Fred James Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 [email protected] January 24, 2020 Mr. Patrick Wruck Commission Secretary and Manager Regulatory Support British Columbia Utilities Commission Suite 410, 900 Howe Street Vancouver, BC V6Z 2N3 Dear Mr. Wruck: RE: Project No. 1599032 British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Fleet Electrification Rate Application BC Hydro writes to provide its Reply Argument in accordance with the regulatory timetable established by Commission Order No. G-314-19. For further information, please contact Anthea Jubb at 604-623-3545 or by email at [email protected]. Yours sincerely, Fred James Chief Regulatory Officer ac/tl Enclosure British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com Fleet Electrification Rate Application Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 Table of Contents 1 Introduction ........................................................................................................ 1 2 Reply to CEABC ................................................................................................. 2 2.1 Recommended Adjustments to the Fleet Electrification Rates .................. 2 2.2 Utility-Scale Batteries and “Smart” Charging ............................................. 5 2.3 Economic Evaluations ............................................................................... 5 2.4 The Cost of New Capacity ........................................................................ 5 3 Reply to BCOAPO .............................................................................................. 6 3.1 Economic Justification ............................................................................... 6 3.2 Cost of Service Justification .................................................................... 10 3.3 Other Considerations .............................................................................. 11 3.3.1 Overnight Rate – Contribution Towards Extensions ................. 12 3.3.2 Overnight Rate – Energy Charge .............................................. 13 3.3.3 Demand Transition Rate – Transitioning to LGS Rates ............ 14 4 Conclusion ....................................................................................................... 15 Fleet Electrification Rate Application Page i Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 1 Introduction 1 1 This is BC Hydro’s Reply Argument for its Fleet Electrification Rate Application filed 2 with the BCUC pursuant to sections 59 to 61 of the Utilities Commission Act (UCA). 3 Capitalized terms in this Reply Argument have the meanings given to them in the 4 Application, unless otherwise defined. 5 The BC Sustainable Energy Association (BCSEA), Commercial Energy 6 Consumers (CEC), BC Old Age Pensioners’ Organization (BCOAPO), Association 7 of Major Power Customers of BC (AMPC) and Clean Energy Association of 2 8 BC (CEABC) filed Final Argument and ChargePoint and the Township of Langley 3 9 (Langley) filed comments in this proceeding. 10 BCSEA, CEC, AMPC, CEABC, ChargePoint and Langley all support BC Hydro’s 11 request for the BCUC to set the Fleet Electrification Rates, so BC Hydro will not 12 reply to their Final Arguments and comments, with the exception of CEABC. 13 BC Hydro will reply to aspects of CEABC’s Final Argument, including its 14 recommended adjustments to the Fleet Electrification Rates. 15 BC Hydro will primarily reply to the Final Argument of BCOAPO, which is the only 16 intervener that does not support BC Hydro’s request for the BCUC to set the Fleet 17 Electrification Rates. 1 Application, Exhibit B-1. On October 30, 2019, BC Hydro filed Exhibit B-1-1, which: (1) corrected the draft order contained in the Application to include Direction 4 that BC Hydro file updated tariff sheets within 15 business days of the date of the order; and (2) corrected the definition of Billing Demand in the rate schedule for the Overnight Rate. 2 Exhibit D-5-1. 3 Exhibit E-1. Fleet Electrification Rate Application Page 1 Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 1 2 Reply to CEABC 2 2.1 Recommended Adjustments to the Fleet Electrification Rates 3 As noted above, CEABC supports BC Hydro’s application. CEABC also offers 4 suggestions on how “this rate proposal or similar proposals might be improved in the 4 5 future”, and submits that those future improvements could be done at “negligible 5 6 cost to BC Hydro’s other customers”. BC Hydro is skeptical that the costs would be 7 negligible, at least in relation to the potential benefits, but understands the 8 submissions to be in regard to future processes and, therefore, they do not need to 9 be considered by the BCUC in this proceeding. Nevertheless, BC Hydro offers some 10 reply submission for completeness of the record. 