NEN•BIRD - Utilities Commission€¦ · The CEC has reviewed the application, ... Project is forecast to be $242.825 million in as spent ... through maintenance and integrity management

0 Barry Kirkham, QC+ James D Burns+ jeffrey B Lightfoot+

Christopher P Weafer+ Michael P Vaughan Heather E Maconachie Michael F Robson+

Zachary 1 Ansley+ George j Roper

Carl J Pines, Associate Counsel+

Robin C Macfarlane+ Duncan J Manson+ Daniel W Burnett, QC + Ronald G Paton+

Gregory J Tucker+ Terence W Yu+ james H McBeath+ Edith A Ryan+

Daniel H Coles

Rose-Mary L Basham, QC, Associate Counsel+ Hon Walter 5 Owen, OC, QC, LLD (1981) john I Bird, QC (2005)

July 31, 2015

VIA ELECTRONIC MAIL

Douglas R johnson+ Alan A Frydenlund, QC +.,

Harvey S Delaney+ Paul J Brown+ Karen S Thompson+

Harley 1 Harris+ Paul A Brackstone+ james W Zaitsoff+

jocelyn M Le Dressay

British Columbia Utilities Commission Sixth Floor, 900 Howe Street Vancouver, BC V6Z 2N3

josephine M Nadel+ Allison R Kuchta+ james L Carpick+

Patrick J Haberl+ Gary M Yaffe+

Jonathan L Williams+ Scott H Stephens+

Pamela E Sheppard Katharina R Spotzl

+ Law Corporation

Also of the Yukon Bar

0\NEN•BIRD L 1\. \V C c; rz 1' tJ lZ A ·r t ~_J N

PO Box49130 Three Bentall Centre 2900-595 Burrard Street Vancouver, BC Canada V7X 1 J5

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

Direct Line: 604 691-7557

Direct Fax: 604 632-4482

E-mail: [email protected]

OurFile: 23841/0117

Attention: Ms. Erica Hamilton, Commission Secretary

Dear Sirs/Mesdames:

Re: FortisBC Energy Inc. ("FEI") Application for a Certificate of Public Convenience and Necessity ("CPCN") for Approval of the Lower Mainland Intermediate Pressure ("IP") System Upgrade ("LMIPSU") Projects, Project No. 3698818

We are counsel for the Commercial Energy Consumers Association of British Columbia ("CEC"). Attached please find the CEC's Final Submissions with respect to the above-noted matter.

A copy of this letter and attached Final Submissions have also been forwarded to FEI and registered interveners by e-mail.

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

Yours truly,

OWEN BIRD LAW CORPORATION

Christopher P. W eafer CPW/jlb cc: CEC cc: FEI cc: Registered Interveners

{00347281;1} B INTERLAW MEMBER OF INTERLAW, AN INTERNATIONAL ASSOCIATION

~ OF INDEPENDENT LAW FIRMS IN MAJOR WORLD CENTRES

COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH COLUMBIA

FINAL SUBMISSIONS

FortisBC Energy Inc. Application for a Certificate of Public Convenience and Necessity for Approval of the Lower Mainland

Intermediate Pressure (IP) System Upgrade Projects Project No. 3698818

The Commercial Energy Consumers Association of BC (CEC) represents the interests of those ratepayers consuming energy under Commercial tariffs in Applications before the British Columbia Utilities Commission (BCUC or Commission). On December 19, 2014 FortisBC Energy Inc. (FEI) applied for a Certificate of Public Convenience and Necessity for the Lower Mainland Intermediate Pressure System Upgrade Projects. The CEC has participated in the process and provides the following submissions.

SUMMARY POSITION

The CEC has reviewed the application, evidentiary update and IR responses and finds that the proposal has been appropriately developed and costed. The CEC recommends that the Commission approve a CPCN for the Coquitlam Gate project and a CPCN for the Fraser Gate project as proposed by FEI with the considerations as outlined in these submissions. The CEC recommends that the Commission address the issue of the capital exclusion materiality threshold for PBR as outlined below.

DISCUSSION

FortisBC Energy Inc. (FEI or the Company) applies to the British Columbia Utilities Commission (the Commission) for a Certificate of Public Convenience and Necessity (CPCN) pursuant to sections 45 and 46 of the Utilities Commission Act (the Act) to construct and operate two Intermediate Pressure (IP) pipeline segments in the Lower Mainland of British Columbia that will replace the existing pipeline segments. FEI seeks approval under sections 45 and 46 of the Act to:

(a)

(b)

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Construct and operate a new Nominal Pipe Size (NPS) 30 IP pipeline operating at 2070 kPa between Coquitlam Gate Station and East 2nd and Woodland Station to upgrade and replace an existing NPS 20 IP pipeline operating at 1200 kPa (Coquitlam Gate IP Project); and

Construct and operate a new NPS 30 IP pipeline operating at 1200 kPa between Fraser Gate Station and a point approximately 280 metres west of Fraser Gate

1

Station to upgrade and replace an existing NPS 30 IP pipeline operating at 1200 kPa (Fraser Gate IP Project). 1

COQUITLAM GATE PROJECT

Project Justification The Coquitlam Gate IP Project involves the installation of approximately 20 kilometres of NPS 30 pipeline operating at 2070 kPa extending from Coquitlam Gate Station at Mariner Way and Como Lake Avenue in Coquitlam to East 2nd and Woodland Drive in Vancouver.2 The project is intended to replace pipeline that is nearing the end of its expected service life, and provide operational flexibility and system resiliency.3 The total capital cost of the Coquitlam Gate IP Project is forecast to be $242.825 million in as spent dollars (including AFUDC of $12.351 million and abandonment/demolition costs of$4.169 million.)4

Needfor Replacement The Coquitlam Gate IP pipeline was constructed in 19585 and is nearing the end of its service life. There is no 'normal' range of service life for pipelines,6 although 50 years appears to be a reasonable expectation for the service life of such a pipeline7

• Many pipelines can exceed this through maintenance and integrity management programs. 8

The pipeline has been experiencing an increasing number of leaks over the last twenty-eight years. Since 1987 the Coquitlam Gate IP pipeline has experienced 15 leaks due to corrosion, seven of which occurred in 2013. A further leak occurred in 2014.9 The leaks are occurring at girth welds over the entire length of the pipeline. 10 There are potential safety concerns with leaks on the Coquitlam Gate IP pipeline. Any time there is a release of gas underground there is the potential for the gas to migrate and accumulate in an enclosed space. If a sufficient amount of gas accumulates and a source of ignition is present, the gas can ignite or explode, which presents a safety risk to those in proximity. 11 The BC Oil and Gas Commission (OGC) ordered that FEI conduct an engineering assessment of the pipeline and complete other activities as a

1 Final Submissions, Page 1



4 Exhibit B-1-6, Evidentiary Update, Page 13

5 Exhibit B-1, Page 15

6 Exhibit B-6, CEC 1.8.2


8 Exhibit B-6, CEC 1.8.1 9 FEI Final Submissions, Page 4 10 Exhibit B-6, CEC 1.8.4.1 11 Exhibit B-6, CEC 1.72.1

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result of the leaks. 12 Other than the non-preventable and increasing leak frequency FEI has not identified any other factors which would indicate that replacement is necessary. 13

The corrosion on the NPS 20 Coquitlam Gate IP pipeline is primarily a result of the quality of installation of the coal tar enamel field applied joint coating during original construction. 14 It is believed that the joint coating issues experienced on the Coquitlam Gate IP pipeline are a result of some combination of surface preparation, environmental conditions during application, and the quality of the application (e.g. thickness) 15 that occurred at the time of installation. FEI has not experienced the same coating issues on subsequent pipelines installed in the same era. 16 FEI is not aware of any other pipelines that have the same coating issues as the NPS 20 Coquitlam Gate pipeline and has not detected this type of coating issue on the TP pipelines it has inspected using inline inspection tools (ILl). However it is possible that such corrosion could occur in the future 17 as the various pipelines age.

The Pipeline Quantitative Reliability Assessment Report (QAR) predicts leaks to escalate to a rate of 3.7 times the 2013 rate by 2033. 18 The predicted leak rate over time is best and most simply described as curvilinear, with a slope that increases over time. 19 FEI is unable to explain why the rate of increase for leak frequency declines over time as a percentage increase while the frequency of leaks rate increases in absolute terms over time because they did not incorporate an underlying mechanistic basis for the results. 20

There were incremental costs of $1.249 million in 2013 as a result of the coating disbandment on the NPS 20 pipeline in 2013.21 Average actual dig and repair costs from 2011-2013 were $92,000 per girth weld.22

Costs for incremental leak surveys and repairs beyond normal maintenance would continue if the Coquitlam Gate replacement project does not proceed.23 To the extent that the costs do not qualify for exogenous treatment and could not be accommodated in the PBR formula amount each year they would affect the earnings sharing mechanism. 24

12 Exhibit B-1-1, Appendix 2, Page 3 13 Exhibit B-6, CEC 1.28 14 Exhibit B-6, CEC 1.3.1.1 15

Exhibit B-6, CEC 1.8.3.1 16

Exhibit 1.8.3.1 17

Exhibit B-6, CEC 1.3.1 18 Final Submissions, Page 5 19 Exhibit B-14, CEC 2.15.1 20

Exhibit B-6, CEC 1. 70.4 21

Exhibit B-14, CEC 2.19.5 22

Exhibit B-6, CEC 1.19.1 23 Exhibit B-14, CEC 2.16.1 24 Exhibit B-14, CEC 2.16.1

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FEI, as a public utility, has an obligation to: "(a) provide, and (b) maintain its property and equipment in a condition to enable it to provide, a service to the public that the Commission considers is in all respects adequate, safe, efficient, just and reasonable."25 On October 30, 2013, the OGC issued Order 2013-2524 requiring FEI to complete and submit an engineering assessment to the OGC.26 FEI's Engineering Assessment did not identify continued leak management, in the absence of a replacement strategy as an acceptable option beyond serving as an interim measure.27 The Oil and Gas Commission has advised FEI that it would not accept continuing ongoing integrity leak management as a longer term means to prevent spillage?8

Ongoing integrity and leak management is not an accepted long-term operating practice for management of potential safety risks to the public, plant, property and FEI personnel. 29 FEI has committed to pursuing replacement as the means to meeting the OGC requirements although it is subject to CPCN approval by the BCUC.30

Rehabilitation of the existing pipeline would involve proactively excavating each girth weld location along the pipeline, inspecting for corrosion and repairing where necessary. 31 FEI outlines the advantages and disadvantages of rehabilitation at pages 33 - 34 of the Application. There are approximately 1700 girth welds along the pipeline.32 The OGC indicates they would only consider the rehabilitation of the pipeline as a suitable alternative under stringent conditions. They state: "Assuming the rehabilitation work is to dig up and inspect EVERY weld, this option would be considered by the OGC. FortisBC Energy Inc. (FEI) would also have to demonstrate that the rest of the pipeline is fit for service and continue the increased frequency leak survey on uninspected sections of the pipeline, until all the welds have been inspected and repaired where necessary. This approach is based on no increased leak frequency or size of leak being detected."

