TABLE OF CONTENTS

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Executive summary. i

1.0          Introduction. 1

1.1          Approvals Sought in the Application. 1

1.2          Regulatory Process. 1

1.3          Legislative and Regulatory Context. 1

1.4          Structure of the Decision. 2

2.0          Is the DSM Plan in the Public Interest?. 3

2.1          Expenditure Schedule Summary. 3

2.1.1          DSM Programs. 4

2.2          British Columbia's energy objectives. 12

2.3          Most Recently Filed Long-term Resource Plan. 14

2.4          Cost-Effectiveness of the DSM Plan. 15

2.5          The Interests of Persons in British Columbia. 20

2.6          Panel Determination. 23

3.0          Additional Approvals Sought. 23

3.1          Funding Transfer Rules. 23

3.2          Deferral Treatment and Amortization. 24

 

Commission Order G-171-23

 

Appendices

 

Appendix A: List of Acronyms

Appendix B: Exhibit List

Executive summary

On August 12, 2022, Pacific Northern Gas Ltd. and Pacific Northern Gas (N.E.) Ltd. (collectively, PNG) filed an Application for Energy Conservation and Innovation (ECI) Portfolio Funding for 2023-2024 (Application), with the British Columbia Utilities Commission (BCUC), pursuant to section 44.2 (3) of the Utilities Commission Act (UCA). PNG seeks acceptance of the proposed Demand-Side Measures (DSM) expenditure schedule for a total of $3,810,452 in expenditures for the years 2023-2024 (Expenditure Schedule). PNG also seeks the following approvals:

1.       Flexibility in the reallocation of expenditures amongst DSM programs and between program years, consistent with funding transfer rules previously approved by the BCUC;

2.       To record all DSM expenditures in a rate base regulatory asset deferral account; and

3.       To change the amortization period applicable to the DSM regulatory asset deferral account from five years to ten years.

On November 7, 2022, the BCUC established a written public hearing process to review the Application. Four interveners registered in the proceeding.

 

The regulatory review process included one round of BCUC and intervener written information requests followed by written final and reply arguments.

 

Having considered all the applicable provisions in section 44.2 of the UCA, the Panel accepts the DSM Expenditure Schedule for expenditures of $3,110,452 for the period 2023-2024 as being in the public interest. Of the total requested amount of $3,810,452, the Panel rejects the following expenditures: a) BC Hydrogen Natural Gas Blending Study in the Energy Transformation program area, in the amount of $600,000; and b) Development of Codes and Standards in the Energy Transformation program area, in the amount of $100,000. Both measures are focused on hydrogen and natural gas blending. The Development of Codes and Standards in the Energy Transformation Program is intended to advance standards required to blend hydrogen in natural gas systems and end use appliances. The program will be further defined and completed as part of PNG’s participation in the BC Hydrogen Natural Gas Blending Study. The Panel finds that PNG has not demonstrated that the use of hydrogen would conserve energy, increase energy efficiency or reduce energy demand, or shift energy use to a time of lower demand as is required to be a demand-side measure.

 

In reaching its decision, the Panel considers that, with the exception of the hydrogen blending related expenditures, PNG’s proposed Expenditure Schedule aligns with BC’s energy objectives by supporting energy conservation and efficiency and the use of clean or renewable resources for both existing and potential residential and commercial customers and potential customers, and implementing initiatives that encourage communities to reduce greenhouse gas emissions.

 

The Panel also finds that the Expenditure Schedule is consistent with PNG’s 2019 Consolidated Resource Plan (CRP) because the Expenditure Schedule continues funding programs and initiatives identified in the 2019 CRP and expands the scope of programs available to PNG’s customers. The adequacy requirements outlined in the DSM Regulation are not mandatory for s. 44. 2 applications. Therefore, the fact that the Expenditure Schedule does not meet one of these requirements does not mean the Panel must reject it.

 

The Panel finds the accepted portions of the Expenditure Schedule to be cost-effective and supports the use of a portfolio-wide assessment of cost-effectiveness.

 

The Panel also approves the continuation of the DSM funding transfer rules as previously approved in BCUC Order G-265-20; the recording of DSM expenditures in a rate base regulatory asset deferral account up to the limit approved by the Panel; and the modification of the amortization period for the DSM regulatory asset deferral account from five years to ten years.

 

 

 

1.0                          Introduction

1.1              Approvals Sought in the Application

On August 12, 2022, Pacific Northern Gas Ltd. and Pacific Northern Gas (N.E.) Ltd. (collectively, PNG) filed an Application for Energy Conservation and Innovation (ECI) Portfolio Funding for 2023-2024 (Application), with the British Columbia Utilities Commission (BCUC). For the purpose of this Decision, the Application will be referred to as PNG’s Demand-Side Measures (DSM) Expenditure Schedule for 2023-2024. PNG seeks acceptance of a schedule of DSM expenditures for the years 2023-2024 (Expenditure Schedule), pursuant to section 44.2 (3) of the Utilities Commission Act (UCA). In total, PNG requests acceptance of DSM expenditures of $3,810,452.[1]

 

PNG also seeks approval of the following:

1.       Flexibility in the reallocation of expenditures amongst DSM programs and between program years, consistent with funding transfer rules as approved under Order G-265-20;

2.       To record all DSM expenditures in a rate base regulatory asset deferral account that includes all expenditures as set out in Table 1 of the Application; and

3.       To change the amortization period applicable to the DSM regulatory asset deferral account from five years to ten years[2].

1.2              Regulatory Process 

The BCUC established a written public hearing process for its review of the Application with one round of BCUC and intervener information requests (IRs) to PNG, final arguments by PNG and interveners, and reply argument by PNG[3].

 

The following parties registered as interveners in this proceeding:

•         British Columbia Old Age Pensioners’ Organization et al. (BCOAPO);

•         British Columbia Sustainable Energy Association (BCSEA);

•         Residential Consumer Intervener Association (RCIA); and

•         City of Terrace (Terrace).

 

PNG submitted its final argument on February 14, 2023. The interveners submitted their final arguments by February 28, 2023. PNG submitted its reply argument on March 14, 2023.

1.3              Legislative and Regulatory Context

Pursuant to section 44.2(3) of the UCA, after reviewing an expenditure schedule, the BCUC, subject to subsection (5), must (a) accept the schedule if the BCUC considers that making the expenditures referred to in the schedule is in the public interest, or (b) reject the schedule. 

 

The BCUC may also accept or reject part of an expenditure schedule, pursuant to section 44.2(4) of the UCA.

 

Section 44.2(5) of the UCA provides:

In considering whether to accept an expenditure schedule filed by a public utility other than the authority, the Commission must consider:

a)       the applicable of British Columbia’s energy objectives;

b)      the most recent long-term resource plan filed by the public utility under section 44.1, if any;

c)       the extent to which the schedule is consistent with the applicable requirements under sections 6 and 19 of the Clean Energy Act (CEA);

d)      whether the schedule includes expenditures on demand-side measures;

e)      whether the demand-side measures are cost-effective within the meaning prescribed by regulation, if any; and

f)        the interests of persons in British Columbia who receive or may receive service from the public utility.

Section 44.2(5)(c) of the UCA is not relevant to this Application. Section 6 of the CEA (electricity self-sufficiency) applies only to BC Hydro and Power Authority or to applications made by public utilities under section 44.1 of the UCA, neither of which applies to PNG’s Application. Section 19 of the CEA also does not apply to PNG’s Application because no regulations have been passed under section 37(h) of the CEA prescribing public utilities for the purposes of section 19.[4]

 

Section 3 of the Demand-Side Measures Regulation (DSM Regulation)[5] defines the requirements that need to be addressed for a utility’s DSM portfolio to be deemed adequate for the purposes of section 44.1(8)(c) of the UCA. 

 

Section 4 of the DSM Regulation defines the process for determining cost-effectiveness of the demand-side measures for the purposes of section 44.2(5)(d) of the UCA.

1.4              Structure of the Decision

Section 2 of this decision addresses the matters the BCUC must consider, pursuant to Section 44.2(5) of the UCA, in determining whether to accept PNG’s proposed DSM Expenditure Schedule as being in the public interest.

