Cascade Pacific Power Corporation

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1 February 7, 2008 C23-3 BC Hydro and Power Authority 17 th Floor, 333 Dunsmuir Street Vancouver, BC V6B 5R3 Attention: Ms. Joanna Sofield, Chief Regulatory Officer Dear MS. Sofield RE: Standing Offer Program BCUC Project BC Hydro and Power Authority Application for Approval of Standing Offer Program and Negotiated Settlement Process. Information Request (IR) Number 2, (Supplemental to BCUC IR s) on behalf of Cascade Pacific Power Corporation In accordance with the BCUC s letter (Exhibit A-4) allowing intervenors to submit written IR s related to BCHydro s January 18, 2008 submission, (Exhibit-B-1-1), attached please find our IR No. 2, (Supplemental to BCUC IR Request No. 1 and BCHydro s Response to that IR No. 1), request from Cascade Pacific Power Corporation. If you have an questions regarding this submission, please contact Roger Bryenton at (909) or by e- mail - rogerbryenton@uschoice.net. Thank you. Sincerely Roger Bryenton, President PO Box 655, Creston, British Columbia V0B 1G0

2 Information Request No Dated: February75, 2008 Supplemental to BCUC Dated January 11, 2008 Page 1 of 2 B-3 original IR 2.1, 1.0 Chapter 4 Commercial Arrangements 4.1 Introduction Reference: Exhibit B-1, 4.1 Introduction, p. 4-1 Original Reference BCUC IR 19.0 Chapter Introduction Reference: Exhibit B-1, 4.1 Introduction, p. 4-1 Commercial Arrangements Please provide BC Hydro s understanding of the term fairness as used by the Province in Policy Action No. 11 and explain how it is applied: In regards to eligibility BC Hydro RESPONSE: With regard to the SOP, fairness generally means that all eligible Developers have an opportunity to participate in the SOP and are not treated in a discriminatory manner. Cascade Pacific Power, and other IPP possible participants, are located in the FortisBC service territory. As such, FortisBC has a direct Transmission connection. For smaller plants, no Network Upgrade will be necessary. Further, as BCHydro is already supplying FortisBC during most of the year, the IPP will replace some of the electricity that BCHydro is now supplying, thus offsetting losses, and not requiring BCTC s services or costs associated with those services. However, the IPP s in FortisBC s territory are subject to transmission and ancillary costs under FortisBC s wheeling tariff. The transmission cost is presently approximately $10/MWh, however, discounting may be applied, if in the opinion of Fortis, it will increase the utilization and revenue to FortisBC. Ancillary costs are approximately $3/MWh for Cascade Power; while losses are 11.53% Cascade contends that suppliers of electricity located in Fortis s territory are thus required to make payments to Fortis, for transmission, ancillary services, and losses, that they would not need to make if located within BCHydro s service territory. Cascade contends that this constitutes an unfair requirement, that due to service territory location, developers will incur unfair costs.

3 Information Request No Dated: February 5, 2008 Supplemental to BCUC Dated January 11, 2008 Page 2 of 2 B-3 original Example: If the full cost of non-discounted transmission at $10/MWh, plus Ancillary services at an estimated $3/MWh, plus 11.53% losses are applied, the regional price of $67 becomes approximately $48.40 net to the developer. Cascade Power contends that this results in a significantly unfair burden to developers within FortisBC s territory, and will substantially hamper efforts by developers within that area, to participate in the SOP. Cascade IR: 2.1 a) Does BCHydro agree that additional costs will be imposed upon developers within FortisBC s service territory. b) Does BCHydro agree that this constitutes an unfair additional cost? c) Would BCHydro be willing to pass through payments for direct transmission costs, ancillary costs, and the value of losses incurred due to a developer s location within FortisBC s service territory? d) If no to above c), can BCHydro suggest alternative mechanisms which might help offset the transmission costs incurred by locations within FortisBC s service territory? This might involve an offset of transmission line losses due to the reduction of losses, a pancaking type of clause or arrangement, where the entire electricity control area (British Columbia) would be treated as a single, uniform supply area, and a price adjustment applied to projects within FortisBC s territory, similar to the regional price differentials now proposed, in order to facilitate the fairness term, of Policy Action No. 11.

4 Information Request No Dated: February 5, 2008 Supplemental to BCUC Dated: January 11, 2008 Page 1 of 2 IR Chapter 5 Cost-Effectiveness and Risk Analysis Summary of Adjustments Reference: Exhibit B-1, 5.2 Price Analysis, Summary of Adjustments, p. 5-4, Losses Original Reference BCUC: 43.0 Chapter 5 Cost-Effectiveness and Risk Analysis Summary of Adjustments Reference: Exhibit B-1, 5.2 Price Analysis, Summary of Adjustments, p. 5-4, Losses For each region please provide the percentage energy losses in Table 5-3 and their derivations. Will the SOP provide for different prices for transmission connected and distribution connected projects, and supply voltage? If not, why not? BC Hydro RESPONSE: The losses used to determine the regional pricing for the SOP were calculated based on the average losses for all projects that submitted a tender in the F2006 CFT. The losses were provided in studies prepared by BCTC. The SOP uses losses from both the F2006 CFT Small Project stream and the Large Project stream. The loss for a region is the simple average of the individual project losses. Region Project Losses (%) Central Interior Central Interior 7.5 (Arithmetic Average) East Kootenay East Kootenay 7.0 (Arithmetic Average) Cascade Power contends that determining losses based upon an arithmetic average, of two (or more) greatly differing projects, does not provide an accurate determination of actual losses. Further, that regional pricing and regional losses ought to be determined on a weighted basis, proportional to project size and distance from connection.

