BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER G-37-00 SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, B.C. V6Z 2N3 CANADA TELEPHONE: (604) 660-4700 web site: http://www.bcuc.com BC TOLL FREE: 1-800-663-1385 FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and An Application by Pacific Northern Gas Ltd. for Approval of 2000 Revenue Requirements BEFORE: P. Ostergaard, Chair ) P.G. Bradley, Commissioner ) March 30, 2000 B.L. Clemenhagen, Commissioner) ORDER WHEREAS: A. On December 1, 1999, Pacific Northern Gas Ltd. (HPNG-West") filed for Commission approval its 2000 Revenue Requirements Application ("the Application") to increase rates on an interim and final basis, effective January I, 2000, pursuant to Sections 58 and 91 of the Utilities Commission Act; and B. The Commission reviewed the Application and issued Order No. G-137-99 approvIng an interim rate increase effective January 1, 2000; and C. PNG-West included a revenue deficiency for the additional cost associated with the accrual of its Other Post Employment Benefits as required under Generally Accepted Accounting Principles ("GAAP"), effective January 1, 2000, and for the income tax gross-up because the pay-as-you-go/cash basis is used to determine current income tax expense; and D. Pursuant to Commission Order No. G-7-00, a Negotiated Settlement Process commenced on February 28, 2000 for PNG-West resulting in a proposed Settlement Agreement which included the comment: "All of the parties agree to a variance from GAAP to allow post-retirement benefits to be recorded on a cash basis." The Settlement Agreement was released to the public and the Commission Panel on March 17, 2000; and E. On March 27, 2000, PNG-West responded to the public circulation of the Settlement Agreement, stating PNG-West's auditors have advised that an Order directing PNG-West will be required to permit PNG-West to account for Other Post Employment Benefits on a pay-as-you-go basis, which will be inconsistent with GAAP; and .. .12
2 F. No additional submissions were received from other Intervenors; and G. The Commission has reviewed the Settlement Agreement and considers that approval is in the public interest. NOW THEREFORE the Commission orders as follows: I. The Commission approves for PNG-West the Settlement Agreement attached as Appendix A to this Order. 2. Pursuant to Section 49 of the Utilities Commission Act, the Commission directs PNG-West to follow an interpretation of the Uniform System of Accounts to account for Other Post Employment Benefits on the pay-as-you-go/cash basis. 3. PNG-West is to file permanent Gas Tariff Rate Schedules that are In accordance with the terms of the Settlement Agreement and this Order. 4. PNG-West is to inform all customers of the Settlement Agreement and its effect on rates. 5. Refunds plus interest, calculated at the utility's short-term borrowing rate to the date of refund, are to be credited to customers' accounts based upon actual consumption from January I, 2000. DATED at the City of Vancouver, in the Province of British Columbia, this Attachment OrderlPNG (West) 2000RR NegStlmnt BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER G-37-00 V4 ,.3 \ "\.. day of April 2000. BY ORDER P.u;: U~ Peter Ostergaard Chair
ApPENDIX A to Order No. G-37-00 Page 1 of 22 WILLIAM J. GRANT SIXTH FLOOR, 900 HOWE STREET, BOX 250 EXECUTIVE DIRECTOR, VANCOUVER, B.C. CANADA V6Z 2N3 REGULATORY AFFAIRS & PLANNING TELEPHONE: (604) 660-4700 bill. grant@bcuc.com BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 CONFIDENTIAL VIA FACSIMILE March 2, 2000 Dear Participants: Re: Proposed Settlement of Issues Pacific Northern Gas Ltd. (West) ("PNG") 2000 Revenue Requirements The purpose of this letter is to record the proposed settlements achieved with respect to PNG Revenue Requirements Application filed December 1, 1999. The enclosed proposed settlement remains confidential until it is submitted to the British Columbia Utilities Commission for consideration. I, therefore ask that you provide to me a communication of endorsement for the proposal by Friday, March lO, 2000. At that time, the Settlement Agreement will be made public and provided to the Commission and all interested parties. PNG has recalculated the revenue requirements schedules to reflect the settlement adjustments It is recognized by all the parties that the agreement represents a package proposal within which there has been give and take by all parties. No issue is to be severed from the proposed settlement without allowing signatories the opportunity to address other related issues in the package. In accordance with the NSP Guidelines, the right of parties to dissent from a proposed agreement is explicitly recognized by the Commission. If a party dissents, it can submit a written argument to the Commission panel. If the Commission panel is of the view that the dissent is reasonable and material, it may request written rebuttal argument or, where the settlement review process is to occur at an oral hearing, request argument at the oral hearing. If the dissent is determined to be reasonable and material, the dissenting party retains the right to present evidence and to cross-examine, or to rebut the evidence of others if there is a written hearing. W.J. Grant JJH Enclosure cc: Mr. Craig P. Donohue Director, Regulatory Affairs and Gas Supply Pacific Northern Gas Ltd. PNG/PNG(NE)/2000RR/PrposedStlmtIssues, West 3/2/00
