Application for Approval of a Deferral Account...Final disposition of Deferral Account under three...
Transcript of Application for Approval of a Deferral Account...Final disposition of Deferral Account under three...
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Application for Approval of a Deferral Account in connection to the Development Agreement
between FEVI and PEC Streamlined Review Process
April 23, 2013
B-9
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Agenda
• Approval Sought • Overview of Existing FEVI System • Woodfibre LNG Project • Pipeline Reinforcement Project • Development Agreement • Other Key Activities • Scope of Development Work • Treatment of Development Costs • Treatment of Commitment Fees • Deferral Account Balance • Examples of Disposition of Deferral Account Balance • AFUDC Treatment of Deferral Balance
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Approval Sought
FEVI seeks BCUC approval of: • Deferral Account to capture
• Development Costs and; • Commitment Fees
• Treatment of the Deferral Account, which is: • Consistent with regulatory practice • Consistent with previously approved treatment in FEVI
The work undertaken in the development stage of this project will answer the many questions raised about the Pipeline Reinforcement Project itself
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Overview of Existing FEVI System
FEVI Peak Day Load
Customer TJ/d MMscfd
Core 106 99
VIGJV 8-12 7-11
BC Hydro 40 - 50 37 - 47
FEW / Squamish 11 10
Total 165-179 153-167
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Woodfibre LNG Site
Proposed Site
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Woodfibre LNG Project • Pacific Energy Corporation (“PEC”) is a Canadian-incorporated company
and part of Pacific Oil & Gas Group (“PO&G”), an independent energy resource development company established in Indonesia in 2003
• PEC is in the early stages of planning, analysis and community engagement regarding a small-scale LNG processing and export facility (“Woodfibre LNG Project”)
• Site conditionally acquired by PEC; former pulp-mill near Squamish, BC
• PEC working on feasibility study for LNG Facility
• PEC’s Final Investment Decision expected Dec 2015
• Firm Contract Demand Requirements: 150 – 220 MMscfd
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FEVI 2017/2018 Design Load Duration Curve
0
50
100
150
200
250
300
350
400
4501 12 23 34 45 56 67 78 89 100
111
122
133
144
155
166
177
188
199
210
221
232
243
254
265
276
287
298
309
320
331
342
353
364
TJs
per
Day
Coldest to Warmest Day (Design Scenario)
FEVI 2017/18 Design Load Duration Curve
Core Load ICP + VIGJV Existing Capacity
Mt. Hayes LNG
Existing Pipeline and Compression
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Woodfibre Demand: 161 TJ/d (150 MMscfd)
0
50
100
150
200
250
300
350
400
4501 12 23 34 45 56 67 78 89 100
111
122
133
144
155
166
177
188
199
210
221
232
243
254
265
276
287
298
309
320
331
342
353
364
TJs
per
Day
Coldest to Warmest Day (Design Scenario)
FEVI 2017/18 Design Load Duration Curve
Core Load ICP + VIGJV Woodfibre New Capacity
Mt. Hayes LNG
Proposed Pipeline and Compression
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Pipeline Reinforcement Project
Proposed Site
Highlighted Area shows Potential System Reinforcements
FEVI Transmission System
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Development Agreement: FEVI and PEC
To commence Development Work for the Pipeline Reinforcement Project
Development Work to be completed in three Phases; Target completion Dec 2015
PEC to provide performance security on the Development costs that FEVI would incur to complete the Development Work
PEC to pay FEVI Commitment Fees of $3.24 million over the three Phases of Development Work
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Other Key Activities
• Negotiate Transportation Service Agreement between FEVI and PEC • Firm Contract Daily Demand • Toll – Consistent with BCUC ongoing ratemaking regulation • Consistent with FEVI General Terms & Conditions • Subject to BCUC approval
• Wheeling Agreement between FEVI and FEI • FEVI to extend the initial term of the Wheeling Agreement • FEVI to determine its long term capacity requirements on FEI’s CTS and to
increase the capacity, if required • Subject to BCUC approval