 

Section 3 of this decision addresses the additional approvals sought by PNG regarding the continuation of existing funding transfer rules, a rate base regulatory asset deferral account to capture the Application’s expenditures and the modification of the expenditures amortization period.

2.0              Is the DSM Plan in the Public Interest?

Pursuant to Section 44.2(5) of the UCA, in determining whether to accept PNG’s DSM Expenditure Schedule as being in the public interest, the Panel addresses the relevant matters it must consider as set out in the applicable legislation described in section 1.3 above.

2.1              Expenditure Schedule Summary

Pursuant to section 44.2(3) of the UCA, PNG seeks BCUC acceptance of the following Expenditure Schedule:

 

Table 1: PNG DSM Expenditure Schedule for the period 2023-2024[6]

 

PNG’s DSM portfolio is organized into four program areas: residential, income qualified, commercial, and energy transformation. In addition, Enabling Activities captures expenditures that support the delivery and development of DSM programs in general and cannot be directly assigned to any one program or program area. Each program area has several programs, with one or more measures in each program. Many of the programs have previously been approved by the BCUC. PNG proposes to expand several programs and to introduce new ones where PNG has identified opportunities to serve the residential and commercial markets.[7] PNG states this Application supports a balanced approach that delivers rebates and incentives to all customer classes. Furthermore, the Application presents the case for an increase in investment in the DSM portfolio to raise participation in and overall awareness of PNG’s DSM programs, and to reduce GHG emissions associated with the combustion of natural gas.[8]

 

The CleanBC “Roadmap to 2030” (Roadmap) released by the Province of British Columbia in 2021 lays out the role the natural gas delivery system will play to help meet the Province’s target of a 40% reduction in GHG emissions from all sectors of the BC economy by 2030, as compared to emissions in 2007. More specifically, the Province has proposed a cap on GHG emissions associated with natural gas consumed in buildings and industrial processes of 6.11 MtCO2e in 2030. This cap is equivalent to a reduction of approximately 45% in emissions associated with natural gas consumption in those sectors, as compared to 2018.[9] PNG is developing and executing its Low Carbon Strategy (LCS), which comprises initiatives intended to meet the Province’s GHG reduction target in the most cost-effective manner possible^[10] including:

•         the DSM portfolio;

•         the delivery of Low Carbon Energy (LCE) such as biomethane and hydrogen that replaces natural gas produced from fossil resources (conventional natural gas); and

•         projects that result in the avoidance of GHG emissions into the atmosphere, or the removal of GHG’s from the atmosphere with permanent sequestration in biological or geological reservoirs.

2.1.1        DSM Programs

The table below summarizes approved, actual (2020 – 2021), projected (2022) and forecast (2023 – 2024) DSM expenditures for new and existing programs. In the period 2023-2024, the proposed new programs represent 8% of the total portfolio.

 

Table 2: Summary of New and Existing Programs[11]

 

The table below compares the accepted and forecast expenditures by program area in the period 2022-2024 and demonstrates the significant increase in the budgets.

 

Table 3: Approved/Forecast Expenditures[12]

Program Areas	2022	2023	2024	2022-23	2023-24
	Approved	Forecast	Forecast	Variation %
Residential Programs	188,700	275,957	450,600	46%	63%
Income Qualified	61,400	193,662	193,662	215%	0%
Commercial Programs	352,400	487,169	491,903	38%	1%
Energy Transformation	244,600	610,000	820,000	149%	34%
Enabling Activities	60,000	112,500	175,000	88%	56%
Total	907,100	1,679,288	2,131,164	85%	27%

 

PNG has added programs in both the residential and commercial program areas and has created a new “income qualified” program area that encompasses existing as well as new programs.[13]

 

A summary of PNG’s proposed expenditures and natural gas savings by program area, as well as a description of the main proposed changes, is provided below.

 

Residential Program Area

The table below summarizes the residential programs including their forecast expenditures, the average number of participants, and the cumulative annual net energy savings.

 

Table 4: Residential Program Area Budget and Cost Test Results[14]

 

 

PNG proposes to expand the Residential Program Area by providing incentives for hybrid heating and heat recovery ventilators and creating two programs: the Efficient Water Heating and Building Envelope programs.[15]

 

Income Qualified Program Area

The table below summarizes the Income Qualified programs including expenditures, the average number of participants, and the cumulative annual net energy savings:

 

Table 5: Income-Qualified Program Area Budget and Cost Test Results[16]

 

Program	Average Annual Participation	Forecast Expenditures ($)		Cumulative Annual Gas Savings  (GJ)
		2023	2024	2023	2024
Income Qualified Efficient Heating	25	125,000	125,000	1,010	2,020
Income Qualified Energy Conservation and Assistance Program (ECAP)	100	31,500	31,500	732	1,464
Income Qualified Energy Savings Kit (ESK)	381	12,162	12,162	757	1,513
Total	506	168,662	168,662	2,499	4,997

 

PNG proposes a new program, Income Qualified Efficient Heating, which consists of incentives for the early replacement of low efficiency furnaces.[17]

 

Commercial Program Area

PNG proposes to expand the Commercial program area.[18] The table below summarizes the Commercial programs including expenditures, the average number of participants, and the cumulative annual net energy savings:

Table 6: Commercial Program Area Budget and Cost Test Results[19]

 

Program	Average Annual Participation	Forecast Expenditures ($)		Cumulative Annual Gas Savings (GJ)
		2023	2024	2023	2024
Commercial Efficient Heating	23	175,680	135,500	7,794	11,239
Commercial Efficient Water Heating	326	31,264	25,081	622	1,145
Commercial Efficient Kitchens	20	2,130	2,130	161	322
Commercial HVAC Controls	63	278,095	329,193	6,877	15,576
Total	431	487,169	491,903	15,454	28,282

 

Energy Transformation Program Area

The Application renames the Conservation Education and Outreach (CEO) to the Energy Transformation Program Area to avoid confusion with the General CEO programs that are included under this program area, and to more clearly align with the purpose of the activities funded in this program area.[20]

 

The Energy Transformation Program Area is designed to raise awareness among customers about the challenges and opportunities for transforming PNG’s natural gas distribution services to lower GHG emissions.[21]

 

The table below summarizes the proposed expenditures in the Energy Transformation Program Area.

Table 7: Budget – Energy Transformation Program Area[22]

 

PNG notes that the Innovation program includes two measures focused on hydrogen and natural gas blending: (i) BC Hydrogen-Natural Gas Blending Study (Hydrogen Study); and (ii) the Development of Codes and Standards. 

 

The Hydrogen Study is a collaboration of PNG, Enbridge and FortisBC Energy Inc. (FEI) to complete a study to investigate the extent to which hydrogen produced from renewable and low-carbon resources could be blended with natural gas to reduce the carbon intensity of delivered gas in BC.[23]  

 

The overall goals of the Hydrogen Study are to:

•         Build a knowledge base to inform the requirements to introduce and increase the hydrogen blend concentration levels over time throughout the transmission and distribution systems in BC;

•         Address the unknowns to support key internal and external stakeholder decision making, including the Province of British Columbia (Province), and define the role for PNG, Enbridge, and FEI in deploying low-carbon hydrogen; and

•         Identify the near and longer term requirements to ensure the energy delivery networks and customers’ “behind-the-meter” end-use equipment, processes, systems, and applications will continue to operate safely and reliably.[24]

For the Hydrogen Study, PNG has committed to assess the ability of the natural gas distribution system in its service area to deliver a hydrogen-natural gas fuel blend safely and reliably. The Hydrogen Study is expected to allow PNG to define a project to upgrade a portion of its distribution system, along with customer appliances, to accept quantities of hydrogen blended with natural gas deliveries.[25]

 

PNG has allotted approximately $1 million to its portion of the Hydrogen Study, some of which will be offset by PNG’s allocated share of the committed contribution from the Province (approximately $400,000). PNG proposes to fund its portion, estimated at $600,000, through the Innovation program included as part of its DSM portfolio.[26]

 