ApPENDIX A to Order No. G-37-00 Page 2 of 22 Pacific Northern Gas Ltd. 2000 RATE APPLICATION ADR SETTLEMENT TERMS Sales Forecast 1. Use 112 GJ use per account for residential customers. 2. Increase small industrial sales customers forecast from 1 628 000 in 2000 rate application to 1 720000 GJ, an increase of 92000 GJ. 3. Change industrial customer forecasts to: Skeena Cellulose 3600000 GJ Eurocan 3300000 GJ 4. Implement a gas deliveries deferral account to record the extent to which net margin received from Methanex, Skeen a and Eurocan in 2000 varies from forecast net margin based on the ADR forecast deliveries. The parties agree that the deferral account is an extraordinary remedy to this year's potential volatility in large industrial volume forecasts, and the approval is limited to calendar year 2000 only. PNG is to provide monthly statements of the financial status of the deferral account, along with a year end report. That report is to be filed by January 31, 2001, detailing the effectiveness of the account. If at any time the deferral account exceeds $1,000,000 cost to customers, PNG is to immediately advise the Commission and the participants to this Settlement. The deferral account is intended to record net margin changes to PNG after accounting for offsetting impacts such as company use gas, force majeure situations or any other mitigating circumstances not related to the normal gas consumption of the three customers. The industrial customers have agreed to the implementation of this deferral account to achieve settlement of the 2000 revenue requirement application and believe the deferral account reduces the business risk of PNG by transferring the large industrial sales volume risk to customers.
ApPENDIX A to Order No. G-37-00 Page 3 of 22 Operating, Maintenance, Administrative & General Expenses ("O,M,A&G") 1. Reduce applied for 2000 gross O,M,A&G expenses from $15.105 million to the 1999 ADR gross O,M,A&G expenses of $13.983 million, a reduction of $1.122 million, as follows: Operating Expenses - Other (Account #685) $ 250,000 Administrative & General Expenses - Company Benefits - OPEB's (Account #725) 339,000 - Other - Business Development (Account #721) 280,000 - Other - General (Account #721) 253,000 $ 1,122,000 All of the parties agree to a variance from Generally Accepted Accounting Principles ("GAAP") to allow post-retirement benefits to be recorded on a cash basis. 2. Forecast 2000 transfers of overhead to capital will be based on the overhead capitalization ratio contained in the 2000 rate application. 3. Business Development costs will be deferred with possible recovery out of future cost savings and revenues attributable to business development activities. Capital Generally, only those additions that are mandatory for safe, reliable service or have a simple payback by October 2002 should be undertaken. Defer as many capital expenditures as possible until the future of the Methanex contract is more certain. Delay all, non-vital safety and reliability rehabilitation projects that are related to Methanex's demand. 1. Reduce forecast capital additions by $500,000 compared to that contained in the 2000 rate application. 2. Reduce cash working capital by the amount of the projected insurance receivable (i.e. $2.325 million).
ApPENDIX A to Order No. G-37-00 Page 4 of 22 Return on Equity 1. Use 10.25 percent return on equity based on a 75 basis points risk premium relative to the low risk benchmark utility. Gas Supply Costs 1. Use February 24, 2000 forward gas price strip to determine projected unit gas supply costs. Rate Design All parties recognize a need for continued rate re-balancing to better recognize the incidence of cost causation by each rate class. The Commission's last Decision on this issue directed that rate design shifts should be limited to 10% rate increases for the composite of revenue requirements, gas costs and rate design. The rapid rise in gas costs has prevented taking any rate design this year. However, if gas costs moderate next year, there may be an opportunity for rate re-balancing within the cap of 10% rate impacts. 1. Remove deficiency volume rate rider as Skeena made up deficiency volumes in December 1999. 2. Reduce hearing costs by $100,000 pending determination of actual costs. 3. PNG will pay industrial customers their share of the income tax adjustment associated with overheads pursuant to the tenllS of the 1999 ADR settlement.