Such an approach would be difficult and costly. There are no technical methods to identify girth weld locations from above ground so multiple digs may be required and some girth welds may be extremely difficult to access,33 FEI considered the use of inline inspections, including tethered inline inspection but is unable to make use of this option due to the factors outlined in BCUC 2.2.2. FEI has utilized multiple above ground techniques as discussed in CEC 1.20.1 to locate areas of ineffective coating and determined that they are ineffective in locating

25 Exhibit B-6, CEC 1.29.1 26 Final Submissions, Page 7 27 Exhibit B-11, BCUC 2.1.1 28 Exhibit B-11, BCUC 2.1.1.1 29 Exhibit B-1, Page 32 30 Exhibit B-6, CEC 1.26.2 31 Finals Submissions, Page 19 32 Exhibit B-1, Page 33 33

Exhibit B-1, Page 33

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disbandment. 34 Unless the entire length of the pipeline were excavated it is possible that certain welds could miss inspection.35

A capital cost estimate of $154 million is estimated for this altemative.36

Replacement meets the requirements of Canadian Standards association (CSA) 10 Z662 Section 12.10.2.3 (d) and the requirements ofthe BC Oil and Gas Activities Act Section 37 (3)."37

A new pipeline is not expected to incur similar concerns. The proposed new pipeline will be constructed with industry standard Fusion Bonded Epoxy 7 (FBE) factory applied pipe coating and field applied liquid epoxy at girth weld locations. Modem day pipeline coatings, such as FBE or liquid epoxy, are subject to strict application procedures as well as a greater level of inspection and quality control. In addition, these coatings are designed to be compatible with cathodic protection in the case of coating disbandment, damage or degradation. This coating system is considered "non-shielding" in the case of failure or loss of adhesion and therefore cathodic protection will continue to protect the pipe from corrosion.38

The CEC submits that an appropriate determination as to whether or not the pipeline should be replaced or rehabilitated should first consider the economic decision and apply likelihoods for the cost and consequences of the replacement/no replacement alternatives such as may be considered in a decision tree examination. The CEC submits that the cost of replacement may be viewed as approximately $3 00 million39 while the cost of rehabilitation is approximately $150 million, with a likelihood of some variability depending upon actual circumstances. The cost of failure of the rehabilitation option would be the additional $300 million cost ofhaving to replace the pipeline in the future. In order for the options to be equally advantageous, there would need to be a 50% chance that the incremental cost of$300 million, or $150 million would occur. The present value of the $300 million replacement would likely be less than $300 million. The CEC submits that the chance of failure of rehabilitation is not 50%, but is somewhere likely below this.

The second consideration is the benefit to be derived from restoring the operational flexibility and resilience which is discussed below. The economic impact of not improving the system resiliency is estimated at $320 million40 for a worst case scenario (see discussion below). There would need to be a nearly 45% over a timeframe of say 20 years for the likelihood of such an event occurring for the opportunities to be equivalent from this perspective. Considering both the costs of replacement, and the worst case economic impact from the lack of resilience would


35 Exhibit B-11, BCUC 2.1.3 36

Exhibit B-1, Page 33 37 Exhibit B-1, Page 19 38 Exhibit B-6, CEC 1.3.1.2 39 PV Incremental Cost Service, Alternatives 4 and 6, Exhibit B-11, BCUC 1.15.1 40 Exhibit B-1, Page 27

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require each to have about a 20% chance of occurring to equalize the economic savings from rehabilitation.

Restoring operational flexibility also has many additional advantages which reqmre consideration.

The CEC submits that the determination of the likelihoods of failure, the impacts to customers and the utility from a cost and convenience point of view, the potential risk to public safety in the event of a failure from inadequate rehabilitation should all be factored into a determination of the public interest and recommends that the Commission weigh these factors in its determinations.

The CEC has evaluated the issue and, using its judgement of these factors, submits there is adequate justification for replacement of the pipeline. The CEC recommends the Commission apply its judgement in this way, and approve pipeline replacement as the appropriate methodology for addressing the vulnerabilities in the Coquitlam pipeline if it finds in balance the judgement of the public interest favours replacement.

The pipeline is subject to leaking that requires costly maintenance which might continue to occur during rehabilitation. It is imperative that FEI provide a robust solution to address the OCG requirements, and continued maintenance is not an acceptable option to the OCG in the long term.

As discussed above and below, rehabilitation is technically challenging and may miss areas that require repair. Since the pipeline has already exceeded its expected life of 50 years, it is reasonable to assume that rehabilitation focused on the girth welds, and potentially misses some, and may not result in the longevity that might be provided by a new pipeline. To the extent that the environmental characteristics of the site could be affecting the existing pipeline, and remediating the site is not practical it may also be preferable to have a new pipeline with modem day coatings. FEI has committed to pursuing replacement as a means to meet the OCG requirements subject to CPCN approval, although FEI's commitment to the OGC to replace the pipeline does not preclude a Commission determination on the appropriate disposition of FEI's CPCN application. FEI's commitment (or non-commitment) is not dispositive of the Commission's determination.41

Opportunity to Restore Operational Flexibility and System Resiliency The need to replace the existing Coquitlam Gate IP pipeline for integrity reasons has created a unique, one-time opportunity for FEI to restore operational flexibility to facilitate planned work42

and provide resiliency to the Metro IP system.43 Operational flexibility refers to the ability to isolate a section of pipeline as required without impacting supply to customers.44 The level of

41 Exhibit B-6, CEC 1.28.4 42 Exhibit B-1, Page 22 43 Exhibit B-1, Page 183 44 Exhibit B-1, Page 20

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operational flexibility varies in major centres throughout FEI service territory.45 For a significant part of the service life of the Metro IP system, there has been sufficient capacity to provide operational flexibility so that the system could be supported without the primary supply from Fraser Gate station.46 Due to growth in demand, the NPS 20 Coquitlam Gate IP can no longer be relied upon to provide the necessary support to the Metro IP system.47 As of 2003 an outage window was no longer available on the pipeline.48 Since 2002, FEI has not encountered any situation requiring the isolation of the IP pipeline segments most impacted by the lack of resiliency and operational flexibility. 49

The current Metro IP system lacks the capacity to provide a level of operational flexibility to facilitate planned outages for work, without the installation of a bypass. 5° An indicative cost of a bypass for Metro Vancouver is estimated at approximately $0.8 million.51 This is considered relatively costly as most centres are smaller than Metro Vancouver and the smaller pipelines serve to reduce the cost and complexity of installing a bypass. 52

System resiliency refers to the capacity of the system to provide year round supply in the event of a required outage of gas supply through either the Coquitlam Gate or the Fraser Gate routes. Currently the existing Fraser Gate IP pipeline and Coquitlam Gate IP pipeline are not capable of providing security of supply to the customers normally served by each other under design day conditions. The pipelines are considered to be single point of failure pipeline segments due to lack of capacity on the Coquitlam Gate IP pipeline.53 There are six obvious system pipe configurations that represent single point of failure on the Metro IP pipeline, however the risk presented by these pipelines is not of the same magnitude as that of the Coquitlam Gate or Fraser Gate IP pipelines. 54 Loss of the NPS 20 pipeline at the Coquitlam Gate outlet would result in loss of service to up to 41,000 customers. Loss ofthe Fraser Gate IP could impact up to 171,000 customers. 55

The Economic Impact to the general public, customers and the Company of a Failure of the Coquitlam Gate IP pipeline was evaluated in 'Economic Consequence Analysis Of Hypothetical Natural Gas Service Interruptions In The British Columbia Lower Mainland' and is estimated to be up to $320 million for an interruption to the Fraser Gate IP and $64 million for an interruption

45 Exhibit B-6, CEC 1.21.1 46 Exhibit B-1, Page 20 47 Exhibit B-1, Page 20 48 Exhibit B-6, CEC 1.23.3 49 Exhibit B-6, CEC 1.21.2.1 50 Exhibit B-1, Page 6 51 Exhibit B-6, CEC 1.22.1.2 52 Exhibit B-6, CEC 1.21.1 53

Exhibit B-1, Page 6 54


Exhibit B-1, Page 27

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to the Coquitlam Gate IP.56 The evaluation focuses on a social cost benefit analysis (CBA57) and

addresses Direct Fixed Expenditures as a Consequence of an Outage, Relight Costs, Revenue Loss, and Service Disruption and is included in Appendix A-5. The purpose of the Economic Analysis was to serve as an input to the valuation of the Operational Risk (Appendix A-1 0). 58

An increase in capacity of the Coquitlam Gate IP pipeline as part of the pipeline replacement is proposed by FEI to alleviate the above issues. A quantitative risk assessment estimates the operational risk to be in the range of $3 million per year, which is reduced by $2.5 million per year if there is a fully resilient Metro IP system as a result of increasing the capacity of the Coquitlam Gate IP pipeline as proposed in the Application. 59

The CEC has reviewed the Economic Impact study and submits that the report is heavily dependent upon the assumptions employed, and results in an apparent refinement that may have considerable subjectivity such as the calculation and derivation of an 11.3% long term price differential. 6° Confidence intervals are not established. 61 The nature of some of the assumptions included and excluded from consideration are illustrated in the CEC IR series 1.74 through 1.86 and is highlighted in the following statement 'The uncertainty in some of these estimates should not detract from the role that the analyses are intended to play. By informing the risk analyses, the consequence analyses show what assumptions are most critical, and that monetary values are potentially significant. 62

The CEC accepts that the risk analysis provides evidence that the monetary values are potentially significant. However, the CEC is concerned with the extent to which refinement of the evidence is suggested and submits that the best use of the information is as evidence of potentially large impact from service loss. The CEC recommends that the Commission evaluate the information in this light in their deliberations, and when assessing the impact of the Quantitative Risk Assessment to which it is an input.

