response to commercial energy consumers association of british columbia (“cec”) ·...

RESPONSE TO COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH

COLUMBIA (“CEC”)

INFORMATION REQUEST No. 2

FOR

2016 - 2017 REVENUE REQUIREMENTS APPLICATION AND RATE

DESIGN FOR NORTHEAST FALSE CREEK

July 18, 2016

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

C I T Y B U I L D E R S E N E R G Y I N N O V A T O R S C R E A T I V E T H I N K E R S

B-15

markhuds

CREATIVE ENERGY 2016-17 RR RD

TABLE OF CONTENTS

Reference: Exhibit B-1A (dated June 7, 2016) Cover Letter, Pages 1 and 2; Application,

Page 3 and Exhibit B-8 (dated June 7, 2016) ............................................................................................................2

Reference: Exhibit B-8, CEC 1. 4.1 ....................................................................................5

Reference: Exhibit B-8, CEC 1.4.2 ....................................................................................5

Reference: Exhibit B-8, CEC 1.5.2 and CEC 1.5.3 ............................................................6

Reference: Exhibit B-11. BCUC 1.49.3 ..............................................................................7

Reference: Exhibit B-11, BCUC 1.49.3 ..............................................................................9

Reference: Exhibit B-11, BCUC 1.49.3 ........................................................................... 10

Reference: Ex. B-11, BCUC 1.49.3 and Attachment; BCUC 1.49.3, CEC 1.13.1 .......... 11

Reference: Ex. B-11, BCUC 1.49.3; Ex. B-1A, p 22 and Ex. B-11, BCUC 1.10.3 .......... 13


Reference: Exhibit B-11, BCUC 1.14.1 and 1.14.2 ......................................................... 17

Reference: Ex. B-11, BCUC 1.49.3; Ex. B-11; BCUC 1.15.1.1-1.15.1.2 and 1.15.3 ...... 17


Reference: Exhibit B-11, BCUC 1.24.5.2 ........................................................................ 19

Reference: Exhibit B-11, BCUC 1. 32.2 .......................................................................... 20

Reference: Exhibit B-11, CEC 1.31.4 .............................................................................. 21

Reference: Exhibit B-8, CEC 1.6.6 and Exhibit B1-A, Cover Letter, . ................. 21

Reference: Exhibit B-8, CEC 1.7.1 and BCUC 1.49.3 .................................................... 23

Reference: Exhibit B-11, BCUC 1. 49.5-1.49.7 ............................................................... 24

Reference: Exhibit B-8, CEC 1.8.3 and 1.8.4 .................................................................. 26

Reference: Exhibit B-8, CEC 1.9.1 .................................................................................. 27

Reference: Exhibit B-8, CEC 1.10.1 ................................................................................ 28

Reference: Exhibit B-8, CEC 1.11.2 to 1. 11.4 and BCUC 1.1.1 .................................... 31

Reference: Ex. B-11, BCUC 1.44.1 and BCUC 1.44.1, Attachment and Ex. B-1, p 19. . 32


Reference: Ex. B-11, BCUC 1.9.2, Appx. 19 and Ex. B-11, BCUC 1.44.1, Attachment . 34

Reference: Exhibit B-11, BCUC 1.2.2 ............................................................................. 35

Reference: Exhibit B-11, BCUC 1. 3.1 ............................................................................ 36

Reference: Exhibit B-11, BCUC 1.5.1 ............................................................................. 37

Reference: Exhibit B-11, Exhibit B-11, BCUC 1.49.3 and Attachment Page 1, Exhibit B-

1A, Page 61, Table 24 and BCUC 1.9.2, Appendix 19 ........................................................................................... 38

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Reference: Exhibit B-1A (dated June 7, 2016) Cover Letter, Pages 1 and 2; Application, and Exhibit B-8 (dated June 7, 2016)

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Please confirm that where there is a difference between the information contained in Information Request Responses and the application in Exhibit B-1A that the information contained in the Information Request Responses is the most up to date information.

Response: Given the number of information requests now exceeds 650, Creative Energy cannot confirm whether there is a difference between the information contained in Exhibit B-1A, and an information request, or whether in all cases the information request is the most up to date response. However, Creative Energy expects that to be the case.

