Virtual pipeline from DC to TR a go…with conditions


Trent Ernst, Editor


The British Columbia Utilities Commission (BCUC) has given a conditional green light to Pacific Northern Gas (PNG) for construction of a so-called Virtual Pipeline between Dawson Creek and Tumbler Ridge.

Currently, PNG doesn’t have the infrastructure to meet the demand for natural gas from the community of Tumbler Ridge and the surrounding industry if another mine, such as Quintette, comes on stream.

Back in September, PNG president Greg Weeres came to town to discuss the virtual pipeline. “Right now, we are able to deliver to Quintette about half of the volume they are looking for without implementing the virtual pipeline,” said Weeres. “What they have told us, is if we are not able to meet their full energy needs, they will convert to an alternative energy source.”

If this was to happen, said Weeres, it would result in a five to six percent increase for residents of Tumbler Ridge. “What is really happening, is they [Quintette] are contributing to the overall spreading of the cost pool. If the Quintette volumes disappear from what they are forecasting, than all of the other customers rates will go up. More than they will if we can meet the Quintette requirements.”

On the other hand, the cost of the virtual pipeline, said Weeres, would only be about one or two percent.

He stated if PNG doesn’t proceed with this alternative it will be a five to six percent increase and with the virtual pipeline residential rates will go up one or two percent.

Mayor Darwin Wren has consistently argued that, if PNG needs to cover the cost of infrastructure to meet the needs of industrial users, it should be the industrial users, and not the residents, that should bear the cost of that. “Is the cost of that infrastructure going to be borne by the residents?”, asks Wren. “If it saves the locals money, that’s great, but if it is only adding cost, then we have concerns.”

While the commission panel that reviewed the proposal accepts that PNG does not have the volume to offer firm service. They were concerned that “there will be insufficient demand to warrant the long-term commitment to capital costs of the Project, which would result in negative impacts on the existing Dawson Creek and Tumbler Ridge consumers.”

So the BCUC is requiring six conditions be put in place “to mitigate the risk of lower than forecasted demand.”

Firstly, PNG must provide evidence that there is sufficient firm commitment for take-or-pay service for a minimum of 60 percent of the total forecast natural gas demand for the Tumbler Ridge Service Area, which is 140,000 GJ. This take-or-pay contract (or combination of contracts) must be set for a minimum seven year period, effective from the in-service date of the Virtual Pipeline.

Secondly, PNG must calculate the rate charged under the minimum 60 percent take-or-pay contract(based on the rolled-in cost of the existing Tumbler Ridge natural gas system with the incremental cost of the CNG Virtual Pipeline. They must also obtain “a minimum volume commitment from the PNG(N.E.) Tumbler Ridge Division of 60 percent of the forecast deliveries of CNG to Tumbler Ridge of 140,000 GJ for a minimum seven year period, effective from the inservice date of the Project”, and “file the minimum take-or-pay contracts which collectively satisfy conditions 1–3.”

PNG is also directed to file a rate proposal and accompanying rate schedule for Quintette Mine and other potential customers of the CNG Virtual Pipeline which contemplates the cost recovery mechanisms in Conditions 1 and 2; and “they must file with the Commission the RS 30 Tariff at the same time as it files the take-or-pay contracts and rate schedules in Conditions 4 and 5.”

These conditions must be met on or before Dec. 31, 2016. If they fail to meet the conditions, the approval will be revoked.

However, the commission denied PNGs request to recover the Quintette SSA Deferral Account from Tumbler Ridge ratepayers, arguing that “While maintaining Quintette Mine as a customer provides some benefit to all Tumbler Ridge ratepayers, the Commission Panel considers that the primary beneficiary of the temporary security of supply arrangement is Quintette Mine itself.

CAO Barry Elliott is cautiously optimistic that this might be what the District was looking for, at least on the surface. But he cautions, “It seems to be interspersed with some of their other obligations on the company. How are they interpreting these? I don’ think it is as simple as saying ‘this won’t affect us.’ I’m convinced that if there is a loophole they can find to make us pay, they will find it.”