Suite 1 – 720 Beatty Street 604 688 9584 TEL Vancouver, Canada 604 688 2213 FAX V6B 2M1 creativeenergycanada.com

11 August 2020 Via E-filing Ms. Marija Tresoglavic Acting Commission Secretary BC Utilities Commission Suite 410, 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Tresoglavic: Re: British Columbia Utilities Commission (BCUC, Commission)

Creative Energy Vancouver Platforms Inc. (Creative Energy) Vancouver House Development District Cooling System (DCS) Rates Application (Application)

Creative Energy writes to file the Application and it requests the approvals set out in section 1.2. As discussed in the Introduction to the Application, Creative Energy is requesting interim approval of rates effective the date that Creative Energy completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement. A draft order is attached at Appendix A and corresponding rate sheets are included in Appendix B. The transaction to acquire the DCS is expected to complete by August 31, 2020 at the earliest. Creative Energy respectfully requests interim approval of the proposed rates prior to the end of September, which would reasonably support the Commission’s review by that time and allow Creative Energy to incorporate the interim approved rates into its September invoices at the close of the month. For further information, please contact the undersigned. Sincerely,

Rob Gorter Director, Regulatory Affairs and Customer Relations Enclosure.

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Melissa.MahText BoxBCUC File 64113

Yvonne.LapierreHeating and Cooling Rates at Vancouver House Developement

Creative Energy Vancouver Platforms Inc.

Application for Rates to Provide District Cooling Service to the Vancouver House Developm

ent

August 11, 2020

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Contents 1. Introduction ............................................................................................................................ 1

1.1. Application Overview ....................................................................................................... 2

1.2. Requested Approvals ....................................................................................................... 4

1.3. Suggested Regulatory Process ......................................................................................... 5

2. Revenue Requirements ........................................................................................................... 6

2.1. Capital and Development Costs ....................................................................................... 6

2.2. Operations and Maintenance Costs ................................................................................. 8

2.3. Variable Electricity and Water Costs .............................................................................. 10

2.4. Annual Revenue Requirements ...................................................................................... 11

3. Rate Design and Billing Determinants .................................................................................. 12

3.1. Capacity Charge .............................................................................................................. 13

3.2. Variable Charge .............................................................................................................. 15

4. Proposed Levelized Capacity Charge 2020-2025 and RDDA ................................................ 16

5. Other Rate Setting Considerations ....................................................................................... 17

Appendices Appendix A - Draft Order Appendix B-1 - Interim Rate Sheet Appendix B-2 - Permanent Rate Sheet Appendix C - Customer Service Agreement Appendix D - Operator Responsibilities Appendix E - Risk Matrix

Tables Table 1: Cooling Rates Application versus Heating Rates Application Evidence ............................ 6 Table 2: Capital and Development Costs ........................................................................................ 6 Table 3: Operations and Maintenance Costs – 2021 ...................................................................... 8 Table 4: Annual Revenue Requirements 2020-2025 .................................................................... 11 Table 5: Capacity Charge Billing Determinants ............................................................................. 13 Table 6: Bonbright Criteria Assessment of Capacity Charge ........................................................ 14 Table 7: Proposed Levelized Capacity Charge versus Cost of Service Rates 2020-2025 .............. 17

1. Introduction Creative Energy Vancouver Platforms Inc. (Creative Energy) applies for Commission approval of permanent rates for the five-year period of September 2020 through December 2025 for its provision of district cooling service to the Vancouver House Development (Application). By Order C-2-20, the Commission granted a Certificate of Public Convenience and Necessity (CPCN) for Creative Energy to acquire and operate the Cooling Thermal Energy System (TES) (alternatively referred to as the District Cooling System (DCS)) being constructed to serve the four buildings that comprise the Vancouver House Development (Development). Approval of the CPCN allows Creative Energy to acquire the DCS under the terms of a Construction and Purchase Agreement with the Owner of the Development. Creative Energy expects to be able to complete the transaction under the Construction and Purchase Agreement with the Owner by August 31, 2020 at the earliest, subject to completion of Building 4 at the Development1 and final commissioning of the DCS assets to serve Building 4. Creative Energy therefore seeks approval of the proposed rates and Customer Service Agreement (CSA) filed with this Application on an interim basis effective the date that Creative Energy begins providing service, which will allow Creative Energy to charge for the cooling services it will be providing. Further to the discussion above, the earliest effective date is September 1, 2020, subject to the timing of the final transaction to acquire the DCS from the Owner of the Development. Nonetheless, the Draft Order attached at Appendix A contemplates interim approval as of the date that Creative Energy begins providing service, which will avoid a circumstance of Creative Energy charging the capacity charge even though no service is being provided. Subject to the date of the final transaction, Creative Energy would charge the interim approved capacity charge pro-rata based on the number of days in September 2020 that interim approved rates are in effect. Charges for service in September will not be invoiced until early October and Creative Energy therefore respectfully requests interim approval prior to the end of September. Creative Energy has attached to this Application its DCS Rates Model, which sets out the forecast revenue requirements and the determination of levelized capacity charges over contract duration. The duration of the customer contract is the term of 30 years as set out in the proposed CSA, discussed further below. For context, there are some rate attributes and associated proposals that are common between this Application and the application for rates in respect of the Heating TES at the same Development (Heating Rates Application). The Commission established an initial proceeding to review the rate design included with the Heating Rates Application, which is the same rate

1 The Development comprises four buildings in total, and the DCS will serve all four buildings.

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design proposed for DCS in this present Application. The Commission has adjourned the proceeding into the Heating Rates Application pending an evidentiary update that Creative Energy will file by August 31, 2020. The introductory section below on regulatory process provides Creative Energy’s suggestions for an efficient review of both applications.

1.1. Application Overview Levelized Capacity Charge Creative Energy applies for approval of a levelized capacity charge to recover the fixed costs of the annual revenue requirements of the DCS. A discussion of the levelized capacity charge rate structure is set out in sections 3 and 4. Creative Energy proposes that the capacity charge be determined on a levelized annual basis. The levelized structure is a cost-based approach that will smooth rate impacts over time, with the result however that forecast revenues recover less than the cost of service during initial years of service. Revenue Deficiency Deferral Account Creative Energy therefore also applies for approval of a rate smoothing Revenue Deficiency Deferral Account (RDDA), as set out in further detail in section 4. The RDDA allows for a levelized rate structure to smooth rate changes over time recognizing that the rates will not initially recover forecast revenue requirements. With Commission approval of the levelized capacity charges and of the RDDA, forecast revenue shortfalls during initial years of service will be added to the balance of the RDDA to be ultimately recovered through levelized rate increases over time. The balance in the RDDA will attract interest at Creative Energy’s weighted average cost of capital and, looking ahead to the approval of final rates for future years, the account balance would be reduced to zero within the 30-year term over which rates are forecast. Variable, Flow-through Charge Creative Energy applies for approval of a variable charge calculated monthly and based on total electricity and water costs divided by total cooling energy consumption. The variable charge will recover the cost of service that varies directly with energy consumption by flowing-through the actual costs. A discussion of the variable charge rate structure is set out in sections 3. Customer Service Agreement Creative Energy applies for interim and permanent approval of the associated terms and conditions of service as set out in the CSA, attached at Appendix C. Creative Energy will execute the CSA with the Owner/Customer of the Vancouver House Development for each of the four buildings and the owner will assign the CSA for the residential tower to the Strata Corporation. Creative Energy will bill the owner and the Strata Corporation solely and directly, and those entities will determine how their costs for cooling will be passed through to tenants and strata unit owners.

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The Vancouver House Cooling CSA is substantially the same as the Heating Rates Application CSA that the Commission has approved on an interim basis, with one exception as explained further below. The Commission’s interim approval of the Vancouver House Heating CSA by Order G-260-19 was subject to striking the standard Assignment provision at section 3.1 of the proposed CSA provided with the Heating Rates Application, which section read as follows:

A Customer may not assign a Customer Service Agreement or any of its rights or obligations thereunder without the prior written consent of the Utility, such consent not to be unreasonably withheld. The Utility may, subject to BCUC approval, assign a Customer Service Agreement or any of its rights or obligations thereunder (including, without limitation, by way of the sale of the majority of its shares or business or its material assets or by way of an amalgamation, merger or other corporate reorganization) to any of its Affiliates or to any other Person without the consent of the Customer, provided such Affiliate or Person is duly qualified to carry out the Customer Service Agreement and enters into a written agreement with the Customer to be bound by the provisions of this Agreement in all respects and to the same extent as the Utility is bound.

