Decision Nsuarb-Ng-02 2003 Nsuarb 8 Nova Scotia Utility
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DECISION NSUARB-NG-02 2003 NSUARB 8 NOVA SCOTIA UTILITY AND REVIEW BOARD IN THE MATTER OF THE GAS DISTRIBUTION ACT - and - IN THE MATTER OF Franchise Applications for the Distribution of Natural Gas in the Province of Nova Scotia BEFORE: John A. Morash, C.A., Chair Margaret A. M. Shears, Vice-chair John L. Harris, Q.C., Member Kulvinder S. Dhillon, P. Eng., Member APPLICANTS: HERITAGE GAS LIMITED John C. MacPherson, Q.C., Counsel STRAIT AREA GAS CORPORATION Leonard MacDonald, Mayor, Town of Mulgrave Billy Joe MacLean, Mayor, Town of Port Hawkesbury Sam Murray, Chief Administrative Officer, Town of Mulgrave HEARING PARTICIPANTS: Canadian Oil Heat Association (NS Chapter) David A. Hovell, Executive Director Geostorage Associates Alan Ruffman, P.Geo., Partner Halifax Regional Municipality Mary Ellen Donovan, LL.B. Senior Solicitor, Legal Services Irving Energy Services Limited Christopher Stewart, LL.B. Document : 82360 Municipality of the County of Richmond Louis A. Digout, Chief Administrative Officer Stewart MacDonald, Deputy Clerk-Treasurer Richard Cotton, Warden Province of Nova Scotia Department of Energy James R. Gogan, LL.B. The Sydney and Area Chamber of Commerce John MacIsaac Wilson Fuel Co. Limited Steven Wilson, Director WPS Energy Services Inc. John F. Sorenson INTERVENORS: see Appendix ‘C’ BOARD COUNSEL: S. Bruce Outhouse, Q.C. BOARD COUNSEL’S CONSULTANT: Richard G.C. DeWolf, P.Eng. HEARING DATES: Heard at Halifax, Nova Scotia, between October 7, 2002 and October 18, 2002 FINAL SUBMISSIONS: December 6, 2002 DECISION DATE: February 7, 2003 DECISION: Heritage Gas Limited - Pursuant to Section 8 of the Gas Distribution Act, the Board grants a full regulation class franchise for a period of 25 years to Heritage Gas Limited, for the Counties of Cumberland, Colchester, Pictou and Halifax, the Municipality of the District of East Hants and the Goldboro area of Guysborough County, subject to the approval of the Governor in Council, and subject to the terms and conditions set forth in Appendix ‘A’, attached. Strait Area Gas Corporation - Pursuant to Section 8 of the Gas Distribution Act, the Board approves the grant, in principle, of a full regulation class franchise for a period of Document : 82360 25 years to Strait Area Gas Corporation, covering areas in Inverness County, Antigonish County, Guysborough County (excluding Goldboro) and Richmond County, subject to the filing of an executed BOOT agreement which is acceptable to the Board. The approval to grant this franchise, on an “in principle” basis, is subject to the approval of the Governor in Council, and is subject to the directives set forth in Appendix ‘B’, attached. Document : 82360 TABLE OF CONTENTS PART ONE INTRODUCTION ........................................................ 1 PART TWO APPLICATION OF HERITAGE GAS LIMITED .................................. 7 1.0 EXISTENCE OF MARKETS ........................................... 7 1.1 Submissions - Applicant ........................................ 7 1.2 Submissions - Intervenors ....................................... 8 1.3 Findings ..................................................... 8 2.0 AVAILABILITY OF ADEQUATE SUPPLY ................................ 8 2.1 Submissions - Applicant ......................................... 9 2.2 Submissions - Intervenors ...................................... 11 2.3 Findings .................................................... 11 3.0 ECONOMIC FEASIBILITY - PLANS FOR SERVICE AND FEASIBILITY TEST .. 12 3.1 Submissions - Applicant ....................................... 12 3.2 Submissions - Intervenors ...................................... 17 3.3 Findings .................................................... 21 4.0 FINANCIAL CAPABILITY AND RELATED EXPERIENCE ................... 24 4.1 Submissions - Applicant ....................................... 24 4.2 Submissions - Intervenors ...................................... 26 4.3 Findings .................................................... 26 5.0 FINANCIAL PLAN ................................................. 26 Document : 82360 5.1 Submissions - Applicant ....................................... 26 5.2 Submissions - Intervenors ...................................... 31 5.3 Findings .................................................... 33 6.0 SOCIO-ECONOMIC IMPACT STATEMENT AND BENEFITS PLAN .......... 35 6.1 Submissions - Applicant ....................................... 36 6.2 Submissions - Intervenors ...................................... 38 6.3 Findings .................................................... 39 7.0 CONCLUSIONS - HERITAGE ........................................ 40 PART THREE APPLICATION BY STRAIT AREA GAS CORPORATION ........................ 