B-9 Application for Approval of a Deferral Account in connection to the Development Agreement between FEVI and PEC Streamlined Review Process April 23, 2013-1 -
Agenda Approval Sought Overview of Existing FEVI System Woodfibre LNG Project Pipeline Reinforcement Project Development Agreement Other Key Activities Scope of Development Work Treatment of Development Costs Treatment of Commitment Fees Deferral Account Balance Examples of Disposition of Deferral Account Balance AFUDC Treatment of Deferral Balance - 2 -
Approval Sought FEVI seeks BCUC approval of: Deferral Account to capture Development Costs and; Commitment Fees Treatment of the Deferral Account, which is: Consistent with regulatory practice Consistent with previously approved treatment in FEVI The work undertaken in the development stage of this project will answer the many questions raised about the Pipeline Reinforcement Project itself - 3 -
Overview of Existing FEVI System FEVI Peak Day Load Customer TJ/d MMscfd Core 106 99 VIGJV 8-12 7-11 BC Hydro FEW / Squamish 40-50 37-47 11 10 Total 165-179 153-167 - 4 -
Woodfibre LNG Site Proposed Site - 5 -
Woodfibre LNG Project Pacific Energy Corporation ( PEC ) is a Canadian-incorporated company and part of Pacific Oil & Gas Group ( PO&G ), an independent energy resource development company established in Indonesia in 2003 PEC is in the early stages of planning, analysis and community engagement regarding a small-scale LNG processing and export facility ( Woodfibre LNG Project ) Site conditionally acquired by PEC; former pulp-mill near Squamish, BC PEC working on feasibility study for LNG Facility PEC s Final Investment Decision expected Dec 2015 Firm Contract Demand Requirements: 150 220 MMscfd - 6 -
FEVI 2017/2018 Design Load Duration Curve 450 400 FEVI 2017/18 Design Load Duration Curve Core Load ICP + VIGJV Existing Capacity 350 300 TJs per Day 250 200 Mt. Hayes LNG Existing Pipeline and Compression 150 100 50 0 1 12 23 34 45 56 67 78 89 100 111 122 133 144 155 166 177 188 199 210 221 232 243 254 265 276 287 298 309 320 331 342 353 364 Coldest to Warmest Day (Design Scenario) - 7 -
Woodfibre Demand: 161 TJ/d (150 MMscfd) 450 400 FEVI 2017/18 Design Load Duration Curve Core Load ICP + VIGJV Woodfibre New Capacity 350 TJs per Day 300 250 200 Mt. Hayes LNG Proposed Pipeline and Compression 150 100 50 0 1 12 23 34 45 56 67 78 89 100 111 122 133 144 155 166 177 188 199 210 221 232 243 254 265 276 287 298 309 320 331 342 353 364 Coldest to Warmest Day (Design Scenario) - 8 -
Pipeline Reinforcement Project Proposed Site FEVI Transmission System Highlighted Area shows Potential System Reinforcements - 9 -
Development Agreement: FEVI and PEC To commence Development Work for the Pipeline Reinforcement Project Development Work to be completed in three Phases; Target completion Dec 2015 PEC to provide performance security on the Development costs that FEVI would incur to complete the Development Work PEC to pay FEVI Commitment Fees of $3.24 million over the three Phases of Development Work - 10 -
Other Key Activities Negotiate Transportation Service Agreement between FEVI and PEC Firm Contract Daily Demand Toll Consistent with BCUC ongoing ratemaking regulation Consistent with FEVI General Terms & Conditions Subject to BCUC approval Wheeling Agreement between FEVI and FEI FEVI to extend the initial term of the Wheeling Agreement FEVI to determine its long term capacity requirements on FEI s CTS and to increase the capacity, if required Subject to BCUC approval - 11 -
FEVI Scope of Development Work PHASE 1 ($1.2 M) Feasibility Study Environmental Assessment Pre-Application Class 4 Cost Estimate for Pipeline Reinforcement; Indicative toll for PEC Stakeholder and First Nations Consultation PHASE 2 ($2.8 M) Front End Engineering and Design Environmental and Engineering Field Studies Class 3 Cost Estimate for Pipeline Reinforcement; Indicative Toll for PEC Stakeholder and First Nations Consultation PHASE 3 ($1.7 M) Regulatory Approvals Submit Environmental Assessment to BCEAO/CEAA and Obtain Approvals Submit CPCN to BCUC and Obtain Approvals Stakeholder and First Nations Consultation For details, please refer to Appendix B of the Application - 12 -
Treatment of Development Costs FEVI to incur Development Costs LNG Project proceeds LNG Project does not proceed Development Costs become part of Project Costs PEC to reimburse FortisBC for Development Costs incurred - 13 -
Commitment Fees Payment Schedule $240 within 10 business days after Approval of Deferral Account Application $1,500 within 10 business days after completion of Phase 1 (i.e. Dec 31, 2013) $1,500 within 10 business days after completion of Phase 2 (i.e. Dec 31, 2014) Commitment Fees are in $000 s - 14 -
Treatment of Commitment Fees PEC to pay Commitment Fees to FEVI LNG Project proceeds LNG Project does not proceed Commitment Fees credited against PEC s future demand charges PEC elects not to proceed FEVI fails to obtain necessary approvals Commitment Fees credited to customers Commitment Fees refunded to PEC - 15 -
Deferral Account Balance (in $000 s) PHASE 1 PHASE 2 PHASE 3 Total Estimated Development Costs $1,200 $2,800 $1,700 $5,700 Commitment Fees $(240) $(1,500) $(1,500) $(3,240) Estimated Balance before AFUDC $960 $300 $200 $2,460 AFUDC $19 $63 $118 $199 Estimated Total Balance $979 $1,363 $318 $2,659 Final disposition of Deferral Account under three possible scenarios Scenario 1: Woodfibre LNG Project & Pipeline Reinforcement Project proceeds Scenario 2: PEC Elects Not to Proceed with Woodfibre LNG Project Scenario 3: FEVI fails to Obtain necessary approvals - 16 -
Examples of Disposition of Deferral Account Example 1: LNG Project and Pipeline Reinforcement Project Proceeds Estimated Deferral Account Balance - $2,659 Estimated Development Costs of $5,700 and AFUDC $199 become part of Project Costs Commitment Fees of $3,240 credited to PEC s future demand charges Customers Benefit Expected reduction in the unit costs of transportation on FEVI system All numbers are in $000 s - 17 -
Examples of Disposition of Deferral Account Example 2: PEC elects not to proceed with LNG Project at end of Phase 2 Estimated Deferral Account Balance - $2,342 Development Costs of $4,000 incurred by FEVI will be reimbursed by PEC PEC forfeits $1,740 of Commitment Fees Customers Benefit - $1,658 (Commitment Fees net of AFUDC amount) All numbers are in $000 s - 18 -
Examples of Disposition of Deferral Account Example 3: FEVI fails to Obtain necessary approvals at end of Phase 3 Estimated Deferral Account Balance - $2,659 Estimated Development Costs of $5,700 incurred by FEVI will be reimbursed by PEC Commitment Fees of $3,240 refunded to PEC Balance amount of $199 to be recovered through Customers in future rates All numbers are in $000 s - 19 -
AFUDC Treatment of Deferral Balance Distinction between feasibility and development costs only required for regular capital; both types are treated the same for large capital projects Consistent with past FEI/FEVI practice and accepted regulatory accounting treatment & USoA that all these costs in support of capital are treated the same In addition, rate base return (AFUDC) appropriate for costs incurred in support of a fixed asset (capital) - 20 -
Thank You - 21 -