CANADA
RÉGIE DE L’ÉNERGIE
No : R-3630-2007
GAZ MÉTRO LIMITED PARTNERSHIP, ,
a legal person duly incorporated, having its
principal place of business at 1717 du
Havre Street, in the City and District of
Montreal, Province of Quebec
(hereinafter called the « Appellant »
or « Gaz Métro »
and
INDUSTRIAL GAS USERS
ASSOCIATION (IGUA)
Intervenor
IGUA’S SUBMISSION ON GAZ MÉTRO’S RISK
1.
Gaz Métro’s Risk Exposure
a. Introduction
In the current file, the expert retained by Gaz Métro argues that Gaz Métro’s risk in 2008 is
greatly superior to that faced by the company in 1999. In this regard, in addition to the topics
touched on by its expert, Dr. Booth, IGUA would like to emphasize certain elements which
show that Dr. Carpenter’s evaluation is not adequately supported by the facts.
In this report, IGUA will deal with three aspects: the risk ensuing from the incentive
mechanism versus traditional regulation, the transportation risk, which was not dealt with by
Dr. Carpenter, and the composition of Gaz Métro’s clientele, which has greatly changed since
1999.
b. Gaz Métro’s Risk as Seen By Dr. Carpenter
In his evidence, Dr. Carpenter indicates that Gaz Métro’s risk has increased since 1999 for
two reasons, one being the introduction of the incentive mechanism. 1
Dr. Carpenter’s analysis sets out the following arguments:
- The introduction of the exogenous factor to counter the average decrease in volume per
consumer does not apply to small and medium flow volumes and there is a two year
delay before its application, 2 without any explicit adjustment for VGE (vente aux
1
2
Dr. Carpenter’s evidence, page 20.
Dr. Carpenter’s evidence, page 25.
IGUA’s submission on Gaz Métro’s risk
Page 2
-
-
-
-
grandes enterprises, sales to major companies) except for a reduction of the factor from
0.5% to 0.3%, which accounts only partly for that fact.3
He discusses the consumption reduction in the industrial sector between 1999 and
2008, noting the contribution of TCE in 2008 which brings volumes pretty well back to
their 1999 level (also noting the unfavourable situation of natural gas with respect to
oil); 4
Gaz Métro’s incentive mechanism has cost of service characteristics with regulatory
lag. However, this kind of regulation is riskier because the revenue cap includes the
effects of projected productivity gains which must be shared with consumers before
any gains or over earnings accrue to Gaz Métro’s shareholders;5
Modification (from 85% to 100%) of the performance indicators can be seen as an
additional obstacle for attaining an additional return for shareholders; 6
The incentive mechanism, set up in 2000 and revised in 2004 and 2007, increases the
company’s risk in comparison to traditional cost of service regulation. 7 In addition,
Dr. Carpenter indicates that the incentives create a greater short-term variation in
revenues in comparison to traditional cost of service regulation, particularly when
deferral accounts are in place to compensate for the effect of certain revenue or cost
fluctuations (both increases and decreases). 8
c. The Risk Ensuing from the Incentive Mechanism
In general, Dr. Carpenter seems to submit that setting up an incentive mechanism is riskier
than traditional cost of service cost regulation. This idea could be true theoretically depending
on the kind of mechanism, the duration for which rates are fixed, the various components
going into the formula, etc. However, Gaz Métro’s specific case does not seem to us at all to
be made up of the characteristics which would so increase the risk to shareholders, except for
one element which we will deal with below. On the contrary, the incentive mechanism only
has the risk of allowing higher levels of earnings than those available under traditional cost of
service regulation. Furthermore, it appears to us that the incentive potential is much superior
to that in place prior to 1999.
i. Forecast Mode
1. Traditional Cost of Service Regulatory Mode applicable to
Gaz Métro before 2000
Under the traditional Cost of Service regulatory mode, the regulated company makes an
update of elements of the rate case on a yearly basis. At that point, the company budgets its
expenses and volumes for the test year. Rates are then established by dividing budgeted
expenses (which include the allowed return on the rate base) by projected volumes.