5 Information Request No Dated: February 7, 2008 Supplemental to BCUC , dated Jannuary 11,20008 Page 2 of 2 B-3 Cascade contends that this would be a very simple calculation, much simpler than pricing energy on a time of day, and monthly basis which BCHydro is proposing. Cascade IR: 2.2 a) Would BCHydro please provide the size and distance from point of connection for the two projects listed in the East Kootenay region? b) Would BCHydro please provide a weighted loss calculation using the data from a), applying size and distance? c) Given that considerable calculation is involved in time of day and month of year pricing, would BCHydro be willing to apply loss factors for pricing purposes, based upon project size and distance?

6 Information Request No. 2.3 Dated: February 7, 2008 Supplemental to BCUC , dated January 11, 2008 Page 1 of 3 B-3 IR 2.3, 36.0 Chapter 4 Commercial Arrangements Environmental Attributes Reference: Exhibit B-1, 4.3 EPA Terms, Environmental Attributes, p. 4-13, Environmental Attributes Price Original Reference BCUC: 36.0 Chapter 4 Commercial Arrangements Environmental Attributes Reference: Exhibit B-1, 4.3 EPA Terms, Environmental Attributes, p. 4-13, Environmental Attributes Price BC Hydro will also acquire the Environmental Attributes associated with successful SOP projects. These Environmental Attributes include green rights, green tags and other credits and allowances for greenness. A payment of $3.05/MWh (2007 Canadian dollars) is proposed for each SOP project receiving environmental certification and delivering energy to the point of interconnection (POI) under an EPA (Exhibit B-1, p. 1-3). An additional payment of $3.05/MWh (2007 dollars) will be made for each MWh of energy delivered to the POI that receives Environmental Certification under a SOP EPA. The payment price for Environmental Attributes was determined based on a review of the market prices in the WECC region, which includes the provinces of Alberta and British Columbia, the northern portion of Baja California, Mexico, and all or portions of the thirteen western states in between (Exhibit B-1, p. 4-13) Please show how the $3.05/MWh Environmental Attributes price was arrived at. BCHydro RESPONSE: pdf document pages The price history for voluntary Renewable Energy Credits (REC) in the Western Electricity Coordinating Council (WECC) region was used as the basis for determining the price. For the F2006 CFT a price of $3.00/MWh was determined

7 Information Request No Dated: February 7, 2008 Supplemental to BCUC , dated January 11, 2008 Page 2 of 3 B-3 based on the quoted prices published by Natsource LLC in their RE Trends Weekly report. A summary of the prices is provided below. Please note that the table represents price quotes and not actual transactions. (Tables Omitted) The most recent quoted prices were compared to quoted prices used to determine the Environmental Attributes price for the F2006 CFT. It was determined that the quotes from the two different periods were not materially different from one another. Therefore, the price offered for Environmental Attributes in the F2006 CFT is the appropriate price to offer for the SOP. Since the $3.00/MWh Environmental Attribute price for the F2006 Call is in 2006$, that price was escalated by one year for the SOP to provide a price in 2007$. Taking into account the escalation, the price offered in the SOP for Environmental Attributes is $3.05/MWh. Extract: It was determined that the quotes from the two different periods were not materially different from one another. Cascade Pacific Power has plotted the data for California Wind Environmental Attribute, (or REC) prices, below, using data from tables in the BCH response, (above) plus Jan 2008 Data from Evolution Markets. CA-REC-Bid Prices (Wind) SLOPE = $ INCREASE / YR = $2.50/MWh/Yr Months-Jan

8 Information Request No Dated: February 7, 2008 Supplemental to BCUC , dated January 11, 2008 Page 3 of 3 B-3 Cascade contends that there is a very substantial, material difference. Further, there is a very distinct escalation trend; exponential. This is within a Voluntary marketplace, where there has been no national leadership or standards established. Since January 2004, there have been substantial increases in bid prices in the REC market in California. Approximating the increase, linearly, it is in the order of $2.50 /MWh per Year. A similar trend occurs in the WECC Bid prices for renewable energy credits. Within the compliance market, in the NE US, where individual states have mandated and are about to enforce renewable or green standards, REC s can trade for between five and ten times greater value. Massachusetts New Certificates $55. Rhode Island New REC - $48.00 (Evolution Markets data). Cascade contends that a similar situation may develop within WECC and California, as environmental pressures increase, as they have in European nations, and thus affecting the BC market for Environmental attributes. In fact, it is not inconceivable that BC Environmental attributes may be sold or traded internationally. Cascade contends that mandatory long-term sale contracts for Environmental Attributes contravenes the Fairness intent (as used in the Provinces Policy Action No. 11) of the SOP, and of the BC Energy Plan, and should not be compulsory, and if so, that it should be indexed to market conditions. Cascade Power IR Request 2.3: a. Given the data analysis above, will BCHydro please confirm that the quotes are materially different.? b. Given the data and chart above, will BCHydro please prepare an updated estimate of the extrapolated value for environmental attributes at 5, 10, 20 and 40 years for a low-range escalation, at CPI, and a high range escalation at $2.50/MWh/yr. c. Given the data and chart above, is BCHydro prepared to re-visit and revalue the environmental attributes, or provide a new escalation rate that would be applied and paid? d. Is BCHydro prepared to escalate environmental attributes in a manner that the developers can share the benefit should values increase substantially, especially internationally?

BChgdro. lor\js. FOR GEt\JE B-1. September 30,2009

$BChgdro. lor\js. FOR GEt\JE B-1. September 30,2009$ BChgdro FOR GEt\JE lor\js B-1 Joanna Sofield Chief Regulatory Officer Phone: (0) -0 Fax: (0) -0 bchydroregulatorygroup@bchydro.com September 0,009 Ms. Erica M. Hamilton Commission Secretary British Columbia