PNG has also budgeted $100,000 in support of the Development of Codes and Standards program, which is approximately 2.5% of its annual forecast DSM expenditures in 2023 and 2024. For this program, PNG has identified opportunities for advancing the standards required to blend hydrogen in natural gas systems and end use appliances. This work will be further defined and completed as part of PNG’s participation in the Hydrogen Study.[27]

 

PNG states that the Province’s BC Hydrogen Strategy supports the blending of hydrogen in natural gas distribution systems. PNG also indicates that a hydrogen-natural gas blend increases the efficient use of natural gas, because hydrogen partially replaces the use of natural gas. PNG compares hydrogen blending to a hybrid heating system where a portion of the thermal energy is extracted from the air and is used to displace the energy from a portion of natural gas, achieving lower GHG emissions to deliver the same thermal output. PNG states that a hydrogen-natural gas fuel blend reduces demand for and consumption of natural gas, reducing customer emissions. In addition, PNG submits that the use of low or zero carbon emitting hydrogen will also achieve a reduction in customers’ emissions.[28]

 

PNG submits that the scope of work in the Hydrogen Study is an important enabler of PNG’s Low Carbon Energy (LCE) strategy[29] and meets the definition of a technology innovation program in the DSM Regulation.[30] The DSM Regulation provides the following definition:

"technology innovation program" means a program

a)       to develop, use or support the increased use of a technology, a system of technologies, a building design or an industrial facility design that is

                                                         i.            not commonly used in British Columbia, and

                                                       ii.            the use of which could directly or indirectly result in significant reductions of energy use or significantly more efficient use of energy,

b)      to do what is described in paragraph (a) and to give demonstrations to the public of any results of doing what is described in paragraph (a), or

c)       to gather information about a technology, a system of technologies, a building design or an industrial design referred to in paragraph (a).[31]

 

PNG submits that the Hydrogen Study addresses parts (a) and (c) of the definition for the following reasons:[32]

•         the Hydrogen Study develops or supports the ability to deliver a hydrogen-natural gas fuel blend safely and reliably to PNG’s customers within the Province;

•         the technology is currently not commonly used in British Columbia;

•         if hydrogen-natural gas blending is implemented, it will directly or indirectly result in significantly more efficient use of energy. PNG submits that a hydrogen-natural gas fuel blend reduces demand for and consumption of natural gas because natural gas is partially replaced by hydrogen, reducing customer emissions; and

•         the Hydrogen Study involves “gathering information” and advancing knowledge.

 

Enabling Activities Program Area

Enabling Activities are programs that support delivery and development of PNG’s DSM programs.[33] The budget for this program area will be used primarily to fund a new ECI program manager whose role will be to assist the Manager Energy Solutions in implementing and administering PNG’s growing DSM portfolio.[34]

 

PNG has modified the cost allocation from the previous application, to be based on the proportion of individual measure budgets to the annual budget as a whole. The Energy Saving Kits and Energy Conservation and Assistance programs administered by BC Hydro, and the elementary school conservation education program administered by the Northern Environmental Action Team[35] remain excluded from the allocation. In addition, the Codes and Standards, and Innovation programs are no longer assigned any costs related to Enabling Activities because of the low administrative burden, and that all costs are directly assignable to these programs.[36]

 

Positions of the Parties

This section will first address the interveners’ positions regarding the overall portfolio, programs and measures and then the Hydrogen Study and related programs.

 

DSM Expenditure Schedule Portfolio

BCOAPO submits that the Residential and Low-Income sectors appear to have received reasonable treatment in the DSM Expenditure Schedule in terms of the relative percentage of expenditures in 2023 and 2024.^[37] However, BCOAPO has concerns on the lack of visibility of some aspects of the Residential, Income Qualified and Energy Transformations expenditures and energy savings; and on the low customer awareness of the DSM programs vis a vis PNG’s ability to ramp up Residential and Income Qualified programs.^[38] BCOAPO states that while the updated DSM programs and the hiring of a DSM Program Manager appear to be directional improvements, BCOAPO would support PNG’s offering of an online energy audit.[39]

 

BCOAPO compares PNG’s expenditures and energy savings in the period 2022 to 2024 and distinguishes two types of programs: customer facing that include the Residential, Income Qualified and Commercial programs; and non-customer facing programs that include Energy Transformations and Enabling Activities. BCOAPO notes that in terms of expenditures, the customer facing programs grow less than the non-customer facing programs, 44% and 56%, respectively. In terms of energy savings, there are improvements in the period 2022-2024, and all savings stem from customer facing programs. Hence, BCOAPO considers that the proportionally larger increase in the budget of non-customer facing programs creates more risk that PNG will not achieve the DSM long-term energy savings.[40]

 

In reply to BCOAPO's concern regarding the increased risk of not meeting the Expenditure Schedule energy savings due to a relatively larger growth of non-customer facing programs, PNG submits that while the energy savings and benefits of the Energy Transformation program area may not be directly quantifiable at this time, they lay the foundation for further energy efficiency and decarbonization initiatives beyond 2024 that are necessary for PNG to meet the policy objectives of the Roadmap.[41] On PNG’s capacity to deliver the projected energy savings, PNG acknowledges that most programs have been underspent in the 2020–2022 period. PNG further submits that the Application addresses the barriers to increased participation in the DSM programs by significantly expanding the Residential program area, budgeting for a DSM program manager, and increasing its marketing activities. PNG also welcomes BCOAPO’s suggestions for increasing participation in its customer-related programs, and states it will explore those suggestions.[42]

 

BCSEA supports the Application’s significant increase in both the spending envelope and the expected energy savings. BCSEA further states that the proportion of spending in the different customer groups (residential, commercial and industrial) is reasonable in relation to the gross margin (sales net of the cost of gas sold) from those categories of customer. BCSEA supports PNG’s proposed measures and programs.[43] BCSEA states its disappointment in PNG’s projected DSM under expenditures for the period 2020-2022. However, BCSEA considers PNG has accurately identified the reasons of the under expenditures and proposed corrective measures in the Application, in particular, increased incentives for residential customers, and the addition of a DSM program manager.[44]

 

RCIA supports the Expenditure Schedule overall. RCIA notes that the Expenditure Schedule represents a significant spending increase and that the proposed programs appear to allow for fair access for customers. RCIA further notes the addition of a program manager and considers the size of the program is a reasonable measure.[45]

 

Hydrogen-Natural Gas Blending Study

The interveners discussed whether the Hydrogen Study and other hydrogen blending related expenditures should be considered demand-side measures as defined by legislation.

 

BCOAPO submits that the Hydrogen Study properly satisfies the definition of a technology innovation program in section 1 of the DSM Regulation and that, in the current policy context, BCOAPO appreciates the value of the program.[46] BCOAPO also encourages PNG in its pursuit of solutions in the Hydrogen Study while seeking to maintain affordable rates for residential and low-income customers.[47]

 

BCSEA is satisfied that PNG’s proposed spending on participation in the Hydrogen Study is within the definition of a demand-side measure as a “technology innovation program” and as “development of codes and standards”.[48] BCSEA submits that the Hydrogen Study is an important element of PNG’s Low Carbon Energy strategy, which aims to achieve GHG emissions reductions in alignment with the Roadmap.[49]

 

RCIA supports the consideration of hydrogen blending expenses as pertinent demand side measures. RCIA submits that hydrogen blending is crucial to the future of gas utilities as British Columbia continues to promote the decarbonization of gas utilities. Therefore, RCIA is of the view that PNG’s participation in the Hydrogen Study is prudent and will benefit PNG’s ratepayers as this technology is developed further in BC.[50]

 

Panel Discussion

DSM Expenditure Schedule Portfolio

The Panel notes that the Application represents a significant increase in the overall DSM expenditures compared to the previous expenditure plan. In addition, PNG’s previous expenditure schedules have been underspent.

 

Based on the information provided in Table 2 of this Decision, PNG’s approved expenditures in the period 2020-2022 were on average, $856,067/year[51], while the actual and forecast expenditures in the same period are $511,086 /year[52] on average. This means that the DSM expenditure schedule in the period 2020-2022 is approximately 40% underspent. In Table 3, the DSM Expenditure Schedule shows an increase of 27% in the budget for the period of 2023 to 2024.

