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Vedder CPCN and Rate Application Streamlined Review Process

FortisBC Energy Inc. September 27, 2012

B-7

markhudsFORTISBC ENERGY VEDDER TRANSPORT

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Agenda

Approvals sought

FEI NGT business

model

Vedder project

description

Vedder CPCN

approval

GT&Cs 12B & Vedder rate

proposal Questions

and Answers Submissions by FEI and Interveners

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Approvals Sought

• Approval of a CPCN for the construction and operation of a LNG refueling station • Project is in the public interest

• Approval of rate design and rate on an interim basis

• Interim approval is based on potential rate impact of Overhead and Marketing charge cost methodology from other regulatory proceedings (i.e. AES Inquiry and BFI Reconsideration)

• Rate design is based on GT&Cs Section 12B

Reference: Exhibit B-1 at Page 1, Exhibit B-2

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Natural Gas Transportation (“NGT”) Business Model • End-to-end service offering for CNG and LNG

Gas Supply Compression & Fueling

(1) Natural Gas Supply (2) Compression & Fueling (3) Vehicles Operating on CNG

FEI CNG Service Offering Customer

(1) LNG Production & Storage

(2) LNG Delivery (3) Fuel Storage & Fueling

(4) Vehicles Operating on LNG

FEI LNG Service Offering

LNG Supply LNG Delivery and Fueling Station

Customer

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Chronology of Events Related to Vedder

• Regulatory review establishes FEI’s NGT fueling station offering (GT&Cs 12B)

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Result or Decision

CNG/LNG Application CNG/LNG fueling stations GT&Cs, Waste Mngt

Tractors ordered

Vedder Contract Temporary Agreement May 12, 2011

Suspended from August 2011 - August 2012G-128-11 CNG/LNG Service Application DecisionG-144-11 Interim approval for tanker charge & temp station

Station Installation Temporary station installed and commissioned

Test fueling in Sept-Oct 2011G-1-12 AES - Zero dollar CPCN threshold establishedG-14-12 CNG/LNG - Approval of GT&Cs 12BVedder Contract Permanent Refueling Agreement March 2, 2012

G-44-12 RRA - Temporary station removed from rate baseC-6-12 BFI Decision - OH&M charge methodology

Permanent Refueling StationFiled July 13, 2012

Legend:

BCUC DecisionsFEI Applications to BCUC

2010 2011 2012

Negotiations with Vedder

Tractor deliveriesTemporary Station / Tanker Charge Application

Vedder fueling tractors

Station InstallationCPCN Application

Construction

FEI - Vedder activities

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Approved Section 12B of GT&Cs – Key Provisions • FEI owning, installing, and maintaining CNG/LNG fueling

station • Charging a ‘take-or-pay’ rate (minimum contract volume) • Actual capital investment in the fueling station • Depreciation and net negative salvage rates and

expense related to the capital assets • All O&M expenses, escalated annually by BC CPI • Allowance for overhead and marketing relating to

developing NGT fueling station agreements • Contract renewal or customer paying unrecovered

capital costs (including positive or negative salvage value)

Reference: Commission Order No. G-14-12

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Vedder Transport

• Headquartered in Abbotsford, B.C. • Liquid-edible, dry-edible, liquid rail car transport • 300 tractors, 800 semi trailers • 54 years of operating experience

Reference: Exhibit B-1 at Page 11

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Vedder 50 LNG Tractors

• Currently 50 LNG tractors to reduce fuel costs and achieve ‘greener’ operations

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Vedder Site Overview

Temporary station

Permanent station

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Temporary Fueling Station (IMC-6000)

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Permanent Fueling Station

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Permanent Station Design

Reference: Exhibit B-1, Appendix A, Schedule B

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Permanent Fueling Station

• Storage capacity three times greater than IMC-6000 • LNG tanker deliveries every two to three days • Refueling time of 2 to 3 minutes • Ability to serve up to 100 vehicles • 50 LNG tractors currently in operation • Target completion – December 2012

Reference: Exhibit B-6, IR 1.5.1 and 1.5.2

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CPCN Approval – legal standards

• Zero dollar threshold for NGT projects established in AES Inquiry (Order No. G-1-12)

