FEI BERC R ATE M ETHODOLOGY E XHIBIT B-10 FortisBC Energy Inc. Application for Approval of Biomethane Energy Recovery Charge Rate Methodology Streamlined Review Process February 3, 2016
Agenda • Introduction Purpose of the Application Approvals Sought • The Application Summary of Program Fundamentals & Changes Market-Based Proposal Level of Premium and Long Term Agreement • Areas of Key Interest Customer Education & Awareness Spending Alternatives Transfer Mechanisms - 2 -
Purpose of the Application • Encourage voluntary participation in the program and moderate the financial impact of the Program on non- RNG customers • Address current challenges: Reduced customer additions Increased customer drops Premium of RNG over natural gas The ability to attract higher volume long term customers - 3 -
Approvals Sought Rate • BERC = Jan 1 st CCRA Rate + $7 per GJ • Maintain Existing Rate Schedules Large Volume Customers • Long Term Customer BERC Rate discount of $1 per GJ Reporting • Replace Quarterly with Annual Report Accounting • Transfer mechanisms for the Biomethane Variance Account (BVA) - 4 - Reference: Exhibit B-1, Section 1.2, Page 3
Renewable Natural Gas Program Structure Purify Raw Biogas Only methane Meets NG standards Remove other 50% - 60% Methane + remains gases a nd known as “RNG” other gases Biomethane Costs and Revenues captured in the BVA - 5 -
Guiding Principles Potential rate Continuance of impact on non- a voluntary RNG customers offering for should be customers minimized Costs recovered from Consistency voluntary with existing customers to Program to the the extent extent possible possible - 6 - Reference: Exhibit B-1, Section 6, Page 41
Basis for Proposal FEI Easy for customers to compare and understand Commodity Rate as Base Uses existing Rate Schedules Level of $7 premium supported by experience BERC Premium More aligned with other green energy programs Discount for $1 discount aligned with customer economics Long Term Contracts Acknowledges commitment for term and volume Transfer Reduces risk of growth in BVA for future recovery Mechanisms Use of principles outlined in Order G-210-13 - 7 -
Premium Analysis Rate Schedule 1B Net Monthly Adds & RNG Price Net Adds BERCRate BERC Premium over NG $16.00 375 1088 1118 $14.00 583 325 584 $12.00 275 Premium reaches almost $9 per GJ $10.00 Period of stable growth 225 PREMIUM ~$7 per GJ $8.00 175 $6.00 125 $4.00 75 $2.00 25 $- (25) $(2.00) (75) $(4.00) (125) 2011 1-Apr-12 1-Aug-12 1-Dec-12 1-Apr-13 1-Aug-13 1-Dec-13 1-Apr-14 1-Aug-14 1-Dec-14 1-Apr-15 - 8 - Reference: Exhibit B-1, Section 5.2.1, Figure 5-2, Page 33
Long Term Agreement Tariff Well established regulatory approach Supplement Filed individually, review and approved by BCUC to 11B Term of Minimum term of 10 years Contract Minimum Minimum of 500 GJ per month, but may be greater RNG Demand Customer will take or pay for this amount Other May consider 5 Year provided demand is at least 60,000 GJ (Equal to 10 Year x 12 months x 500 GJ) Termination Subject to termination payment in event of early termination - 9 -
Areas of Key Interest • Customer Education and Awareness Spending • Alternatives • Transfer Mechanisms - 10 -
Education & Awareness Spending Stimulate Generate interest in RNG awareness of offering renewable energy Maintain Generate participation awareness of and support of RNG offering RNG program - 11 -
Approximate Breakdown of Spending 450,000 Actual Forecast 400,000 350,000 300,000 Spending ($) 250,000 200,000 150,000 100,000 50,000 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Research Print Digital Radio Trade Shows Direct Sales Costs Reference: Spending-Exhibit B-5, Response to BCUC IR 1.9.1 and 1.43.1 - 12 - Demand -Exhibit B-3, Attachment A and Exhibit B-1-1, Appendix E, Schedule 2
Measuring Effectiveness Costs to make customers aware of the Program are fundamental to the Program Impact of spend is relatively minimal Total marketing spend equates to approximately $0.001/GJ over total customer base Research costs to measure effectiveness would be proportionally large in relation to total spend Continue to evaluate based on direct customer feedback and available information: • Website traffic flows • Number of customer acquisitions • Net customer additions • Total RNG demand - 13 -
FEI Considered Alternatives Five Year Costs Lowest Rate Average Maintain Recovered Impact to Residential Voluntary from Non-RNG Non-RNG Low GHG Voluntary Customers Program Annual Bill Alternative Offering Customers (Rank) Consistency Impact Status Quo Partially 4 $21.69 Yearly Clearing Partially 2 $4.47 Universal 3 $7.06 ‘Green Portfolio’ Market-Based + Partially 1 $2.68 Yearly Clearing Reference: Appendix E of Exhibit B-1-1 as updated in Exhibit B-5, Response to BCUC IR 1.31.1 - 14 -
Alternatives Identified in BCUC IR 1.19.1 1. Additional levels of pricing on a $ per GJ basis with discounts for RNG volume consumed (Options 1-3) Generally consistent with FEI proposed approach FEI ranked these alternatives higher than a block rate but lower than the FEI proposal. 2. Block based purchases of renewable energy (Option 6) Other utilities have been successful with this approach; however, Requires greater investment in IT & customer awareness Migration of customers more challenging Does not preserve per GJ environmental benefits Not recommend at this time - 15 -
RNG Program Costs & Recovery Value of BVA Saleable Supply Remaining Project 1 Gas Costs MCRA Balance in BVA if Aged Inventory Costs <> Project 2 Gas Costs Recoveries ..ETC Capital Delivery Remaining O&M Balance Rates Deferral Gas Cost Account Project 3 COS BVA ($) Project 4 COS ..ETC Total Marketing & Costs $ BERC Admin Costs Recoveries ($) Total GJ Demand Project 1 Volume (GJ) RNG RNG Voluntary RNG Notional Notional Project 2 Volume Demand Bank (GJ) Bank (GJ) ..ETC Aged(GJ) BVA = Biomethane Variance Account COS = Cost of Service BERC = Biomethane Energy Recovery Charge - 16 -
Transfer Mechanisms Storage & Transport Delivery Rates Rates Opening Amortization MCRA January 1 BVA Expense GJ & $ Balance $ GJ & $ C Aged B Inventory (GJ) x CCRA Rate Inventory = A-B-C Available For Sale (GJ) X January 1 December 31 BERC Rate BVA Balance GJ & $ A - 17 -
Continued Program Oversight • FEI will continue to seek recovery of costs through relevant filings • FEI will seek approval for BERC rates aligned with Fourth Quarter Gas Cost Report • All transfers will be subject to Commission Review • Annual Status Report will continue • FEI will continue to seek acceptance of new supply agreements pursuant to section 71 of the UCA and the approved criteria for biomethane supply projects - 18 -
For further information, Find FortisBC at: please contact: Fortisbc.com Jason Wolfe, Jason.Wolfe@fortisbc.com Michelle Carman, Michelle.Carman@fortisbc.com 604-576-7000 - 19 -
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