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December 19, 2005 640 – 5 Avenue SW
December 19, 2005 Sent via e-mail Alberta Energy and Utilities Board 640 – 5th Avenue SW Calgary, Alberta T2P 3G4 Attn: Jamie Cameron, Application Officer Dear Jamie: Re: TransCanada Energy Complaint Alberta Electric System Operator (AESO) Customer Contribution Policy (Application No. 1431750) Please find attached for filing with the Board, the AESO’s Statement of Facts with respect to the above mentioned application. If you have any questions or concerns, please contact me at (403) 539-2751, or via email at [email protected] or contact Ed Hucman at (403) 539-2469, or via email at [email protected]. Yours truly, Heidi Kirrmaier Vice President, Regulatory 2500, 330 - 5th Ave SW Calgary, Alberta T2P 0L4 t (403) 539-2450 | f (403) 539-2949 | www.aeso.ca Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 1 of 12 On December 9, 2005 the EUB issued a letter outlining the process for the review of TransCanada Energy's (“TCE”) complaint in relation to the AESO - Alberta Electric System Operator’s optional facilities charge on the TCE Edson Gas Storage Project. As requested by the Board, this document summarizes: • the facts regarding how the customer contribution for the TCE project was calculated; • the pertinent circumstances of the EnCana Countess project as it relates to the TCE project; and, • a brief comparison discussion of the two projects. 1. TransCanada Energy Edson Gas Storage Project The general facts surrounding the TCE Edson Gas Storage project in the Marlboro area are as follows. TransCanada first met with the AESO to discuss the Edson Gas Storage Project on February 26, 2004. In March 2004, TCE filed with the AESO their Stage one and Stage two System Access Service (SAS) Applications, in accordance with Article 7 of the terms and conditions of the AESO Tariff, requesting the following: • transmission service for 24 MW at a 70% load factor to supply seven (7) 4000 hp induction motors; • in service date of June 2005; • a substation configuration comprising two (15/20/25 MVA) transformers. Once the AESO received the Section 101 permission from Aquila (now Fortis), (which allowed the project to proceed on a transmission direct connect basis), the AESO reviewed the customer requirements and developed interconnection alternatives. On April 1, 2004 the AESO provided TCE a preliminary proposal outlining the recommended interconnection and the estimated costs thereof, as shown in Table 1.0 below: Table 1.0 April 1, 2004 Preliminary Interconnection Proposal TCE Edson Gas Storage Project AESO standard facilities proposal: Substation: • Construction a new “Marlboro” substation • 138 kV bus work and a single circuit breaker • a single 20/27/33 MVA 138/4.16 kV LTC transformer • protection, control and communication equipment Transmission: • construct 10 km of 138 kV line and associated switches Total standard facilities cost: Optional Facilities: • one 138 kV breaker • one 20/27/33 MVA 138/4.16 kV LTC transformer Total project cost (standard + optional facilities): +/- 30% cost estimate $3.0m $1.5m $4.5m $1.0m $5.5m Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 2 of 12 The AESO determined that most economic interconnection, meeting good transmission practices including applicable reliability, protection and operating criteria was a single line and a single 20/27/33 MVA transformer at the Marlboro facility. The preliminary proposal included the optional second transformer of equal size because the AESO assumed that TCE desired a two transformer configuration as demonstrated in the system access applications, for redundancy purposes. The customer contribution calculation provided in the Preliminary Proposal is outlined in Table 2.0 below. Also included in the table is a reference to the applicable sections of the AESO’s terms and conditions. Table 2.0 Customer Contribution Calculation TCE Edson Gas Storage Project Description Article Estimate Total project costs: 9.1 $5.5m System-related costs: 9.2 $0.0 Customer-related costs: 9.2 $5.5m Demand-related costs: 9.3 $4.5m (roll-in available) Roll-in calculation: Revenue related amount: $2.65m 9.4 Commitment term amount: $2.00m Total roll-in: $4.65m Optional costs: 22.4 $1.0m Customer contribution: 9.4 $4.5m – 4.65m = 0.0 Optional costs: $1.0m Total contribution: $1.0m Contractual term: 9.4 9 years TransCanada contacted the AESO on April 10, 2005 requesting additional clarification on some of the technical considerations associated with the project and surrounding transmission system. Some of the inquiries included a request for additional information on the reliability of line 854L which the project was tapping, whether AltaLink had a spare (20/27/33 MVA) transformer and what the expected outage duration was if the single transformer failed. The AESO provided a response on April 22, 2005 informing TCE that line 854L was very reliable, Altalink did have a spare (20/27/33 MVA) transformer and in the event of a transformer failure it would approximately take 4-7 days to ship and replace the transformer depending on road conditions and crew availability. Full details of the communication exchange are available in Appendix A. On May 6, 2004 TCE sent a letter to the AESO expressing their concern regarding the optional facility charge at the Marlboro facility. On June 16, 2004 the AESO provided a letter to TCE responding to the concerns outlined in the May 6 letter. Both letters are available in Appendix B. Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 3 of 12 While the AESO was preparing the June 16 response letter the AESO noticed in point three of the May 6 letter that TCE considered two (15/20/25 MVA) transformers as an acceptable interconnection alternative. As such AESO staff followed up with the customer to further clarify their requirements along with the information provided in the SAS Applications. Following a discussion with representative from TCE the AESO was able to determine the following: • TCE was not seeking 100% redundancy for their operation and that a somewhat smaller level of redundancy was acceptable • TCE presented a two transformer configuration in their System Access Application because they assumed this would be the standard configuration proposed by the AESO for their requested load • The project would now consist of six (6) 4,500 hp motors still equaling 24 MW of load Following the June 16 letter the AESO revised its interconnection proposal outlining the AESO’s standard facilities interconnection and the interconnection requested by the customer as illustrated in Table 3.0 below: Table 3.0 Revised Interconnection Proposal TCE Edson Gas Storage Project AESO standard facilities proposal: Substation: • Construction a new “Marlboro” substation • 138 kV bus work and a single circuit breaker • a single (20/27/33 MVA) 138/4.16 kV LTC transformer • protection, control and communication equipment Transmission: • construct 10 km of 138 kV line and associated switches Total standard facilities cost: Optional Facilities: • one 138 kV breaker • one 20/27/33 MVA 138/4.16 kV LTC transformer Total project cost (standard + optional facilities): Customer requested proposal: Substation: • Construction a new “Marlboro” substation • 138 kV bus work and a single circuit breaker • a single 15/20/25 MVA 138/4.16 kV LTC transformer • protection, control and communication equipment Transmission: • construct 10 km of 138 kV line and associated switches Total standard facilities cost: +/- 30% cost estimate $3.0m $1.5m $4.5m $1.0m $5.5m $2.9m $1.5m $4.4m Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 4 of 12 Optional facilities: • one 138 kV breaker • one 15/20/25 MVA 138/4.16 kV LTC transformer Total project cost (standard + optional facilities): $900k $5.3m As there was a revision to the interconnection proposal, there was also a subsequent change to the customer contribution determination. The calculation is summarized in Table 4.0 below: Table 4.0 Revised Customer Contribution Determination TCE Edson Gas Storage Project Description Article AESO Standard Customer Requested Facilities (+/-30%) Facilities (+/-30%) Estimate Estimate Project costs 9.1 $5.5m $5.3m System-related costs 9.2 $0.0 $0.0 Customer-related costs 9.2 $5.5m $5.3m $3.0 + 1.5 = $4.5m $2.9 + 1.5 = $4.4m Demand-related costs 9.3 (roll-in available) $4.5m Roll-in calculation: $2.65m Revenue related The AESO would have amount: invested up to this amount 9.4 $2.00m Commitment term under the proposed amount: standard interconnection* (less) Total roll-in: Optional costs Customer contribution: (plus) optional costs: $4.50m $900k $4.40m – 4.40m = $0.0 $900k – (4.50-4.40=100k) = $800k** Total contribution: $1.0m $800k Contractual term: 9.4 10 years 10 years * Note: $4.5m is the maximum available investment, as the roll-in amount would have covered the entire cost of the AESO’s standard facilities interconnection cost. ** Note: the $4.5m maximum available investment was applied to the total costs of the customer requested interconnection. 