In this regulatory mode, any variance at the start of the year, therefore in forecast mode, is
borne entirely by the customers. For example, all else being equal, the following situations
would appear:
3
Dr. Carpenter’s evidence, page 28.
Dr. Carpenter’s evidence, page 26.
5
Dr. Carpenter’s evidence, pages 27-28.
6
Dr. Carpenter’s evidence, page 28.
7
Dr. Carpenter’s evidence, page 29.
8
Dr. Carpenter’s evidence, page 18.
4
2
IGUA’s submission on Gaz Métro’s risk
Page 3
RATE CASE
MODIFICATION
Increased costs
Decreased costs
Increased volumes
Decreased volumes
EFFECT ON RATES
Rate increase
Rate reduction
Rate reduction
Rate increase
We can therefore conclude that there is almost no risk to the distributor in forecast mode. This
statement assumes that the regulator accepts the regulated company’s proposal, as presented.
The regulator could however decide not to accept certain of the distributor’s proposals which
could, ultimately, affect its ability to earn its expected return.
In short, in traditional service cost regulation mode, the distributor is assured, in forecast
mode and excluding the potential impact of the regulator, of earning back its entire cost of
service, including its return. However, taking Gaz Métro’s example before the setting up of
the incentive mechanism in 2000, the distributor could benefit from only a small reward over
and above its allowed return insofar as 50% of all surplus earnings then had to be reimbursed
to the users.
2. Gaz Métro’s Incentive Mechanism
It must be noted right off that the incentive mechanism in place since 2000 is the result of a
proposal presented by the distributor itself, as opposed to a mechanism imposed by the
regulator or instituted at the request of stakeholders such as the consumers. In this context, it
is difficult to conceive that the distributor would propose or accept in the course of
negotiations a mechanism increasing the company’s risk or reducing its profitability in
comparison to the traditional regulatory mode.
That being said, Gaz Métro’s incentive mechanism does in fact allow a 50% reward on
productivity gains in forecast mode, which is not possible under the traditional regulatory
mode. In addition, if the distributor manages to maintain these productivity gains over time, it
will be possible for him to continue to profit from this same reward for a period of 5 years.
Furthermore, what would happen if Gaz Métro is unable to propose, in forecast mode, a
required income below the revenue cap (thus a situation of economic loss)? According to Gaz
Métro’s incentive mechanism, the revenue required by the Distributor would be applied.
Thus, if Gaz Métro is unable to create productivity gains and to improve its return, it would
find itself in the same situation as under traditional regulation, with rates allowing the
company to recover projected costs, including its allowed return.
When compared to the traditional regulatory mode, we therefore see that the only effect which
Gaz Métro’s incentive mechanism in forecast mode has on the Distributor’s risk is to offer a
possible reward over and above the allowed return.
However, Gaz Métro must have its expenses approved each year, just as under a traditional
regulatory mode. Even though this is done as part of a lighter process, the regulator has as
much power as under the traditional mode to reduce the requests of Gaz Métro. The
Distributor thus has the same risk as in a traditional regime. On the other hand, the regulator
has less interest in not recognizing the revenue level required by Gaz Métro insofar as the
3
IGUA’s submission on Gaz Métro’s risk
Page 4
mechanism is supposed to offer sufficient incentive to the Distributor to itself achieve its
productivity gains, which is not recognized under the traditional regulation model.
In short, in forecast mode, Gaz Métro’s situation is in no way riskier under the incentive
regulation than under traditional regulation.
ii. Year End
1. The Traditional Cost of Service Regulatory Mode of before
2000
At year end in 1999 and in previous years, Gaz Métro had to file for the statutory closing of
its books. At this point, if it turned out that surplus earnings over the allowed return had been
collected, Gaz Métro could keep a 50% reward over its allowed return. The rest was returned
to its customers.
On the other hand, if there proved to be a shortfall, i.e. costs greater than actual revenues, the
shareholders then suffered a loss on their return. This is notably what happened in 1995.
