VIGP Hearing Daily Summary

DAY 14 - July 28, 2003 - Oral Argument

The purpose of today's session of the VIGP hearing was to allow the
Commission Panel to ask questions of BC Hydro and intervenors with regard to
the Reply Arguments from the intervenors and BC Hydro's reply argument and
to further its understanding of the arguments and test possible outcomes
that could result from its decision on the Application.
The Panel began with the stating of seven possible assumptions regarding the
final Decision:
- It is appropriate to zero rate the HVDC system in 2007 for
planning purposes.
- The Vancouver Island capacity shortfall for 2007 is 100 - 150 MW.
- The urgency for VIGP is established, but a delay to 2008 is an
acceptable risk.
- The on-island generation option is more certain in terms of cost
and timing than the 230 kV cable option.
- The long term mix of on-island generation and mainland
transmission is accepted as the best way to serve Vancouver Island.
- The evidence is not sufficient to conclude that VIGP with the GSX
is the least cost alternative.
- The Call for Tenders ("CFT") is the appropriate next step.
These assumptions were to be used by the participants in the hearing when
responding to the Commissions queries.
The Commission began with a series of questions to BC Hydro's counsel
regarding economic bypass and the use of the bypass argument vis-à-vis
Terasen Gas Vancouver Island's ("TGVI") proposal that GSX should not be
built and that TGVI's system should be used instead to provide gas to VIGP.
There then followed a further series of questions as to whether or not just
the incremental cost of VIGP to BC Hydro should be looked at or should the
cost of all utilities in a particular portfolio mix be reviewed.
BC Hydro replied that the lowest economic cost should be accepted and that
this would result in the best impact to the ratepayers of all utilities.
Counsel for TGVI responded that BC Hydro should have in place all
contractual arrangements to solidify all of the costs that VIEC will incur.
TGVI does not agree with BC Hydro that there is a tolling issue, it is
simply a cost issue.
Norkse responded strongly that the BCUC should use extreme caution in
considering other the costs to other utilities of VIGP as the evidence is
not adequately on the record to fully account for rate impacts.
CBTE also urged caution with regard to the BCUC going beyond the impact to
BC Hydro as the evidence may not be sufficient.
The Commission queried whether its jurisdiction was limited to solely BC
Hydro ratepayers and invited comments from the participants. The Commission
distributed copies of two court cases from PEI concerning this particular
question.
The Commission then invited comments on Exhibit 13K, wherein TGVI was asked
to provide the conditions that it would like to see applied to BC Hydro in
any Order from the BCUC. TGVI had requested that BC Hydro be directed to
negotiate and enter into a long-term transportation agreement with TGVI.
BC Hydro was asked whether those conditions contained in Exhibit 13K are
directions to negotiate or did they go beyond. BC Hydro replied that it
considers the answer to be conditions to negotiate. However, TGVI submitted
that it did not consider that there was any direction to negotiate in their
conditions. TGVI commented that there are two alternative gas transportation
routes and that the BCUC should be aware of the cost of gas transportation
via either route.
The Commission then put forth questions concerning the curtailment of Norske
and its role in meeting the expected capacity shortfall on Vancouver Island.
In particular, the question was put as to whether the WECC requirements
would allow for curtailment in the planning requirements of member
utilities. BC Hydro responded that it thought it was possible to design
curtailment that meets the WECC standards. BC Hydro was not ruling out the
possibility of a curtailment contract.
The Commission then began to investigate the possible granting of a CPCN and
what conditions could possible be attached.
First of all, the Commission asked BC Hydro whether or not the BCUC could
issue a conditional CPCN if it assumed that the VIGP was not the least cost
solution.
BC Hydro's counsel responded that a conditional CPCN is not likely if the
VIGP is not the least cost alternative and that if the BCUC determined that
VIGP was not the least cost alternative, the CPCN should be denied. The CFT
would be used if the BCUC cannot make a determination that VIGP is the least
cost alternative. In other words, BC Hydro counsel stated that in order for
the Commission to grant the CPCN, it must be satisfied that VIGP is the
least cost alternative. However, BC Hydro counsel also stated that the BCUC
must first decide that the VIGP is the most cost effective project, and then
the Commission could decide that a conditional CPCN is acceptable.