22.4 9.4 $4.65m $1.0 $4.5m – 4.65m = $0.0 $1.0m The above information was presented to TCE for review. TCE continued to voice their disagreement with the optional facilities charge but in the interests of moving their project forward and meeting their required in service date they complied with AESO interconnection milestones. The AESO filed a needs application for the new Marlboro substation with EUB on July 5th. On page one of the needs application, the Project Scope Summary outlined the customer’s requirements, the two (2) 25 MVA transformer configuration interconnection proposal (as outlined in Table 3.0 above) and customer contribution determination as outlined in (Table 4.0) above (attached as Appendix C). Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 5 of 12 The AESO issued an invoice to TCE for the $856,000 customer contribution on July 6, 2005. During the review of the needs application the AESO received several information requests from the EUB regarding the project including the rationale for installing two transformers at the substation (BR-AESO-01 a). The question and response are provided below: Request: (a) Explain why there is the requirement for installing two 15/20/25 MVA 138/4.16 kV transformers in this application. Response: (a) TransCanada requested the installation of a second transformer for reliability purposes. AltaLink has informed AESO that the response time to replace a transformer at the proposed Marlboro station is 4 to 7 days. Further delays could also occur if road bans are in effect for the Edson area during spring break up. This level of reliability is unacceptable to TransCanada and they have requested a second transformer. In the event of a single transformer failure, most of the load can be served by the second transformer. TransCanada also requested that smaller sized transformers be installed in order to reduce short circuit levels at their 4.16 kV busses TCE sent another letter informing the AESO that they still disagreed with the optional facility charge but wished to proceed with the project. The AESO acknowledged that letter on September 8, 2005. Both letters are available in Appendix D. The AESO received the needs application approval for the TCE Edson Gas Storage Project from the EUB on October 18, 2004. During the same time period the AESO received the final functional specification for the project along with a new project cost estimate of (+/-10%) for both the AESO standard facilities interconnection and the customer requested interconnection. As there were material changes to the original +/30% cost estimates the AESO recalculated the customer contribution calculation as given in Tables 5.0 & 6.0 below. Table 5.0 Revised Interconnection Proposal Costs (+/- 10% Estimate) Edson Gas Storage Project +/- 10% Cost AESO standard facilities proposal: Estimate $3.57m Substation: • Construction a new “Marlboro” substation • 138 kV bus work and a single circuit breaker • a single (20/27/33 MVA) 138/4.16 kV LTC transformer • protection, control and communication equipment $3.18m Transmission: Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 6 of 12 • construct 10 km of 138 kV line and associated switches Total Optional Facilities: • one 138 kV breaker • one 20/27/33 MVA 138/4.16 kV LTC transformer Customer requested proposal: Substation: • Construction a new “Marlboro” substation • 138 kV bus work and a single circuit breaker • a single 15/20/25 MVA 138/4.16 kV LTC transformer • protection, control and communication equipment Transmission: • construct 10 km of 138 kV line and associated switches Total Optional facilities: • one 138 kV breaker • one 15/20/25 MVA 138/4.16 kV LTC transformer $6.75m $1.67m $3.47m $3.18m $4.4m $1.57m Table 6.0 Revised Customer Contribution Determination (+/- 10 % Estimate) TCE Edson Gas