Creative Energy acknowledged in its response to BCUC Information Request Series 18.0 during the Heating Rates Application proceeding that the standard assignment provision copied above may raise certain concerns and that it would revisit the terms to be proposed for permanent approval. Creative Energy believes that it is appropriate to include an assignment provision in the CSA to specify the rights, if any, of each party to assign the CSA. In the event of a sale of the DCS, which would be subject to BCUC approval, it is reasonable that the Customer should have the comfort of an assurance that the assignee of the CSA will agree to be bound by the terms and conditions. That said, the approval of the Customer will not be required and Creative Energy confirms that the assignment provision in the proposed Cooling CSA does not grant the Customer any approval rights in respect of any such corporate level reorganization, but there would be an agreement pursuant to which the new utility entity would agree to be bound by the obligations of Creative Energy under the original CSA, and subject to BCUC acceptance. The proposed standard Assignment provision at section 3.1 of the CSA for the Vancouver House DCS is as follows, with one notable change highlighted in bold font2:

2 An Affiliate or Person would require a CPCN from the BCUC to acquire and operate the DCS. This updated assignment provision will also form part of the requested approvals to be included as part of the evidentiary update into the Heating Rates Application, to be filed by the end of August 2020.

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The Customer may not assign this Customer Service Agreement or any of its rights or obligations hereunder without the prior written consent of the Utility, such consent not to be unreasonably withheld. The Utility may, subject to BCUC approval, assign this Customer Service Agreement or any of its rights or obligations thereunder (including, without limitation, by way of the sale of the majority of its shares or business or its material assets or by way of an amalgamation, merger or other corporate reorganization) to any of its Affiliates or to any other Person without the consent of the Customer, provided such Affiliate or Person is accepted by the BCUC to carry out the Customer Service Agreement and agrees in writing to assume and be bound by the provisions of this Customer Service Agreement in all respects and to the same extent as the Utility is bound.

Regulatory Cost Variance Deferral Account The proceeding to review this Application has not been established and the associated costs of the proceeding and the amounts that Creative Energy will be directed to pay are not known, are uncertain and generally outside of Creative Energy’s control. Creative Energy therefore seeks approval of a Regulatory Cost Variance Deferral Account (RCVDA) to record the difference between the regulatory cost forecast provided in this Application and the final actual costs when so determined. Creative Energy does not expect there to be significant regulatory costs and any variances will be administratively simple to recover or credit through a rate rider applied to each building customer on a $/MWh basis (i.e. using the same allocation method as for the Variable Charge as explained in section 3). Further discussion is included in section 2.4.

1.2. Requested Approvals In this Application, Creative Energy is seeking Orders of the Commission granting the approvals described below pursuant to the noted sections of the legislation. A draft Commission Order is provided in Appendix A to this Application while Appendix B provides the corresponding tariff pages for approval. Creative Energy requests the following approvals:

1. Interim approval, effective the date that Creative Energy begins providing service, and pursuant to sections 58 to 60 and 90 of the Utilities Commission Act (the Act) and section 15 of the Administrative Tribunals Act:

• the Levelized Capacity Charges set forth in Appendix B-1;

• the RDDA described in section 4;

• the Variable Charge set forth in Appendix B-1;

• the CSA provided at Appendix C;

• the RCVDA described in section 1.1;

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2. Permanent approval, effective the date that Creative Energy begins providing service, and pursuant to sections 58 to 60 of the Act:

• the Levelized Capacity Charges set forth in Appendix B-2;

• the RDDA described in section 4;

• the Variable Charge set forth in Appendix B-2;

• the CSA provided at Appendix C; and

• the RCVDA described in section 1.1.

1.3. Suggested Regulatory Process Creative Energy recommends that this Application is suitable to a written hearing process of the Commission in the normal course. The Application requests approval of rates for the five-year period through 2025 and Creative Energy offers no specific timing suggestions on process steps outside of its request for interim approvals. As elaborated below, Creative Energy does expect overall that in view of this relatively straightforward Application and the alignment of certain evidence with the Heating Rates Application and prior evidence submitted in support of the CPCN, the regulatory process may thus also be straightforward and overall efficient. In view of the common and consistent nature of certain rate proposals between the Heating Rates Application and this Cooling Rates Application, there is an opportunity to simplify and streamline the regulatory review of both Applications overall. As highlighted in Table 1 below, there are shared attributes, evidence and principles supporting the rate proposals already on the record in the Heating Rates Application and elaborated upon further in this Application, where applicable. Subject to receipt of the interim approvals requested in this Application and recognizing that an evidentiary update in the Heating Rates Application is pending and will be filed by August 31, 2020, Creative Energy requests that the Commission be guided by the Table 1 in seeking any opportunity to coordinate the concurrent review of each Application. Creative Energy acknowledges that may be best facilitated also through having the same Commission Panel assigned to each Application, which would support hearing each Application under one potentially multi-phased process. If a different Panel is assigned to each Application, Creative Energy would request that the rate design and CSA proposal gain precedent for review through the Heating Rates Application proceeding and to which the Cooling Rates Application proceeding could then refer to as need be.

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Table 1: Cooling Rates Application versus Heating Rates Application Evidence

Component Evidence Cooling Heating Comment Revenue Requirements Stand-

alone Stand-alone

Some O&M input assumptions are similar and could be defended together, but the capital, development and overall cost of service of each TES are separate and should be reviewed on a stand-alone basis.

Rate Design Common By definition, the billing determinants of each system are different but the rate design, and the underlying evidence and support for such, is the same for each system and can be reviewed together.

Customer Service Agreement Common Outside of system-related references to cooling versus heating, the CSA for the Cooling DCS and the Heating TES is the same (and intended to be such upon permanent approval, including of the proposed Assignment provision as discussed above).

Customers Impacted Common The Cooling DCS and the Heating TES serve the same customers.

2. Revenue Requirements

2.1. Capital and Development Costs The total capital and development costs of the DCS to be recovered through rates are summarized in Table 2. Table 2: Capital and Development Costs

To Date To Complete Total DCS Purchase Price 2,530,000 Design review and commissioning services 17,667 17,667 Civil works 15,000 15,000 Project Management 57,320 32,446 89,766 Legal services 3,424 7,000 10,424 Regulatory 38,757 38,757 Total 132,168 39,446 2,701,614

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Purchase Price The DCS purchase price is the amount set out in the Construction and Purchase Agreement, which was reviewed in the proceeding established in respect of the Vancouver House DCS CPCN Application, approved by Order C-2-20.

Design Review and Commissioning A third-party engineering consultant, Kerr Wood Leidel Consulting Engineers (KWL) conducted a peer review of system design as well as follow-up inspection work to confirm the technical suitability of the constructed plant. Civil Works This amount reflects the allocated sharing of the costs to the DCS of the shared trenching supporting the installation of the distribution infrastructure for both the DCS and the Heating TES. Project Management The amounts reflect the internal time devoted to the following activities:

• Review of DCS mechanical design package and specifications prior to construction; • Attend design coordination meetings with Developer and third-party consultants; • Attend pre-commissioning meetings scheduled by base building construction team; • Construction site visits to review and assess construction progress; • Review contracts and follow through with the items needed to be satisfied prior to

takeover of DCS system; • Organize mechanical and controls demonstrations presented by base building team,

equipment representative, designers and commissioning agents; • System commissioning and identification of mechanical and controls deficiencies;

follow-up meetings with base building team and ongoing review of status; • Review remote monitoring system, identify deficiencies, review closeout document with

base building team; • Review operations and maintenance manuals; and • Regulatory and related internal efforts to support development and review of the CPCN

application.

Legal Services The amount reflects the external services to support the drafting and execution of the contracts and agreements that underpin construction and purchase of the DCS and the provision of service by Creative Energy.

Regulatory The costs of legal support to Creative Energy directed to the development, review and approval of the CPCN ($18,982), as well as the Intervener participant costs ($11,799) and Commission fees ($7,976) reimbursed in respect of the Commission proceeding to review the CPCN.

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2.2. Operations and Maintenance Costs

The assumptions underpinning the annual operation and maintenance costs of the DCS are summarized in Table 3. Annual costs are reported for 2021, while the escalation of these costs over the five-year period of the requested approvals is set out further below in Table 4.