 

The DSM Expenditure Schedule, as PNG notes above, proposes expenditures of $1.9 Million/year on average, which represents an increase of 121% of the approved budget per year compared to the period 2020-2022. The Panel accepts PNG’s explanation of how it proposes to remedy its previous underspending of its full DSM budget largely by hiring a program manager dedicated to DSM, increasing its marketing activities and expanding its Residential program area.

 

The Panel is satisfied with the proposed expenditure increase related to programs other than the Hydrogen Study and the Development of Codes and Standards, which we discuss below. Excluding the expenditures for the Hydrogen Study and the Development of Codes and Standards, the average proposed expenditures would be $1,559,226[53] for an average increase of 82% per year for the 2023-2024 period.

 

Hydrogen-Natural Gas Blending Study

The Panel must consider whether the expenditures in the schedule meet the criteria in section 44.2(5) of the UCA as set out in Section 1.3 above. Each of the criteria in that section is discussed in detail below. As noted above, sections 6 and 19 of the CEA do not apply to PNG’s Application; however, the Panel looks to that Act for a definition of what is considered a demand-side measure. The UCA defines “demand-side measure” to have the same meaning as s. 1(1) of the CEA. The CEA defines demand-side measure to mean a rate, measure, action or program undertaken to:

a.       Conserve energy or promote energy efficiency,

b.       Reduce the energy demand a public utility must serve, or

c.       Shift the use of energy to periods of lower demand. 

To accept a DSM program, therefore, the Panel must assess whether the objective of the program is within at least one of the criteria of a demand-side measure.

 

PNG argues that the Hydrogen Study meets the definition of a technology innovation program in the DSM Regulation.[54] As described above, PNG’s LCE portfolio includes a collaborative effort between natural gas distributors in B.C. to study the prospect of blending hydrogen with natural gas and delivering it through PNG’s natural gas distribution system. PNG compares hydrogen blending to hybrid heating systems, stating that it increases the efficient use of natural gas in end-use appliances, which extract a portion of the energy from low or zero carbon emitting hydrogen to achieve the same thermal output with less natural gas. PNG states that providing a hydrogen-natural gas fuel blend reduces demand for and consumption of natural gas, thereby reducing customer emissions.

 

The Panel does not agree with PNG that expenditures on studies related to hydrogen blending meet the definition of a technology innovation program in the DSM Regulation. The Panel also disagrees with the interveners regarding the proposed expenditures related to hydrogen.  There was no evidence presented that the use of hydrogen would conserve energy, increase energy efficiency or reduce energy demand, or shift energy use to a time of lower demand as is required to be a demand side measure. Therefore, the Panel does not accept the BC Hydrogen Natural Gas Blending Study as a DSM expenditure because it does not meet the definition of a technology innovation program as outlined in the DSM Regulation or the definition of a demand side measure as outlined in the CEA. For the same reason, the Development of Codes and Standards program, related to the blending of hydrogen in natural gas systems and end use appliances, cannot be accepted as a DSM expenditure. 

2.2              British Columbia's energy objectives

Pursuant to section 44.2(5)(a) of the UCA, the Panel must consider the applicable of British Columbia's Energy Objectives, which are set out in section 2 of the CEA.

 

PNG states the identification and selection of potential DSM Programs are guided by PNG’s Guiding Principles, which include the program’s alignment with BC’s Energy Objectives.[55]

 

PNG estimates the net cumulative natural gas savings and GHG reductions over the life of measures installed from 2023 to 2024 to be 562 TJ and almost 30 kilotonnes respectively, as shown in the table below.[56]

 

Table 8: DSM Portfolio Energy Savings and GHG Reductions over the Life of the Measures[57]

 

PNG submits that its DSM Expenditure Schedule enabling the continuation and expansion of PNG’s DSM portfolio is in the public interest and is aligned with achieving BC’s Energy Objectives that include conserving energy and reducing greenhouse gas (GHG) emissions.[58] PNG further states that its portfolio includes programs for low income and rental sectors in compliance with Section 3 of the DSM Regulation and BCUC directives.[59]

 

Positions of the Parties

BCSEA submits that the Application supports the BC energy objectives of energy efficiency and conservation and GHG emissions reductions.[60]

 

RCIA states it supports PNG’s position that the proposed programs in the Application appear to be reasonable methods to align with British Columbia provincial policies surrounding GHG emission reduction and energy conservation.[61]

 

BCOAPO did not take any position on whether the DSM Expenditure Schedule is aligned with the applicable BC Energy Objectives.

 

Panel Discussion

The Panel finds that, with the exception of the BC Hydrogen Natural Gas Blending Study and the proposed expenditures on the Development of Codes and Standards related to the blending of hydrogen in natural gas systems, which are discussed in Section 2.1, PNG’s DSM Expenditure Schedule aligns with the following applicable BC Energy Objectives described in section 2 of the CEA:

d)      to use and foster the development in British Columbia of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources;

g)       to reduce BC greenhouse gas emissions; and

i)        to encourage communities to reduce greenhouse gas emissions and use energy efficiently. 

The Panel is satisfied that the DSM Expenditure Schedule is designed to use and foster the development of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources. The portfolio is directed toward initiatives aimed at both residential and commercial customers and potential customers, and will encourage communities to reduce greenhouse gas emissions and use energy efficiently, and includes programs directed at low-income households and rental housing as set out in s.3 of the DSM Regulation.

 

Pursuant to section 44.2(4) of the UCA, the Panel accepts that, without including the Hydrogen Study and the Development of Codes and Standards, PNG’s programs can potentially provide energy savings in the order of 562 TJ, equivalent to 30 kilotonnes of avoided GHG emissions over the next 2 years thereby contributing to the BC Energy Objectives regarding the reduction of GHG emissions. 

2.3              Most Recently Filed Long-term Resource Plan

PNG’s most recently filed long-term resource plan is the 2019 Consolidated Resource Plan (CRP) filed concurrently with the 2019 DSM Expenditure Schedule for the period 2020-2022.[62] Both were approved by BCUC Order G-265-20.[63]

 

PNG submits that the Expenditure Schedule continues funding for the programs and initiatives identified in the 2019 CRP and expands the scope of programs available to PNG’s customers and, for this reason, the Application is consistent with the 2019 CRP.[64]

 

Section 3 of the DSM Regulation[65] defines the requirements that must be addressed for a utility’s DSM portfolio to be deemed adequate for the purpose of section 44.1(8)(c) of the UCA. While section 3 is directly applicable to long-term resource plans, PNG identifies how the current Application addresses each of the adequacy requirements.[66]

 

PNG states that the Development of Codes and Standards program is the only program to meet the adequacy requirement established in section 3(1)(e) of the DSM Regulation.[67] The Development of Codes and Standards program is intended to include opportunities for advancing the standards required to blend hydrogen in natural gas systems and end use appliances. This program will be further defined and completed as part of PNG’s participation in the Hydrogen Study. The program has a budget of $100,000, equivalent to approximately 2.5% of its annual forecast DSM expenditures in 2023 and 2024.[68]

 

Positions of the Parties

None of the interveners took a position on the alignment of the Application with PNG’s most recently filed long-term resource plan.

 

BCSEA submits that the portfolio meets the adequacy requirements set out in section 3 of the DSM Regulation.[69]  BCSEA is satisfied that PNG’s proposed spending on the Hydrogen Study is within the definition of a demand-side measure as a “technology innovation program” and as “development of codes and standards”.[70]

 

RCIA supports that the Development of Codes and Standards be accepted as meeting the adequacy requirements of the DSM Regulation.[71]

 

BCOAPO notes that PNG has not identified alternative means to meet the adequacy requirement in section 3(1)(e) of the DSM Regulation. BCOAPO submits that PNG’s failure to identify an alternative measure should not be a reason to approve the proposed measure.[72]

 

Panel Discussion

The Panel finds that the Expenditure Schedule is consistent with PNG’s 2019 CRP because the Application continues funding programs and initiatives identified in the 2019 CRP and expands the scope of programs available to PNG’s customers. However, this finding excludes the expenditures in the BC Hydrogen Natural Gas Blending Study and the Development of Codes and Standards program which the Panel established cannot be considered DSM, as indicated in section 2.1.

