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BChgdro mR GE!\l IONS
Joanna SofieldChief Regulatory OfficerPhone: (604) 623-4046Fax: (604) [email protected]
August 28, 2009
Ms. Erica M. HamiltonCommission SecretaryBritish Columbia Utilities CommissionSixth Floor - 900 Howe StreetVancouver, BC V6Z 2N3
Dear Ms. Hamilton:
RE: British Columbia Utilities Commission (BCUC)British Columbia Hydro and Power Authority (BC Hydro)Toad River Electrification Project Application - Final Submission
BC Hydro attaches its final submission regarding the above noted matter.
For further information, please contact Sandra Jones at 604623-4315.
Yours sincerely,
J'iJ.J){h.Joanna Sofield
Chief Regulatory Officer
Enclosure
British Columbia Hydro and Power Authority, 333 Dunsmuir Street, VancouverHC V6B 5R3www.bchydro.com
Toad River Electrification Project Application – Final Submission
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BC Hydro Final Submission – Toad River Electrification Project Application
In accordance with the British Columbia Utilities Commission’s (BCUC) July 23, 2009
letter, BC Hydro is filing its final submission in respect of the Toad River Electrification
Project Application (Application). BC Hydro’s submission is divided into eight parts:
1. Context / orders sought; 5
2. Regulatory framework; 6
3. Summary of Project; 7
4. Application process; 8
5. First Nations consultations; 9
6. Reply comments;
7. RCE regulatory process; and
8. Conclusion.
A. Context / Orders Sought 13
In 2005, BC Hydro established the objective of providing reliable, safe, cost-effective
electric utility service to remote communities and, in support of that objective,
established the Remote Communities Electrification (RCE) program. In 2007, the B.C.
Government expressed its support for the BC Hydro RCE program by way of Policy
Action Items 27 and 28 of the 2007 Energy Plan, the Remote Communities Regulation
(RC Regulation) and Special Direction No. 10.
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BC Hydro estimates that there are about 34 remote communities in B.C. that may be
eligible to participate in the RCE program: 21 on-reserve First Nations communities and
13 other communities.2
1 Copies of the relevant parts of the 2007 Energy Plan, the RC Regulation and Special Direction 10 are
included in the Application at Appendices C, D and E. 2 Application, Appendix L, section 4.1, page 14 of 58. In footnote 25 on that same page, BC Hydro
explains why it also uses a range of 30-40 communities when discussing the number of eligible remote communities.
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Toad River Electrification Project Application – Final Submission
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On June 19, 2009, BC Hydro filed the Application with the BCUC, the first such
application to the BCUC under the RCE program.
As noted in section 1.1 and Appendix B of the Application, BC Hydro is applying for a
certificate of public convenience and necessity (CPCN) for the Toad River Electrification
Project (Project) under sections 45 and 46 of the Utilities Commission Act (UCA) as well
as amendments to the Electric Tariff (Tariff) under section 61 of the UCA to add Toad
River to the list of Rate Zone II communities. The form of orders sought is included in
Appendix B of the Application.
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BC Hydro is not seeking any orders in respect of the RCE program. BC Hydro included
the RCE Program 20-Year Plan at Appendix L of the Application in view of commitments
previously made in the F2007/F2008 RRA Negotiated Settlement Agreement.
B. The Regulatory Framework 12
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On June 25, 2007 the B.C. Government enacted the RC Regulation. In accordance with
the RC Regulation, BC Hydro is legally obligated to provide electricity service under its
Tariff to persons who apply for service if their premises are within 90 metres of a
distribution system owned by BC Hydro in a community listed on the schedule to the RC
Regulation.
Toad River is listed on the schedule to the RC Regulation. In accordance with the
Takeover Agreement dated June 18, 2009 (Appendix I to the Application), BC Hydro will
takeover and own the distribution system in Toad River currently owned by the Northern
Rockies Regional Municipality (NRRM) and thereafter BC Hydro will be legally obligated
to provide electrical service in accordance with the RC Regulation.
Section 3 of the RC Regulation states that it does not relieve BC Hydro of any obligation
it might otherwise have to obtain a CPCN under section 45 of the UCA. BC Hydro
determined that a CPCN was necessary for Toad River because it is a new service area
not physically connected to BC Hydro’s existing electrical system.