Table 3: Operations and Maintenance Costs – 2021

2021 Assumption Maintenance 32,776 1 percent of total project cost based on actual cost to construct Operator 20,808 20% of a full-time equivalent operator at $100K in 2019 dollars Insurance 11,492 Modelled equivalent to the insurance under 0.29% for property

and 0.02% for boiler and machinery insurance plus business interruption

Municipal Access Fee 5,526 1.25 percent of Revenue Lease Payments 33,293 $20 per square foot for the building floor space utilized by the

cooling plant Administration 36,967 Allocation of residual General and Administration expense in

accordance with the Commission approved Massachusetts formula

Financing Fees 4,660 Annual refinancing charges Total 145,522

Maintenance The forecast is based on Creative Energy’s experience that an amount of 1 percent of actual construction costs per year is sufficient and appropriate for both routine and sustained annual maintenance.

While recovery of plant-in-service costs are based on Creative Energy’s purchase price, maintenance is forecast based on the Developer’s total actual costs to construct and develop the DCS ($2,978,683), which is greater than the purchase price. The forecast assumption of maintenance as applied to Creative Energy’s plant in service costs in the attached Rates Model is therefore scaled up by an equivalent amount to reflect the underlying higher asset values.

Maintenance costs do not include a reserve to replace equipment. Creative Energy is of the opinion that the estimate of 1 percent per year is sufficient to cover any replacement items that are required in the normal course of operation.

Emergency repair costs have not been factored into the estimates of maintenance costs for this project. As the magnitude and timing of emergency repair costs cannot be predicted, we have refrained from forecasting them. Should extraordinary events require maintenance costs that exceed our estimate of recurring maintenance costs, Creative Energy will apply for recovery of those costs at that time as applicable and only if necessary.

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Operator The DCS requires a part time operator, estimated at 20 percent of a full-time equivalent position and based on the responsibilities summarized in Appendix D. Insurance The Vancouver House Cooling asset is insured directly for property insurance and boiler and machinery insurance. It is also covered under Creative Energy Vancouver Platform Inc.’s general liability, umbrella, director and officers and errors and omissions policies. Property insurance and boiler and machinery will be directly charged to the DCS while general liability and the other policies are included in Administration costs as allocated. Three components drive actual property and boiler and machinery insurance costs: replacement value of the asset, the value of business interruption and the insurer’s rates. Replacement value is equal to the cost to rebuild the asset at current market prices, which is assumed equal to the total actual capital and development costs of DCS. Business interruption is calculated using 2 years EBITDA and 2 years of additions to the RDDA on a rolling basis. The cooling assets are not yet insured and the rates used to estimate insurance costs are the actual rates being charged for the Vancouver House Heating TES assets: 0.29% for property and 0.02% for boiler and machinery insurance.3 Municipal Access Fee This cost is forecast in accordance with the Municipal Access Agreement between Creative Energy and the City of Vancouver, dated September 1, 1999. Lease Payments The amounts are pursuant to the Contribution Agreement as reviewed in the proceeding established for the Vancouver House DCS CPCN Application, approved by Order C-2-20. Reported amounts reflect the cost of renting the space occupied by the cooling plant, at a rate of $20 per square foot for approximately 1,600 square feet and escalated at an inflation factor of 2 percent. Administration General and Administration expense is allocated under the Commission-approved Massachusetts Formula currently in effect (3-factor and using depreciated values for the property, plant and equipment). Reported amounts reflect an allocation ratio of 2.7 percent on total allocable overhead $1,316,000.4

3 Under the construct of the Rates Model, a constant percentage amount is imputed to forecast insurance within the model and consistent with the forecast based on actual insurance rates. 4 The reported amounts are directionally correct but ultimately indicative subject to approval of Creative Energy’s 2019-2020 RRA, including in respect of modifications to the Massachusetts Formula being considered in that

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The following categories of General and Administration costs comprise the allocable overhead and do not include any expenses that can be directly assigned:

• Directors fees; • Residual salaries and benefits (such costs are first directly assigned to utility projects); • Office supplies & expenses; • General legal and audit fees; and • General liability, umbrella and other insurance not directly charged.

Potential modifications to the Massachusetts Formula are currently before the Commission Panel in Creative Energy’s 2019-2020 RRA and ought not to be a subject of review in regard to this Application. Rather, at such time that the Commission issues a decision into the 2019-2020 RRA, Creative Energy can file an evidentiary update reflecting any changes if and as applicable. Financing Fees The reported amounts are the annual refinancing fees of 30 basis points on the credit facilities consistent with HSBC term sheet and allocated pro rata to the DCS on the basis of deemed debt. Cost Escalation Factor For the purpose of setting rates over the 2020-2025 period, and as set out in the attached Rates Model, Creative Energy has assumed an annual inflation rate of 2 percent on applicable costs. This assumption accords with the current Bank of Canada inflation control target, which can be referenced at the following link: https://www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/

2.3. Variable Electricity and Water Costs As reported in Table 4 below, the total annual revenue requirements of the DCS reflect indicative estimates of electricity and water costs based on the estimated demand for cooling energy and the applicable rates for electricity and water, which expenses will be directly flowed-through based on actual invoiced amounts on variable usage (as explained further in section 3).

• Actual electricity costs will be the amounts invoiced by BC Hydro each month for the electricity usage of the Cooling Plant under the rates for Medium General Service; and

• Actual water costs will be equal to the City of Vancouver’s water rates for water consumption by the Vancouver House Development (as invoiced every four months)

application. Creative Energy would propose to provide an evidentiary update on allocable amounts in response to IRs in this proceeding as necessary.

https://www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/https://www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/

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multiplied by the usage of water by the Cooling Plant, as measured by a sub-meter downstream of the City of Vancouver ‘property line’ water meter.

The rates for electricity and water consumption are externally set, and the volumes of electricity and water consumed by the DCS are driven directly by variable cooling usage. Creative Energy does not control or manage either of these factors and accordingly proposes a variable charge to flow-through these expenses on an actual as-incurred basis. The Application includes indicative estimates of these costs; however, under the proposed fixed and variable rate design these estimates have no material effect on the revenue requirements of the DCS for the purpose of rate setting.

2.4. Annual Revenue Requirements Please refer to Table 4 for a summary of annual requirements over the requested rates approval period. Table 4: Annual Revenue Requirements 2020-20255

Component 2020 2021 2022 2023 2024 2025 Electricity Cost (indicative) 16,802 70,400 71,808 73,244 74,709 76,203 Water Cost (indicative) 1,227 5,755 5,870 5,987 6,107 6,229 Total Variable Cost 18,030 76,155 77,678 79,232 80,816 82,433 Maintenance 10,711 32,776 33,431 34,100 34,782 35,477 Operator Cost 6,800 20,808 21,224 21,649 22,082 22,523 Insurance 3,755 11,492 11,722 11,956 12,195 12,439 Municipal Access Fee 1,683 5,526 5,749 5,981 6,223 6,475 Financing Fees 1,553 4,660 4,505 4,350 4,194 4,039 Lease Payments 10,880 33,293 33,959 34,638 35,331 36,037 Regulatory Costs 20,000 - - - - - Administration 12,081 36,967 37,706 38,460 39,230 40,014 Depreciation - 90,054 90,054 90,054 90,054 90,054 Income Tax - 32,582 31,665 30,320 28,976 27,631 Interest 20,342 62,137 60,066 57,995 55,923 53,852 Return on equity 34,866 107,260 103,624 99,988 96,352 92,716 Total Fixed Costs 122,672 437,555 433,705 429,491 425,341 421,257 Total Revenue Requirement 140,701 513,710 511,383 508,722 506,157 503,690

5 Amounts reported for 2020 are for 4 months only.

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Depreciation Annual depreciation is the 30-year straight-line amount of the total plant in service, which is the purchase and development costs reported in Table 2. This assumption is reasonable noting that the estimated useful life of the cooling plant, heat exchangers and distribution piping is 30 years, 24 years, and 50 years, respectively. In addition, the recovery of development costs align with the 30- year term of the CSA under which rates are forecast. Income Tax The amounts are calculated based on 27 percent of the return on equity plus depreciation less capital cost allowance (CCA), the latter consistent with the Class 1 designation that this type of asset would be categorized under. Return on Capital Projected financing costs reflect a deemed capital structure of 57.5 percent debt and 42.5 percent equity and an equity risk premium of 75 basis points above the low-risk benchmark. The corresponding allowed return on equity (ROE) is 9.5 percent and Creative Energy estimates that an overall cost of debt of 4.0% is reasonable at this time and consistent with the current average debt rate in effect under rate approvals for Creative Energy’s Core steam system. Creative Energy submits that it is reasonable to use the default deemed capital structure and ROE consistent with the Commission’s direction as set through the Generic Cost of Capital (GCOC) Stage 2 Decision of a default equity thickness of 42.5 percent and an equity risk premium of 75 basis points for regulated thermal energy systems, of which the Vancouver House DCS is an example. The Commission has recommended that small TES utilities use an established risk matrix to justify any request for approval of a capital structure and risk premium over and above the benchmark. Creative Energy includes a risk matrix for the Vancouver House DCS at Appendix E. Creative Energy includes reference to the risk matrices completed in respect of a few other heating TES, not necessarily to suggest that such utilities are directly comparable, but rather to highlight the general applicability of the established deemed capital structure and equity risk premium for small TES utilities to further its view that the assumed capital structure and ROE is appropriate, reasonable and aligns with the precedent established by the Commission in its GCOC Stage 2 decision.

