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B-18

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Steam

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A. STEAM RATES

Reference: GENERAL

Order G-49-16 Interim rates

60.1 If the British Columbia Utilities Commission’s (BCUC/Commission) final approved rates for Creative Energy Vancouver Platforms Inc. (Creative Energy) Steam class of service (Steam) are higher or lower than the interim rate set by Order G-49-16, by what means does Creative Energy propose the difference be collected or refunded to customers? Response: Creative Energy proposes that variances from the interim rate approved by Order G-49-16 be collected for refunded to customers by an adjustment to rates effective January 1, 2017.

Reference: COMPLIANCE WITH PAST DIRECTIVES Order G-98-15; Exhibit B-1A, Appendix A Steam - Capitalized overhead study

On page 35 of the decision accompanying Order G-98-15 in the Creative Energy 2015-2017 Revenue Requirements Application (RRA) proceeding, the panel directed Creative Energy to file a capitalized overhead study in its next RRA outlining the utilities policies on allocating costs from O&M to capital. In Exhibit B-1A (Application), Appendix 4, Creative Energy states that it obtained an estimate for a capitalized overhead study and does not propose to file a capitalized overhead study unless directed by the Commission following this proceeding.

61.1 Given that Creative Energy was directed by Commission Order G-98-15 to file a capitalized overhead, is Creative Energy now requesting a variance of that directive under section 99 of the Utilities Commission Act (UCA)? Response: Creative Energy did not seek a variance of the directive under section 99 of the UCA. Given the subject of the directive, Creative Energy concluded that a reconsideration process would not be efficient, and would unnecessarily increase the regulatory burden on Creative Energy, a small Stream B utility. Creative Energy concluded that it was far more efficient to simply request in this proceeding the Commission determine that the Creative Energy should not be required to file a capitalized overhead study for the reasons set out in the Application at Exhibit B-1A, p. 52, Section 4.6.2.

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61.1.1 If so, please confirm and provide an explanation as to why the variance should be approved by the Commission. Response: Please see the response to the above information request BCUC IR 61.1.

61.1.2 If not, please explain. Response: Please see the response to the above information request BCUC IR 61.1.

Reference: GENERAL Order G-88-16 NEFC NEA

62.1 Are there any impacts to the Application due to the recent Commission decision

on Creative Energy’s Application of for Approval of the Restated and Amended Northeast False Creek (NEFC) and Chinatown Neighborhood Energy Agreement (NEA)? Response: The response to this information request is dependent on the Commission decision regarding the Creative Energy reconsideration and variance application on July xx of Order G-88-16 dated June 16, 2016. During the Order G-88-16 proceeding Creative Energy said in Final Argument in para. 278:

In conclusion, Creative Energy submits that the removal of a commitment by the CoV to provide mandatory connection constitutes a fundamental change to the approach to achieving the CoV policy objectives and in that context many provisions in the NEA are rendered moot or unworkable. If this is the Commission’s determination, then Creative Energy should have the same flexibility as all competitors to pursue the provision of thermal energy services in whatever manner possible consistent with whatever policies the CoV ultimately uses to achieve the outcomes in the NEA. These may include steam service, hot water service, on-site systems or (as in the case of Telus Garden) a mix of on-site and off-site systems. These systems should be allowed to 72 evolve organically in response to incremental decisions of individual developers at different locations and different points in time. Creative Energy cannot be expected to commit to or pursue larger and potentially more cost-effective solutions for customers that do not exist yet or in advance of sufficient commitments from future developers. Creative Energy observes that in the absence of the CoV, which prepares long-term neighbourhood visions and plans, there simply is no voice for future end users except via developers, and that there is no mechanism for end users in future development to influence decisions in relation to near-term development. Even with a notional increase in allowed ROE, there is a practical limit for a small utility such as Creative Energy to take a long-term view of energy supply for customers that do not yet exist. In the absence of the mandatory connection and in turn the NEA, Creative Energy will identify and pursue

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the feasible and best alternatives available to it if and when individual customers require service. Creative Energy will not commit to an overarching vision for the neighbourhood or larger-scale infrastructure options since it must be allowed (like other competitors) to respond to the needs of individual developers at very different locations and different points in time.

Reference: GENERAL Exhibit B-6, BCOAPO IR 1.1.1 Customer billings - Steam

63.1 Please explain why Creative Energy does not show the charge per tier in the line

item “Steam-Tariff” on the customers invoice. Response: Creative Energy uses a DOS based billing system that does not have the capability to show the charge per tier on the customer invoice.

Reference: GENERAL Exhibit B-1A: Appendix 1A, Appendix 9; Exhibit B-11, BCUC IR 1.9.2(ii) Combined schedules

64.1 Please explain why in Appendix 1A, Creative Energy presented the regulatory

schedules for NEFC and Steam combined. Please explain why the regulatory schedules for the Steam RRA on a standalone basis were not provided. Response: No particular reason as it was thought this was how the application should be made. Total costs and rate base of the utility for both NEFC and Steam is aggregated and any incremental costs is directly assigned to NEFC. As NEFC is being treated as a customer of steam, these costs are being recovered through the steam tariff from NEFC.

64.2 Please explain why the revenue requirements for Steam was calculated on the basis of a consolidated revenue requirements (including a combined rate base) adjusted for NEFC costs (directly attributable and shared). Response: Please see above response to BCUC IR 2.64.1.

64.3 Please prepare a schedule for Steam, similar to the schedule provide in Appendix 19 attached to BCUC IR 1.9.2(ii), that shows a column for Steam before allocation (excluding any NEFC direct costs), a NEFC or Other allocation column for any shared costs and a final column for the Steam RRA alone. Response: Please see above response to BCUC IR 2.64.1. Also, all the information that is asked for above is on the schedule for in BCUC IR1.9.2(ii). As an example, under the Steam Column, line items from line 4 to line 19 are considered as costs associated directly with Steam. The items from line 21 to line 27 are costs recovered from NEFC through the steam tariff charged to NEFC.

64.4 Please prepare a schedule for NEFC, similar to the schedule provide in Appendix

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19 attached to BCUC IR 1.9.2(ii), that shows a column for NEFC direct costs, a column for the costs allocated from Steam, and a final column for the NEFC RRA alone. It would be expected that the final column for the NEFC RRA ties to the schedules filed in Exhibit B-1A, Appendix 9. Response: Please see above response to BCUC IR 2.64.1. Also, all the information that is asked for above is on the schedule for in BCUC IR1.9.2(ii). As an example, under the Steam Column, line items from line 4 to line 19 are considered as costs associated directly with Steam. The items from line 21 to line 27 are costs recovered from NEFC through the steam tariff charged to NEFC.

Reference: RATES - UPDATES Exhibit B-1A: Errata letter, Section 2.1, p. 17; Exhibit B-11: BCUC IR 1.9.1, Appendix 19 attached to BCUC IR 1.9.2(ii) NEFC change in methodology Forecast rate increase after IR No.1

On page 1 of the Errata letter, filed as Exhibit B-1A, Creative Energy states: “This change from the use of allocation methodologies to the use of Steam Rates for the purpose of determining the Hot Water Service [NEFC] revenue requirement has increased the Steam rates and has not changed the Hot Water Service [NEFC] rates.”

65.1 Please confirm, or explain otherwise, that there is no change to the NEFC rates

because of the Revenue Deficiency Deferral Account (RDDA), which smooths the rate; however there were changes to some of the costs. Response: Confirmed.

On page 2 of Exhibit B-1A, Creative Energy further states: “The rate increase for Steam customers will increase from 6.23% to 7.15% effective January 1, 2017 if the use of Steam rates for the purpose of determining Hot Water Service [NEFC] revenue requirements is approved.” Appendix 18 attached to BCUC IR 1.9.2(ii) provides a detailed schedule showing a rate increase of 6.23 percent in 2016 and 7.15 percent in 2017.

However in response to BCUC IR 1.9.1 Creative Energy states: “[t]he table below has been updated to show the resulting increase in rate of 6.32% from 6.28% on a smoothing basis over the two test years.”

65.2 Please clarify the Steam rate increase in 2016 and 2017 that Creative Energy is now requesting. Response: The Steam rate increase in 2016 and 2017 that Creative Energy is now requesting is as per Appendix 18: 6.23% in 2016 and 7.15% in 2017.

