Creative Energy Vancouver Platforms Inc. Creative NEFC Neighbourhood Energy Agreement Amendments Submission of FortisBC Energy Inc.

Transcription

1 C5-2 April 22, 2016 File No.: /14797 Matthew Ghikas Direct Facsimile VIA British Columbia Utilities Commission 6 th floor, 900 Howe Street Vancouver, BC V6Z 2N3 Attention: Erica Hamilton Commission Secretary Dear Sir/Mesdames: Re: Creative Energy Vancouver Platforms Inc. Creative NEFC Neighbourhood Energy Agreement Amendments Submission of FortisBC Energy Inc. I am counsel for FortisBC Energy Inc. ( FEI ) in this proceeding. I write further to the Commission s request 1 for submissions regarding its jurisdiction to approve a franchise with a term that is shorter than that contemplated in the Neighbourhood Energy Agreement ( NEA ), and in response to Creative Energy s submissions filed to address the Commission s request. Specifically, the Commission sought further submissions on two questions: 1. Does the Commission have jurisdiction under section 45 of the Utilities Commission Act to approve a time frame shorter than 30 years for the proposed franchise or some aspects of it? 2. If the Commission does have jurisdiction to approve a shorter time frame, should that jurisdiction be exercised by the Panel in this application? In its submission, Creative Energy answered the first question positively and the second negatively. That is, Creative Energy considers the Commission to have the requisite jurisdiction to approve a franchise for a time frame shorter than 30 years, but submits that 1 Exhibit A-6, Commission Request for Additional Submissions, April 8, 2016

2 Page 2 the Commission should not exercise that jurisdiction in this case. FEI has reached the same conclusions, but for different reasons. FEI sets out its view with respect to each of the Commission s questions in turn: 1. Does the Commission have jurisdiction to approve a franchise for a time-frame shorter than that applied for? FEI is not aware of any jurisdictional constraint that would interfere with the approval of a franchise (or some aspects of it) for any time frame the Commission considered appropriate. In FEI s view, this authority is found in section 45(9) of the Utilities Commission Act: 2 That section provides: (9) In giving its approval the commission (b) may impose conditions about (i) the duration and termination of the privilege, concession or franchise. As explained in more detail in FEI s final submission 3, the suite of rights that make up the privilege, concession or franchise, that require approval from the Commission to be valid, are not limited to those rights and obligations articulated in the NEA. In addition to the NEA, these rights are reflected in the Bylaw Enactment Agreement as well as the bylaw that is incorporated by reference into those agreements. The Commission must consider the full breadth of the privilege, concession or franchise conferred by the City of Vancouver ( COV ) on Creative Energy and whether approval is necessary for the public convenience and properly conserves the public interest. Although the Commission has the necessary jurisdiction to impose whatever duration it deems appropriate in approving a franchise, it must be recognized that a franchise requiring Commission approval is based on rights that a municipality has agreed (in this case, via multiple agreements) to confer on a public utility. For the franchise to have any effect, the Commission must approve the franchise, and the parties must be in agreement with the terms that the Commission has approved. As such, a Commission order approving a franchise that is different from the one to which the parties have agreed 2 3 RSBC 1996, c 473 Submission of FEI, Part 3(E)

3 Page 3 would have no effect unless and until the parties agreed between themselves to the altered terms. FEI notes that Creative Energy shares this view. 4 Analogous questions arose in the proceeding convened to consider the original version of the NEA. In that proceeding, the Commission asked that the parties address in their final submissions, among other things, what the consequences would be if certain elements of the NEA were not accepted. 5 As Creative Energy noted: The fact is that the NEA has no effect if it is not approved or approved with conditions, unless both parties agree to those conditions. 6 FEI agrees with Creative Energy s submission on this point. Under the law of contract, if a term of the NEA is changed, that change must be ratified by the parties to the agreement. While the Commission has jurisdiction to impose terms on a franchise, it cannot unilaterally alter the terms of a contract. Creative Energy s response to this question appears to be substantively the same as FEI s. That is, the Commission has the jurisdiction to impose conditions when determining whether to approve a franchise granted by a municipality, but it cannot create a franchise where there is no underlying agreement. Although FEI agrees with Creative Energy s ultimate conclusion regarding Commission jurisdiction, it does take issue with some aspects of Creative Energy s submissions on this question. For instance, Creative Energy has reiterated its original submission that the Commission should restrict its review in this proceeding to the issues expressly raised by the panel in the Original Proceeding. The Commission has already concluded that this proceeding merits a full review under section 45 of the UCA, and [the Commission] declines [Creative Energy s request] to issue a directive at this time that further limits the scope of the proceeding Should the Commission exercise its jurisdiction to approve the franchise for a time-frame shorter than that applied for? FEI shares Creative Energy s view that the Commission should not exercise its jurisdiction to approve the franchise granted by the COV to Creative Energy for a shorter term; however, FEI reaches that conclusion for fundamentally different reasons. First, for the reasons stated in FEI s Final Submission, the franchise conferred by the COV on Creative Energy is not necessary for the public convenience and does not properly conserve the public interest, regardless of term. Those submissions made clear that: Response of Creative Energy to Panel Questions, para. 10. Original Proceeding - Transcript Vol. 3 p. 616 Original Proceeding - Reply Submission of Creative Energy, p. 47 Order G-29-16A, Appendix B, Reasons for Decision, p. 2