3. Rate Design and Billing Determinants Creative Energy seeks approval to recover its cost of service for the Vancouver House DCS through:

1. a fixed capacity charge ($/kW); and 2. a variable charge that flows through actual electricity and water input costs on a

$/MWh basis.

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The proposed rate design is the same rate design proposed for the Vancouver House Heating TES and approved on an interim basis by Order G-260-19. As per the suggested regulatory process discussed in section 1.3, Creative Energy considers that final approval of this rate design for both the Vancouver House Heating TES and Cooling DCS can be considered jointly as the merits of the rate design are independent of the level of costs to be recovered. Thus, the merits of the rate design as set out in the interim Heating Rates Application and as elaborated upon in response to Information Requests (IRs) in that proceeding are fully applicable in respect the DCS rate design. Please refer, for example, to sections 5 and 6 of the Heating Rates Application at Exhibit B-1 in the Commission proceeding to review that application as well as to the responses to BCUC IRs series 10.0 through 13.0 at Exhibit B-2. While further distinction or expansion of the evidence supporting the DCS rate design is therefore not essential, Creative Energy does provide below a brief review of the rate design in the context of the DCS billing determinants.

3.1. Capacity Charge The capacity charge will recover the capital and fixed operating costs of the DCS on a $/kW basis, in accordance with the design peak demand of each building. The capacity charge will recover all costs that do not vary with energy consumption; that is, the cost of service excepting variable electricity and water costs. In that regard, these costs are considered ‘fixed’ and therefore should not be recovered on a $/MWh basis. The level of the capacity charge is set based on total design peak cooling demand, which is the overall driver of the fixed costs of the DCS. Correspondingly, the billing determinants for the allocation of capital and fixed operating costs to each building are the total design peak cooling demand in kW of each building in the Vancouver House Development. Table 5: Capacity Charge Billing Determinants

Building Customer Total Design Peak Cooling Demand (kW)

Building 1 322

Building 2 1,457

Building 3 370

Building 4 340

Total 2,489

The fixed structure of the capacity charge thereby fairly and reasonably aligns with a cost causation rate setting principle under which rates ought to recover costs in a manner consistent with the factors that cause those costs; that is, in this case, with respect to costs that are not

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expected to vary with energy consumption. The capacity charge also supports stable and predictable rates and recovery of the revenue requirement because the recovery of fixed costs is not tied to energy use. The capacity charge is readily understood and already accepted by the customer of the DCS. With particular reference to the Bonbright rate design principles, and as referred to also in the response to BCUC IR 12.1 at Exhibit B-2 in the proceeding to review the Heating Rates Application, the proposed rate design is superior overall to an alternative fixed charge based on $/m2 floor space at the Vancouver House Development as summarized in Table 6. By definition, a capacity charge or floor space charge would each recover the same amount of fixed costs. However, a floor space charge is a relatively arbitrary billing determinant on which to allocate costs and cannot be justified as a preferred alternative on the merits as set out in Table 6. Given that the buildings served by the DCS are expected to have significantly different cooling energy consumption (associated with residential spaces vs. commercial office spaces), a floor space charge may not be the most fair approach to apportionment of fixed costs.6 Table 6: Bonbright Criteria Assessment of Capacity Charge

Bonbright Criteria Fixed Charge Comment $/kW Capacity $/m2 Floor

1. Recovery of the Revenue Requirement

Good

Good Any revenue shortfall allocated to a future period under a rate smoothing account (RDDA) is independent of the billing determinant but a function of putting in place competitive levelized rates over time.

2. Fair apportionment of costs

Good Not as good A $/m2 charge can create a subsidy between the building customers. Total building floor area is a simple but relatively poor proxy for the cost of the system as compared to system size, and its use would then lead to a less fair allocation of costs among the building customers. That would arise due to the relative difference between the proportion of total floor area of each building as compared to the relative heating design capacity of each building.

6 Please note that any references to floor space billing determinants and associated outputs in the attached Rates Model are a construct of a legacy model and are independent of and have no effect on the modelling of the DCS cost of service and the levelized capacity charges as also determined through that model.

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Bonbright Criteria Fixed Charge Comment $/kW Capacity $/m2 Floor

3. Efficient prices Good Not as good The fixed charge is aligned with the causation of costs that do not vary directly by consumption. The rate design with separate fixed and variable charge components provides efficient pricing.

4. Customer understanding and acceptance

Good Not as good Either charge is simple and easy to understand as a means to recover a fixed monthly cost of service; no customer education or additional administration is required. However, the $/kW charge better serves customer understanding and acceptance in the particular case where the customers are the buildings.

5. Practical and cost-effective

Good Good Either charge can be readily implemented within Creative Energy’s billing system.

6. Rate stability Good Not as good Either rate will support and facilitate continuity and predictability over time; however a $/m2 charge introduces cost allocation and stability risk as related to the addition of new customers or future changes in the building design of existing customers that do not correlate with changes in the demand for cooling services.

7. Revenue stability

Good Good All else equal, revenues are predictable and stable over time (given changes in load etc.).

8. Avoid undue discrimination

Good Good The Commission has approved fixed charges based on demand capacity and m2 as just and reasonable, and not unduly discriminatory.

3.2. Variable Charge

The Variable Charge will recover on a flow-through basis the actual electricity and water costs of the DCS, which are driven directly by cooling energy consumption.

• With respect to electricity costs, Creative Energy will determine the $/MWh variable charge each month as the invoice of BC Hydro costs ($) divided by the total metered energy consumption at the Cooling Plant for cooling all buildings in that month (in MWh). Creative Energy will bill each building customer in accordance with such calculated rate ($/MWh) multiplied by each individual building’s metered energy cooling use (MWh).

• Water costs are invoiced every four months by the City of Vancouver. The Cooling Plant is separately sub-metered for water consumption and will be assigned its share of total

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water costs by the Strata Corporation. Creative Energy will determine for each building customer their allocated water cost for the four-month period based on their pro rata share of total cooling energy consumption over the corresponding four-month period.

The overall variable charge therefore will be expressed on $/MWh basis, calculated monthly and equal to total monthly electricity costs plus total monthly allocated water costs divided by total monthly cooling energy consumption. The underlying electricity and water rates are externally set, and total electricity and water costs vary directly with cooling energy consumption outside of Creative Energy management and control. The flow-through of such costs is therefore fair, readily understood and verifiable, and the mechanism to allocate these charges in the same applicable billing period is administratively simple and does not require a deferral account. Creative Energy notes that larger utilities commonly use deferral mechanisms and periodic (quarterly or annual for example) adjustments to a rate rider to flow the utility’s actual fuel costs through to customers. Such utilities may have a large portfolio of energy supply resources and thousands of customers. Creative Energy’s proposal accomplishes the same thing (that is, flowing through actual fuel costs to customers) without requiring a deferral mechanism or burdensome regulatory process in respect of adjustments to the charge.

4. Proposed Levelized Capacity Charge 2020-2025 and RDDA Creative Energy proposes that the capacity charge be determined on a levelized annual basis as compared to the alternative of setting rates annually based strictly on full recovery each year of the forecast annual capital and fixed operating cost of service. The levelized capacity charge will escalate annually at 2 percent per year and is determined such that the ROE over the 30-year term of analysis is equal to the allowed ROE of 9.5 percent under an annual cost of service rate structure over the same 30-year period. A levelized approach is advantageous to customers and thermal energy utilities as it promotes stable rates and predictable costs and revenues in any given year, and lessens overall regulatory process and burden over time for all parties, as compared to rates that would otherwise need to be reset each year to target forecast costs under a strict cost of service approach. Levelized rates that escalate gradually over time are generally more stable and predictable and better understood by customers as compared to a cost of service rate set on a long-term basis that may fluctuate year to year and, particularly in the case of a small TES with a fixed base of customers, decline over time. Cost of service rates for such TES tend to be initially higher due to the allowed return on capital which is initially undepreciated and then reduces over time with accumulated depreciation, while levelized rates tend to start lower and then increase at a smooth rate of increase reflecting inflation.