The CEC recommends that the Commission consider some of the other issues, including softer issues that have not been addressed in the risk analysis such as those outlined in CEC 1.74-1.86 and any other issues that the Commission views as being relevant.

The CEC submits that FEI has provided appropriate justification for considering the restoration of operational flexibility and resiliency to the systems should the Commission approve pipeline replacement as the appropriate response to the leaks and capacity issues in the Coquitlam Gate pipeline.

56 Exhibit B-1, Page 27 57 Exhibit B-1-1, Appendix A-5, Page 11 58 Exhibit B-6, CEC 1. 75.2 59 Exhibit B-1, Page 6 60 Exhibit B-6, CEC 1.83.1 61 Exhibit B-6, CEC 1.85.3 62 Exhibit B-6, CEC 1.85.3

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Evaluation of Alternatives FEI conducted a non-financial analysis of alternatives, and a financial analysis of those alternatives deemed to be feasible. Non-financial considerations included whether or not the alternative met pre-established objectives of reducing pipeline risk, providing sufficient operational capacity, providing full system resiliency, and whether or not they were constructible. The objectives for each are laid out in pages 41-42 of the Application. This overall assessment indicated whether or not they were considered feasible. 63

A financial analysis was conducted for those alternatives that met a considerable portion of the objectives and requirements of the non-technical analysis.64 Financial considerations included the capital cost and the present value (PV) of increased operating costs to arrive at a PV of the Incremental Cost of Service over 60 years. 65 Sixty years is consistent with the economic life of the project66 and FEI has used 60 years for assessing the present value of the alternatives for previous CPCN applications for pipeline projects such as Fraser River South Arm, Huntingdon Station Bypass, and Kootenay River Crossing.67

FEI also conducted a quantitative assessment of the Operational Risk as discussed below to provide a PV of the Remaining Operational Risk over 60 years. The PV of the Incremental cost of service was added to the PV of the Operational Risk Assessment to arrive at a final figure 'PV Remaining Operational Risk + PV Incremental Cost of Service' for comparison.

FEI provides its quantitative analysis of operational risk "Dynamic Risk Quantitative Risk Assessment of LMIPSU Projects" in Appendix A-1 0 of the application (Exhibit B-1-1). The study is considered a "high level' Quantitative Risk Assessment. 68 Operational Risk is a measure of the loss-of-service impact and is defined as the sum of the quantitative risk value of each pipeline section per year of operation, based on failure frequency per year and financial cost per event associated with the loss of service.69 The study utilized a before the Lower Mainland System Upgrade (LMSU) and after LMSU approach to identify the change in risk. 70 The risk assessment study indicated that the operational risk reflective of select portions of today' s Metro IP system is estimated to be $3.054 million/year. It estimates the potential annual operational risk reduction associated with replacing the existing Coquitlam NPS 20 IP pipeline operating at 1200 kPa with an NPS 30 IP pipeline operating at 2070 kPa and the addition of capacity at Coquitlam Gate Station achieved by looping the NPS 20 Transmission Pressure (TP) pipeline between the Cape Hom Valve Station and Coquitlam Gate Station with a NPS 36 TP pipeline is

63 Exhibit B-1, Page 41 64 Exhibit B-1, Page 41 65

Exhibit B-1, Page 43 66 Exhibit B-4, BCUC 1.22.10 67 Exhibit B-6, CEC 1.34.2 68

Exhibit B-1-1 Appendix A-10, Page 4 69 Exhibit B-1-6 Evidentiary Update, Page 17 70 Exhibit B-1-1, Appendix A-10, Page 4

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estimated to be $2.456 million/1 with remammg risk of $598 thousand/year. The total Operational Risk is therefore estimated at $2.456 million per year in 2014 dollars.72

The CEC has reviewed the Quantitative Risk study provided in the Application. The Quantitative Risk Assessment results are largely dependent upon the results and hence the assumptions in the economic impact study discussed above and included in the Determination of Consequences.73 The CEC therefore submits that the Quantitative Risk Assessment should not be afforded a full degree of confidence in the refinement of its results.

The Quantitative Risk Assessment is significant in its impact of the overall comparison of the Alternatives in that it makes the difference between Alternative 4 and Alternative 6 as being the most cost effective. The CEC also notes that while the AACE Estimate for the primary alternatives has been undertaken to a Class 3 level, the Quantitative Risk Assessment (QRA) has been conducted at 'a high level.' The CEC therefore recommends that when the Commission assesses the alternatives it apply heavy emphasis to the costs and general merits of the alternative, and apply the financial considerations of the QRA judiciously and with somewhat less weight in its deliberations.

FEI identified 7 alternatives including:

1. Status Quo; 2. Rehabilitation of the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa in place; 3. Replace (in-kind) the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa with a

NPS 20 pipeline operating at 1200 kPa; 4. Replace the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa with a NPS 24

pipeline operating at 2070 kPa; 5. Replace the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa with a NPS 36

pipeline operating at 1200 kPa; 6. Replace the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa with a NPS 30

pipeline operating at 2070 kPa; and 7. Replace the existing NPS 20 Coquitlam Gate IP operating at 1200 kPa with a NPS 42

pipeline operating at 1200 kPa.

The CEC also considered the possibility of providing additional system resiliency through the acquisition of moveable LNG plants. This option is not feasible as the volumes required are far too great to be serviced by a moveable LNG plant. 74

71 Exhibit B-1-1, Appendix A-10, Page 1 72 Exhibit B-1-6 Evidentiary Update, Page 17 73 Exhibit B-1-1 Appendix A-10, Page 15 74 Exhibit B-6, CEC 1.32.1.1

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Alternative 1 - Status Quo

Alternative 1 is the least cost alternative from a capital perspective and involves continuing ongoing integrity and leak management which the FEI consider to be an infeasible solution. 75

The CEC agrees particularly in that it does not meet the requirements of the OGC as discussed above. The CEC recommends that the BCUC disregard Alternative 1 as a potential option.

Alternative 2 - Rehabilitation

Alternative 2 provides for rehabilitation of the existing NPS 20 Coquitlam Gate IP and is

considered by FEI to be an infeasible option.76 The project would take place over three to four years and has a capital cost in excess of $150 million. There is likely to be uncertainty around costs given the requirement to access every girth weld. The OGC would accept rehabilitation as an option only under stringent conditions, and the rehabilitation would be very difficult due to

changes in the land-use and heavy congestion, an inability to locate girth welds and would incur additional hazards from completing rehabilitation work on a live pipeline in an urban environment. 77

The CEC submits that the FEI approach of dismissing this alternative without a full financial analysis is not especially well considered. The CEC provided a discussion earlier in this

document with respect to the possibility of rehabilitation.

The CEC recommends that the Commission provide an economic and subjective analysis to this alternative in its deliberations, considering both the quantitative and qualitative impacts.

For the reasons outlined earlier the CEC submits that Alternative 2 (Rehabilitation) is not a suitable alternative and recommends that the Commission approve an alternative that replaces

the pipeline.

Alternative 3 - Replace with similar size and operating capacity

Alternative 3 includes replacing the existing NPS 20 Coquitlam Gate IP with a NPS 20 pipeline operating at 1200 kPa and is not considered by FEI to be an appropriate solution.78 Alternative 3 is constructible but does not meet the FEI objectives of providing operational flexibility and

system resiliency. 79 It has one of the lowest Capital Cost estimates of the alternatives with an AACE Class 4 Project Capital Cost Estimate of $142.162 million.80 The advantages and

disadvantages are outlined in the Application at pages 34 and 35. In addition to other issues, it does not provide sufficient operational flexibility to pe1mit planned maintenance and repair of

75 Final Submissions, Page 16 76 Final Submissions, Page 16 77 Exhibit B-6, CEC 1.27.1 78 Final Submissions, Page 16 79 Final Submissions, Page 18 80 Exhibit B-1, Page 34

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the Fraser Gate IP pipeline; it does not provide operational flexibility to the Metro IP system and it does not enhance resiliency of the Metro IP system. A bypass would be necessary to allow supply from Fraser Gate to bypass the isolated section to support the portion of the system demand that an NPS 20 Coquitlam Gate IP 4 pipeline operating at 1200 kPa does not have the capacity to deliver.81 Temporary bypasses would be needed to accommodate all the maintenance and repair on Fraser Gate and valve replacements are anticipated in the future. 82 A typical NPS 20 bypass would cost approximately $0.6 million and an NPS 30 bypass approximately $0.8 million. Longer and/or larger diameter bypasses would increase this cost.83

The CEC submits that Alternative 3 is reasonably excluded from further consideration in that it does not provide an improvement in the operational flexibility or the resilience of the system. The CEC recommends that the Commission not consider Alternative 3 as an appropriate option.

