Tom A. Loski Chief Regulatory Officer 16705 Fraser Highway Surrey, B.C. V4N 0E8 June 27, 2008 Tel: (604) 592-7464 Cell: (604) 250-2722 Fax: (604) 576-7074 Email: [email protected] British Columbia Utilities Commission www.terasengas.com th 6 Floor, 900 Howe Street Regulatory Affairs Correspondence Vancouver, BC V6Z 2N3 Email: [email protected] Attention: Ms. Erica M. Hamilton, Commission Secretary Dear Ms. Hamilton: Re: 2008 Resource Plan - Terasen Gas Inc. (“TGI”), Terasen Gas (Vancouver Island) Inc. (“TGVI”) and Terasen Gas (Whistler) Inc. (“TGW”) (collectively “Terasen Gas” or the “Companies”) By Letter No. L-70-06, dated November 15, 2006, the British Columbia Utilities Commission (the “Commission”) accepted the TGI and TGVI 2006 Resource Plans and directed TGI and TGVI to submit their updated 2008 Resource Plans by the end of the first quarter of 2008. By Order No. G-53-06 dated May 19, 2006, the Commission accepted the 2005 TGW Resource Plan and did not direct a future timeline for a new plan to be filed. On July 13, 2007, the Commission issued Order No. G-79-07 approving the request by the Companies to file a consolidated 2008 Resource Plan for TGI, TGVI and TGW by the end of the second quarter of 2008. Pursuant to Letter No. L-70-06, Orders No. G-53-06 and G-79-07, and in accordance with the Commission’s Resource Planning Guidelines and Section 44.1 of the Utilities Commission Amendment Act (the “Act”), Terasen Gas respectfully submits the attached combined 2008 Resource Plan for the Commission’s review. This Resource Plan submission includes five-year capital plans and statements of facilities expansion, however, the Companies are not requesting approval of those capital plans with this submission. Terasen Gas will file separate CPCN applications, if necessary, for any of those projects, in accordance with the Commission’s guidelines. The Companies are seeking acceptance of this Resource Plan in accordance with Section 44.1 of the Act. If there are any questions regarding the content of this letter, please contact the undersigned or Ken Ross at (604) 576-7343 or [email protected]. Yours very truly, TERASEN GAS Original signed by: Shawn Hill For: Tom A. Loski Attachments cc (e-mail only): Resource Plan Stakeholders 2008 Resource Plan Blue path Green future www.terasengas.com 2008 RESOURCE PLAN EXECUTIVE SUMMARY Introduction Terasen Gas Inc. (“TGI”) and Terasen Gas (Vancouver Island) Inc. (“TGVI”) together provide natural gas service to more than 925,000 residential, commercial, industrial and transportation customers throughout British Columbia. In 2009, the approximately 2,400 Terasen Gas (Whistler) Inc. (“TGW”) propane customers will also be converted to natural gas customers, served through the combined transmission systems of TGI and TGVI. Collectively, these three companies are referred to herein as “Terasen Gas” and are the subject of the Terasen Gas 2008 Resource Plan. Table ES-1 summarizes customer and consumption characteristics for each of the Terasen Gas service areas. Table ES-1 Terasen Gas 2007 Service Area Statistics TGI TGI Lower Mainland Interior TGVI TGW Number of Customers 573,295 249,627 91,242 2,411 Annual Demand (TJ) 86,220 28,310 12,066 742 Peak Day Demand (TJ/d) 931 337 108 6.6 Length of Transmission Pipeline (km) 570 2,290 780 -- Length of Distribution Pipeline (km) 10,960 8,600 3,400 100 The Terasen Gas utilities are subsidiary companies of Terasen Inc. In May 2007, Terasen Inc. and its subsidiaries were acquired by Fortis Inc., the largest investor-owned utility company in Canada. Today almost half of the total gas and electricity customers served by Fortis Inc. are Terasen Gas customers. The B.C. based electric utility FortisBC is also a Fortis Inc. subsidiary and sister company to Terasen Gas. In its previous Resource Plans, TGI, TGVI and TGW all identified approaching system capacity constraints. For TGW and TGVI these constraints were imminent and the Resource Plans recommended the extension of natural gas service to Whistler and the Mt. Hayes Storage facility on Vancouver Island respectively as preferred solutions. The Mt. Hayes facility would also provide gas supply and system capacity benefits to TGI’s Lower Mainland customers. Applications to and subsequent approvals from the British Columbia Utilities Commission (“BCUC”) for these projects led to their design and ongoing implementation. With these projects underway, resource planning at Terasen Gas now focuses on other emerging energy policies and trends, and other system and regional gas infrastructure issues. The resource planning process explores the social, regulatory and market landscapes in which Terasen Gas must continue to operate over the planning horizon. The 2008 Resource Plan examines future demand and supply resource conditions over the next 20 years and recommends actions needed over the next four years. Terasen Gas’ Resource Plan is submitted every two years with