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Please note that for the remainder of the information requests (IRs) staff is assuming that the Appendix 19 attached to BCUC IR 1.9.2(ii) reflect the correct numbers, and Creative Energy is requesting an increase of 6.23 percent in 2016 and 7.15 percent in 2017.

Reference: RATES – RATE INCREASE Exhibit B-1A: Errata, Section 2.1, p. 17; Appendix 10; Exhibit B-11, BCUC IR 1.1.1, 1.1.2, 1.9.2(ii); Exhibit B-8, CEC IR 1.6.1 NEFC change in methodology Forecast rate increase

66.1 Please confirm, or explain otherwise, that the rate increase summary in Exhibit B-1A, Appendix 10, does not reflect the updated revenue requirement or rate increase as set out in Appendix 19 to BCUC IR 1.9.2(ii). Response: Confirmed.

66.2 Please confirm, or recalculate with explanation, that based on the updated information provided in Appendix 19 attached to BCUC IR 1.9.2(ii) that the following staff prepared table results in a rate increase of 4.96 percent in 2017, under the assumption that the rate increase for 2016 is set at 6.23 for rate smoothing purposes.

Response: The calculation as set out in BCUC IR2.66.2, has the increase being effective from January 1, 2016. Whereas the rate increase provided in Appendix 19 attached to BCUC IR1.9.2(ii) has the increase being effective from May 1, 2016. Please refer to Exhibit B-1A, Appendix 10, which has split the Revenue Requirement for 2016 for the months of Jan-Apr and May to Dec. A

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revised schedule below shows the comparison between BCUC's calculations vs Creative's calculations. Please see BCUC IR2.66.3 Table below

66.3 Please reconcile staff’s table to the rate increases proposed in Appendix 19 to BCUC IR 1.9.2(ii). Response:

66.4 In response to BCUC IR 1.1.1 Creative Energy states that it calculated the requested rate increase using the “Goal Seek” function in excel. Please explain why the standard rate increase calculation show in the staff table above is not more appropriate? Response: In reviewing the standard rate increase calculation as provided by staff table, that can be used to arrive at the requested rate increase. Goal Seek was used as it was linked to the Confidential customer detailed demand schedule.

66.5 Please explain how the Goal Seek function provides for transparency and recalculation.

Per BCUC Sch Per CE RRA Calculation

$/M# M# $$ $/M# M# $$

2016 Revenue Requirement 8,754,635$ 8,754,635$ A

Load Forecast

Jan-Apr 2016 7.50$ 511,898 3,839,235$ 7.50$ 511,898 3,839,235$ B1

May-Dec 2016 7.50$ 556,101 4,170,758$ 7.50$ 556,101 4,170,758$ B2

8,009,993$ 8,009,993$ B

Total M# 1,067,999 1,067,999 C

Effective Rate 6.23% increase in 2016 / M#

Per BCUC Schedule 7.97$ 7.97$ D = $7.5*(1+0.0623)

Per CE RRA Schedule 7.50$ E = 7.50-2015 Effective Rate)

Revenues Collected in 2016 with 6.23% increase

Effective Jan 1, 2016 8,509,015$

Effective May 1, 2016 8,269,831$ F=B1M#*E +B2M#*D

Remain Unapplied Deficiency 245,620$ 484,804$ G=A-F

2017 Revenue Requirement 8,698,400$ 8,698,400$ H

Load Forecast (Jan - Dec) 1,069,572 1,069,572 I

Forecast Revenue in 2017 Based on 2016 Rates 8,521,548$ 8,521,548$ J=I*D

Revenue Requirement in 2017 plus 2016 Unapplied 8,944,020$ 9,183,204$ K=G+H

2017 Revenue Deficiency 422,472$ 661,657$ L=K-J

Effective Rate to recover 2017 Rev. Deficiency 8.36$ 8.59$ M=K/I

Calculated Rate Increase 4.96% 7.76% N=(M-D)/D

2016

2017

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In response to the Commercial Energy Consumers (CEC) of British Columbia IR 1.6.1 Creative Energy states the following:

Response: It does not as excel does the calculation in the background. The rate increase calculation shown in the staff table provides better transparency.

66.6 Please explain how the “existing effective rate” of $7.50 in Appendix 10 was calculated. Please provide all assumptions that go into determining the effective rate. Response: The existing effective rate of $7.50 in Appendix 10 was calculated as follows: Total Tariff Revenue for the Year / Total M# for the Year = Effective Rate / M# $7,303,070 / 973,151 M# = $7.50 /M#

66.7 Please confirm, or recalculate with explanations, that the following staff prepared table is accurate without consideration of rate smoothing.

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Response: Not confirmed. Please see below revised table. The Rate increase denominator used is incorrect for 2016. For 2017, the 2017 Rate of $8.07 is calculated incorrectly. Please see revised table below.

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66.8 Please reconcile staff’s table to the response to BCUC IR 1.1.2 which shows a rate

increase of 9.01 percent in 2016 and a rate decrease of 0.82 percent in 2017. Response: Differences are minor and could be due to rounding.

Reference: RATES Exhibit B-1A: Errata, Section 2.1, p. 17; Exhibit B-11, Appendix 19 to BCUC IR 1.9.2(ii) Adjustment to the revenue requirements for Steam and NEFC after IR No. 1

Appendix 19 attached to BCUC IR 1.9.2(ii) shows a number or adjustments to get to the updated rate increase including the following:

Net Fuel Costs: An increase in the net fuel cost of $1,500 and $2,600 in 2016 and 2017 respectively due to the build out and consumption of NEFC.

O&M: decrease in O&M of $2,100 and $12,600 in 2016 and 2017 respectively without explanation.

MAF: Decrees in the Municipal Access Fee (MAF) for Steam of $700 and $4,200 without explanation.

$$ Calculation

2016 Revenue Requirement 8,754,635$ A

Total M# 1,067,999 B

Existing Approved Effective Rate 7.50$ C

Load Forecast 8,009,993$ D=B*C

2016 Revenue Deficiency 744,643$ E=A-D

2016 Rate 8.20$ F=A/B

Rate Increase 9.30% G=(F-C)/C

2017 Revenue Requirement 8,698,400$ H

Load Forecast (Jan - Dec) 1,069,572 I

Forecast Revenue in 2017 Based on 2016 Rates 8,767,529$ J=H*I

2017 Revenue Sufficiency (69,129)$ K=H-J

2017 Rate 8.13$ L=H/I

Rate Decrease -0.79% M=(L-F)/F

2016

2017

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Amortization (AFUDC): Increase in the Amortization or Non-Rate Base Deferral account for AFUDC of $7,992 and $25,562 in 2016 and 2017 respectively due to AFUDC missing in the original submission. (See BCUC IR 2.20)

Fuel Stabilization Account – Interest: Decrease for Interest on Fuel Cost Stabilization Account (FCSA) of $34,356 and $36,216 in 2016 and 2017 respectively Interest at Weighted Average Cost of Debt (WACD) vs Revenue Requirement. (See BCUC IR 2.27)

67.1 Please confirm that the $12,300 of the decrease of $12,600 in O&M in 2017 relates solely to NEFC and is recovered by NEFC ratepayers. Response: Confirmed. The decrease in costs was due to an error where the net fuel costs in the 2016-17 RRA for NEFC was accounted for twice. This was corrected in the revised Appendix 19 attached to BCUC IR 1.9.2(ii).

67.1.1 Please provide support for the reduction of $12,300 in O&M costs for NEFC. Response: Please see above response to the reason for the reduction and hence the breakdown.

Reference: RATES Exhibit B-11, BCUC IR 1.1.2, 1.3.1, Appendix 18 to BCUC IR 1.9.2(ii); Exhibit B-1A:Section 1.5, pp. 14-15; Appendix 16 Interim rates 2017 for Steam

On pages 14 and 15 of the Application, Creative Energy states: “…Creative Energy is seeking final rates effective May 1, 2016 and is seeking steam rates, NEFC hot water rates proposed for Test Period 2017 to be interim and to be made final following an Application to be filed by Creative Energy on or before 1 November 1, 2016.”

