Subject: VIEC final argument (para 200-210)

Date: July 16, 2003 6:28 PM

Vancouver Island Energy Corporation
Application to the British Columbia Utilities Commission
For a Certificate of Public Convenience and Necessity for
The Vancouver Island Generation Project

Applicant's Final Argument (para 200-210)
July 15, 2003


Conditional CPCN - Call For Tenders

200.    After VIEC's filing of the Application for a CPCN, a number of
alternative proposals for supplying electricity to Vancouver Island were
brought forward, as outlined above.  These proposals have some merit but
lack details and certainty relating to key factos such as reliability,
dispatchability, costs, scheduling and permitting.

201.    As a result of the interest shown by prospective suppliers, BC Hydro
raised the idea that the Commission might issue a CPCN for the VIGP,
conditional on BC Hydro conducting a call for tenders (CFT) if the
Commission were to form the view that one or several of the prospective
suppliers might prove to offer a lower-cost alternative to the VIGP.

202.    It may be that a CFT would give potential electricity suppliers an
opportunity to bid their projects into the process and demonstrate that they
have a viable low-cost alternative for supplying power.  The CFT process is
being designed to be transparent and fair, and those attributes would be
subject to verification by an independent reviewer.

203.    BC Hydro recognizes, however, that a CFT process would be relatively
expensive, not only for the utility and its ratepayers, but also for project
proponents.  BC Hydro would need to spend up to $15 million and divert a
large but unquantifiable amount of internal resources, and bidders would be
put to significant cost, to determine if there is a more cost-effective
alternative to Vancouver Island's imminent capacity shortfall.

204.    The VIGP can be completed for approximately $280 million, over and
above what has already been spent.  The fact is that the project is now well
advanced.  BC Hydro has applied for the necessary regulatory approvals and
the only regulatory steps left are the decisions.  The VIGP has a site,
detailed engineering, a steam turbine, and a firm price for a gas turbine.
Of the alternative projects, only Green Island Energy's proposal appears to
be advanced much beyond the conceptual stage, but at 105 MW in its two
phases, it is insufficient to meet the need on its own.

205.    It would be a challenge for any of the proponents to bring their
project to fruition through detailed design, permitting, and construction at
a cost comparable to completing the VIGP.  With the possible exception of
Green Island Energy, the early stage of development on the other on-island
proposals discussed in the hearing also suggest that the VIGP offers the
greates feasibility, regulatory, cost, and timing certainty.  The specific
issues of risk have been discussed above with respect to each proposed
alternative.

206.    While the foregoing my create an unlevel playing field from the
perspective of other projects' proponents, it is simply a fact.  The
investment has been made; to ignore it in comparing the alternatives to the
VIGP could increase the cost of meeting the Island's power needs, which
would be unfair to BC Hydro's ratepayers.

207.    In addition to generation proposals, BC Hydro will accept tenders
for demand-side management that are capable of contributing to meeting the
Island's capacity requirements in a reliable and sustained manner.  BC Hydro
anticipates evaluating load displacement proposals consistent with Power
Smart criteria.

208.    BC Hydro intends to sell the VIGP to the private sector if that
outcome makes economic sense.  This will take place under a competitive bid
process.  Because of hte timing imperative for new Vancouver Island
capacity, it would be expedient to conduct the VIGP sale as part of a CFT
process.



Order Sought

Vancouver Island Energy Corporation respectfully asks the Commission to
grant,

209.    An unconditional certificate of public convenience and necessity for
the construction and operation of the Vancouver Island Generation Project.

210.    In the alternative, a certificate of public convenience and
necessity subject to the following conditions:

a.    BC Hydro conducts a request for qualifications and call for tenders
(RFQ/CFT) consistent with the process outlined in Schedule A to this Order;

b.    The independent reviewer retained pursuant to the RFQ/CFT files a
final report in a form satisfactory to the Commission confirming that:

    i.    The RFQ/CFT has been conducted substantially in accordance with
the terms set out in Schedule A to this Order

    ii.    The RFQ/CFT process has been conducted fairly;

    iii.    BC Hydro has carried out the evaluation in an impartial manner,
substantially in accordance with the criteria set out in the RFQ/CFT;

c.    The Commission has satisfied itself that BC Hydro has fairly
determined that none of the tenders received in the RFQ/CFT process is
preferable to the construction of the Vancouver Island Generation Project by
BC Hydro.


The full document is too big to copy, but if anyone wants a copy, email
gsxccc@sqwalk.com

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