information and analysis updates and a revised four year action plan. These study timelines ensure that system and regional resources with long lead times are being developed when needed. Page E-1 2008 RESOURCE PLAN Resource Planning Objectives One of the first steps in this process is establishing an appropriate set of planning objectives against which resource alternatives can be evaluated. Achieving the proper balance between multiple objectives is the key challenge in making resource decisions. Terasen Gas’ resource planning objectives apply to all three utilities: • providing safe, reliable and secure supply; • delivering cost effective service to customers; • advancing energy efficiency and conservation; and • managing social and environmental impacts. Planning Environment Social perceptions, government policies and regulations and market trends affecting the energy industry are in a state of flux within both the province and the greater Pacific North West (“PNW”) Region, driven by rising energy costs and climate change concerns. The most common forms of energy used within the region - natural gas, electricity and petroleum based fuels for transportation - are traded across jurisdictional boundaries throughout the PNW, while climate change and carbon emissions are global issues. Therefore energy choice and resource decisions need to consider the broader regional implications and not be limited by the boundaries of any one province or state. Total demand for natural gas in the PNW surpasses that of electricity (see Figure ES-1). Growth in demand from natural gas fired electricity generation in the U.S. PNW is on the rise to meet growing demand for firm electricity. Figure ES-1 Total Natural Gas and Electricity Consumption in the PNW 1,200 Source: EIA, StatsCan 1,000 800 600 Million Dth End Use Gas 400 Total Gas Use 200 Note: The difference between End Use Total Electric Gas and Total Gas Use is gas used for electricity generation 0 0 1 2 3 2 3 4 5 6 9 9 9 9 99 00 01 0 0 0 0 0 9 9 9 9 994 995 996 997 998 9 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 While most states and provinces in the region have implemented some form of mandatory renewable electricity standards, most jurisdictions have limited access to these resources. The economic, environmental and social risks associated with nuclear and coal fuelled generation Page E-2 2008 RESOURCE PLAN mean that more natural gas generators are being used to provide base load and peaking electricity as well as firm back up for the intermittent renewable resources being added. Direct use of natural gas is also viewed in many jurisdictions as the preferred fuel for space and water heating. The main alternative, electric heating, puts additional load pressure onto the electric system which on the margin is being met by natural gas or coal-fired generators. Using natural gas in direct use applications is much more efficient and therefore results in fewer emissions than using gas to generate electricity which is then used to heat homes and businesses. In B.C., total demand for natural gas equals that of electricity. Natural gas demand is just over half of the energy consumed in petroleum products which are used mostly for the transportation sector (See Figure ES-2). With the province’s population expected to grow by about 1 million people over the next 20 years, demand for all types of energy is expected to increase even with more aggressive conservation and efficiency programs. In summary, the size of the pie chart in Figure ES-2 is getting larger and the energy mix that makes up its slices will be determined by a combination of energy costs and government policy and legislation. Figure ES-2 Annual Energy Consumption in B.C. across Energy Types Source: NRCan, BC Stats The B.C. government has legislated that the province become electricity self sufficient by 2016, and that 90% of new generation resources be from clean and renewable resources. In addition, all generation in the province must achieve net zero greenhouse gas (“GHG”) emissions by 2016. With high growth in electricity demand expected and a growing deficit of electricity imports and exports for B.C., these goals are challenging and will be costly. Natural gas is an important part of reaching these goals by keeping new and existing heating loads from adding to the amount of electricity required. Currently, incremental natural gas direct use in B.C. displaces imported electricity that might otherwise be used for space and water heating. This imported electricity is generated using coal or natural gas less efficiently and with higher emissions than direct use of natural gas. In the future, once B.C. becomes electricity self sufficient, greater direct use of natural gas will mean that more excess clean and renewable electricity can be exported to the PNW to replace Page E-3 2008 RESOURCE PLAN demand for natural gas and coal fired generation in other jurisdictions.