“On or before November 1, 2016, Creative Energy proposes to file a simplified application to update the 2017 demand forecast and to update the revenue deficiency for 2016 projected year-end balances, including amortizations for deferral accounts.”

In response to BCUC IR 1.3.1 Creative Energy updated its position stating “the rate for 2017 would then be based on an updated and approved forecast with no changes to the revenue requirement which is largely fixed but for fuel which is a flow through…” [Emphasis added]

“Creative Energy is prepared to accept that rates for 2017 be based on the revenue requirements filed with this Application, but does request that the load forecast for 2017 be based on a load forecast filed in November 2016.”

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68.1 Please confirm, or explain otherwise, for the 2017 Steam class of service, Creative Energy is now requesting approval for the “revenue requirement after allocations” (Appendix 19 to BCUC IR 1.9.2(ii), line 29, column 2017 Steam) only and not the ultimate rate increase (Appendix 19 to BCUC IR 1.9.2(ii), “Rate Increase Request” of 7.15 percent) given that the demand forecast for 2017 is yet to be filed and reviewed by the Commission. Response: Confirmed.

68.2 Given that Creative Energy has confirmed that rates for 2017 are to be based on an updated and approved 2017 demand forecast, please confirm, or explain otherwise, that the ultimate 2017 rate increase for Steam will not be known until after the Commission reviews the 2017 updated load forecast. Response: Confirmed.

In response to BCUC IR 1.1.2, Creative Energy shows a table which results in a rate increase of 9.01 percent in 2016 and a rate reduction of 0.82 percent in 2017 without rate smoothing.

68.3 Please confirm, or explain otherwise, that if the updated load forecast for 2017 is lower than the forecast in Appendix 16 of the Application, the 2017 rate increase will be greater. Response: Confirmed.

68.3.1 If confirmed, please confirm, or explain otherwise, that the actual rate increase in 2017 could be much greater than 7.15 percent if the updated 2017 load forecast is lower, or the rate increase could be lower if the updated load forecast is higher. Response: Confirmed.

68.4 Given the rate increase is unknown for 2017, under Creative Energy’s proposed rate smoothing calculation (Excel Goal Seek function), please explain how rate smoothing over the two years will actually be achieved and accurately tracked.

Response: Creative Energy will take the load risk for 2016 and using the 2016 Unapplied Deficiency to be carried forward to 2017. In this application, the amount of Unapplied Deficiency is $458,434 as depicted in Appendix 19 in answer to BCUC IR 1.9.2(ii) will be carried over to test period 2017.

Reference: RATES Exhibit B-11, BCUC IR 1.2.2; Exhibit B-1A, Appendix 10 Rate Smoothing Deferral Account

In response to the concept of a Rate Smoothing Deferral Account proposed by staff in BCUC IR 1.2.2, Creative Energy responded as follows:

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69.1 What carrying cost did Creative Energy include in the rate smoothing calculation? Please explain why Creative Energy did not disclose the carrying costs in Exhibit B-1A, Appendix 10. Response: The carrying cost in the rate smoothing calculation was based on Weighted Average Cost of Debt at 3.83%. It was an oversight on our part in not disclosing the carrying costs in Exhibit B-1A, Appendix 10.

69.2 Please confirm that Creative Energy understands that a deferral account can have other purposes other than capturing the difference between forecast and actual costs, such as rate smoothing. Response: Confirmed.

69.3 Given that it is common regulatory practice to use a rate smoothing deferral account as the mechanism to facilitate rate smoothing over multiple test periods, would Creative Energy be opposed to a rate smoothing deferral account to capture the Steam revenue requirement (after allocation) not recovered in 2016, (on the basis of a rate increase in 2016 of 6.23 percent) if it was the only way the Commission would approve any form or rate smoothing? Response: In circumstances where the rate smoothing is proposed to occur in one of the test periods that is the subject of the RRA Application, Creative Energy does not believe that a rate smoothing deferral account is necessary. Creative Energy does not oppose the approval of such a deferral account, but believes that it will add unnecessary regulatory burden to Creative Energy.

69.3.1 If not opposed, does Creative Energy agree that that balance should be fully amortized in 2017 and would attract interest at Creative Energy’s short term interest rate? Response: Creative Energy agrees that the balance should be fully amortized in 2017 as per the Application, and has proposed that the 2016 revenue deficiency collected be collected in 2017 and that such deficiency would attract interest at Creative Energy’s WACD.

69.3.2 If opposed, please fully explain why.

Response: Not Opposed

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B. DEMAND FORECAST (LOAD/SALES)

Reference: STEAM LOAD FORECAST Exhibit B-1A, Appendix 16; Exhibit B-11, BCUC IR 1.11.1, 1.49.3 Impact of NEFC as a Steam customer

In response to BCUC IR 1.49.3 Creative Energy proposes to apply the Steam rates to NEFC in lieu of the cost allocation methodology proposed in the Application, and to charge NEFC for actual costs, based on NEFC’s proportion of total steam consumed by all customer.

70.1 Please confirm, or explain otherwise, that the Steams load forecast set out in Exhibit B-1A, Appendix 16 should be updated to include NEFC’s forecast steam load (which was provided in response to BCUC IR 1.11.1 in M#) considering that NEFC will be treated as a customer of Steam. Response: Confirmed.

70.1.1 If yes, please update Appendix 16 to show additional rows in 2016 and 2017 for NEFC’s monthly forecast load (in M#), and also provide a total by month for Steam load including NEFC. Response: See Attachment BCUC IR2.70.1.1.

70.1.2 If not, please explain. Response: Please see the response to BCUC IR 2.70.1.1.

70.2 Please confirm or explain otherwise, that if NEFC’s load is forecast too high then rates will be set too low and the customer will benefit, and if the load forecast for NEFC is too low than rates will be set too high and the shareholder will benefit. Response: If NEFC’s actual load is different from forecast, there will be no impact to the shareholder or to NEFC customers due to the variance in NEFC revenue, as any variance in NEFC revenues would be captured in the RDDA. However, if actual NEFC loads are lower than forecast, then steam system revenue will have been over-estimated, and steam customers will benefit. If NEFC loads are higher than forecast, then steam revenue will have been under-estimated, and the shareholder will benefit. But this potential benefit or loss to the shareholder is through steam revenues, not through NEFC directly.

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70.3 Please confirm the staff prepared table below is accurate, or provide an alternate calculation that shows, when taking into consideration the additional NEFC load in 2016 and 2017, the Steam rate in 2017 would be $8.10 instead of $8.36, or a rate increase of 1.7 percent instead of 4.96 percent. Please note the 2016 rate increase is held constant to achieve a 6.23 percent rate increase; therefore the impact will only be reflected in 2017 rates.

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Response: The table provided by staff takes into account the increase being effective from January 1, 2016. Creative has recreated a table that shows the impact to the calculated rate increase with the increase in 2016 rates being effective from May 1, 2016.

Reference: STEAM DEMAND FORECAST Exhibit B-11, BCUC IR 1.6.1, 1.10.2 Fuel expense recovered in Tariff and Water Expense – Impact due to load forecast

In response to BCUC IR 1.6.1, Creative Energy filed the following table explaining the impacts to the RRA in 2014 and 2015 due to the actual load forecast being lower than the forecast load.