11 CEABC states that the Overnight Rate “could be made even more effective if 12 BC Hydro were to ‘relax’ the Zero-Demand-Charge time period by an hour at each 6 13 end.” 14 As explained in its response to BCUC IR 1.13.2, BC Hydro determined the overnight 15 period for the Overnight Rate to be between 10:00 p.m. and 6:00 a.m. based on 16 when BC Hydro’s system has spare capacity while still recovering BC Hydro’s cost 7 17 of service. BC Hydro also chose the overnight period to meet the customers’ depot 8 18 charging requirements. BC Hydro conducted a sensitivity analysis of customer bills 9 19 using alternative hours for the overnight period, but it did not conduct such an 20 analysis for expanding the overnight period. BC Hydro also analysed the probability 21 of charging depots triggering distribution station upgrades based on spare capacity 22 during the overnight period of between 10:00 p.m. and 6:00 a.m., particularly at 4 CEABC Final Argument at page 1. 5 CEABC Final Argument at page 8. 6 CEABC Final Argument at page 6. 7 See BC Hydro’s responses to BCUC IR 1.13.2, Exhibit B-4, PDF 132. 8 See BC Hydro’s responses to CEC IR 1.13.1, Exhibit B-5, PDF 272. 9 See BC Hydro’s responses to BCUC IR 1.13.2.1, Exhibit B-4, PDF 133. Fleet Electrification Rate Application Page 2 Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 10 1 10:00 p.m., because that is the time with the lowest spare capacity. BC Hydro has 2 not conducted such an analysis based on spare capacity at 9:00 p.m., but we 3 reasonably anticipate that the amount of spare capacity available, particularly at the 4 distribution level, will diminish as the number of hours is extended beyond 10 p.m. to 5 6 a.m. Therefore, BC Hydro does not support extending the overnight period for the 6 Overnight Rate. 7 CEABC recommends the following three adjustments to “enhance the effectiveness” 11 8 of the Demand Transition Rate: 9 (1) Rather than a fixed term ending in 2032 for all customers, the term could be set 10 for each customer from the date of that customer’s initial service; 11 (2) The Demand Charge “holiday” period should be extended to eight or even nine 12 years, rather than six years; and 13 (3) Change the time definition of the peak load that is subject to the Demand 14 Charge to exclude the period between 11:30 a.m. and 4:00 p.m. 15 BC Hydro addressed the first proposed adjustment (i.e., custom start dates for 16 service under the Demand Transition Rate) in the Application. BC Hydro analyzed 17 the impact of implementing this suggestion and concluded that the resulting 18 complexity limits it practicality. In particular, BC Hydro estimates that providing 19 custom start dates would result in 40 different individual rates schedules over the ten 12 20 years that the Demand Transition Rate is proposed to be made available. For that 21 reason, BC Hydro proposes to set a fixed term for the Demand Transition Rate for 22 all customers ending F2032 and does not support the term being set for each 23 customer from the date of that customer’s initial service. 10 See BC Hydro’s responses to BCUC IR 1.17.10, Exhibit B-4, PDF 196. 11 CEABC Final Argument at page 8. 12 Application, Exhibit B-1, page 49. Fleet Electrification Rate Application Page 3 Reply Argument of British Columbia Hydro and Power Authority January 24, 2020 1 BC Hydro addressed the second proposed adjustment (i.e., extending the period of 2 no demand charges) in its response to AMPC IR 1.1.4. BC Hydro originally 3 examined a five-year period of no demand charges which was intended to provide 4 customers mitigation to the financial impacts of the demand charge while they 5 convert their fleets to electricity. However, in response to stakeholder requests for 6 custom start dates for service under the Demand Transition Rate, BC Hydro 7 proposed a six-year period of no demand charges as a compromise, given that 13 8 custom start dates are not practical. BC Hydro notes that further extending the 9 number of years that no demand charges apply may negatively impact the 10 economics for all ratepayers. Accordingly, BC Hydro does not support amending the 11 Demand Transition Rate to extend the number of years of no demand charges. 12 Regarding the third proposed adjustment (i.e., no demand charge between 13 11:30 a.m. and 4:00 p.m.), BC Hydro considered a similar request during the 14 14 consultation process for time of day energy rates. BC Hydro did not adopt time of 15 day energy rates, because customer engagement indicated that in-route bus 16 charging load has limited ability to respond to time of day energy charges and there 17 would be incremental costs and time required to implement the metering and billing 15 18 solutions required to enable time of day energy use charging. BC Hydro does not 19 support changing the time definition of the peak load that is subject to the Demand 20 Charge to exclude the period between 11:30 a.m.