 

In the Application, PNG outlines how the programs meet the adequacy requirements set out in section 3 of the DSM Regulation. In accordance with section 44.1(8)( c) of the UCA, in considering whether to accept a long-term resource plan, the BCUC must consider whether the utility intends to pursue adequate, cost-effective demand side measures.  In contrast, when considering whether to accept an expenditure schedule filed by a public utility under section 44.2 of the UCA, the BCUC must consider whether the demand-side measures are cost-effective within the meaning prescribed by regulation. Further, section 3 of the DSM Regulation, which addresses the adequacy of demand side measures, refers specifically to a public utility's plan portfolio for the purposes of section 44.1 (8) (c) of the [UCA]…”, but does not refer to section 44.2 of the UCA. In our view, this is an important distinction: while it is mandatory to consider adequacy during a review of a long-term resource plan application, it is not mandatory during a review of a DSM expenditure schedule application. However, as part of our consideration of the most recently filed Long Term Resource Plan, the Panel reviews the extent to which the Expenditure Schedule addresses the adequacy requirements.

 

As noted in section 2.1, the programs other than the Hydrogen Study and the related Development of Codes and Standards programs are acceptable DSM expenditures under the CEA and the DSM Regulation. The Panel accepts that the Development of Codes and Standards program is the only program PNG proposed to address the adequacy requirement established in section 3(1)(e) of the DSM Regulation, although we are not persuaded that this Expenditure Schedule meets the criteria of s. 3(1)(e). The fact that one of the adequacy requirements is not met, however, is not critical to the Panel’s overall determination on the Expenditure Schedule because the Panel is satisfied that PNG has addressed the remainder of the adequacy requirements. Nevertheless, the Panel encourages PNG to demonstrate in its next DSM expenditure schedule application that the proposed portfolio complies with all the DSM Regulation adequacy requirements.    

2.4              Cost-Effectiveness of the DSM Plan

Pursuant to section 44.2(5)(d) of the UCA, the Panel must consider whether the proposed 2023-2024 DSM Expenditure Schedule measures are cost-effective within the meaning prescribed by the DSM Regulation.

 

Section 4(1) of the DSM Regulation states that the BCUC may evaluate the cost-effectiveness of DSM measures individually, for multiple measures, or at a portfolio level. PNG argues the portfolio-level analysis is the appropriate method to evaluate PNG’s 2023-2024 DSM Expenditure Schedule for the following reasons:[73]

•         The portfolio approach provides the most flexibility for PNG to implement programs that meet customer needs while addressing the requirements of the DSM Regulation and maintaining a cost-effective portfolio;

•         The DSM Regulation requires a portfolio approach in assessing the cost-effectiveness of “specified demand-side measures” and “public awareness programs” such as PNG’s proposed education programs for students, funding for energy efficiency training, funding for codes and standards development, a community engagement program, and a technology innovation program;

•         A portfolio approach allows PNG to offer programs to low income and rental sectors, in compliance with Section 3 of the DSM Regulation and BCUC directives, while maintaining a cost-effective portfolio of programs; and

•         A portfolio approach is also consistent with the BCUC’s Order G-36-09 in FEI’s 2008 Energy Efficiency and Conservation Application, and subsequent decisions where the BCUC determined that the cost-effectiveness of DSM activities should be measured at the portfolio level.

Section 4 of the DSM Regulation sets out the tests for measuring the cost-effectiveness criteria. The primary test for DSM expenditure schedules is the Total Resource Cost (TRC) test. The TRC is the ratio that results when the value of the benefits of DSM activity, as measured by avoided energy and capacity costs as applicable, is divided by the sum of the utility and customer costs for that DSM activity. A TRC ratio of 1.0 or more indicates that the benefits of a DSM activity equals or exceeds its total costs.

 

Another test to measure cost-effectiveness is the modified TRC (mTRC) test, which includes an adder for non-energy benefits. PNG explains that pursuant to sections 4(1.1) and 4(2) of the DSM Regulation, PNG may use the mTRC test for up to 40 percent of its portfolio expenditures.[74] The calculation of mTRC uses a Zero-Emission Energy Supply Alternative (ZEEA) to determine the avoided cost of energy, which is applied to the energy savings to determine the overall customer benefits. Section 4(1.1)(a) of the DSM Regulation defines the ZEEA as the amount the BCUC “is satisfied represents [BC Hydro’s] long-run marginal cost of acquiring electricity generated from clean or renewable resources in British Columbia.”[75]

 

For the calculation of ZEEA, PNG used a reference Long Run Marginal Cost (LRMC) of $106/ MWh as it did in its 2019 Application[76]. PNG explains that this value “comes from BC Hydro’s Waneta 2017 Transaction Application (Waneta Application) to the BCUC that established BC Hydro’s long-run marginal cost for energy at $106/MWh. PNG understands that the value of $106/MWh is the only value that has been reviewed and approved by the BCUC.”[77] PNG also notes that the ZEAA values used in its cost-effectiveness calculations are consistent with those used by FEI in its 2023 DSM Expenditures Plan, which was under review by the BCUC at the time of this Application.[78]

 

PNG submits that all programs are cost-effective as measured by either the TRC or mTRC, and the portfolio as a whole has an mTRC of 1.79.[79] PNG summarizes the cost benefit test results for the various program areas in the table below:

Table 9: Portfolio-Level Cost-Effectiveness[80]

 

* Section 4 of the BC DSM Regulation, as amended in March 2017, requires the use of the Zero Emission Energy Alternative and a 40% benefit adder in calculating the mTRC for income qualified programs.

** Includes the mTRC adder of fifteen percent for programs that require it.

 

Through information requests, the BCUC asked PNG to calculate the mTRC for the portfolio, program areas and measures assuming alternative ZEEA values of $54/MWh and $65/MWh, which represent values BC Hydro has provided in recent applications to the BCUC:

•          In its Fiscal 2022 Revenue Requirement Application, BC Hydro provided a preliminary range of the cost of new wind resources of between $54 and $80/MWh. BC Hydro also indicated that the cost range of $54 to $80/MWh was outdated, and an update would be provided in the IRP [BC Hydro’s 2021 Integrated Resource Plan].[81]

•          The BC Hydro 2021 IRP, currently under review, presents an LRMC of $65/MWh.[82]

 

PNG provided the recalculation of mTRC using ZEAA values of $54/MWh and $65/MWh by program area, program, measure, and portfolio. A summary is presented in the table below.

 

Table 10: Calculation of mTRC using Alternative ZEEA Values[83]

 

Using ZEEA values of $106/MWh and $65/MWh, the portfolio is cost-effective with blended TRC/mTRC of 1.79 and 1.16, respectively. If the ZEEA value is $54/MWh, the portfolio blended TRC/mTRC is 0.99, slightly below the cost-effectiveness threshold.[84] PNG states that the Residential Building Envelope is the only program that is not cost-effective if ZEEA is 54$/MWh.[85]

 

Regarding the selection of the ZEEA value, PNG submits that the value $106/MWh from the Waneta Application is the only one that has been reviewed and approved by the BCUC.[86] PNG also submits that the three alternative values considered ($106/MWh, $65/MWh and $54/MWh) reflect prices for energy only (wind supply) and do not reflect the cost of the capacity resources required to provide that energy on a firm basis. Therefore, PNG submits that these three ZEEA values significantly understate the cost of acquiring electricity generated from clean or renewable resources.[87]

 

Positions of the Parties

BCSEA agrees with PNG that a portfolio level analysis is appropriate. In addition, BCSEA submits that ZEEA values of (i) $54/MWh and (ii) $65/MWh are not appropriate for calculating the mTRC of PNG’s 2023-2024 DSM portfolio. BCSEA agrees with PNG that ZEEA values based only on energy do not reflect the cost of the capacity resources required to provide that energy on a firm basis and would therefore significantly understate the cost of acquiring electricity generated from clean or renewable resources.[88]