Alternative 4 - NPS 24 at 2070 kPa

Alternative 4 includes replacement of the pipeline with NPS 24 and 2070 kPa. It is considered feasible by FEI but does not provide full system resiliency.84

Due to the higher operating pressure, IP/IP stations would be required to reduce the pressure from 2070 kPa to 1200 kPa at existing offtake points along the existing pipeline route. This would require an additional five stations connected to the network. These additional stations would introduce pressure regulation points and require monitoring and maintenance activities similar to what is currently undertaken throughout FEI' s system. An incremental annual Operations and Maintenance cost of approximately $1500 has been forecast for each of the 13 additional five stations.85

The NPS 24 2070 kPa does not provide full operational flexibility or resiliency. As illustrated in BCUC 2.31, the Fraser Gate Outage Window would run from Late February to Late November in 2019 and shrink to mid-March to mid-November by 2034. By 2054 the window would be mid-March to Early November. Initially there would be approximately 7 days in a year in which full resiliency was not achieved86 and work requiring isolation of the supply at either gate87 could not be conducted without the use of bypass. The cost of a bypass cannot be readily estimated and is discussed in BCOAPO 1.3.7. At the end of the twenty year planning period there would be approximately 12 days without full resiliency and by 2074 there would be 24 days. 88

81 Exhibit B-5, BCOAPO 1.3.6





86 Exhibit B-11, BCUC 2.3.3 87 Exhibit B-11, BCUC 2.3.2 88 Exhibit B-11, BCUC 2.3.3

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Under peak hour demand up to 192,000 customers could lose delivery pressure such that they could not operate their appliances. 89

To the extent that the utility utilized assumptions to achieve the peak demand, there could be variability in the peak.90 Nevertheless, there is not a significant difference if the peak day were forecast as either higher or lower. If a 10% higher peak day forecast is employed, there are 26 days in which full resiliency is not achieved by 2074 under this option,91 and 22 days if a 10% lower peak day forecast is employed. 92

The Alternative 4 Class 4 cost estimate was revised in BCUC 2.15.1 as a Class 3 Cost Estimate. The initial estimate inadvertently excluded an allowance for contractors overhead and markup.93

The pipeline materials and construction costs are the largest components of the capital costs compnsmg 80 to 90 percent of the total.94 The total as-spent including Abandonment/Demolition and AFUDC is estimated at $234.157 million compared to $242.825 million for Alternative 6. The Annual Incremental Gross O&M is $0.055 million and the Levelized Rate Impact over 60 years is $0.096 per GJ. These compare to $0.055 million and $0.100 respectively for Alternative 6. The Present Value of the Incremental Cost of Service is $284.207 million which is approximately $13 million lower than the Alternative 6 PV of the Incremental cost of service at $297.183 million.

The Operational Risk for Alternative 4 is diminished by $0.352 million resulting in an estimated at $2.104 million in remaining risk. The Present Value of the Remaining Operational Risk is estimated at $33.307 million.95 The PV of the Remaining Operational Risk for Alternative 6 is 0.

The present value of the Operational Risk plus the Present Value of the Incremental cost of service for 60 years is $317.514 million, which exceeds the value of Alternative 6 at $297.183 million96 by approximately $20 million.

The CEC submits that there is sufficient justification for the elimination of Alternative 4. The savings from the PV of the incremental cost of service are less than 4% and are 4% for the levelized rate impact.


90 Exhibit B-11, BCUC 2.9.2 91 Exhibit B -11, BCUC 2.4.2 92 Exhibit B-11, BCUC 2.4.2 93 Exhibit B-14, CEC 2.21.1 94 Exhibit B-1-6, Evidentiary Update, Page 16 95 Exhibit B-1-6, Evidentiary Update, Page 17 96 Exhibit B-11, BCUC 2.15.2

{00347781;1} 13


Alternative 5 involves replacing the existing Coquitlam Gate IP Pipeline Operating at 1200 kPa with a NPS 36 Pipeline Operating at 1200 kPa. The larger NPS 36 pipeline operating at 1200

kPa in this alternative could provide pressures sufficient for most areas of the Metro IP system except for the stations nearer Fraser Gate. 97 The potential risk to customers is limited to 47,500

customers in this alternative in the event that of a failure at Fraser Gate station.

The Fraser Gate Outage Window would run from Late January to mid-December in 2019, shrink to Early February to Early December by 2033 and shrink further to Late February to Late November by 2054.98

Alternative 5 was developed to an AACE Class 4 level of project definition in the range of 1% to 15%.99

The total as-spent capital costs including Abandonment and AFUDC is the highest of the options at $250.924 million compared to $234.157 million for Alternative 4 and $242.825 million for Alternative 6. The operating costs are less than half of either Alternative 4 or 6, being approximately $20 thousand compared to $55 thousand for each of the other Alternatives. 100

The Levelized Rate impact over 60 years is $0.103 per OJ compared to $0.096 for Alternative 4

and $0.10 for Alternative 6.

The CEC submits that since the cost of option 5, excluding the Quantitative Risk Assessment is higher than that for Alternative 6, combined with the fact that it does not provide the full operational flexibility and resiliency that is provided in Alternative 6 means that it is appropriately discarded as an Alternative.


Alternative 6 was developed to an AACE Class 3 level of project definition in the range 10% to 40%.101

Alternative 6 is discussed at pages 24-25 of the Final Submission. The proposed NPS 30 (2070

kPa) pipeline is the only option that provides full resiliency through to 2074 102 and would allow work that may require isolation of supply at either the Coquitlam or the Fraser Gate station to be accommodated at any time of year. The full system resiliency is achieved until 207 4 even with a 1 0% increase in the peak day forecast. 103 Work performed on the Metro IP system would not

97 Exhibit B-6, CEC 1.31.1 98 Exhibit B-11, BCUC 2.31 99 Exhibit B-6, CEC 1.33.3.1 100 Exhibit B-1-6 Evidentiary Update, Table 2-2 101 Exhibit B-6, CEC 1.33.2 102 Exhibit B-11, BCUC 2.3.1 103

Exhibit B-11, BCUC 2.4.2

{00347781;1} 14

incur any additional costs for bypass piping around the work area. Emergency situations requiring isolation would not incur significant customer outages and associated costs.

A financial incremental benefit of the NPS 30 (2070 kPa) pipeline over the NPS 24 (2070 kPa) pipeline (Alternative 4) would be the avoidance of any costs associated with bypass installation and costs associated with customer outages. 104

Alternative 6 has a Direct capital cost including Abandonment/Demolition and AFUDC of $242.825 million which is approximately $8 million higher than Alternative 4. 105 The Annual Incremental O&M is the same as Alternative 4 at $0.055 million and the levelized rate impact is about 4% higher than Alternative 4 ($0.096 per GJ) at $0.100 per GJ. The Total PV incremental cost of service is $297.183 million which is approximately $13 million higher than Alternative 4. However, as there is no cost attributable to Alternative 6 in the Quantitative Risk Assessment, the PV for the Operational Risk and the PV Incremental Cost of Service combined results in a $20 million saving for Alternative 6. 106

The CEC view is that Alternative 6 should be the focus for the Commission determination.

Alternative 7- NPS 42 (1200 kPa)

Alternative 7 involved replacing the existing Coquitlam Gate IP pipeline Operating at 1200 kPa with a NPS 42 pipeline Operating at 1200 kPa and was found to be not constructible. 107 There was no financial analysis.

The CEC accepts that Alternative 7 should not be considered for approval by the Commission.

Other Alternatives

Other alternatives such as higher operating pressures, including a moveable LNG regasification, 108 and alternate pipeline specifications were examined and were not found to be feasible. 109 The CEC accepts the

Conclusion on Alternatives

The CEC submits that the evidence shows that Alternative 6 is potentially the best alternative. As discussed above, the CEC recommends that the Commission apply lower weight to the Quantitative Risk Assessment than it does to the PV of Incremental Cost of Service. Eliminating the QRA from the analysis means that Alternative 6 is approximately $13 million more costly than the next best alternative (Alternative 4) from an Incremental cost of service perspective,

104 Exhibit B-11, BCUC 2.3.2 105

Exhibit B-11, BCUC 2.15.1 106

Exhibit B-11, BCUC 2.15.2 107 Final Submissions, Page 26 108

Exhibit B-6, CEC 1.32.1 109 Final Submissions, Page 27

{00347781;1} 15

and $0.004/GJ more costly in the levelized rate impact. The CEC also recommends that the Commission review and apply consideration of softer issues in its evaluation of the public interest. As Alternative 6 provides full resilience and operational flexibility, and the economic impact can be assessed as significant if a failure occurs, the CEC accepts that Alternative 6 is the preferred alternative and recommends that the Commission approve the proposed NPS 30 2070 pipeline alternative.

Load Determination The CEC has reviewed the load determination methodology as outlined in the Application and in response to information requests and finds it to be appropriate. The CEC recommends that the Commission accept and apply the FEI load determinations in its deliberations.

Project Design Details of the proposed project are outlined in Section 4 ofFEI Final Submissions and in Section 3.3 of the Application. The design, construction and operation of FEI natural gas pipelines and stations are conducted in accordance with British Columbia Oil and Gas Commission regulations and the Canadian 13 Standards Association (CSA) Standard Z662 "Oil and Gas Pipeline Systems." The Coquitlam Gate IP Project will be developed in accordance with all applicable statutory codes and standards including FEI's internal standards. 110

The CEC submits that FEI has the requisite expertise to design and develop the proposed project in accordance with best practices. The CEC recommends that the Commission accept the proposed project design subject to the correction of any flaws that may be identified.

Inline Inspection Tools FEI proposes to incorporate in-line inspection (ILl) tools in the Coquitlam Gate project at an expected cost of $1.9 million. 111 FEI expects ILl technology will maximize the asset life by identifying possible mitigation requirements. ILl reduces failure risk 112 and enables more targeted mitigation planning and response than other currently available methods and facilitates asset planning and risk mitigation decisions. 113 FEI does not use inline inspection tools in any of its intermediate pressure system or pipelines other than transmission pressure pipelines because of low operating pressures and the presence of inside diameter restrictions. 114 Changes in technology have recently advanced the feasibility of using these tools. 115 Although FEI does not have direct experience in running in-line inspection tools in intermediate pressure pipelines, discussions with vendors indicate that the proposed design and operating parameters would allow for successful inspection of the proposed pipeline. 116 FEI will consider designing other long


111 Exhibit B-4, BCUC 1.14.1 112

Exhibit B-14, CEC 2.9.1 113 Exhibit B-14, CEC 2.8.1.2 114

Exhibit B-14, CEC 2.8.1.1 115 Exhibit B-4, BCUC 1.14.1 116 Exhibit B-11, BCUC 2.2.6

{00347781;1} 16

length IP pipeline replacements with ILl capability. ILl technology may become more commonplace in lower pressure pipelines in the future. 117

The CEC submits that the inclusion in line inspection tools is appropriate and will further the expected life of the asset. Simply calculated, the cost of the inline inspection tools is approximately $31 thousand per year. The CEC submits that even a small increase in the asset life of the pipeline, or improvement in risk mitigation decisions can adequately justify the annual cost. The CEC submits that it is possible that the use of inline inspection tools could reduce the O&M requirements for this pipeline. If so, then the CEC submits that it could be worthwhile for the Commission to determine if the savings that may accrue from the use of these tools is significant both so that the Operations and Maintenance formula might be reconsidered and for evaluation of future pipeline projects.