2. Gaz Métro’s Incentive Mechanism
According to the incentive mechanism, Gaz Métro will be able to keep 25% of surplus
earnings at the end of the year. Furthermore, if there is a shortfall at the end of the year, the
shareholders will then suffer a loss, either of their incentive or of the allowed return,
depending on the situation at the start of the year. However, this loss will be lower than under
the traditional regulatory mode, as explained below.
Furthermore, contrary to the traditional regulatory mode, Gaz Métro will be able to keep 50%
of the surplus earnings received for the next five years if it can convert this unforeseen gain
into a long-term gain. Under the traditional regulatory mode, if the gain is a long-term one, it
must be incorporated into the budget of the next rate case, thus making all possible future
reward on this productivity gain disappear.
Thus, even though the end of year reward is less in the framework of the incentive mechanism
in the short term, there is no additional risk of not reaching the allowed return whether we are
under the regulatory mode or under the incentive mechanism. Furthermore, if we are talking
of permanent productivity gains, the incentive mechanism offers a greater likelihood of
keeping part of the gains up to 50% of them over the next five years.
iii. Deferral Accounts
Exclusions9
and
Different
Exogenous
Factors
and
The objective of setting up the deferral accounts used at Gaz Métro and the exogenous factors
and exclusions integrated to the incentive mechanism is much the same, i.e.: to protect and
compensate Gaz Métro from the effects of short and long term revenue and cost fluctuations.
In this respect, Gaz Métro is protected against temperature variations, costs of the PGEÉ (Plan
global d’efficacité énergétique, overall energy efficiency plan), interest rate variations,
9
Mécanisme incitatif, pages 14-18. Incentive Mechanism, pages 14-18.
4
IGUA’s submission on Gaz Métro’s risk
Page 5
intervener costs, 90% of the variation in PMD customer volumes, the 53rd pay period, etc.10
Certain elements are under its control and dealt with through exclusions (PGEÉ, etc.), while
elements beyond the company’s control (interest rates, etc.) are treated as exogenous factors.
When comparing the two methods of regulation, it does not seem to us that Gaz Métro’s risk
has been increased in the least through the implementation of the incentive mechanism.
Obviously, there is an annual “true-up” phenomenon in the framework of a traditional
regulation based on actual data while, in the incentive mechanism, there is a part that is
established on the basis of a mathematical formula.
We note that the parameters have evolved since 2000 in order to allow the incentive
mechanism to remain effective. This efficacy implies the certainty of obtaining, on the part of
the Distributor, the addition of a reward to the shareholders’ allowed return in exchange for
productivity gains. The addition of wind and temperature warming as factors over the last
years demonstrates the mechanism’s capacity to adapt to Gaz Métro’s situation. We consider
that these examples demonstrate that using parameters adds no additional risk to Gaz Métro.
Furthermore, there is not a single year to date in which the required income has been greater
than the revenue cap and in any case, as explained previously, in the worst of cases it would
be the required income which would be used to fix the rates generating the revenues. This
ensures, in any event, that the Distributor should at the least earn its allowed return, excluding
the short term variations within a year.
iv. The Effect of Variations of Volumes within the year Prior to 1999
in comparison to 2008
Gaz Métro has always been at risk during the year of not meeting its budgets. It is therefore at
risk on its volume forecasts and its costs.
Thus, whether it be under the traditional regime or the incentive mechanism, Gaz Métro has
always had to make do with its forecast risk, except that it has been reduced in different ways
over time. The first element is the setting up of a deferral account for temperature
normalization, which has protected Gaz Métro from the volume fluctuations caused by
temperature. The other element is the nature of Gaz Métro’s clientele. This element will be
covered below, but at this stage we would like to say that the structure of Gaz Métro’s
clientele will make it possible, as of 2008, to have a lower risk than that of 1999 with respect
to volume variations, having reduced the industrial portion thereof. In short, the situation has
changed little since 1999 and it has even improved with regard to the composition of Gaz
Métro’s clientele.
Furthermore, an important additional protection is now part of the incentive mechanism.