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The Commission has indicated a preference for levelized rates for thermal energy services over cost of service rates. However, given that levelized rates under-recover costs during initial years following commencement of service, the Commission has also accepted the establishment of an accompanying revenue deficiency deferral account (RDDA), to track the balance of under-recovered costs to be recovered from customers in future years. The RDDA is particularly important in relation to this Application for approval of cooling rates for the five-year period, at the end of which Creative Energy forecasts the rates will have under-recovered costs by $341,110. It is critical that Creative Energy has a RDDA to carry forward that deficiency for recovery in rates after 2025. Creative Energy thus requests approval of an RDDA as a necessary component to support implementation of its levelized capacity charge. Once the RDDA is reduced to zero it will be cancelled. That is, although rate smoothing will continue under levelized rates over the entire 30-year term (as such rates are set to recover the entire cost of service over that timeframe), the purpose of the RDDA will be complete when its balance its reduced to zero. At the time that the RDDA balance is reduced to zero within the 30-year term, Creative Energy would no longer seek approval to record any changes to the balances in the account. Table 7 sets out the proposed Levelized Capacity Charge in comparison to an Annual Cost of Service rate, and the forecast additions to the RDDA determined on this basis. Table 7: Proposed Levelized Capacity Charge versus Cost of Service Rates 2020-2025

Proposed Capacity Charge Unit 2020 2021 2022 2023 2024 2025 Levelized $/kW/year 137.37 140.12 142.92 145.78 148.70 151.67 $/kW/mo. 11.45 11.68 11.91 12.15 12.39 12.64 Cost of Service $/kW/year 147.86 175.80 174.25 172.56 170.89 169.25 $/kW/mo. 12.32 14.65 14.52 14.38 14.24 14.10 Billing Determinants kW 2,489 2,489 2,489 2,489 2,489 2,489 Levelized recovery $ 113,972 348,756 355,731 362,845 370,102 377,504 Cost of Service recovery $ 122,672 437,555 433,705 429,491 425,341 421,257 Forecast RDDA additions $ 8,699 88,799 77,974 66,645 55,239 43,753

5. Other Rate Setting Considerations The following discussion addresses the rate design considerations specifically noted in the TES Regulatory Framework Guidelines (Guidelines). Equitable Balance of Cost and Risk The proposed rates balance cost and risk in that a portion of the fixed charge is recovering operating costs that do not vary with consumption but that may still vary within an approval

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period and for which the utility would share risk if actual operating costs differ from the forecast under which rates are approved. Amounts that accrue to the RDDA relate only to the approval of the levelized rates put into effect for the test period. Thus, the risk of variances between actual and forecast controllable costs is shared between the utility and ratepayers under the approved levelized rates put in place for a given approved RDDA balance. Least Deferral Mechanisms Possible Creative Energy has proposed a RDDA as a rate smoothing mechanism and which supports the implementation of levelized rates. The only variance deferral mechanism that Creative Energy has applied for is the RCVDA to capture any variances between actual and forecast regulatory costs. Regulatory costs are inherently uncertain at this time. Restrict Ability of the Utility to Pass Controllable Costs onto Ratepayers Creative Energy has not proposed any variance deferral mechanisms for the operating costs that are within its control. Use the Least Amount of Regulatory Oversight to Protect the Ratepayer Creative Energy’s proposed rate design and application for approval of rates for a five-year period provides predictable and stable rates, and supports regulatory efficiency. Avoid Rate Shock The levelized rates are set to fully recover the cost of service over the contract term assuming a 2 percent annual escalation factor. Benchmark Rates There are no benchmark rates applicable to the Vancouver House DCS. The TES Guidelines contemplate that an assessment of whether the proposed rates will be competitive with other service options may be appropriate subject to the choice customers may have in a new service area. In contrast, Creative Energy’s purchase of the Vancouver House DCS has been granted a CPCN and the DCS is nearly fully commissioned. Thus, Creative Energy’s proposed rates and rate design are set only in relation to the DCS cost of service, established on the merits and based on accepted rate design principles. A comparison of the proposed capacity charges to other options would thus have no relevance nor consequence to the requested approvals in this Application. In summary, Creative Energy submits that its proposed rates for the DCS provide fair, stable and predictable cost recovery and reasonably balance the sharing of risk, in particular given the uncertainty that operating costs may vary over the five-year test period.

Appendix A

Draft Order

Order Number

IN THE MATTER OF the Utilities Commission Act, RSBC 1996, Chapter 473

and

Creative Energy Vancouver Platforms Inc. Application for Cooling Rates for the District Cooling System (DCS)

at the Vancouver House Development

ORDER

WHEREAS:

A. On August 11, 2020, Creative Energy Vancouver Platforms Inc. (Creative Energy) applied for British Columbia Utilities Commission (BCUC) approval of rates, terms and conditions and a Revenue Deficiency Deferral Account (RDDA) for its provision of cooling service at the Vancouver House Development in the South Downtown area of Vancouver (Application);

B. Creative Energy applies for permanent approval of a rate design, consisting of a levelized Capacity Charge per kilowatt (kW) per month and a Variable Charge per megawatt hour (MWh), and permanent approval of an associated terms and conditions for service as set out in the Customer Service Agreement (CSA) attached as Appendix C to the Application;

C. Creative Energy applies for permanent approval of a RDDA to record forecast annual revenue deficiencies or surpluses resulting from the difference between annual revenue at the approved rates and the annual cost of service. The RDDA will attract interest at Creative Energy’s weighted average cost of capital and will be recovered from customers over time through the levelized Capacity Charge;

D. Creative Energy applies for permanent approval of a Regulatory Cost Variance Deferral Account (RCVDA) to record the difference between the regulatory cost forecast provided in the Application and the final actual costs when so determined;

E. Creative Energy requests permanent approval of the rates for the five-year period commencing September 2020 through December 2025. The requested approvals are summarized at sections 1.1 and 1.2, and the accompanying rate sheets and CSA are attached at Appendices B and C of the Application;

F. Creative Energy expects to be able to complete the transaction under the Construction and Purchase Agreement with the Owner of the Development by August 31, 2020,

under which Creative Energy will acquire the DCS from the Owner and begin providing cooling service to the Development;

G. Creative Energy therefore seeks approval of the proposed rates and CSA filed with this Application on an interim basis effective the date that Creative Energy begins providing service. The earliest effective date would be September 1, 2020, subject to the timing of the final transaction to acquire the DCS from the Owner of the Development;

H. Interim approval of the capacity and variable charges will allow Creative Energy to charge for the cooling services it will be providing upon its acquisition of the DCS. Interim approval of the associated terms and conditions of service as set out in the CSA and of the RDDA will support implementation of the interim rates; and

I. The Commission has reviewed the Application and is satisfied that the rates and terms and conditions should be approved on an interim basis subject to the Panel’s considerations as ordered below.

NOW THEREFORE the British Columbia Utilities Commission orders as follows:

1. The Capacity Charges ($/kW/month) as proposed and as set out in Appendix B-1 of the Application are approved on an interim and refundable basis, subject to further order of the Commission. This approval is effective the date that Creative Energy completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement.

2. A Variable Charge ($/MWh) as proposed and set out in Appendix B-1 of the Application is approved on an interim and refundable basis, subject to further order of the Commission. This approval is effective the date that Creative Energy completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement.

3. The CSA as provided in Appendix C to the Application is approved on an interim basis, subject to further order of the Commission. This approval is effective the date that Creative Energy completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement.

4. The RDDA as proposed in the Application is approved an interim basis, subject to further order of the Commission. This approval is effective the date that Creative Energy completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement.

5. The RCVDA as proposed in the Application is approved on an interim basis, subject to further order of the Commission. This approval is effective the date that Creative Energy

completes the transaction to acquire the DCS from the Owner of the Development and begins providing cooling service as per the terms of the Construction and Purchase Agreement.

6. The rates approved by this order will remain interim and subject to refund/recovery or adjustment with interest at Creative Energy’s weighted average cost of debt until further order of the Commission.

7. Creative Energy is directed to provide notice to the Commission of the date the transaction to acquire the DCS from the Owner of the Development is expected to be completed 5 days prior to such date.