1.1.1 If not confirmed, please identify which Information Request responses and which portions of the Application contain updated information and which Information Request responses and portions of the Application are outdated.

Response: Please see the response to CEC IR 2.1.1.

Please confirm that the responses to the CEC and other interveners all reflect the updated information that was provided in response to BCUC and any other interveners.

Response: Confirmed, with the single exception of the response to CEC IR 1.6.6. See the response to CEC IR 2.17.1.

1.2.1 If not confirmed, please update responses to any information requests that are not reflective of the new information.


Please provide a summary table identifying changes to the application and where they are identified in Information Request responses.


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Reference: Exhibit B-8, CEC 1. 4.1

Please confirm that there were no increases between from 2010 to 2013 inclusively or

otherwise provide these increases.

Response: Confirmed.

2.1.1 If confirmed, please confirm that the average rate increase has been about 1.1% over the nine years from 2006 to 2013 inclusive.

Response: Not confirmed. 2006 to 2013 inclusive is an eight year period. The simple average of steam rate increases in those eight years was 1.2%.

Reference: Exhibit B-8, CEC 1.4.2

Please provide the costs for all the temporary costs including in the 2016 and 2017 test years.

Response: See Exhibit B-1A, Schedule 11, After Tax Pension Asset and GCOC Deferral Account 2013/2014.

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Reference: Exhibit B-8, CEC 1.5.2 and CEC 1.5.3

Would Creative Energy be willing to recover the RDDA over the term of the Neighbourhood Energy Agreement if so directed by the Commission?

Response: Yes.

4.1.1 If not, please explain why not.


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Reference: Exhibit B-11. BCUC 1.49.3

What is the ‘temporary feature’ of the Massachusetts formula to which Creative Energy refers? Please explain and provide a discussion explaining the purpose of the ‘temporary feature’ of the Massachusetts allocation and how it affects the allocation.

Response: The response to BCUC IR 1.49.3 referenced in the preamble does not describe “a temporary feature of the Massachusetts formula”. It refers to “a temporary feature of the allocation methodology, driven by the Massachusetts allocation of overheads”. There is no temporary feature of the Massachusetts formula that is or is not in effect. The application of the Massachusetts formula temporarily results in the originally proposed cost allocation methodology exceeding the steam rates.

Please provide the calculations related to the ‘temporary feature’ that result in the allocation being higher than it would be when the temporary feature is not in effect.

Response: See the response to CEC IR 2.5.1.

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For approximately how long is the ‘temporary feature’ likely to be in effect? Please

explain and discuss what factors impact the duration of the ‘temporary feature’.


Please explain the implications that Creative Energy is intending to convey and/or conclusions that Creative Energy wishes to be drawn by the statement ‘The time required to review and approve this approach is also proportional to the volumes of energy and dollar amounts involved. During the test period, total steam consumption by the NEFC is comparable to the individual steam consumption by several of Creative Energy’s larger steam customers.’

Response: The statement is self-explanatory.

Please confirm, or otherwise explain, that it is Creative Energy’s intention to regularly compare the proposed cost allocations to the steam rates, and select the methodology which results in NEFC paying the lower of the two rates.

Response: Not confirmed. As described in the response to BCUC IR 1.49.3, for several reasons Creative Energy is of the view that the steam rates are an appropriate approach for NEFC. As part of a future rate application, Creative Energy expects to propose a cost allocation methodology for NEFC, in lieu of using the steam rates. The switch from using the steam rates, to using a cost allocation methodology, is expected to be a one-time change.

5.5.1 If not confirmed, please explain why not and explain under what circumstances Creative Energy would utilize the methodology that resulted in a higher rate rather than the methodology that resulted in a lower rate.


5.5.2 If confirmed, does Creative Energy propose to go back and forth between the two methodologies?


5.5.3 Who does Creative Energy propose should bear the difference between the cost allocation methodology and the retail steam rates?

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Response: Whatever approach is used to determine costs to NEFC, the resulting revenue will count against the steam system’s revenue requirement and will impact steam system rates.

Please confirm that ‘the 100% of direct capital costs, direct development costs, direct O&M within the NEFC’ and ‘100% of network losses within the NEFC’ are all costs that are caused by the NEFC.