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Toad River Electrification Project Application – Final Submission
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Section 5 of Special Direction No. 10 provides that the BCUC must ensure that
BC Hydro’s Non-Integrated Areas (NIA) rates and classes of service are available to
customers who receive electricity service under the RC Regulation. Moreover, the BCUC
is directed to ensure that BC Hydro’s rates allow BC Hydro to collect sufficient revenue
to enable it to recover costs related to the provision of electricity services under the RC
Regulation.
BC Hydro is of the view that the BCUC is not, in the context of CPCN applications for
remote communities (as defined in the RC Regulation), assessing whether or not
BC Hydro ought to provide electrical service to Toad River since the RC Regulation
already imposes that legal obligation on BC Hydro. Rather, the BCUC must assess
whether or not BC Hydro is proposing to provide electric service in a cost-effective
manner in view of the legal obligations imposed by the RC Regulation and the directions
to the BCUC in Special Direction No.10. The issue of “cost-effectiveness” is discussed
further in part F(ii) of this submission.
In this context, BC Hydro notes, and agrees with, the following statement by the
Commercial Electricity Customers of British Columbia (CECBC): “The CEC agrees that
the Toad River Project is directly required by government policy and law under
regulation.”3
C. The Project 19
The Project consists of the following physical facilities: 20
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1. 13 km of distribution line, constructed by the NRRM at its cost; and
2. A diesel generation plant to be located at a site east of the community of Toad
River.
The physical facilities are more fully described in sections 4.4.5 and 4.4.6 of the
Application.
3 CECBC August 21, 2009 submission, section 2.
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Toad River Electrification Project Application – Final Submission
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As noted in section 4.4.6 of the Application, BC Hydro will use temporary generators
after the CPCN is issued until the permanent generators are installed at the generation
site (expected to occur in the summer 2010).
Diesel generation is the most cost-effective means of providing reliable utility-grade
electrical service to Toad River. However, BC Hydro will implement, as appropriate,
demand side measures (DSM) and alternative energy supply (wind, solar and/or or in-
stream hydro) to reduce fuel costs and GHG emissions.4
As of the filing date of the Application, BC Hydro had received 27 applications for service
in Toad River.5
As noted in section 4.5.4 of the Application, the cumulative rate impact of the Project is
about 0.03 per cent.
D. Application Process 12
BC Hydro filed the Application with the BCUC on June 19, 2009 and concurrently
notified all of the registered intervenors from the BC Hydro F2009/F2010 Revenue
Requirements Application (RRA Intervenors) and the NRRM. In addition, BC Hydro
notified the following First Nations and First Nation organizations: Fort Nelson First
Nation, Kaska Dena Council, Daylu Dena Council, Dease River First Nation, Kwadacha
First Nation, Liard First Nation, and Ross River First Nation (Identified First Nations).
Copies of the Application were provided to all RRA Intervenors, the NRRM and the
Identified First Nations.
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By letter dated June 25, 2009, the BCUC advised that it was considering proceeding
with the Application on its own motion without further public process, rather than
establishing the regulatory timetable proposed by BC Hydro in the Application. The
BCUC requested comments from RRA Intervenors by July 10, 2009 and a response
4 Application, section 4.7. 5 Application, section 4.4.7.
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Toad River Electrification Project Application – Final Submission
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from BC Hydro by July 17, 2009. The BCUC also requested that BC Hydro file an
evidentiary update in respect of First Nations consultations by July 31, 2009. BC Hydro
delivered a copy of the June 25th letter to all Identified First Nations.
The British Columbia Old Age Pensioners Organization et al. (BCOAPO), B.C.
Sustainable Energy Association et al (BCSEA), CECBC and Joint Industry Electricity
Steering Committee (JIESC) each made submissions to the BCUC and BC Hydro made
a submission by letter dated July 17, 2009.
By letter dated July 23, 2009 the BCUC requested that participants file information
requests with regard to the Application and Toad River Project by July 31, 2009, with
responses from BC Hydro by August 11, 2009, if possible. The BCUC supported
BC Hydro’s suggestion of a workshop to be held on August 14, 2009, with an emphasis
on the RCE program, cost of the regulatory process and the need to streamline the
process, and the cost-effectiveness of the Project. The BCUC asked BC Hydro to file a
summary of the workshop by August 21, 2009. Finally, the BCUC requested that
participants file any comments with the BCUC by August 21, 2009 and that BC Hydro
reply by August 28, 2009. BC Hydro delivered a copy of the July 23rd letter to all
Identified First Nations.
On July 31, 2009 BC Hydro filed an evidentiary update on consultations with First
Nations, and copies were provided to all Identified First Nations.
