In a recent decision, the British Columbia Utilities
Commission (BCUC) approved a "System Extension Fund" of
up to $1 million per year to assist eligible customers in low
density areas to connect to the FortisBC Energy (FEI) gas
distribution system. The approval is in the form of a four-year
pilot program, under which FEI will provide funding of up to
$10,000 to eligible customers to offset the "contributions in
aid of construction" (CIAC) that they have to pay to FEI to
make their connection economic. The System Extension Fund will be
paid for by all ratepayers.
The BCUC's approval of the System Extension Fund was part of
a larger review of FEI's system extension policies. On the
broader issues, the BCUC largely accepted the existing tests and
approach used to evaluate FEI's system extensions and agreed
with FEI that changes should be made to some items, including
aspects of the "mains extension test" that is used to
evaluate and cost expansion projects.
The System Extension Fund concept was advanced by FEI as a means
to help eligible
customers in lower density areas of FEI's service area to pay
for the CIAC necessary to connect their homes to FEI's system.
The CIAC is an amount payable by a customer towards the
distributor's capital costs to ensure that the customer's
project is not subsidized by other ratepayers. According to FEI,
individual customers in lower density areas are farther from
existing mains and therefore these customers will be required to
pay a larger CIAC in order to obtain natural gas service.
FEI's arguments in favour of the System Expansion Fund
included the following: (i) the ability to access the System
Expansion Fund will provide for more equitable access for remote
customers; (ii) BC Hydro already has a similar fund; and (iii) the
System Expansion Fund will promote the B.C. Government's energy
objectives by making it easier for customers to switch from fuel
oil to natural gas, thereby reducing CO² emissions.
The BCUC approved the System Expansion Fund on a pilot project
basis until the end of 2020. In coming to this determination, the
BCUC acknowledged FEI's efforts to provide certain communities,
including rural communities, an opportunity to connect to the
natural gas system. The BCUC also noted that there could be a
favourable clean energy impact if customers are fuel switching from
a high carbon intensive fuel.
The pilot project approved by the BCUC allows for a System
Expansion Fund of up to $1 million per year. The parameters of the
funding are as proposed by FEI. To be eligible, a customer must
have a profitability index of at least 0.2. The maximum funding per
customer is $10,000, and each customer must make its own payment
towards the required CIAC in an amount at least as large as the
funding provided. FEI must report annually on the activities
associated with the System Expansion Fund.
Finally, it bears noting that (as we have
discussed earlier), the Ontario Energy Board has recently held
its own hearing to consider proposals to provide natural gas
service to unserved communities in Ontario. As part of that
"Community Expansion" proceeding, a number of proposals
that would encourage expanding natural gas service to new
communities have been advanced by gas distributors and other
stakeholders (including a potential new entrant). The OEB has not
yet released its decision in its "Community Expansion"
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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