The British Columbia Public Interest Advocacy Centre ~ " ~ 81 5 - 815 West Hastings Street Vancouver. B. C. V6G 184 Tel: (604) 687-3063 Fax: (604) 682-7896 email: bcpiac@bcpiac.com http://www.bcpiac.com Via fax and mail: 660-1102 BCUC log # ...... .at.%~.6.. .. _ March 10, 2000 RECEIVED Robert J. Pellatt MAR 1 6 2000 . Commission Secretary BC UTIUTIES Routing.l$...'<v <?# COMMISSION 6th Floor - 900 Howe Street Vancouver, BC V6Z 2V3 ·Dear Mr. Pellatt: Re: Pacific Northern Gas Ltd. Settlement Agreement CAC(BC) et al. agrees with the drat't settlement agreement as circulated and as ~ended by Mr. Hague's March 7, 2000 fax. cc: Craig Donahue, PNG RJG:ll p: \msoffice \ dick\ energy\ 7174 \pellsettlement.let ApPENDIX A to Order No. G-37-00 Page 5 of 22 Michael P. Doherty 687·3034 R . .J. Gathercole e87·3006 ~ Sarah Khen 687·4134 Patricia MecOonald 687·3017 ~ Susan Prosl!!er Cercicled student;) 687·3063 ~ 6arristers & Solicitors ---..,.
File: 5.6.14. Via Fax: (604)660-1 102 March 9,2000 Mr. William J. Grant Executive Director Regulatory Affairs & Planning British Columbia Utilities Commission 6 11 ' Floor, 900 Howe Street, Box 250 Vancouver, B.C. V6Z2N3 Dear Mr. Grant: Re: Proposed Settlement of Issues Pacific Northern Gas Ltd. (West) 2000 Revenue ReqUirements Kitimat Municipal Council has had an opportunity to review the settlement arrived at among the attendees at the B.C.U.C. Alternative Dispute Resolution for P.N.G.'s year 2000 rate application. Council agrees the tenns are fair and reasonable and as such endorses the settlement. Funher to the fax of March 7> 2000, from your Mr. John Hague, Senior Financial Analyst, the District of Kitimat has no comment. I f you have any further questions please give me a call. Yours truly, .~ ( Murucipal Manager TH:ml ApPENDIX A to Order No. 0-37-00 Page 6 of 22 KITIMAT DISTRICT OF KITIMAT 270 City Contre Kltimat. British Colurnhi;:\ Canada vee 2H7 Phone (250)632-2161 Fax (250) 632-4995 acuc log iF" .. 1.. .s .5..~ ....- RECEIVED MAR 1 0 2000 RoutingG~~ WG:..&I'K .J1'~ •. Qg,~::: Ct:f.'>
ApPENDIX A to Order No. G-37-00 Page 7 of 22 BURNS LAKE SPECIALTY WOOD LTD. Box 1229, BURNS LAKE, B.C. CANADA VOJ 1EO PHONE: 250-698-7391 FAX: 250-698-7682 Fa< Transmission To: John Hague From: Barry Metzner Re: PNG - Draft Settlement Agreement pages: 1 From: (250) 698-7682 Date: March 09, 2000 at 13:41 • Comments: The agreement is acceptable to us Barry Metzner BCUC Log #.~.f..s.:~. . _._ R EC EIV E 0 MAR 0 9 2000 Rou ti nF./JL'd..;f..(l::.j. .. f.t:!..c /( ... ~:;[H~ ... a.~!ti:. ___C t.:f":£_ .. _. The content of this fax is confidentJal, rf the reader IS not the Intended recipient or Its agent, be advised that any dlsseminatJon, distribution or copymg of the content of this fax is prohibited. If you have receIVed this fax in error. please notify us ImmeOiatelv and retum the onginal fax to us at our exoense.
Alriatl Ene'IY canada. Ltd. 1006-1166 Alb.,,,, Sl Vantouvar, ac, Canada V6E 3ZJ Telephone 804-a2.U4Q Facsimile 604-682·"'1 March 15. 1999 Mr. Bill Grant British Columbia Utilities Commission SIXth Aoor, 900 Howe street Vancouver. B.C. vez 2N3 Fax No: 660-1102 Dear Mr. Grant: RE: Pacific Nonhem Gas Ltd. - 2000 Revenue Requirements Application On behalf of Alcan Smelters and Chemicals Ltd. and our other industrial and commercial customers on the PNG system, Avlsta Energy would like to endorse the proposed settlement dated March 2nd. 2000. In addition, we support the wording change to the last paragraph under the Sales Forecast section as suggested by Fred Weisberg. L __- ApPENDIX A to Order No. G-37-00 Page 8 of 22 AV'S7.Energy aeue Log # ...... 2B.'f.I.. ... RECEIVED MAR 1 6 2000 Ch-. -T1/J r , 1"(G Routing.::t~."f-~ Qt1."~. og/(..-(~. An effllia!e 01 A.'$la Corp.