BC Hydro published notice of the August 14, 2009 workshop in newspapers between
July 31 and August 5, 2009 and provided direct notice to all Identified First Nations.
By letter dated August 6, 2009, the BCUC requested that BC Hydro file a further
evidentiary update in respect of First Nations consultation prior to the August 14th
workshop.
BCOAPO, BCSEA and CECBC provided information requests to BC Hydro and
BC Hydro responded to all of the information requests on August 12, 2009. Copies of the
responses were provided to all Identified First Nations.
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Toad River Electrification Project Application – Final Submission
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On August 13, 2009, BC Hydro filed with the BCUC the second evidentiary update in
regards to First Nations consultations and provided copies to all Identified First Nations.
A workshop took place on August 14, 2009 in Vancouver and a summary of the
workshop was provided to the Commission on August 21, 2009. A list of attendees is
included with the filed summary.
In accordance with the BCUC’s letter date July 23, 2009, BCSEA and CECBC provided
final written comments in respect of the Application on August 21, 2009.
E. First Nations Consultations 8
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BC Hydro summarized the consultations with Identified First Nations in section 5 and
Appendix K of the Application, as well as the July 31 and August 13, 2009 Evidentiary
Updates. BC Hydro provided copies of the Application, as well as BCUC letters, the
Evidentiary Updates and responses to Information Requests to all of the Identified First
Nations.
Liard First Nation was the only Identified First Nation that expressed concerns about the
Project. BC Hydro responded promptly to Liard First Nation’s May 21, 2009 letter (Tab 6,
Appendix K) including a meeting on June 9 and a site visit on July 14, 2009. There were
various telephone, written, and email communications between BC Hydro and Liard First
Nation during July and August 2009. On August 20, 2009, BC Hydro and Liard First
Nation met in Vancouver to review proposed changes to the Project to accommodate the
interests of Liard First Nation. BC Hydro notes that Liard First Nation made
representatives available in a timely manner and offered some helpful suggestions that
enhanced the management of environmental risk and public safety associated with the
diesel generation plant.
Liard First Nation has consistently stated that they are not opposed to the electrification
of Toad River.
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Toad River Electrification Project Application – Final Submission
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As a result of the discussions with Liard First Nation, BC Hydro modified the Project by
(i) moving the permanent generation plant closer to the Alaska Highway and significantly
reducing the physical footprint of the plant, thereby providing a larger buffer between the
plant and a neighbouring wetland; (ii) enhancing the oil-water separation system to drain
away from the adjacent wetlands and incorporating an additional gravel containment pit
in the unlikely event of a large volume spill; (iii) enhancing operations and maintenance
procedures; and (iv) moving the site access road to avoid an area of known
archaeological significance and agreeing to explore moving the intersection between the
site access road and the Alaska Highway to further enhance public safety (subject to
approval by the relevant government agencies). BC Hydro estimates that these
measures will cost about $100,000.
Liard First Nation advised BC Hydro that they are satisfied with the modifications to the
Project and appreciate BC Hydro’s efforts to date to accommodate their interests. On the
basis of assurances from BC Hydro of ongoing efforts to consult with Liard First Nation
and reach appropriate accommodations, Liard First Nation does not oppose the
issuance of a CPCN or the modification of the Tariff, as requested in the Application.6
In BC Hydro’s view, consultation with all Identified First Nations in respect of the Project
has been adequate at this stage. BC Hydro notes that consultations will continue until
the construction of the generation station is completed.
F. Reply Comments 21
The NRRM supports the Application, as set out in Appendix J of the Application. Toad
River residents have shown their support by way of 27 service applications, the
construction of interconnections between the distribution system and their premises, and
by agreeing to fund a substantial portion of the construction cost of the distribution
system.
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6 Liard First Nation was provided with a draft copy of Part E of this submission and they confirmed that
the statements in Part E regarding the Liard First Nation’s advice to BC Hydro and their position in respect of the Application are accurate. A copy of the full submission will be sent to all Identified First Nations.
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Toad River Electrification Project Application – Final Submission
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None of the Identified First Nations oppose the Application.
Of the 38 RRA Intervenors that were notified of the Application, four participated in the
Application process and only two, BCSEA and CECBC, submitted final submissions in
accordance with the Commission’s letter dated July 23, 2009. None of the RRA
Intervenors oppose the issuance of the orders sought in the Application, although
BCSEA and CECBC have asked that certain conditions be placed on the CPCN.
