DP station PROPANE STORAGE NESTERS PLANT Build regulating station. De-commission Function Junction propane facility. PROPANE STORAGE FUNCTION JUNCTION 60

62 Conversion Description Sectional conversion starts PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Start in south section of community. Isolate individual sections, upgrade meters and regulators, purge and gasify distribution system, and perform customer appliance retrofits. Sections are grouped based on customer makeup to allow daily conversions. 61

63 Conversion Description Sectional conversion moves north PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Continue north with sectional conversions until Nesters is reached 62

64 Conversion Description Sectional Conversion reaches Nesters PROPANE STORAGE NESTERS PLANT When Nesters is reached, propane tankers will be used to supply propane north of Nesters during conversion activities Decommission Nesters. Continue with conversion activities. PROPANE STORAGE FUNCTION JUNCTION 63

65 Conversion Description Conversion complete PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Continue north with sectional conversion until entire community is converted to natural gas. 64

66 Conversion Description Disposal of Propane Facilities and Land PROPANE STORAGE NESTERS PLANT Dispose of propane facilities and land at Nesters and Function Junction. Mons site will be retained for muster point. PROPANE STORAGE FUNCTION JUNCTION 65

67 Capital Costs Description Cost ( $) IP/DP Station $ 269 Conversion Technical Assessment $ 43 System Improvements $ 294 Customer Upgrades Meter Set Upgrades $ 457 Equipment Retrofits $ 3,049 Piping Compliance $ 250 Planning and Project Management $ 350 Contingency $ 590 Total $ 5,303 Equipment retrofits represent most significant component to capital cost; estimate for same based on: a review of TGW customer records; an assessment of labor rates; an estimate of conversion man-hours and material costs; and a survey of per diem expenses. 66

68 Appliance Retrofits An Example Appliance retrofit for a sample development Row of residential townhouses Appliance Type Count Unit Labour Unit Material Conversion Cost Fireplace 78 $ 60 $ 75 $ 10,530 Barbeque 10 $ 60 $ 75 $ 1,350 Patio Heater 2 $ 60 $ 75 $ 270 Furnace 8 $ 90 $ 200 $ 2,320 Boiler 11 $ 90 $ 200 $ 3,190 Hot Water Tank 11 $ 90 $ 200 $ 3,190 Range 8 $ 90 $ 75 $ 1,320 Commercial Boiler 4 $ 480 $ 1,000 $ 5,920 Commercial Hot Water Tank 3 $ 900 $ 500 $ 4,200 Makeup Air Unit 4 $ 480 $ 200 $ 2,720 Generator 1 $ 480 $ 200 $ 680 Total $ 35,690 67

69 Disposal of Propane Facilities Tank Future Market Value Original six Nesters tanks: US$0 20,000 per tank Remaining five Nesters tanks: US$40,000 50,000 per tank Four Function Junction tanks: US$40,000 50,000 per tank 10% for decommissioning, freight, and miscellaneous Facilities Removal Tank foundation removal and disposal: $170,000 Other foundation removal and disposal: $40,000 Other Expenses: $75,000 Amount* (000s $) Propane Facilities Gross book value 6,979 Accumulated depreciation (1,947) Propane tank salvage value (194) Total 4,374 *Amounts are in $2009 or book values as at December 31,

70 Disposal of Land Market values for land sales in 2009 based on 2004 appraisals Amount* (000s $) Land Book value of Nesters and Function Junction land $899 Land remediation and disposal costs ($284,000 plus 50% contingency and inflation) Assessed Value of Nesters and Function Junction land 1,930 Net Proceeds from sale of land ($1,930,000 adjusted for capital gains tax) (1,824) *Amounts are in $2009 or book values as at December 31,

71 Benefits of Natural Gas in Whistler Eliminates rail and road traffic and operational complexity associated with providing propane service to Whistler Eliminates propane railcar offloading activities and associated noise near residential neighbourhood Eliminates propane facilities at Nesters and Function Junction; facilities can be removed and land can be re-developed Reduction in GHG intensity of major heating fuel Facilities NGV program which reduces criteria air contaminants (SOx, NOx, VOCs, PM2.5) 70

72 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Propane vs Natural Gas Commodity Pricing Logistics Tania Specogna

