VIGP Daily Hearing Summary For June 30

DAY 11
The VIGP hearing has moved to the Commission Hearing Room in Vancouver for
the remainder of the proceedings.
BC Hydro Panel No. 6 (Lach Russel, Graeme Simpson, Mary Hemmingson, Bob
Elton,Dorell Carlson) - VIGP cost of service and rate impact panel.
The day commenced with BC Hydro reviewing its Call For Tenders ("CFT")
document, exhibit 4FF. The CFT had been distributed prior to the close of
the proceedings in Nanaimo with the understanding that the intervenors would
have a chance to review it over the weekend.
NorskeCanada cross-examination of BC Hydro Panel No. 6:
Norske began its examination with questions concerning BC Hydro's
debt/equity ratios and the financing of the VIGP project. BC Hydro views the
VIGP as an incremental project, not a rolled-in project with respect to BC
Hydro's debt/equity structure. Thus, it considers that VIGP could be
financed with 100 per cent debt. Norske queried the equity requirements that
may be required from an IPP that purchases VIGP. BC Hydro replied that it
would be expected that an IPP's equity structure would be different than BC
Hydro's , though the risk could be reduced somewhat due to the EPA that
would be signed by BC Hydro with any successful purchaser. There then
followed a series of questions concerning updated exchange rates,
differences in costs between VIGP and GSX. Norske also spent a large amount
of its cross with questions concerning the CFT; would the CFT provide a
"profile" of the projects to be bid in, i.e how would the CFT provide
information regarding the project to be bid on. Norske also asked about the
process for selling the VIGP. The rate impact of VIGP sunk costs was queried
as was any ceiling price that BC Hydro may put into place on the projects
that are being bid in. The gas price risk with VIGP and how it is addressed
in the CFT was reviewed.
The issue of Schedule A to the CFT was raised by the Commission Chair.
Schedule A of the CFT will contain the details of the evaluation process.
The Chair has requested that BC Hydro file a draft of Schedule A on
Wednesday morning, July 2 for discussion. The cross-examination completed
with questions regarding the interconnection charges required for any IPP
bidding in the CFT to assume and the choice of an independent reviewer for
the CFT.
JIESC cross-examination of Panel No. 6:
The JIESC opened with some questions regarding the gas price forecast and BC
Hydro's long term exchange rate forecast. The price sensitivity of the VIGP
to differing gas price assumptions was also reviewed and the reliability of
those gas prices. The levelized cost of electricity and its comparison with
the CFT and BC Hydro's CBG call were queried. Burrard Thermal came under
scrutiny with a series of questions concerning the forecast output of
Burrard Thermal contain in BC Hydro quarterly reports for December 2001 and
2002 and the actual output from Burrard thermal in fiscal 2002/03. The
liquidated damages that may arise out of any IPP contract were queried. The
cross completed with some questions regarding any mainland based costs for
VIGP. BC Hydro confirmed that there were no mainland costs connected to the
VIGP project.
Terasen Gas (Vancouver Island) Inc. ("TGVI") cross-examination of Panel No.
6:
TGVI opened with some questions regarding the property tax reduction that
has been granted to GSX. The compressor fuel costs were reviewed regarding
their inclusion in the Cost of Service table provided by BC Hydro. TGVI then
proceeded to engage in a lengthy series of questions regarding the CFT. The
regulatory approvals needed, capacity charges, the in-service date of VIGP,
BC Hydro's experience with ICP, GSX and its effect on the CFT timing, and
whether any CPCN granted by the BCUC would implicitly include the GSX costs
(BC Hydro responded in the negative).
Hillsborough Resources cross-examination of Panel No. 6:
Hillsborough had a very brief cross-examination of the panel touching on the
VIGP Rate of Return, financial assurances in the CFT and environmental
standards for IPP's (BC Hydro stated that IPP's are expected to have the
same environmental standards as BC Hydro).
GSXCCC cross-examination of Panel No. 6:
GSXCCC opened with some questions regarding the inclusion of spare parts
costs in the operating costs of VIGP. BC Hydro confirmed that those costs
were included in the operating costs contained in the cost of service
analysis. The foreign exchange forecasts used by BC Hydro were queried as
was the in-service date. The evaluation criteria were reviewed, as they had
been by other intervenors, along with queries regarding liquidated damages.
The CFT was again questioned, in particular the need for year-round
capacity. BC Hydro stated that there was a need for any bid-in project to
include long-term system benefits, not just short-term Vancouver Island
capacity.
BCOAPA cross-examination of Panel No. 6:
BCOAPA questioned the levelized cost of energy that was announced in the
legislature by Minister Neufeld in April as it differs from the cost of
energy that BC Hydro has filed with the Application. BC Hydro stated that
the amount announced by the Minister was the correct amount at the time and
the subsequent analysis had changed the cost of energy that was presented in
response to information requests. BCOAPA also had a series of questions
regarding the Port Alberni Co-Generation project and the pursuance by BC
Hydro of a natural-gas based generation project. BCOAPA completed with some
rate impact questions.
The Commission Chair completed the day with a discusssion with the Panel
regarding commercial sensitivities of any conditional CPCN that may be
approved by the Commission. The Chair requested that BC Hydro provide
comments on the following scenarios with regard to their commercial
sensitivities:
No CPCN
CPCN as per the CFT ( would there by any commercial sensitivities if the
BCUC was more prescriptive than the CFT?).
CPCN for IPP's that purchase the VIGP.
CPCN that goes to an EPA (i.e. who should share the price risk).
CPCN with TGVI-type conditions.
CPCN with a determination as to the cost of VIGP.
A direction with regard to a 230 kV project (i.e. no CPCN for VIGP but a
direction to proceed with the 230 kV cable).
The hearing resumed at 8:30 this morning, July 2