 

RCIA states that it is satisfied the proposed program is cost-effective. It makes no submissions on what ZEEA value should be used.[89]

 

BCOAPO states that it finds it difficult to accept PNG’s justification for using $106/MWh for the LRMC simply because this is the most recently approved value, given that this appears to be significantly overstated when updated for more current information. BCOAPO recognizes that it may not be prudent to rely entirely on an LRMC that is still under review, although it notes that the proposed BC Hydro value in its IRP of $65/MWh is $41 or 39% lower than the $106 value. “Clearly, an update to the LRMC to a value more in line with the value proposed by BC Hydro would represent a material decrease.” BCOAPO submits that it would be reasonable to rely on an LRMC of $65/MWh for the purpose of considering the cost-effectiveness of the PNG Plan.[90]

 

In reply to BCOAPO, PNG asserts that “there is no basis for accepting a change to the LRMC value for the purpose of determining the cost-effectiveness of the 2023-2024 DSM Expenditure Schedule. PNG understands that BC Hydro’s 2021 Integrated Resource Plan Application, including the acceptability of a ZEEA value of $65/MWh, is still under review by the BCUC. PNG therefore submits that a ZEEA value of $106/MWh is the only value approved by the BCUC and is therefore the only value that can be applied in the cost-effectiveness test set out in … the [DSM] Regulation.”[91]

 

Panel Discussion

For the reasons set out below, the Panel finds that the DSM Plan is cost-effective within the meaning prescribed by the DSM Regulation.

 

In this discussion, we consider several issues. First, whether it is appropriate to review the cost-effectiveness on a portfolio level. Second, what is the appropriate ZEEA value to use in the mTRC calculation. Finally, we consider whether the proposed plan is cost-effective.

 

The BCUC has the option, as described in section 4(1) of the DSM Regulation, to assess the cost-effectiveness of demand side measures individually, relative to other demand side measures, or at the portfolio level. As PNG points out, the BCUC has opted in the past to apply this test on a portfolio basis. This provides PNG with the flexibility to implement programs that meet customer needs, including offering programs to low-income and rental sectors, while addressing the requirements of the DSM Regulation and maintaining a cost-effective portfolio. The Panel is satisfied that it is appropriate to evaluate the cost-effectiveness of the PNG Expenditure Schedule on a portfolio level.

 

We accept that PNG’s proposed plan is not cost-effective using the TRC. The DSM Regulation however, permits the use of an adder in the form of the mTRC to demonstrate the plan’s cost-effectiveness. The issue for the Panel therefore, is determining the appropriate adder to use when calculating the mTRC. This is a matter on which section 4.1.1(a) of the DSM Regulation indicates we must be satisfied represents BC Hydro’s long-run marginal cost of acquiring electricity generated from clean or renewable resources in British Columbia. The Panel accepts PNG’s statement that the BCUC has previously approved a value for BC Hydro’s LRMC, and that this is evidence for our consideration, although not determinative. In fact, given the more recent values of LRMC relied on – for example in BC Hydro’s IRP, we are not satisfied that $106/MWh continues to represent BC Hydro’s LRMC.

 

The range of values among options presented is substantial – from $106/MWh from the Waneta Application on the upper end and between $54/MWh and $80/MWh for new wind power resources on the lower end. The most recent estimate of the ZEEA in the BC Hydro 2021 IRP Application, which is currently under review by the BCUC, is $65/MWh.

 

We are persuaded by BCOAPO’s observation that it is difficult to accept PNG’s justification for using $106/MWh for the LRMC simply because this is the most recently approved value, given that this appears to be significantly overstated when updated for more current information. Nor do we consider that the $54/MWh lower cost point of marginal cost is a reasonable value for the purposes of the ZEEA, because that figure was provided as a range of $54 to $80/MWh in the BC Hydro F2022 Revenue Requirement Application. We consider the more recent ZEEA estimate of $65/MWh in the IRP Application to be more reasonable.

 

In any event, as Table 10 above shows, the DSM Portfolio is cost-effective at any of the three ZEEA values canvassed in this proceeding: the $106/MWh in PNG’s application; $65/MWh (the value in the most recent BC Hydro 2021 IRP) and, but for one residential program, is almost cost-effective at $54/MWh.

 

In addition, we note that if the expenditures related to the Hydrogen Study and the Development of Codes and Standards related to the use of hydrogen are excluded from the cost-effectiveness calculations, directionally this would improve the portfolio cost-effectiveness results. While specific evidence was not filed on this matter, we note the hydrogen related programs do not have forecast energy savings. Therefore, removing this program from the calculation would reduce the overall costs without changing the benefits in the calculation of the TRC and mTRC.

 

We also note that interveners support the cost-effectiveness of the overall portfolio.

2.5              The Interests of Persons in British Columbia

Pursuant to section 44.2(5)(e), the Panel must consider the interests of persons in British Columbia who receive or may receive service from the public utility.

 

PNG submits that the proposed programs included in the DSM Expenditure Schedule are in the interests of customers and potential customers because they encourage energy efficiency and conservation, reduce GHG emissions, and are cost-effective. Individual consumers who participate in DSM programs will reduce their natural gas consumption and their natural gas utility bills.[92]

 

PNG adds the portfolio is cost-effective, both in terms of the cost of energy saved and the cost of GHG emissions reductions,[93] and provides the following table which outlines the estimated cost of the proposed DSM program expressed as an annual cost per customer, per GJ of energy saved, and per avoided tonne of CO2e.

Table 11: Cost of Energy and GHG Emissions Reductions[94]

 

*Forecast expenditures divided by the cumulative net energy savings and net GHG reductions over the life of the measures installed from 2023-2024

 

PNG states that it completed a survey of customer attitudes towards energy conservation in 2019 and used the results to better understand demographic and socio-demographic characteristics, dwelling characteristics, environmental beliefs, actions, and activities, as well as experience with customer service and programs in order to help shape the development of DSM programs.[95] PNG submits its portfolio of DSM programs is designed to find broad acceptance amongst PNG’s customers, with expenditures allocated roughly equally to the residential/income qualified, commercial, and CEO programs.[96]

 

In addition, PNG states its aim to limit the non-incentive costs of each program to 50% of the expenditure in a given year and submits that based on current projections, the non-incentive portion of costs of 13% for PNG’s incentive programs is within its guideline.[97]  

 

PNG submits that it engages community service organizations, chambers of commerce, local and provincial governments, and relevant non-governmental organizations on DSM programs. As part of the development of this DSM Plan, PNG invited stakeholders to discuss aspects of the draft DSM Plan via webinar. Participants included HVAC contractors, the Canadian Home Builders Association, BC Sustainable Energy Association, the Community Energy Association, and the BC Non-Profit Housing Association. PNG also held sessions with the Ministry of Energy Mines and Low Carbon Innovation.[98]

 

In the Application, PNG states there is evidence of general support for PNG’s proposed DSM Portfolio and most stakeholders indicated a desire to work more closely in the future. PNG further submits that in response to comments from stakeholders, PNG has added programs and increased incentives for low income, Indigenous Communities, not-for-profit housing customers, and support for low carbon hybrid heating systems.[99]

 

PNG states that in BCUC Decision and Order G-265-20, the BCUC agreed with “BCOAPO’s observation that without specific metrics to measure customer awareness and satisfaction, it is difficult for PNG to maximize the effectiveness of its ECI portfolio spending.” The BCUC therefore encouraged PNG to “include such metrics in its next ECI Application.”[100]

 

PNG submits that over the past two years, it has increased its advertising activities to more aggressively promote its residential and commercial programs. PNG has branded its DSM programs under the name “Smart Energy Solutions” and developed a portfolio of electronic and printed media that is used in a sustained electronic media campaign. The effectiveness of the campaign in raising awareness amongst customers is measured directly based on the traffic generated on PNG’s website in general, and on the Smart Energy Solutions web pages specifically.[101]

 

