ORDER NUMBER
P-6-19
IN THE MATTER OF
the Utilities Commission Act, RSBC 1996, Chapter 473
and
Kinder Morgan Canada (Jet Fuel) Inc.
2019 Tariff Filing Application
BEFORE:
B. A. Magnan, Panel Chair
T. A. Loski, Commissioner
C. M. Brewer, Commissioner
on June 28, 2019
ORDER
WHEREAS:
A. On November 29, 2018, Kinder Morgan Canada (Jet Fuel) Inc. (KMJF) filed with the British Columbia Utilities Commission (BCUC) an application for approval of Tariff No. 40, which extends the existing terms of service and tolls payable for the transportation of turbine fuel to Vancouver International Airport and the Burnaby Terminal (Application), effective January 1, 2019;
B. By Order P-1-18 dated December 14, 2018, the BCUC approved, on an interim and refundable basis, KMJF’s Application effective January 1, 2019, to the earlier of December 31, 2019, or the parties reaching a mutual agreement, and established a public written submission process and regulatory timetable to explore stakeholders’ submissions and/or other potential issues;
C. By letter dated March 7, 2019, a collective request was filed by KMJF and shippers: Parkland Refining Ltd. (Parkland), Shell Canada Products and the Vancouver Airport Fuel Facilities Corporation (VAFFC) to extend the regulatory timetable for the purpose of exploring further negotiations amongst KMJF and its shippers;
D. By Order P-3-19A dated March 14, 2019, the BCUC approved an amended regulatory timetable to accommodate further negotiations amongst KMJF and its shippers;
E. By letters dated April 5, 2019, VAFFC and Parkland informed the BCUC that the negotiations between KMJF and its shippers did not produce an agreed settlement. VAFFC submitted a request to the BCUC to reverse the interim tolls approved by Order P-1-18 and establish a regulatory proceeding regarding the Application;
F. By Order P-4-19 dated April 10, 2019, the BCUC approved an amended regulatory timetable regarding VAFFC and Parkland’s request to establish a regulatory proceeding regarding the Application;
G. By April 24, 2019, VAFFC and Parkland had registered as interveners in the Application;
H. By letter dated April 29, 2019, KMJF responded to intervener comments and proposed an amended regulatory timetable to accommodate KMJF’s submission on its detailed application for final tolls. Further, KMJF responded to intervener submissions to change the interim tolls established in Order P-1-18 and requested that the interim tolls remain pending the outcome of the Application;
I. On May 2, 2019, the BCUC appointed additional Commissioners to the existing Panel to review the Application;
J. By Order P-5-19 dated May 7, 2019, the BCUC established further regulatory process regarding the Application, which included intervener submissions on the interim rate, KMJF responses to intervener submissions on the interim rate, KMJF filing a detailed final toll application, BCUC and interveners information requests (IR) to KMJF, KMJF responses to IRs and further process to be determined;
K. By letter dated May 16, 2019, VAFFC submitted a request to the BCUC to reverse the KMJF interim toll established in Order P-1-18 and return to the existing toll in place at the time of the Application;
L. By letter dated May 30, 2019, KMJF responded to intervener submissions on proposed changes to the interim toll established in Order P-1-18. KMJF submits that the continuation of the interim and refundable toll is consistent with earlier BCUC decisions and allows for regulatory efficiency in the current Application; and
M. The BCUC has reviewed the evidence filed by KMJF and VAFFC regarding the interim toll and makes the following determination.
DATED at the City of Vancouver, in the Province of British Columbia, this 28th day of June 2019.
BY ORDER
Original signed by:
B. A. Magnan
Commissioner
Attachment
Kinder Morgan Canada (Jet Fuel) Inc.
