SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. V6Z 2N3 CANADA web site: http://www.bcuc.com IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and An Application by Terasen Gas (Whistler) Inc. for Approval of its 2004 and 2005 Revenue Requirements BEFORE: L.A. Boychuk, Panel Chair ) Commissioner R.H. Hobbs, Commissioner L.F. Kelsey, Commissioner O R D E R WHEREAS: A. On October 28, 2003, Terasen Gas (Whistler) Inc. (“Terasen Whistler”) applied to the British Columbia Utilities Commission (“the Commission”) for approval of its 2004 and 2005 Revenue Requirements (“the Application”) to recover projected revenue deficiencies of $1,090,100 and $847,900 for 2004 and 2005 respectively; and B. For 2004 the Application proposes to increase the Basic Charge per month from $7.50 to $10.00, to increase the propane commodity charge from $12.522/GJ to $13.930/GJ, and to decrease Rider ‘A’ from $2.493/GJ to $0.376/GJ, all effective January 1, 2004; and C. For 2005 the Application proposes to decrease the propane commodity charge to $13.540/GJ and to decrease Rider ‘A’ to zero, both effective January 1, 2005; and D. The Commission, by Order No. G-77-03, established a Negotiated Settlement Process; and E. The Negotiated Settlement Process was held on January 8, 2004 and a proposed Settlement Agreement regarding the Application was agreed to by Terasen Whistler, Intervenors, and Commission staff; and F. The Commission has reviewed the proposed Settlement Agreement and considers that approval is in the public interest; and G. All participants have reviewed and approved the proposed Settlement. BR I T I S H CO L U M B I A UT I L I T I E S COM M I S S I ON OR D E R NU M B E R G -14-04 TELEPHONE: (604) 660-4700 BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102 ) February 3, 2004 ) ) . . . /2
2 NOW THEREFORE the Commission orders as follows: 1. The Commission approves for Terasen Whistler the Settlement Agreement attached as Appendix A, which includes: a. A basic monthly charge of $7.50 for 2004 and 2005 b. Effective January 1, 2004: • Propane commodity charge increase from $12.522 to $14.225 • Rider ‘A’ rate decrease from $2.493/GJ to $0.376/GJ c. Effective January 1, 2005: • Propane commodity charge decrease from $14.225 to $13.855 • Rider ‘A’ rate decrease from $0.376 to zero 2. Terasen Whistler is to refund any overpayment in rates with interest calculated at the prime rate of the principal bank with which it conducts its business. Terasen Whistler is to inform all customers of the final rates and refund by way of a customer notice. 3. Terasen Whistler is to file a permanent Gas Tariff Rate Schedule in accordance with the terms of the Settlement Agreement and this Order. DATED at the City of Vancouver, in the Province of British Columbia, this 12 Attachment Orders/TGW/2004-2005RR, SettlmtAgrmt BR I T I S H CO L U M B I A UT I L I T I E S COM M I S S I ON OR D E R NU M B E R G-14-04 th day of February 2004. BY ORDER Original signed by: Lori Ann Boychuk Panel Chair and Commissioner
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APPENDIX A to Order No. G-14-04 Page 2 of 23 CENTRA GAS WHISTLER INC. 2004/5 Revenue Requirements Application Negotiated Settlement Agreement CONFIDENTIAL Terasen Gas Whistler Inc (Terasen Gas or the Company) filed its 2004/5 Revenue Requirement and Rate Application (the Application) on October 28, 2003 with the British Columbia Utilities Commission (the Commission or the BCUC). The Application sought approval of its forecast 2004 and 2005 revenue requirements, and to amend its schedule of rates on a permanent basis effective January 1, 2004. Commission Order G-77-03 established a regulatory timetable with which to review the Application, establishing an Information Request and negotiated settlement process. Commission Order G-77-03 also approved as interim the existing rates in Whistler until such time as the review process determined that a rate change to the existing tariff rates was required. Notices of the negotiated settlement process were published in the Whistler Pique and the Question on November 27, 2003 and November 28, 2003 respectively. On December 5, 2003, the Commission issued its information request SR1. Terasen Gas responded to SR1 on December 19, 2003, providing responses to the BCUC and Intervenors. No other information requests were