73 Logistics and Commodity Logistics Compare Propane and Natural Gas Supply Chain and Logistics Natural Gas Transmission systems are in the business of transporting natural gas Propane Logistics Complex and Supply Chain Segregated Commodity Benefits of Natural Gas Market Propane and Natural Gas Differentials 72

74 Supply Chain Natural Gas Supply Propane Supply Transportation Transportation Enduser Enduser 73

75 Complex Propane Logistics 4. Refinery notifies Railway 5. Railway picks up full railcar and sets off to Whistler 6. Other types of Freight Railcars are added along the way. Railcars arrive Whistler 5-10 days later 1. TGW provides supplier 6 week railcar order 2. Supplier places detailed daily/weekly order with Refinery 7. Empty cars removed by CN 8. Full Cars placed for unloading 9. TGW unloads 3. Pools of railcars nominated & delivered to refinery by railway days from Ordering to Delivery if all goes well 74

76 Reduced Flexibility Staging Railcars at Squamish no longer available to Whistler Prior to CN takeover BC Rail staged railcars (1 week supply for Whistler during winter). Provided some flexibility. CN s policy restricts staging of dangerous goods on railway TGW baseload 60 trucks during Nov- Mar (15% of load) 4 to 5 trucks/week during Dec-Jan on Whistler Highway Increased Truck Traffic on Whistler Highway 75

77 Whistler Truck Usage Historical and Forecast 6,000,000 History Forecast 5,000,000 4,000,000 Litres 3,000,000 2,000,000 1,000, South Plant Nesters Plant 76

78 Operational Issues Add to Propane Logistics Complexity Railcar disruptions CN Rail had 11 derailments in 2005 on BC Rail system BC Rail averaged 6 derailments/year system wide CN running one long train rather than three shorter ones likely to cut cost 4 CN derailments in Sea to Sky Corridor in 2005 even with fewer number of CN trains versus BC Rail Service Additional truck deliveries required to mitigate disruptions Baseload trucks in December managed the December rail disruption given the warmer than normal weather. Normal or colder weather would have required ordering incremental trucks Consumption changes Consumption can fluctuate by 50% over 48 hours requiring change to railcar/truck order 77

79 Western Natural Gas Logistics British PNG Station 2 Columbia Fort Nelson Aitken Creek TGVI NWP Pine River Duke McMahon Huntingdon/ Sumas Jackson Prairie WA Western Canada Sedimentary Basin Terasen TCPL GTN Alberta TCPL NOVA TCPL BC Kingsgate Alliance Carbon AECO Transmission systems are in the business of transporting natural gas Direct Connection to Supply Nominations for supply made to pipeline systems dedicated to natural gas TCPL delivery Use LNG and Storage Assets tied to pipeline to balance load fluctuations Northern Border Mist OR Stanfield Northwest Pipeline Rocky Mountain Basin Clay Basin 78

80 Summary Logistics Complex Propane Logistics Propane Supply Chain Segregated Elimination of Squamish Staging reduces flexibility Increased Truck Traffic on Whistler Highway Natural Gas Pipeline Direct Connection to Supply Eliminates rail and road traffic and operational complexity associated with providing propane service to Whistler 79

81 Western Propane and Natural Gas Commodity Propane Edmonton Major Western Supply British Hub 0.8 bcfd PNG Station 2 Fort Nelson Aitken Creek Edmonton physical Columbia hub (no financial trading) Edmonton priced TGVI off of US Mid- Continent Pricing NWP US Mid-continent Pine River Mist Propane contracts trade out 18 months Duke McMahon Huntingdon/ Sumas Jackson Prairie WA OR Western Canada Sedimentary Basin Terasen Stanfield TCPL GTN Alberta TCPL NOVA TCPL BC Kingsgate Alliance Northwest Pipeline Carbon Natural Gas AECO AECO Natural Gas Market 16 bcfd AECO physical and Financial Trading Hub AECO Natural Gas contracts TCPL trade out 72 months Northern Border Rocky Mountain Basin Clay Basin 80

82 Propane By-Product Propane is a By- Product Propane left in natural gas stream if natural gas prices rise Propane competes with Crude Oil By- Products 81

83 Propane Follows WTI Crude Oil US$/Gallon Commodity Prices (US$/Gallon) $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 Propane follows Crude Oil Pricing Propane Typically Trades 65-85% of Crude Oil Propane follows Natural Gas Spikes $0.20 $0.00 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 US Mid-Continent Propane WTI Crude Oil 82