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FEVI Scope of Development Work
PHASE 1 ($1.2 M)
• Feasibility Study
• Environmental Assessment Pre-Application • Class 4 Cost Estimate for Pipeline Reinforcement; Indicative toll for PEC • Stakeholder and First Nations Consultation
PHASE 2 ($2.8 M)
• Front End Engineering and Design
• Environmental and Engineering Field Studies • Class 3 Cost Estimate for Pipeline Reinforcement; Indicative Toll for PEC • Stakeholder and First Nations Consultation
PHASE 3 ($1.7 M)
• Regulatory Approvals
• Submit Environmental Assessment to BCEAO/CEAA and Obtain Approvals • Submit CPCN to BCUC and Obtain Approvals • Stakeholder and First Nations Consultation
For details, please refer to Appendix B of the Application
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Treatment of Development Costs
FEVI to incur Development Costs
LNG Project proceeds
LNG Project does not proceed
PEC to reimburse FortisBC for Development Costs
incurred
Development Costs become part of Project Costs
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Commitment Fees Payment Schedule
• within 10 business days after Approval of Deferral Account Application $240
• within 10 business days after completion of Phase 1 (i.e. Dec 31, 2013) $1,500
• within 10 business days after completion of Phase 2 (i.e. Dec 31, 2014) $1,500
Commitment Fees are in $000’s
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Treatment of Commitment Fees
PEC to pay Commitment Fees to FEVI
Commitment Fees credited against PEC’s future
demand charges
LNG Project proceeds
LNG Project does not proceed
PEC elects not to proceed
FEVI fails to obtain necessary approvals
Commitment Fees credited to customers
Commitment Fees refunded to PEC
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Deferral Account Balance
(in $000’s) PHASE 1 PHASE 2 PHASE 3 Total Estimated Development Costs
$1,200 $2,800 $1,700 $5,700
Commitment Fees $(240) $(1,500) $(1,500) $(3,240) Estimated Balance before AFUDC
$960 $300 $200 $2,460
AFUDC $19 $63 $118 $199
Estimated Total Balance
$979 $1,363 $318 $2,659
Final disposition of Deferral Account under three possible scenarios • Scenario 1: Woodfibre LNG Project & Pipeline Reinforcement Project proceeds • Scenario 2: PEC Elects Not to Proceed with Woodfibre LNG Project • Scenario 3: FEVI fails to Obtain necessary approvals
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Examples of Disposition of Deferral Account Example 1: LNG Project and Pipeline Reinforcement Project Proceeds
• Estimated Deferral Account Balance - $2,659
• Estimated Development Costs of $5,700 and AFUDC $199 become part of Project Costs
• Commitment Fees of $3,240 credited to PEC’s future demand charges
• Customers Benefit – Expected reduction in the unit costs of transportation on FEVI system
All numbers are in $000’s
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Examples of Disposition of Deferral Account Example 2: PEC elects not to proceed with LNG Project at end of Phase 2
• Estimated Deferral Account Balance - $2,342
• Development Costs of $4,000 incurred by FEVI will be reimbursed by PEC
• PEC forfeits $1,740 of Commitment Fees
• Customers Benefit - $1,658 (Commitment Fees net of AFUDC amount)
All numbers are in $000’s
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Examples of Disposition of Deferral Account Example 3: FEVI fails to Obtain necessary approvals at end of Phase 3
• Estimated Deferral Account Balance - $2,659
• Estimated Development Costs of $5,700 incurred by FEVI will be reimbursed by PEC
• Commitment Fees of $3,240 refunded to PEC
• Balance amount of $199 to be recovered through Customers in future rates
All numbers are in $000’s
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AFUDC Treatment of Deferral Balance
• Distinction between feasibility and development costs only required for regular capital; both types are treated the same for large capital projects
• Consistent with past FEI/FEVI practice and accepted regulatory accounting treatment & USoA that all these costs in support of capital are treated the same
• In addition, rate base return (AFUDC) appropriate for costs incurred in support of a fixed asset (capital)
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Thank You