5.6.1 If not confirmed, please explain why not and provide quantification for ‘direct capital, development, O&M within the NEFC and the costs related to the network losses within the NEFC that are not caused by the NEFC and would otherwise be paid for by Creative Energy customers.


5.6.2 If confirmed, please provide Creative Energy’s rationale as to why the costs caused and paid for by NEFC should influence their responsibility for paying the same steam rates as other retail steam customers.

Response: NEFC is not a “retail steam customer.” See the responses to BCUC IR 1.49.3, BCUC IR 1.53.1, and BCUC IR 2.102.7.

Does Creative Energy have a system extension policy?

Response: Creative Energy does not have an approved system extension policy.

5.7.1 If yes, please provide and identify when it came into effect.


Reference: Exhibit B-11, BCUC 1.49.3

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Are other steam retail customers entitled to pool their consumption from different locations? Please explain why or why not.

Response: Yes. This has been included in the Creative Energy steam tariff since at least 2003.

Please confirm that all steam customers are responsible for their own costs after the

point of delivery.


6.2.1 If not confirmed, please explain why not and give examples.



Please provide the total variance caused by the change in allocation methodology and that caused by the adjustment to the demand forecast.

Response: See Attachment BCUC IR 1.44.1 to Exhibit B-11 for the magnitude of the NEFC demand forecast variance in each year. For 2016, the demand forecast variance between the original application, and the updates provided in Exhibit B-11, was 0.2%. Creative Energy declines to calculate the exact proportion of the cost variance for 2016 that was due to the demand forecast variance but expects that it is less than 1%, and that over 99% of the cost variance is due to the change in methodology. The NEFC demand forecast variance for 2017 was -3.2%. Creative Energy estimates that 20% of the cost variance for 2017 is due to the change in the NEFC demand forecast. For the total 2016-2017 cost variance of $117,000 described in the response to BCUC IR 1.49.3, Creative Energy estimates that 15% is due to the change in the NEFC demand forecast, and 85% is due to the revised allocation methodology.

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Reference: Ex. B-11, BCUC 1.49.3 and Attachment; BCUC 1.49.3, CEC 1.13.1

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The CEC wishes to be able to distinguish between the costs that were allocated in the RRA under the Massachusetts Formula and the costs allocated under Retail rates before and after the change in the demand forecast. Please complete the following table showing the figures prior to the change in demand forecast and after the change in demand forecast. Please also complete a similar set of tables for 2017. Please add any additional costs that may not have been included in the RRA figures that would otherwise be included elsewhere. Please provide any corrections to the information recorded by the CEC.

2016 Post –

Change to

Demand Forecast

Cost Allocation under Mass.

Formula as originally proposed

Post Change to demand forecast

Cost Allocation under Creative

Energy retail rates Post change

to demand Forecast

Variance: Creative

Energy Proposed Retail

and Mass. Formula

Steam Cost

Alloc’n to NEFC

NES

NES Fuel

Recovery Cost

Alloc’n

Steam Rates paid

by NEFC

$43,000

Fuel cost paid by

NEFC

$53,000

Credit to NEFC

for Fuel Recovery

in Steam Rates

$(3,500)

Fuel Cost Adjust.

Other Costs

Total $92,500

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2016 PRE –

Change to

Demand Forecast

Cost Allocation under Mass. as

originally accounted for in RRA

PRE CHANGE TO DEMAND

FORECAST

Cost Allocation under

Creative Energy proposed

retail rates PRE change to

demand Forecast

Variance: Creative

Energy Proposed

and Mass. Formula

Steam Cost

Alloc’n to NEFC

NES

79,200

NES Fuel

Recovery Cost

Alloc’n

51,200

Steam Rates paid

by NEFC

Fuel cost paid by

NEFC

Credit to NEFC

for Fuel Recovery

in Steam Rates

Fuel Cost Adjust.

Other Costs

Total 130,400

Response: Creative Energy declines to provide detailed calculations involving an outdated demand scenario and an allocation methodology which is no longer being requested. See the response to CEC IR 2.7.1.