8. Creative Energy is directed to file with the Commission the rate schedules reflecting this order for endorsement by the BCUC within 14 days of the date the transaction to acquire the DCS from the Owner of the Development is completed, in accordance with the terms of this order.

DATED at the City of Vancouver, in the Province of British Columbia, this _____ day of ____ 2020.

Appendix B-1 Interim Rate Sheet

Vancouver House Cooling Tariff BCUC No. 1

Original – Page 1

CREATIVE ENERGY VANCOUVER PLATFORMS INC.

1. RATE SCHEDULE

Applicability: Vancouver House District Cooling System (DCS) served by the Utility.

Class of Service: Thermal energy for the provision of cooling to the four buildings in the Vancouver House Development, as indicated in the table below.

Rates for Service: Capacity Charge per kilowatt per month for the period effective September

2020 through December 2025, as follows:

Year 2020 2021 2022 2023 2024 2025 $/kW/mo. 11.45 11.68 11.91 12.15 12.39 12.64 The applicable Capacity Charge billing determinants to the four buildings in the Vancouver House Development are as follows:

Building Customer Civic Address Design Peak Cooling Demand (kW)

Building 1 1480 Howe Street 322

Building 2 Tower 1480 Howe Street 1,457

Building 3 1461 Granville Street 370

Building 4 1462 Granville Street 340 Variable Charge per megawatt hour for all megawatt hours supplied during a month: $/MWh calculated monthly The Variable Charge is to be calculated each month equal to total monthly electricity and water costs of the DCS divided by the total metered energy supplied by the DCS to the customers during the month (in MWh). .

Accepted

Issued by: ___________________________ for Filing:_____________________________

Krishnan Iyer CEO

Creative Energy Vancouver Platforms Inc. Acting Commission Secretary Suite 1, 720 Beatty Street British Columbia Utilities Commission Vancouver, B. C. V6B 2M1 Effective Date: [pending]

Approved on an interim basis by Order G-xxx-20

Appendix B-2 Permanent Rate Sheet

Vancouver House Cooling Tariff BCUC No. 1

Original – Page 1

CREATIVE ENERGY VANCOUVER PLATFORMS INC.

1. RATE SCHEDULE

Applicability: Vancouver House District Cooling System (DCS) served by the Utility.

Class of Service: Thermal energy for the provision of cooling to the four buildings in the Vancouver House Development, as indicated in the table below.

Rates for Service: Capacity Charge per kilowatt per month for the period effective September

2020 through December 2025, as follows:

Year 2020 2021 2022 2023 2024 2025 $/kW/mo. 11.45 11.68 11.91 12.15 12.39 12.64 The applicable Capacity Charge billing determinants to the four buildings in the Vancouver House Development are as follows:

Building Customer Civic Address Design Peak Cooling Demand (kW)

Building 1 1480 Howe Street 322

Building 2 Tower 1480 Howe Street 1,457

Building 3 1461 Granville Street) 370

Building 4 1462 Granville Street) 340 Variable Charge per megawatt hour for all megawatt hours supplied during a month: $/MWh calculated monthly The Variable Charge is to be calculated each month equal to total monthly electricity and water costs of the DCS divided by the total metered energy supplied by the DCS to the customers during the month (in MWh). .

Accepted

Issued by: ___________________________ for Filing:_____________________________

Krishnan Iyer CEO

Creative Energy Vancouver Platforms Inc. Acting Commission Secretary Suite 1, 720 Beatty Street British Columbia Utilities Commission Vancouver, B. C. V6B 2M1 Effective Date: [pending]

BCUC Order G-xxx-20

Appendix C Customer Service Agreement

CUSTOMER SERVICE AGREEMENT

CREATIVE ENERGY VANCOUVER PLATFORMS INC.

NEIGHBOURHOOD ENERGY SYSTEM

COOLING SERVICE

CIVIC ADDRESS: ♦

LEGALLY DESCRIBED AS:

♦

TERMS & CONDITIONS OF CUSTOMER SERVICE

Effective: __________________________

These Terms and Conditions are available for public inspection on the website of the British Columbia Utilities Commission and at the office of the British Columbia Utilities Commission in Vancouver, British Columbia.

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NEIGHBOURHOOD ENERGY SYSTEM SERVICE AGREEMENT COOLING SERVICE

Customer Information and Billing Address Name or company name (include business registration no. if applicable)

Mailing/billing address If company, contact name

Telephone

Email

Property/Service location address (the “Lands”)

Legally described as:

The Customer, by signing this Agreement, accepts and agrees to be bound by the terms and conditions herein contained, including in Sections A, B and C below.

CUSTOMER:

Signature Date

Name Title

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SECTION A - DEFINITIONS

Unless the context otherwise requires, in these Terms and Conditions the following terms have the following meanings:

Affiliate: means, with respect to any Person (i) any entity over which such Person exercises, directly or indirectly, Control, (ii) any entity that is under the common Control of the same entity as such Person, or (iii) any entity which exercises control over such Person by virtue of ownership, financial participation or the rules which govern it.

BCUC: British Columbia Utilities Commission.

Buildings: means the buildings, structures and improvements on the Lands, and Building means any one or more Buildings comprising the residential or commercial component, as applicable, that may be situate on any parcel created upon the subdivision of the Lands and includes a subdivision by air space plan or strata plan, or a Building operated as a separate component of the development on the Lands, and which may be subject to a separate Customer Service Agreement.

Building System: means the system of water pipes and Thermal Energy delivery and storage equipment to be installed and used for distributing and storing Thermal Energy in a Building, connected to but downstream of and excluding the Energy Transfer Stations.

Contaminants: means any radioactive materials, asbestos materials, urea formaldehyde, underground or above ground tanks, pollutants, contaminants, deleterious substances, dangerous substances or goods, hazardous, corrosive, or toxic substances, hazardous waste, waste, pesticides, defoliants, or any other solid, liquid, gas, vapour, odour, heat, sound, vibration, radiation, or combination of any of them, the storage, manufacture, handling, disposal, treatment, generation, use, transport, remediation, or Release into the environment of which is now or hereafter prohibited, controlled, or regulated under Environmental Laws.

Control: means a Person receiving Energy Services pursuant to a Customer Service Agreement. means more than fifty per cent (50%) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

Customer: means a Person receiving Energy Services pursuant to a Customer Service Agreement.

Customer Service Agreement: means an agreement between the Utility and a Customer for the provision of Energy Services to a Building or Buildings, which agreement is comprised of a page bearing the information and signature of the Customer and these Terms and Conditions.

Design Capacity: means the load for which the Neighbourhood Energy System has been designed.

4 Distribution System: means, collectively, the system of pipes, fittings and ancillary components and equipment within the NES Area distributing Thermal Energy to the Energy Transfer Station.

Encumbrance: means any mortgage, lien, charge, pledge, judgement, execution, financial charge, security interest, claim or other financial encumbrance, excluding any financial encumbrance in favour of the City of Vancouver.

Energy Services: means the provision by the Utility of Thermal Energy via the Neighbourhood Energy System.

Energy Transfer Station: means the separate exchanger for Thermal Energy, energy meter including temperature sensors and flow meter, control panel and all pipes, fittings and other associated equipment that control the transfer, and measure Thermal Energy from the Distribution System to a Building System.

Environment: includes the air (including all layers of the atmosphere), land (including soil, sediment deposited on land, fill, lands submerged under water, buildings, and improvements), water (including oceans, lakes, rivers, streams, groundwater, and surface water), and all other external conditions and influences under which humans, animals, and plants live or are developed and “Environmental” has a corresponding meaning.

Environmental Laws: means any and all applicable statutes, laws, regulations, orders, bylaws, standards, guidelines, protocols, permits, and other lawful requirements of any Governmental Authority now or hereafter in force relating to or for the Environment or its protection, environmental assessment, health, occupational health and safety, protection of any form of plant or animal life, or transportation of dangerous goods, including the principles of common law and equity.

Governmental Authority: means any federal, provincial, regional, municipal, local or other government, governmental or public department, court, tribunal, arbitral body, commission, board, bureau or agency and any subdivision, agent, commission, board or authority.

Lands: means those lands and premises situate in Vancouver, British Columbia, and as more particularly described on the signature page forming part of this Customer Service Agreement.

Meter: means an energy consumption meter owned and operated by the Utility and comprising part of an Energy Transfer Station, excluding any energy consumption meter owned by a Customer or a Person other than the Utility comprising part of a Building System.

NES Area: means the south downtown neighbourhood in the City of Vancouver, within which the Lands are situate.