Per BCUC Sch Per CE RRA Calculation

$/M# M# $$ $/M# M# $$

2016 Revenue Requirement 8,754,635$ 8,754,635$ A

Load Forecast

Jan-Apr 2016 7.50$ 511,898 3,839,235$ 7.50$ 511,898 3,839,235$ B1

May-Dec 2016 7.50$ 561,541 4,211,558$ 7.50$ 561,541 4,211,558$ B2

8,050,793$ 8,050,793$ B

Total M# 1,073,439 1,073,439 C

Effective Rate 6.23% increase in 2016 / M#

Per BCUC Schedule 7.97$ 7.97$ D = $7.5*(1+0.0623)

Per CE RRA Schedule 7.50$ E = 7.50-2015 Effective Rate)

Revenues Collected in 2016 with 6.23% increase

Effective Jan 1, 2016 8,552,357$

Effective May 1, 2016 8,313,173$ F=B1M#*E +B2M#*D

Remain Unapplied Deficiency 202,278$ 441,462$ G=A-F

2017 Revenue Requirement 8,698,400$ 8,698,400$ H

Load Forecast (Jan - Dec) 1,098,515 1,098,515 I

Forecast Revenue in 2017 Based on 2016 Rates 8,752,144$ 8,752,144$ J=I*D

Revenue Requirement in 2017 plus 2016 Unapplied 8,900,678$ 9,139,862$ K=G+H

2017 Revenue Deficiency 148,534$ 387,719$ L=K-J

Effective Rate to recover 2017 Rev. Deficiency 8.10$ 8.32$ M=K/I

Calculated Rate Increase 1.70% 4.43% N=(M-D)/D

2016

2017

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71.1 Please confirm, or explain otherwise, that “fuel expense recovered in Tariff” ($0.41) is based on the forecast cost of energy, which is based on the forecast load, and if the load forecast is overstated Creative Energy’s shareholders will benefit from the difference for “fuel expense recovered in the Tariff.” Response: The variances shown in the table above are the “Approved” minus the “Actuals” and therefore a positive value indicates that less than what was approved was actually recovered by CE. The variance should not be confused as revenue, but the difference between forecasted recovery and actual recovery. The approved amount was based on a load forecast and the cost of service to meet that forecast. As shown by the ROE, an overstated forecast, results in under recovery of most expenses of the cost of service and would not be considered a benefit to the shareholder.

71.2 Please confirm, or explain otherwise, that the same holds true for Water Expense. Response: See response BCUC IR 2.71.1.

In response to BCUC IR 1.10.2 Creative Energy states the following:

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71.3 This response appears to contradict the evidence provided in response to BCUC IR 1.6.1. Please explain. Response: Because the recovery is per mmBTU, the forecasted amount should not matter and the actual recovery should always meet the cost of service. Should there be an over or under recovery as a result of consumption (that varies from the forecast), from the 41 cents per mmBTU to meet the cost of service, the difference is captured in the Fuel Cost Stabilization Account. As stated in response BCUC IR 2 71.1, the evidence referenced is referring to the variance approved vs actual recovery.

71.4 For each mmBTU forecast (based on the load forecast) 41 cents is recovered in the “Fuel Expense Recovered in Tariff.” If there is more or less actual load as compared to forecast load does the variance between the forecast and actual mmBTUs x 41 cents go into the FCSA? Response: See response BCUC IR 2.71.3.

71.4.1 Specifically in 2014 and 2015 was the variance of 48 thousand and 51 thousand respectively, as shown in response to BCUC IR 1.6.1, credited to the FCSA for the benefit of ratepayers? Response: No, see response BCUC IR 2.71.1

Reference: STEAM DEMAND FORECAST Exhibit B-11, BCUC IR 1.9.2(ii) Revenue Requirements

72.1 Please explain what the table in the body of the response to BCUC IR 1.9.2(ii) on page 14 of Exhibit B-11, represents. Please explain why it is different than the PDF attachment to the response? Response: The table in the body of the response to BCUC IR 1.9.2(ii) on page 14 of Exhibit B-11 was in error and should have reflected the pdf attachment which shows the 6.23% and 7.15% increase for 2016 and 2017 respectively.

C. FUEL COSTS

Reference: FUEL COST Exhibit B-1A, p. 27; Exhibit B-11, BCUC IR 1.15.1; Exhibit B-7, BCSEA IR 1.6.1 Fuel Cost Stabilization Account Additions Clear Sky charges – Steam and NEFC Energy connection equipment operating costs

On page 27 of the Application, Creative Energy states that the company keeps 25 percent of the savings and remits the payment for 75 percent of the savings to Clear Sky.

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In response to BCUC IR 1.15.1 the following calculation for the Clear Sky charges was provided:

73.1 Please confirm, or explain otherwise, that 2.5 percent of the “Total Applicable to Clear Sky” fuel costs represent 75 percent of the savings which are remitted to Clear Sky in accordance with the agreement. Response: Confirmed.

In response to BCUC IR 1.15.1, Creative Energy confirmed that it is still responsible for the Operating Costs for the Energy Connection Equipment under Section 4.1(h) of the ESA estimated to be a maximum of $10,500, based on a 365 days a year operation. In response to the British Columbia Sustainable Energy Association and Sierra Club of BC (BCSEA) IR 1.6.1 Creative Energy states the following:

73.2 If any, please provide actual operating costs for 2015 and the forecast cost for 2016 and 2017. Response: Operating costs for the economizer and associated equipment are included general plant operating cost. CE cannot provide operating costs specific to the Clear Sky equipment only.

73.3 Does the Energy Connection Equipment operating cost get accounted for in the O&M expenses for Steam or NEFC system? If so, under which account? Response: Yes the operating costs get accounted for in “Steam Production O&M” for Steam and NEFC.

73.4 Please explain if the operating costs and the maintenance cost are different costs.

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If not, please explain why there would be charges for Clear Sky in operating costs if Clear Sky provides those services. Response: Yes the operating and maintenance costs are different. The operating costs are mainly associated with the electricity used by the equipment’s fans and pumps that is the responsibility of CE to provide.

D. TAXES

Reference: TAXES Exhibit B-6, BCOAPO IR 1.7.1 Municipal taxes and property taxes

Creative Energy provided the following response to British Columbia Old Age Pensioners’ Organization et. al. (BCOAPO) IR 1.7.1:

74.1 In the Application Creative Energy requests approval for two deferral accounts, the Special Services and the FCSA, neither of which captures the variance between actual and forecast taxes paid. Please explain which deferral account Creative Energy is referring to. Response: The reference to a deferral account in the response to this information request is misleading. Creative Energy does not propose a deferral account for variances between actual and forecast taxes paid.

74.2 Is the deferral account referred to in the IR response an NEFC or a Steam deferral account? Response: Please see response to the above information request BCUC 74.1.

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Reference: TAXES Exhibit B-1, Section 3.5, p, 36 Property taxes

75.1 Please complete the following table showing the property values and the levy rates to arrive at property tax.

75.1.1 Please fill in the actual 2015 property tax. Response: Actual property tax: $$ 410,913.

75.2 Please explain in full detail how the forecast property values for 2016 and 2017 were determined, and provide any supporting evidence. Response: The forecast property values were estimated based on the property assessment that was received in January 2016. The total taxable value was $20,071,000 against the 2015 property assessment of $17,981,000. This represents an increase of approximately 11.6%. Please see 2016 assessment below.

75.3 Please explain in full detail how the forecast levy rates for 2016 and 2017 were determined and provide any supporting evidence. Response: The forecast levy was calculated using the 2015 rates multiplied by the increase percentage in the property assessment

75.4 Are the property taxes assessed on the distribution system (pipes in the ground) as well as the Beatty Street building? Response: No property taxes are assessed on the distribution pipes.

75.4.1 If yes, please ensure the table shows the property values and levies are broken

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down by assessed asset. Response: Not applicable as there are no assessment on distribution pipes.

Reference: TAXES Exhibit B-1A: Section 3.5, p, 36; Appendix 1A, schedule 19; Exhibit B-11, BCUC IR 1.27.4 Income taxes

In response to BCUC IR 1.27.4 Creative Energy provided the following information:

76.1 Please provide an updated schedule 19 showing the Steam Service Income Tax expense without consideration of NEFC. Response:

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CREATIVE ENERGY VANCOUVER PLATFORMS INC.