Reference: Ex. B-11, BCUC 1.49.3; Ex. B-1A, p 22 and Ex. B-11, BCUC 1.10.3

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Please provide the unit of measurement for Table 4.

Response: $ per M# steam.

Will the NEFC pay the regular tariff rate of $7.96 in 2016 plus the fuel costs identified? Please confirm or otherwise explain.

Response: There is no “regular tariff rate”. The referenced value in the above table is the average effective steam rate. See the response to BCUC IR 1.49.3.

Please identify any other charges and credits the NEFC will pay or receive.

Response: See the response to BCUC IR 1.49.3.

Will Steam customers pay the regular tariff rate of $7.96 plus the Fuel Cost Adjustment Charge of $8.75 for a total of $16.71 in 2016? Please confirm or otherwise explain.

Response: Not confirmed. There is no “regular tariff rate”. Steam customers pay the steam rates; the effective rate varies per customer based on consumption due to the declining block structure. Steam customers also pay the Fuel Cost Adjustment Charge, which varies with gas prices.

Please provide a breakdown with quantification comparing all the components of the total cost per MMbtu paid by the NEFC and that paid by existing Steam customers.

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Response: Creative Energy does not understand the request.

Please confirm that the Fuel Cost Adjustment Charge is a charge to customers, and not a credit.


Please provide a breakdown of the ‘Fuel Cost Adjustment Charge’ with quantification, including the amounts related to the balance of the Fuel Cost stabilization account.

Response: The response to BCUC IR 1.12.1 shows all components of the fuel expense. Exhibit B-1A, Appendix 1A, Schedule 14, line 5 shows the base fuel cost and NEFC fuel cost, which are excluded from the FCAC. The net totals to be recovered through the FCAC are summarized in the table below.

2016 2017

Total Fuel Expense (from response to BCUC IR 1.12.1)

$10,420,425 $11,913,531

Exclude Base Fuel Cost and NEFC Fuel Cost (from Exhibit B-1A, Appendix 1A, Schedule 14 line 5)

($749,000) ($1,015,000)

Net Total to be Recovered through FCAC (matches response to CEC IR 1.13.1, slight difference due to rounding)

$9,671,425 $10,898,531

The response to CEC IR 1.13.1 provided the estimate of the FCAC for 2016 and 2017 based on these amounts.

9.7.1 Are there elements of the Fuel Cost Adjustment Charge which are appropriate for NEFC customers to participate in? Please explain why or why not for each of the Fuel cost adjustment components and identify if the NEFC will be participating in them.

Response: All costs which make up the FCAC are also charged to NEFC.

Do other ‘new customers’ participate in the Fuel Cost Adjustment Charge and the fuel cost stabilization account?

Response: New core steam customers participate in the FCAC and the FCSA.

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9.8.1 If yes, please explain why the NEFC should be treated differently than other new customer.


How would inclusion of the FCAC impact the total NEFC charges? Please explain and provide quantification.

Response: It would have minimal impact on total NEFC charges as NEFC will pay for its fuel costs the same way core steam customers do, based on consumption.

How would the FCAC be impacted by increases in the cost of natural gas? Please explain and provide examples with quantification.

Response: An increase in the cost of natural gas would likely lead to an increase in the FCAC so the amount recovered from customers through the FCAC matches the fuel costs to produce steam. See the response to CEC IR 1.13.1 for example calculations for 2016 and 2017.


Is there a risk of changes in transportation rates?

Response: Yes, there is a risk that transportation rates may change. FortisBC does not guarantee future transportation rates. Changes in transportation rates are flowed through to ratepayers, as transportation charges are included in the FCAC.

10.1.1 If yes, to whom does the risk accrue? Shareholders or ratepayers? Please explain.


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Reference: Exhibit B-11, BCUC 1.14.1 and 1.14.2

Would Creative Energy be willing to update its application based on the most current forward gas strip prices for 2016 and 2017? Please explain why or why not.

Response: Creative Energy sees no value in updating its application based on the most current forward gas strip prices because, as is clearly explained in the referenced response to BCUC IR 1.14.1.1, the current forward gas strip prices do not impact the revenue requirements in the Application.