The purpose of this part of the submission is to reply to the August 21, 2009 submissions
of BCSEA and CECBC. The reply is divided into six topics: (i) quality of service; (ii) cost
of service / cost-effectiveness; (iii) alternative energy, DSM and fuel switching; (iv) GHG
emissions and offsets; (v) rate design / tariff amendments; and (vi) CPCN conditions and
preliminary orders.
i.) Quality of Service
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The objective of the RCE program is to provide reliable electric utility service to eligible
remote communities that wish to receive service from BC Hydro. At section 5 of their
reply, CECBC states that quality of service in British Columbia already varies and
BC Hydro should explore the range of flexibility with regards to the quality of service to
find an appropriate balance for the cost of the service versus the quality.
In reply, BC Hydro submits that this issue is addressed in section 3.3.3 of the Application
insofar as BC Hydro has established a 99 per cent reliability target for remote
communities rather than the 99.7 per cent historical average in NIA in large part due to
the substantial costs implications of targeting the NIA historical average reliability in
remote communities. BC Hydro will continue to adapt and improve its approach to
reliability and station design as it obtains more experience in remote community
electrification design and operations. However, BC Hydro submits that the NIA is the
appropriate “measuring stick” for non-integrated remote communities, consistent with the
intent of BC Hydro’s corporate objective, the 2007 Energy Plan, and Special Direction
No. 10.
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Toad River Electrification Project Application – Final Submission
BC Hydro does not believe it is appropriate to materially sacrifice reliability in remote
communities, particularly since reliability is one of the major benefits of BC Hydro
providing electrical utility service to remote communities. Moreover, the incremental
savings enjoyed by sacrificing reliability may not always be substantial and from a rate
impact perspective would probably be inconsequential. For example, the total capital
cost of three generators in Toad River is about $400,000 of the $2.3 million Project
capital costs. Eliminating one generator will have a marginal impact on cost and almost
no effect on the cumulative rate impact, but would reduce the reliability of service.
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ii.) Cost of Service / Cost-Effectiveness
“Cost of Service”
In its letter dated July 23, 2009, the BCUC noted that cost-effectiveness is an issue with
respect to the Application. CECBC commented on the cost of service in Toad River in its
August 21, 2009 submission, as well as cost-effectiveness. BCSEA commented on the
cost of the Project.
In reply, BC Hydro acknowledges that the cost per account in remote communities is
considerably higher than the NIA average. The cost disparity between the Project and
the NIA average is largely a function of the relatively small size of remote communities
such as Toad River, with the average NIA having about 500 dwellings and the average
remote community having about 26 dwellings7. Simply put, the NIA have better
economies of scale and thus a lower per account cost of service.
It is important to note that 21 of the 34 eligible remote communities are First Nation
communities and, in the context of those communities, the Government of Canada will
be paying a portion of the costs of service, thereby reducing the financial cost to existing
BC Hydro ratepayers.
7 The average number of dwellings in NIA and RCE communities is not included in the Application or
responses to information requests but was discussed at the August 14, 2009 workshop.
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Toad River Electrification Project Application – Final Submission
BC Hydro will, in all cases, make all commercially reasonable efforts to mitigate the
impact on existing rate payers by providing electrical service in a cost-effective manner.
However, the cost of service (on a community or per account basis) is not a bar to a
community being eligible to participate in the RCE program. Once a community is added
to the RC Regulation, BC Hydro will provide cost-effective, safe and reliable electric
utility service to that community, even if the cost of service is considerably higher than
the NIA average
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8.
“Cost-Effective”
The fact that the Project is more expensive per account compared to the NIA average
does not mean that the Project is not cost-effective. In BC Hydro’s submission, “cost-
effectiveness” in the case of the Project – and all RCE program communities - must be
assessed in the context of the objective of the RCE program (the provision of reliable
electric utility service to remote communities) and the RC Regulation and Special
Direction No. 10.
The RC Regulation expressly contemplates the provision of electrical service by way of
an electric distribution system insofar as the ownership of such a distribution system in a
remote community is the foundation of the legal obligation to serve. BC Hydro submits
that the proper question to ask when assessing the cost-effectiveness of the Project is:
what is the most cost-effective means of providing electric utility service to Toad River, in the context of a centralized electrical distribution system?
In view of the nominal cost of the distribution system to BC Hydro ($1.00)9, BC Hydro submits that the fundamental issue in this Application is the cost-effectiveness of the electricity supply option selected by BC Hydro relative to other supply options.