84 Commodity Prices (US$/Mmbtu) $14 $12 $10 $8 $6 $4 $2 $0 Propane Premium to Natural Gas US$/MMbtu $10 $8 $6 $4 $2 $0 ($2) ($4) ($6) ($8) ($10) 1-Nov Mar Jul Dec Apr-02 6-Sep Jan-05 NG minus US Mid-Continent Propane 83 Nov-96 Mar-97 Jul-97 Nov-97 Mar-98 Jul-98 Nov-98 Mar-99 Jul-99 Nov-99 Mar-00 Jul-00 Nov-00 Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Henry Hub Natural Gas US Mid-Continent Propane Propane trades premium to Natural Gas Propane follows Natural Gas Spikes Commodity Price Differential (US$/Mmbtu)

85 GLJ Long Term Forecast $20 $10 Historical Forecast Historical Forecast $8 Commodity Prices (US$/Mmbtu) $18 $16 $14 $12 $10 $8 $6 Commodity Price Differential (US$/Mmbtu) $6 $4 $2 $0 ($2) ($4) ($6) ($8) ($10) 1-Nov Jul Apr Jan Oct Jul-10 6-Apr-13 NG minus Propane GLJ NG minus Propane Propane premium to Natural Gas $4 $2 $0 Nov-96 Jul-99 Apr-02 Jan-05 US Mid-Continent Propane Henry Hub Natural Gas Oct-07 Jul-10 Apr-13 GLJ US Mid-Continent Propane GLJ Henry Hub Natural Gas Jan-16 84

86 GLJ Forecast Compared to Forward Curve $20 $10 Historical Forecast Historical Forecast $18 $8 Commodity Prices (US$/Mmbtu) $16 $14 $12 $10 $8 $6 $4 Commodity Price Differential (US$/Mmbtu) $6 $4 $2 $0 ($2) ($4) ($6) ($8) ($10) 1-Nov Jul Apr Jan Oct Jul-10 6-Apr-13 NG minus Propane GLJ NG minus Propane Nymex NG minus propane $2 $0 Nov-96 Jul-99 Apr-02 Jan-05 US Mid-Continent Propane Henry Hub Natural Gas Oct-07 Jul-10 Apr-13 GLJ US Mid-Continent Propane GLJ Henry Hub Natural Gas Jan-16 85

87 Commodity Summary Natural Gas Market larger and more liquid than Propane Market Benefits of TGI Natural Gas Portfolio Propane commodity trades at a premium to natural gas 86

88 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Whistler Demand Forecast Ken Ross

89 Introduction Integral Topic: Demand Forecast Topics: Demand risk is low vast majority of future demand for natural gas is conversion of existing load Customer additions forecast is conservative Annual and Design Day use rates are appropriate and yet could increase in future years Future Scenarios Summarize Annual and Design Day Forecasts Future demand expectations include the impact of Whistler 2020 and the Sustainable Energy Strategy 88

90 Existing vs. Future Load Demand (GJ) 1,200,000 Total Annual Energy Requirements 1,000, ,000 12% Greenfield GSHP Load Displacement GSHP Load New Gas Load NGV load addition 600, ,000 Existing Gas Load Existing Gas Load 88% Net Residential & Commercial load addition 200,

91 Customer Additions Inputs & Drivers - Historic trends - Localized economic environment - Pre-Olympic development expectations - Accommodations and Housing - Community / Sporting Facilities - RMOW Planning / Development Limitations - Impact of Whistler 2020 on - New development - Introduction of NGV Customers - Community and Customer Consultation for Natural Gas Vehicles Identify expectations for residential, commercial, facilities & NGV customers 90

92 World Renowned Resort Community Attracts demand for market housing, accommodations, businesses and supporting infrastructure TGW - Year-end Customers 2,500 2,300 2,100 1,900 1,700 1, Residential (SGS - 1 / 2) Commercial (SGS - 1 / 2) Commercial (LGS - 1) Commercial (LGS - 2) Large Commercial (LGS - 3) 91

93 Continuing Development Pressure Pent-up demand for employee housing - over 500 Families on Whistler Housing Authority s wait list RMOW, Whistler 2020 goal of 75% of Whistler employees living within the community *Future bed unit development available subject to rezoning include: Whistler Mountain (64) Crown (228) Taluswood (214) Rainbow Current proposed developments under consideration*: Alpha Lake Road Alpha Creek Athlete s Village Shoestring Lodge Holborn Group Mount Whistler Lodge *source: Whistler Question article dated Aug. 8th,