Reference: Ex. B-11, BCUC 1.49.3; Ex. B-11; BCUC 1.15.1.1-1.15.1.2 and 1.15.3

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Please confirm, or otherwise clarify, the CEC’s interpretation that the Clear Sky fees that are included in the FCAC are the same as those that have been added to the fuel costs borne by the NEFC.

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Response: Confirmed, as is clearly shown in the referenced responses to BCUC IR 1.49.3, and BCUC IR 1.15.1.1.


Why were the 2015 Unaudited Net Wages nearly $300 thousand lower than the 2015

Approved.

Response: The main reason 2015 Unaudited Net Wages were $300,000 lower than approved is that more staff time than anticipated was capitalized to the NEFC CPCN proceeding.

Why does Creative Energy anticipate an increase of about 28% over the 2015 Unaudited?

Response: Creative Energy does not anticipate as many hours being capitalized to other capital projects as in 2015.

Reference: Exhibit B-11, BCUC 1.24.5.2

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Why did Creative Energy propose to charge $106,337 to NEFC Rate Base in 2016 and nothing in 2017?

Response: It is anticipated that there will be no or minimal time capitalized to NEFC in 2017.

Reference: Exhibit B-11, BCUC 1. 32.2

Are there reconciliations for variances in fuel expenses for NEFC?

Response: No. NEFC will be charged monthly based on actual consumption and actual fuel costs, so there is no need for a reconciliation.

15.1.1 If yes, please explain where these variances are reconciled.

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15.1.2 If no, please explain why not.



Please describe and provide a breakdown of the costs that have been allocated to the

other business units over the last three years.

Response: Other costs related to non-utility based activities during prior years and the test period are shown in Exhibit B-1A, Schedule 8, line 20 for Depreciation, and Schedule 16 Line 20 for Property Taxes.

Please provide a breakdown the costs that will be allocated to other business units over the test period.


Please describe and provide a breakdown of the costs that have been borne by Creative Energy’s shareholder over the last 3 years.


Please provide a breakdown of the costs that will be borne by Creative Energy’s shareholder over the test period.


Reference: Exhibit B-8, CEC 1.6.6 and Exhibit B1-A, Cover Letter, Page 2.

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Please rationalize the 6.2% increase shown in response to CEC 1.6.6 for both 2016 and

2017 with the 6.23% and 7.15% identified in the Consolidated Application.

Response: The values of 6.23% and 7.15% shown in the Consolidated Application are the correct values. Revised tables are provided below. There are no other tables requiring revision.

2007 2008 2009 2010 2011 2012

Actual Actual Actual Actual Actual Actual

Total Effective Steam Rate 17.9$ 19.0$ 19.4$ 19.7$ 19.5$ 19.5$

% Change 5.8% 2.2% 1.5% -1.2% 0.4%

Average Annual Vancouver CPI 2.0% 2.4% 0.2% 1.8% 2.3% 1.3%

% Change in Underlying Steam Tariff 7.29%* 1.3% 1.3%

*Rate was changed in October so only part of rate increase was capturdd in effective rates for 2007.

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If the CEC responses are not reflective of the current information, please provide updated answers to any inaccurate responses, such that the CEC can rely on the responses provided to all of its information requests.


Reference: Exhibit B-8, CEC 1.7.1 and BCUC 1.49.3

2013 2014 2015 2016 2017

Total Change

(2007 - 2017)

Total Change

(2008 - 2017)

Actual Actual Actual Forecast Forecast 11 Years 10 Years

Total Effective Steam Rate 19.6$ 21.8$ 24.2$ 25.0$ 27.6$

% Change 0.2% 11.2% 11.0% 3.5% 10.2% 53.5% 45.1%

Average Annual Vancouver CPI 0.2% 1.1% 1.2% 2.1% 2.1% 15.29% 12.8%

% Change in Underlying Steam Tariff 11.4% 10.0% 6.2% 7.2% 53.7% 43.2%

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Please confirm that the customers to whom the ‘total steam consumption by NEFC is

individually comparable to purchase’ steam under the ‘single tariff’ referenced in CEC 1.7.1.


If Creative Energy has a single tariff, and the NEFC will be receiving steam from Creative Energy, why should the NEFC be treated any differently than any other similarly-sized customer?