Storage Project Description Article AESO Standard Customer Requested Facilities Facilities Total project costs: 9.1 $6.75m $8.22m System-related costs: 9.2 $0.0 $0.0 Customer-related costs: 9.2 $8.42m $8.22m Demand-related costs: $6.75m $6.65m 9.3 (roll-in available) $6.75m Roll-in calculation: $2.65m Revenue related The AESO would have amount: invested up to this amount 9.4 $4.40m Commitment term under the proposed amount: standard interconnection* (less) Total roll-in: Optional costs: Customer contribution: (plus) Optional costs: 22.4 9.4 $7.05m $1.67m $6.75m – 7.05m = $0.0 $1.67 $6.75m $1.57m $6.65m – 6.65m = $0.0 $1.57 – (6.75-6.65=100k) = $1.47m** Total contribution: $1.67 $1.47m Contractual term: 9.4 16 years 16 years * Note: $6.75m is the maximum available investment, as the roll-in amount would have covered the entire cost of the AESO’s standard facilities interconnection cost. Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 7 of 12 ** Note: the $6.75m maximum available investment was applied to the total costs of the customer requested interconnection. TCE was invoiced an incremental $716,900 (inclusive of GST) in December of 2004 to account for the increase in customer contribution attributed to the change in project costs estimates. The incremental contribution was calculated as follows: Customer contribution (+/-10% estimate): Customer contribution paid (+/-30% estimate): Contribution outstanding: Contribution outstanding inclusive of GST: $1.47m $800 k $670 k $716.9k The last communication that the AESO had with TCE regarding the project is a letter dated January 19, 2005 wherein TCE informed the AESO that the number and type of compressor motors was changing from six (6) 4500hp motors provided in the needs application to now five (5) 5000hp motor driven compressors. There was no mention of changing the load requirement at the site. Please see Appendix E. The AESO notes that final costs have not yet been received with respect to this project, and the customer contribution will be subject to final true-up at that time consistent with Article 9.7(e) of the AESO’s current terms and conditions of service. 2. EnCana Countess Gas Storage Project The following are the general facts surrounding the EnCana Countess Gas Storage project. EnCana approached the AESO in November 2002 requesting system access service for their gas storage plant in southern Alberta. Project assumptions at the time were to install ten (10) 4,000hp induction motors at the site. EnCana filed for system access service on November 6, 2002. The application stated that the site load would be 22 MW with a requested in service date of September 1, 2003. The AESO continued to meet with the EnCana over December 2002 and January 2003 to discuss and clarify various aspects of the project. In January the customer informed the AESO that the load requirement at the site may be larger than originally contemplated in the application as EnCana was considering installing seven (7) 4,500 hp induction motors bringing the load requirement to 26.1MW. EnCana also informed the AESO that there would be a second phase to the project where the facility would be further expanded the following year by installing an additional three (3) 4,500hp motors bringing the total load at the facility 37.2MW. Based on the information provided by EnCana, the AESO proceeded to draft the need application for the project assuming Phase 1 of EnCana’s project would consist of seven (7) x 4500 hp motors with a total installed site load of 26.1 MW and that Phase II would proceed in 2004 where a total of ten (10) 4,500 hp motors would be at the facility increasing the site load by 11.1 MW to a total of 37.2 MW. Please see the Project Scope Summary in the needs application filed with the EUB on February 5, 2003 – Appendix F. Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 8 of 12 Using the current information available to the AESO at the time the AESO determined the best interconnection alternative that would meet the customer’s requirement and filed that information in a needs application with EUB in February 2003. The following considerations were taken into account in the decision making process: • • • Proceeding with a single 25 MVA transformer could accommodate the 22MW outlined in the System Access Service application but would not accommodate the increased Phase I load of 26.1 MW Proceeding with a single 42 MVA transformer would provide capacity for both Phases I and II but AltaLink (AML) did not have a 42 MVA spare available Proceed with a two (2) 25 MVA transformer configuration that would accommodate both “Phase I and II” and allow sparing to be covered by AML’s existing 33 MVA spare. The AESO conducted a cost comparison of installing two (2) 25 MVA transformers versus one 42 MVA transformer and is outlined in Table 7.0 below. Table 7.0 Interconnection Alternative Cost Comparison EnCana Countess Gas Storage Project Option #1 Install two 25 MVA transformers (@ $600k ea.) Option #2 Install one 42 MVA transformer (@ $800k ea.) plus additional LV Bus & switchgear (@ $200k) Phase I: seven 4500hp motors (2003) Phase II: 10 4500hp motors (2004) $1.2m $0.00 $1.0m $800k (purchase of spare 42 MVA transformer) The AESO concluded that the two (2) 25 MVA transformer configuration was the preferred standard interconnection alternative on the grounds that: • the proposed development was to expand to a total of 37.2 MW in the following year and, • AltaLink did not have a spare 42 MVA transformer available On January 16, 2003 the AESO presented EnCana the following customer contribution determination based on a two 25 MVA transformer configuration (please see Table 8.0 below). Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 9 of 12 Table 8.0 Interconnection Proposal & Customer Contribution Determination EnCana Countess Gas Storage Project +/- 10% cost AESO standard facilities proposal: estimate Substation facilities: • build new Hussar substation • two 138 kV breakers $5.0m • two (15/20/25 MVA) 138/4.16 kV LTC transformers • protection, control and communication equipment • upgrades to the Namaka Substation Transmission: $5.0m • construct 44 km of 138 kV line and associated switches $10.0m Total standard facilities cost: Description Total project costs: System-related costs: Customer-related costs: Demand-related costs: (roll-in available) Roll-in calculation: Revenue related amount: Commitment term amount: Total roll-in: Optional costs: Customer contribution: Optional costs: Total contribution: Contractual term: Article 9.1 9.2 9.2 Estimate $10.0m $0.0 $10.0m 9.3 $10.0m 9.4 $1.60m $6.00m $7.60m $0.0m $10.0 – 7.60 = $2.4m $0.0m $2.40m 20 years 22.4 9.4 9.4 The project was energized in September 2003. EnCana approached the AESO shortly after energization about some concerns regarding errors made in the customer contribution calculation. The AESO reviewed the concerns by the customer and presented a revised customer contribution calculation to the customer on December 18, 2003 (outlined in Table 9.0). Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 10 of 12 Table 9.0 Customer Contribution Determination EnCana Countess Gas Storage Project Description Article Estimate Total project costs: 9.1 $10.0m System-related costs: 9.2 $640k* Customer-related costs: 9.2 $9.36m Demand-related costs: 9.3 $9.36m (roll-in available) Roll-in calculation: Revenue related amount: 9.4 $1.80m** Commitment term amount: $6.00m Total roll-in: $7.80m Optional costs: 22.4 $0.0m Customer contribution: 9.4 $9.63 – 7.80 = $1.83m Optional costs: $0.0m Total contribution: $1.83m Contractual term: 9.4 20 years Contribution refund: 9.7 $570k*** * Note: $640k of the total project costs were now deemed system-related costs. ** Note: the revenue related amount is now $1.80m versus $1.60m due to an error in the first calculation *** the customer originally paid a contribution of $2.40m less new contribution of $1.83m lead to a $570k contribution refund to EnCana Actual costs for the project were provided by AltaLink on March 26, 2004 and the AESO finalized the customer contribution calculation for the project (provided in Table 10.0 below) Table 10.0 Final Customer Contribution Determination EnCana Countess Gas Storage Project AESO standard facilities proposal: Actual Costs Substation facilities: • build new Hussar substation • two 138 kV breakers $4.69m • two (15/20/25 MVA) 138/4.16 kV LTC transformers • protection, control and communication equipment • upgrades to the Namaka Substation Transmission: $3.95m • construct 44 km of 138 kV line and associated switches $8.64m Total standard facilities cost: Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 11 of 12 Description Article Actual Costs Total project costs: 9.1 $8.64m System-related costs: 9.2 $680k Customer-related costs: 9.2 $7.96m Demand-related costs: 9.3 $7.96m (roll-in available) Roll-in calculation: Revenue related amount: 9.4 $1.80m Commitment term amount: $6.00m Total roll-in: $7.80m Optional costs: 22.4 $0.0m Customer contribution: 9.4 $7.96 – 7.80 = $160k Optional costs: $0.0m Total contribution: $160k Contractual term: 9.4 20 years Contribution refund: 9.7 $2.24m* * Note: the customer originally paid a contribution of $2.40m less new contribution of $160k lead to a $2.24m contribution refund to EnCana 3. TCE / EnCana Comparison Each customer interconnection request is unique, and therefore the final interconnection configuration and/or commercial terms are generally also unique. Notwithstanding, the AESO applies the tariff and related principles and approach consistently across all customers, subject to normal refinement and development of supporting business practices over time. In its complaint, TCE suggested there is an inconsistency in customer treatment between the EnCana Countess and TCE Marlboro projects. The AESO submits that the principles the AESO adhered to in both cases were the same. Table 11.0 below provides a comparison summary of the two projects: Table 11.0 Project Comparison TCE Edson & EnCana Countess Gas Storage Projects TCE Edson Gas Storage EnCana Countess Gas Project Storage Project Load requested 24.0MW 26.1MW Future load requirement 0.0MW 37.2MW Initial standard facilities • build new Hussar • Construction a new interconnection proposed substation “Marlboro” substation by the AESO • one 138 kV breaker • 138 kV bus work and one circuit breaker • one 42 MVA transformer • one (20/27/33 MVA) 138/4.16 kV LTC • protection, control and transformer communication equipment • protection, control and communication • upgrades to the Alberta Electric System Operator - Statement of Facts TransCanada Energy Complaint Application No. 1431750 December 19, 2005 Page 12 of 11 • Decision considerations • • Final standard facilities proposed by the AESO • • • • • equipment construct 10 km of 138 kV line and associated switches No incremental load growth contemplated AltaLink had a spare 33 MVA transformer available Construction of a new “Marlboro” substation 138 kV bus work and a single circuit breaker a single (20/27/33 MVA) 138/4.16 kV LTC transformer protection, control and communication equipment construct 10 km of 138 kV line and associated switches • • • • • • • • • Namaka Substation construct 44 km of 138 kV line and associated switches AltaLink did not have a spare 42 MVA transformer the proposed development was to expand to a total of 37.2 MW in the following year build new Hussar substation two 138 kV breakers two (15/20/25 MVA) 138/4.16 kV LTC transformers protection, control and communication equipment upgrades to the Namaka Substation construct 44 km of 138 kV line and associated switches In summary, the AESO submits the standard facilities interconnection solution proposed for TCE’s Edson Gas Storage project is the result of a sound approach and consistent with the intent of the tariff. Alberta Electric System Operator (AESO) Application No. 1431750 Appendix A Alberta Electric System Operator (AESO) Application No. 1431750 Appendix A Alberta Electric System Operator (AESO) Application No.1431750 Appendix B Alberta Electric System Operator (AESO) Application No.1431750 Appendix B Alberta Electric System Operator (AESO) Application No.1431750 Appendix B Alberta Electric System Operator (AESO) Application No.1431750 Appendix B Alberta Electric System Operator (AESO) Application No.1431750 Appendix B Alberta Electric System Operator (AESO) Application No.1431750 Appendix C Alberta Electric System Operator (AESO) Application No. 1431750 Appendix D Alberta Electric System Operator (AESO) Application No. 1431750 Appendix D Alberta Electric System Operator (AESO) Application No. 1431750 Appendix D Alberta Electric System Operator (AESO) Application No. 1431750 Appendix E Alberta Electric System Operator (AESO) Application No. 1431750 Appendix E Alberta Electric System Operator (AESO) Application No. 1431750 Appendix F