LETTER NO. L·45·95 SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. CANADA V6Z 2N3 TELEPHONE: (604) 660-4700 ROBERT J. PELLATT BC TOLL FREE: 1-800-663-1385 COMMISSION SECRETARY FACSIMILE: (604) 660-1102 September 15, 1995 Mr. Alan Fogwill Senior Economist Centra Gas British Columbia Inc. 1675 Douglas Street P.O. Box 3777 Victoria, B.C. V8W3V3 Dear Mr. Fogwill: Re: Centra Gas British Columbia Inc. Request for Interpretation/Clarification of part of Order G-55-95 DSM Accounting Policy - Point 4 "Program Failure and Prudency" The Commission has considered your August 2, 1995 request for an interpretation and clarification of the tenus "Program Failure" and "Prudency" used in the DSM Accounting Policy. Centra Gas suggested that program failure could be defined, by management, as a Total Resource Cost ("TRC") Test result of 30 percent less than an original TRC less than 1, and 0.7 for an original TRC greater than 1. Centra Gas also suggested that the Commission should only consider the prudency of an approved program after an impact evaluation indicated program failure and only to the extent of money spent after a failure was identified. Point 4 of the approved Accounting Policy reads as follows: " 4. Program Failure and Prudency When management concludes that a program, representing significant or material cost, has failed and no remedial action appears probable then a partial or full abandonment may occur. The unamortized costs of the abandoned program or portion shall be amortized using a rapid write-off. Prudency may be determined by the Commission case by case in the same manner as supply-side investments. " The Commission is satisfied that the wording of the accounting policy conveys the intended meaning and does not need the Commission's specification of what constitutes program failure or prudency. Management may find it a useful control to specify some "rules of thumb" for its own use, but the Commission believes that it is not reasonable for the Commission to fetter its own judgment. ... /2
2 The Commission's disposition of the results of a prudency review would need to take relevant information into account including whether or not the utility was given pre-approval by the Commission for any specific DSM project. Yours truly, RlP/yk CG/Cor/DSM Acct.
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