Neighbourhood Energy System: means the energy system by which the Utility delivers Thermal Energy to Customers, including the Distribution System and the Energy Transfer Stations.

Person: means an individual or his or her legal personal representative, an unincorporated organization or association, or a corporation, partnership, limited partnership, trust, trustee, strata

5 corporation, syndicate, joint venture, limited liability company, union, Governmental Authority or other entity or organization.

Release: means any release, spill, leak, pumping, pouring, emission, emptying or discharge, injection, escape, leaching, migration, disposal, or dumping.

Standard Fees and Charges: means the standard fees and charges which may be charged to the Customer by the Utility and set out in the Tariff.

Tariff: means Rate Schedule No. 1, which sets out the rates for Energy Services and certain related terms and conditions, as amended from time to time by the Utility with the approval of, and as filed with, the BCUC.

Terms and Conditions: means these Thermal Energy Service Terms & Conditions, including Sections A, B and C herein, all as amended from time to time by the Utility with the approval of, and as filed with, the BCUC to the extent required by the BCUC.

Thermal Energy: means all thermal energy for space cooling purposes.

Utility: means Creative Energy Vancouver Platforms Inc. carrying on the business of a public utility.

Utility’s Representatives: means any Person who is an officer, director, employee, agent, contractor, subcontractor, consultant or advisor of either the Utility or any Affiliate of the Utility.

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SECTION B – NATURE OF AGREEMENT

1. The Lands 1.1 If a Customer wishes to subdivide the Lands, including by way of air space or strata plan

or both, such Customer shall provide prior notice of such subdivision to the Utility, together with subdivision plans for the Lands and such further information as the Utility may require, and the Customer will execute and deliver, or will cause the applicable Person to complete, execute and deliver, to the Utility at its option forthwith following such subdivision, a Customer Service Agreement in respect of any one or more of the following:

(a) any Building;

(b) any legal parcel, including without limitation an air space parcel or a remainder parcel, that is subdivided from the Lands or any portion thereof; and

(c) a strata corporation that is formed within any Building by way of the deposit of a strata plan, and in each such case the applicable Customer Service Agreement shall be executed and delivered to the Utility by the strata corporation prior to the first conveyance of a strata lot within the applicable strata plan.

1.2 A Customer will cause any Person to whom the Customer transfers or otherwise disposes, whether directly or indirectly, all or any portion of its interest in the Lands to complete, execute and deliver to the Utility a Customer Service Agreement covering the applicable portion of the Lands.

2. Provision of Energy Services 2.1 The Utility will provide Energy Services to Customers solely in accordance with these

Terms and Conditions. 2.2 A Customer may be required to provide reference information and identification acceptable

to the Utility. 2.3 The Utility may refuse to provide Energy Services to a Customer if there is an unpaid

account for Energy Services in respect of such Customer or the relevant Building(s). 2.4 This Customer Service Agreement relates only to the provision of the Energy Services by

the Utility to the Customer, upon the terms and conditions contained herein. The Utility shall not be responsible for the provision of any utility services other than the Energy Services, such as electricity and natural gas, and the Customer shall be solely responsible for any fees and charges associated with such utility services, in addition to the fees and charges payable to the Utility hereunder.

3. Assignment 3.1 The Customer may not assign this Customer Service Agreement or any of its rights or

obligations hereunder without the prior written consent of the Utility, such consent not to be unreasonably withheld. The Utility may, subject to BCUC approval, assign this Customer Service Agreement or any of its rights or obligations thereunder (including, without limitation, by way of the sale of the majority of its shares or business or its material

7

assets or by way of an amalgamation, merger or other corporate reorganization) to any of its Affiliates or to any other Person without the consent of the Customer, provided such Affiliate or Person is accepted by the BCUC to carry out the Customer Service Agreement and agrees in writing to assume and be bound by the provisions of this Customer Service Agreement in all respects and to the same extent as the Utility is bound.

4. Applicable Rates 4.1 The rates to be charged by, and paid to, the Utility for Energy Services are set out in the

Tariff from time to time in effect, which may be reviewed on the website of the BCUC or at the office of the BCUC in Vancouver, British Columbia.

4.2 The rates have been determined on the basis of the estimated connected loads and Design Capacity which are in turn based on the intended design and use of the Buildings. A Customer must not significantly change its connected load without the prior written approval of the Utility.

4.3 The Utility may conduct periodic reviews of the quantity of Thermal Energy delivered and the rate of delivery of Thermal Energy to a Customer for the purpose of, among other things, determining whether to substitute a more applicable Tariff.

4.4 If the maximum Thermal Energy demand exceeds the Design Capacity, the Utility may, subject to BCUC approval, assess additional fees and charges to the Customer for usage exceeding such limits as approved by the BCUC, provided that if usage exceeds such limits, the Utility reserves the right to temporarily suspend or limit the Energy Services to reduce the load on the Neighbourhood Energy System.

5. Ownership and Care of Neighbourhood Energy System 5.1 Notwithstanding any degree of annexation or affixation, or rule of law or equity to the

contrary, the Utility owns all components of the Neighbourhood Energy System and all additions or extensions thereto will be and remain the property of and vest in the Utility, whether located inside or outside of any Building. No component of the Neighbourhood Energy System shall be moved or removed from a Customer’s lands (whether located inside or outside of any Building) without the advance written permission of the Utility.

5.2 The Customer will take reasonable care of and protect all components of the Neighbourhood Energy System in, on or under the Customer’s lands (whether located inside or outside of any Building) against damage and must advise the Utility promptly of any damage to or disappearance of the whole or part of any such component. Further, the Customer will pay to the Utility promptly upon request the cost of any broken, missing or damaged component of the Neighbourhood Energy System (or part thereof), except to the extent that the Customer demonstrates that such component (or part thereof) was broken, missing or damaged due to a defect therein or to any act or omission of the Utility or any of the Utility’s Representatives.

6. Meter Reading 6.1 The amount of Thermal Energy registered by a Meter during each billing period will be

converted to megawatt-hour.

8 6.2 The interval between consecutive Meter readings will be at the sole discretion of the Utility.

The Meter will typically be read at monthly intervals.

7. Meter Testing 7.1 Any Customer who doubts the accuracy of a Meter may request to have the Meter tested

by an independent qualified third party. 7.2 If the testing indicates that the Meter is recording accurately, the Customer must pay the

Utility for the cost of removing, replacing and testing the Meter as set out in the Standard Fees and Charges and the reconnection charge as set out in Section 10.

7.3 If the testing indicates that the Meter is recording inaccurately, the Utility will incur the cost of removing, replacing and testing the Meter.

8. Maintenance 8.1 The Utility will repair, maintain and replace all components of the Neighbourhood Energy

System in, on or under the Customer’s lands (whether located inside or outside of the Buildings or any of them), from time to time at its own cost to keep the same in good working order. For greater certainty, except for the Utility’s obligation to repair, maintain and replace such components of the Neighbourhood Energy System as aforesaid, the Utility is not, and will not be, responsible for repairing, maintaining or replacing any Building System or part thereof or other facility or equipment in, on or under a Customer’s lands (whether located inside or outside of the Buildings or any of them.

8.2 The Customer shall not make any alterations to any Building System which may impact the provision of the Energy Services by the Utility without the prior written approval of the Utility.

8.3 The Customer will promptly repair, maintain and replace the Building Systems from time to time at its own cost to keep the same in good working order.

9. Connections and Disconnections 9.1 No connection, disconnection, reconnection, extension, installation, replacement or any

other change is to be made to any component of the Neighbourhood Energy System by anyone except by the Utility’s Representatives authorized by the Utility.

10. Energy Services Reconnections 10.1 If:

(a) Energy Services are discontinued to a Customer for any of the reasons specified in Section 15 or any other provision of this Customer Service Agreement.

(b) a Building System is disconnected from the Neighbourhood Energy System or Energy Services are discontinued to a Customer:

(i) at the request of the Customer with the approval of the Utility; or

(ii) to permit a test of a Meter at the request of the Customer, which Meter is subsequently determined to be accurate;

9

and such Customer or the employee, agent or other representative of such Customer re-applies for Energy Services for the same Building within 12 months of such discontinuance or disconnection (as applicable), then if the Building’s Building System is reconnected to the Neighbourhood Energy System or if Energy Services are restored to such Customer, such Customer will pay, as part of fees owing for the first month of Energy Services, a reconnection charge equal to the sum of:

(c) the actual costs that the Utility will incur in reconnecting the Building’s Building System to the Neighbourhood Energy System or restoring Energy Services to such Customer; and

(d) the Basic Charge (as set out in the Tariff) that such Customer would have paid had Energy Services continued during the period between the date of discontinuance or disconnection (as applicable) and the date of such re- application.