94 Managing Growth - RMOW Development Cap Development Cap = 55,000 bed units Remaining Capacity = 6,234 bed units Whistler 2020 Sustainable Community Plan Encourage alternative energies, reduce growing dependence on fossil fuels New employee housing = an additional 6,650 bed units not currently included in forecast Introduce NGV programs to reduce emissions and GHG s in the Sea to Sky Corridor Sustainable Olympics Initiative Encompass social, economic and environmental stewardship New developments related to the games are not currently included in the forecast ex.: Athletes Village, Sledge Hockey Arena & Sliding Centre. 93

95 Expectations for New Gas Customers Residential and Commercial Customer Additions: 150 TGW Account Additions 100 Historic Forecast Potential NGV Fleet Customers: RMOW, Transit, Waste Haulers, Whistler Blackcomb, Taxis and Shuttles Community Facilities - Meadow Park: An existing facility currently using bottled propane 94

96 Annual and Design Day Demand Annual Demand Definition Cumulative daily demand for gas over the entire year. Relevance More relevant to rate setting and revenue impact to Utility. Design Day / Hour Demand Definition The maximum demand for natural gas a utility expects it must provide over a single day. Relevance Required for identifying system constraints and capital requirements. 95

97 Annual Demand GJ 12,000 Average Annual Use per Customer Total Customers Res SGS 1/2, ,000 4,000 LGS 3, 21 LGS 2, 51 LGS 1, 85 Com SGS 1/2, Res SGS 1/2 Com SGS 1/2 LGS 1 LGS 2 LGS 3 96

98 Annual Demand Total Customers Res SGS 1/2, 2007 LGS 3, 21 LGS 2, 51 LGS 1, 85 Com SGS 1/2, 167 Contribution to Total Annual Demand Res SGS 1/2 24% Com SGS 1/2 4% LGS 1 13% LGS 3 37% LGS 2 22% 97

99 Design Day Demand The primary consideration in Resource Planning Based upon detailed analysis of consumption records versus weather daily consumption A weather driven event: The temperature expected on the coldest day with a 20 year return period for Whistler o C or 41.3 Heating Degree Days heating degree days Customer additions drive the forecast 98

100 Impact of the Sustainable Energy Strategy Introduction of GSHP technology space heating / hot water Combined GSHP / Gas Customer Annual Load 100% 75% Gas load, 30% Gas load, 10% 50% 25% GSHP load, 70% GSHP load, 90% 0% Design Day load 99

101 Impact of the Sustainable Energy Strategy Introduction of GSHP technology large commercial customers Propane End Uses - Contribution to Annual Demand Whistler Large Commercial Customers Fireplaces, 14% Annual Load Kitchen, 5% Ventilation Heating, 18% Domestic Hot Water, 31% Pools, In-suite Heating, 7% 25% GSHP load, 73% Gas load, 27% 100

102 Highlights of the Forecast Scenarios Scenario Propane system Natural Gas System Business As Usual (High) The past is an indicator of the future. Modest SES Implementation. Sustainable Technology (Base) Strong support for the SES and alternative energy technology implementation Aggressive Technology (Low) Aggressive Implementation of the SES and alternative energy technology with strong support from government and industry 101

103 Highlights of the Forecast Scenarios Scenario Propane system Natural Gas System Business As Usual (High) The past is an indicator of the future. Modest SES Implementation. Sustainable Technology (Base) Strong support for the SES and alternative energy technology implementation Aggressive Technology (Low) Aggressive Implementation of the SES and alternative energy technology with strong support from government and industry Customer and load growth throughout study period No conversions to alternative energy systems No load addition from NGV or Meadow Park Load growth in early years prior to GSHP conversions Expected level of GSHP conversion No load addition from NGV or Meadow Park Initially constrained by current system capacity Aggressive conversion to GSHP technology No load addition from NGV or Meadow Park Customer and Load growth throughout study period No conversions to alternative energy systems Load addition from Meadow Park and limited NGV Load growth in early years prior to GSHP conversions Expected level of GSHP conversion Expected level of demand growth from NGV and Meadow Park Load growth in early years prior to GSHP conversions Aggressive conversion to GSHP technology and district energy Aggressive incremental demand growth from NGV and meadow park early in the planning period 102