received. A settlement conference was held in Whistler on January 8, 2003 at the Whistler Coast Hotel, commencing at 10:00 AM. In attendance were Commission Staff, representatives of the RMOW, Intrawest Corporation, and Terasen Gas, all of whom participated in the settlement discussions. At the conference a Negotiated Settlement was reached by all parties, establishing proposed final rates effective January 1, 2004 for Whistler rate payers being served from the propane distribution grid. The proposed rates are $7.50 per month fixed monthly charge plus a commodity rate of $14.602/GJ, consisting of a commodity sales rate of $14.225/GJ and Rider A of $0.376/GJ. The agreed proposed 2004 final rates result in a 2.6% decrease to customers over existing 2003 approved rates as shown on the attached schedules that form part of this negotiated settlement package. Final rates for 2005 are $7.50 per month fixed monthly charge, plus a commodity rate of $13.855/GJ, resulting in a further decrease of 4.8% over final 2004 rates. This settlement agreement includes the following items and adjustments to the Application:
Item 1: OM&A Net Direct OM&A (Gross Expenses less capitalization of OM&A) agreed to at the Settlement Conference for 2004 and 2005 is to be $576,600 and $588,700 respectively. Included in the calculation of net Direct OM&A is the allocation of $60,000 (representing 50% of the gross direct costs associated with the Manager for wages, benefits and vehicle expenses) to the Squamish Gas service territory. The following table shows the calculation of allowed net Direct OM&A: Gross OM&A as Filed Less: Allocation to Squamish General Reduction Gross OM&A Agreed to OM&A Capitalization as Filed Less: Allocation to Squamish OM&A Capitalization as Agreed Net Direct OM&A Item 2: Commodity Cost of Propane Terasen Gas expressed its concern that the cost of propane should be increased above that forecast in its application due to recent projections of higher costs. For 2004, Participants agree that the commodity cost of propane will be between $9.700/GJ as filed (exclusive of the gas management fee) and up to a maximum of $10.000/GJ, such that the overall rate decrease at a minimum will be as filed in the Application of a 2.2% decrease. Based on all changes agreed to at the Settlement Conference, Commodity Cost of Propane for 2004 will be set at $10.00/GJ for rate setting purposes. For 2005, the Commodity Cost of Propane for rate setting purposes will be $9.801/GJ. Differences between the actual propane costs and the agreed cost of propane will continue to be recorded in the Gas Cost Reconciliation Deferral Account. Terasen Gas will continue to review the cost of propane quarterly, and file applications for changes to Rider A as needed, while considering the desirability of rate stability. Terasen Gas will file its quarterly reviews on an unbundled format, clearly identifying the components of the rate (fixed monthly charge, delivery charge, Rider A). APPENDIX A to Order No. G-14-04 Page 3 of 23 2004 2005 $738,400 $756,900 60,000 60,000 12,400 16,400 $666,000 $680,500 $107,400 $109,800 18,000 18,000 $ 89,400 $ 91,800 $576,600 $588,700
APPENDIX A to Order No. G-14-04 Page 4 of 23 Participants agree to Terasen Gas’s Unaccounted for propane (UAF) rate of 3.496% for 2004 and 2005. Although this amount is still over 3%, Terasen has not fully identified the root cause of its UAF, and will not investigate further until the outcome of the long-term supply study is completed, and a recommendation for either continued propane use in Whistler or a natural gas pipeline is accepted. If it is determined that the appropriate course of action is to continue to expand the propane distribution system to meet future load growth, Terasen Gas will undertake further study into its UAF. Item 3: Rider A Participants to the Settlement Conference agree that Rider A should be set to $0.376/GJ for 2004. Assuming no further additions to the Cost of Propane deferral account based on the above agreed Commodity Cost of Propane, Rider A will be reduced to zero in 2005. Rider A will continue to be reviewed in the quarterly commodity cost reviews, and subject to periodic changes based on the outcomes of the quarterly review. Item 4: Basic Monthly Charge Participants to the Settlement Conference agree that the proposed increase in the