The CEC recommends that the BCUC approved the incorporation of the Inline Inspection Tools.

Coating FE I' s proposed coating is outlined in Final Submissions page 3 7. The CEC has reviewed the evidence with respect to the selected coating and submits that the new coatings are unlikely to result in a similar pattern of corrosion118 that occurred in the original pipeline.

Cathodic Protection Cathodic protection is required by CSA Z662 119 and is applied as a secondary defense against corrosion. 120 It is expected that the existing CP system could be used to provide protection to the new Coquitlam Gate IP pipeline but will be confirmed during detailed design. 121 The failure of the cathodic protection in the original pipeline was a result of disbandment and CP shielding. 122

The CEC submits that it is reasonable and likely cost effective for FEI to utilize the existing system if possible. The CEC recommends that the Commission rely upon FEI's determination as to the appropriate CP to employ.

Route FEI conducted significant analyses related to identifying the preferred route selection which was put forth in the original application. The route evaluation process is described in section 3.3.4 and Appendix A-17, section 1 of the Application. In the Evidentiary Update FEI revised its original route selection to a nearby and parallel route along the Lougheed Highway. 123 The route evaluation used the same process as was undertaken originally, 124 but the re-evaluation

117 Exhibit B-14, CEC 2.10.1 118 Exhibit B-6, CEC 1.3 series 119

Final Submissions, Page 59 120 Exhibit B-1, Page 17 121 Exhibit B-1, Page 59 122

Exhibit B-1, Page 17 123 Exhibit B-1-6, Pages 9-10 124

Exhibit B-1-6, Page 7

{00347781;1} 17

anticipates reduced traffic dismption considerations and impact on the socio-economic criteria versus the original analysis. The re-evaluation also results in a higher environmental impact assessment due to the presence of more potential contaminated sites in Section 5 than originally considered and reduces the ecology criteria score to a moderate impact (good route choice). The route re-evaluation increased the Lougheed Highway technical (non-financial) score from 310 (Appendix A-17 Table 4 of the Application) to 335 (Evidentiary Update, Appendix A-17 25 Addendum, Table 1-1 ), making the Lougheed Highway route option rank first. 125 A comparison of the costs of route corridor Section 6 (Springer A venue and Boundary Road) indicates that the cost of the originally preferred option would have been approximately 109% of the current proposed option Lougheed Highway option A. 126 The present value (PV) of the new route is virtually equivalent to the originally proposed route at $297.183 million and $298.714 million respectively. 127 The levelized rate impact for each is $1.00/GJ. 128

The new route will have no bearing on the viability for removing the original pipeline after decommissioning. 129 Soil Modeling is not considered necessary as the new Coquitlam gate IP pipeline will be installed under roadways and because FEI's selection of Fusion Bonded Epoxy coating mitigates the potential for cathodic protection shielding. 130

There were no additional development expenses incurred as a result of FEI proceeding with the application prior to finalizing the route. 131

FEI is seeking approval of a CPCN to construct and operate the entire Coquitlam Gate IP Project based on a routing that the Commission determines is in the public interest. With Commission approval FEI will proceed with detailed design. In the event that the Commission approved routing is no longer considered feasible and another route emerges as a feasible alternative after detailed design, FEI proposes to update the Commission about the alternative route, including any Project cost and schedule impacts and additional consultation that may be required. FEI will then propose an appropriate level of Commission review of the new route based on the nature and scope of the change. FEI expects that the requirement for further review would be based on the extent of the proposed route change. While a minor change may require little or no review, a significant change may require a more detailed Commission review. 132

The CEC submits that FEI has conducted a thorough review of the options and addressed the key requirements in selecting the route corridor and has adequately presented its case for the preferred route along the Lougheed highway.

125 Exhibit B-1-6, Page 10

126 Exhibit B-1-8, Page 18

127 Exhibit B-1-6, Page 40 128

Exhibit B-1-6, Page 40 129

Exhibit B-14, CEC 2.11.1 130


Exhibit B-6, CEC 1.6.2 132 Exhibit B-11, BCUC 2.10.1

{00347781;1} 18

The CEC submits that given the level of evaluation already undertaken it is appropriate for the Commission to approve a specific route at the present time to allow for reasonable certainty at the time of the detailed design. The CEC submits it is unlikely that there will be significant route changes but that it is reasonable for a process to be in place to address potential issues as they arise. The CEC submits that FEI's proposed manner to address change is appropriate. The CEC recommends that the Commission approve the proposed route at this time.

Construction FEI provides an overview of the proposed construction methodology and management in pages 129-132 of the Application.

FEI proposes to use one contractor for the construction of the Coquitlam Gate IP pipeline133

which will be subject to a competitive tender. FEI will select the successful Contractor based on capability, safety, schedule and cost. 134 FEI is currently evaluating Expressions of Interest for suitability. 135 The advantages and disadvantages of using a single contractor versus multiple contractors are laid out in CEC 1.49.3.2. The CEC submits that either alternative would be acceptable.

The pipeline will traverse a variety of different landscapes which will present different construction challenges. FEI may be using stovepipe, drag section, in street and typical cross country methods 136 as well as trenchless construction in certain areas. FEI anticipates horizontal directional drilling or micro-tunnelling trenchless construction techniques will be required in three major locations and in a number of shorter bored crossings at major traffic intersections. 137

The final determination of the most appropriate method of trenchless construction will be site specific for each crossing location and may involve different trenchless techniques for different locations. 138

Noise control, safety, traffic control environmental management and design and quality control will all be addressed.

It is estimated that businesses will experience disruption for approximately 3-5 days or longer. 139

Generally, the shorter the length ofthe open trench the lower the number of businesses impacted at any time. 140 The length of time that businesses can expect disruption will vary depending upon a number of factors outlined in CEC 2.22.1. FEI will maintain ongoing dialogue with

133 Exhibit B-1, Page 81 134 Exhibit B-1, Page 92 135 Exhibit B-6, CEC 1.49.1 136 Exhibit B-1, Pages 81-82 137 Exhibit B-6, CEC 1.47.2 138 Exhibit B-6, CEC 1.47.3 139 Exhibit B-14, CEC 2.22.1 140 Exhibit B-14, CEC 2.22.1

{00347781;1} 19

businesses to address specific concerns and mitigate disruption. FEI Community Relations staff will be accessible to business owners for the duration of the construction period and beyond. 141

The CEC submits that the business impact is manageable and appears to be reasonably addressed by FEI.

The CEC is satisfied with the construction proposal and recommends the Commission accept the construction proposal as appropriate.

Pipeline Abandonment The existing NPS 20 Coquitlam Gate IP pipeline will be abandoned in place once the new pipeline is in service. FEI will follow their internal standards and the CSA Z662-11 regulations when doing so which includes:

• Emptied of service fluids; • Purged and appropriately cleaned;

Physically separated from any in-service piping; • Cut and capped below grade; and • No longer cathodically protected or maintained according to normal maintenance

schedules.

The pipeline will be sectioned into shorter segments, and all open ends plugged or sealed with watertight closures in order to minimize potential gas or water migration. Sections of the abandoned pipe may be filled with a structural grout to prevent pipeline collapse and ensure the integrity of nearby drainage systems or other infrastructure. All recorded data pertaining to the abandoned pipeline, including location and depth of cover, will be maintained on file. 142

FEI will not be performing any extra-ordinary assessment of the abandoned pipeline. FEI has identified the factors that led to the accelerated corrosion which is occurring on the original pipeline, which are specific to the Coquitlam Gate IP pipeline and its coating and installation. Any learning from further assessments could not be used to improve the integrity of the proposed pipeline and as such would not provide benefit for the additional expense. 143

The environmental risks of pipeline abandonment include soil and groundwater contamination, soil resources, creation of water conduits and pipeline water crossings. The urban location coupled with the operational history of carrying sweet, dry natural gas presents less environmental risk than would a liquid hydrocarbon pipeline that was abandoned in place. 144 A Det Norske Veritas study indicates that contamination risks could be greatest for pipelines abandoned in-place because they will be subject to corrosion and ultimately allow contaminants

141 Exhibit B-14, CEC 2.22.1




{00347781;1} 20

in the pipeline to migrate to the surrounding environment. 145 FEI states this is primarily applicable to pipelines carrying liquid hydrocarbons that are not left in clean state. 146

Risk will be minimized by cutting the pipeline into shotier segments which will then be cleaned and capped. The risk of contaminants being left in the pipeline is minimal and the potential for soil and groundwater contamination from the cleanliness of the pipeline will not be a factor. 147

FEI outlines the factors that will contribute to internal and external corrosion of the abandoned pipeline in CEC 1.45.1 0.

FEI confirms that to the extent that the field applied coating at the girth welds is causing unusual corrosion, there will be increased perforations occurring in these locations in the abandoned pipeline. However, FEI believes there is no consequential impact due to potentially increased through-wall perforations at gi1ih welds for the abandoned pipeline. 148

FEI will not continue cathodic protection (CP) for the abandoned pipeline. 149 It is expected that the abandoned pipeline will be subject to greater corrosion than is currently being experienced as a result of removal of cathodic protection, increased potential for water ingress, and unrepaired coating damage due to third party impacts. 150 It is at FEI's discretion as to whether or not to continue CP, 151 and it is not feasible to use the existing impressed current CP system as it would negatively impact the ability of the CP system to protect the new NPS 30 IP Pipeline. Costs to install a dedicated CP system for the abandoned pipeline could exceed $200 thousand and the annual operation and maintenance are expected to exceed $30 thousand per year. 152

The CEC submits that the proposed abandonment plans are appropriate. Given the infeasibility of using the existing impressed current CP system and the cost of installing cathodic protection the CEC submits that discontinuance is appropriate. The CEC recommends the Commission approve the proposal to abandon the pipeline in place.