ApPENDIX A to Order No. G-37-00 Page 9 of 22 WEISBERG LAW 2730 Ailsa Crescent North Vancouver, B.C. Canada V7K 2Bl COR PO RAT 0 N Tel: 604 980 4069 Fax: 604 980 6357 fjw@)c.sympatico.ca Marc.b. 10, 2000 BY FAX British Columbia Utilities Commission 6th Floor - 900 Howe Street Vancouver, B.C. V6Z2N3 BCUC Log # ...... cl.Z.b...¥.. .......... . RECEIVED MAR 1 0 2.000 Dear Sirs/Mesdames: Routing. .... _-_. .... _ .... ·_ _. . ... ----.. _.. . --._. ............................. . Re: Pacific Northern Gas (West) 2000 Revenue Requirement Application Proposed Settlement of Issues Our File: 600.1 Cantor Corporation ("Canfor"). Eurocan Pulp and Paper Co. ("Eurocan'") and Skeena Cellulose Inc. ("Skeena"). collectively referred to as the IGI Resources, Inc. Industrial Customers Group. have reviewed the "PNG 2000 Rate Application ADR Settlement Terms" document circulated by CommiSsion staff on March 2, and the amending letter dated March 7. 2000. With regard to the fmal sentence of paragraph 4 under the heading "Sales Forecast", we suggest that it should read U ••• the deferral account reduces the business risk of PNG by transferring the large industrial sales volume risk to customers." In our view, this suggested wording accurately reflects the understanding and agreement of the ADR participants. and precludes any potential controversy regarding the meaning of "some n or "a large part" of the sales volume risk. In Ught of the fact that PNG's business risk has been significantly reduced by the establishment of a deferral account for large industrial volumes, the IGI Resources, Inc. Indust:ri.al Customers Group harbours some concern as to whether a 7S basis point risk. premium remains appropriate. However, given the nature of the ADR negotiations, we are prepared to accept that level of return on equity for the one year term of the 2000 ADR Settlement and the large industrial volumes deferral account.
ApPENDIX A to Order No. G-37-00 Page 10 of 22 British Columbia Utilities Conunission March 10, 2000 ... page :2 With the change suggested above, and subject to our review of any changes proposed by other participants, the IGI Resources, Inc. Industrial Customers Group accepts and supportS the ADR Settlement Terms. enc:s. copy to C. Donohue D. Bursey R. Gathercole J. Langley J. Lutes
ApPENDIX A to Order No. G-37-00 Page 11 of 22 BUll, HaUSSER & TUPPER BAlUUS"l"ERS /II:. SOIJCITORS P. n",t & r,.odf-M rlf"i:. II.KllllrJ 3000 ROYAL. CENTRe: • P.O. Box, 1130' 10:1:1 WEST GEORCI'- STREE!'!' • VANCOUVSR, BRITISI'! C;:QL.UMBII'\ • C'-NAOA V6E 31'13 TEL.EPI'IONE (604) 1567-6575 • FI-X (604) 641-4949 • W(;'B SITE: WWW.SoHT.COM 8cue Log i~ ...... 2..s...~.¥..._ Reply Attention of; David Bursey RECEIVED Diret:l Line: 641.4969 t:-mail: dwb@bht..com MAR 1 4 2000 Our file No.: 99-6084 Date: March 14, 2000 Ro utl . n g C .. C ,! ' . • D ,,_ . --( C 1 1' V A IA /:" ;;;;a J kwG- .. Qt,IG - (/-'Is. British Columbia Utilities Commission Sixth F1oor, 900 Howe Street. Box 250 Vancouver, Be V6Z 2N3 Attention: W. J_ Grant. Executive Director, Regulatory Affairs & Planning Dear SirslMesdames: Re: Proposed Settlement of Issues Pacific Northern Gas Ltd. (West) ("PNG") 2000 Revenue Requirements Methanex Corporation submits the following comments on the Settlement proposal attached to the Commission's letter dated March 2,2000. Methanex has two points of clarification, as follows: 1. Large Industrial Sales Forecast Deferral Account Methanex has read the comments submitted by Canfor, Eurocan and Skeena in Mr. Weisberg's letter dated March 10 and agrees that the wording suggested by Mr. Weisberg best captures the view of the large industrial customers on the business risk issue. Specifically. Methancx agrees that the last paragraph of item 4 of the Settlement Terms should be re-written to read as follows: ... the Deferral Account reduces the business risk of PNG by transferring the large industrial sales volume risk to customers. W'''H OFFICES IN V"NCQUVER AND SHANClI"A'