As noted in section 4.7 of the Application and sections 8 and 9 of Appendix H of the
Application, BC Hydro reviewed six supply options including diesel only, diesel plus
8 BC Hydro response to BCSEA IR No. 1.7.5. 9 In accordance with the Takeover Agreement between BC Hydro and the NRRM, BC Hydro is paying
$1.00 for the distribution system (Application, Appendix I section 4.1).
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Toad River Electrification Project Application – Final Submission
alternative energy (four options), and interconnection with the existing system at Fort
Nelson. The latter option (interconnection) was considerably more expensive and
therefore was ruled out as an option. Some of the alternative energy options appear to
be promising insofar as the NPV of the options are comparable to the NPV of the diesel
only option and have the added benefit of mitigating environmental risk and reducing
GHG emissions. However, all of the renewable or alternative energy opportunities
require diesel generation back-up (since none of the identified alternative energy options
provide firm, reliable utility service). None of the alternative energy opportunities have
been sufficiently studied to implement them concurrent with the start of service in the fall
2009. In view of the RCE program objective (reliable electric utility service), the desire to
implement service in the fall of 2009 and the uncertainties around the appropriate
implementation of alternative energy opportunities, diesel is the most cost-effective
option in the short to medium term.
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BC Hydro acknowledges that diesel has both environmental and fuel price risks. As a
result, the focus of BC Hydro’s efforts on a go-forward basis in Toad River, and other
remote communities, is to mitigate these risks by the appropriate integration of
alternative energy supply options with the diesel generation system and DSM. This
approach is consistent with the government’s energy objectives defined in section 1 of
the UCA and Policy Action No. 28 in the 2007 Energy Plan.10 This is discussed in the
next part of this submission under “Alternative Energy, DSM and Fuel Switching”.
CECBC suggests at section 4 of its August 21st submission that remote communities
might find the option of a $10,000 to $20,000 per year per account payment to be
attractive, while retaining current energy supply options. This, in CECBC’s view, would
allow residents in remote communities to enjoy heritage power benefits. In reply,
BC Hydro submits that the objective of the RCE program is to provide reliable electric
utility service to remote communities and the CECBC’s proposal does not achieve this
objective. Under the RCE program, BC Hydro is offering reliable electric utility service to
remote communities – not financial payments in lieu of reliable utility electric service.
10 Policy Action No. 28 is “Ensure BC Hydro considers alternative electricity sources and energy
efficiency measures in its energy planning for remote communities”.
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Toad River Electrification Project Application – Final Submission
BC Hydro does not consider the CECBC suggestion to be an alternative in the context of
the RCE program and its stated objectives.
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BC Hydro notes that the electrification of small, remote communities is a relatively new
business for BC Hydro and, as such, experience gained in Toad River will be invaluable
in continually improving the cost-effective delivery of electrical service to remote
communities.
iii.) Alternative Energy, DSM and Fuel Switching
“Alternative Energy”
As noted in BC Hydro’s response to BCSEA IR No. 1.6.2, there are no cost-effective
generation opportunities in Toad River that would provide utility-quality electrical service
on a year-round firm basis other than diesel generation. Having said that, BC Hydro
generally supports BCSEA’s assertion that diesel plus alternative energy opportunities
appear to be attractive in comparison to the diesel only supply option, particularly after
taking into account GHG emissions and other environmental risks.11 As noted in section
4.7 of the Application and responses to BCSEA IR No. 1.1.2, 1.1.4, 1.1.5, 1.6.2, and
1.6.3, BC Hydro is continuing to study the appropriate integration of alternative energy
opportunities with diesel generation. BC Hydro is highly motivated to implement
alternative energy solutions both to reduce fuel costs and GHG emissions12. Moreover,
the appropriate integration of alternative energy opportunities is consistent with the
government’s energy objectives as defined in section 1 of the UCA and Policy Action No.
28 of the 2007 Energy Plan.
BC Hydro notes that BCSEA is “disappointed that BC Hydro was unable to assemble a
feasible renewable-plus-diesel generation package for the initial configuration of the
Toad River Project”13. At this time, BC Hydro does not have sufficient experience
integrating alternative energy opportunities such as wind, solar and in-stream hydro with
small diesel generation systems like Toad River and, as such, BC Hydro could not
11 BCSEA August 21, 2009 submission, page 4 of 6. 12 BC Hydro response to BCSEA IR No. 1.1.5. 13 BCSEA August 21, 2009 submission page 4 of 6.
