B-8 GAZ MÉTRO RESPONSE
TO IR NO. 1 FROM ACIG/IGUA
(Gas Métro -1 documents 1.13 - 13.6
Gax Métro -2 document 1.1-1.2)
(English translation)
Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Connection Model
Reference:
(i)
Gaz Métro 1, document 1, p.11, Graph 1
Preamble:
In graph 1, Gaz Métro indicates that the TCPL/TQM [TransCanada PipeLines Limited/ Trans
Québec & Maritimes Pipelines Inc.] network can be used for the transmission of natural gas
between the consumption areas.
Question:
1.1
Do the existing installations of the distribution network allow routing the gas from the
consumption areas to the TQM network? If negative, how does Gaz Métro intend to
recover the costs related to such investments, if applicable?
Answer:
Generally, Gaz Métro’s consumption areas are connected to TQM and therefore route
the excess gas to TQM. Each situation is different, therefore it is not possible to
generalize whether or not specific installations are required in order to route the natural
gas to the TQM network.
However, as mentioned in the response to request for information 11.1 of the Régie Gaz
Métro-1, Document 1.11), if investments were necessary to improve Gaz Métro’s
network in order to route natural gas from the consumption areas to the TQM network,
producers would be entirely responsible for the charges.
Question:
1.2
Do the existing TQM installations allow to reverse the flowing direction of the gas on
certain segments (i.e. between the adjacent consumption areas) as a temporary
measure (e.g. flow towards east during winter and west during summer)?
Answer:
Yes. Up to certain volume limits that should be indicated by TQM.
Original: 2010.09.14
Gaz Métro – 1, Document 1.13
Page 1 of 1
Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Category “A” Costs
References: (i)
(ii)
Gaz Métro 1, Document 1, page 14, Line 15
Gaz Métro 1, Document 1, page 15, Line 11
Preamble:
At point (i), Gaz Métro specifies:
“Moreover, if new investments in the existing distribution network (i.e. downstream the
interconnection point) are required only for the need of the producers, the costs related
to these investments will be borne by the producers.”
At point (ii), Gaz Métro states:
“This agreement will describe the circumstances and the conditions leading to the
reimbursement of incurred costs.”
Question:
2.1
Please describe the nature and the scope of the investments which may be necessary
downstream from the interconnection point.
Answer:
Investments would be mainly for compression and possibly an increase in capacity. The
scope of these investments is unknown for the moment and will depend mainly on the
volume injected into the gas network.
Question:
2.2
What are, according to Gaz Métro, the circumstances that should not lead to the
reimbursement of the incurred expenses?
Original: 2010.09.14
Gaz Métro – 1, Document 1.14
Page 1 of 2 Answer:
There are no circumstances that should not lead to reimbursement of incurred charges.
Use of the conditional has no other goal than to refer to a situation that has not yet
occurred.
At reference (i), the sentence could therefore read: “In addition, when new investments
[...] are required for only the needs of producers, producers will also be responsible for
the costs related to these investments.” At reference (ii), the sentence could read: “This
agreement will describe the circumstances and conditions which lead to a
reimbursement of incurred costs.”
Original: 2010.09.14
Gaz Métro – 1, Document 1.14
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Category “B” Costs
References: (i)
Gaz Métro 1, Document 1, page 15, Line 27
Preamble:
At point (i), Gaz Métro specifies:
“There is a distinction made within the same gas network, that is the distribution network
and the transmission network of Gaz Métro.”
Question:
3.1
Please indicate whether Gaz Métro has already established a distinction between the
transmission and distribution functions of the distribution network and provide
appropriate references.
Answer:
Currently there is a distinction between the functionalities of the various pipelines in the
service cost allocation study (R-3720-2010, Gaz Métro-13, Document 14, Page 5, Factor
“CONPRIN”). The allocation of carrier pipelines (which in fact includes the allocation of
carrier and supply pipelines) is done for the capacity component only, whereas the
allocation of distribution pipelines is done for the access and capacity components.
3.2
Please draw the lists including the types of pipeline according to their level of pressure
and indicate which of them are associated with the transmission function. For each of
these types of pipelines please indicate the number of existing clients who are
connected to them and the tariff class they belong to.
Answer:
See answer to question 5.1 of the Régie in the document Gaz Métro-1, Document 1.5 for
the type of pipeline.
[See table in corresponding .pdf file]
Original: 2010.09.14
Gaz Métro – 1, Document 1.15
Page 1 of 2 3.3
Please indicate whether there are clients who are served by high-pressure pipelines; if
affirmative, how many.
Answer:
Yes, see answer to question 3.2.
3.4
Please indicate whether the gas transmission in the distribution network requires
compression. If affirmative, Please indicate whether it is provided that a part of these
costs are allocated to producers.
Answer:
Routing natural gas through the distribution network generally does not require
compression. The only compression in operation today is found in Saint-Maurice, at the
junction between Gaz Métro’s network and TQM’s network. The gas is compressed
upon exiting TQM’s network and routed to Saguenay, and upon exiting the LSR plant for
injection into the network.
However, if there were compression costs to disperse the natural gas injected by
producers from the connection network to the existing network (compression at
interconnection points), these costs would be charged to producers and priced at
receiving points.
Original: 2010.09.14
Gaz Métro – 1, Document 1.15
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Category “D” Costs
References: (i)
Gaz Métro 1, Document 1, page 17, Line 16
Preamble:
At point (i), Gaz Métro specifies:
“…if the additional costs for the use of the network were incurred, these costs would be
paid by the producers.”
Question:
4.1
Please identify exhaustively the situations where the additional costs for the use of the
TCPL/TQM network will be incurred.
Answer:
Each time the gas must be routed via TCPL/TQM’s carrier network, costs will be
incurred because Gaz Métro must contract carrier services from carrier companies.
Besides the additional costs for using TCPL/TQM’s network, Gaz Métro could also incur
costs for modifying their network, such as modifications to measuring and ranging
equipment at receiving points, etc. At this time, Gaz Métro does not believe that it is
possible to exhaustively identify the occurrence of additional costs for using
TCPL/TQM’s network. When an investment is required, Gaz Métro will analyze the
reasons for this investment and will allocate this cost to the type of client involved.
Question:
4.2
For each of the situations identified above, Please indicate whether there are contract
obligations binding Gaz Métro to TCPL/TQM or any other obligations not allowing Gaz
Métro to substitute the gas from outside the franchise with the gas from the reception
point without generating additional expenses for TCPL/TQM.
Original: 2010.09.14
Gaz Métro – 1, Document 1.16
Page 1 of 2 Answer:
The contract held by Gaz Métro with TQM refers specifically to the transportation of gas
from storage sites located in Quebec and include two specific receiving points. The
transportation contracts held by Gaz Métro with TCPL refer to the transportation of gas
between Empress, Dawn or Parkway in accordance with the contract and the delivery
points located in Gaz Métro’s territory. These contracts strongly do not allow the
receiving of gas at other delivery points. TCPL’s pricing does not allow Gaz Métro to
segment these transportation contracts to transport gas over different segments within
the same contract.
Gaz Métro can therefore not transport natural gas from one consumption area to
another without incurring costs. However, Gaz Métro is free to change its existing
portfolio with TCPL in order to supply itself with locally produced natural gas
instead of natural gas from the West. Gaz Métro would, however, have to end its
transportation contracts originating from the West and enter into new
transportation contracts that allow them to route natural gas from one
consumption area to another. The applicable rates for the various contracted
services will be different due to less distance travelled.
Original: 2010.09.14
Gaz Métro – 1, Document 1.16
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Receiving Point Pricing
References: (i)
Gaz Métro 1, Document 1, page 21, Line 16
Preamble:
At point (i), Gaz Métro specifies:
“A progressive increase of the [CMC] is allowed in the 16 cases of progressive start-up
of certain production sites.”
Question:
5.1
Please indicate whether the application of a progressive CMC will affect the level of the
tariff, the recovery profile of costs in time and the yield of the project.
