D Barry K1rkham, Qc+ James D Burns+

Jeffrey B Lightfoot+

Chnstopher P Wedf0r+

:Vhchad P Vaughan

Carv M Yaffe~

Jonathan L W1lllams+

Scott H Stephens' James W Za1tsoff jocelyn M Le Dressav

Carl J Pnws, Assonatc Counsel_,_

Robm C Macfarlane"' Duncan J Manson+

Dame! \\' Burnett, QC +

RonJld G Paton 1

Gregory J Tuckt:>r+

Heather E Maconachw lvlKhael F Robson+

ZachMy J Ansley~ Panwla F. Slwpp<Hd

Katharina R Spotzl

Rose-Mary L BJshJm, QC, Assoc!Jte Counsel­Han WalterS Owen, OC, QC, LLD (1981)

john I B.rd, CoX: (2005)

February 12, 2014

VIA ELECTRONIC MAIL

Douglas R Johnson+

Alan A Frydenlund+ •

Harvey 5 Delaney-.-Pau! J Brown.,.

Kar0n S Thompson+­ference W Yu ~

James H \1cBedth+ Susan C Ctkhnst

George _i Roper

British Columbia Utilities Commission 61

h Floor, 900 Howe Street Vancouver, B.C. V6Z 2N3

Josephine 1\'1 NJdeJ+

Allison R Kuchta~ ]<1m0s L CJrpkk+

Patnck J Haberl._ Andre 1 Beaulieu+"

HMk'V J HJrns.,. Paul A Brarkstone+

Ed1th A Ry<ln Ddlllf'l H Coles

Law Corporatwn Also of the Yukon BM Also of the Albata BM

Attention: Ms. Erica Hamilton, Commission Secretary

Dear Sirs/Mesdames:

PO Box 49130 Three Bentall Centre 2900-595 Burrard Street Vancouver, BC Canada V7X 1J5

Telephone 604 688-0401 Fax 604 688-2827 Website www.owenbird.com

Direct Line: 604 691-7557

Direct Fax: 604 632-4482

E-mail: cwcafcr@owenbird.com

Our File: 23841/0092

Rc: FortisBC Inc. Application for Approval of a Multi-Year Performance Based Ratemaking Plan for 2014 through 2018 ~Project No. 3698719

Re: FortisBC Energy Inc. (FEI) Application for Approval of a Multi-Y car Performance Based Ratcmaking Plan for 2014 through 2018 ~Project No. 3698715

We are counsel for the Commercial Energy Consumers Association of British Columbia ("CEC"). Attached please find the CEC's Information Requests on the intervener evidence of Russ Bell for the British Columbia Pensioners' and Seniors' Organization, Active Support Against Poverty, BC Coalition of People With Disabilities, Counsel of Senior Citizens' Organizations of BC, and the Tenant Resource and Advisory Centre (BCPSO) pertaining to the above-noted matters.

A copy of this letter and attached Information Request has also been forwarded to FortisBC, FEI, BCPSO and registered interveners by e-mail.

If you have any questions regarding the foregoing, please do not hesitate to contact the undersigned.

Yours truly,

OWEN BIRD LAW CORPORATION

Christopher P. Weafer CPW/jlb cc: CEC cc: FortisBC Inc. cc: FortisBC Energy Inc. cc: Registered Interveners

{00103954;1} AFFILIATED WITH r\IRD & BERLIS • TORONTO

INTERLAW McMHfR R! AW, AN INHRNA1!0NAl A~'>llC!ATJ\1\1

C1-17

COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH COLUMBIA (CEC)

INFORMATION REQUEST ON INTERVENER EVIDENCE OF RUSS BELL

FOR THE BRITISH COLUMBIA PENSIONERS' AND SENIORS' ORGANIZATION, ACTIVE SUJ>PORT AGAINST POVERTY,

BC COALITION OF PEOPLE WITH DISABILITIES, COUNSEL OF SENIOR CITIZENS' ORGANIZATIONS

OF BC, AND THE TENANT RESOURCE AND ADVISORY CENTRE (BCPSO)

FortisBC Energy Inc. (FEI) Application for Approval of a Multi-Year Performance Based Ratemaking Plan for 2014 through 2018

Project No. 3698715

AND

FortisBC Inc. (FBC) Application for Approval of a Multi-Year Performance Based Ratemaking Plan for 2014 through 2018