Indeed, one can read in section 3.2.3 of the incentive mechanism dealing with surplus earnings
and revenue shortfalls:
“At year end …
In case of a shortfall, this will be calculated comparing the actual return (as
today) with that due to the methodology retained by the Régie replacing the
fixed rate of return formula (prior to any incentive).
10
D-99-11, page 32.
5
IGUA’s submission on Gaz Métro’s risk
Page 6
Were a shortfall to be noted in the annual report, 50% of said shortfall will be
recovered by customers in the rates of the following year and treated as an
exclusion.”
Thus, contrary to the traditional regulatory mode, Gaz Métro can now recover 50% of any
shortfall against its allowed return.
We consider that this element considerably reduces Gaz Métro’s risk in 2008 compared to that
it faced in 1999 under the traditional regime.
v. Compensation of Volume Variations for the Duration of the
Mechanism
Dr. Carpenter seems to indicate that Gaz Métro’s incentive regime is riskier than a traditional
regime because the latter does not take into account all of the volume fluctuations over time.
In fact, we agree with Dr. Carpenter that the effect of volume is not totally taken into account
with respect to the PMD. Indeed, he is correct to state that only 90% of the variation in
volume is taken into account with a two year delay. It is important, however, to note that this
is true both ways. Thus, if there is an increase of volume for this clientele, the effect is to
reduce the revenue cap by only 90%, thus leaving a supplementary productivity gain of 10%
to Gaz Métro. The compensation is thus not one-directional. In this respect, it is interesting to
note that this year the situation is one of an increase in volumes.11 Thus, since the
implementation of this adjustment through an automatic formula, it does not seem to us that
Gaz Métro has an additional risk in comparison to its situation under the traditional regulatory
mode.
Furthermore, Dr. Carpenter indicates that only part of the volume variation of VGE customers
is taken into account by the reduction of the X factor by 0.2%. This is not our understanding.
According to IGUA, the reduction of the X factor by 0.2% is applied completely to take into
account the reduction in volumes of VGE customers.
A quick calculation leads us to conclude that this compensation is more than sufficient,
representing close to 75% of distribution revenue generated by rate 4 and 5 users from 2008
over five years. 12 Furthermore, excluding TCE’s share in distribution revenues generated by
class 4 and 5 customers, this represents a compensation of close to 90% of all other industrial
consumers. Thus, even if we retain Dr. Carpenter’s affirmation that only part of the
compensation of 0.2% would be for the volume variation of the VGE, e.g. 0.1% instead of
0.2%, this would mean that Gaz Métro would be compensated over the next five years for
losses of 45% of the volumes of the VGE, excluding TCE (TransCanada Energy Limited).13
11
Voir R-3630-2007, Gaz Métro-8, document 5, page 3. See R-3630-2007, Gaz Métro-8, Document 5, page 3.
0,2 % * 5 * 459,191 M$ = 45,191 M$ versus des revenus de distribution pour les tarifs 4 et 5 en 2008 de
60,5 M$ (Gaz Métro-13, document 6) 0.2 % X 5 X $459.191 million = $45.191 million versus distribution
revenues in 2008 for rates 4 and 5 of $60.5 million (Gaz Métro-13, Document 6)
13
Nous discuterons plus loin de la différence de TCE versus les autres types de clients industriels. Pour l’instant,
limitons nous pour mentionner que le risque de perdre les revenus de TCE est très faible comparativement aux
autres clients industriels. We will discuss below the difference of TCE versus other types of industrial customers.
For now, let us simply mention that the risk of losing TCE revenues is very low compared to other industrial
customers.
12
6
IGUA’s submission on Gaz Métro’s risk
Page 7
Furthermore, this compensation for VGE volume variations is directly included in the
calculation formula of the revenue cap and is therefore not linked to actual evolution. Thus, if
industrial consumers who currently use oil instead of natural gas were to return, this
compensation will still be present. The compensation would then represent an effortless
productivity gain for Gaz Métro.
All of this does not seem to us to represent a greater risk, but rather an advantage of the
incentive mechanism over the traditional regulatory mode. Moreover, the current situation in
which the volumes of the least captive customers have already left and in which everything is
coming together for the consumption of less polluting energies brings us to conclude that the
sales situation for the VGE will only improve over the next few years (for example the green
tax, an eventual carbon tax, etc.)