2019 Tariff Filing Application
REASONS FOR DECISION
1.0 Introduction
On November 29, 2018, Kinder Morgan Canada (Jet Fuel) Inc. (KMJF) filed with the British Columbia Utilities Commission (BCUC) pursuant to section 65 of the Utilities Commission Act (UCA), the proposed Tariff No. 40 which governs the terms of service and tolls payable for the transportation of turbine fuel to the Vancouver International Airport and Burnaby Terminal (Application).[1] Pending a final decision on the Application, KMJF sought interim approval of the tariff (interim toll), effective January 1, 2019.[2]
By Order P-1-18, pursuant to sections 65 and 89 of the UCA, the BCUC approved KMJF’s Application on an interim basis.[3] The interim toll is based on the existing toll methodology established by Order P-5-09, that fixes annual revenues on an annual escalation of 2.5 percent per year.[4] The interim toll is effective January 1, 2019, to the earlier of December 31, 2019, or the parties reaching a mutual agreement. In addition, the BCUC established a public written submission process and a regulatory timetable to explore stakeholder submissions and/or other potential issues.
2.0 Interim Toll Request
The BCUC, by issuance of procedural orders P-2-19 and P-3-19A,[5] extended the regulatory timetable in response to requests filed by KMJF and its shippers: Parkland Refining Ltd. (Parkland) and Vancouver Airport Fuel Facilities Corporation (VAFFC). The stated purpose being to provide time necessary for the sophisticated parties to further their negotiations.
On April 5, 2019, VAFFC and Parkland informed the BCUC that discussions between KMJF and its shippers had not produced a negotiated settlement. In the absence of an agreement, VAFFC and Parkland requested that the BCUC establish a regulatory proceeding regarding the Application.[6] In addition, VAFFC argued that the BCUC should reverse its decision approving the interim tolls as made by Order P-1-18.[7]
On April 10, 2019, by Order P-4-19 the BCUC further amended the regulatory timetable to include intervener registration, BCUC and intervener information requests (IR), KMJF’s response to IRs and further process to be determined.[8]
By April 24, 2019, both VAFFC and Parkland had registered as interveners in the Application. On the same date VAFFC filed a request to reverse the interim toll established in Order P-1-18. The BCUC responded through Order P-5-19 requesting that KMJF and interveners make submissions on the interim rate.[9] On May 16, 2019, VAFFC provided its submission on the interim rate. VAFFC requested that the BCUC reverse the approval of KMJF’s interim toll and return to the existing toll in place at the time of the Application.[10]
3.0 Positions of the Parties
3.1 Parkland
While Parkland has not made a formal submission, its position on the interim rate has been made clear during its request for intervener status. Parkland contends that the BCUC has not been presented with evidence sufficient to justify the increase in toll rates as effected in the interim. Moreover, Parkland submits that the BCUC cannot determine on the reasonableness of rates adopted in the absences of such evidence.[11] Parkland asserts that KMJF has not met the required burden placed upon it to present a case that allows adequate evaluation of the relief sought in KMJF’s Application.[12] Parkland further contends that KMJF should be required to file the evidence necessary to justify the tolls contained in its proposed Tariff No. 40.[13]
3.2 VAFFC
VAFFC states that its submission on May 16, 2019, regarding KMJF’s interim toll consolidates its previous evidence and letters of comment.[14] In filings dated April 5, 2019 and April 24, 2019, VAFFC argued that KMJF had not filed an adequate application or provided compelling evidence to justify an increase in its toll rate, including the interim toll.[15] VAFFC concurs with Parkland’s view in submitting that KMJF has failed to discharge its evidentiary onus. VAFFC submits that KMJF has left interveners with insufficient information upon which to review the Application or to craft relevant and material IRs necessary to enable robust discussion and argument. VAFFC asserts that this failure runs contrary to the requirements of procedural fairness and natural justice.[16]
VAFFC argues that retaining the interim toll is inconsistent with the BCUC’s established practice of maintaining the “status quo” in an interim toll application, absent “compelling” evidence to make a change.[17] VAFFC submits that no such compelling evidence has been provided by KMJF.[18]
VAFFC claims that Canadian regulators in the past, including the BCUC, have rejected interim toll increases in the absence of compelling evidence or indication of a pressing and immediate need.[19] In addition, VAFFC references previous BCUC decisions testifying to similar practice.[20]