Project No. 3698719

1. Reference: Exhibit CS-6, Page 3 and Page 4

been r<:tJHl.ed to PBR ;chem6 m place m Albe1J and to

{00103944;1}

ln

In

I h;l'v'e

cu:::uilJlv E'\1\L4_X Pc,'xer

tlu~: PBR

tlus PBR ;md

fortiS

on PBR model

fBR.

the PBR term

fr::nnorwo1k that ca:ues ineeuri\'<"<; f•:.r rhe nntnr.·t·;. their v:inle ecsnru:z the e:a:.m

to :n:r•z .:·\·e 7he Comm:. ':',!,)!1 t:;

n:•..t 2U1er', ·

:nstL1Hiers The ·jecond the fi;:u:n.e?,·;;;l k and

attent:<::.n .::-u b,:,th p:1ce,:"' ztod cd"' -ser\~tce HO.J(Lfl'.• Added;

m

2

1.1. The CEC distinguishes between the words 'reward' and 'incent'. Would Mr. Bell agree that an appropriate purpose for a PBR mechanism is to reward a utility for finding efficiencies, and that such rewards should be based on efficiencies that are distinguishable from cost savings unrelated to efficiencies? 1.1.1. If not, please explain why not.

1.2. Would Mr. Bell agree that a plan that rewards efficiencies and distinguishes such

efficiencies from cost savings that are unrelated to efficiencies provides an appropriate incentive for companies to search for efficiencies? 1.2.1. If so, would Mr. Bell also agree that clearly distinguishing efficiency savings

from savings unrelated to efficiencies provides a superior incentive for the company to direct their energies to efficiencies and provides better protection for the ratepayer?

1.2.1. 1. If not, please explain why not.

1.3. Would Mr. Bell agree that reducing regulatory expense is a separate goal and may or may not be achieved with PBR, given the initial and ongoing expense of the process? 1.3.1. If not, please explain why not.

1.4. Would Mr. Bell agree that improving the efficiency of the regulatory framework and

allowing the Commission to focus more of its attention on both prices and quality of service does not necessarily mean reduced transparency nor extending the time between regulatory processes, but instead references the importance of an effective regulatory framework that appropriately protects ratepayers? Please explain why or why not. 1.4.1. Would Mr. Bell agree that extending the time between regulatory processes

results in reduced transparency for the customer, and is not, in and of itself, a

customer-oriented goal? Please explain why or why not.

2. Reference: Exhibit CS-6, Page 4

L

1l:fZ1l!:ttcd ccuxpa:n\· th:H arc :ele·:a:nt ... ,,"'""'·'"' :-. Ct.~',\0tl!eE< :tnd the

daPBR

{00103944;1}

3

2.1. Please highlight the key ways in which the AUC undertook to achieve the same efficiency incentives as those experienced in a competitive market in its PBR process.

2.2. Please provide Mr. Bell's views with respect to whether or not FEI and FBC PBR

plans create the same efficiency incentives as those experienced in a competitive market.

2.3. Please explain the manner in which the AUC expects to maintain service quality in its PBR plan.

2.3.1. Please provide Mr. Bell's views with respect to how FEI and FBC plan to maintain service quality relative to those in Alberta.

2.4. Please explain the importance of a materiality provision for exogenous factors and discuss its inclusion in the AUC PBR decision.

3. Reference: Exhibit CS-6, Page 11

bur rhe mrent market pnces are ser

1\ith

3.1. Would Mr. Bell agree that deferrals and temporary savings that result in larger, later

expenditures are not necessarily prudent for a competitive company? 3.1.1. If not, please explain why not?

4. Reference: Exhibit CS-6, Page 16

The

to a summar: of

customer rt'lll2!ms

In re;;ponse

for the Ye:trs

4.1. Please confirm, or explain otherwise, that an analysis on the basis of per Customer information would have the gro\vth factor implicitly included as it would be applied under the FortisBC and FEI PBR plans.

{00103944;1}

4

5. Reference: Exhibit CS-12, BCUC 1.1.1

5.1. Please confirm that it is Mr. Bell's view that a PBR plan of one or two years' term is

sufficient to incent efficiencies from a utility, if that is the goal of the regulatory

mechanism, and that a longer term is not necessary.

5 .1.1. If not, please explain why not.

5.2. Please provide Mr. Bell's views with regard to the development of a performance based plan that requires documentation of efficiencies by the utility in order to

generate a reward.

6. Reference: Exhibit CS-6, Page 12

difference from th;:tr under the

a fomml;,. ;111d not on detailed cost

the bu;;,iness. and to the extent

6.1. The CEC would like to establish an appropriate description for the PBR plan as

proposed. Would Mr. Bell agree that an appropriate description for the proposal is

that the companies will benefit to the extent that there is difference from the forecast,

and not just to the extent that they find efficiencies.