Finally, and as for all other aspects, if it turned out that the reduction in volumes were more
rapid than the compensations included in the calculation formula of the revenue cap, there
would then be application of the required income, which would not in any way affect Gaz
Métro’s ability to earn its allowed return before any reward.
vi. The Only Potential Risk to Gaz Métro under the Incentive
Regulatory Mode Compared to the Traditional Regulatory Mode
All of this discussion brings us to conclude that Gaz Métro has no additional risk under the
incentive regime as opposed to the traditional regime under which it was regulated before
2000. Quite the contrary, it appears to us that the risk is lower than it was in 2000, notably
through the protection against revenue shortfalls.
In fact, only one element of risk is truly present according to us, though we consider it to be
more on a theoretical level. This element would be the case in which the mechanism would
come to an end and there would be revenue shortfalls or surplus earnings which would not
have been reimbursed to the customers. Section 3.2.4 of the mechanism indicates:
“If the required revenue presented by Gaz Métro in the rate case were to
exceed the revenue ceiling, the rates would be adjusted to the level of the
required revenue, with the following reservations:
All subsequent productivity gain (required revenue less than the revenue
ceiling) would first be used to reduce the rates (before any sharing) until the
overpayments have been compensated for;
All subsequent over earnings would first be used to reduce the rates (before all
sharing) until the overpayments have been compensated for;
If the mechanism were to end, Gaz Métro would have to reimburse customers,
through rates and over a three year period, with interest weighted on capital
costs, 50% of accumulated overpayments up to 0.75% of the rate base.
The portion of the shortfall recovered from the customers would be reimbursed
to the customers, with interest, if the subsequent productivity gains and over
earnings make this possible. If the incentive mechanism were to come to an
end, the outstanding balance would be cancelled.”
7
IGUA’s submission on Gaz Métro’s risk
Page 8
We therefore note that Gaz Métro could have a shortfall at the end of the incentive mechanism in a
situation in which the revenue shortfalls had not been completely reimbursed. We consider this to
be a very minor and mostly unlikely risk.
d. The Transportation Risk
In his evidence, Dr. Carpenter does not deal with the transportation element in Gaz Métro’s
risk. According to IGUA, this element creates less risk today than in 1999 for the following
reasons:
- In 1999 :
- Long term contract with TCPL;14
- Less liquid secondary market;
- Rates that have not been unbundled, no consumer (save exception) owning their
own transport.
- In 2008 :
- Contractual quantities with TCPL are, for the most part, revised annually. Gaz
Métro can easily get rid of its transportation surpluses at this time;15
- The secondary market is more active and more liquid, thus further ensuring the
possibility of recovering stranded transportation costs ;
- A portion of transportation needs are now directly managed by customers, thus
reducing the extent of Gaz Métro’s potential stranded costs (biogas and
customer-held transportation represent, for 2008, 8.27% of peak transportation
needs).16
Despite these changes, VGE customers still have rate conditions which motivate
customers to make agreements for long periods (five or three years with continuous
renewal). IGUA has even shown, as part of its 2006 dissenting position, that if a customer
decides to no longer consume natural gas in order to change to another energy source, Gaz
Métro would find itself in a position in which it would make greater transportation
revenues than what it would have made had the customer continued to consume gas (this
was for a customer not holding his own transport, as is the case for all rate D5
customers). 17
All of these elements bring us to conclude that Gaz Métro today bears a lesser
transportation risk, on the short term in comparison to the situation that prevailed in 1999.
e. Composition of Gaz Métro’s Clientele
The composition of Gaz Métro’s clientele has greatly evolved between 1999 and 2008. The
changes can be rapidly summarized by three phenomena:
- A marked increase in residential and commercial clientele;
- A marked reduction in traditional VGE clientele; and
14
Voir R-3484-2002, SCGM-6, document 1 et 1.6. See R-3484-2002, SCGM-6, Documents 1 and 1.6.