PROJECT COST The total cost for the Coquitlam Gate project at a Class 3 cost estimated is anticipated to be $242.825 million in as-spent dollars including abandonment/demolition and AFUDC as evaluated under Alternative 6. 153 The project will have a levelized rate impact (60 years) of $0.1 00/GJ and a PV Incremental cost of service of $297.183 million.

145 Exhibit B-6, CEC 1.45.1 146 Exhibit B-6, CEC 1.45.1 147 Exhibit B-6, CEC 1.45.1 148 Exhibit B-6, CEC 1.45.14 149 Exhibit B-6, CEC 1.45.10 150 Exhibit B-6, CEC 1.45.9 151 Exhibit B-6, CEC 1.45.7 152 Exhibit B-14, CEC 2.12.1 153 Exhibit B-11, BCUC 1.15.1

{00347781;1} 21

The CEC submits that the project is appropriately costed at a Class 3 estimate and is readily justified on the basis of the need to address the leaks. The CEC submits that the incremental $ 8 million in As Spent Dollars including Abandonment and AFUDC and approximately $13 million in the PV of the incremental cost of service (over 60 years) as a premium to Alternative 4 is also justified on the basis of the expected differential of operating flexibility and resilience.

Rate Impact Based on the approved natural gas commodity and common delivery rates effective January 1, 2015, the approximate annual bill impact for small commercial customers is estimated to be approximately 1.4% from the Coquitlam Gate IP Project. For large commercial sales customers the approximate annual bill impact is estimated to be approximately 1.6% from the Coquitlam Gate IP Project. 154 Due to their individual natural gas commodity arrangements, FEI cannot provide a comparable estimated annual bill impact for Transportation customers; however, it is reasonable to expect that these customers would have an annual bill impact similar to large commercial sales customers. 155

The approximate annual bill impact for small commercial customers is forecast to be approximately 1.4% and approximately 1.6% for large commercial sales customers for the Coquitlam Gate IP Project and the Fraser Gate IP Projects together, based on approved natural gas commodity and common delivery rates effective January, 2015. 156

The CEC submits that the rate impacts for the Coquitlam Gate projects are acceptable.

Performance Based Ratemaking The Capital cost for the Coquitlam Gate project is in the order of $242.825 million, making it clearly a capital project to be excluded from the PBR formula.

Under PBR, the CPCN review of a project should include an assessment by the Commission of any potential impact of the project on O&M. That is, the potential impact to O&M should also be examined if capital associated with a particular CPCN is excluded from the formula. If appropriate, an adjustment to the formula based O&M spending envelope should then be made. 157

The CPCN project is expected to increase annual incremental O&M by $0.055 million which is not significant and an adjustment to the PBR formula should not be required on this basis.

Between 2010 and 2013 FEI had approximately $2.8 million in incremental O&M due to integrity concerns arising from the field applied coating, with another $0.99 million in 2014. 158

154 Exhibit B-14, CEC 2.18.1 155

Exhibit B-14, CEC 2.18.1 156

Exhibit B-14, CEC 2.18.1 157

Exhibit B-14, CEC 2.19.3 158 Exhibit B-4, BCUC 1.1.9

{00347781;1} 22

FEI states that with respect to PBR, the 2013 actual and unplanned leak repair and survey costs were not included in the 2013 O&M base, however the standard annual leak survey costs would have been included. 159 The extent of the leaks was not known at the time of the 2013 PBR application as 6 of the major leaks in 2013 occurred in the latter half of the year, and the DRAS reliability assessment was not completed until July 2014. 160 An explanation for how the 2013 O&M PBR base excluded the incremental O&M costs related to the leak repair is detailed in CEC 2.19 .1. The 2013 Approved, which was forecast in early 2011, was based on a three year average of actual costs incurred in 2008, 2009, and 2010 and therefore did not include any 2011 or 2012 10 actual costs. The Coquitlam Gate IP 2010 costs of $74 thousand were known at the

time. As such, there would have been approximately $25 thousand of Coquitlam Gate IP leak repair costs embedded in the 2013 Approved (one-third of the $74 thousand). With the

exception of a $25,000 increase in the 2013 base, 161 the O&M base going forward does not consider the higher leak repair and survey costs that are likely to be experienced in the absence ofthe project. 162

Additionally, FEI included $540 thousand in net sustainable costs in the PBR Application and

Evidentiary update. 163 In the PBR Evidentiary Update FEI wrote that 'the additional O&M in the Operations department in 2013 was due primarily to higher levels of leak repairs .... ' However, it also appears that of $728 thousand in higher spending only $220 thousand was to be carried forward into PBR164 and these were for vegetation management and were not included in costs for the Coquitlam Gate pipeline. 165 The remaining $508 thousand in 2013 Actual expenditures above the 2013 Approved that were not accounted for by increased vegetation management would have been attributable to expenses across the entire FEI system and were not

identified as being directly related to the current project. 166

FEI acknowledges that under the terms of the PBR plan, the Commission could consider whether an adjustment to the formula O&M is required as a result of a CPCN. In this case, since the

avoided leak repair costs would not be realized until at least 2018, and FEI has forecast additional O&M associated with this CPCN of $26 thousand in 2018 and $53 thousand in 2019 for which it has not proposed an increase to the base O&M, FEI has likewise not proposed a reduction of the Base O&M for the embedded $25 thousand in avoided leak repair costs. 167

The CEC submits that FEI has provided a reasonable explanation as to the accounting for the increased O&M due to leaks and is satisfied that only $25 thousand was included in the base.

159 Exhibit B-4, BCUC 1.24.1 160 Exhibit B-14, CEC 2.20.1 161

Exhibit B-14, CEC 2.19.1 162 Exhibit B-14, CEC 1.24.1 163 Exhibit B-14, CEC 1.24.1 164 Exhibit B-14, CEC 2.19.1, FEI PBR Evidentiary Update Attachment 5, Page 4. 165 Exhibit B-14, CEC 1.24.1 166

Exhibit B-14, CEC 2.19.6 167 Exhibit B-14, CEC 2.19.1

{00347781;1} 23

The CEC accepts that these savings will not accrue for several years, and will therefore not make a significant difference under PBR. The CEC recommends that the Commission not adjust the PBR base for O&M savings from this portion of the project.

FRASER GATE PROJECT

Project Need Fmiis has identified the seismic safety risk in professional assessment reports and the appropriate seismic safety standards which should be met. 168 This section of the Fortis natural gas transportation system is assessed as being vulnerable to a 1 in 2475 return period seismic event.

Consequences of Failure A full bore rupture of the Fraser Gate IP pipeline due to a seismic event could result in significant public safety and economic consequences and would require the complete shutdown ofthe pipeline. 169

Loss of the Fraser Gate IP pipeline could result in up to 171 thousand customers being without natural gas supply for up to three weeks. 17° FEI estimates that the economic impact to the general public, customers and the Company of a failure of the Fraser Gate IP pipeline could be in excess of $320 million as shown in the application section 4.1.2.3. 171

The revised understanding of the extent of soils susceptible to ground displacement does not alter the estimates of the likelihood of a seismic event leading to a full bore rupture. 172

The importance of the Fraser Gate in combination with the Coquitlam Gate to service the Vancouver, Burnaby and North Shore areas is demonstrated by evidence in the Pipeline Capacity Comparison Table of the degree to which either is able to meet the peak demand load before and after an adequate alternative is implemented. 173

Fortis's main concern would appear to be the resiliency of the pipeline network to service customers in the event of a failure of a one of the specific routes for delivering gas. The assessment of resiliency of the system is the important criteria for determining reliability for serving customers. 174

The Fraser Gate has not experienced any significant shut downs and is only expected to incur one over the next 20 years likely related to 3rd party damage. 175 The Fraser Gate has not had any


169 Exhibit B-1, Page 4 and Page 103 170 Exhibit B-1, Page 4 and Page 103 171 Exhibit B-1, Page 5 and Page 103 172 Exhibit B-14, CEC 2.5.1 173 Exhibit B-4, BCUC 1.3.2, Lines 13 to 14 174 Exhibit B-4, BCUC 1.4.1.2 175 Exhibit B-4, BCUC 1.28.1

{00347781;1} 24

leaks in its history indicating that it is operating safely. 176 The Fraser Gate pipeline coating and cathodic protection have been assessed a performing well leaving the system in excellent condition. 177 The Fraser Gate system would not need replacement within the planning period. 178

The Fraser Gate pipeline system is assessed as being capable of withstanding a 1 in 24 75 return seismic event except for the portion around the outlet of the Fraser Gate station. 179

The CEC accepts that primary need for the Fraser Gate project is for seismic vulnerability and not for condition of the system. This makes the Fraser Gate project very different from the Coquitlam Gate project.

Alternatives Fortis describes the alternatives as;

• Do nothing; and

• Pipeline replacement.

Fortis dismisses the do nothing option as unacceptable180 and not feasible. 181

The CEC submits that a proposed alternative which is not acceptable and not feasible is not really and alternative. The CEC submits that defining alternatives at this level then fails to allow the subdivision of options within a feasible direction to enable examination of true alternative. The result, the CEC submits, is a potential for an inadequate analysis.

In this particular case the Fmiis selected alternative was challenged in information requests, with respect to why the project requires a 500 meter section replacement. 182 The evidence supporting the replacement was based on data from two test holes about soil conditions and an inference about the conditions between the two holes. 183 Fortis was asked if it would be prudent to examine additional test hole data to refine and optimize its project requirement and Fortis revised its understanding of the seismic vulnerability and agreed that additional test holes would be valuable. 184 Fortis was asked to analyze another alternative and determine if it was feasible and Fortis determined that it would be feasible. 185 The alternative proposed was evaluated to be superior to the option proposed by FEI 186 and potentially a lower cost. 187

176 Exhibit B-4, BCUC 1.29.1 177 Exhibit B-4, BCUC 1.29.1.6 178 Exhibit B-4, BCUC 1.29.1.6.1 179

Exhibit B-4, BCUC 1.29.5 180

Exhibit B-1, Page 107, Lines 25 to 29 181

Exhibit B-1, Page 109, Lines 3 to 4, Table 4-1 182

Exhibit B-1, Page 102 183

Exhibit B-4, BCUC 1.31.1 184 Exhibit B-4, BCUC 1.31.4 185 Exhibit B-4, BCUC 1.32.1 186 Exhibit B-4, BCUC 1.34.1

{00347781;1} 25

Prior seismic upgrading in 1997 was conducted and was considered successful at the time but recent examination has identified further vulnerability. 188 Using a similar method to the previous one of ground improvement with vibo-replacement stone column has not been considered an alternative by Fortis because it is expected to be more expensive than a replacement. 189

Fortis filed an evidentiary update with revised Golder and Associated ground displacement information based on additional holes drilled to confirm the extent of vulnerable soils 190 and new assessment of routing and pipeline strengths. 191 These re-evaluations resulted in evidentiary updates to the whole Fraser Gate submission192 demonstrating a revised cost of $8.99 million193

versus the original estimate of $14.855 million. 194

Ultimately Fortis adopted a replacement along the alternative route proposed as an alternative which involved replacement of about 280 meters of pipeline instead of the original 500 meters of pipeline along a less attractive route. 195 FEI has agreed that this alternative is preferred.

