BCSEA-BCSC IR No. 2 Pacific Northern Gas Ltd. PNG-West 2014 RP and Pacific Northern Gas (N.E.) Ltd. PNG(N.E.) 2012 RP Update Page 1

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1 Page 1 B-8 REQUESTOR NAME: BC Sustainable Energy Association and Sierra Club BC INFORMATION REQUEST ROUND NO: 2 TO: Pacific Northern Gas (PNG) and Pacific Northern Gas (N.E.) (PNG(NE)) DATE: July 15, 2014 PROJECT NO: APPLICATION NAME: PNG 2014 Resource Plan for PNG West; and PNG(NE) Resubmission of DSM Part of 2012 Resource Plan 11.0 Topic: DSM Reference: Exhibit B-5, BCSEA PNG agrees that the goals of DSM under the UCA do not include load building. [Exhibit B-5, BCSEA 1.2.2, underline added] One of the reasons PNG gives for intentionally limiting the selection of DSM programs to be included in the proposed portfolio to programs that target the sectors identified in section 3 of the DSM Regulation is that For PNG, the greatest opportunity to reduce the cost of service is through improving pipeline efficiency by increasing the load factor on its existing pipeline assets and thereby lowering the unit cost of service to customers of the pipeline. [underline added] 11.1 PNG agrees that the goals of DSM under the UCA do not include load building and yet PNG cites load building as a reason why its proposed DSM Plan excludes any and all cost-effective DSM beyond the minimum requirements of DSM Regulation section 3. Please reconcile these positions. PNG does not cite load building as a reason why its proposed DSM Plan excludes any and all cost-effective DSM beyond the minimum requirements of DSM Regulation section 3. In its response to BCSEA 1.5.1, PNG simply discusses the challenges of implementing cost effective DSM programs, particularly on a system having excess capacity and where there is no opportunity cost associated with the alternative of adding capacity through system expansions. PNG s reference to lowering the unit cost of service to all of its customers through increasing the pipeline load factor underlines PNG s position that the DSM programs addressing the DSM Regulation section 3 requirements are not expected to result in lower costs to a broad segment of PNG s customers.

2 Page Topic: DSM Reference: Exhibit B-5, BCSEA (and many other references) PNG has developed the DSM Plan with the primary objective of meeting the adequacy requirements of section 44.1(8)(c) of the Utilities Commission Act. That said, this initial DSM Plan is focusing on making programs available to those sectors identified in Section 3 of the DSM Regulation The two sentences appear to say the same thing, yet they are connected by That said. Please explain what is meant. These two sentences do say the same thing, that the DSM Plan was developed to meet the adequacy requirements of Section 3 of the DSM Regulation.

3 Page Topic: DSM Reference: Exhibit B-5, BCSEA 1.4.1; PNG directed Energitix to limit, at this time, its recommendations regarding a DSM Plan to meeting the section 3 adequacy requirements. Please see also the response to BCSEA 1.5.1, below. [BCSEA 1.4.1] PNG limited the selection of the DSM programs in the DSM Plan to the sectors identified in Section 3 of the DSM Regulation to comply with the Regulation.... [BCSEA 1.5.1] 13.1 Please confirm that the DSM Plan for which PNG seeks Commission acceptance contains two main features: (a) future filing of a DSM expenditure schedule for PNG to implement DSM programs certainly addressing low income households (DSM Regulation, s.3(a)), school (s.3(c)) and postsecondary education (s.3(d)) and possibly rental accommodations (s.3(b)) if cost-effective; and (b) no other DSM programs or activities even where such measures would be cost-effective. If this is not the case, please explain. Confirmed. Once the Commission approves the proposed DSM Plan, PNG will prepare and submit an application for funding and will conduct a more detailed analysis of the programs included in the DSM Plan namely the low-income program, the Conservation Education and Outreach program, and possibly a rental program.