Voir R-3630-2007, Gaz Métro – 3, document 1, page 14. See R-3630-2007, Gaz Métro – 3, Document 1, page
14.
16
Voir R-3630-2007, Gaz Métro – 4, document 6, page 1. See R-3630-2007, Gaz Métro – 4, Document 6, page
1.
17
Voir Dissidence de l’ACIG, cause tarifaire 2007, R-3596-2006, phase II, pièce C-1-11. See IGUA Dissenting
Reasons, rate case 2007, R-3596-2006, Phase II, exhibit C-1-11.
15
8
IGUA’s submission on Gaz Métro’s risk
Page 9
-
The arrival of a major player VGE consumer (TCE representing 15% of Gaz Métro’s
volumes) with a very minimal risk profile.
We can see from the table below that the VGE only represent approximately 50% of Gaz
Métro’s volumes in 2008, compared to 57% in 1999. Furthermore, if TCE is excluded in
2008, VGE customers only represent 36% of total volumes.
Similarly, VGE revenues have gone from 31% in 1999 to 19% in 2008 (17.5% if TCE is
excluded).
Thus, this demonstrates that the weight of the industrial sector is in strong decline both with
respect to volumes and revenues from 1999 to 2008. This reduction in the weight of the
industrial clientele represents, according to IGUA, a reduction in Gaz Métro’s business risk.
With respect to TCE, this client does not represent the same risk level as an a conventional
industrial customer. Indeed, this customer signed a 20 year contract with Gaz Métro, linked to
the nature of its production, being an electricity supply contract of 20 years with HydroQuébec Distribution.18 Thus, this client is not a risk to the economic growth of its sector of
activity, as a pulp and paper factory or a steel plant would be, for example (no unforeseeable
variations in production linked to the economy).
Nombre de clients, volume et revenus moyens par classe de tarif
Données projetées
1998-99
Nombre moyen de clients par classe de tarif
Tarifs D1
148 092
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2007-2008
avec TCE
continu (DM)
149 594
150 130
151 496
150 600
153 248
156 300
163 152
169 276
173 885
173 886
947
119
1 181
116
1 306
116
1 424
118
1 585
113
1 490
110
1 593
105
1 772
95
1 788
90
1 744
1 745
269
149 427
259
151 150
257
151 809
239
153 277
242
152 540
254
155 102
234
158 232
216
165 235
206
171 360
84
173
175 886
83
173
175 887
99,11%
98,97%
98,89%
98,84%
98,73%
98,80%
98,78%
98,74%
98,78%
98,86%
98,86%
Tarif D 4
0,63%
0,08%
0,78%
0,08%
0,86%
0,08%
0,93%
0,08%
1,04%
0,07%
0,96%
0,07%
1,01%
0,07%
1,07%
0,06%
1,04%
0,05%
0,99%
0,05%
0,99%
0,05%
Interruptible (tarif D5)
0,18%
0,17%
0,17%
0,16%
0,16%
0,16%
0,15%
0,13%
0,12%
0,10%
0,10%
Tarifs DM et D 3
Tarif D 4
Interruptible (tarif D5)
Total
Tarifs D1
Tarifs DM et D 3
Volume moyen par classe de tarif (millier de m³, @ 37,89 MJ/m³)
Tarif D 1
2 062 597
2 148 027
2 197 424
2 022 470
2 060 007
2 066 583
2 077 506
2 064 043
2 003 626
1 991 162
1 991 163
565 929
631 190
724 962
764 296
758 073
777 016
833 433
913 213
918 489
908 687
1 818 874
1 946 923
1 827 567
1 885 024
1 667 890
1 559 555
1 646 103
1 905 182
1 975 463
2 314 086
2 331 921
1 421 734
1 601 342
6 176 791
1 291 942
5 898 726
1 339 011
6 146 421
798 970
5 253 626
810 167
5 187 802
771 969