104 Summary of NGV load assumptions Business as Usual Sustainable Technology Aggressive Technology Transit Buses Compressed Natural Gas Transit Buses Fuel Cell Municipal Vehicle Fleet Local Taxis and Shuttles Whistler Blackcomb Fleet medium and light duty Whistler Blackcomb Fleet heavy duty Waste Management Fleet 103

105 Conclusion Customer additions forecast conservative based on local and regional conditions Design day model verified by 2004 actual event Sustainable Technology scenario represents a level of GSHP implementation that balances the community s objectives with economic and technical feasibility NGV expectations based on municipal, community and customer support and NGV expert advice 104

106 Annual Forecast natural gas GJ/year 1,050, , , , , , Business as Usual Sustainable Technology (Base) Aggressive Technology (Low) 105

107 Design Day Forecast natural gas GJ/day 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5, Business as Usual (High) Sustainable Technology (Base) Aggressive Technology (Low) 106

108 Terasen Gas (Whistler) Inc. & Terasen Gas (Vancouver Island) Inc. TGVI System Capacity

109 TGVI Customers Residential & Commercial Core market LDC TGS & Terasen Gas (Whistler) Industrial customers (VIGJV) Generation (BC Hydro) 108

110 TGVI System Current system capacity approximately 153 TJ/d Whistler design day 7500 growing to about 8200 GJ/d Annual Load 750,000 to 850,000 GJ (30-32% load factor) No immediate impact on system expansion requirements Future expansion facility requirement dependant on: VIGJV future demand requirements ICP s requirement for firm capacity TGVI Core Market Growth Burrard Thermal Operation Availability of on-system storage resources Page 109

111 Customer Demand 250 TGVI Design Day Forecast 200 Gigajoules per Day TGVI Core Whistler BC Hydro Squamish VIGJV 2005 Capacity Year beginning November Page 110

112 Commercial Arrangements Transport Agreement Consistent with serving TGVI and TGS core markets Terms & Conditions 15 years initial term with evergreen annual renewal Termination payment after initial term based on then book value of Whistler facilities Allocation of TGVI transmission costs based on TGW s peak day demand Unit toll based on annual forecast of peak day and annual load Maximum contract demand based on initial pipeline capacity Capital Contribution Agreement TGW pays capital contribution when TGVI natural gas service first commences Maximum TGVI rate base addition $21,000 million Based on recovery of TGVI incremental revenue requirement through forecast of tolls Page 111

113 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Financial Analyses / Business Case Dave Perttula

114 Financial Presentation 1. Description of financial analysis process 2. Presentation of results 3. Conclusions / observations Page 113

115 Gas Movement to Whistler Gas delivered from the supply area to Sumas using pipeline and storage capacity leased by TGVI. Sumas Eagle Mountain (Coquitlam) on the TGI Coastal Transmission System. Eagle Mountain Squamish on the TGVI High-Pressure Transmission System. TERASEN GAS (Vancouver Island) TGVI Transmission Pipeline TGVI Distribution Service Area Squamish - Whistler on the Proposed Whistler pipeline. Distribution within Whistler by Terasen Gas Whistler (TGW) TGI Coastal Transmission System TGI Distribution Service Area Page 114

116 IP Pipeline Commercial Arrangements TGVI builds and operates lateral to Whistler in order to provide natural gas transportation service to TGW TGVI adds pipeline capital costs net of TGW capital contribution to rate base. TGVI transmission cost-ofservice increased for IP pipeline O&Ms, property taxes, etc. TGVI service rates based on current cost allocation principles TGW capital contribution is determined to ensure TGVI s existing customers indifferent to the added IP Pipeline COS. Page 115

117 Pipeline Commercial Arrangements Capital Contribution calculation o o Contribution is the amount which allows the 15-year present value of Whistler pipeline revenue requirement to equal the transportation service rate revenue. Final contribution to be determined after construction completion i.e. capital cost variations are to the account of TGW Rates for gas transportation service to be set annually o o Rates to be specified on a $/GJ basis Annual resetting will be based on Whistler demand nomination and Whistler load Page 116