Answer:
Receiving point pricing is established in order to recover costs over the amortization
period of investments. The rates established at receiving points will vary depending on
the characteristics specific to each project and each proposal must be reviewed by the
Régie when investments are required. The possibility of a progressive CMC form a part
of the characteristics specific to the project. In order to not create cross-subsidization
between producers, the progressivity of the CMC will be taken into account in the
establishment of receiving point rates.
The profitability of the project will not be affected as Gaz Métro will always target an IRR
equal to the cost of weighted capital and as a result, a rate break-even point equal to the
amortization period.
The rate level will be slightly higher than if the CMC had not been progressively
established in order to make up for the lack of revenue vs. service costs that do not
change.
Lastly, the cost recovery profile will also be slightly affected. Indeed, rate revenues for
years where the CMC is progressing will be lower than the rate revenues if the rate was
fixed with a continuous CMC. However, for the entire amortization period, the rate
revenue is strictly equal to the service cost in the two cases.
Original: 2010.09.14
Gaz Métro – 1, Document 1.17
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
(i)
Gaz Métro 1, Document 1, Page 27
Gaz Métro 1, Document 1, Page 29, Table 2
Preamble:
At point (i), Gaz Métro draws the following list of exploitation expenses related to the supply of
the producers:
“Administration expenses
Services to clients
Contracts, calling clients and orders
Invoicing the subscribers
Credit and recovery
Provisions for bad debts
Other expenses – Accounting subscribers”
At point (ii), Gaz Métro allocates $107,787,000 of the exploitation expenses to the “Producer”
budget in the total exploitation expenses of $156,096,000. Thus, 48.3 million dollars are not
allocated to the “Producer” budget.
Question:
6.1
Please distribute by budget heading the 48.3 million dollars of exploitation expenses that
were not allocated to the “Producer” budget (column 2 of table 2). Please justify for each
of the headings the option not to allocate the cost to the “Producer” budget.
Original: 2010.09.14
Gaz Métro – 1, Document 1.18
Page 1 of 3 Answer:
Details of Operating Expenses
Gas lost in the network
Main pipelines
Connections and detours
Counters and regulators
Administration expenses
Electricity transmission
Mercaptan and other
Amortization of deferred charges
Biogas compression
Customer service
Contracts, client calls and orders
Subscriber billing
Credit and collection
Provisions – bad debt
Other charges – subscriber account
Sales and representation charges
Advertising expenses
TOTAL OPERATING EXPENSES
2008-2009
BUDGET
7,190,000
13,820,000
5,206,000
3,364,000
81,122,000
1,666,000
300,000
1,300,000
1,040,000
12,155,000
4,796,000
4,125,000
2,830,000
1,010,000
1,749,000
10,581,000
3,842,000
156,096,000
2008/2009
BUDGET TO
SHARE
0
0
0
0
81,122,000
0
0
0
0
12,155,000
4,796,000
4,125,000
2,830,000
1,010,000
1,749,000
0
0
107,787,000
ALLOCATION
FACTORS
FB01D
CONDPRIN
FS21
FS22
EXPLOITD
FB01D
FB01D
FB07D
Biogaz
FB08
FS23
FS25
FS29
FS26
CDA
FS27
FS28
•
Gas lost in the network: This cost is included in Category B.
•
Main pipelines: This cost is included in Category B.
•
Connections and detours: Current connections and detours consist of distribution
function costs and will continue to be assumed by consumer clients. See Section
2.2.2 of the document Gaz Métro-1, Document 1.
•
Counters and regulators: Current connections and detours consist of distribution
function costs and will continue to be assumed by consumer clients. See Section
2.2.2 of the document Gaz Métro-1, Document 1.
•
Electricity transmission: This cost is included in Category B.
•
Mercaptan and other: Gas injected into the network does not include Mercaptan.
•
Amortization of deferred charges: For the moment, these are past deferred
charges. If new deferred charges are added in the future, one part must be
assumed by the producers.
•
Biogas compression: Biogas costs will continue to be allocated to level M10 only,
where the current biogas client is found.
•
Sales and representation charges: For the moment, it is not expected that the
current sales force will be involved with producer clients. It will be directly via
Operations.
•
Advertising expenses: For the moment, it is not expected that advertising will be
done for producer clients. This will be done directly via Operations. No
advertising will be done for this group of clients.
Original: 2010.09.14
Gaz Métro – 1, Document 1.18
Page 2 of 3 Question:
6.2
Please add to table 2 a specific line for the provisions of bad debts.
Answer:
Distribution Costs
Provisions – Bad Debt
OPERATING EXPENSES
GLOBAL ENERGY EFFICIENCY PLAN
ENERGY EFFICIENCY FUND
2008/2009
BUDGET
2008/2009
BUDGET
(1)
1,010,000
156,096,000
TO SHARE
(2)
1,010,000
107,787,000
14,282,000
0
Number of
clients
function
Volume
function
(3)
(4)
Income
function
Other
138
0
(5)
91,656
91,656
0
0
0
Total
(6)
822,773
(7)
91,656
914,566
0
0
1,892,000
0
0
0
0
0
0
GREEN FUND
37,957,000
0
0
0
0
0
0
AMORTIZATION EXPENSES
86,248,000
19,911,000
0
0
0
234,729
234,729
AMORTIZATION OF DEFERRED COSTS
57,697,000
15,466,000
0
62,072
62,072
156,529
280,672
TAXES AND FEES
25,057,000
1,876,263
0
0
0
21,770
21,770
INCOME TAX
32,398,000
2,831,238
0
0
256,929
0
256,929
1,062,000
0
0
0
0
0
0
124,318,000
12,830,777
0
0
0
141,362
141,362
537,007,000
160,702,278
138
62,072
410,656
1,377,163
1,638,631,000
169,122,000
CONSUMPTION REBATE AND OTHER
RATE BASE RETURN
TOTAL DISTRIBUTION COSTS
RATE BASE
1,850,028
45,792,000
Question:
6.3
Does Gaz Métro intend to make provisions for bad debts concerning the producers?
Answer:
Yes.
Original: 2010.09.14
Gaz Métro – 1, Document 1.18
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
(ii)
(iii)
(iv)
Gaz Métro 1, Document 1, Page 29, Table 2
R-3662-2008, Gaz Métro-9, Document 18 (dated November 20, 2008)
R-3662-2008, Gaz Métro-9, Document 20 (dated November 20, 2008)
R-3662-2008, Gaz Métro-9, Document 21 (dated November 20, 2008)
Question:
7.1
Please reconcile the budget amounts for the amortization expense (total budget and
“Producer” budget) with the values presented at point (ii).
Answer:
The costs in Column 1, Table 2 result from the 2008/2009 cost allocation study and
represent distribution costs only. The document Gaz Métro-9, Document 18 provides all
projected amortization expenses. Some costs in this document are functionalized in the
balancing service for the service cost study. These costs are the overall costs related to
the LSR plant totalling $1,201,000.
For the budgeted amount to producers in the amortization costs, only costs related to
general installations were taken into account in Category C, being $19,911,000.
Question:
7.2
Please reconcile the amounts allocated for the amortization expense of the reported
expenses (total budget and “Producer” budget) with the values presented at point (iii).
Answer:
The breakdown of total budgeted amounts for amortization expenses of deferred fees is
found in the document Gaz Métro-12, Document 12, lines 315 to 337 and corresponds to
Column 5 of the document Gaz Métro-9, Document 20.
For the budgeted amount to producers in the amortization expenses of deferred fees,
only costs related to self-insurance provisions, computer development, start-up benefit
and stakeholder expenses were taken into account in Category C, being $15,466,000.
Original: 2010.09.14
Gaz Métro – 1, Document 1.19
Page 1 of 3 Question:
7.3
Please justify why the amortization of the reported expense account “leveling lost gas”
and “patents” in the “Producer” budget.
Answer:
Gaz Métro considers that patents do not target producer clients, but consumer clients.
Producer clients are not to assume these costs for now.
Costs related to lost gas were taken into account in Category C and not in Category B.
Question:
7.4
Please confirm that the reported expense account “integrated management system” is
included in the “Producer” budget. If negative, please explain why it was not included.
Answer:
Gaz Métro confirms that this cost is integrated into Category C costs.