5 261 671
745 189
5 561 310
694 528
5 647 247
575 694
5 811 895
646 263
5 878 033
646 263
5 878 034
Tarif D 1
33,39%
36,42%
35,75%
38,50%
39,71%
39,28%
37,36%
36,55%
34,47%
33,87%
33,87%
Tarifs DM et D 3
9,16%
10,70%
11,79%
14,55%
14,61%
14,77%
14,99%
16,17%
15,80%
15,46%
30,94%
Tarif D 4
Interruptible (tarif D5)
31,52%
30,98%
30,67%
31,75%
30,06%
31,28%
34,26%
34,98%
39,82%
39,67%
24,19%
25,93%
21,90%
21,79%
15,21%
15,62%
14,67%
13,40%
12,30%
9,91%
10,99%
10,99%
Tarifs DM et D 3
Tarif D 4
Interruptible (tarif D5)
Total
Revenu moyen par classe de tarif (millier de $)
Tarifs D1
420 845
433 562
458 865
459 145
480 008
497 119
498 227
478 629
493 030
502 356
502 356
63 398
68 428
82 723
92 696
92 462
98 518
103 313
105 015
109 441
112 032
121 925
123 556
109 175
118 014
125 776
114 367
115 318
135 586
116 794
102 740
105 461
95 569
83 837
691 636
58 941
670 106
67 191
726 793
63 574
741 191
56 658
743 495
51 404
762 359
52 749
789 875
47 250
747 688
37 488
742 699
37 505
757 354
37 505
757 355
Tarifs DM et D 3
60,85%
9,17%
64,70%
10,21%
63,14%
11,38%
61,95%
12,51%
64,56%
12,44%
65,21%
12,92%
63,08%
13,08%
64,01%
14,05%
66,38%
14,74%
66,33%
14,79%
66,33%
16,10%
Tarif D 4
17,86%
16,29%
16,24%
16,97%
15,38%
15,13%
17,17%
15,62%
13,83%
13,92%
12,62%
Interruptible (tarif D5)
12,12%
8,80%
9,24%
8,58%
7,62%
6,74%
6,68%
6,32%
5,05%
4,95%
4,95%
SCGM-17
Doc 2A
R-3397-98
SCGM-10
Doc 9 A
R-3426-99
SCGM-11
Doc 2
R-3444-2000
SCGM-11
Doc 7
R-3463-2001
SCGM-14
Doc 7
R-3484-2002
SCGM-12
Doc 7
R-3510-2003
SCGM-12
Doc 8
R-3529-2004
SCGM-12
Doc 8, p1
R-3559-2005
SCGM-13
Doc 8, p1
R-3596-2006
Tarifs DM et D 3
Tarif D 4
Interruptible (tarif D5)
Total
Tarifs D1
Sources
Gaz Métro - 8 et Gaz Métro - 13
Doc 10
Doc 6
R-3630-2007
R-3630-2007
IGUA considers that when the weight of industrial customers is evaluated in Gaz Métro’s
franchise with respect to the company’s risk, the weight of TCE must be withdrawn from this
18
D-2004-197, pages 5 and 7.
9
IGUA’s submission on Gaz Métro’s risk
Page 10
calculation. Thus, we can see that Gaz Métro’s business risk has been greatly reduced
between 1999 to 2008.
f. Conclusion
It does not appear to IGUA that the business risk has increased between 1999 and 2008 as
submitted by Dr. Carpenter on the elements dealt with above.
The incentive mechanism has not added risk. On the contrary, we have demonstrated that the
mechanism provides additional protection against eventual revenue shortfalls and the only
risk Gaz Métro must bear with respect to other elements is the adding of an additional reward
to its allowed return.
The management of transportation is less risky today, the contracts more flexible, the market
being more liquid with a portion of the risk now being borne directly by the customers.
Finally, Gaz Métro’s clientele is much less based today on the industrial clientele than it was
in 1999, thus reducing this aspect of its business risk.
All of these facts together thus indicate that Gaz Métro’s business risk in 2008 is largely
inferior than that for 1999.
THE WHOLE RESPECTFULLY SUBMITTED.
MONTREAL, July 6, 2007
HEENAN BLAIKIE LLP
Attorneys for IGUA
10