41 8.0 EXISTENCE OF MARKETS ......................................... 41 8.1 Submissions - Applicant ....................................... 41 8.2 Submissions - Intervenors ...................................... 43 8.3 Findings .................................................... 45 9.0 AVAILABILITY OF ADEQUATE SUPPLY ............................... 48 9.1 Submissions - Applicant ....................................... 48 9.2 Submissions - Intervenors ...................................... 49 9.3 Findings .................................................... 49 10.0 ECONOMIC FEASIBILITY - PLANS FOR SERVICE AND BOOT PROPOSAL .. 50 10.1 Submissions - Applicant ....................................... 50 10.2 Submissions - Intervenors ...................................... 53 10.3 Findings .................................................... 57 Document : 82360 11.0 FINANCIAL CAPABILITY AND RELATED EXPERIENCE .................. 59 11.1 Submissions - Applicant ....................................... 60 11.2 Submissions - Intervenors ...................................... 62 11.3 Findings .................................................... 62 12.0 SOCIO-ECONOMIC IMPACT STATEMENT AND BENEFITS PLAN .......... 62 12.1 Submissions - Applicant ....................................... 64 12.2 Submissions - Intervenors ...................................... 67 12.3 Findings .................................................... 69 13.0 CONCLUSIONS - STRAIT ........................................... 70 PART FOUR OTHER ISSUES ........................................................ 72 14.0 BUNDLED GAS SALES AND CODE OF CONDUCT ...................... 72 15.0 REGULATORY OVERSIGHT ........................................ 75 16.0 MUNICIPAL FEES AND MUNICIPAL TAXATION ......................... 80 17.0 LATERAL POLICY ................................................. 84 18.0 ROAD SHOULDERS/ROAD RIGHTS-OF-WAY .......................... 86 19.0 FUTURE PROCEEDINGS ........................................... 87 20.0 SUMMARY OF FINDINGS ........................................... 88 HERITAGE 20.1 Grant of Franchise ........................................... 88 20.2 Existence of Markets .......................................... 88 20.3 Availability of Adequate Supply .................................. 88 Document : 82360 20.4 Feasibility Test - Application .................................... 89 20.5 Feasibility Test - Ongoing Review ................................ 89 20.6 Customer Commitment ........................................ 89 20.7 Tolls and Tariffs Proceeding/Extension of Services .................. 90 20.8 Financial Capability and Related Experience ....................... 90 20.9 Capital Structure and Cost of Debt ............................... 90 20.10 Deferral Account ............................................. 91 20.11 Return on Equity ............................................. 91 20.12 Socio-Economic Impact Statement and Benefits Plan ................ 91 STRAIT 20.13 Approval of Grant of Franchise “in principle” ........................ 92 20.14 Existence of Markets .......................................... 92 20.15 Availability of Adequate Supply .................................. 93 20.16 Economic Feasibility - BOOT Agreement .......................... 93 20.17 Filing Requirements - BOOT Agreement - Phase II .................. 93 20.18 Phase II/Costs ............................................... 95 20.19 Financial Capability and Related Experience ....................... 95 20.20 Socio-Economic Impact Statement and Benefits Plan ................ 95 OTHER 20.21 Gas Sales .................................................. 96 20.22 Licencing Process ............................................ 96 20.23 Codes of Conduct - Working Group .............................. 97 20.24 Gas Cost Variance Account .................................... 97 Document : 82360 20.25 Regulatory Oversight .......................................... 97 20.26 Municipal Fees and Municipal Taxation ........................... 98 20.27 Lateral Policy ................................................ 98 20.28 Road Shoulders/Road Rights-of-Way ............................. 98 20.29 Future Proceedings - Strait ..................................... 98 APPENDICES Appendix - A Heritage Gas Limited - Terms and Conditions of Franchise Appendix - B Strait Area Gas Corporation - Directives Concerning Approval, in Principle, of Grant of Franchise Appendix - C List of Formal Intervenors Appendix - D Board Directions on Procedure and Board Regulations Document : 82360 1 PART ONE INTRODUCTION [1] This decision follows a public hearing conducted by the Nova Scotia Utility and Review Board (“the Board”) over nine hearing days between October 7, 2002 and October 18, 2002, in the matter of applications by Heritage Gas Limited