Question:
7.5
Please reconcile the amounts allocated for the tax and royalty expense (total budget and
“Producer” budget) with the values available at point (iv). Please identify the items of this
document that are included in the “Producers” budget.
Answer:
The same costs are taken into account in the two documents.
The $484,000 spread between the two totals ($25,538,000 – $25,057,000 = $484,000$)
is due to the fact that in table 2, only distribution costs are taken into account, whereas in
reference IV, the tax on capital includes all services.
Question:
7.6
Please detail the calculation of the amounts related to the income tax and the yield
based on the pricing for the “Producer” budget.
Original: 2010.09.14
Gaz Métro – 1, Document 1.19
Page 2 of 3 Answer:
The applicable ratio on income tax and the base is 10%. This ratio was calculated as
follows:
DISTRIBUTION RATE BASE
Self-insurance provision
Computer system development
Start-up benefit
Stakeholder fees
Régie fees
TOTAL NON AMORTIZED COSTS
General installations
Land, structure and improvement
Various equipment and materials
Mobile materials and machinery
TOTAL CAPITAL PROPERTY
Rate base taken into account in Category C
TOTAL DISTRIBUTION RATE BASE
RATIO
(328,000)
44,597,000
3,254,000
684,000
607,000
48,814,000
55,181,000
30,910,000
34,217,000
120,308,000
169,122,000
1,638,631,000
10.321%
The obtained ratio is multiplied by the total 2008/2009 budget to estimate the portion of
costs that must be shared between producer clients and consumer clients.
Original: 2010.09.14
Gaz Métro – 1, Document 1.19
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
Gaz Métro 1, Document 1, Page 29, Table 2
Question:
8.1
Please distribute the “others” category (column 6) of table 2.
Original: 2010.09.14
Gaz Métro – 1, Document 1.20
Page 1 of 3 Answer:
FUNCTIONALIZATION AND CLASSIFICATION TABLE – 2008/2009 BUDGET
2008-2009 BUDGET
2008/2009 BUDGET
TO SHARE
Gas lost in the network
Main pipelines
Connections and detours
Counters and regulators
Administration expenses
Electricity transmission
Mercaptan and other
Amortization of deferred charges
Biogas compression
Customer service
Contracts, client calls and orders
Subscriber billing
Credit and collection
Provisions – bad debt
Other charges – subscriber account
Sales and representation charges
Advertising expenses
TOTAL OPERATING EXPENSES
7,190,000
13,820,000
5,206,000
3,364,000
81,122,000
1,666,000
300,000
1,300,000
1,040,000
12,155,000
4,796,000
4,125,000
2,830,000
1,010,000
1,749,000
10,581,000
3,842,000
156,096,000
0
0
0
0
81,122,000
0
0
0
0
12,155,000
4,796,000
4,125,000
2,830,000
1,010,000
1,749,000
0
0
107,787,000
FB01D
CONDPRIN
FS21
FS22
EXPLOITD
FB01D
FB01D
FB07D
Biogaz
FB08
FS23
FS25
FS29
FS26
CDA
FS27
FS28
GLOBAL ENERGY EFFICIENCY PLAN
14,282,000
0
PGEE
Distribution Costs
ENERGY EFFICIENCY FUND
ALLOCATION
FACTORS
1,892,000
0
FEE
0
FB01FV
Contributions
Main pipelines
Land and easements
Civil part of stations
Delivery and holding stations (regulation equip.)
Connections and detours
Counters and regulators
General installations
Biogas
TOTAL AMORTIZATION EXPENSES
(16,358,000)
45,709,000
684,000
530,000
3,626,000
25,315,000
6,559,000
19,911,000
272,000
86,248,000
0
0
0
0
0
0
0
19,911,000
0
19,911,000
CONDPRIN
CONDPRIN
CONDPRIN
CONDPRIN
CONDPRIN
FS21-A
FS22-A
IMMOBILD
Biogaz
Self-insurance provision
Computer development – amortization
Stabilization account recovery
CTGN patent
Income tax assessment
Subsidy – P.R.C.
Subsidy – P.A.I.R.E.
Global energy efficiency plan
1st establishment fees
Start-up benefit
Stakeholder fees
Régie fees
2003 overpayment
Operating expense relief
Green fund
TOTAL DEFERRED EXPENSE AMORTIZATION
(656,000)
13,192,000
13,350,000
13,000
(860,000)
18,802,000
5,000
2,773,000
113,000
1,562,000
1,368,000
1,214,000
(8,006,000)
1,556,000
13,271,000
57,697,000
(656,000)
13,192,000
0
0
0
0
0
0
0
1,562,000
1,368,000
0
0
0
0
15,466,000
BASETARD
BASETARD
TEMPER-A
BASETARD
REVBRUTD
PRCA
PAIRE
PGEE
IMMOBILD
IMMOBILD
FS31
FB01D
REVREQ
EXPLOITD
FB01FV
Tax on network
Tax on capital
Tax on capital – Green Fund
Transmission network
Places of business
Régie du bâtiment/de l’énergie fees
TOTAL TAXES AND FEES
11,851,000
4,382,000
15,000
2,448,000
1,424,000
4,937,000
25,057,000
0
452,263
0
0
1,424,000
0
1,876,263
REVBRUTD
BASETARD
BASETARD
BASETARD
IMMOBILD
FB01D
Income tax
Income tax – Green Fund
Tax related to productivity gain sharing
TOTAL INCOME TAX RELATED TO RETURN
27,432,000
97,000
562,000
28,091,000
2,831,238
0
0
2,831,238
REVNETD
REVNETD
REVNETD
Tax on temporary spreads and other
TOTAL INCOME TAX UNRELATED TO RETURN
4,307,000
4,307,000
0
0
IMMOBILD
More pollutant energy substitution assistance account
Consumption rebate
TOTAL CONSUMPTION REBATE AND OTHER
1,000,000
62,000
1,062,000
0
0
0
CASEP
PRC
SUB-TOTAL OF DISTRIBUTION COSTS
412,689,000
147,871,501
RATE BASE RETURN
124,318,000
12,830,777
TOTAL DISTRIBUTION COSTS
537,007,000
160,702,278
Original: 2010.09.14
821,713
1,060
822,773
37,957,000
GREEN FUND
OTHER
234,729
234,729
-7,227
145,342
18,414
156,529
4,983
16,787
21,770
0
0
1,235,801
BASETARD
141,362
1,377,163
Gaz Métro – 1, Document 1.20
Page 2 of 3 Question:
8.2
Please indicate the methods used to allocate the costs to producers based on the
incomes, knowing that the allocation period of the costs is prior to the establishment of
the tariff and thus the incomes of the producers.
Answer:
Gaz Métro issued the hypothesis that the income is proportional to volume.
Question:
8.3
Please detail the allocation calculation of the underlying costs in table 2 including for
each of the items subject to allocation: the allocation factor used, the percentage
allocated to producers, the data allowing to establish this percentage, the hypotheses
sustaining these data, and any other information necessary to reproduce the
calculations.
Answer:
In order to evaluate the distribution costs unrelated to the gas network of a producer
client, Gaz Métro simulated costs from the allocation study. For the details of costs that
must be shared among producers and consumer clients, as well as the corresponding
factor, see the response to the request for information 8.1. For cost sharing in columns
(3), (4) and (5), the concept of marginal cost was used. Each cost was prorated
depending on the number of clients, volume or income. Gaz Métro hypothesized that the
income was proportional to volume. For example, in order to obtain the amount of
$256,929 in column (5) for costs related to income tax, the reasoning is as follows:
516,475,000 m³ (expected volume of a typical case) / (5,174,833,000 m³ (2008-2009
budget total expected volume) + 516,745,000 m³ (expected volume of a typical case)*
$2,831,238. For costs where the allocation factor is not a basic factor function (volume,
number of clients and income), the portion of costs assumed by clients at a rate of 4.09
(for each factor) was applied to each cost.
