LETTER NO. L-30-01 ROBERT J. PELLATT SIXTH FLOOR, 900 HOWE STREET, BOX 250 COMMISSION SECRETARY VANCOUVER, B.C. CANADA V6Z 2N3 Commission.Secretary@bcuc.com TELEPHONE: (604) 660-4700 web site: http://www.bcuc.com BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102 Log No. 6964 VIA FACSIMILE October 4, 2001 Mr. Robert H. Hobbs Vice President Regulatory and Legislative Services West Kootenay Power Ltd. P.O. Box 130 Trail, B.C. V1R 4L4 Dear Mr. Hobbs: Re: West Kootenay Power Ltd. Request for Short-Term Adjustments to the Harmonization Clause On May 29, 2001, Riverside Forest Products Limited (“Riverside”) applied for an exemption from certain provisions of the Utilities Commission Act (“the Act”) with respect to its incremental electricity generation. In response to a request from the Commission, West Kootenay Power Ltd. (“WKP”) provided its comments on Riverside’s application in a letter dated July 13, 2001. In that letter, WKP supported Riverside’s application subject to Riverside agreeing to waive the harmonization clause for transmission to the British Columbia Hydro and Power Authority (“B.C. Hydro”) system, as it applies to the customer charge only, under Schedules 101 and 102 of WKP’s transmission access tariff. The effect of this waiver would be that Riverside would pay WKP the customer charge of $1,242 per month even though this charge would not otherwise apply under the tariff. WKP indicated that this charge would, in its view, be appropriate due to the non-trivial administration costs associated with metering/billing and the interrelated nature of the City of Kelowna, WKP and Riverside. WKP committed to reviewing these administration charges after some experience had been gained. In a letter dated July 24, 2001, Riverside indicated that it did not believe it should be required to waive the B.C. Hydro harmonization clause because the harmonization clause is an approved part of WKP’s tariff and varying the tariff to remove the harmonization clause would be discriminatory towards Riverside. Riverside subsequently reconsidered its position and, in a letter dated August 20, 2001, agreed to waive the harmonization clause as it applies to the customer charge for a three month trial period. The Commission agreed to request approval from the Lieutenant Governor in Council to issue an Order exempting Riverside from certain provisions of the Act. Any determination with respect to Riverside’s waiver of the harmonization clause was postponed in anticipation of a further letter from WKP on this issue. …/2
2 LETTER NO. L-30-01 In a letter dated August 29, 2001, WKP noted that providing Independent Power Producers (“IPPs”) with access to WKP’s transmission system while collecting no fees related to “rental” of the wires or a customer charge may not be an equitable sharing of costs between customers and exporting IPPs. WKP recognized, however, that the counter flow nature of some IPPs may provide system benefits not included in the tariff rate. Until such issues can be resolved, WKP suggested that the harmonization clauses for B.C. Hydro and WKP could be modified so that the customer charge continues to apply in all circumstances, with the “wires” charge being waived under harmonization. WKP further suggested that this issue could be appropriately reviewed at the time that B.C. Hydro files its report regarding distribution IPP access as required by Order No. G-52-01. B.C. Hydro provided its comments on WKP’s proposal in a letter dated September 21, 2001 (attached). B.C. Hydro indicated that rate harmonization is not appropriate where additional costs are caused by wheeling transactions and that it does not oppose changes to WKP’s harmonization clause if WKP demonstrates that the current tariffs do not lead to an equitable sharing of costs between customers (load) and exporting IPPs. B.C. Hydro indicated that it is not seeking changes to its own tariffs and that it does not believe that the harmonization rules of B.C. Hydro and WKP need to be symmetric. B.C. Hydro also expressed concern about deviating from the assumption of average losses based on the cost causation profile of a particular customer within a larger class. The Commission recognizes that WKP may incur additional administration costs related to IPPs wheeling electricity to B.C. Hydro’s system. The Commission notes, however, that the extent of these costs will not be known until WKP has gained some experience in this area. The Commission also notes that IPPs may provide benefits to the system due to the counter flow nature of some IPP load, and that the full monthly customer charge may not be appropriate for IPPs if costs other than administrative costs are recovered through this charge (meter costs, for example). The Commission is not convinced that changes to the harmonization clause are warranted at this time. WKP may wish to reapply for changes to its harmonization clause if, after gaining some experience, it finds that IPPs impose significant ongoing administrative costs. Yours truly, Original signed by: Robert J. Pellatt MAG/cms Attachment cc: Mr. Max Collett Bull, Housser & Tupper Mr. Ray Aldeguer, Senior Vice President Legal and Regulatory Affairs and General Counsel British Columbia Hydro and Power Authority WKP/Cor/Harmonization Amdmnts Denied