BUll. HOUSSER & TuPPER ApPENDIX A 2 to Order No. G-37-00 Page 12 of 22 2. Transfers of Overhead to Capital Methanex read the comments submitted by PNG in Mr. Donohue's letter dated March 10. Methanex accepts the clarification suggested by PNG to include the word forecast. The discussion on the adjustment for the 2000 projected capitalization ratio and the reduction in the forecast transfer of overhead to capital raises a general concern. Methanex is concerned that the rate-setting model creates an incentive for PNG to capitalize more overhead costs than forecast. Since the 2000 rates will be based on a forecast amount of overhead cost transferred to capital, there is potential for the actual overhead cost that is capitalized in 2000 to vary significantly from the forecast. IfPNG capitalizes more overhead cost than the forecast embedded in the rates, those additional costs will be deferred for recovery in future years. Additionally. PNG's actual expenses in 2000 in this category may be lower as a result of the greater capitalization of overhead. In that case, PNG will benefit since the forecast overhead expense embedded in the rates and recovered from customers will be hlgher than the actual amount expensed. The overhead adjustment in rate-setting has extra importance in the context of tbis Settlement because of how the 2000 0, M, A & G budget was reduced to the 1999 ADR level and how the overall gross reduction of $1.122 million in forecast 0, M, A & G expenses is offset by overhead adjustment. Apart from the reductions to Company Benefits (for OPEB) and to Other (for Business Development) which were specific reductions directed by the Settlement, the balance of the Settlement reduction is achieved by reducing accounts 685 by $250,000 and 721 by $253,000. The choice of accounts 685 and 721 is significant because those two accounts are subject to the overhead transfer adjustment. Lowering the gross amounts in 685 and 721 reduces the forecast transfer of overhead to capital since the projected capitalization ration is applied to the reduced account total. This adjustment, in turn, reduces the net effect of the gross reduction of $1.122 million to the 0, M, A & G budget - an effec~ that would not occur if other cost accounts were reduced instead of 685 and 721. Methanex. is not proposing any change to the Settlement, but is giving notice of an issue that should be examined in next year's application. Methanex submits there should be careful accounting in next year's application of overhead cost that is actually transferred to capital to ensure the actual cost arc justified before being allowed in rate base.
ApPENDIX A to Order No. G-37-00 Page 13 of 22 BUll. HOUSSER & TuPPER 3 Subject to these two qualifications, Methanex accepts the proposed Settlement. I would be pleased to answer any questions to elaborate further on these points. Yours truly, BULL, HOUSSE.R & TUPPER ~~ David Bursey {/ rr -. -. p -DWB/eal/8240S2 Copy to ADR Participants
ApPENDIX A to Order No. G-37-00 Page 14 of 22 Pacific Northern Gas Ltd. paCifiC Suite 1400 ~~ Northem 1185 West Georgia Street Vancouver. British Columbia -_GasUd. V6E 4E6 (604) 691-5882 Fax: (604) 691-5863 Craig P. Donohue Director. Regulatory Affairs & Gas Suppl BCUC log -If · E ' : J , ~l n R E C ·t '~'D-MAR 21 2000 Via Fax and Mail i'J I / March 14, 2000 ~~ B.C. Utilities CommissIOn File No.: 4.2.7(2000) 6th Floor - 900 Howe Street Vancouver, B.C. V6Z2N3 Attention: R.I. Pellatt Commission Secretary Dear Sir: Re: Proposed Settlement ofIssues for PNG's 2000 Revenue Requirement PNG wishes to comment on the wording change to the settlement document suggested by the Industrial Customers Group in Fred J. Weisberg's letter to the Commission dated March 10, 2000. The wording change would result in the last paragraph under the Sales Forecast section of the settlement agreement reading as follows: The industrial customers have agreed to the implementation of this deferral account to achieve settlement of the 2000 revenue requirement application and believe the deferral account reduces the business risk of PNG by transferring the large industrial sales volume risk to customers. Mr. Weisberg states in his letter that the "suggested wording accurately reflects the understanding and agreement of the ADR participants". PNG emphasizes the wording of this paragraph is presented in the context of what the industrial customers believe to be the case and therefore does not reflect the agreement of all the ADR participants. PNG's views on the impact of the deferral account on sales volume risk would be characterized differently than what is believed to be the case by the industrial customers. PNG is in agreement with allowing the industrial customers to state their opinion in the settlement agreement but is not in agreement with the statement itself. Please direct any questions regarding this letter to my attention. C.P. Donohue CPD:sI Attach.