VAFFC references the BCUC’s decision in Order G-248-18, regarding Creative Energy’s Application for 2019 Interim Rates for Core Steam and Northeast False Creek Operations.[21] VAFFC offers this as an example of a prevailing principle of maintaining the status quo:
The Panel acknowledges that Creative Energy intends to file a full rate application for the core steam system and for NEFC in 2019 and is thus only seeking interim 2019 rates at this time. An interim rate application in such circumstances should generally seek to maintain the status quo unless the utility is able to provide compelling evidence for changes to be made. No such evidence was provided in this case.[22]
VAFFC argues that to maintain the status quo must mean keeping the rates the same, and not continuing with the existing pattern of increased rates, as proposed in KMJF’s Application.[23] Furthermore, VAFFC submits that KMJF should not benefit from any possible ambiguity in interpretation, where to do so increases revenue in KMJF’s favour and to the detriment of others.[24]
VAFFC submits that KMJF’s justifications for the requested 2.5 percent escalation are flawed.[25] VAFFC states that while KMJF assumed an inflation rate of 2 percent (based on a 2009 National Energy Board recommendation[26]) it did not provide any argument as to why the interim toll increase sought was necessary for its business purposes. VAFFC argues that historical inflation figures prior to 2009 are dated and provide a less relevant basis for calculation than post 2010 inflation values, all of which, apart from one exception, are below 2 percent.[27] VAFFC further contends that the imposition of an additional 0.5 percent premium constitutes a “double dipping” attempt by KMJF to earn a return based on assumed business risk.[28]
VAFFC submits that KMJF has failed to justify an interim rate increase pending the outcome of its Application, as KMJF has not provided any compelling evidence to merit such a change.[29] On this basis, VAFFC requests that the BCUC reverse its approval of KMJF’s interim rate, made in Order P-1-18, and return to the rates in force at the time of the initial Application.
3.3 KMJF
KMJF submits that since 2009, the tolls governing the transportation of turbine fuel between the Vancouver International Airport and Burnaby Terminal have been based on a negotiated settlement between KMJF and its shippers, including VAFFC, and have been continued on an interim basis by the BCUC.[30]
KMJF states that the approval of the interim rates based on the continuation of the existing toll methodology (which fixes annual revenues based on an annual escalation of 2.5 percent per year) was reasonable and correct.[31] KMJF submits that continuation of the interim toll is consistent with earlier BCUC decisions and allows for regulatory efficiency in the current matter.[32] KMJF argues that varying the interim toll established in
Order P-1-18, as requested by VAFFC, would add unnecessary regulatory and administrative burdens on all parties, including the BCUC and with only minimal or no benefit to shippers; therefore, VAFFC’s request should be dismissed.[33]
In response to VAFFC’s contention that, “Authorities are clear that absent evidence of need for an interim rate increase, such a request should be rejected,”[34] KMJF states that it did not actually request an interim rate increase.[35] KMJF argues it requested continuation of the tolls set out by Order P-5-09 on an interim basis, as agreed to by KMJF, its shippers and VAFFC while the Application is reviewed by the BCUC.[36] Furthermore, KMJF submits that the regulatory decisions regarding interim rate increases offered in argument by VAFFC, generally deal with rate requests by public utilities subject to cost of service regulation. KMJF contends that these decisions have limited applicability to the Application where the BCUC has approved interim rates for a common carrier based on an expiring settlement and pending the outcome of negotiations for a new tolling agreement.[37]
KMJF submits that it has followed the existing regulatory process and filed the interim toll application to continue the tolls approved under BCUC Order P‐5‐09.[38] This allows for 2019 rates to be in place while it continues to engage with shippers to explore the potential to reach a negotiated settlement.[39]
4.0 Panel Determination
Considering the factors outlined below and the evidence submitted in this proceeding, the Panel denies VAFFC’s request to revoke the interim toll as approved by Order P-1-18. The interim toll remains in effect until the earlier of December 31, 2019, the parties reach a mutual agreement or by further order of the BCUC.