118 Whistler Natural Gas Project PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Elements of TGW Cost of Service Analysis - Natural Gas Scenarios Rate Base Existing distribution grid NG conversion costs Capital contribution to TGVI Retired Propane Plant book value less sale proceeds NG Study Deferral Account & Development Costs Expenses Natural gas GLJ forecast Transportation toll to TGVI O&M, property taxes, depreciation & amortization adjusted to reflect NG changes Return debt interest & ROE Load forecast NG scenarios per RP Update Page 117

119 TGW Propane Scenarios PROPANE STORAGE NESTERS PLANT PROPANE STORAGE FUNCTION JUNCTION Elements of TGW Cost of Service Analysis - Propane Scenarios Rate Base Existing distribution grid and propane handling/storage facilities Additional capital for propane expansion scenarios NG Study Deferral Account Expenses Propane GLJ forecast O&M, property taxes, depreciation & amortization forecast using existing Rate Base Return debt interest & ROE Page 118

120 Financial Analysis Summary Natural Gas TGVI Transmission System Analysis Forecast allocated costs without TGW Determine TGW annual revenue using same allocated cost and Whistler peak day IP Pipeline Cost of Service Compare TGW annual revenues to IP Pipeline cost of service capital contribution determined to account for difference Total TGW Cost of Service and Cost of Commodity determined on a $/GJ basis Page 119

121 Financial Analysis Summary Steps in the Analysis Natural Gas Scenarios: 1. TGVI Transmission Cost of Service Determination of TGVI $/GJ/day of peak day demand TGVI $/GJ/day applied to TGW peak day to determine annual revenue to be paid by to TGW to TGVI Annual TGW revenues divided by annual volumes to determine $/GJ unit toll 2. Annual TGW revenues compared with IP Pipeline cost of service Capital Contribution determined which sets on a PV basis the net cost of service of the IP Pipeline equal to annual TGW revenues Page 120

122 Financial Analysis Summary Steps in the Analysis Natural Gas Scenarios: 3. Delivered cost of natural gas to Whistler determined on a $/GJ basis Total TGW cost of service and cost of commodity calculated Existing cost of service adjusted for changes due to NG Project Includes capital contribution, NG conversion costs and recovery of retired propane plant and Pipeline Study Deferral Account Demand forecast as per Sustainable Technology Scenario from TGW 2005 Resource Plan Update Base capital costs Sensitivities developed High and low demand forecast scenarios High and low capital cost scenarios 4. Develop Competitive Energy Comparisons for Electricity and GSHP Page 121

123 Competitive Pricing - Electric Competitive electricity based on current tariffs rates and marginal costs Current tariff rates weighted by volumes in applicable BC Hydro classes and escalated at 1%. (See table below) Marginal electricity line estimated based on Tier II pricing from TSR Settlement (Industrial Stepped Rates) 2005 BCH Tariff Energy Conversion Variable cost $/KWh 90% Efficiency KWh/GJ Efficiency Adjusted Weighted Electricity Rate - Usage Average $/GJ Weighting $/GJ RCS - 1/2 $ % $ % $ SCS - 1/2 $ % $ % $ LCS - 1 $ % $ % $ LCS - 2 $ % $ % $ LCS - 3 $ % $ % $ % $ Page 122

124 Competitive Pricing - GSHP Expected adoption of GSHP - greenfield projects initially some conversions over time Delivered cost of energy: Greenfield low end delivered cost in the range of $13/GJ levelized Retrofit - economically challenged relative to alternatives more in the range of $20/GJ levelized GSHP delivered cost of energy developed using a utility cost of service methodology Page 123

125 Updates to Financial Analysis Changes identified in responses to BCUC IR#1: Transportation fuel gas added AECO basis for natural gas price forecast instead of Sumas Deferral account and pre-development costs amortization commencement changed to 2009 Base NG scenario per Application - $16.29/GJ Base NG scenario after adjustments - $16.62/GJ Page 124

126 Results Propane Scenarios $25 $23 New Facility Additions $21 Average Unit Cost ($/GJ) $19 $17 $15 $13 $11 $9 15-yr levelized Propane: Low Case - No Expansion $17.87 Propane: Base Case - No Expansion $17.54 Propane: Base Case - Expansion $19.83 $7 Electricity: Weighted BCH Tariff (1% Escalation) $15.41 Electricity: Long Run Marginal (2% Escalation) $19.60 $ Propane: Low Case - No Expansion Propane: Base Case - No Expansion Propane: Base Case - Expansion Electricity: Weighted BCH Tariff (1% escalation) Electricity: Long-Run Marginal (2% escalation) Page 125

