2016 Rate Design Application Workshop 2 Transportation Review

Transcription

1 2016 Rate Design Application Workshop 2 Transportation Review Atul Toky Manager, Rate Design and Tariffs Rohit Pala Resource Development Manager Stephanie Salbach Transportation Services Manager Ronald J. Amen Black & Veatch Management Consulting LLC August

2 Introduction - Objectives for Today Provide Services Overview and Background Inform & Review services within Transportation Model Discussion on Key Topics related to Transportation Model Summarize Key Issues List 2

3 Workshop Guidelines Participate Respect other participants and presenters Questions & responses as we go / if needed - add to an Issues List Issues list to be compiled and revisited following presentation One speaker at a time Documentation: Meeting Notes Issues List FortisBC Responses to Issues Issues List Items not Addressed During Workshop 3

4 Agenda Discussion Guide Services Overview and Background Services within the Transportation Model Key Discussion Topics Next Steps Monthly vs Daily Balancing Balancing Tolerance and Value Additional T-South Capacity Other Discussion Topics Concluding Remarks Compile Key Issues List Workshop 3 Rate Design and Segmentation 4

5 Part I DISCUSSION GUIDE 5

6 All Components Affect Rate Design Gas Wells Producing Basin Transmission Lines Gas Processing Plant LNG Compressor Stations Large Volume Customer Meter/ Regulator Underground Storage Interconnect (Meters / Regs) Distribution Mains Residential Customer Commercial Customer 6

7 Services Overview and Background 7

8 Station 2 Sales Service Interconnect AECO/NIT Receives gas from supply hubs & storage and transports it to the FEI system for delivery to customers Managed by the contracting of midstream resources under the ESM Transportation Service Sumas Kingsgate allows customers to bring gas to FEI system at specific points whereby FEI take possession and deliver it to customers premises 8

9 Overview of FEI Services & Rates FEI Sales Transportation Throughput Bundled Unbundled 40% Commodity 58% Storage & Transport Storage & Transport 2% Delivery Delivery Delivery Storage and Transport also referred to as Midstream 1 PJ = 1,000 TJ = 1,000,000 GJ 9

10 From Wellhead to Burnertip Gas Supply Hub Marketer Commodity Supply FEI Commodity Supply Commodity (CCRA) Storage & Transport (MCRA) FEI System Essential Services Model (ESM) Customers Customer Meter FEI Delivery System Delivery Margin 10

11 Daily System Load Balancing Overview Sales Customers Supply Total Daily System Supply Transportation Customers Supply FEI interconnect Supply vs. Demand Daily System Imbalance Daily System Imbalance Managed by ACP Resources Total Daily System Demand Sales Customers Demand Transportation Customers Demand 11

12 Services within Transportation Model 12

13 Transportation Model System Throughput Customer Pooling Imbalance Return Balancing Tolerance and System Inventory Charges as defined in the FEI Transportation Rate Schedules 13

14 FEI System Throughput & Customers Annual Throughput No. of Customers 3.0% 0.2% 40% 58% 96.8% 2% Bundled Sales Unbundled Sales Transportation Service 14

15 Customer Pooling Daily LML Monthly LML Lower Mainland Marketers may pool their customers in daily and monthly balanced groups at specific interconnects Majority of customers and load are at LML and INT interconnects 2,400+ customers 16 Daily groups and 34 Monthly groups 600 customers in Daily Balanced groups / Load ~ 40 PJ/year in ,865 customers in Monthly Balanced groups / Load ~ 33 PJ/year 15

16 Imbalance Return Imbalance Return Lower Mainland and Interior Tool for daily balanced groups only FEI adjusts as needed 16

17 Balancing Tolerance and System Inventory DAILY Balanced Groups 20% Tolerance MONTHLY Balanced Groups No Requirement FEI can reduce the balancing tolerance to 5% System Inventory Levels 17

18 Charges Transportation Rate Schedules Backstopping and replacement gas Daily balancing gas and balancing premium charges Monthly balancing gas Unauthorized Overrun (under and over 5%) Demand Surcharge 18

19 Part II KEY DISCUSSION TOPICS 19

20 Topic #1 Monthly vs Daily Balancing 20

21 Monthly vs Daily Balancing FEI recommends all customers to be daily balanced Marketers have tools available to manage fluctuation in demand in the day Marketers with daily balanced groups currently effectively balance FEI balances the total system daily at major interconnects 21

22 Topic #2 Balancing Tolerance and Value 22

23 A Sampling of Common Industry Practices LDC balancing provisions are a product of their position on the interstate pipeline grid and proximity to market hubs 23

24 Issues Related to Current Balancing Provisions Aggregate daily imbalances fluctuate widely on FEI s system due to daily under-supply by monthly balanced marketer pools and the flexible 20% balancing threshold currently allowed Imbalances require the utilization of resources on FEI s system (i.e., injecting or withdrawing storage gas), which are funded by sales customers This creates a mismatch between services received by transportation customers & the underlying resources paid for by sales customers 24