4 Page In PNG s view, is it open to the Commission to determine that PNG s proposed DSM Plan is inadequate because the Plan fails to pursue any costeffective DSM beyond the adequacy requirements of section 3 of the DSM Regulation? If not, why not? PNG is of the view that the adequacy of the proposed DSM Plan, as part of PNG s long-term resource and conservation planning, must be assessed in the context of section 44.1 of the Utilities Commission Act. Per section 44.1(8) of the Act, the Commission is to make a determination on the adequacy of cost-effective demand side measures, however, the Act does not define adequate measures or their characteristics. The determination of the meaning of adequacy is left to the DSM Regulation and the Ministry of Energy and Mines Guide to the Demand-Side Measures Regulation (Aug 2012). Per section 3 of the DSM Regulation and section 3.1 of the Guide, utilities are required to include certain measures in the DSM portfolio in order for the portfolio to be considered adequate for purposes of section 44.1(8)(c) of the Act, with specifically enumerated programs for: low-income households, rental accommodations, and schools including postsecondary institutions. Each of these programs is a necessary component of a DSM plan in order for the plan to meet the adequacy requirement. On this basis, as PNG s proposed DSM Plan includes all of the enumerated program elements, PNG respectfully submits that its proposed DSM Plan meets the adequacy requirements If the Commission was to determine that PNG s proposed DSM Plan is inadequate because the Plan fails to pursue any cost-effective DSM beyond the adequacy requirements of section 3 of the DSM Regulation, what directions should the Commission give PNG concerning the revision and refiling of a DSM Plan? PNG respectfully submits that, as per its response to Question 13.2, it is of the belief that the proposed DSM Plan meets the adequacy requirements and therefore declines to speculate that the Commission may determine otherwise and/or what the Commission s subsequent direction on this matter may be.

5 Page Topic: DSM Reference: Exhibit B-5, BCSEA PNG has limited experience with developing and delivering DSM programs. It therefore, believes that limiting the planned DSM programs to the sectors identified in section 3 of the DSM Regulation at this time allows it to develop its expertise and comply with the Regulation Given that PNG has limited experience with developing and delivering DSM programs, does PNG agree that an alternative is for PNG to contract with another party to have DSM programs delivered? As indicated on page 28 of the DSM Plan, PNG plans to pursue partnerships for developing and developing DSM programs. Furthermore, as indicated in response to BCUC IR , PNG has had preliminary meetings and discussions with a number of organizations including BC Hydro, FortisBC, and the BC Sustainable Energy Association. During these meetings, PNG discussed the various programs offered by these organizations and the potential for partnering to deliver some of the programs offered by these organizations in PNG s service territory. All of these organizations were open to further exploring the possibility of partnering with PNG. Some of these organizations already partner with one another to deliver some of their programs, such as the low-income programs, and they viewed a partnership with PNG as an extension of their existing partnership arrangements Please comment on the proposition that regardless of whether PNG s DSM Plan is limited to the minimum requirements of DSM Regulation section 3 or includes all cost-effective DSM it would it would make more sense for PNG to contract with the FortisBC Energy Utilities to deliver DSM to PNG s customers than for PNG to develop and deliver its own DSM programs. Please refer to the response to Question 14.1 above. While partnering with FEI to develop and deliver DSM programs makes sense, PNG does not intend to limit partnership discussion with FEI only. PNG plans to discuss partnership opportunities with several organizations to ensure that it forms partnerships that are in the best interest of PNG customers.

6 Page Topic: DSM Reference: Exhibit B-1, Appendix A, Summary of Resource Plan Objectives; Exhibit B-5, BCSEA PNG agrees that the goals of DSM under the UCA do not include load building. [Exhibit B-5, BCSEA 1.2.2] 15.1 Please confirm that promoting natural gas as the appropriate fuel for heating, hot water and cooking is load building. While PNG agrees that simply promoting natural gas as the appropriate fuel for heating, hot water and cooking is load building, promoting efficient use of natural gas for heating, hot water, and cooking is considered DSM since it can reduce energy use and reduce GHG emissions Please confirm that the B.C. Energy Objectives do not include promoting natural gas as the appropriate fuel for heating, hot water and cooking. While the BC Energy Objectives do not specifically include promoting natural gas as the appropriate fuel for heating, hot water and cooking, they do include: 2 (g) to reduce BC greenhouse gas emissions 2 (h) to encourage the switching from one kind of energy source or use to another that decreases greenhouse gas emissions in British Columbia