127 Results Natural Gas (Demand Sensitivities) $25 Sensitivity to Demand Forecast $23 Natural Gas in Whistler $21 Average Unit Cost ($/GJ) $19 $17 $15 $13 $11 $9 15-yr levelized Pipeline - Low Demand Forecast $17.36 Pipeline Base Case $16.62 Pipeline - High Demand Forecast $16.21 $7 Electricity: Weighted BCH Tariff (1% Escalation) $15.41 Electricity: Long Run Marginal (2% Escalation) $19.60 $ Pipeline - Low Demand Forecast Pipeline - Base Case Pipeline - High Demand Forecast Electricity: Long-Run Marginal (2% escalation) Electricity: Weighted BCH Tariff (1% escalation) Page 126

128 Natural Gas and Propane Comparisons (15-yr levelized) $25 Demand Forecast Sensitivities 15-yr Levelized Average Unit Costs ($/GJ) 5.84% Discount Rate $20 $19.60 $15.41 $15 $10 $5 Marginal Electricity (2% escalation) $17.36 $16.62 $8.25 $8.25 $2.61 $2.61 $16.21 $8.25 $2.61 Weighted BCH Tariff (1% escal) $17.87 $17.54 $12.88 $12.88 $19.83 $12.88 $6.50 $5.76 $5.34 $4.99 $4.66 $6.95 $- Pipeline - Low Demand Pipeline - Base Case Pipeline - High Demand Propane: Low Case - No Expansion Propane: Base Case - No Expansion Propane: Base Case - Expansion TGW Delivery Margin TGVI Transport Cost of Gas Page 127

129 Propane Scenarios (15-year levelized) $25 Demand Forecast Sensitivities - Propane 15-yr Levelized Average Unit Costs ($/GJ) 5.84% Discount Rate $20 $15 $10 $5 $17.87 $12.88 $17.54 $12.88 $19.83 $12.88 $18.27 $12.88 $4.99 $4.66 $6.95 $5.39 $- Propane: Low Case - No Expansion Propane: Base Case - No Expansion Propane: Base Case - Expansion Propane: High Case - Existing Facility Expansion TGW Delivery Margin TGVI Transport Cost of Gas Page 128

130 IP Pipeline Capital Cost Scenarios (15-year levelized) $25 Capital Cost Sensitivities 15-yr Levelized Average Unit Costs ($/GJ) 5.84% Discount Rate $20 $19.60 $15.41 $15 $10 $5 $15.80 $8.25 $2.61 $16.62 $8.25 $2.61 Long Run Marginal Electricity (2% escalation) $17.41 Weighted $17.54 BCH Tariff (1% escalation) $8.25 $2.61 $12.88 $4.94 $5.76 $6.55 $4.66 $- Pipeline - Low Capital Cost Pipeline - Base Case Pipeline - High Capital Cost Propane: Base Case - No Expansion TGW Delivery Margin TGVI Transport Cost of Gas Page 129

131 Natural Gas and Propane Scenarios (vs. GSHP) $25 Demand Forecast Sensitivities 15-yr Levelized Average Unit Costs ($/GJ) 5.84% Discount Rate $20 $15 $13 $10 $5 $17.36 $8.25 $2.61 GSHP - Retrofit GSHP Greenfield $16.62 $8.25 $2.61 $16.21 $8.25 $2.61 $17.87 $17.54 $12.88 $12.88 $19.83 $12.88 $6.50 $5.76 $5.34 $4.99 $4.66 $6.95 $- Pipeline - Low Demand Pipeline - Base Case Pipeline - High Demand Propane: Low Case - No Expansion Propane: Base Case - No Expansion Propane: Base Case - Expansion TGW Delivery Margin TGVI Transport Cost of Gas Page 130

132 Conclusions / Observations 1. Financial analysis supports the natural gas option 2. Natural gas option remains the preferred solution across a range of capital cost and demand sensitivities 3. Natural gas improves TGW s competitive position relative to propane, although the competitive challenge against alternative energy sources is not eliminated 4. Natural gas vs. GSHP comparison supports the demand forecast assumptions that GSHP growth in Whistler will be mainly in greenfield developments and only gradually adopted in retrofit markets. Page 131