Reference: Exhibit B-11, BCUC 1. 49.5-1.49.7

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Does Creative Energy propose to treat all its new ‘customer classes’ differently?

Response: Creative Energy has not made any proposal for how to treat future customer classes and is not requesting guidelines for establishing future customer classes.

19.1.1 If yes, what are the guidelines for determining which customers should be treated as a different customer class? Please explain and provide quantification of any thresholds with the appropriate rationale.


Please confirm that cost causation is an important concept in utility regulation and that customer classes should typically be expected to recover their cost of service.


If Creative Energy adds new ‘customer classes’, will Creative Energy conduct a Cost of Service analysis for approval by the BCUC? Please explain why or why not.


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Reference: Exhibit B-8, CEC 1.8.3 and 1.8.4

Please confirm that the HayGroup recognized in its assessment of ‘management

salaries’ as being competitive in the market that the activities being conducted would ‘not normally be considered management’.

Response: The following response is from the HayGroup: “Yes. Our focus in analyzing the roles was on job content (specific activities and requirements of the roles), not title.”

20.1.1 If confirmed, please identify where in the HayGroup report it was acknowledged that the ‘management salaries being assessed were for individuals whose activities do not reflect that which would normally be ‘considered management’ activities.

Response: The following response is from the HayGroup:

“The section titled Methodology includes the following:

The market comparison was based on job size as measured by the Hay Group

Guide Chart-Profile Method of Job EvaluationSM, a point factor job evaluation plan

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based around four core factors: Know-How, Problem Solving, Accountability and

Working Conditions

– The evaluation allows us to compare each job to jobs in other

organizations based on job size – as not all jobs with the same or similar

title are of similar scope and market value

– For example, the Creative Energy CEO is not broadly

compared to CEOs of all other utilities, but rather to jobs of

comparable points within the sample

– It also allows us to compare unique roles to the market place even

when there are few direct comparables.

Our methodology assesses roles based on Know-How, Problem Solving, Accountability

and Working Conditions. These were assessed based on job information, and so our

assessment reflects the actual duties and accountabilities of the roles in question – their

actual activities, whether management or non-management, as opposed to what the

title/grouping of the role is.

This methodology leads us to a number of points, which we then used to draw our

compensation data from the database. Therefore the compensation data provided is

calibrated to the actual activities and demands of the jobs.

For example, if a Facility Manager at organization X was a true manager with a large team,

perhaps we would assess their job at 800 points. At Organization Z, the Facility Manager

may actually not be a manager but rather an individual professional contributor – perhaps

we would assess their job at 400 points. When we access market data from the database,

we would draw data at 800 points for Organization X and 400 points for Organization

Y. The market data we draw and analyze would be different for the two organizations,

even though both have Manager titles.”

20.1.2 Please identify what adjustments, if any, the HayGroup made to accommodate the fact that the management titles are not reflective of the activities being performed.

Response: See the response to CEC IR 2.20.1.1.


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Please confirm that zero-based budgeting is a relatively expensive process.

Response: Zero-based budgeting is done internally at Creative Energy with no incremental costs. In a much larger utility with much higher costs, zero-based budgeting may be expensive.

Please show the metrics under which the zero-based budgeting has been used for each of the zero-based budgeting line items.

Response: Creative Energy does not use metrics in its zero based budgeting process.

Please provide the intention and value of zero-based budgeting if it is not to lower the overall costs. Is it to improve cost-effectiveness?

Response: Zero-based budgeting is used by Creative Energy to ensure that the each year the costs are examined, and not simply based on historic costs.

21.3.1 If it is to improve cost-effectiveness or for another purpose(s), please explain and quantify what has been achieved by using zero-based budgeting.



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Creative Energy states in Exhibit B-1, page 17 that the steam requirement in excess of the steam sales was to be captured elsewhere in the underlying cost allocations. In response to CEC 1.10.1, Creative Energy claims that they, at no point, proposed to allocate the steam losses 100% to the NEFC. What portion of the steam requirement in excess of the steam sales was to be captured in the underlying cost allocations and allocated to the NEFC?