Following are the results obtained from the allocation of costs:
CDA:
EXPLOITD:
BASETARD:
IMMOBILD:
REVNETD:
REVBRUTD:
FS26:
Original: 2010.09.14
0.000606129
0.010129351
0.01101741
0.011788902
0.023976551
0.018407594
0.006374122
Gaz Métro – 1, Document 1.20
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
(ii)
Gaz Métro 1, Document 1, Page 29, Table 2
La Presse, August 18, 2010, Page A2 (copy attached)
Preamble:
At point (i), Gaz Métro writes:
“For this purpose, Gaz Métro drew up several hypothetical scenarios regarding the level
of the volumes injected in the network as well as the investments made by Gaz Métro to
supply the new clients. Consequently, a ratio has been calculated dividing the
distribution costs allocated to the producers (different from the 28 royalties) by the
investments based on the hypotheses of different scenarios. The ratios vary from 2.8%
to 5.6%.”
Point (ii) indicates:
“This is our first project of gas line for the gas production, states Marie-Noelle Cano, Gaz
Metro spokeswoman. The producers authorized us to suggest a route. Our role is to
extend our network towards the production sites. We plan the start-up for the middle of
2011.”
Question:
9.1
For each of the scenarios analyzed, please:
9.1.1. present and explain all the hypotheses used;
9.1.2. prove the economic feasibility of the scenarios;
9.1.3. distribute the investment between the different components (connection pipelines,
measuring installations, chromatographic installations,…);
9.1.4. indicate the length and the diameter of the connection pipeline as well as the
associated capacity to each of the diameters;
9.1.5. present the equivalent of table 2.
Original: 2010.09.14
Gaz Métro – 1, Document 1.21
Page 1 of 3 Answer:
For sub-question 9.1.1, see answer to request for information 9.5 of the Régie (Gaz
Métro-1, Document 1.9).
For sub-question 9.1.2, projects are always oriented toward being profitable, therefore
sustainable on an economic point of view, for the distributor and their current clients,
when subject to the receiving rate, as it is adjusted in such a way that projects would
defer costs over the lifetime of the assets. The economic sustainability of projects on the
producers’ point of view is not evaluated by Gaz Métro.
For sub-question 9.1.3:
•
•
•
•
•
•
Permits, land and engineering: Approximately 12%
Materials: Approximately 17%
Management and inspection: Approximately 5%
Construction: Approximately 3%
Pipeline: Approximately 54%
Contingency: Approximately 9%
For sub-questions 9.1.3 to 9.1.5:
Scenario 1: Approximately 50 km, the majority 273 mm CL-3950 pipelines, with a
capacity of more than 70,000 m3/h
Scenario 2: Approximately 60 km, the majority 273 mm CL-3950 pipelines, with a
capacity of more than 60,000 m3/h
Scenario 3: Approximately 80 km, the majority 273 mm CL-3950 pipelines, with a
capacity of more than 90,000 m3/h
Gaz Métro cannot accurately respond to these questions as the scenarios result from
actual discussions with producers and are therefore governed by confidentiality
agreements.
For sub-question 9.1.5, see answer to request for information 9.3 of the APGQ.
Question:
9.2
Referring to point (ii), please indicate the level of the investment, the length and the
diameter of the anticipated connection pipelines, as well as the volumes for all the
projects currently subject to a claim to Gaz Métro.
Answer:
See answer to request for information 9.1 of the APGQ.
Original: 2010.09.14
Gaz Métro – 1, Document 1.21
Page 2 of 3 Question:
9.3
Please present the equivalent of table 2 for each of the projects.
Answer:
See answer to request for information 9.1 of the Régie (Gaz Métro-1, Document 1.9).
Question:
9.4
Please explain the proposition of Gaz Métro to calculate the costs based on the
investment value and not on other criteria (e.g. incomes, volume).
Answer:
See answer to request for information 9.6 of the Régie (Gaz Métro-1, Document 1.9).
Question:
9.5
Based on the example in table 2, please identify the category “C” costs that vary based
on the investment level related to the reception point and sum it up.
Answer:
Table 2 refers to Category “B” costs and not Category “C” costs. See answer to request
for information 4.1 of TCE (Gaz Métro-1, Document 1.40).
Original: 2010.09.14
Gaz Métro – 1, Document 1.21
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
(ii)
Gaz Métro 1, Document 1, Page 31, Table 3
Gaz Métro 1, Document 1, Page 32, Table 4
Question:
10.1
Please provide the analyses obtained or made by Gaz Métro and any other data
available for Gaz Métro and that sustain the hypothesis of a useful life of 20 years for the
connection pipelines and related installations.
Answer:
See answers to requests for information 6.1 and 6.2 of the Régie (Gaz Métro-1,
Document 1.6).
Question:
10.2
Which is the inflation rate used in the example presented in table 3 and 4?
Answer:
In the example presented in Tables 3 and 4, inflation rates were not incorporated.
Question:
10.3
Please explain why inflation is not applied on the distribution costs not related to the gas
network available in table 4.
Answer:
These costs were established based on the allocation of costs. Gaz Métro did not
foresee the evolution of costs attributed to producers. Inflation could justify, on one hand,
the increase of these costs in future years, and on the other hand, the increase in
Original: 2010.09.14
Gaz Métro – 1, Document 1.22
Page 1 of 3 volume of producers in future years could justify a decrease in these costs via scale
savings.
Question:
10.4
Please explain why inflation is not applied on the royalty cost available in table 4.
Answer:
Gaz Métro does not foresee the inflation of fees. In fact, if volumes produced for a
specific project decrease over the years, fee costs may decrease.
Question:
10.5
Gaz Métro suggests using as measure of the capital cost the capital cost approved by
the Régie for all the franchise. Can one draw the conclusion that Gaz Métro considers
that the business risk associated to the producers is similar to that associated to
consumers?
Answer:
No. Gaz Métro cannot conclude anything on this subject. Each market to be developed
or each client has its own risk.
Question:
10.6
Please provide the underlying calculation file in table 4 including the 20 years of
calculation. If this file is not submitted, please provide all necessary data to reproduce
the calculations including the source data as well as the applied formulae.
Answer:
See attached file named Tableaux III et IV.
Original: 2010.09.14
Gaz Métro – 1, Document 1.22
Page 2 of 3 Question:
10.7
Which is the discount rate used by Gaz Métro and which is the source?
Answer:
The refresh rate is the weighted rate of the capital, being 7.67%.
Project Hypothesis
3
Annual volume (m )
Total capital investment ($)
Distribution costs unrelated to gas network (4.0% of investment) ($)
Regulated Parameters
Useful lifetime of assets (years)
3 3
Régie de l’énergie fee rate ($/10 m )
3 3
Régie du bâtiment fee rate ($/10 m )
Utility tax rate
Income tax
Debt rate (weighted cost)
Equity rate (weighted cost of equity of ordinary and privileged shareholders)
Percentage of debt
Percentage of equity of shareholders (ordinary and privileged)
Weighted rate of capital
Rate break-even point (years)
500,000,000
45,000,000
1,800,000
20
0.311486
0.411000
1.50%
26.90%
6.91%
8.55%
54%
46%
7.67%
20
[Refer to corresponding .pdf file to view second table]
Original: 2010.09.14
Gaz Métro – 1, Document 1.22
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
Gaz Métro 1, Document 1, Page 23, Line 4
Preamble:
At point (i), Gaz Métro states:
“In the example given, the incomes necessary are of $7,525,000 and divided by the
volumes injected of 500 Mm3/year the result is a rate of 1.50 ¢/ m3.”
Question:
11.1
Is it possible that Gaz Métro will receive a request for a connection of 500 Mm3 per year,
but it chooses to install a more important pipeline which would be necessary in the
future? If affirmative, how will the price at the reception point be established?
Answer:
No. Given that rates are established in order to recover all project costs, Gaz Métro will
build according to these needs. In the case where the capacity of a receiving point
becomes insufficient following an increase in demand for natural gas injection at a
receiving point, Gaz Métro should evaluate the investments required in order to increase
the receiving capacity. On this last point, please refer to the answer to question 55 of the
APGQ in document Gaz-Métro-1, Document 2.51.
Question:
11.2
Does Gaz Métro intend to maintain the same price at the reception point for the 21st year
as that for year 1 to 20 following the connection of a production site? If negative, please
specify how the tariff will be calculated as of the 21st year.