PNG states it regularly assesses the effectiveness of its media campaigns and uses the results to inform subsequent campaigns. Overall, a recent campaign completed in the Fall of 2021 resulted in an increase of 116% in traffic on PNG’s website, compared to the same period in 2020.[102]

 

Positions of the Parties

BCSEA supports PNG’s Expenditure Schedule and finds it to be in the interests of current and future customers, as it encourages energy efficiency and conservation, reduces GHG emissions, and is cost-effective.[103]  BCSEA also commends PNG’s commitment to marketing its DSM programs.[104]

 

BCOAPO submits that the BCUC should require that “PNG provide sufficient evidence of changes in its Plan going forward as they relate to costs, energy saving, benefits and cost-effectiveness as well as the relationship between those measures” as a precondition to consider the plan to be in the public interest.[105] With regards to the inclusion of metrics of customer awareness, BCOAPO considers that the monitoring of PNG’s website traffic and participation levels in its programs may not be adequate for the purposes of addressing customer awareness and satisfaction and to address past trends of DSM Residential and Income Qualified program underspending.[106]

 

RCIA states that it is concerned about the cumulative rate impacts to residential customers resulting from the wide range of spending programs that utilities are generally engaged in.[107]

 

Panel Discussion

The Panel finds that, other than the expenditures related to the Hydrogen Study and the Development of Codes and Standards related to the use of hydrogen with natural gas, the proposed DSM expenditures are in the interests of persons in British Columbia and therefore existing and future customers of PNG. These proposed expenditures will provide PNG customers with opportunities to reduce monthly costs and GHG emissions by the continuation of the expansion of PNG’s DSM offerings.

 

At the same time, the Panel does not agree with the proposed precondition put forward by BCOAPO. The Panel is satisfied that PNG has provided sufficient evidence of continued efforts to demonstrate that its DSM programs are in the public interest, and we have no reason to impose conditions on PNG’s future applications.

 

Finally, RCIA has expressed concern about the cumulative rate impacts to residential customers resulting from the wide range of spending programs that utilities are generally engaged in. However, when considering an application under section 44.2 of the UCA, the Panel must consider whether the proposed expenditures are in the public interest and whether the proposed DSM expenditures are cost-effective within the meaning prescribed by the DSM Regulation. Although there may be implications for rates, which the Panel is sensitive to, we consider these expenditures to be both cost-effective and in the public interest.

2.6               Panel Determination

Having considered the applicable provisions in section 44.2 of the UCA and for the reasons set out above, the Panel determines the following:

•         The BC Hydrogen Natural Gas Blending Study in the Energy Transformation program area, in the amount of $600,000, is rejected.

•         The Development of Codes and Standards in the Energy Transformation program area, in the amount of $100,000, is rejected.

•         The BCUC accepts all other proposed DSM Expenditures as outlined in the Application, for a total of $3,110,452 for the period 2023-2024. The accepted expenditures by program area are summarized in Table 12, below.

Although the DSM Expenditure Schedule does not meet one of the adequacy requirements in the DSM Regulation, that is not critical to the Panel’s overall determination on the Expenditure Schedule because it is not mandatory that the BCUC consider all of the adequacy requirements when considering an application under section 44.2 of the UCA. Further, the Panel is satisfied that PNG has addressed the remainder of the adequacy requirements.

Table 12: Accepted DSM Expenditures for the Period 2023-2024

Program Area	2023	2024	Total Budget (2023 - 2024)
	$
Residential	275,957	450,600	726,557
Income Qualified	193,662	193,662	387,323
Commercial	487,169	491,903	979,072
Energy Transformation	260,000	470,000	730,000
Enabling Activities	112,500	175,000	287,500
Total Expenditures	1,329,288	1,781,164	3,110,452

3.0              Additional Approvals Sought

3.1              Funding Transfer Rules

PNG requests approval for flexibility in the reallocation of expenditures amongst different DSM programs and between program years, subject to the total amount actually spent between the date of approval of the Application and December 31, 2024 not exceeding the total amount of $3,810,452 sought in this Application, unless otherwise approved by the BCUC.[108] PNG proposes to continue using the program funding transfer rules applicable since the inception of PNG’s DMS portfolio in 2015, that the BCUC most recently approved under Order G-265-20:[109]

         i.            Prior BCUC approval is not required for a funding transfer from one program area to another program area in the accepted expenditure schedule within the same year, if the funding transfer is less than or equal to 25 percent of the budget for each of the program areas;

       ii.            Prior BCUC approval is required for each funding transfer from one program area to another program area in the accepted expenditure schedule, if the funding transfer is greater than 25 percent of the budget of either program area; and

     iii.            Unspent funds from a program in the accepted expenditure schedule may be transferred to the next year for spending on the same program without prior approval of the BCUC.

 

PNG states that the requested flexibility in the funding transfer rules continues to be suitable and does not anticipate requiring a change of the funding transfer rules.[110]

 

Positions of the Parties

BCSEA, RCIA and BCOAPO support PNG’s request. BCSEA submits it supports PNG’s proposed continuation of the program funding transfer rules that were approved under Order G-265-20.[111]  RCIA submits its support for PNG’s request, and feels the proposed rules are reasonable and have been tested in previous DSM applications.[112]

BCOAPO submits it finds PNG’s rationale is, on balance, sound, and the request is reasonable.[113]

 

Panel Determination

In its Application, PNG seeks the continuation of the transfer rules presently in effect for PNG, which is also supported by the interveners. The Panel agrees with PNG’s assertion that the rules as presently set out provide them with sufficient flexibility to manage the programs and provide transfer of funds between programs where necessary. Therefore, the Panel approves the continuation of the DSM funding transfer rules presently in effect for PNG.

3.2              Deferral Treatment and Amortization

PNG seeks approval to continue to record the DSM expenditures as set out in Table 1 in a rate base regulatory asset deferral account. This accounting treatment of DSM expenditures was approved for the period 2020 to 2022 by Order G-265-20.[114]

 

PNG also seeks approval to set the amortization period for all expenditures charged to this regulatory asset deferral account to 10 years, an increase from the 5 years approved for DSM expenditures in the period 2020-2022.[115] PNG submits the reasons to support an increase in the amortization period:[116]

a)       An amortization period of 10 years more closely reflects the actual lives of the measures proposed in the Application;

b)      An amortization period of 10 years is consistent with the amortization period approved by the BCUC for FEI’s DSM expenditures; and

c)       A longer amortization period mitigates the rate impacts to customers.

 

Average Measure Life of the DSM Expenditure Schedule

PNG provides an analysis of the budget-weighted measure life and the GHG-savings measure life for each program and the overall portfolio.[117]  At a portfolio level, the budget-weighted and the GHG-savings-weighted approaches result in an average life of 8.7 years and 12.3 years, respectively.[118] Funding for measures having lives 10 years or greater comprises 51% of the total 2023-2024 DSM expenditures and represents 77% of the expected annual GHG savings.[119]

 

PNG acknowledges that both metrics are subject to a number of influences, such as actual participation rates and actual GHG savings, and that there is some uncertainty associated with each of these results. However, both metrics yield results that indicate that an amortization of five years is unnecessarily short and contributes to increased impacts on the rates charged to PNG’s customers.[120]

 

Rate Impact of Different Amortization Periods

PNG provides a calculation of the overall cost of the Application using different amortization periods: 5, 8 and 10 years, as per the table below.

Table 13: 2023-2024 DSM Expenditure Schedule Total Cost Using Different Amortization Periods[121]

 

PNG also provides the monthly bill impact of the Expenditure Schedule on years 2024 and 2025[122] for different types of customers and in different service areas, considering amortization periods of 5, 8 and 10 years.

