B.C. Reg. 265/2014, deposited December 22, 2014, under the UTILITIES COMMISSION ACT [section 3]. Order in Council 749/2014, approved and ordered December 19, 2014.

On the recommendation of the undersigned, the Lieutenant Governor, by and with the advice and consent of the Executive Council, orders that Direction No. 5 to the British Columbia Utilities Commission, B.C. Reg. 245/2013, is amended as set out in the attached Schedule.

— W. R. BENNETT, Minister of Energy and Mines and Minister Responsible for Core Review; M. POLAK, Presiding Member of the Executive Council.

Schedule

1 Section 1 of Direction No. 5 to the British Columbia Utilities Commission, B.C. Reg. 245/2013, is amended

(a) by renumbering the section as section 1 (1),

(b) in subsection (1) in paragraph (a) of the definition of “applicable customers” by striking out “or”, in paragraph (b) by striking out “rate base;” and substituting “rate base, or” and by adding the following paragraph:

(c) under the transportation rate schedule. ,

(c) by adding the following definitions:

“construction carrying costs” means a return on the feasibility, development and capital costs of a facility, equal to the utility’s weighted average cost of capital, that will be incurred during the period ending when the facility enters a utility’s natural gas class of service rate base;

“contract demand” has the same meaning as in the LNG rate schedule;

“CTS expansion project” means any of the following projects:

(a) the project to expand the transmission facilities of FortisBC Energy Inc. at and between the Cape Horn Valve Assembly and Coquitlam Gate Station;

(b) the project to expand the transmission facilities of FortisBC Energy Inc. at and between the Nichol Valve Assembly and Port Mann Crossover Station;

(c) the project to expand the transmission facilities of FortisBC Energy Inc. at and between the Nichol Valve Assembly and Roebuck Valve Assembly;

(d) the project to expand the transmission facilities of FortisBC Energy Inc. at and between the Tilbury Gate Station and Tilbury LNG Facility;

“EGP project” means the project to expand the transmission facilities of FortisBC Energy (Vancouver Island) Inc at and between the Eagle Mountain Compressor Station in Coquitlam and an LNG facility in Woodfibre, and at the Port Mellon Compressor Station;

“extraordinary retirement costs” means asset retirement costs from causes not reasonably anticipated when calculating the depreciation of the asset;

“letter agreement” means the letter agreement as set out in Appendix 3 attached to this direction;

“liquefaction capacity” means the capacity of an LNG facility, measured in terajoules per day, to liquefy natural gas to produce LNG;

“LNG agreement” has the same meaning as in the LNG rate schedule;

“LNG revenue variance regulatory account” means an account to capture the first 3 annual revenue variances between

(a) the forecast revenues from the LNG rate schedule that are used by the commission in setting rates for applicable customers, and

(b) the actual annual revenues received under the LNG rate schedule;

“long-term LNG service” has the same meaning as in the LNG rate schedule;

“operating costs”, in relation to a facility, means

(a) operating and maintenance expenses,

(b) electricity expenses,

(c) interest expenses,

(d) taxes, including property taxes,

(e) return on equity,

(f) extraordinary retirement costs, and

(g) amounts with respect to the depreciation of the

(i) capital costs,

(ii) construction carrying costs,

(iii) feasibility and development costs,

(iv) sustaining capital costs, and

(v) decommissioning and salvaging costs

determined with reference to the remaining service life of the facility, as estimated by the commission in setting rates for applicable customers;

“operation period”, with respect to phase 1B facilities, means the period beginning on the date those facilities begin operations and ending 15 years later;

“phase 1A facilities” means expansion facilities to provide

(a) liquefaction capacity of up to 40 terajoules per day of LNG, and

(b) storage capacity of between 1.0 petajoules and 1.1 petajoules of LNG;

“phase 1B facilities” means expansion facilities other than phase 1A facilities, but does not include LNG storage facilities;

“specified agreement” means an LNG agreement for long-term LNG service having

(a) a contract term of 10 years or more, and

(b) a contract demand specified for 10 years or more of the contract term;

“sustaining capital costs” means capital costs expended for the purpose of maintaining or extending the life of an asset;

“transportation rate schedule” means the Large Volume Industrial Transportation Rate Schedule 50 of FortisBC Energy Inc. as set out in Appendix 4 attached to this direction; , and

(d) by adding the following subsection:

(2) In this direction, a reference to a utility referred to in the definition of “utility” in subsection (1) includes any successor entities of that utility on amalgamation, merger or consolidation.