Answer:
No. Theoretically, once the initial investments are completely amortized, the applicable
receiving point rate should be adjusted at the decline to allow the recovery of distribution
costs unrelated to the gas network.
Original: 2010.09.14
Gaz Métro – 1, Document 1.23
Page 1 of 2 However, the reality will likely be different. In effect, the initial amortization rates of
pipelines will probably be readjusted in transit following changes to the useful lifetime of
the pipelines. For example, if there are five years remaining on the amortization duration,
but the client signs a new contract and wishes to inject gas on the 15th and 25th year,
Gaz Métro will review the amortization period of the asset, as well as the applicable
receiving rate. In addition, new investments may be required along the way in order to
maintain the receiving point injection. In this case, there may be non amortized
investments after the 20th year. The receiving point rate starting on the 21st year will then
take into account these changes and/or investments.
Question:
11.3
If the two reception points are located at the middle (reception point 1) and respectively
at the extremity (reception point 2) of the same connection pipeline, how will the costs be
distributed between the two reception points and how will the prices be established?
Answer:
Take a simple case where two producers (at receiving points 1 and 2) have a CMC of
50,000 m³/day. The part of the connection pipeline that connects receiving point 1 at the
interconnection point to the existing network must have a capacity of 100,000 m³/day.
The cost of the portion of the pipeline between receiving point 1 and the interconnection
point will be equally assumed between the two producers. The rate at receiving point 1
will take into account these costs.
The rate at receiving point 2 will be established by taking into account the share of costs
of the portion of the connection pipeline that connects receiving point 1 at the
interconnection point to the existing network over and above 100 % of the costs of the
portion of the connection pipeline that connects receiving point 2 to receiving point 1 at a
capacity of 50,000 m³/day.
Question:
11.4
How does Gaz Métro intend to establish the reception price if the consumers are
connected starting at the connection pipeline of a production site.
Answer:
The receiving point rate will be established in accordance with the Régie’s proposed
methodology by taking into account that only the producer uses the new pipeline. If
consumer clients were possibly connected to this pipeline, the decline of the applicable
receiving point rate would be reviewed. The cost allocation method among producers
and consumer clients will be presented to the Régie upon request.
Original: 2010.09.14
Gaz Métro – 1, Document 1.23
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Applicable Receiving Point Rates
References: (i)
(ii)
Gaz Métro 1, Document 1, Page 23, Line 6
Gaz Métro 1, Document 1, Page 20, Line 19
Preamble:
At point (i), Gaz Métro writes:
“If another producer wishes to inject the same level of volume (i.e. additional 500 Mm3)
and does not require additional assets, the necessary income will also be $7,525,000
per year divided by the new volumes of 1,000 M m3/year and this will be equal from now
on to a rate of 0.75¢/m3. Gaz Métro will revise the rates at the reception points
concerned at the time of the subsequent tariff cause to the investment request.”
At point (ii), Gaz Métro writes:
“This option will allow to reduce the risk of inaccurate real costs and thus the rates at the
reception points and to ensure thus the stability of these rates for the producers.”
(emphasis supplied)
Question:
12.1
What treatment will Gaz Métro apply if a producer who shares a reception point with one
or more producers shuts down? Does the reverse situation apply (i.e. proportional
increase of the rate)?
Answer:
In the case of the closure of a producer client who shares a receiving point with one or
more other producer clients prior to the maturity of the first contract, the producer must
continue to pay the fixed fees up to the maturity of this contract and the rates paid by
other producers will not be subject to any adjustment. On the other hand, as mentioned
in Article 3.5.3 of the document Gaz Métro-1, Document 1, producers who do not renew
their contract while the break-even point has not yet been reached must pay an
allowance. In this case, other producer clients will not be subject to an increase.
Original: 2010.09.14
Gaz Métro – 1, Document 1.24
Page 1 of 2 However, in the case where a new producer adds a receiving point and that the
receiving capacity is sufficient, applicable rates must be newly calculated in order to
share the costs of connection pipelines among all user producers and these pipelines.
However, if new investments were required in order to increase the receiving capacity,
the new producer would be responsible for the charges.
Question:
12.2
Please comment on the stability of the rates referred to at point (ii) if the answer is
affirmative at point (i) and considering the answer to the previous question.
Answer:
Rates would remain effectively stable in the case of a closure of a producer
client, but may be called to be lowered in the case where a new producer is
added to a receiving point.
Original: 2010.09.14
Gaz Métro – 1, Document 1.24
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Unit Rate to Volume Delivered Outside the Franchise
References: (i)
(ii)
Gaz Métro 1, Document 1, Page 37, Line 1
Gaz Métro 1, Document 1, Page 37, Line 18
Preamble:
At point (i), Gaz Métro states:
“The application of this allocation factor as part of the allocation study of the costs for
year 2008/2009 allowed identifying that 32% of the gas network pipelines are
transmission pipelines.”
At point (ii), Gaz Métro specifies regarding the allocated costs according to the derived factors:
“For all these costs, the segment allocated to the transmission function is 16%.”
Question:
13.1
Please show in detail how the application of the CONDPRIN factor allows identifying that
32% of the gas network pipelines are transmission pipelines?
Answer:
The breakdown of main pipelines in the allocation of costs is done via a method called
CAU. It allows for making a distinction between the pipelines according to their purpose.
•
•
Carrier pipelines feed the various distribution networks;
Distribution pipelines allow for the connection to service lines.
The breakdown of costs for carrier and distribution pipelines that cannot be directly
attributed to each rate class requires the application of certain hypotheses.
Two important functions can be perceived for distribution pipelines:
•
•
An “access” component;
A “capacity” component;
Carrier pipelines are a function of the capacity component only.
Original: 2010.09.14
Gaz Métro – 1, Document 1.25
Page 1 of 3 In order to allow the breakdown of pipeline costs between the distribution and carrier
pipelines, two pieces of information are required:
1. A unit cost ($/metre) for each type of pipeline, and the length (metre) of the
pipelines.
2. The lengths are categorized per pipe capacity:
• Distribution: 0 to 999 kpa
• Carrier: 1000 kpa or more.
Unit costs are multiplied by the lengths of each category. This provides a proportion of
costs for each category. These same proportions are then applied to the capital property
value. The 32% is obtained by the ratio between the carrier pipeline value and the total
value of the pipelines.
Question:
13.2
Please explain in detail the calculations allowing concluding that 16% of the associated
costs to the derived factors must be allocated to the transmission function.
Answer:
See answer to request for information 12.1 of the Régie (Gaz Métro-1, Document 1.12).
Question:
13.3
Please present the calculations allowing concluding that 16% of the costs associated to
the “REVBRUTD” factor must be allocated to the transmission function.
Answer:
See answer to request for information 12.1 of the Régie (Gaz Métro-1, Document 1.12).
Question:
13.4
Please present the calculations allowing concluding that 16% of the associated costs to
the “BASETARD” factor must be allocated to the transmission function.
Answer:
See answer to request for information 12.1 of the Régie (Gaz Métro-1, Document 1.12).
Original: 2010.09.14
Gaz Métro – 1, Document 1.25
Page 2 of 3 Question:
13.5
Please present the calculations allowing concluding that 16% of the associated costs of
the “REVNETD” must be allocated to the transmission function.
Answer:
See answer to request for information 12.1 of the Régie (Gaz Métro-1, Document
1.12).
Original: 2010.09.14
Gaz Métro – 1, Document 1.25
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Unit Rate to Volume Delivered Outside the Franchise
References: (i)
(ii)
Gaz Métro 1, Document 1, Page 38, Table 5
Gaz Métro 1, Document 1, Page 39, Line 21
Preamble:
At point (i), Gaz Métro allocates $5,193,557 of the contributions to the “Producer” budget.
At point (ii), Gaz Métro writes:
“The transmission costs allocated to D4 price (excluding the 4.10 section) are of
$11,112,086 and the volume of 1,582,973 103m3. The resulting unit cost is thus of 0.70
¢/m³ and this is the rate applicable to producers for this new price.”