2016-2017 REVENUE REQUIREMENT APPLICATION

INCOME TAXES

2015 2015 2016 2017

Line # Item Approved Projection Forecast Forecast

1 Allowed/Proposed Return on Rate Base (After Tax) 1,638,756 1,024,035 1,639,600 1,671,200

2 Add: Equity Portion of AFUDC

3 Less: Financing Costs (594,737) (593,749) (577,900) (599,500)

4 Accounting Income After Tax 1,044,020 430,286 1,061,700 1,071,700

5

6 Add:

7 Depreciation Expense 921,422 892,448 909,186 939,566

8 Amortization of Deferrals

9 Non Deductable/Portion of Dues & Entertainment

10 Charitable Donations 500 500 500

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12 Total Additions 921,422 892,948 909,686 940,066

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14 Deduct

15 Capital Cost Allowance (1,183,200) (1,189,146) (1,217,157) (1,236,839)

16 Cummulative Eligible Capital 0 (274) (255) (237)

17 Capitalized OH Deduction (Tax vs. Accounting) 15,300 0 0 0

18 Capitalized Interest

19 Deferral Additions

20 Pension Contribution 0 0

21 Impairment of Property & Equipment Loss

22 Total Deductions (1,167,900) (1,189,420) (1,217,412) (1,237,077)

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24 Taxable Income/(Loss) for Tax Purposes (After Tax) 797,541 133,815 753,974 774,690

25 Tax Gross Up 75.00% 75.00% 75.00% 75.00%

26 Taxable Income/(Loss) for Tax Purposes (Before Tax) 1,063,388 178,419 1,005,299 1,032,920

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28 Effective Income Tax Rate 25.00% 25.00% 25.00% 25.00%

29 Current Income Tax Expense 265,847 44,605 251,325 258,230

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E. DEPRECIATION EXPENSE

Reference: DEPERCIATION EXPENSE Exhibit B-6, BCOAPO IR 1.10.1 Contribution in aid of construction (CIAC)

Creative Energy provided the following response to BCOAPO IR 1.10.1:

77.1 Please confirm, or explain otherwise, that this error only results in a timing difference and the total balance of the CIAC that will be fully amortized does not change. Response: Confirmed.

Reference: DEPERCIATION EXPENSE Exhibit B-11, BCUC IR 1.34.1; Exhibit B-11-3, Schedule 4 Depreciation expense – Steam only

78.1 Please provide Appendix 1A, schedule 5 for steam only ensuring that it ties to Appendix 19 of BCUC IR 1.9.2(ii) line Depreciation, column Steam, in 2016 and 2017. Response: This can also be found in Exhibit B-11-3. Below is a table showing how the Depreciation ties from Exhibits to Appendix 19.

78.2 Please confirm, or explain otherwise, that none of the $944,900 and $959,400

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depreciation expense for 2016 and 2017 as set out in Appendix 19 of BCUC IR 1.9.2(ii) respectively relates to NEFC. Response: Confirmed.

F. AMORTIZATION OF NON-RATE BASE DEFERRAL EXPENSES

Reference: AMORTIZATION OF NON-RATE BASED DEFERRAL EXPENSES Exhibit B-1A, Appendix 1A, schedule 12; Exhibit B-11, Appendix 19 to BCUC IR 1.9.2(ii) Updates to the Application

In Appendix 19 to BCUC IR 1.9.2(ii) Creative Energy shows the calculation for the updated revenue requirements for Steam and NEFC for 2016 and 2017. One of the adjustments shows an increase in the amortization or non-rate base deferrals of $7,992 and $25,562 in 2016 and 2017 respectively. Schedule 12 of Appendix 1A shows that for 2017 the balance of $136,328 is derived as follows: $110,500 transition adjustment amortization, $8,592 NEFC RRDA amortization and $17,236 for the amortization of the “Steam Revenue Deficiency deferral account.”

79.1 Please provide details of the Steam Revenue Deficiency deferral account that appears to be created in 2016. Response: The Steam Revenue Deficiency Deferral account should reflect the remaining unapplied deficiency for 2016. The amount of $449,742 should have been updated to $458,434 as per Appendix 19 to BCUC IR1.9.2(ii). Creative Energy is not asking for an approval of a deferral account for the Unapplied Deficiency. However, there will be an Unapplied Deficiency amount per the application and Creative Energy will be taking the load risk in 2016.

79.1.1 Please provide the order number that approved this deferral account. Response: There was no Order number that was approved for this deferral account. Creative Energy will not be asking for an approval to have a steam revenue deficiency deferral account/Unapplied Deficiency account.

79.2 Please provide details for the calculation of $17,236 in amortization in 2017. Response: The calculation of $17,236 is calculated as follows: 2016 Revenue Deficiency * WACD = 458434 * 3.82% = $17,512.

The revenue deficiency as noted is slightly off but the difference in the amortization is small.

Reference: AMORTIZATION OF NON-RATE BASED DEFERRAL EXPENSES Exhibit B-1A, p. 42 Pension Expense Deferral Account

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On page 42 of the Application Creative Energy states that Order G-98-15, approved the creation of a non-rate base deferral account to capture the variance between the forecast pension expense recovered in rates, and the pension expense reported in the company’s audited financial statements.

80.1 Please confirm, or explain otherwise, that the 2016 and 2017 revenue requirements do not include any amortization of this account. Response: Confirmed. At the time of preparing for the application, the actual pension costs represented draft numbers and as such was not included. For 2016 and 2017, the variance relating forecast pension expense and actual pension expense will have to be accounted in future rate application in 2018. For 2015, please see below for the variance:

80.2 Please confirm, or explain otherwise, that a portion of the variance relating to 2016 and 2017 will be allocated to NEFC when it is eventually amortized into rate. Response: Not confirmed. As the pension variance will be included in the tariff, this will be flow through to NEFC through the steam tariff charge from the Steam system.

80.2.1 Please explain how the appropriate portion will be allocated. Response: N/A

G. RATE BASE – PLANT IN SERVICE

Reference: PLANT-IN-SERVICE Exhibit B-11, BCUC IR 1.34.1; Exhibit B-11-3, Schedule 4 Manhole structures

In the 2015-2017 RRA, $515,000 was approved for manhole maintenance in 2015. In response to BCUC IR 1.34.1, Creative Energy explained that it only spent $747 of the $515,000 of the 2015 approved cost in the Manhole Structures account, occurred because “due to work required to connect and labour constraints, manhole maintenance had to be delayed.” In the revised Steam Plant-in-Service submitted in Exhibit B-11-3, Schedule 4, the 2016 and the 2017 sheets indicate $0 expense towards the Manhole Structures account.

81.1 Please confirm, or explain otherwise, that by not performing any manhole maintenance in 2015, 2016 and 2017, there are no associated safety risks.

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Response: No safety concerns: the risk is mitigated by having the Distribution Service Team monitor the condition of such manholes from time to time. The refurbishment/maintenance of manholes expense was inadvertently included in the account 376 - "Mains" in Exhibit B-11-3, Sch 4. $800,000 of the $925,000 should have been included in account 378 "Manhole Structures".

81.2 Please provide an estimate of when Creative Energy anticipates the manhole maintenance will take place. Response: Maintenance of two manholes to be completed in the fall/winter of 2016.

81.3 Please separate Exhibit B-1A, Appendix 11A for Steam only and NEFC only. Response: The NEFC component can be found at row 66 to 74 in Exhibit B-1A, Appendix 11A.

H. RATE BASE RETURN

Reference: PLANT-IN-SERVICE Exhibit B-11, BCUC IR 1.34.1, BCUC IR 1.36.3 (WIP); Exhibit B-11-3, Schedule 4 Interest and ROE

In response to BCUC IR 1.34.1 Creative Energy filed a Steam standalone Plant-in-Service calculation as marked as Exhibit B-11-3.

82.1 Please also file Exhibit B-1A, Appendix 1A, schedules: 6, 7, 13 and 18 for Steam only. Response: Sch. 6 can be found in Exhibit B-11-3. We have included Schedule 6 as part of the answer to 82.1. Please see Attachment BCUC IR 2.82.1

82.1.1 Please ensure that the updated balance in schedule 13, row 13 (Capital Structure and Cost of Capital) for 2016 and 2017, agrees to the updated Plant-in-Service total of $26,648,321 and $27,322,662 in 2016 and 2017 as reported in Exhibit B-11-3. Response: Schedules are consistent to the Plant In Service as reported in Exhibit B-11-3.

82.1.2 Please ensure that line 24 of Appendix 13 in 2016 and 2017 agrees Appendix 19 to BCUC IR 1.9.2(ii), lines 16 and 17 for Steam in 2016 and 2017. Response: It is assumed Appendix 13 was meant to say Sch 13. The amounts won’t agree to Appendix 19 to BCUC IR 1.9.2(ii), lines 16 and 17 for Steam in 2016 and 2017. This is due to the fact that the rate base amounts is an aggregate.