Table 14: Monthly Bill Impact of 2023-2024 DSM Expenditures in 2024 and 2025[123]

Customer	Service Area	Billing year	Monthly Bill Impact ($) under different amortization period
			5 years	8 years	10 years
Residential	PNG-West	2024	0.50	0.40	0.34
Residential	PNG-West	2025	1.07	0.79	0.70
Residential	FSJ/DC	2024	0.61	0.48	0.41
Residential	FSJ/DC	2025	1.27	0.95	0.82
Residential	Tumbler Ridge	2024	0.43	0.31	0.29
Residential	Tumbler Ridge	2025	0.88	0.67	0.59
Small Commercial	PNG-West	2024	1.84	1.47	1.25
Small Commercial	PNG-West	2025	3.92	2.87	2.56
Small Commercial	FSJ/DC	2024	1.98	1.54	1.33
Small Commercial	FSJ/DC	2025	4.09	3.07	2.65
Small Commercial	Tumbler Ridge	2024	1.76	1.26	1.19
Small Commercial	Tumbler Ridge	2025	3.64	2.74	2.44
Large Commercial	PNG-West	2024	31.09	24.80	21.07
Large Commercial	PNG-West	2025	66.24	48.62	43.27
Large Commercial	FSJ/DC	2024	38.99	30.35	26.14
Large Commercial	FSJ/DC	2025	80.51	60.32	52.06
Large Commercial	Tumbler Ridge	2024	36.41	26.10	24.68
Large Commercial	Tumbler Ridge	2025	75.40	56.88	50.62
Small Industrial	PNG-West	2024	123.40	98.41	83.63
Small Industrial	PNG-West	2025	262.89	192.97	171.75
Small Industrial	FSJ/DC	2024	66.95	52.12	44.88
Small Industrial	FSJ/DC	2025	138.25	103.57	89.39

 

 

PNG submits that increasing the amortization from 5 to 10 years decreases the impacts on customers by approximately 35%. While extending the amortization period to 10 years results in a modest decrease in customer rates under the proposed DSM Expenditure Schedule, a longer amortization will have an increasingly beneficial impact mitigating rate impacts as PNG increases its spending on its DSM programs, in response to policy changes in BC.[124]

 

Positions of the Parties

BCSEA supports the increase from five years to ten years of the amortization period of the rate base regulatory asset deferral account, as proposed by PNG.[125]

 

RCIA supports PNG’s requested deferral treatment and the extension of the amortization period.[126]

 

BCOAPO submits that PNG’s request for a change to its existing amortization period for the requested DSM expenditures are rational and appear to be reasonable.[127]

 

Panel Determination

PNG’s request to continue to record the DSM expenditures in a rate base regulatory asset deferral account is supported by all interveners and is the same as was approved in Order G-265-20. The Panel approves PNG’s request to continue to record the DSM expenditures in a rate base regulatory asset deferral account.

 

In addition, PNG is seeking to change the amortization period for DSM expenditures from five years to 10 years. PNG argues that this change would better align the amortization of these expenditures with the life span of the DSM measures. Based on PNG’s analysis, this treatment would also lower the monthly costs to ratepayers despite the increased carrying costs over the amortization period. It should be noted this analysis would continue to be applicable to those programs accepted in this decision. The Panel accepts PNG’s analysis regarding the proposed amortization period as being reasonable. The Panel also notes that this treatment would align with the amortization period of 10 years presently used by both FEI and Fortis BC Inc. for their DSM expenditures. Therefore, the Panel approves PNG’s request to increase the amortization period for DSM expenditures to 10 years.

 

Dated at the City of Vancouver, in the Province of British Columbia, this          29^th           day of June 2023.

 

 

 

Original signed by:

____________________________________

E. B. Lockhart

Panel Chair / Commissioner

 

 

Original signed by:

____________________________________

C. M. Brewer

Commissioner

 

 

Original signed by:

____________________________________

B. A. Magnan

Commissioner

 

 

 

 

 

Pacific Northern Gas Ltd. and Pacific Northern Gas (N.E.) Ltd.

2023-2024 Energy Conservation and Innovation Portfolio Funding

 

Glossary and Acronyms

 

 

Acronym / Glossary	Description
Application	PNG’s application to the BCUC for acceptance of a proposed Demand-Side Measures Expenditure Schedule
BCOAPO or BCOAPO et al.	British Columbia Old Age Pensioners’ Organization, Active Support Against Poverty, Disability Alliance BC, Council of Senior Citizens’ Organizations of BC, Tenants Resource and Advisory Centre, and Together Against Poverty Society
BCSEA	British Columbia Sustainable Energy Association
BCUC	British Columbia Utilities Commission
CEA	Clean Energy Act
CEC	Commercial Energy Consumers Association of British Columbia
CEO	Conservation Education and Outreach
CRP	Consolidated Resource Plan
DSM	Demand-Side Measures
DSM Regulation	Demand-Side Measures Regulation
ECI	Energy Conservation and Innovation
Hydrogen Study	Hydrogen-Natural Gas Blending Study - a collaboration of PNG, Enbridge and FortisBC Energy Inc. to investigate the extent to which hydrogen produced from renewable and low-carbon resources could be blended with natural gas to reduce the carbon intensity of delivered gas in BC.
IR	Information Request
IRP	Integrated Resource Plan
LCE	Low Carbon Energy
LCS	Low Carbon Strategy
LRMC	Long Run Marginal Cost
mTRC	Modified Total Resource Cost
NEAT	Northern Environmental Action Team
PNG	Pacific Northern Gas Ltd. and Pacific Northern Gas (N.E.) Ltd.
RCIA	Residential Consumer Intervener Association
Roadmap	CleanBC Roadmap to 2030
Terrace	City of Terrace
TRC	Total Resource Cost
UCA	Utilities Commission Act
Waneta Application	BC Hydro’s Waneta 2017 Transaction Application
ZEEA	Zero-Emission Energy Supply Alternative

 

 

 

 

 

 

 

 

IN THE MATTER OF

the Utilities Commission Act, RSBC 1996, Chapter 473

 

and

 

Pacific Northern Gas Ltd. And Pacific Northern Gas (N.E.) Ltd.

2023 to 2024 Energy Conservation and Innovation Portfolio Funding

EXHIBIT LIST

 

Exhibit No.                                                                          Description

 

Commission documents

 

A-1	Letter dated October 20, 2022 – Appointment of the panel for the review of the 2023 to 2024 Energy Conservation and Innovation Portfolio Funding Application
A-2	Letter dated November 7, 2022 – BCUC Order G-318-22 establishing a regulatory timetable
A-2-1	Letter dated November 8, 2022 – BCUC Order G-318-22A with the regulatory timetable amending Order G-318-22
A-3	Letter dated November 21, 2022 – BCUC Information Request No. 1 to PNG
A-4	Letter dated January 24, 2023 – BCUC Order G-15-23 with further regulatory timetable

 

Applicant documents

 

B-1	Pacific Northern Gas Ltd. And Pacific Northern Gas (N.E.) Ltd. (PNG) - 2023 to 2024 Energy Conservation and Innovation Portfolio Funding dated August 12, 2022
B-2	Letter dated December 22, 2022 – PNG submitting responses to BCUC Information Request No. 1
B-2-1	CONFIDENTIAL - Letter dated December 22, 2022 – PNG submitting confidential response to BCUC Information Request No. 1
B-3	Letter dated December 22, 2022 – PNG submitting responses to RCIA Information Request No. 1
B-4	Letter dated December 22, 2022 – PNG submitting responses to BCOAPO Information Request No. 1
B-5	Letter dated December 22, 2022 – PNG submitting responses to BCSEA Information Request No. 1

 

 

Intervener documents

 

C1-1	British Columbia Old Age Pensioners’ Organization et al. (BCOAPO et al.) – Letter dated November 22, 2022 request to intervene by Leigha Worth
C1-2	Letter dated December 1, 2022 – BCOAPO Information Request No. 1 to PNG
C2-1	BC Sustainable Energy Association (BCSEA) - Letter dated November 22, 2022 request to Intervene by Thomas Hackney and William J. Andrews
C2-2	Letter dated December 1, 2022 – BCSEA Information Request No. 1 to PNG
C3-1	Residential Consumer Intervener Association (RCIA) – Letter dated November 24, 2022 request to intervene by Samuel Mason
C3-2	Letter dated December 1, 2022 – RCIA Information Request No. 1 to PNG
C4-1	City of Terrace (Terrace) – Letter dated January 16, 2023 request to intervene by Nathan Brooks