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Toad River Electrification Project Application – Final Submission
reasonably implement these opportunities in the short run, without further study in the
context of an operational small diesel system. BC Hydro intends to implement
appropriate alternative energy opportunities, but it will take two or more years before
BC Hydro knows whether or not the diesel system in Toad River can be complemented
by alternative energy opportunities
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14. BC Hydro will pilot test alternative energy
opportunities in Toad River which should provide invaluable experience and information
both in terms of future operations in Toad River and the electrification of other remote
communities.
“DSM and Fuel Switching”
In their submissions, both BCSEA and CECBC support DSM initiatives in Toad River,
particularly in the context of concerns about fuel switching. CECBC recommends that the
BCUC add significant weight to the issue and attach DSM requirements to the approval
of the Toad River CPCN (the issue of “CPCN Conditions” is discussed in part F(vi) of this
submission). BCSEA recommends that the BCUC encourage BC Hydro to include, in the
preparation of the Toad River DSM plan and the refinement of load and consumption
forecasts, consideration of the impact of electrification on the overall choices of energy
types in the community.
BC Hydro respectfully disagrees with the CECBC’s statement that the Application
contains too little in the way of DSM. In fact, BC Hydro outlines its DSM approach and
initiatives in sections 3.3.2 and 4.9.3 and Appendix H (Toad River Community Electricity
Plan) of the Application as well as responses to various information requests.
In section 3.3.2 of the Application, BC Hydro states that it is developing a DSM program
entitled “Power Smart for Remote Communities” (PS4RC) to facilitate DSM before
BC Hydro becomes the electrical service provider in remote communities. Toad River is
a PS4RC market test for non-First Nation communities. In section 4.9.3 of the
Application, BC Hydro notes that Toad River is the first remote community in which
BC Hydro will be pursuing DSM initiatives and BC Hydro identifies a number of DSM
14 BC Hydro response to BCSEA IR No. 1.1.5.
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Toad River Electrification Project Application – Final Submission
opportunities that will be investigated and implemented if appropriate during the fall of
2009.
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BC Hydro plans to implement cost-effective DSM initiatives in Toad River that provide
value in terms of energy savings resulting in the generating station consuming less
diesel than would otherwise be consumed had no DSM initiatives been implemented.
Additionally, if DSM initiatives are successful, BC Hydro may be able to reduce the size
of diesel generators, when replaced15.
As noted in BC Hydro’s response to CECBC IR No. 1.12.1, the work to develop the DSM
offers and implementation plan for the Toad River market test is underway. BC Hydro
has begun to gather information required to establish the appropriate DSM opportunities
and is aiming to have DSM offers available to residential customers in the fall of 2009. In
this same time frame, audits will be conducted for commercial customers to determine
which commercial DSM opportunities to target.
In specific reply to the BCSEA and CECBC comments about fuel switching, BC Hydro
notes that, as part of the market test for PS4RC, BC Hydro will be investigating the need
to influence fuel choices made by customers and if appropriate, which strategies to
pursue. Preliminary findings suggest that fuel switching to electricity in Toad River is not
expected to be significant at the time of electrification16. As a result, BC Hydro has some
time to further investigate this issue and any appropriate strategies.
BC Hydro does not agree with the CECBC recommendation that measures (whatever
they may be) should be included in the Tariff to assure that “inappropriate” fuel switching
does not take place. First, there is no evidence on the record as to the types of
measures that could be implemented or how effective, and costly, the measures might
be. Second, BC Hydro will be investigating, in the context of the Toad River market test,
what strategies if any to pursue in respect of fuel switching and, as such, is not in a
position to say what strategies are preferable.
15 Application, section 4.9.3. 16 BC Hydro response to CECBC IR No. 1.7.2.
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Toad River is a PS4RC market test because BC Hydro does not have sufficient
experience in the design and implementation of DSM in small, remote communities. The
experience and information from Toad River will inform future operations in Toad River
and other remote communities.
iv.) GHG Emissions and Offsets
BC Hydro acknowledges that the Project will probably cause a net increase in GHG
emissions, although the amount of GHG emissions will be relatively small given the size
of Toad River. BC Hydro intends to mitigate any increase in GHG emissions by
implementing appropriate alternative energy and DSM opportunities as quickly as
possible. BC Hydro submits that this is consistent with the government’s energy
objectives as defined in section 1 of the UCA and Policy Action No. 28 of the 2007
Energy Plan.
BC Hydro does not intend to acquire full GHG offsets for the Toad River diesel
generation17. In its August 21, 2009 submission, BCSEA argues that BC Hydro should
be required to obtain corresponding GHG offsets. BC Hydro respectfully disagrees.
There is no legal obligation on BC Hydro to purchase GHG offsets for the Project.