82.2 Please calculate schedule 13, lines 20-25 for 2016 and 2017, under the

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assumption that the Work in Progress (WIP) balance is removed from Working Capital. Response: Please see attachment BCUC IR 2.82.2

I. FUEL COST ADJUSTMENT CHARGE AND THE FUEL COST STABILIZATION ACCOUNT

Reference: Fuel Cost Adjustment Charge and the Fuel Cost Stabilization Account Exhibit B-11, BCUC IR 1.10.3; Exhibit B-1A, p. 23; Exhibit B-8, CEC IR 1.13.1 Current and proposed function of the fuel cost charge and stabilization account

In response to BCUC IR 1.10.3 Creative Energy states:

In response to CEC IR 1.13.1 Creative Energy states:

In response to BCOAPO IR 1.1.2 Creative Energy states the following:

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83.1 Please fully explain how the Fuel Cost Adjustment Charge (FCAC) and the FCSA operated before the Commission directed there be carrying costs credited to ratepayers on the unamortized balance in the 2015-2017 RRA. Please including in your explanation (i) what balances are added to the FCSA, (ii) if the FCSA capture variance in both forecast fuel costs and forecast fuel volumes, (iii) how the FCAC is determined (iv) how, if at all, Creative Energy tracks and reconciles the FCSA with the FCAC collected from customers, and (v) how the buffer is determined. Response: Prior to carrying costs being applied to the unamortized balance, the FCSA operated as it is now without the carrying costs. Carrying costs are currently determined annually. (i) Amount applied to FCSA = Total Fuel Costs - Amount recovered through FCAC – Amount recovered through tariff (41 cents portion) (ii) The FCSA only captures variances in forecast fuel costs. Forecasted volumes have no effect on the FCSA. (iii) See response CEC IR 1 13.1. (iv) CE tracks the FCSA on a monthly basis to monitor the buffer. In the case where the buffer is outside the determined range of 10-15%, likely due to fuel prices drastically changing, the FCAC is adjusted accordingly. (v) The buffer was determined by Central Heat and adopted by Creative Energy.

83.2 Given that the only gas costs recovered in the steam tariff, and used to calculate

to revenue requirement for Steam, is the 41 cents base fuel costs, please explain what Creative Energy means when it states: “The FCAC allows CE to change the rates charged to customers to accommodate for fluctuations in gas prices, in order to meet the forecasted revenue requirements.” Response: The use of the word “rate” here, was used incorrectly and should instead be “fuel costs”. It is referring to the $/M# amount customers pay for fuel as the Fuel Cost Adjustment Charge.

83.3 Please fully explain exactly the changes proposed to the FCAC and the FCSA in this Application. Response: The only proposed change to the FCAC and FCSA is that CE is proposing carrying costs be applied to the balance of the FCSA.

83.3.1 Specifically, other than there being a carrying cost credited to ratepayers on the balance in the FCSA, is Creative Energy proposing any other changes to how the FCAC is calculated or how the FCSA functions? Response: No other changes are being proposed in this Application.

Reference: Fuel Cost Recovery Exhibit B-1A, Appendix 2, p. 2; Exhibit B-11, BCUC IR 1.16.3;

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Creative Energy 2015-2017 Revenue Requirement Proceeding, Exhibit B-5, BCUC IR 2.12.1 and IR 2.12.1.1 Fuel cost variance

Appendix 2 of Exhibit B-1A contains schedules for the FCAC and the FCSA as filed with the Commission on February 11, 2016. In the Creative Energy 2015-17 Revenue Requirements proceeding, the Commission asked how Creative Energy determines the appropriate size of the over recovery buffer developed through the use of the Fuel Cost Adjustment Charge and the Fuel Cost Stabilization Account. Creative Energy responded by stating: “…Creative Energy has historically maintained a balance of 10% to 15% of the actual annual energy costs.” In response to BCUC IR 1.16.3, Creative Energy provided a table that showed, on a monthly basis, the balance of the FCSA as a percentage of the sum of the actual energy costs for the previous 12 months. The table shows an increasing trend in the FCSA as a percentage of the previous 12 month fuel costs from approximately 5 percent in each of January and February of 2015, to just over 10 percent in each of February, March and April of 2016.

84.1 Please provide an explanation for this increasing trend in the balance of the Fuel Cost Stabilization Account as a balance of the actual energy costs over the previous 12 months. Response: As stated above, CE aims to maintain the FCSA at a balance of 10-15% of the actual annual energy costs, as shown in the table referenced, the balance was well below the 10% mark. As natural gas costs dropped, CE kept the FCAC constant to allow the balance to increase to the desired range.

84.1.1 Please explain how Creative Energy will address this increasing trend in order to maintain the balance of between 10 percent and 15 percent of actual annual energy costs, as described in the preamble. Response: CE has recently adjusted the FCAC from $8.75/M# to $7.00/M# in order to stabilize the trend.

Reference: Fuel Cost Adjustment Charge and the Fuel Cost Stabilization Account Exhibit B-11, BCUC IR 1.32.5 Current and proposed function of the fuel cost charge and stabilization account

BCUC IR 1.32.5 asked and was responded to by Creative Energy as follows:

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85.1 Please confirm, or explain otherwise, that Creative Energy is addressing the FCSA as directed by the Commission on page 19 of the 2015-2017 Creative Energy RRA Decision. Response: Confirmed.

85.2 Please confirm, or explain otherwise, that the directive on page 19 of the 2015-2017 RRA Decision relating to the FCSA is different from the rate design directive on page 25 of the Decision relating to the 41 cent Base Cost recovered in the Tariff. Response: Confirmed.

85.3 Please confirm, or explain otherwise, that variance deferral accounts normally have an amortization period and do not function the way the FCSA is being proposed by Creative Energy. Response: Confirmed.

85.4 Please confirm that variance deferral accounts normally do not include balances collected from the customer in advance that do not relate to a variance between the forecast and the actual cost. Response: Confirmed.

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85.5 Please explain the advantages and disadvantages of a concept where the test period forecast fuel costs are recovered through the FCAC at a rate based on “total forecast fuel costs/total forecast load in #M.” On a quarterly basis the actual fuel cost is compared to the fuel cost recovered in the FCAC and the difference is placed in the FCSA. The FCSA is amortized into rate as a rate ride once it reaches a certain balance. Response: CE currently uses an approach similar to this however, rates are not amortized at set intervals and we currently use a rate smoothing method instead of a flow through. This approach would provide better control over the amount in the FCSA, and keep the FCAC more aligned with current fuel prices but there would be more risk for price volatility and would require more administrative work. The method Creative currently uses and prefers to continue with the FCSA, allows for rate smoothing and more stability and consistency in the FCAC. The FCAC rate is set based on fuel expenses and to keep the balance of the account at 10-15% of 12-month fuel costs, while a rate rider is not explicitly broken out the FCAC is adjusted periodically to maintain the balance. CE has used this method for 20+ years and customers like this stability in gas prices this provides.

85.5.1 Under this approach how much of a balance does Creative Energy consider should be held in the FCSA before any of the balance is amortized through a rate rider? Please ensure that you address any intergenerational equity impacts. Response: Creative’s preference, as stated in BCUC IR 2.85.5, is to continue with our current method. However, should Commission Staff recommend a threshold for the balance of the FCSA, beyond which the excess balance is amortized through a rate rider, Creative Energy proposes that the FCSA should be permitted to hold at least 15% of 12 month fuel costs, before any excess amount is amortized through a rate rider. Amortizing any excess balance (i.e. above the 15% threshold) through a rate rider should be done within 1-2 years to limit intergenerational equity concerns.

85.5.2 Under this approach how often should the FCSA rate ride be reviewed and adjusted (quarterly, semi-annually, or annually)? Response: Creative’s preference, as stated in BCUC IR2.85.5, is to continue with our current method. However, should Commission Staff recommend the current balance be amortized through a rate rider, Creative would adjust the FCSA rate rider semi-annually.

85.5.3 Please confirm that under this approach there would be no impacts to the Municipal Access Agreed fees. Response: Confirmed.