The BCUC’s decision to approve the interim toll provided KMJF and its shippers time to explore a negotiated settlement and promoted regulatory efficiency in the review of the Application. Established by Order P-5-09, the existing toll methodology upon which the interim toll is based was the result of a negotiated settlement between KMJF, its shippers and VAFFC. The Panel considers that, given this and the information before it at the time of the Application, its decision to implement an interim rate was reasonable.
The Panel notes that at the time the Application was made, no shippers filed any submissions opposing the request for the interim approval of the tariff. All parties agreed that exploring a potential negotiated settlement had merit and actively participated in the negotiations. It was not until almost four months after Order P-1-18 was issued that VAFFC sought to reverse the interim toll and maintain the toll which was in place at the time of the Application.
The Panel further acknowledges that any variance between the interim toll and the arrived at permanent toll is subject to refund or recovery, with interest payable at the average prime rate of KMJF’s principal bank for its most recent year. This is outlined in directive six (6) of Order P-1-18. The Panel is of the view that this will safeguard shippers from any over recovery during the interim toll period. Further, the Panel acknowledges that KMJF has now provided additional information in support of its proposals, in its 2019 Revenue Requirement and Final Tolls application filed on June 7, 2019.[40]
While the Panel considered KMJF’s assertion that interim rate decisions regarding public utilities may have limited applicability to common carriers in certain circumstances, the Panel affirms the BCUC’s discretion to set interim rates without making distinction between public utilities and common carriers. Further regarding BCUC’s discretion, the Panel considered VAFFC’s argument regarding BCUC past decisions but points out that the BCUC is not bound by its own precedent and, in many other instances, has set interim rates in a way which does not mirror the Creative Energy decision. Previous decisions do not fetter the Panel in deciding current applications.
[1] Exhibit B-1, p. 1.
[2] Ibid.
[3] Exhibit A-2, Order P-1-18.
[4] Trans Mountain (Jet Fuel) Inc. An Application for Approval of 2010 Tariff Filing and Toll Setting Agreement for the term 2010 - 2018, Order P-5-09 dated December 16, 2009.
[5] Exhibit A-6, Order P-2-19; Exhibit A-8, Order P-3-19A.
[6] Exhibit E-3-1, p. 3.
[7] Ibid.
[8] Exhibit A-9, Order P-4-19.
[9] Exhibit A-12, Order P-5-19.
[10] Exhibit C2-2, p. 4.
[11] Exhibit C1-1, pp. 3–4.
[12] Ibid., p. 4.
[13] Ibid.
[14] Exhibit C2-2, p. 1.
[15] Exhibit E-3-1, p. 1; Exhibit C2-1, p. 3.
[16] Exhibit C2-2, p. 1.
[17] Ibid., p. 2.
[18] Ibid.
[19] Exhibit C2-1, pp. 2–3.
[20] Exhibit C2-2, p. 2.
[21] Creative Energy Vancouver Platforms Inc. Application for 2019 Interim Rates for Core Steam and Northeast False Creek Operations, Order G-248-18 dated December 20, 2018.
[22] Ibid., p. 2.
[23] Exhibit C2-2. p. 2.
[24] Exhibit C2-1, p. 2.
[25] Exhibit E-3-1, p. 2.
[26] National Energy Board, Reasons for Decision RH-2-2008, May 2009, Table 4-2, p. 45.
[27] Exhibit B-3, p. 7.
[28] Exhibit E-3-1, p. 2.
[29] Exhibit C2-2, p. 4.
[30] Exhibit B-7, p. 2.
[31] Ibid.
[32] Exhibit B-7, p. 3.
[33] Ibid., p. 2.
[34] Exhibit C2-2, p. 2.
[35] Exhibit B-7, p. 3.
[36] Ibid.
[37] Ibid.
[38] Ibid.
[39] Ibid.
[40] Exhibit B-8.