As noted in BC Hydro’s response to BCSEA IR No. 1.5.2, Policy Action No. 18 of the
2007 Energy Plan states that new oil-fired electricity generation projects developed in
B.C. connected to the integrated grid will have zero net GHG emissions. Policy Action
No. 19 states that all existing thermal generation power plants in the integrated grid
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must
completely offset their GHG emissions by 2016. Therefore, the BCSEA’s suggestion is
not consistent with the 2007 Energy Plan insofar as remote communities like Toad River
are not connected to the integrated grid.
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Imposing a requirement on BC Hydro to purchase GHG offsets would clearly be a
precedent for all remote communities and would impose an additional cost on all
ratepayers. There is no evidence on the record in this Application regarding the
17 BC Hydro response to BCSEA IR No. 1.5.3.
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magnitude of the cost of GHG offsets or the benefits relative to those costs and, in
BC Hydro’s view, the BCUC should not establish such a precedent in the context of this
Application.
BC Hydro is concerned about the nature of BCSEA’s request in that BCSEA is
effectively asking the BCUC to direct BC Hydro to purchase GHG offsets, in the absence
of an obligation on BC Hydro to purchase GHG offsets. BC Hydro respectfully submits
that the BCUC should not, and arguably cannot, direct BC Hydro to purchase GHG
offsets.
As noted, BC Hydro will implement appropriate alternative energy opportunities and
DSM in Toad River to mitigate any net increase in GHG emissions. BC Hydro submits
that this is entirely consistent with the government’s energy objectives defined in section
1 of the UCA and Policy Action No. 28 of the 2007 Energy Plan. There is no basis for the
BCUC to impose any requirements on BC Hydro to purchase GHG offsets.
v.) Rate Design / Tariff Amendments
At section 8 of its August 21, 2009 submission, CECBC recommends that the
Commission attach a condition to the CPCN that BC Hydro implement rate designs to
reflect the appropriate avoided cost of supply price signals, as well as Tariff amendments
to assure that inappropriate fuel switching does not take place. BC Hydro does not agree
with this recommendation. CECBC has not indicated what it specifically intends. There is
no evidence on the record in this Application as to the prudence, necessity or
effectiveness of any such rate designs or Tariff amendments. And in any event,
BC Hydro submits that the Commission cannot develop different rates for RC Regulation
communities relative to NIA because Special Direction No .10 clearly states that the
rates and classes of service available to customers in RC Regulation Communities must
be the same rates as NIA. In BC Hydro’s view, it would not be appropriate to make a rate
design decision or amend the Tariff (other than adding Toad River to the Tariff) in the
context of this Application.
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Toad River Electrification Project Application – Final Submission
vi.) CPCN Conditions and Preliminary Orders 1
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BCSEA and CECBC each make recommendations in their submissions in terms of
conditions to be imposed on the issuance of a CPCN or the issuance of a preliminary
order under section 46(4) of the UCA. BC Hydro respectfully submits that there is no
basis for the conditions or the preliminary order.
At page 5 of its August 21st submission, BCSEA suggests the Commission consider
issuing a CPCN that expires after about three years, unless BC Hydro brings forth a
diesel-renewable option for Toad River or provides persuasive evidence why there was
no feasible alternative to a diesel-only approach. BC Hydro strongly disagrees with this
suggestion for two reasons. First, the consequences and risks of this condition would be
primarily borne by the residents of Toad River whose services may be terminated if the
CPCN was terminated at the end of three years. It is unfair and unreasonable to impose
this potential risk on BC Hydro’s customers in Toad River. Second, the condition is
simply not necessary. As noted in BC Hydro’s response to BCSEA IR No.1.1.5 and part
F(ii) of this submission, BC Hydro is highly motivated to implement alternative energy
solutions to reduce fuel costs and GHG emissions, consistent with the government’s
energy objectives defined in section 1 of the UCA and Policy Action No. 28 of the 2007
Energy Plan.
As noted earlier, the CECBC recommends the BCUC place a condition on the CPCN in
relation to rate design. BC Hydro disagrees for the reasons set out in part F(v).
The CECBC also recommends that the BCUC attach to any CPCN requirements for
BC Hydro “to increase its demand side measures” and to “implement such further DSM
programs as may be required to assure that all cost-effective measures are being taken
to contain the electric load.”18 The CECBC further suggests that the BCUC could issue a
preliminary order under s. 46(4) prior to the issuance of a CPCN.