On the question of directions being issued to BC Hydro in a conditional
CPCN, BC Hydro stated that directions could be issued but that BC Hydro
would interpret the directions.
Norkse responded that the onus is on BC Hydro to prove that VIGP is the most
cost-effective project, the onus is not on other parties to make that
determination.
CBTE, GSXCCC, BCOAPO and the JIESC also stated that it did not believe that
the BCUC had jurisdiction to issue a CPCN for the VIGP if it was not the
most cost effective solution.
There ensued a discussion on the ability of the Commission to issue
directions. The Commission concluded that if the CPCN is denied, it did not
have the jurisdiction to then issue directions to BC Hydro.
TGVI weighed in with its comments. TGVI was in stark contrast to the other
intervenors. TGVI looked as section 45 of the Utilities Commission Act ( the
section requiring a CPCN) and found no language that required a project for
which a CPCN is granted to be the most cost effect or least cost. Section 45
talks about public convenience and neccessity. The least cost is a concern,
but should not be the primary concern for the BCUC. TGVI also went on the
say that projects cannot be studied forever and that public convenience and
necessity may require that a decision be made today.
BC Hydro concluded that if the CPCN is denied and a conditional CPCN given,
then the directions in the CPCN would be considered "suggestions" to the
Board of Directors, in line with the Goldie Decision.
Finally, BC Hydro responded that suggestions could be made in the CPCN about
the portfolio methodology.
The Commission then moved on to the two cases from PEI that had been
circulated earlier in the morning. The question arising from the cases was
whether or not the BCUC could consider the rate impacts of the VIGP
application beyond BC Hydro ratepayers and therefore include in their
considerations the rate impacts on ratepayers of other utilities.
Again, Norske again stated that the BCUC should exercise extreme caution
when considering other utility ratepayers as there may not be proper
evidence presented to allow for such a determination (CBTE also agreed with
this position).
TGVI also was in disagreement with the cases as they were not dealing with
CPCN's.
The BCUC then moved onto the issue of sunk costs in this context. BC Hydro
asserted that the BC Hydro ratepayers are the group that the BCUC should be
concerned with. However, the amount that is passed on to ratepayers, i.e.
the rate impact, is properly the subject of a revenue requirements hearing,
not a CPCN hearing. Rate impacts are not an issue in this hearing. The
prudency of the costs is a separate issue from the granting of a CPCN.
The BCOAPA stated that if the CPCN was turned down, it would still be open
for BC Hydro to request that its sunk costs be allowed. However, BCOAPO had
a concern that if the CPCN is approved, that would provide support that the
sunk costs are prudently incurred.
The Commission the looked at amendments to the Schedule A, the CFT process.
The discussion was around the use of Schedule A as a condition to a CPCN,
i.e. Schedule A would only have use as an attachment to a conditional CPCN.
It would have no use if the CPCN was denied.
Norske commented that if the generation alternative is appropriate, then a
CFT is necessary.
The JIESC stated that the CFT should include the transmission alternative as
a possible solution to the Vancouver Island capacity problem.
Finally, the Commission had a few questions left for BC Hydro. It questioned
how the terms of the CFT should be reflected in any Decision. BC Hydro
responded that if a conditional CPCN is granted with a CFT, then the CFT
would not be considered as directions from the BCUC. If the CPCN was denied,
BC Hydro would not proceed with the CFT that looks like the one proposed in
Schedule A. BC Hydro would be in a position it could not accept, it would
try to find the room to get reliable service on the island until a further
option was developed, which would not necessarily be the VIGP or
transmission option.
The oral phase of argument then concluded. BC Hydro will now wait for a
Decision from the BCUC on its VIGP Application.