Question:
14.1
Please indicate whether it is planned that the producers pay the contributions to fund the
investments for the main pipelines. If not, please explain the allocation of the contribution
to the “Producer” budget.
Answer:
No. With respect to the allocation of contributions to the “Producer” budget, given that
these stem from government subsidies, Gaz Métro deems it reasonable that producer
clients reap the benefits.
Original: 2010.09.14
Gaz Métro – 1, Document 1.26
Page 1 of 2 Question:
14.2
Referring to point (ii), please indicate the transmission costs allocated to D4 tariff
excluding the allocation contributions. Please calculate the resulting unit cost.
Answer:
2008/2009 Budget
2008/2009
BUDGET
Carrier
BUDGET
ALLOCATION
FACTORS
D4.6
D4.7
D4.8
D4.9
D4.10
ANNUAL DISTRIBUTION VOLUME (000 m3)
Gas lost in network
Main pipelines
Electricity transmission
Other
TOTAL OPERATING EXPENSES
GLOBAL ENERGY EFFICIENCY PLAN
ENERGY EFFICIENCY FUND
GREEN FUND
Contributions
Main pipelines
Land and easements
Civil part of stations
Delivery and holding stations (regulation equip.)
Other
TOTAL AMORTIZATION EXPENSES
TOTAL AMORTIZATION EXP. OF DEFERRED FEES
Tax on network
Tax on capital
Transmission network
Other
TOTAL TAXES AND FEES
Income tax
Other
TOTAL INCOME TAX RELATED TO RETURN
TOTAL INCOME TAX UNRELATED TO RETURN
TOTAL CONSUMPTION REBATE AND OTHER
RETURN ON RATE BASE
TOTAL DISTRIBUTION COSTS
Unit cost would be 0.78 ¢/m3.
Question:
14.3
If it collects contributions from the clients, does Gaz Métro make a distinction between
the contribution allocated to the main pipelines and the contributions allocated to other
assets? If affirmative, please provide the contributions per type of pipelines.
Answer:
Information on client contributions is not broken down by type of pipeline.
Original: 2010.09.14
Gaz Métro – 1, Document 1.26
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Unit Rate to Volume Delivered Outside the Franchise
References: (i)
Gaz Métro 1, Document 1, Page 36, Section 3.4.2.2
Question:
15.1
Please indicate whether there are contract obligations binding Gaz Métro to TCPL-TQM
or any other obligations not allowing Gaz Métro to exchange gas with the producers
delivering gas outside the franchise.
Answer:
There are no contractual constraints that prevent Gaz Métro from proceeding with
exchanges. The possibility of exchanges with producers will be evaluated on an
individual case basis depending on Gaz Métro’s operational needs and the anticipated
gas flow upon request from a producer.
Original: 2010.09.14
Gaz Métro – 1, Document 1.27
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Other Provisions
References: (i)
Gaz Métro 1, Document 1, Page 43, Line 7
Preamble:
At point (i), Gaz Métro writes:
“Gaz Métro requests the approval of the Régie regarding the methods used to establish
the applicable rates to the daily and cumulative disproportions as well as to set these
rates based on the TCPL tariffs in force when the decision is made.”
Question:
16.1
Gaz Métro requests the approval of the method used to establish the applicable rates to
the daily disproportions. However, it dose not provide the result of this method. Please
explain in detail the full method of calculations generating the results available in table 6
and 7.
Answer:
Gaz Métro simply requests that the same penalties be applied as those that will be
applied by the transportation company due to a daily or cumulative spread. Fees
payable by TCPL are indicated in Section XXII of TCPL’s “General Terms and
Conditions”. Fees are expressed in percentage of the “long distance” transportation rate
from the East. Currently, the rate of the applicable area is $1.6381/GJ. Gaz Métro simply
multiplied the percentage indicated in TCPL’s rate by the rate currently in effect in order
to obtain the rates in $/GJ for each level of imbalance. These rates were then converted
to ¢/m³ in order to comply with Gaz Métro’s overall pricing. TCPL’s rate can be consulted
on their website (www.transcanada.com).
Original: 2010.09.14
Gaz Métro – 1, Document 1.28
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Other Provisions
References: (i)
(i)
Gaz Métro 1, Document 1, Page 43, Line 11
Gaz Métro 1, Document 1, Page 43, Line 16
Preamble:
At point (i), Gaz Métro writes:
“Gaz Métro will request that the initial contracts be concluded for at least 10 years for the
clients subject to the reception tariff.”
At point (ii), Gaz Métro writes:
“This indemnity would be equal to the book value of the assets at this moment plus the
opportunity cost that the producer will pay if it is bound by a contract until the break-even
point is reached, which must correspond, in the majority of situations, to the duration of
the amortization, i.e. 20 years.” break-even point is reached, which must correspond, in
the majority of situations, to the duration of the amortization, i.e. 20 years.”
Question:
17.1
Please explain the 10 years requested for the initial validity of the contract given the fact
that the useful life of the assets is 20 years.
Answer:
It is current practice to request rate contracts that are shorter than the useful lifetime of
the assets. The case of TCE, discussed at length with the Régie, is a good example.
Question:
17.2
What will be the minimum contract validity once the initial contract of 10 years is
terminated?
Original: 2010.09.14
Gaz Métro – 1, Document 1.29
Page 1 of 4 Answer:
The minimum duration of the contract, once the initial contract has expired, is one year,
but the start-up benefit would still apply for dedicated assets.
Question:
17.3
Please indicate whether the tax for the future public services will be considered when
calculating the indemnity.
Answer:
No. Since this cost will not be incurred for years following the benefit.
Question:
17.4
At point (ii), Gaz Métro uses the conditional “would” when referring to the value of the
indemnity. Please confirm that the sentence refers to the fact that this amount is not
conditional and it would be equal to the book value of the assets at this moment plus the
opportunity cost that the producer will pay if it is bound by a contract until the break-even
point is reached. If negative, please explain the circumstances based on which the
indemnity would be different.
Answer:
Gaz Métro confirms that the conditional has no other goal than to refer to a situation that
has not yet occurred (see answer to request for information 2.2 of ACIG; Gaz-Métro-1,
Document 1.14). At reference (ii), the sentence could therefore read: “This benefit would
equal the book value [...].”
Question:
17.5
If a producer decides to end its operations when the 10-year initial agreement expires or
at any other moment before the end of the useful life of the equipment and if this client
becomes insolvent (i.e. it is impossible to pay the indemnity provided), how does Gaz
Métro intend to recover the category “A” costs that could not be recovered from the
producer if:
17.5.1. the client is the only one connected at the reception point?
17.5.2. the client shares the reception point with other producers?
Answer:
In the two figure cases, if a producer goes bankrupt during the year, the shortage to be
gained will be shared between clients (consumer and producer clients) and Gaz Métro in
accordance with the prescribed regime in effect. For the following year, Gaz Métro
expects to recover the costs from all consumer and producer clients.
Original: 2010.09.14
Gaz Métro – 1, Document 1.29
Page 2 of 4 Question:
17.6
If the costs are not paid by the producers (e.g. a bankrupt and insolvent client unable to
pay the category “A” costs), does the suggestion made by Gaz Métro imply that the
“failed” cost would be totally paid by the consumers? If affirmative, why these “failed”
costs are not incurred:
17.6.1. only by the producers?
17.6.2. only by the Gaz Métro shareholder?
17.6.3. by the producers and the Gaz Métro shareholder?
Answer:
As is explained in answers 10.3 and 10.4 to the Régie’s questions in the
document Gaz Métro-1, Document 1.10, the risk of “bankruptcy” is as much a
residual risk for Gaz Métro as it is for existing clients and other producers under
rate contract at the time of the bad debt. The requested rate principles limit the
risk over the lifetime of the dedicated assets upon receipt with the proposal of the
benefit, but the potential for sharing current costs and gains among everyone
(existing clients, producer clients, Gaz Métro shareholders) is also very important
with the contribution of the unit rate to volumes outside the territory.
Question:
17.7
Or a reception point with two producers (A and B). The two clients are connected at the
same time concluding 10-year contracts with CMC of 20,000 m3 each. After 10 years,
the client A does not renew its contract. The other renews it for one year for 20,000 m3.