25 Assumptions used to value current Balancing Services A methodology was developed by Black & Veatch to calculate the estimated replacement cost of the balancing services provided by FEI Analysis reviewed five years of daily system balancing data; selected daily imbalance and delivered volumes for all marketers from 2015 as an indicative year Considered costs of contracting for storage and transportation assets at Jackson Prairie Storage, Mist Storage, and Northwest Pipeline These facilities were selected because of their significant intraday nomination activity relative to other assets, indicating their importance in balancing the system Max tariff rates for all of the capacity resources were used 25

26 Cost / Risk Trade-off Associated with Replacing Balancing Services Imbalance in Excess of Threshold Contracted MDQ ( 3 rd Quartile) Analysis examined the marketer s position when considering how to address its anticipated daily imbalances with firm contracted capacity for a given year Contracting for a high MDQ* would leave a marketer paying high demand charges, even on days it is not using the capacity (see blue dots below the red line) Contracting for a low MDQ would leave a marketer with large volumes on which it must pay imbalance charges (see blue dots above the red line) Chart depicts an individual indicative marketer; analysis was conducted using all marketers on the FEI system Analysis is based on a 3rd quartile approach, an assumption selected that adequately balanced firm reservation charges with the risk of incurring imbalance charges * MDQ Maximum Daily Quantity 26

27 Results Base Case Total Charges for Volumes in Excess of Threshold (Excluding Imbalance Charges) Total Charges $/GJ 5% $15,100,000 $ % $11,600,000 $ % $8,600,000 $ % $6,500,000 $0.09 Calculated by adding reservation & volumetric charges, then dividing by transportation customer throughput Lower balancing tolerances require marketers to contract for more capacity to manage imbalances, resulting in higher costs Subtract Replacement Costs Relative to a 5% Balancing Threshold Replacement Cost $/GJ 10% $3,500,000 $ % $6,500,000 $ % $8,600,000 $0.12 Calculated by taking difference between industry median 5% threshold result and 10%, 15%, or 20% threshold result Higher thresholds require more resources and more costs to replace; current replacement cost of FEI s service is $

28 Sensitivities Three sensitivity cases were performed to assess how certain key assumptions would impact the results Replacement Cost: Exclude Imbalance Return Case $/GJ Δ to Base Case 10% $0.05 $ % $0.09 $ % $0.13 $0.015 Under a 20% threshold, the implied value of imbalance return service is $0.015/GJ Replacement Cost: Include Imbalance Charges Case $/GJ Δ to Base Case 10% $0.05 ($0.002) 15% $0.09 ($0.001) 20% $0.13 $0.009 Based on a 3rd quartile portfolio balancing decision, there is virtually no difference when including imbalance charges Replacement Cost: 0% Threshold Case $/GJ Δ to Base Case 5% $0.05 $ % $0.10 $ % $0.14 $ % $0.17 $0.048 When replacement costs are assessed relative to a 0% threshold, costs increase by amount equal to the 5% threshold replacement value case All sensitivity cases examined indicate replacement cost estimates remain within a relatively close range 28

29 Summary of Balancing Tolerance and Value FEI should continue to balance the system as a whole for both Sales and Transportation Customers. There is a value associated with the current balancing provisions and tolerances that FEI provides to its Transportation Customers Different value for different balancing tolerance levels FEI would like to consider inputs on: 1. Balancing Tolerance: 20%, 15%, 10% or 5%? 2. Appropriate Balancing Charges for different tolerance levels? 3. How should FEI account for these balancing Charges Captured in R:C ratios for Transportation Customers? Derive a Midstream Fee? 29

30 Topic #3 Additional T-South Capacity 30

31 Station 2 Current T-South constraints Interconnect FEI secured additional T-South capacity for Transportation customers To protect the customer and manage risk from buying at Sumas Sumas 31

32 Additional T-South Capacity FEI received BCUC approval to contract for additional T-South capacity FEI collaborated with marketers to allocate the capacity to transportation customers Requests received exceeded capacity available FEI is working with marketers to have contracts in place for the start of the 2016/17 gas year 32

33 Update on 2016/17 Gas Year This capacity is administered through Gas EDI with marketers on behalf of their customers Capacity uptake is fully allocated to marketers/customers Net Benefit to Midstream costs (IT rate vs Toll) Could change year to year based on uptake of capacity 33

34 Additional T-South capacity: Options to Manage OPTION A Managed in Midstream Group under RS30 OPTION B Included in Transportation Rate Schedules Considerations for these options Cost Recovery (Impact to Midstream) Long term commitment Transparency Administration Flexibility Option A Option B 34

35 Other Discussion Topics 35

36 Part III CLOSING REMARKS & NEXT STEPS 36

37 Next Steps Documentation & Communication FEI distributed key issues list and meeting notes for Workshop 1 (FEI COSA and Fort Nelson Service Area) FEI will distribute key issues list and post notes from today s workshop by Aug 26 Website: Customer Research Customer survey for FEI & Fort Nelson Residential Customers Workshop 3 Rate Design & Segmentation Rate Design and Segmentation Workshop is scheduled for Aug 31 FEI will distribute the discussion guide for Rate Design & Segmentation Workshop two weeks in advance 37

38 For further information, please contact: Find FortisBC at: Fortisbc.com