• Vedder project in the public interest • Supporting the applicable British Columbia energy objectives • Meeting the most recent long-term resources plan filed by FEI • Accruing benefits to all FEI customers, including NGT customers • Minimizing risks to core customers by complying with approved

GT&Cs section 12B • Recovering capital expenditures, O&M, Overhead & Marketing

costs directly from Vedder through fueling charges

Reference: Exhibit B-1 at Page 8

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Project Benefits

• Net Rate Schedule 16 delivery margin estimate of $284,000 per year

• GHG emission reductions of 3,826 tCO2e per year

• Economic benefits to the Province

• Fuel cost savings of 35-50% to Vedder • Potential benefits may flow to Vedder’s customers

Reference: Exhibit B-1 at Pages 13 - 17

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Forecast Net Delivery Margin Benefit (Year)

• Incremental benefit estimated at 50% of Rate Schedule 16 delivery rate

• Consistent with benefit calculations presented in NGT Application

Annual NG Volume (GJ) 140,000

Rate 16 Delivery Rate (2012) 4.05$

Total Delivery Revenue 567,000$

Less: Fully Allocated O&M Cost (est. 50% of delivery) -50%

Total Incremental Margin 283,500$

Reference: Exhibit B-1 at page 17

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GHG Emission Reductions Benefits

• GHG emission reductions of 3,826 tCO2e per year or 26.8% from diesel

GHGenius v3.20 X Average Annual = Emissions Per X Number of = Emissions Per Emissions Kms Traveled Tractor (tCO2e) Tractors Fleet (tCO2e)

Diesel (t/km) 0.0015002 190,000 285.0 50 14,251.9 LNG (t/km) 0.0010975 190,000 208.5 50 10,426.3

Emissions Reduction (tCO2e): 76.5 3,825.7

Reference: Exhibit B-4, IR 1.2.1

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Vedder Conforms to GT&Cs 12B

Section 12B

Term or Condition Appendix A (Contract)

12B.1 LNG Service definition 4.3 12B.2 owned by FEI 5.1 12B.3 take-or-pay volume 8.4 12B.4 (a) actual capital 8.3 12B.4 (b) depreciation / net negative salvage 8.2 (a) 12B.4 (c) O&M, no adj. for capitalized OH, escl. by CPI 8.2 (b) 12B.4 (d) overhead & marketing charge 8.2 (b) 12B.5 Contract renewal or buyout provision 15

Reference: Exhibit B-1, Appendix B

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Approval of Rate Design as Just and Reasonable • Seeking interim rate approval (subject to resolution of

AES Inquiry and BFI Reconsideration) • Related to the Overhead and Marketing charge cost methodology

• Proposed rates in Table 5 of Exhibit B-1 • Proposed rates are designed on GT&Cs 12B and

adjusted based on directions from the BFI Decision • BFI Decision directed FEI to include branding costs, insurance

premium costs and application cost

Reference: Exhibit B-1 at Page 24, Exhibit B-2

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Proposed Fueling Station Charge Component Fueling Charge

Proposed (Table 5, Exhibit B-1)

Excess Rate Proposed

Capital $1.780 per GJ $0.890 per GJ

Operations & Maintenance

$0.584 per GJ $0.584 per GJ

Overhead & Marketing

$0.286 per GJ

Fueling Service Rate

$2.650 per GJ $1.474 per GJ

Reference: Exhibit B-1 at Page 24

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Rate Assumptions

Input Assumption Initial contract term 10 years Take or Pay Volume 140,000 GJ per year Capital investment $2,394,080 Branding costs (capital) $3,000 Fueling station O&M $80,000 per year Insurance premium (O&M) $1,800 per year Application costs $35,000

Reference: Exhibit B-1 at Pages 24 - 25

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Conclusion

• CPCN should be granted because project is in the public interest • Benefits to all FEI’s customers, including NGT customers • Benefits to the public in general • Risks to natural gas customers mitigated • Costs recovered from Vedder

• Rate Design and Rates are just and reasonable • Consistent with GT&Cs section 12B • Cost inputs incorporated directives from BFI Decision

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Questions and answers Vedder CPCN and Rate Application