133 Terasen Gas (Vancouver Island) Inc. and Terasen Gas (Whistler) Inc. Whistler Natural Gas and IP Pipeline CPCN Applications Preferred Portfolio and Summary of Project Benefits Cynthia Des Brisay

134 Balanced Approach to Planning TGW Resource Planning Objectives Provide service at least delivered Cost Ensure Reliable and Secure Supply Reduce Rate Volatility Balance Socio-economic Impacts 133

135 Delivered Cost & Competitiveness $25 Demand Forecast Sensitivities 15-yr Levelized Average Unit Costs ($/GJ) 5.84% Discount Rate $20 $19.60 $15.41 $15 $10 $5 Marginal Electricity (2% escalation) $17.36 $16.62 $8.25 $8.25 $2.61 $2.61 $16.21 $8.25 $2.61 Weighted BCH Tariff (1% escal) $17.87 $17.54 $12.88 $12.88 $19.83 $12.88 $6.50 $5.76 $5.34 $4.99 $4.66 $6.95 $- Pipeline - Low Demand Pipeline - Base Case Pipeline - High Demand Propane: Low Case - No Expansion Propane: Base Case - No Expansion Propane: Base Case - Expansion TGW Delivery Margin TGVI Transport Cost of Gas 134

136 Secure and Reliable Supply Eliminate dependence on rail and truck deliveries Dedicated delivery infrastructure Benefit from TGI s gas supply portfolio 135

137 Reduced Rate Volatility $20 Historical Average Large Commercial Rates: Lower Mainland & Whistler $18 $16 Average Rate ($/GJ) $14 $12 $10 $8 $6 $4 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Whistler LML Rate 3 LML Rate 5 136

138 Socio-economic Impacts - Whistler 2020 Excerpt from Energy Strategy The Energy Strategy is concerned with meeting Whistler s energy needs in an affordable, reliable and sustainable way, while managing air quality and greenhouse gas emissions and contributing to economic development. It focuses on energy supply and direct use related to the municipality s operations, the resort community, and to some degree, travel to and from Whistler. Natural gas alternative: is more affordable than propane is less GHG intensive than propane facilitates local NGV program; thus, reduces emissions of common air contaminants from transportation sector facilitates demonstration of local British Columbia NGV technology supports development of alternative energy technology will generate a total employment benefit of up to 255 full-time equivalents 137

139 Socio-economic Impacts GHG Emissions Transportation 5,000 4,500 Annual Vehicle Emissions in ,405 Annual Emissions (tco2e) 4,000 3,500 3,000 2,500 2,000 1,500 3, tco2e 20% reduction 1, Status Quo (Diesel and Gasoline) NGV and FCV A natural gas vehicle reduces GHG lifecycle emissions by 16% and 21% over an equivalent diesel and gasoline vehicle respectively. 138

140 Socio-economic Impacts CAC Emissions Transportation cont Contaminant Reduction in Emissions (NGV versus Gasoline) Light Duty Vehicles Contaminant Percentage Reduction over Gasoline CO -67.3% NOx -35.7% SMOG Ozone-weighted -87.6% SOx -47.6% PM -19.4% GHG -21.6%* *Projected to increase to -26.6% in Contaminant Reduction in Emissions (NGV versus Diesel) Heavy Duty Vehicles Contaminant Percentage Reduction over Diesel NOx -35% to -50% Sulphur Emissions -90% Particulate Emissions -95% Air Toxic Emissions Many lower GHG Emissions -6% to -16% 139

141 Socio-economic Impacts GHG Emissions Space Heat and Hot Water Propane GHG intensity = 59 tco2e/1000 GJ Natural gas GHG intensity = 50 tco2e/1000 GJ a 15% reduction in GHG intensity Un-Captured, 2,300 GSHP Peaking, 242 Meadow Park, 708 Total emissions 47,754 tco2e GSHP Peaking, 205 Meadow Park, 600 Total emissions 40,469 tco2e 7,285 tco2e 15% reduction Propane Base Scenario with No Facility Expansion Natural Gas Pipeline Base Scenario Existing Propane Load, 44,503 Space Heat, 39,

142 Socio-economic Impacts Land Impacts Eliminates propane railcar offloading and shunting activities at Mons Siding near residential neighbourhoods Propane facilities at Nesters and Function Junction can be removed and land can be redeveloped 141