BChydro E Ray Aldeguer Senior Vice-President Legal, Regulatory Affairs and General Counsel Phone: (604) 623-45 13 Fax: (604) 623-4407 Mr. Robert J. Pellatt Commission Secretary British Columbia Utilities Commission P.O. Box 250 600-900 Howe Street Vancouver, BC V6Z 2N3 Dear Mr. Pellatt: , RE: British Columbia Hydro and Power Authority West Kootenay Power Ltd. (“WKP”) Request for Short Term Adjustments BC Hydro writes in response to questions September 2001. 1. “ . ..[t]he Commission requests that BC Hydro provide number of transactions affected by the harmonization 1999.” The harmonization clause has not been used to date. 2. “The Commission also asks BC Hydro experience to date provides a sufficient No. G-l 2-99”. Given that there has been no use of the harmonization evidence to demonstrate that there is a material weakness in its design. As such, BC Hydro sees no basis for undertaking the review contemplated No. G-12-99. Similarly, to date there has been no fundamental characteristics which might warrant re-examination 3. “The Commission further requests proposal. Specifically, the Commission circumstances, if any, in which it is appropriate customer charge of both utilities. circumstances in which it would be appropriate customer charge to both utilities, please indicate the tariff changes requested by WKP or believes British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 vvww.bchydro.com THE POWER IS YOURS 21 September, 2001 (“BC Hydro”) to the Harmonization Clauses posed in the Commission’s letter of 10 information related to the clause since January 28, to comment on whether or not the basis for the review indicated in Order provision, there is no in Commission Order change in market of the harmonization provisions. that BC Hydro comment on WKP’s requests BC Hydro’s comments on the for customers to pay the If BC Hydro believes that there may be for the customer to pay the whether BC Hydro supports it would be more appropriate
-2- to wait until more experience is gained changes.” Both BC Hydro and WKP agreed in the process surrounding proposal that “[r]ate harmonization is not appropriate caused by wheeling transactions”. This was acknowledged Appendix A (Reasons for Decision) to Order No. G-l 2-99, at page 4. BC Hydro’s position in this regard demonstrate to the Commission that the current tariffs do not lead to “an equitable sharing of costs between customers BCUC dated 29 August 20011 then BC Hydro has no opposition approving a change to the relevant WKP tariffs. However, the Commission has asked for BC Hydro’s opinion which it might be appropriate for customers utilities”. This request has been made in the context of soliciting our view on WKP’s “proposal”, which we read to mean that “the harmonization WKP.. .be modified so that the customer circumstances, with the ‘wires’ charge being waived under harmonization.” As such, both WKP and the Commission just to the WKP tariffs but to BC Hydro’s tariffs, as well. BC Hydro notes that its WTS tariffs currently have no separate customer BC Hydro wishes to make clear that it is not seeking the addition of such a charge, either generally or in the specific case of the harmonization Commission determined in its Reasons for Decision attached to Order No. G-69-01, it would not be prudent to contemplate structure of any future regional transmission Furthermore, BC Hydro believes there harmonization rules of BC Hydro and WKP need to be symmetrical harmonization clauses must produce commensurate each direction. After all, the WTS tariffs of the two utilities are materially from one another, so the effect of the harmonization dependent on the direction of a given wheeling transaction. understood when the harmonization clauses were introduced would likely produce unequal treatment Hydro (the expected loser in cost shifts between the two utilities) accepted that “lack of neutrality as an unavoidable consequence systems” [Appendix A (Reasons for Decision) to Order No.G-12-99, As for whether WKP’s tariff change should happen immediately further period of consideration, BC Hydro is troubled change the WKP tariff until more experience conjunction with WKP’s comment that “the counter flow nature of some IPP load may actually provide system benefits not included in the WTS rate.” jWKP Letter to BCUC dated 29 August 20011. The issue of average versus incremental Hydro’s 1997/98 WTS hearing process before implementing the tariff the rate harmonization where additional costs are by the Commission in has not changed. As such, if WKP can (load) and exporting IPPs”, jWKP Letter to to the Commission on circumstances in to pay the customer charge of “both clauses for BC Hydro and charge continues to apply in all appear to be contemplating a change not charge component to them, and clause. Moreover, as the changes to open access tariffs until the organization has been finalized. is no reason why changes to the - that is, why reductions in rate pancaking in different provisions are already In addition, it was clearly that these provisions for BC Hydro and WKP. At the time, BC of harmonization between the two page 31. or following some by the concept of waiting to is gained, if that notion is read in losses was exhaustively considered in BC and the resulting Commission Decision
-3- clearly found “that rate payers are best protected system losses” [WTS Decision, 23 April 1998, Page 471. In summary, then: 1. BC Hydro does not oppose WKP’s proposal, apply only to WKP’s tariffs; and 2. BC Hydro continues to support the concept of average losses, and believes that the Commission must exercise caution based on the cost-causation profile of a particular customer within a larger class. Finally, WKP appears to suggest that a broad review of the harmonization should be undertaken in conjunction with BC Hydro’s report on IPP distribution as that report is defined in Commission Order No. G-52-01. BC Hydro believes that the issue of transmission-voltage rate harmonization IPP connection are quite separate, and should be evaluated as such. if BC Hydro employs average to the ektent that any changes in setting or amending tariffed rates issue access, and the issue of distribution-voltage Yours very truly, Legal, Regulatory Affairs and General Counsel
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