Response: Under the original proposal, which no longer applies, all steam system losses would have been allocated to the existing steam customers, and no steam system losses would have been allocated to NEFC. Under the current proposal, NEFC would pay the same steam rates as all other customers and would therefore be responsible for a proportional share of steam losses based on steam consumption.

Where were the excess steam requirements to be allocated under the original methodology?


22.2.1 Please provide estimates of the steam requirement in excess of the steam sales that would not have been allocated to the NEFC under the original methodology. Please provide in mmBtu and as a % of the total steam sales.

Response: Creative Energy does not understand this information request.

What is the demand forecast for steam production and what is the forecast for steam

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sales for the NEFC?

Response: Creative Energy does not have a “demand forecast for steam production”. The steam demand forecast for core customers is shown in Exhibit B-1 starting on page 18 and was already subject to multiple IRs from CEC. Creative Energy does not know what CEC means by “steam sales for the NEFC” as NEFC customers purchase steam, not hot water. Steam consumption by NEFC at the steam to hot water converter stations is shown in the response, including attachment, to BCUC IR 1.49.3.

Please confirm, or otherwise explain, that there are no incremental steam requirements as a result of the NEFC taking service that would not be captured in the retail existing steam tariff.


22.4.1 If not confirmed, please provide an estimate of any steam requirements that would not captured in the retail steam tariff.


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Reference: Exhibit B-8, CEC 1.11.2 to 1. 11.4 and BCUC 1.1.1

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The CEC does not require customer specific information in order to assess the validity of the load forecast. Please provide the requested information without reference to specific customer identity information. Aggregate information, if necessary, to preserve customer confidentiality while retaining some reasonable level of granularity into the forecast.

Response: Aggregated load forecast information has already been provided. See Exhibit B-1, pp 18-19. Creative Energy declines to provide further detail on customer loads.

Reference: Ex. B-11, BCUC 1.44.1 and BCUC 1.44.1, Attachment and Ex. B-1, p 19.

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The written response to BCUC 1.44.1 references buildings with a total floor area of 51,800 m2 connecting in 2016; the attachment table in response to the same question only indicates 48,800 m2. Please explain.

Response: The written response to BCUC IR 1.44.1 was referring to the forecast methodology used at the time of the CPCN Application, and the floor area referenced was the value used in the CPCN application. The table attached to the response to BCUC IR 1.44.1 has the updated and correct value.


Why did Creative Energy select 15 years as the appropriate recovery period for the deferral account?

Response: Creative Energy’s proposal to use a 15 year recovery period was addressed in the CPCN proceeding. See page 59 of the Decision issued with Order C-12-15.

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Reference: Ex. B-11, BCUC 1.9.2, Appx. 19 and Ex. B-11, BCUC 1.44.1, Attachment

Creative Energy 2016-17 RRA

Variances between Exhibit B-1 and Response to BCUC IR1

RRA

Filing

IR1

Update

Varianc

e

2016 NEFC Revenue

$

146,200

$143,60

0 -$2,600

2017 NEFC Revenue

$

821,600

$824,40

0 $2,800

RRA

Filing

IR1

Update

Varianc

e

2016 NEFC Energy MWh 1,715 1,718 3

2017 NEFC Energy MWh 9,450 9,141 - 309

Please confirm that changes in revenue requirement as a result of changes in buildout

and consumption for NEFC applies only to Line 4 and not to Line 5.

Response: Assuming that CEC’s intended reference was to Attachment BCUC IR 1.9.2(ii) to Exhibit B-11, confirmed.

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26.1.1 If not confirmed, please explain why the Total Net Fuel for the Revenue Requirement (Line 6) increased from $698,000 in 2016 Per the RRA application to $748,000 or 7% in the new application, whereas the change in MWh increased by less than 1%/,



If Creative Energy does not utilize a deferral account to reconcile for actuals for the 2016 deficiency, to whom would an over-collection or under-collection accrue? Please explain.

Response: Creative Energy does not propose to reconcile for actuals for the 2016 deficiency. The over-collection or under-collection would accrue to the Company. However, in response to BCUC IR 2.69.3 Creative Energy has indicated that it does not oppose such a deferral account.

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Reference: Exhibit B-11, BCUC 1. 3.1

Please explain how the operation of deferral accounts creates risks for customers.