The CEC submits that review of alternatives evoked as a result of the regulatory process has resulted in an improved alternative being identified providing significant benefit to customers. The CEC submits that the Commission should approve this new alternative in agreement with FEI's revised assessment and evidentiary update filing.

Route Options The original application considered three route options, which were evaluated in table 4-4, 196

with ratings on several different criteria culminating is a selection of route option 1 representing 540 meters. 197 The revised project alternative has stayed with route option 1 and shortened it to 280 meters and avoided the need for trenchless construction under the CP rail lines further reducing costs. 198

The CEC is satisfied that the route option selected for the Fraser Gate project as revised in the evidentiary update is appropriate.

187 Exhibit B-4, BCUC 1.34.1.3 188 Exhibit B-4, BCUC 1.33.1.1.1 189 Exhibit B-4, BCUC 1.33.1.2 190 Exhibit B-1-8, Appendix A-30 191 Exhibit B-1-8, Appendix A-4 192 Exhibit B-1-6, Pages 19 to 24 193 Exhibit B-1-6, Page 22, Section 3.6.1 194 Exhibit B-1, Page 107 195 FEI Final Argument, Page 56, Paragraph 172 196 Exhibit B-1, Page 127, Table 4-4 197 Exhibit B-1, Pages 119 to 128 198 Exhibit B-1-6, Pages 20 and 21, Section 3.2.1

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Project Design Specifications The project design specifications are provided for the original pipeline alternative in Table 4-3.199 The project update to the new alternative has changed the length of the pipeline specification but the evidentiary update does not show any other changes to the pipeline specifications.

The CEC is satisfied that the design specifications for the replacement pipeline are appropriate.

Rate Impact The impact on rate payers for the original Fraser Gate plans was expected to be .008 $/GJ.200· The impact on rate payers of the revised Fraser Gate plan is expected to be .004 $/GJ.201 This reflects the significant drop in the capital cost investment. This equates to a bill impact for a large commercial customer of about 0.1% and for a small commercial customer of about 0.0%.202.

The CEC submits that the cost to rate payers for the additional seismic security is warranted and that approval of the project by the Commission is appropriate.

JOINT PROJECT JUSTIFICATION AND PBR FEI proposes to unde1iake the Coquitlam Gate Project at the same time as it undertakes the Fraser Gate IP project. The Coquitlam Gate project has an estimated cost of $242.825 million and the Fraser Gate IP project has an estimated cost of $8.99 million for a total of $251.815 million.

The projects are relatively discrete, and the Commission can approve one Project and not the other.203

FEI states that "While each of the individual Projects noted above is a stand-alone project that is justified on its own merits in this CPCN, and can be constructed independently of the other Project, FEI has grouped the two Projects into this one CPCN due to the fact that they are related, complement one another and will provide regulatory and construction efficiencies if they are addressed at the same time.204

FEI does not provide a priority ranking for the Fraser Gate project but scheduled the project to be concurrent with the Coquitlam Gate project construction.205 The priority of the Fraser Gate IP project is unchanged if it were to be undertaken independently of the Coquitlam Gate IP

199 Exhibit B-1, Page 114, Table 4-3

200 Exhibit B-1, Page 138, Table 5-2 201

Exhibit B-1-6, Page 20, Table 3-1 202

Exhibit B-14, CEC 2.18.1 203 Exhibit B-6, CEC 1.6.2 204 Exhibit B-1, Page 8 205 Exhibit B-6, CEC 1.52.4

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project.206 FEI considers the following factors in prioritizing seismic vulnerabilities on its system include the following with the respective rationales identified below.

• Estimated probability of failure 207

o identified vulnerability to 1:24 75 seismic event208

• Estimated consequences of failure209

o significant consequences of failure both safety and economic related210

• Ease or difficulty of determining or implementing a solution to mitigate the risk211

• Ease or difficulty of repair, including duration of repair in the event of a seismic-related failure212

• Financial considerations including the impact to other identified work213

o An opportunity for improved constructability of a pipe replacement214

FEI states that it is logical that both Projects should be undertaken at the same time in terms of planning, permitting, stakeholder consultation and ultimately construction and commissioning, and FEI has identified cost savings benefits that can be achieved by coordinating the construction ofthe Projects."215

The proposed Coquitlam Gate IP and Fraser Gate IP Projects both involve the construction and installation of NPS 30 pipe to replace existing pipe. Both projects share common attributes in design, routing process, materials procurement and specialized construction and installation techniques due to their location in an urban environment.216 With the replacement of the NPS 30 Coquitlam Gate IP pipeline in service it will be possible to isolate the Fraser Gate IP pipeline and replace the seismically vulnerable portion without the need for a bypass. 217 The pmiion of the total cost attributable to the bypass which would reduce the additional costs by approximately $1.4 million to an approximate range of$1.3 to $1.8 million? 18

If the Projects were undertaken separately, dependent on the timing of the Projects as described in FEI's response to CEC IR 2.3.1, the capital costs would be increased. The increase in the capital costs of the Fraser Gate IP Project could be in the range of approximately $1.3 million to

206 Exhibit B-14, CEC 1.14.2

207 Exhibit B-6, CEC 1.52.4 208


Exhibit B-6, CEC 1.52.4 210 Exhibit B-6, CEC 1.52.5 211



Exhibit B-6, CEC 1.52.4 214 Exhibit B-6, CEC 1.52.4 and CEC 1.65.1.3 215 Exhibit B-6, CEC 1.6.2 216

Exhibit B-6, CEC 1.3.2 217 Exhibit B-6, CEC 1.3.2 218 Exhibit B-14, CEC 2.3.1 and BCUC 1.3.6

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$3.2 million. FEI provides the potential financial impact on the Fraser Gate IP project of doing the projects separately in CEC 2.3.2 as below.

1. Contractor mobilization and demobilization, which would be shared between the two IP Projects, would increase to the full cost if the Fraser Gate IP Project was undertaken independently;

2. Independent pipe orders would not avail of the economy of scale associated with the larger pipe order for both IP Projects, and would therefore incur additional procurement costs due to the smaller order quantity for the Fraser Gate IP Project;

3. It is likely that the Coquitlam Gate IP pipeline contractor would not be available or interested in the much smaller scope of the Fraser Gate IP Project; therefore, knowledge and productivity gain from the Coquitlam Gate IP Project would be lost which could result in reduced pipeline productivity and an increased construction schedule;

4. A different pipeline contractor would require retesting and requalification to FEI procedures and standards, including revised pipeline test plans and hydrostatic test heads; and

5. If the Fraser Gate IP Project is constructed independently of, and prior to, the Coquitlam Gate IP Project, a temporary bypass would be required. The above factors could result in additional Project costs in the range of approximately $2.7 -$3.2 million. Ifthe Fraser Gate IP Project could be constructed independently of, and after, the Coquitlam Gate IP Project, a temporary bypass would not be required.

Depending upon the increase in capital costs ($1.3 million or $3.2 million) the Present Value cost could increase from $10.764 million219 over 60 years to $12.654 million or $15.417 million?20 The impact on the levelized rate impact is nominal going from $0.004221 over 60 years to $0.004 or $0.005 respectively for the capital cost increases mentioned above?22

The CEC submits that the evidence shows that there are important savings that may be achieved from managing the construction of the two projects simultaneously and recommends that the Commission approve the projects to be constructed simultaneously. The CEC submits that such complementary scheduling should be undertaken as frequently as possible in prudent management of the company resources.

219 Exhibit B-1-6, Page 24, Table 3-1 220

Exhibit B-14, CEC 2.3.2 221 Exhibit B-1-6, Page 24, Table 3-1 222 Exhibit B-14, CEC 2.3.2

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The CEC also submits however, that it is not necessary for the two projects to be grouped together as one CPCN in order to do so. The CEC submits that the standalone nature of the projects is indicative that the project grouping as a single CPCN is not necessary. The CEC submits that the maximum savings to be achieved from grouping the projects as a single CPCN are in regulatory costs.

In its Decision accompanying Order G-138-14 (issued September 15, 2014) regarding FEI's 2014-2018 Performance Based Ratemaking Application, the Commission approved FE I' s $5 million CPCN exemption threshold as applied for until such time as any further determination by the Commission is made concerning capital exclusion?23 On December 19, 2014 FEI filed the Application for the CPCN for the Lower Mainland Intermediate Pressure System Upgrade comprising the $$250 million Capilano Gate project and the $8 million dollar Fraser Gate project. Commission Order G-120-15 was issued July 22, 2015 and revised the FEI materiality threshold for capital exclusions to $15 million.

