On April 29, 2008, the Ontario Energy Board (OEB) released
its decisions on Natural Gas Storage Allocation Policies for
Enbridge Gas Distribution Inc. and Union Gas Limited
(EB-2007-0724 and 0725). An oral hearing had taken place
December 17-20, 2007.
The hearing addressed certain issues arising from the
OEB's 2006 Natural Gas Electricity Interface Review
(NGEIR) decision, in which the OEB had ordered Union and
Enbridge to submit new storage allocation policies on the basis
that existing rules, in particular Union's policy of
applying the aggregate excess method for semi-unbundled
customers, were not consistently applied. The aggregate excess
method permits customers with seasonal loads to balance
constant supply, allowing them to inject storage all summer and
then withdraw all winter.
Enbridge had only nine unbundled customers at the time of
the hearing, and there was no opposition by intervenors to its
proposal. Enbridge proposed following the aggregate excess
method for most customers, but that large-volume unbundled
customers should be free to choose an allocation of cost-based
storage based on a method originally designed for gas-fired
power generators that was part of a June 13, 2006 settlement
proposal in the NGEIR proceeding.
The OEB ordered a different methodology for Union. At the
time of the hearing, Union had 51 customers taking
semi-unbundled service (T1 and T3 rates). The majority of
Union's T1 customers on one-year renewable contracts
have allocations that are higher than their allocations under
the aggregate excess method, primarily because 22 of the T1
customers have "grandfathered" allocations based on
an OEB-approved June 7, 2000 settlement agreement.
Customers whose allocations have been grandfathered since
2000 will now have those allocations reviewed upon contract
renewal, which in most cases will occur within one year. The
allocations of the small number of customers with long-term
contracts will also be reviewed on contract renewal.
The Board agreed with Union that the storage allocation
should not be based entirely upon a customer's past
use, as that is not always indicative of "reasonable
needs". The Board found that the maximum level of
deliverability available to a T1 or T3 customer at cost-based
rates should equal the greater of DCQ and (CD - DCQ). DCQ is
"Daily Contract Quantity," the amounts that T1 and T3
contracts require customers to arrange for equal daily
deliveries of natural gas to Union's system over a
year. (CD - DCQ) is the customer's "Contract
Demand," the maximum amount of gas that Union is obligated
to deliver to a customer in any one day, less the DCQ.
The Board also agreed with Union's modifications to
the aggregate excess method. The revisions include a 50%
weighting for one year of forecast data in the calculation,
forecast only for new customers and customers undergoing
significant operational changes, and a new aggregate excess
calculation for each contract renewal.
Union further proposed a 10 × DCQ formula for
customers with process loads as opposed to seasonal storage
patterns because the customers receive very small storage
allocations under the aggregate excess method. The 10 ×
DCQ method would allow process load customers to elect to
follow a method that would provide a storage allocation more
reflective of their reasonable needs. Intervenors argued that
more storage is required for process load customers, and the
Board ordered that a 15 × DCQ method be applied.
The Board ordered that Union and Enbridge are to file draft
rate orders reflecting this decision.
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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