ApPENDIX A to Order No. G-37-00 Page 15 of 22 Pacific Northem Gas Ltd. r:lliiII Suite 1400 c:::::", 1185 West Georgia Street .L..J. .I _U_ .. Vancouver. British Columbia ~....,;G' asUd. V6E 4E6 (604) 691-5882 Fax: (604) 691-5863 Craig P. Donohue Director, Regulatory Affairs & Gas Supply BCUC Log # .... ~.f..7.O'. .. _.. _ _ RECEIVED Via Fax & Mail MAR 21 2000 March 10, 2000 ~ B.C. Utilities Commission File No.: 4.2.7(2000) 6th Floor - 900 Howe Street Vancouver, B.C. V6Z2N3 Attention: W.J. Grant Dear Sir: Re: Proposed Settlement ofIssues for PNG 2000 Revenue Requirement PNG hereby endorses the proposed settlement distributed by you under cover of letter dated March 2, 2000 subject to the following: 1. Under the heading "Operating, Maintenance, Administrative & General Expenses ("O,M,A&G")" a reduction of $339,000 in O,M,A&G is made to reflect the continuation of accounting for other post employment benefits ("OPEB's") on a cash basis rather than on an accrual basis as directed by the Canadian Institute of Charter Accountants. This reduction was made on the understanding the Commission would issue an Order to PNG directing it to account for OPEB's on a cash basis. Therefore the settlement document needs to reflect this understanding. PNG recommends a sentence be added to section 1 stating something like the following: "The above reduction of $339,000 for OPEB's is conditional upon the B.C. Utilities Commission directing PNG to continue to account for OPEB costs on a pay as you go basis." 2. Statement 2 under the O,M,A&G heading states that "Transfers of overhead to capital will be based on the overhead capitalization ratio contained in the 2000 application". This statement is intended to ensure the parties acknowledge that when adjustments are made to the applied for level of O,M,A&G expenses the forecast transfers to capital will change as a result of the projected 2000 overhead capitalization ratio applying to the new O,M,A&G figures. To clarify this point the words "Forecast 2000" should be added so that statement 2 reads as follows: "Forecast 2000 transfers of overhead to capital will be based on the overhead capitalization ratio contained in the 2000 application". Please direct any questions regarding this letter to my attention. CP Donohue
~G::iC:m .1... J1. a-.....' . i.!..J. r . GasUd. Craig P. Donohue Director, Regulatory Affairs & Gas Supply Via Courier March 2, 2000 B.C. Utilities Commission 6th Floor - 900 Howe Street Vancouver, B.C. V6Z2N3 Attention: R.J. Pellatt Commission Secretary Dear Sir: Re: 2000 ADR Settlement Regulatory Schedules 1 to 5 Enclosed are 10 copies of the above noted regulatory schedules 1 to 5. Also enclosed are 10 copies of the Table at Tab Application, Page 6 revised to consistent with the enclosed regulatory schedules. Please direct any questions regarding this letter to my attention. Yours truly, C~ C.P. Donohue CPD:sl Attach. ApPENDIX A to Order No. G-37-00 Page 16 of 22 Pacific Northern Gas Ltd. Suite 1400 1185 West Georgia Street Vancouver, British Columbia V6E 4E6 (604) 691-5882 Fax: (604) 691-5863 File No.: 4.2.7(2000) acuc Log #"".2,,,fo..'. ........... RECEIVED MAR 0 2 2000 Routing. ...... oH .............._ ..............._ .. .... u .......... u .............................................. ,~o_.