BC Hydro disagrees with the CECBC’s recommendation for three reasons. First,
BC Hydro’s evidence is clear that Toad River is a market test for DSM in small, remote
18 CECBC August 21, 2009 submission, sections 2 and 8.
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communities. BC Hydro does not know what, if any, DSM measures will be successful in
Toad River and how cost-effective the different measures will be. Second, such a
condition is not necessary. As with the implementation of alternative energy
opportunities, BC Hydro is motivated to implement DSM to reduce fuel costs and GHG
emissions, consistent with the government’s energy objectives defined in section 1 of the
UCA and Policy Action No. 28 of the 2007 Energy Plan. Third, BC Hydro does not agree
that section 46(4) could be relied upon for the purpose suggested by CECBC insofar as
this provision refers to a preliminary order where a public utility “desires to exercise a
right or privilege under a consent, franchise, licence, permit, vote or other authority that it
proposes to obtain but has not, at the date of the application, been granted to it….”
Section 46(4) requires a public utility to apply for the preliminary order. BC Hydro is not
applying to the BCUC for a certificate while it is attempting to obtain a consent franchise,
licence, permit, vote or other authority to be issued in respect of Toad River and
therefore section 46(4) is not applicable in the circumstances contemplated by CECBC.
G. RCE Regulatory Process 15
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BC Hydro prepared this Application in accordance with the BCUC CPCN Guidelines.
While the Application is lengthy, the bulk of the Application is comprised of documents
that were created separate and apart from the regulatory process. As noted in
BC Hydro’s letter dated July 17, 2009 to the BCUC, BC Hydro wanted to ensure the
Application was comprehensive because it is the first RCE program application to the
BCUC.
BC Hydro agrees with the general consensus among participants that the RCE
regulatory process should be simplified and streamlined, in view of the small size of each
community and the number of applications (34 communities).
The issue of regulatory process was discussed at the August 14, 2009 workshop.
BC Hydro suggested that participants and the BCUC consider an exclusion regulation
under section 45(4) of the UCA for plant used to service RCE communities. It was
suggested by some participants that conditions or criteria should be attached to any
exclusion regulation, if this approach was to be adopted by the BCUC.
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Toad River Electrification Project Application – Final Submission
BC Hydro tends to agree with BCSEA’s views in its August 21, 2009 submission that it
would be premature to develop a more streamlined system until after the BCUC has
made a decision on this Application and an RCE application involving a First Nation
community.
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BC Hydro proposes to meet informally with BCOAPO, BCSEA, CECBC, JIESC and
BCUC staff (and any others who may be interested) to determine whether or not there
may be some form of consensus around the nature and form of regulatory process
appropriate for the RCE program. BC Hydro is particularly interested in the concept of an
exclusion regulation under section 45(4) or a very streamlined application review
process with simplified applications. BC Hydro proposes to report back to the BCUC
either as part of, or concurrent with, the next RCE application (which will be a First
Nation community) or shortly after the next RCE application.
H. Conclusion 13
BC Hydro acknowledges the efforts of the NRRM and the residents of Toad River as well
as the valuable information and feedback provided by Liard First Nation and participants
such as BCOAPO, BCSEA, CECBC and JIESC. BC Hydro acknowledges that BCSEA
strongly supports the use of alternative energy opportunities in remote communities to
reduce GHG emissions and that both BCSEA and CECBC support the use of DSM.
BC Hydro fully intends to mitigate fuel costs and GHG emissions by implementing the
appropriate alternative energy opportunities and DSM initiatives in Toad River,
consistent with the government’s energy objectives defined in section 1 of the UCA and
Policy Action No. 28 of the 2007 Energy Plan.
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No one opposes the issuance of the orders sought in this Application. BC Hydro
respectfully submits that the BCUC should issue the orders sought in this Application
(CPCN and tariff amendment), without conditions, because:
19 BCSEA August 21, 2009 submission, page 3 of 6.
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1. In accordance with the RC Regulation, BC Hydro is legally obligated to provide 1
electrical service in Toad River after the takeover of the distribution system is
completed;
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2. Diesel generation is the most cost-effective supply option for Toad River, 4
particularly in terms of providing reliable utility electrical service in the context of a
centralized distribution system; and
3. There is no basis for including any of the conditions requested by BCSEA or 7
CECBC in the CPCN.
ALL OF WHICH IS RESPECTFULLY SUBMITTED Dated: August 28, 2009 BRITISH COLUMBIA HYDRO AND POWER AUTHORITY
Per:_________________ Ken Duke Solicitor & Counsel