6.2. Would Mr. Bell agree that the value for the customer is derived only in the extent to which the company develops efficiencies that are above and beyond any forecast

error, and also above and beyond that which are prudently undertaken by appropriate

management techniques? 6.3. Would Mr. Bell agree that cost forecasts based on formulas are likely to be materially

less accurate than forecasts based on detailed cost estimates?

6.3 .1. If not, please explain why not.

{00103944;1}

5

6.4. Would Mr. Bell agree that forecasts based on future expectations of interest and wages have the potential to be to materially different than that which is actually experienced? 6.4.1. If not, please explain why not.

6.5. Please provide Mr. Bell's views with respect to the length of term and the likelihood of cumulative forecast error resulting in the utility achieving earnings targets without real e fficicncy improvements.

7. Reference: Exhibit CS-12, BCUC 1.1.2

7.1. Would Mr. Bell agree that 'adequate results' for customers operating under incentive based regulation that includes reduced transparency, should include a material and long tenn reduction in costs over what the actual costs arc actually likely to have been, rather than a reduction in costs over a formula forecast? 7.1.1. If not, please provide Mr. Bell's views with respect to what constitutes

'adequate results' for customers.

8. Reference: Exhibit BS-12, BCUC 1.1.3

Response:

8.1. Would Mr. Bell agree that it is very difficult to accurately forecast what is likely to be the actual, prudent costs of providing service over even one year, much less multiple years? 8.1.1. If not, please explain why not.

{00103944;1}

6

8.2. Would Mr. Bell agree that an appropriate assessment of a utility's achievement of efficiencies could be to evaluate the actual costs of providing service against what would likely have been the likely prudent, cost of providing service based on the actual growth and inflation that occurred during the period, rather than comparing the actual costs to a pre-established forecast of growth and inflation? 8.2.1. Please explain why or why not.

8.3. Would Mr. Bell agree that under the proposed PBR plan there is as much, or more incentive, to over-forecast in the formula expected costs than there is to achieve efficiencies? Please explain why or why not.

8.4. Would Mr. Bell agree that to the extent that costs could be over-forecast and generate earnings by virtue of being embedded in the formula, and that there is a financial trigger for an off-ramp of 200 basis points, that there is effectively a limit on the efficiencies that might be achieved by the Companies? 8 .4.1. If not, please explain why not.

9. Reference: Exhibit BS-12, BCUC 1.1.9

9.1. Please explain how a ratepayer may distinguish between appropriate cost reductions due to genuine efficiencies. Please include how they may be accurately measured and distinguished from cost savings that are temporary in nature or based on forecast or formula error.

{00103944;1}

10. Reference: Exhibit BS-12, BCUC 1.2.2

the costs re!oted to other costs 111

not?

Response:

'""'n""""'' on J , the "'""'""'"'"/ mcurred costs The

leost cost a!ternattve thJt

7

m st:md.Jrds feCOVBf

the ,.,,,,.,,,,-, st;:mdan:l

1 0.1. Does Mr. Bell have an opinion as to what would constitute 'material changes in costs' arising from changes in standards? If so, please provide a description of what constitutes a material change in costs.

11. Reference: Exhibit BS-12, BCUC 1.2.4 and 1.5.2

2.~

Response:

Yes the ~espcnse to not needed rn the FBC

the

IS

11.1. Would Mr. Bell agree that the history of O&M expenditures essentially incorporates all the factors related to growih, inflation and whatever productivity the company has applied in the course of its business?

{00103944;1}

11.1.1. If not, please provide a further explanation as to what 'factors' the historical O&M figures would include.

8

12. Reference: Exhibit CS-12, BCUC 1.2.5

b:Jse. the nENl

for customers to recei •e the benefit ;-.,p~~,,,,.p P..oo!•c~1itlon the last

12.1. Is it Mr. Bell's view that the company essentially double counts savings that are achieved between the 2012 actual and the (reconciled) 201 3 Approved base? Please explain.

12.2. Would Mr. Bell agree that there are incentives for a company to boost spending prior to a PBR process in order to establish a higher base from which to achieve 'efficiencies'?

12.2.1. If not, please explain why not.

13. Reference: Exhibit CS-12, BCUC 1.7.3

As Mr Bell

13.1. Please provide Mr. Bell's views with respect to the potential for unjustified rewards that are not related to etliciencies to be established based on CPCN investments that

are tracked outside of the PBR process and have the O&M included in PBR once

approved.

{00103944;1}