Basic Monthly Charge from $7.50 to $10.00 is not consistent with the intent of the Commission Order G-74-01, and is therefore not allowed. The Basic Monthly Charge will be $7.50/month in both 2004 and 2005. Item 5: Deferral Accounts The participants to the Settlement Conference agree that the forecast balance of the Margin Deferral Account of $80,300 ($51,000 after tax) be amortized over a 1 year period in 2004. The Margin Deferral mechanism will continue in effect throughout the settlement period. The forecast balance of the Demand Side Management Study Deferral Account of $45,000 (28,600 after tax) will be amortized over a two year period commencing in 2004. Participants agree that the 2004/5 Regulatory Costs of $20,000 ($13,100 after tax) should be amortized over the two year settlement period commencing in 2004. Item 6: Continuation of Recording Variances
APPENDIX A to Order No. G-14-04 Page 5 of 23 The participants to the Settlement Conference agree that Terasen Gas will continue to record variances between actual and forecast values in deferral accounts for Property Taxes and Interest Costs. Participants agree to fixing $8 Million of floating rate debt as per the Application through a medium term loan arrangement with Terasen Inc, and agree that Terasen will apply to the BCUC for approval of an appropriate interest rate. For rate setting purposes, Terasen Gas will use 5.1% for the $8 million term loan and 4.0% for the remaining floating rate debt portion of debt capital for both 2004 and 2005. To the extent that the actual interest rates are different from those used for rate setting, the difference will be recorded in the Interest Rate Variance Deferral Account. Item 7: Return on Equity Participants agree that the Commission’s automated adjustment mechanism for return on common equity results in a ROE for Terasen Gas in 2004 of 9.75% at 60 bps above the benchmark utility. For rate setting purposes, Terasen Gas will continue to use 9.75% in 2005, with differences between actual and forecast ROE being recorded in a deferral account, the disposition of which will be determined in the next revenue requirements application. Item 8: Period of the Application Participants to the Settlement Conference agree that the appropriate settlement period is two (2) years. This period will allow Terasen Gas to explore synergies with Squamish Gas. Commodity reviews will continue on a quarterly basis in the format agreed above over the settlement period. Item 9: Long-term Supply Study Terasen Gas will continue to evaluate the best means of providing a long-term supply solution to the demand growth in Whistler. The study will evaluate both the continuation and expansion of the existing propane system and a natural gas pipeline, and will include input and participation of stakeholders in the evaluation. Item 10: Demand Side Management Study If the final version of the Demand Side Management Study indicates that there is a safety issue with the installation of some residential propane fireplaces, Terasen Gas will issue a bill message warning customers of the
APPENDIX A to Order No. G-14-04 Page 6 of 23 potential safety hazard. With respect to commercial audits recommended by the Study, Participants agree that Terasen Gas can provide preliminary information on commercial audits, but most of the cost of audit recommendations is to be borne by those customers requesting an audit. Item 11: Load Forecast Participants to the Settlement Conference agree that the appropriate forecast energy sales volumes for 2004 and 2005 rate setting are 723,958 GJ and 763,633 GJ respectively. Item 12: Cost of Relocation of Facilities The participants agree that Terasen Gas should ensure that its propane facilities are routed or located in a manner that minimizes the likelihood of relocations being required in the near term. The Company and the participants agree to hold confidential the discussions held on January 8, 2004, until agreed to by the participants and released publicly by Commission staff. Agreement to this settlement is on a without prejudice basis. Any position taken or statement made during discussions, by the participants or the Company, will not be made public or restrict in any way, positions taken in future proceedings concerning other applications.
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