In IR 2.3 .4 the CEC requested FEI to provide an analysis of the net costs that would accrue to the ratepayer if the projects were undertaken separately and the materiality threshold for capital exclusion criteria rose to $10 million or more such that the Fraser Gate project was below the capital exclusion criteria. FEI declined to provide the requested information indicating that a change in the capital exclusion criteria would not be applicable to the LMIPSU project, which was filed in 2014 under the then approved $5 million capital exemption threshold.224

FEI states that any revisions to the capital exclusion criteria that may result from the FortisBC Capital Exclusion Criteria proceeding [would] not be applicable to this Application. The CPCN threshold of $5 million was approved and in place when this CPCN Application was filed and as such, it is the $5 million CPCN Capital Exclusion threshold that applies regardless of the outcome of the FortisBC Capital Exclusion Criteria proceeding. FEI states that Huntingdon Station Bypass CPCN was approved under the CPCN threshold that was in place at the time the application was filed, even though it was not known what threshold would be in place at the time it was constructed. Further, the capital plmming and the timing of capital projects is guided by system sustainment, growth-related and other operational considerations to ensure that natural gas services are provided safely, reliably and at the lowest reasonable costs to meet the energy demands of our customers. The Fraser Gate IP Project involves the replacement of a segment of the Fraser Gate IP pipeline identified to be unacceptably vulnerable to seismic activity?25

The CEC submits that the capital exclusion criteria should apply to the project at the time of the Commission decision on the project rather than at the time of the application, and that the FEI position that it applies at the time of the Application has no basis in either a Commission decision nor in practice, and is simply FEI's opinion. The example of the Huntingdon Station




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bypass is not relevant because FEI is referencing the time of construction rather than the time of the Commission decision for the CPCN. The Commission decision was issued under the original materiality threshold guidelines, which is not the situation in this instance.

The CEC submits that FEI was anticipating an increase in the materiality threshold at the time of the application. The CEC submits that there is no rationale justification for including the Fraser Gate seismic upgrade into the same CPCN except to avoid the materiality threshold, when construction could and should be appropriately scheduled in a complementary fashion in any event, particularly in that PBR is intended to promote cost effectiveness. The CEC submits that there are costs to the ratepayer for including the Fraser Gate IP seismic upgrade in the Coquitlam Gate CPCN, that accrue as a result of excluding the Fraser Gate IP project from the PBR formula. Additionally, there are potential benefits from including the project under the PBR formula in terms of actual rewards and the creation of incentives for the utility to reduce costs. A $100 thousand variance between actual and forecast results in $2,276 to be returned or collected from shareholders.226

The CEC recommends that the Commission first make a determination as to whether or not the current materiality threshold applies to projects that are in the approval process, but were applied for under the previous criteria. The CEC submits that there is no reasonable justification for not including projects that are in the approval process. The rationale of not including projects that are in the approval process under the revised criteria is that it would have been unfair to the utility in its decision-making as to whether to proceed with projects or whether to group the projects together or not. Grouping projects together for the purposes of excluding projects under the materiality threshold is not acceptable under PBR. The CEC therefore recommends that the Commission determine that the present materiality threshold be applied to projects at the time of decision.

The CEC recommends that the Commission secondly determine whether or not the Fraser Gate IP project should be rationally grouped in the CPCN or not. As the projects are standalone, have no significant linkages except the benefits from construction scheduling and potentially marginal regulatory benefits from combining them in a CPCN. The CEC submits that the intention of PBR is to incentivize such cost savings and it is reasonable that a complementary construction schedule should be undertaken by the utility regardless.

Order No G-120-15 states:

For any capital project applications that exceed the PBR materiality threshold, FBC and FEI are directed to demonstrate to the Commission that the project applied for is not the result of combining smaller projects and that the actual costs fall above the PBR threshold.

226 Exhibit B-11, BCUC 2.22.1.1

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In the above, FEI appears to be interpreting capital project application at the time of filing. The CEC submits that a more appropriate would be to interpret it as a capital project application before the Commission for decision.

The CEC notes that FEI did not apply for a single CPCN approval. FEI applied for two approvals, one for each project separately identified for approval. 227 The CEC submits that indeed FEI is asking for two separate CPCN approvals.

The CEC submits that based on the existing evidence, the projects would not be considered as being appropriately grouped. The CEC recommends that the Commission direct FEI to provide argument that that the Fraser Gate IP project should not be excluded from the PBR formula and make its decision based on the evidence before it.

The CEC recommends that the Commission consider deferring the final determination of this issue to the FEI PBR Annual Review so that the Decision can be made in the context of all the PBR issues. The CEC recommends that if the Commission panel has views with respect to this issue, it may choose to include them in this Decision for effective communication to the PBR Annual Review panel.

ENVIRONMENTAL, ARCHAEOLOGICAL AND SOCIO ECONOMIC ASSESSMENTS The CEC has reviewed the evidence with respect to the environmental, archaeological and socioeconomic impacts and finds it to be acceptable. The Projects are expected to have minimal environmental and archaeological impacts. Any impacts can be mitigated through the implementation of standard best management practices.228 The socio economic impact is much improved with the newer route for the Coquitlam gate project.229 Project development costs include $263 thousand in Environmental and Archaeological costs.23° FEI will identify, manage and mitigate the potential environmental, public or stakeholder legacy issues for abandonment for both projects231 in a responsible fashion. 232

The CEC recommends that the Commission find the environmental, archeological and socioeconomic impacts to be acceptable.

PUBLIC AND FIRST NATIONS CONSULTATION The CEC has reviewed the evidence with respect to Public and First Nations consultation. The projects are located within traditional territories of the Coast Salish Peoples, the Tsleil-Waututh First Nation, Squamish Nation, Kwikwetlem First Nation, St6:16, Musqueam Indian Band, Semiahmoo First Nation and Tsawwassen First Nation. The Projects do not cross any First

227 Exhibit B-1, Page 1, Lines 9 to 15


229 Exhibit B-1-6, Evidentiary Update, Page 10 230

Exhibit B-14, CEC 2.6.1 231 Final Submissions, Page 57 232 Exhibit B-6, CEC 1.61.1

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Nations reserve lands. FEI outlines its approach and activities in Exhibit B-1, at pages 133-180. The potential impact of the Projects on First Nations' rights and title will be limited?33 The CEC is satisfied that the approach is appropriate.

FEI has a public Communications and Consultation plan and conducted pre-consultation activities?34

Project development costs include $130 thousand in stakeholder engagement costs.235 FEI has included a budget of $300 thousand for legacy projects which it views as a mitigation initiative to offset negative impacts the project has created on stakeholders?36

The CEC is has reviewed the evidence with respect to public consultation and finds it to be acceptable.

The CEC recommends that the Commission find the consultation activities and the costs acceptable.

RATEPAYER IMPACT In the Evidentiary update, FEI identifies the Total Capital Cost (As-spent dollars) including Abandonment and AFUDC as $251.815 19 million with a 2019 Average Cost of Service Impact of $0.124/GJ. For a typical FEI residential customer consuming 95 GJ per year in 2019, this would equate to approximately $12 per year and reflects an approximate increase of 3.23 percent on delivery margin or an approximate increase of 1.3 percent on the burner tip.237

The rate impact for the Coquitlam Gate IP Project and the Fraser Gate IP Project together, based on approved natural gas commodity and common delivery rates effective January 14, 2015, is forecast as an approximate annual bill impact for small commercial customers of approximately 1.4% and approximately 1.6% for large commercial sales customers.238 Due to their individual natural gas commodity arrangements, FEI cannot provide a comparable estimated annual bill impact for Transportation customers; however, it is reasonable to expect that these customers would have an annual bill impact similar to large commercial sales customers?39

The CEC submits that the ratepayer impacts are acceptable for these projects.

APPLICATION AND PROJECT DEVELOPMENT COSTS The CEC has reviewed the evidence with respect to the application and project development costs. Under Sections 59-61 ofthe UCA, FEI is seeking approval to record project development



235 Exhibit B-14, CEC 2.6.1 236 Exhibit B-11, BCUC 2.23.1 237 Exhibit B-1-6, Page 42 238 Exhibit B-14, CEC 2.18.1 239 Exhibit B-14, CEC 2.18.1

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costs in a new deferral account. The balance in the account was forecast to be approximately $2 million as of December 2015,240 however as of January 2015, total project development costs have been approximately $2.433 million.241

In the Evidentiary Update FEI states that the December 31, 2015 net-of-tax balance in the LMIPSU Development Costs deferral account is forecast to be $2.382 million which is an approximate $0.375 million increase from what was filed in the Application. The reason for the increase was for the additional cost related to examine the Lougheed Highway route alignment (approximately $400 thousand before tax offset) and the change in scope for the Fraser Gate IP Project (approximately $85 thousand before tax offset).

The CEC is satisfied with the application and project development costs and recommends the Commission approve these costs as filed.

CONCLUSION In conclusion, the CEC submits that the Commission decision on whether or not to approve the Coquitlam Gate project should be based on a broad range of public interest issues the alternatives available for consideration. The CEC has submitted that FEI's dismissal of some alternatives may be inappropriate and that the Commission should apply its judgement in the context of the trade-off judgements between costs and public interest issues, notably the issues of system resilience and cost escalation risk and probabilities of success for rehabilitation options. In addition, the CEC submitted that the quantitative assessment of risks used to justify a more expensive replacement option should be given somewhat lesser weighting and that soft risk issues, not quantitatively evaluated should be given some weighting as the Commission applies its judgement across all risk issues.

The CEC's judgement of the public interest issues leads it to recommend to the Commission approval of a CPCN for the Coquitlam Gate project, and specifically the alternative requested by FE I.

The CEC submits that the Commission decision on whether or not to approve the Fraser Gate project should be based on its assessment of the seismic vulnerability of the section of pipe identified as vulnerable to a 1 in 24 7 5 return seismic risk.

The CEC recommends that the Commission approve a CPCN for the revised Fraser Gate project as proposed by FEI.

The CEC recommends that the Commission direct FEI to provide argument that the Fraser Gate IP project should not be excluded from the PBR formula and make its decision based on the evidence before it.



{00347781;1} 34

The CEC recommends that the Commission consider deferring the final determination of this issue to the FEI PBR Annual Review so that the Decision can be made in the context of all the PBR issues. The CEC recommends that if the Commission panel has views with respect to this issue, it may choose to include them in this Decision for effective communication to the PBR Annual Review panel.

ALL OF WHICH IS RESPECTFULLY SUBMITTED.

(})avitf Craig

David Craig, Consultant for the Commercial Energy Consumers Association of British Columbia

Christopher P. Weafer, Counsel for the Commercial Energy Consumers Association ofBritish Columbia

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Documents

NEN•BIRD - Utilities Commission€¦ · The CEC has reviewed the application, ... Project is forecast to be $242.825 million in as spent ... through maintenance and integrity management