17.7.1 What will happen with the rate of the reception price in the 11th year?
17.7.2 If client B interrupts its operations after the eleventh year, who is responsible to
pay the indemnity, and what are the proportions?
17.7.3 If client B interrupts its operations because of bankruptcy, who is responsible to
pay the indemnity, and what are the proportions? Would Gaz Métro recover the
entire indemnity?
Answer:
In the eleventh year, client A, who does not renew his contract, would be billed for the
benefit covering his share of costs, being 50% in this example. Thus, the applicable
receiving point rate should not be allocated and client B would not be affected.
If client B also ceases operation after the 11th year, he would be billed for the benefit
covering the other share of costs, being the other 50%.
Original: 2010.09.14
Gaz Métro – 1, Document 1.29
Page 3 of 4 If client B ceases operation due to bankruptcy and it is not possible for Gaz Métro
to recover the benefit, please refer to answers to questions 17.5 and 17.6.
Original: 2010.09.14
Gaz Métro – 1, Document 1.29
Page 4 of 4 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Other Provisions
References: (i)
Gaz Métro 1, Document 1, Page 44, Line 12
Preamble:
At point (i), Gaz Métro writes:
“If the gas received is not compliant, Gaz Métro will notify the client and can immediately
suspend the reception of the noncompliant gas until the corrective measures are taken
or can continue to accept the noncompliant natural gas.”
Question:
18.1
If Gaz Métro accepts noncompliant gas (e.g. low calorific content), how does it intend to
compensate the consumers in the consumption area affected?
Answer:
Gaz Métro would only accept non compliant gas from a producer if it had no great
impact on the quality of natural gas delivered to consumer clients and that the gas be
compliant (significant dilution effect).
Original: 2010.09.14
Gaz Métro – 1, Document 1.30
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Gaz Métro Business Risk
Question:
19.1
According to Gaz Métro, does contracting of new clients lead to the increase or
decrease of the business risk of Gaz Métro or will it be the same? Please explain.
Answer:
It is impossible to speculate on this question without knowing the rate principles that will
inevitably be adopted and without having a bit of development history for this category of
clientele. For the moment, on a strictly economic angle, Gaz Métro is of the opinion that
the demand of this new rate, with all associated applicable terms and conditions, equally
and fairly shares the risks of gains or losses among current clients, producer clients and
Gaz Métro shareholders.
Question:
19.2
Supposing that the analysis presented by Gaz Métro is based on the hypothesis that the
new producers will not affect the business risk of Gaz Métro, please indicate whether a
change in this hypothesis (e.g. contracting of new clients will lead an increase in the
business risk of Gaz Métro), would impact the offer of Gaz Métro.
Answer:
See answer to question 19.1.
Question:
19.3
Does Gaz Métro intend to subscribe provisions for bad debts regarding the producers? If
yes, what would be the range of this provision according to the scenarios analyzed and
referred to on page 28 in the GM-1 document, document 1.
Original: 2010.09.14
Gaz Métro – 1, Document 1.31
Page 1 of 3 Answer:
For the first part of the question, please refer to the answer to question 6.3 of the ACIG.
Parameters for quantifying the provision specifically for new producer clients have not
yet been established to date. However, Gaz Métro considers that this cost is a category
C cost, being distribution costs unrelated to the gas network. This cost is therefore
covered by the applicable 4% on investments upon the establishment of receiving point
rates.
Question:
19.4
If Gaz Métro decides to set up a new company, Gaz Métro 2, and if the latter has the
purpose to connect the producers to the Gaz Métro network. Would Gaz Métro accept to
offer the same tariffs as those in this file, as well as the same yield? Please explain any
difference referring to these two subjects (tariff and yield).
Answer:
This is a speculative question on which Gaz Métro cannot lean toward with respect to
this case. See answer to question 19.1.
Question:
19.5
As part of the pricing offered, please confirm that adding a producer will lead to an
increase in pricing the first years for all existing clients. If this is not the case, please
explain who will pay the difference between the costs and incomes for these clients
during the first years.
Answer:
This affirmation would be true if the receiving rate consisted only of a pricing element at
receiving points. However, the rate also includes a pricing element at delivery points.
This delivery point pricing anticipates that additional income (0.70¢/m3) will be added to
receiving point income in the case where natural gas is delivered outside the territory.
This additional income would increase project profitability as there would be a
contribution to existing carrier network fees and, thus, a rate decrease for consumer
clients. In addition, if a rate increase results in the addition of a new client, this increase
would be entirely compensated in the future by more decreases than increases, so that
other clients remain unaffected in present value.
For additional information, see answer to question 6.3 of the Régie (Gaz Métro-1,
Document 1.6).
Original: 2010.09.14
Gaz Métro – 1, Document 1.31
Page 2 of 3 Question:
19.6
Has Gaz Métro assessed the impact on pricing that the existing clients may incur
depending on whether one or several producers are connected the following years? If
affirmative, please present the scenarios analyzed. If negative, please present the
impact on pricing for the existing clients if:
19.6.1. there would be one connection in 2011;
19.6.2. there would be 5 connections in 2011;
19.6.3. there would be one connection per year, from 2011 to 2020.
As part of this exercise, you can use the data of the mean of the estimated connections
to make the other calculations presented in the file with the associated volumes (table 3
of the Gaz Métro provision).
Answer:
No. Gaz Métro did not evaluate the rate impact that may support existing clients if there
were one or more producer client connections in the following years.
The following table lists the requested analyses. Gaz Métro used the same hypotheses
as those in table 3 and the results from table 4 for service costs, rate income and the
difference between costs and income. In order to calculate the rate impact for current
consumer clients, Gaz Métro used the distribution income from the 2011 Rate Cause
budget, including GAC and Green Fund income.
[Refer to corresponding .pdf file to view table]
Original: 2010.09.14
Gaz Métro – 1, Document 1.31
Page 3 of 3 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Service Conditions
References: (i)
Gaz Métro 1, Document 1, Page 43, Line 11
Question:
20.1
How does Gaz Métro intend to make a distinction among the volumes delivered by the
two producers by using the same reception point?
Answer:
Producers should route natural gas from the wells to receiving points via collection
networks. If two producers route natural gas via two separate pipelines, Gaz Métro will
install two counters and each producer will have a contract with Gaz Métro and will be
priced separately.
In the event that two producers route natural gas to the same receiving point via one
pipeline (collection network), one counter will be installed and billing will be established
as if there was only one producer client.
Original: 2010.09.14
Gaz Métro – 1, Document 1.32
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Impact on Other Services
References: (i)
Gaz Métro 1, Document 1, Page 55, Line 22
Preamble:
At point (i), Gaz Métro writes:
“The supply that Gaz Métro would purchase from the producers would be distributed
among the supply services, compressure gas, transmission and balancing based on the
same principles as those currently applied for the purchases made at Dawn.”
Question:
21.1
Please explain the proposition to distribute the supply costs based on the same
principles as those currently applied for the purchases made at Dawn.
Answer:
Gaz Métro’s grouped pricing ensures that clients are billed independently for supply,
compression, transportation and balancing services. The purchase of a molecule at a
geographical point other than the borders of Alberta necessarily imply a reallocation of
acquisition costs for the various services that will be billed to clients. This is what is done
in the case of a purchase in Dawn and it is what Gaz Métro proposes to do for
purchases that will be done directly within their territory.
Question:
21.2
Does Gaz Métro request the approval for this distribution in this claim.
Answer:
No. This case targets the creation of a receiving rate and not the purchase of locally
produced gas by Gaz Métro.
Original: 2010.09.14
Gaz Métro – 1, Document 1.33
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Impact on Other Services
References: (i)
(i)
Gaz Métro 1, Document 1, Page 57, Line 24
Gaz Métro 1, Document 1, Section 3.5.2.2
Preamble:
At point (i), Gaz Métro states:
“The differences between the “nominations” and the volumes actually injected of the 24
producers are covered by a specific method of the latter and this method as well as the
related expenses have been described in section 3.5.2.2.”
At point (ii), Gaz Métro describes the application of a penalty in case of disproportion between
the nominations and the injected volumes. However this section does not include the
operational impacts on the nomination disproportions.