2 Section 4 is repealed and the following substituted:

Expansion facilities

4  (1) The commission must not exercise its power under section 45 (5) of the Act in respect of

(a) phase 1A facilities, and

(b) phase 1B facilities, if, on the date construction of phase 1B facilities begins, specified agreements are in place representing an average of at least 70% of the intended liquefaction capacity of the phase 1B facilities for the operation period, calculated as follows:

AV = Y/15

where:

(2) In setting rates under the Act for FortisBC Energy Inc., the commission must do all of the following:

(a) on January 1 of the year immediately following the year in which phase 1A facilities are completed, include in the utility’s natural gas class of service rate base the sum of the following:

(i) the lesser of

(A) the capital costs of the phase 1A facilities, and

(B) $400 million;

(ii) the construction carrying costs for the phase 1A facilities;

(iii) the feasibility and development costs incurred on or after January 1, 2013;

(b) on January 1 of the year immediately following the year in which phase 1B facilities are completed, include in the utility’s natural gas class of service rate base the sum of the following:

(i) the lesser of

(A) the capital costs of phase 1B facilities, and

(B) $400 million;

(ii) the construction carrying costs for phase 1B facilities;

(iii) the feasibility and development costs incurred on or after January 1, 2013;

(c) include in the calculation of rates for applicable customers

(i) the annual revenues from the sale of LNG from phase 1A facilities and phase 1B facilities,

(ii) the annual operating costs of phase 1A facilities and phase 1B facilities, and

(iii) the capital costs, construction carrying costs, sustaining capital costs, decommissioning and salvaging costs and feasibility and development costs respecting phase 1A facilities and phase 1B facilities;

(d) allow a utility to establish an LNG revenue variance regulatory account for the following 2 purposes, if applicable:

(i) for the operation of the phase 1A facilities;

(ii) for the operation of the phase 1B facilities;

(e) set rates for applicable customers in such a way as to allow the LNG revenue variance regulatory account to be cleared from time to time, and within a reasonable period by allowing the balance to be returned to or recovered from applicable customers.

3 Section 5 is amended by adding the following subsection:

(1.1) Before January 1, 2015, the commission must issue an order amending the LNG rate schedule as set out in Appendix 5 attached to this direction, effective on January 1, 2015.

4 The following sections are added:

Transportation rate schedule

6  (1) Within 60 days of the date this section comes into force, the commission must issue an order setting the transportation rate schedule as a rate for FortisBC Energy Inc., effective on the date the order is issued.

(2) In calculating rates for applicable customers, the commission must include the annual revenues and operating costs arising from services provided under the transportation rate schedule.

(3) Section 5 (2) applies to the transportation rate schedule.

(4) The commission must not exercise a power under the Act in a way that would directly or indirectly prevent FortisBC Energy Inc. from providing service under the transportation rate schedule.

(5) If the shipper is not creditworthy and has not provided the guarantee referred to in section 13.2 (b) of the transportation rate schedule, the commission must set the required security amount on the basis of the following:

(a) the shipper’s creditworthiness;

(b) the contract demand and the contract term of the transportation agreement;

(c) the book value of the incremental system upgrades constructed, acquired, contracted for or secured by a utility to serve the shipper;

(d) any other matter the commission considers relevant.

(6) Terms used in subsection (4) and not defined in this direction have the same meaning as in the transportation rate schedule.

EGP project

7  (1) Within 60 days of the date this section comes into force, the commission must, by regulation under section 45 (4) of the Act, exclude the EGP project from the operation of section 45 (1) of the Act.

(2) In setting rates under the Act for FortisBC Energy (Vancouver Island) Inc., the commission must

(a) on January 1 of the year immediately following the year in which the EGP project is completed, include in the utility’s natural gas class of service rate base the capital costs, construction carrying costs and feasibility and development costs for the EGP project,

(b) allow the utility to earn a return on the costs referred to in paragraph (a), and

(c) include in the calculation of rates for applicable customers

(i) the annual operating costs of the EGP project, and

(ii) the capital costs, construction carrying costs, sustaining capital costs, decommissioning and salvaging costs and feasibility and development costs respecting the EGP project.

CTS expansion projects

8  (1) The commission must refrain from exercising its power under section 45 (5) of the Act with respect to a CTS expansion project.

(2) In setting rates under the Act for FortisBC Energy Inc., the commission must

(a) on January 1 of the year immediately following the year in which a CTS expansion project is completed, include in the utility’s natural gas class of service rate base the capital costs, construction carrying costs and feasibility and development costs for the CTS expansion project,

(b) allow the utility to earn a return on the costs referred to in paragraph (a), and

(c) include in the calculation of rates for applicable customers

(i) the annual operating costs of the CTS expansion project, and

(ii) the capital costs, construction carrying costs, sustaining capital costs, decommissioning and salvaging costs and feasibility and development costs respecting the CTS expansion project.

Letter agreement

9  (1) Within 60 days of the date this section comes into force, the commission must issue an order setting the letter agreement as a rate for FortisBC Energy Inc. and FortisBC Energy (Vancouver Island) Inc., effective, subject to section 2.1 of the letter agreement, on the date the order is issued.

(2) Section 5 (2) applies to the letter agreement.

5 The following Appendices are added:

Appendix 3

Letter Agreement

Appendix 4

Rate Schedule 50

Appendix 5

Rate Schedule 46

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