Response: The risk of variances between forecasts and actual costs or revenues may be borne by either customers or the Company. Deferral accounts typically reconcile forecast and actual costs or revenues such that the balances in deferral accounts are recovered or refunded to customers.

Please confirm that Creative Energy is only assuming the ‘load forecast’ risk, if the actual load is lower than forecast. If not confirmed, please explain why not.

Response: Not confirmed. Creative Energy has not applied for a deferral account for the variances in forecast and actual revenues, including those related to the load forecast, so in that sense Creative Energy is assuming the load forecast risk of the actual load being lower than forecast. If actual load exceeds forecast load then Creative

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Energy will benefit from revenues that exceed forecast.

Please confirm that customers are assuming any ‘load forecast risk’ if the actual load is higher than forecast. If not confirmed, please explain why not.


If 25.2 and 25.3 are confirmed, would Creative Energy agree that there is an incentive for Creative Energy to understate the load forecast? Please explain why or why not.

Response: Agreed. However, it is clear the load forecast has been biased to be too high, not too low, for several years now. Creative Energy has proposed a load forecast that it believes is reasonable, and is no longer biased.


Why does Creative Energy believe that it is better able to adjust the demand forecast for customers than the individual customer?

Response: Creative Energy operates a utility that provides heating service; in Creative Energy’s view, relying on the utility’s knowledge of building performance, prior years’ data, and the impact of upgrades is a more effective means of forecasting consumption than asking consumers to estimate their consumption.

Please provide the total adjustment made by Creative Energy to the weather normalized

average consumption.

Response: The adjustment consisted of recalculating certain customers’ weather normalized average consumption by discarding some prior years, if those years predated recent building upgrades. Creative Energy’s default approach is to calculate the five year weather normalized average consumption for each customer, but for customers who have recently upgraded their buildings, the weather normalized average consumption was

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based on a shorter timeframe to exclude years that are no longer relevant. Creative Energy does not have the total amount of the adjustment in volume or percentage terms but can confirm that this type of adjustment was made for approximately 10-15 customers.

Without identifying the specific customers, please provide a table of the weather

normalized consumption for each customer, the customers’ own estimates of their buildings’ consumption and Creative Energy’s adjustments to the consumption.

Response: Creative Energy does not have the requested information. Creative Energy does not have customer-generated load estimates for every single building. See the responses to BCUC IR 1.5.1, CEC IR 2.29.1 and CEC IR 2.29.2.

Reference: Exhibit B-11, Exhibit B-11, BCUC 1.49.3 and Attachment Page 1, Exhibit B-1A, Page

61, Table 24 and BCUC 1.9.2, Appendix 19

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Please confirm, or otherwise explain, that the ‘Steam Cost Allocation to NEFC NES in BCUC 1.49.3 is the same figure as Line Item 27 Total NEFC NES Transferred Costs in BCUC 1.9.2 Appendix 19.


Please confirm, or otherwise explain, that the NES Fuel Recovery Cost Allocation in

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BCUC 1.49.3 is the same figure as Line Item 4 Fuel in Appendix 19, of BCUC 1.9.2. The detail shown in BCUC 1.49.3 indicates $51,200 as the Fuel Recovery Cost Allocation for 2016 for Cost Allocations in the RRA.


Please confirm, or otherwise explain, that the Steam Costs allocated to the NEFC NES shown in Exhibit B-1A, page 61 Table 24 Fuel (Line 20) and Net Fuel (Line 22) is the same figure as Line Item 4 Fuel in Appendix 19, of BCUC 1.9.2.


In Appendix 19, of BCUC 1.9.2 the $51,200 (Line 4) Fuel portion of the Cost of Service ‘Per the RRA’, is reduced by $49,000 (Line 5) for Fuel Recovery, whereas it is not reduced in BCUC 1.9.2 or in Exhibit B-1A, page 61 Table 24 Fuel (Line 20) and Net Fuel (Line 22). Please explain.

Response: In Appendix 19 of the response to BCUC IR 1.9.2, the $49,000 value that CEC refers to appears on the right side of the page where it is labeled as applying to the original RRA application. It is not a current number. The left-hand side of that page provides the current proposal, which does not include this reduction.

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