Question:
22.1
Please prove that the nomination disproportions would not need additional balancing. If
negative, please prove that the costs generated by these additional needs are entirely
borne by the producers.
Answer:
Gaz Métro still doesn’t know the delivery profile of gas producers as well as their ability
to precisely anticipate the daily production of their wells. In light of discussions that Gaz
Métro held with some producers, they seem confident in their ability to adequately
predict the production of their wells and therefore to precisely nominate. Gaz Métro does
not foresee contracting balancing tools to producers or reserving them a portion of
existing balancing tools. There are therefore no resulting additional costs for producer
needs. In the event that producer nomination imbalances produce additional costs for
Gaz Métro with TCPL, the necessary fees by Gaz Métro being based on payable fees by
TCPL, the remainder of the clientele should be indemnified.
Original: 2010.09.14
Gaz Métro – 1, Document 1.34
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Pricing Text
References: (i)
(ii)
(ii)
Gaz Métro-2, Document 1, Page 7
Gaz Métro-2, Document 1, Page 15, Section 4.1
Gaz Métro-2, Document 1, Page 13, Section 3.1
Preamble:
Point (i) shall be interpreted as follows:
“NATURAL GAS SERVICE
One or more services of the distributor among the following: natural gas supply,
compressure gas service, transmission, and balancing, and distribution.”
Point (ii) shall be interpreted as follows:
“4.1. NATURAL GAS SERVICE REQUEST
4.1.1. SERVICE REQUEST PROCEDURE
4.1.1.1. Address related to the distribution network
The service request can be made by phone, mail, email, fax or on the website of the
distributor. If the distributor requests so, this request must be drawn up when the
claimant does not understand to occupy the address concerned.
The service request of a client subject to an reception tariff must be made in writing.”
(emphasis supplied)
Reference (iii) shall be interpreted as follows:
“3.1. NATURAL GAS SERVICES
The distribution service is offered exclusively by the distributor on its territory, as
provided by the Law on the Régie de l’énergie.
Except for the clients subject to the reception tariff, the following services can be
obtained from the distributor, if the client chooses so, subject to Tariff, assumed by the
client from one or more suppliers:
Original: 2010.09.14
Gaz Métro – 2, Document 1.1
Page 1 of 2 1 the supply service, including the dilution gas;
2 compressure gas service;
3 transmission service;
4 balancing service.
The distributor supplies these services by default, according to the Tariff, unless the
client expresses the intention to contract one or more services.” (emphasis supplied)
Question:
23.1
The natural gas service excludes the reception of gas according to the definitions of the
text regarding the service and pricing conditions. However, subsection 4.1.1.1. stipulates
the service request methods for the reception service even if section 4.1. refers
specifically to the natural gas supply. Does Gaz Métro not see a contradiction here?
Should gas service definition include the gas reception? Alternatively, should section
4.1. be called “REQUEST FOR NATURAL GAS SERVICE AND NATURAL GAS
RECEPTION?”?
Answer:
Natural gas service does not exclude the receipt of natural gas. In effect, the introduction
of Article 4.2 in the document Gaz Métro-1, Document 1, page 54 justifies that the new
natural gas receiving rate will be a part of the distribution service and that the general
provisions for the distribution service will apply to both distribution rates and receiving
rates.
The definition of natural gas service therefore includes the receipt of natural gas and
thus no changes to the above references are required according to Gaz Métro.
Question:
23.2
In the same manner, in section 3.1, is it necessary to exclude explicitly the clients
subject to the reception tariff, knowing that this section specifically refers to the natural
gas service?
Answer:
Since section 3.1 deals with natural gas services that include the receipt of natural gas
(see answer to request for information 23.1), it is necessary to explicitly exclude clients
subject to the receiving rate.
Original: 2010.09.14
Gaz Métro – 2, Document 1.1
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Pricing Text
References: (i)
Gaz Métro-2, Document 1, Page 73, Section 16.6.3
Preamble:
The last paragraph at point (i) shall be interpreted as follows:
“If another client wishing to inject natural gas in the network of the distributor requests to
access, during the period covered by the indemnity, all or a part of the CMC supplied by
the client who paid the indemnity, the latter can be partially reimbursed by the distributor,
as agreed on by the parties.”
Question:
24.1
Please indicate whether the new reimbursement level is subject to certain formulas or
obligations. Would Gaz Métro be free to accept any reimbursement level deemed
acceptable.
Answer:
At this time, Gaz Métro has not yet established a formula for determining the
reimbursement level of the allowance.
Gaz Métro notes that two conditions are required before such a reimbursement can
occur. Firstly, the 10 first years of the producer’s contract must have lapsed. Secondly, a
scenario where another producer wishes to detain the released capacity at the same
receipt point must occur. Until then, Gaz Métro is open to analyze and eventually
propose rules for determining the calculation of the reimbursement in a next rate case.
Question:
24.2
Please indicate the principles that Gaz Métro intends to follow to determine if
reimbursement is necessary and to establish the amount.
Original: 2010.09.14
Gaz Métro – 2, Document 1.2
Page 1 of 2 Answer:
See answer to request for information 24.1 of the ACIG.
Original: 2010.09.14
Gaz Métro – 2, Document 1.2
Page 2 of 2 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Comparables
Question:
25.1
Does Gaz Métro know if there are other gas suppliers in North America who have an
reception tariff? If affirmative, please name them and summarize the different pricing
structures used by them.
Answer:
To our knowledge, the only gas distributor in Canada that has a receiving rate is Union
Gas. This is a locally produced gas receiving rate, the rate being “M13 Rate Schedule Transportation of Locally Produced Gas”. See the following website for more
information:
www.uniongas.com/storagetransportation/services/transportation/m13transport.asp
Gaz Métro did not find any information from the United States.
Original: 2010.09.14
Gaz Métro – 2, Document 1.35
Page 1 of 1 Gaz Métro Limited Partnership
Creation of a Natural Gas Receiving Rate, R-3732-2010
GAZ MÉTRO’S RESPONSE TO A REQUEST FOR INFORMATION
Origin:
Request for information #1 dated August 19th, 2010
Applicant:
Industrial Gas Users Association
Invoicing
Question:
26.1
Please indicate which of the following invoices will be included on the invoices of the
producers:
26.1.1. Reception
26.1.2. Delivery in franchise
26.1.3. Delivery outside franchise
26.1.4. Distribution
26.1.5. Balancing
26.1.6. Transmission
26.1.7. Inventories
26.1.8. Supply
Answer:
As mentioned in the response to request for information 23.1 of the ACIG (Gaz Métro-2,
Document 1.1), the receipt of natural gas belongs to the distribution service. It is only
this service – distribution – that will appear on producer client invoices.
Question:
26.2
Are there other services or expenses that might be invoiced to the producers?
Answer:
Fees for the daily overrun of the maximum contractual capacity may be billed (Article
3.5.2.1 of Gaz Métro-1, Document 1). However, these are not “additional” fees but fees
that are an integral part of the distribution service.
With respect to spreads between “nominated” volumes and injected volumes, fees are
required when the daily spread between “nominated” volumes and injected or withdrawn
volumes is greater than 2% of the total “nominated” volume at this receiving point (Article
3.5.2.2 of Gaz Métro-1, Document 1). Fees are also payable when the daily balance of
Original: 2010.09.14
Gaz Métro – 2, Document 1.36
Page 1 of 2 the cumulative spread account is greater than 4% of the greater of the “nominated”
volumes or the average of “nominated” volumes over the past 30 days.
On the other hand, an allowance can be billed in the event that the producer decides to
not renew their contract and that the rate break-even point has not been reached (Article
3.5.3 of Gaz Métro-1, Document 1).
In the case where a producer chooses a reading method other than the one chosen by
the distributor, actual fees related to the requested reading method may be billed (Gaz
Métro-2, Document 1, Article 5.3.1).
Lastly, certain other applicable fees (Chapter 17 of Gaz Métro-2, Document 1) may also
be billed to producers when applicable.
Original: 2010.09.14
Gaz Métro – 2, Document 1.36
Page 2 of 2