Pacific Northern Gas Ltd. UTILITY INCOME & RETURN SCHEDULE I (OOO's) Line Ns2.. Energy sales (TJ) 2 Average rate per GJ 3 Per cent increase in rates 4 5 Transportation service (TJ) 6 Average rate per GJ 7 Per cent increase in rates 8 9 Total deliveries (TJ) IO II Utility revenue 12 Energy sales 13 Interim rates - sales 14 Transportation service 15 Interim rates - transportation 16 17 18 Cost of sales 19 20 Gross margin 21 22 Operating expenses 23 Maintenance expenses 24 Admin. & general expenses 25 Property taxes, BC capital tax 26 Depreciation 27 Amortization 28 Investment income, other revenue 29 30 31 32 Earned return before income taxes 33 Income taxes 34 35 Earned return 36 37 Utility rate base 38 39 Return on rate base ApPENDIX A to Order No. G-37-00 Page 17 of 22 Test Year Normalized Forecast ADR 2QQQ .l.222 .l.222 .l.222 6026 7552 7576 8371 $6.31 $3.92 $3.93 $3.48 60.92% 12.70% 12.92% . -16.70% 33240 29477 29477 29397 $0.85 $0.88 $0.88 $0.92 -4.15% -3.62% -3.62% -11.64% 39266 37029 37053 37768 $38,244 29,631 $29,783 29,142 (198) 28,478 26,055 26,055 26,960 (317) 66,207 55,686 55,838 56,102 20,415 12,743 12,812 12,901 45,792 42,943 43,026 43,201 11,003 9,521 9,521 9,605 752 977 977 1,002 5,220 4,988 4,988 4,796 3,237 3,238 3,238 3,215 6,258 6,041 6,041 6,095 926 822 822 803 (1,314) (1,270) (1,270) (1,300) 26,082 24,317 24,317 24,216 19,710 18,626 18,709 18,985 5,914 5,106 5,143 5,210 $13,796 13,520 $13,566 13,775 $146,460 146,830 $146,830 $145,947 9.42% 9.21% 9.24% 9.44% PNG 2000 ADR Settlement 01-03-00 4:02 PM
Pacific Northern Gas Ltd. UTILITY RATE BASE SCHEDULE 2 (OOO's) Line 1::!.Q... I Plant in service beginning of year 2 Additions 3 Disposals 4 5 Plant in service end of year 6 Accumulated depreciation 7 8 Net plant in service end of year 9 10 Net plant beginning of year 11 12 Net plant in service midyear 13 Adjustment - expenditure timing 14 Contributions for construction 15 Construction advances 16 Deferred income taxes 17 Work in progress, no AFUDC 18 Unamortized deferred charges 19 Conversion loans 20 Cash working capital 21 Other working capital 22 23 Utility rate base, midyear ApPENDIX A to Order No. G-37-00 Page 18 of 22 '. Test Year Normalized Forecast ADR 2.QQQ .l2.22 l22.2 l222 $227,615 219,940 $219,940 220,742 5,761 9,137 9,137 6,155 (475) (1,464) (1,464) (1,882) 232,901 227,613 227,613 225,015 73,260 67,088 67,088 66,886 159,641 160,525 160,525 158,129 160,527 158,388 158,388 158,991 160,084 159,457 159,457 158,560 (85) 635 635 124 (6,439) (6,487) (6,487) (5,317) (510) (530) (530) (517) (14,915) (14,915) (14,915) (14,915) 1,650 1,650 1,650 550 3,877 4,364 4,364 4,407 850 878 878 1,250 1,528 1,358 1,358 1,385 420 420 420 420 $146,460 146,830 $146,830 145,947 PNG 2000 ADR Settlement 01-03-00 4:02 PM
Pacific Northern Gas Ltd. INCOME TAXES SCHEDULE 3 (OOO's) Line MQ.. I Calculation of Taxable Income 2 Earned return before income taxes 3 Interest 4 Permanent differences 5 Timing differences 6 7 Taxable income 8 9 Calculation of Income Tax Expense 10 Income taxes payable 11 Part 1.3 tax 12 Deferred income tax 13 14 Income tax expense 15 16 Particulars of Timing Differences 17 A. Tax Effects Subject To Flowthrough 18 Depreciation 19 Amortization 20 Capital cost allowance 21 Overheads capitalized 22 Other 23 24 25 B. Tax Effects Subject To Deferral 26 Deferred charges 27 28 Timing differences ApPENDIX A to Order No. G-37-00 Page 19 of 22 Test Year Normalized Forecast ADR 2Q.QQ .l.222 .l222. .l.222 $19,710 18,626 $18,709 18,985 (8,042) (8,198) (8,198) (8,172) 12 12 12 12 201 (2,622) (2,622) (926) SII,881 7,818 S7,901 9,899 S5,287 3,479 $3,516 4,405 377 401 401 384 250 1,226 1,226 421 $5,914 5,106 $5,143 5,210 S6,258 6,041 $6,041 6,095 926 822 822 803 (5,447) (5,345) (5,345) (5,312) (812) (1,221) (1,221) (1,402) (163) (165) (165) (165) S762 132 S132 19 (561) (2,754) (2,754) (945) $201 (2,622) ($2,622) (926) PNG 2000 ADR Settlement 01-03-00 4:02PM