4 Page 4 the concerns expressed by the Commission in the Original Proceeding related to the linkages between the NEA and mandatory connection have not been addressed by Creative Energy and the COV; the nature of the franchise is unchanged by splitting it into two agreements; continued inclusion of Chinatown in the NEA is inappropriate and untenable given that Creative Energy does not have a CPCN permitting it to provide service there; the COV has acted beyond its authority in purporting to regulate a public utility like Creative Energy; the NEA and overall franchise is inconsistent with the fundamental principles articulated by the Commission in the AES Inquiry Report; mandatory connection and exclusivity shift risk from Creative Energy to developers and end users and the public interest considerations of this transfer of risk have not been made by the Commission; precluding FEI from adding load in the franchise area would have negative rate implications for natural gas customers as a whole; and approving the franchise would be inconsistent with FEI s existing rights to provide natural gas service in the franchise area. These issues remain regardless of the term of the franchise that may be granted. Second, the consideration of a shorter term franchise may introduce issues, in respect of which the evidentiary record is currently insufficient. For example: Would Creative Energy proceed with the project if the franchise were approved for a shorter term than that applied for? Would the COV agree to a shorter term? If the COV and Creative Energy returned to the negotiating table to address a Commission direction for a shorter term, what other puts and takes may be made by the parties to accommodate a shorter term NEA? Would those further changes be in the public interest?

5 Page 5 What would be the interplay between a franchise that expired after a shorter term and the authority Creative Energy argues the COV has over mandating customers to connect to a public utility, irrespective of the Commission s view? If Creative Energy s submission that the Commission lacks the jurisdiction to interfere with the COV s preference for mandatory connection proved to be incorrect at law (as FEI submits it is): Would buildings that are required to connect to Creative Energy s system be able to change energy providers upon the expiry of the franchise? Would the implementation of the building design and construction requirements imposed to meet Creative Energy s requirements represent a barrier to that building subsequently changing energy providers on expiry of the franchise? If yes, how should such barriers be mitigated? If changing energy providers was practical, how would the sunk costs associated with the building s connection to Creative Energy s system be treated? Despite the fact that the mandatory connection requirement may only be in place for a short time period, would the practical effect of even a short period of mandatory connection be permanent load security for Creative Energy for the buildings connected during that time period? Should these issues be addressed expressly in the NEA? The Connection Agreement? An Order issued by the Commission? If a shorter term franchise were approved, would there be an impact to the inservice date? If yes, are there any meaningful consequences arising from that delay? Creative Energy s submissions highlight some of these potential questions and others as well. Among other reasons, Creative Energy argues that a shorter term should not be pursued because: there is insufficient evidence to support approval of the franchise for a term less than 30 years;

6 Page 6 Such an approval would require Creative Energy and the COV to return to the negotiating table and the Commission should not assume that the COV will respond as the Commission expects it will; rather, that order would [put] the Project at risk by imposing a condition related to a shorter time frame 8 ; Reducing the term of the NEA will not similarly limit the duration of the imposition of mandatory connection and preclusion of customer choice; and Imposing that change may delay the in-service date. The above submissions of Creative Energy share a common theme: it cannot be known on the face of the record and submissions before the Commission how an approval of this franchise for a shorter term may operate in practice. Response to Creative Energy s Other Arguments Although FEI shares Creative Energy s view that the Commission should not approve a shorter term, FEI disputes Creative Energy s assertion that it must be assumed 9 that the Commission considered issuing an approval of the NEA on a term less than 30 years and decided not to do so. Creative Energy acknowledged in its preceding paragraph that the term of the Original NEA was not a significant issue tested in either written or oral submissions during the first proceeding and there is insufficient evidence to support a determination for a shorter time frame. 10 It cannot be assumed that a shorter term was contemplated if the record was insufficient on that issue. FEI similarly disagrees with Creative Energy s suggestion that the Commission should place weight on the potential negative reaction the COV may have to an order approving the franchise for a term less than 30 years. It is the Commission s responsibility to ensure that any franchise approved properly conserves the public interest. It should not be concerned with whether such an approval has the consequence of compelling two sophisticated parties to revisit the contractual terms governing the relationship between them. Put another way, the Commission would err were it to approve a franchise that was otherwise unpalatable simply to avoid that consequence. FEI also disputes Creative Energy s argument that even were the Commission to limit the duration of the franchise, that would not impact the COV s authority to implement mandatory connection and eliminate customer choice. 11 This mirrors Creative Energy s Response of Creative Energy to Panel Questions, para. 16 Response of Creative Energy to Panel Questions, para. 14 Response of Creative Energy to Panel Questions, para. 13 Response of Creative Energy to Panel Questions, para 18.

7 Page 7 position in the original proceeding that the Commission cannot stop the COV from empowering a Commission-regulated utility from developing district energy in NEFC. Indeed, Creative Energy reproduced its submission from the original proceeding that the Commission must respect the decisions of the City of Vancouver and that the CoV s jurisdiction is broad enough to ensure the successful development of a district energy system in NEFC. 12 As FEI set out in its submissions in the original proceeding and rearticulated in its March 18, 2016 submission, Creative Energy s view of the COV s jurisdiction vis-à-vis the Commission s jurisdiction is incorrect. Were the Commission to accept Creative Energy s submission that it must respect the decisions of the COV, it would fetter its discretion and err in law. Conclusion There is no need to re-open the evidentiary record to address the practical questions about what will happen if a shorter term were to be approved. The franchise proposed is not necessary for the public convenience and does not properly conserve the public interest, regardless of whether it is for a term of one year, 30 years, or anywhere in between. ALL OF WHICH IS RESPECTFULLY SUBMITTED. Yours truly, FASKEN MARTINEAU DuMOULIN LLP [original signed by] Matthew Ghikas MTG 12 Response of Creative Energy to Panel Questions, pp. 3 and 5.