Reference: Fuel Cost Stabilization Account

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Exhibit B-1A, Appendix 1A, Schedule 1; Exhibit B-11, BCUC IR: 1.9.2(ii), 1.32.1 Carrying costs

86.1 In the Appendix 19 to BCUC IR 1.9.2 (ii) there is reduction to the Steam RRA of $34,356 in 2016 and $36,261 in 2017 to account for the interest of the FCSA. Please explain why this adjustment is not reflected in the rate schedule set out in Exhibit B-1A, Appendix 1A, Schedule 1. Response: No particular reason as to why it was not reflected in the rate schedule as set out in Exhibit B-1A, Appendix 1A, Schedule 1.

86.2 Please explain why the credit interest on the deferral account is recorded as a credit to the revenue requirements rather than a credit to the FCSA deferral account. Response: The interest is a credit to reduce the revenue requirement and hence offset the rate increase.

86.2.1 Please show details for the FCSA interest adjustment for both 2016 and 2017. Response: Balance as of May 30, 2016*WACD = Interest adjustment.

In response to BCUC IR 1.32.1 regarding the appropriate carrying costs for the FCSA, Creative Energy states the following:

86.3 Is Creative Energy requesting and applying the WACD as directed by the Commission in the 2015-2017 RRA, or is Creative Energy requesting/applying the Weighted Average Cost of Capital (WACC) as suggested in BCUC IR 1.32.1? Response: Confirmed.

J. OPERATING AND MAINTENANACE - WATER EXPENSE

Reference: O&M Exhibit B-1A, pp. 17 and 28; Exhibit B-11, BCUC IR 1.17.1-2; Exhibit B-8, CEC IR 1.16.2 Water expense

On page 27 of Exhibit B-1A, Creative Energy states: “The cost of water is one of the major expenses for the Company. … The methodology to forecast the water expense is based on a historic ratio of actual water expense vs actual demand for steam times the forecast demand.”

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Further on page 28 of Exhibit B-1A, Creative Energy states: “The 2015 Unaudited Actual Water Expense of $900,222 …” and also states “[t]he forecast Water Expenses for 2016 and 2017 are $904,200 and $973,300, respectively.” In Exhibit B-11, Creative Energy responded to a Commission information request by completing a table related to water expenses. The table in the response showed that Creative Energy’s actual water expense for 2015 was $500,997 and that the 2016 and 2017 forecast water expenses were $468,908 and $493,644 respectively.

87.1 Please explain the differences in the figures presented on page 28 of Exhibit B-1A and the figures presented in response to BCUC IR 1.17.1. Response: The difference consists of other costs related to water such as chemicals, pump expense relating to the delivery of water

87.2 If the figures reported in response to BCUC IR 1.17.1 represent water expense, please fully explain what the remaining costs recorded in account #502 relate to. Response: Please see response to 87.1 above

In response to CEC IR 1.16.2 Creative Energy explains the following:

In response to BCUC IR 1.17.2 Creative Energy states the following:

87.3 Has Creative Energy deviated from using a 4 percent annual increase in 2017? If yes, please explain why. Response: Creative Energy, for 2015, used a 5% to account for the 4% and adding 1% for inflation.

87.4 Creative Energy provided water rates for 2014 to 2016 in response to BCUC IR 1.17.2. What does Creative Energy forecast the rate per unit to be in 2017? What evidence or assumptions is this forecast based on?

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Response: The assumptions used for the forecast for 2017 was the 4% as from the CoV website and as of Dec 2015, the Stats Canada CPI for BC. Website: http://www.bcstats.gov.bc.ca/StatisticsBySubject/Economy/ConsumerPriceIndex.aspx

Reference: O&M Exhibit B-11, BCUC IR 1.17, 1.18.3, 1.49.3 Allocation to NEFC

In response to BCUC IR 1.49.3, Creative Energy proposes to apply the Steam rates to NEFC in lieu of the cost allocation methodology proposed in the Application, and to charge NEFC for actual costs, based on NEFC’s proportion of total steam consumed by all customers.

In response to BCUC IR 1.18.3, Creative Energy shows that $25,400 and $62,300 of Steam Expenses (account #502) are allocated to NEFC.

88.1 Given that NEFC is being treated as a customer rather than a cost allocation, please explain why there is still a need for a Steam/Water expense (account #502) allocated to NEFC? Response: This was an oversight and should have been omitted from NEFC revenue Requirement.

K. OPERATING AND MAINTENANCE EXPENSE – LABOUR

Reference: O&M Exhibit B-11, BCUC IR 1.24.1-2; Exhibit B-8, CEC IR 1.8.1 Labour

In response to BCUC IR 1.24.1 Creative Energy filed the following table:

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In response to BCUC IR 1.24.2, Creative Energy confirms that this table represents 100 percent of management salaries and the “Net Wages” are included in O&M expense used to calculate the revenue requirements. Tables 1 and 2 of Appendix 7A identify that Creative Energy’s management employees share their time between Steam, NEFC, and six other projects.

89.1 Please confirm or explain otherwise that the Tables 1 and 2 in Appendix 7A show the allocation to Steam, NEFC, and the 6 other project by employee for labor that is capitalized only. Response: Confirmed. Please note that the amount being cross charged to projects are typically of a capital nature. The time spent are based on forecast amount of time multiplied by hourly rate of the employee working on that capital project.

89.1.1 If not confirmed, please explain why the amounts exactly tie to line 11 “Capitalized Labour” in the table provided in response to BCUC IR 1.23.1. Response: See above response 89.1

89.2 Please explain why none of the labour included in account #500 or account #870 is capitalized. Response: Account #500 relates to employees in the plant and account #870 relates to employees on the service line. These are labour costs relating to operations.

89.3 Please confirm, or explain otherwise, that labour reported in accounts #500, #870, and #920, totaling $2,183,600 in 2016 and $2,263,400 in 2017 is Creative Energy’s total labour cost excluding capitalized labour (un-capitalized labour). Response: Confirmed.

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89.3.1 Please confirm, or explain otherwise, that $17,300 and $22,100 in 2016 and 2017 respectively of the un-capitalized labour has been allocated to NEFC and none has been allocated to the other six projects. Response: Note that this is an estimated time that these are operators time that had been estimated to be associated with NEFC. From an operation standpoint, there are no allocations to the other six projects.

89.3.1.1 Please explain how this allocation to NEFC was determined and why it is considered appropriate. Response: This was based on an estimated time that may be required directly for the service crew to attend to the NEFC division.

89.3.2 Please confirm that other than the small portion allocated to NEFC all of Creative Energy’s remaining un-capitalized labour is allocated to Steam. Response: Confirmed.

89.3.3 Please explain why this is considered appropriate. Response: The labour amount that remains is appropriate as employees are directly associated with the plant and the distribution network.

89.4 Please confirm or explain otherwise that all the labour reported in accounts #500 and #870 relates exclusively on Steam other than the small amount of account #870 that is allocated to NEFC. Response: Confirmed.

89.5 Please provide a table similar to the one provided in response to BCUC IR 1.24.1 for Steam Production salaries and Service Line Wages Salaries. Response: For Steam Production salaries, there are no allocation of salary costs to other projects or capital projects.

89.6 Do the employee benefits recorded in account #926 include benefits for any of the wages that are capitalized to NEFC or the other six projects as reported in Appendix 7A? If yes, please explain why none of the expense has been allocated to NEFC or any of the other six projects. Response: Yes. The amount that is being capitalized includes the benefits recorded. For example, the amount of $533K that is being credited from wages in 2016 is the grossed up amount which includes all the benefit costs. This was done this way to minimize the entries needed.

Reference: O&M Exhibit B-8, CEC IR 1.17.3; Exhibit B-11, BCUC IR 1.24.4; Exhibit B-1A, Appendix

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7A Management bonus

Creative Energy provided the following information in response to CEC IR 1.17.3:

In response to BCUC IR 1.24.4 Creative Energy states the following:

90.1 Please confirm that if Creative Energy does not pay out the bonus as forecast, the cost is still recovered from ratepayers. Response: Confirmed.

90.1.1 Please confirm that this is not any different than if they were capitalized. Response: Not confirmed, although it is true that variances from forecast of both O&M expenses and capital expenditures are recovered from ratepayers.

90.2 Please explain why none of the bonus is allocated to the other six projects as set out in Appendix 7A when it appears that significant portions of management salaries have been allocated to the six other projects. Response: The incentive plan is based on performance targets that relate to specific accomplishments that do not include all the activities of management. And as the quoted information request states the recovery of bonuses should be as an O&M expense because it is dependent on performance in the year, and not necessarily activities to support capital projects.