7 Page Topic: GHG emissions Reference: Exhibit B-5, BCSEA For what years (historically) has PNG filed GHG emissions reports with the B.C. Ministry of Environment? PNG has filed GHG emissions reports with the B.C. Ministry of Environment for the years 2006 through Please provide a table showing PNG s annual GHG emissions in tco 2 e, by Combustion, Flaring, Venting, Fugitive, and Total, for 2013 and for previous years for which PNG has filed GHG emissions reports with the B.C. Ministry of Environment Combustion (tco 2 e) 10,683 11,625 10,146 10,002 7,973 6,318 6,377 5,535 Flaring (tco 2 e) (a) (a) (a) (a) (a) 2,617 2,638 2,418 Venting (tco 2 e) 10,323 10,152 16,007 4,734 7,284 6,462 2,405 6,204 Fugitives (tco 2 e) 23,559 23,746 23,229 23,872 24,571 16,537 11,468 13,529 Total (tco 2 e) 44,564 45,523 49,382 38,608 39,827 31,934 22,888 27,685 Notes: (a) GHG emission from flaring were not calculated separately and were included with the combustion emissions. (b) The 2006 through 2009 GHG Emissions were only calculate at a Corporate level per MOE regs at the time of reporting in (c) All GHG reported were calcaulated using the MOE prescribed calculation methods in force at the time.

8 Page Please provide a table showing PNG s annual GHG emissions of methane (CH 4 ), throughput of natural gas, and the former as a percentage of the latter, for 2013 and for previous years for which PNG has filed GHG emissions reports with the B.C. Ministry of Environment. Noting that the CH 4 emissions are reported in tonnes in the GHG emissions report, please use the same units for the methane emissions and the natural gas throughput.

9 Page Topic: PNG Pipeline Looping Project Reference: Exhibit B-4, BCUC 5.3; 5.1; 5.1.1; 5.2; 5.3 PNG does not believe that there will be any adverse impacts to its operations from LNG exports. PNG is developing the Pipeline Looping Project (PLP) in order to participate in the growing interest in LNG exports and to increase throughput on its system specifically for the benefit of its existing customers who will see significantly lower delivery charges. Please see also the response to BCUC [Exhibit B-4, BCUC 5.1.1] 17.1 To what risks, financial or otherwise, are PNG s ratepayers exposed in connection with PNG s development of the Pipeline Looping Project? The PLP remains in its early stages, however, PNG does not anticipate any material risks financial or otherwise during the development stages of the PLP project. Should the project continue to advance and a CPCN application is filed with the Commission, PNG would expect that at that time all project risks would be fully identified, reviewed and evaluated through the application review process. Confirmed Is the Pipeline Looping Project being developed by PNG in PNG s capacity as a public utility under the Utilities Commission Act? 17.3 If PNG is successful in developing the PNG Pipeline Looping Project what services will PNG provide and to whom? Will these services be regulated under the Act? PNG is intending to operate its existing facilities and the new facilities (i.e. PLP) as a single integrated system providing gas transportation service to its existing and new customers alike. It is PNG s current intention to have these services regulated by the Commission.

10 Page In developing the Pipeline Looping Project, does PNG consider itself to be in competition with other companies developing natural gas transportation and LNG export projects? No, not directly, as PNG is not involved in developing a LNG liquefaction and export terminal, while each of the other pipelines being proposed is intended to provide service to a specific terminal only To PNG s knowledge are all the companies developing natural gas transportation and LNG export projects within the PNG service area, apart from PNG, doing so not as a public utility under the Utilities Commission Act? To the best of PNG s knowledge, yes If PNG is developing the Pipeline Looping Project as a public utility, what are the competitive advantages and disadvantages of being a public utility in competing in the market for natural gas transportation and LNG export facilities? To be clear, PNG is not participating in the development of any LNG export facilities, but rather is only a gas transportation service provider. Because of the number of potential shippers who are choosing to develop non-bcuc regulated pipelines, one can only assume they perceive some competitive disadvantage with being a public utility. PNG is not prepared to speculate what these might be. However, for its own expansion project, PNG anticipates that development of the PLP as a public utility asset will result in lower rates for its existing customers than they would otherwise experience. PLP will also increase the security of uninterrupted supply due to the twinning of the pipeline. As project development timelines are already lengthy, the additional time required to complete the CPCN application and review process is seen as a burden and competitive disadvantage from a potential shippers perspective.