Pacific Northern Gas Ltd. COMMON EQUITY SCHEDULE 4 (OOO's) Line ~ Opening balance 2 Share capital 3 Contributed surplus 4 Retained earnings 5 6 7 8 Net income 9 Shares issued 10 Preferred dividends 1 1 Common dividends 12 13 Closing balance 14 15 16 Midyear common equity 17 less: acquisition premiums 18 less: investment in subsidiary companies 19 20 ApPENDIX A to Order No. G-37-00 Page 20 9f 22 Test Year Nonnaiized Forecast ADR 2QQ.Q .l222 .l222 .l222 $8,839 8,836 $8,836 8,835 2,046 2,026 2,026 2,018 53,006 50,597 50,597 51,364 63,891 61,459 61,459 62,217 7,020 6,662 6,707 7,051 0 24 24 0 (338) (338) (338) (338) (3,960) (3,960) (3,960) (3,958) $66,613 63,847 $63,892 64,972 $65,252 $62,653 $62,676 63,595 (1,918) (1,918) 0,918) 0,918) (4,939) (4,634) (4,634) (4,653) $58,396 56,101 $56,124 57,024 PNG 2000 ADR Settlement 01-03-00 4:02 PM
Pacific Northern Gas Ltd. RETURN ON CAPTIAL SCHEDULE 5 (OOO's) Line ~ Short tenn borrowings 2 proportion 3 rate of return 4 return component 5 6 Long tenn debt 7 proportion 8 rate of return 9 return component ]0 11 Preferred shares 12 proportion 13 rate of return 14 return component 15 16 Common equity 17 proportion 18 rate of return 19 return component 20 21 Total capitalization 22 23 Return on rate base 24 25 Utility rate base ApPENDIX A to Order No. G-37-00 Page 21 of 22 Test Year Nonnalized Forecast ADR 2.Q.QQ l22.2 l222 l22.2 $5,174 2,270 2,270 1,705 3.53% 1.55% 1.55% 1.17% 5.50% 4.50% 4.50% 4.50% 0.19% 0.07% 0.07% 0.05% $83,560 86,701 86,701 86,701 57.05% 59.05% 59.05% 59.41% 9.28% 9.337% 9.337% 9.34% 5.30% 5.51% 5.51% 5.55% $5,000 5,000 5,000 5,000 3.41% 3.41% 3.41% 3.43% 7.01% 7.01% 7.01% 7.01% 0.24% 0.24% 0.24% 0.24% $52,726 52,859 52,859 52,541 36.00% 36.00% 36.00% 36.00% 10.25% 9.40% 9.49% 10.00% 3.69% 3.39% 3.42~·o 3.60% 146,460 146,830 146,830 145,947 9.42% 9.21% 9.24% 9.44% $146,460 $146,830 $146,830 $145,947 PNG 2000 ADR Settlement 01-03-00 4:02 PM
Pacific Northern Gas Ltd PNG·West Division DERIVATION OF 2000 REVENUE DEFICIENCY (SUFFICIENCY) Test Year EXPENSES Operating Labour Other Company Use Gas Transfers to Capital Total 11,003 Maintenance Labour Other Total Administrative and General Labour Total Company Benefits Other Transfers to Capital Total Property Taxes, BC Capital tax Depreciation Amortization Other Income (1 TOTAL EXPENSES 26,082 Income Taxes Return on Common Equity Short Term Debt Long Term Debt Preferred Shares TOTAL COST OF SERVICE 45,793 Revenue increase due to deliveries in 2000 to 1999 Revenue increase to flow through higher company use costs in 2000 compared to 1999 ApPENDIX A to Order No. G-37-00 Page 22 of 22 ADR pifference ($000) ($000) ($000) (53) 5 38 4,548 3,302 1,246 (693) 167 9,605 265 285 (20) 487 717 (230) 752 (250) 1,628 7 1,472 10 2,983 248 159 424 3,215 22 6,258 6,095 163 926 803 123 (1,300) (14) 1,866 5,210 704 152 285 77 208 (338) 351 351 0 43,201 2,592 1,861 1,246 3,107 (515) REVDEFOO#4-ADRxls Rev Def Caus,Factors - PNG 4/13/00
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