10.2 If a Building System is disconnected from the Neighbourhood Energy System or Energy Services are discontinued to a Customer for public safety or Utility service requirement reasons, there will be no reconnection charge to reconnect the Building’s Building System to the Neighbourhood Energy System or to restore Energy Services to such Customer.

11. Billing 11.1 Bills will be rendered to the Customer in accordance with the Customer’s Customer Service

Agreement, including the Tariff. 11.2 Subject to Section 11.4 below, if Meter readings cannot be obtained for any reason,

consumption may be estimated by the Utility for billing purposes and the next bill that is based on actual Meter readings will be adjusted for the difference between estimated and actual use over the interval between Meter readings.

11.3 If any Meter fails to register or registers incorrectly, the consumption may be estimated by the Utility for billing purposes, subject to Section 12.

11.4 If the Customer terminates a Customer Service Agreement, the final bill rendered to the Customer will be based on an actual Meter reading.

11.5 Bills will be rendered as often as deemed necessary by the Utility, but generally on a monthly basis. The due date for payment of bills shown on the face of the bill will be the first business day after: (a) the 21st calendar day following the billing date; or (b) such other period as may be specified in the Application for Service or otherwise

agreed in writing by the Customer and the Utility. 11.6 Bills will be paid in the manner specified therein, which may include payment by regular

mail, payment at a designated office of the Utility and/or payment by on-line banking or electronic funds transfer.

11.7 Customers requesting historic billing information may be charged the cost of processing and providing this information.

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12. Back-billing 12.1 Minor adjustments to a Customer’s bill, such as an estimated bill or an equal payment plan

billing, do not require back-billing treatment. 12.2 Back-billing means the re-billing by the Utility for Energy Services rendered to a Customer

because the original billings were discovered to be either too high (over-billed) or too low (under-billed). The discovery may be made by either the Customer or the Utility. The cause of the billing error may include any of the following non-exhaustive reasons or combination thereof: (a) stopped Meter; (b) metering equipment failure; (c) inaccurate Meter, as determined pursuant to Section 7; (d) switched Meters; (e) double metering; (f) incorrect Meter connections; (g) incorrect use of any prescribed apparatus respecting the registration of a Meter; (h) incorrect Meter multiplier; (i) the application of an incorrect rate; (j) incorrect reading of Meters or data processing; or (k) tampering, fraud, theft or any other criminal act.

12.3 Where the Customer requests that the Meter be tested, the provisions of Section 7 will apply in addition to those set forth in this Section.

12.4 Where metering or billing errors occur and the Customer does not request that the Meter be tested, the consumption and demand will be based on the records of the Utility for the Customer or on the Customer’s own records to the extent they are available and accurate or, if not available, on reasonable and fair estimates made by the Utility. Such estimates will be on a consistent basis within each Customer class or according to a contract with the Customer, if applicable.

12.5 In every case of under-billing or over-billing, the cause of the error will be remedied without delay, and the Customer will be promptly notified of the error and of the effect on the Customer’s ongoing bill.

12.6 In every case of over-billing, the Utility will refund to the Customer money incorrectly collected, with interest computed at the short-term bank loan rate applicable to the Utility on a monthly basis thereon, for the shorter of: (a) the duration of the error; or (b) six months prior to the discovery of the error.

12.7 Subject to paragraph 12.11 below, in every case of under-billing, the Utility will back-bill the Customer for the shorter of:

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(a) the duration of the error; or (b) six months prior to the discovery of the error.

12.8 Subject to paragraph 12.11 below, in every case of under-billing, the Utility will offer the Customer reasonable terms of repayment. If requested by the Customer, the repayment term will be equivalent in length to the back-billing period. The repayment will be interest free and in equal instalments corresponding to the normal billing cycle. Delinquency in payment of such instalments will be subject to the usual late payment charges.

12.9 Subject to paragraph 12.11 below, if a Customer disputes a portion of a back-billing due to under-billing based upon either consumption, demand or duration of the error, the Utility will not threaten or cause the discontinuance of Energy Services for the Customer’s failure to pay that portion of the back- billing, unless there is no reasonable ground for the Customer to dispute that portion of the back- billing. The undisputed portion of the bill will be paid by the Customer and the Utility may threaten or cause the discontinuance of Energy Services if such undisputed portion of the bill is not paid.

12.10 Subject to paragraph 12.11 below, in all instances of back-billing where changes of occupancy have occurred, the Utility will make a reasonable attempt to locate the former Customer. If, after a period of one year, such Customer cannot be located, the over-billing or under-billing applicable to them will be cancelled.

12.11 Notwithstanding anything herein to the contrary, if there are reasonable grounds to believe that the Customer has tampered with or otherwise used the Thermal Energy or any component of the Neighbourhood Energy System in an unauthorized way, or there is evidence of fraud, theft or another criminal act, back-billing will be applied for the duration of the unauthorized use, and the provisions of paragraphs 12.7, 12.8, 12.9 and 12.10 above will not apply.

12.12 Under-billing resulting from circumstances described in paragraph 12.11 will bear interest at the rate specified in the Tariff on unpaid accounts from the date of the original under-billed invoice until the amount under-billed is paid in full.

12.13 In addition, the Customer is liable for the direct administrative costs incurred by the Utility in the investigation of any incident of tampering, including the direct costs of repair, or replacement of equipment.

13. Late Payment Charge And Collection Charge 13.1 If the amount due on any bill has not been paid in full on or before the due date shown on

such bill, a further bill will be rendered to include the overdue amount plus a late payment charge as set out in the Standard Fees and Charges. Notwithstanding the due date shown, to allow time for payments made to reach the Utility and to co-ordinate the billing of late payment charges with scheduled billing cycles, the Utility may, in its discretion, waive late payment charges on payments not processed until a number of days after the due date. If the Customer’s account is overdue and requires additional effort to collect, the Utility may charge the Customer a collection charge as set out in the Standard Fees and Charges.

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14. Dishonoured Payments Charge 14.1 If a cheque received by the Utility from a Customer in payment of any account is returned

by the Customer’s bank, trust company or financial institution because of insufficient funds (NSF), or any reason other than clerical error, a returned cheque charge as set out in the Standard Fees and Charges will be added to the amount due and payable by the Customer whether or not the applicable Building System has been disconnected from the Neighbourhood Energy System or Energy Services have been discontinued to the Customer.

15. Refusal to Provide Energy Services and Discontinuance of Energy Services 15.1 The Utility may, after having given 48 hours prior written notice, discontinue providing

Energy Services to any Customer, who: (a) fails to fully pay for any Energy Services provided to any Building(s) on or before

the due date for such payment; or (b) fails to provide or pay by the applicable date required any security deposit,

equivalent form of security or guarantee or any requisite increase thereof. 15.2 The Utility may, without having to give any notice, discontinue providing Energy Services

to any Customer, who: (a) refuses to provide reference information and identification acceptable to the Utility

when applying for Energy Services or at any subsequent time on request by the Utility;

(b) breaches any material terms and conditions of the applicable Customer Service Agreement (including, without limitation, these Terms and Conditions);

(c) has defective pipes, appliances, or Thermal Energy fittings in any part or parts of Building(s) which may adversely impact the provision of the Energy Services by the Utility;

(d) uses the provided Thermal Energy in a manner that may, in the opinion of the Utility:

(i) lead to a dangerous situation; or

(ii) have a negative impact on the Neighbourhood Energy System, or any components thereof;

(e) fails to make modifications or additions to the Customer’s equipment as required by the Utility to prevent the danger or negative impact described in paragraph (d) above;

(f) negligently or fraudulently misrepresents to the Utility its use of Thermal Energy or the Thermal Energy load requirements of, or Thermal Energy volume consumed within and by, any Building;

(g) makes any alterations to any Building System which may impact the provision of the Energy Services by the Utility without the prior written approval of the Utility;

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(h) terminates the applicable Customer Service Agreement pursuant to Section 19 or causes the termination of the applicable Customer Service Agreement for any reason; or

15.3 The Utility may, without having to give notice, discontinue proving Energy Service to any Customer, who stops consuming Thermal Energy in any of the buildings, for a time period determined by Creative Energy, acting reasonable, and no soon than six months, unless agreed by the Customer.

15.4 The Utility will not be liable for any loss, injury or damage