90.3 Please quantify the portion of management bonuses that have been allocated to NEFC in 2016 and 2017. Response: None of the management bonuses have been directly assigned to NEFC.

90.4 Creative Energy filed the 2016 Incentive Plan Objectives confidentially with the Commission (Exhibit B-11-2), which set out the objectives and the weighting that the incentive plan is based on. For each individual please discuss what percentage of the bonus calculation directly benefits Steam Customer and what percentage

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directly benefits NEFC customer. Response: Creative Energy filed individual incentive plan objectives for all eligible employees in order to disclose the nature of the performance targets that have been established. All customers whether taking hot water service or taking steam service benefit from the commitment of employees to the success of Creative Energy and the development of new thermal networks and the achievement of performance targets established by the CoV. So it is not possible to identify by individual the percentage of the bonus that directly benefits a steam customer and directly benefits a hot water service customer.

90.5 Given that the bonuses are partially set to encourage growth of the company as a whole please fully explain why the majority of the bonus expense is forecast to be recovered from Steam ratepayers. Response: Creative Energy believes that the connection of new customers for steam or hot water service is in the interests of all customers. Moreover, only a small percentage of the performance targets relate to efforts to “encourage growth of the company as a whole”. For that reason, Creative Energy believes that it is appropriate for the majority of the bonus to be recovered from Steam ratepayers

Reference: O&M Exhibit B-8, CEC IR 1.8.4, 1.21.1, 1.21.3, 1.21.5, 1.42.3 Board of Directors

Creative Energy provided the following information in response to CEC IR 1.8.4:

Creative Energy provided the following information in response to CEC IR 1.21.1:

Creative Energy provided the following information in response to CEC IR 1.21.3:

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Creative Energy provided the following information in response to CEC IR 1.21.5:

Creative Energy provided the following information in response to CEC IR 1.42.3:

91.1 Does Creative Energy keep minutes of the Board of Directors (BOD) meeting? If yes, could the minutes not be used as a way to determine how much time is spent on NEFC and the other six projects? Response: Minutes of the meeting of the Board of Directors are prepared and then approved by the Board. The Board has responsibilities to ensure reliable service at reasonable rates to all customers. It is not possible to identify time spent on NEFC and the other six projects.

91.2 Director Fees are forecast to be $48,200 and $49,400 in 2016 and 2017 respectively. Less than 10 percent of those costs are being allocated to NEFC. Please confirm that no more than 10 percent of the BOD time is forecast to be spent on NEFC in 2016 and 2017. Response: Please see the response to information request BCUC 91.1. Creative Energy is unable to answer the information request because during Board meeting there is no timekeeper.

91.3 How much, if any, of the BOD time is spent on projects other that Steam and NEFC (i.e., the other six projects)? If any time is spent of other projects, why are these costs included in the Steam revenue requirements?

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Response: Please see the response to information request BCUC 91.1. Creative Energy is unable to answer the information request because during Board meeting there is no timekeeper.

91.4 Is it expected that the BOD will spend 90 percent of its time on Steam in 2016 and 2017? Response: Please see the response to information request BCUC 91.1. Creative Energy is unable to answer the information request because during Board meeting there is no timekeeper.

91.4.1 If not, why have 90 percent of the BOD costs been allocated to Steam? Response: Please see the response to information request BCUC 91.1. Creative Energy is unable to answer the information request because during Board meeting there is no timekeeper.

91.4.2 What is Creative Energy’s best estimate of the percentage of time the BOD will spend on Steam in 2016 and 2017? Response: Creative Energy is unable to provide an estimate of the percentage of time the BOD will spend on Steam in 2016 and 2017.

L. OPERATING AND MAINTENANCE EXPENSE – OTHER

Reference: O&M Exhibit B-8, CEC IR 1.18.1 Sales Expense (Account #910)

92.1 Please confirm, or explain otherwise, that approximately 22 percent of the total Sales Expense in 2016 and 2017 is allocated to NEFC and the remainder to Steam. Response: Not confirmed. The Sales expense would include costs for both for steam and NEFC.

92.2 Do any of Creative Energy’s other six projects or potential projects benefit from Sales Expenses? Response: No.

92.2.1 If yes, why have more of these expenses not been allocated out of Steam? Response: N/A

Sales Expense has increased from $25,217 in 2011 to $70,200 in 2016 while sales for Steam have remained relatively flat (Appendix 16).

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92.3 If 78 percent of the Sales Expenses are attributable to Steam please explain why those expenses have not resulted in increased sales. Response: Creative believes there will be some lag time between the incurred Sales Expenses and seeing the results of those expenses. Creative Energy connected 3 new customers to the core in 2016, however some larger customers currently connected have implemented building efficiency measures to reduce their consumption, resulting in reduced steam sales.

Reference: O&M Exhibit B-11, BCUC IR 1.22.4.1, 1.18.3 Insurance (Account #924)

Creative Energy states the following in response to BCUC IR 1.22.4:

93.1 The schedule attached to BCUC IR 1.18.3 shows that $4,100 and $11,900 in 2016 and 2017 respectively, have been allocated to NEFC. Given that NEFC is under construction during the test period please explain why a higher portion of the costs have not been allocated to NEFC? Response: For the test years of 2016 and 2017, insurance for NEFC are based on 0.225% of midyear capital costs relating to NEFC.

Reference: O&M Exhibit B-11, BCUC IR 1.18.3, 1.22.2, 1.22.3; Exhibit B-8, CEC IR 1.24.10, 1.24.13 Special Service Costs (Account #923)

94.1 In response to BCUC IR 1.22.2, Creative Energy forecasts to spend $100,000 on the Rate Design Application for Steam, stating that it will require 600 consulting hours to complete. Please provide more details on how a small rate design application requires this many consulting hours. Response: The description of the $100,000 budget for this Rate Design process was incorrect. It is not only consultant time; this is an allowance for the entire Rate Design proceeding. It is consistent with Creative Energy’s recent regulatory burden. It includes costs for the Rate Design application, multiple rounds of

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written IRs, Argument, and PACA funding.

94.2 Do the forecast “Accounting Tax and Audit” costs include fees for any other entity other than the Steam class of service and NEFC? If yes, please explain. If yes, what is the cost for Accounting, Tax and Audit for Steam only? Response: No, these are for the steam and NEFC.

94.3 Do the forecast “Legal Fees” include legal work for any other entity other than the Steam class of service? If yes, please explain. If yes, what are the Legal Fees cost for Steam only? Response: No.

94.4 Do the forecast “Communication” costs include work for any other entity other than the Steam class of service? If yes, please explain. If yes, what is the cost for Steam only? Response: Yes. The communication costs would impact both the Steam class of service and NEFC. In response to CEC IR 1.24.13 Creative Energy states the following:

94.5 Are these costs solely for this Application? Please explain why none of these costs have been allocated to NEFC. What percentage relates to NEFC? Response: For the 2016 and 2017 test years, NEFC customers are being treated as steam customers and will be charged the steam tariff.

94.6 What are the Commission regulatory costs of $28,000 in 2016 and $43,000 in 2017 related to? Are these costs solely for this Application? Why have none been allocated to NEFC? What percentage relates to NEFC? Response: For the 2016 and 2017 test years, NEFC customers are being treated as steam customers and will be charged the steam tariff.

94.7 What are the Commission RRA costs of $15,000 in 2016 and $15,000 in 2017 related to? Are these costs solely for this Application? Why have none been allocated to NEFC? What percentage relates to NEFC?

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Response: For the 2016 and 2017 test years, NEFC customers are being treated as steam customers and will be charged the steam tariff.

Out of the forecast Special Service Costs of $418,200 and $307,300 in 2016 and 2017 respectively, only $6,000 and $6,120 in accounting fees have been allocated to NEFC. Creative Energy explained the reason in BCUC IR 1.22.3:

94.8 Please explain fully why Creative Energy could not identify any other Special Services cost directly related to NEFC. Response: Creative Energy is simply unable to directly allocate many Special Services costs. These costs include consultant time and regulatory fees and effort which cannot realistically be directly assigned.

In response to CEC IR 1.24.10 Creative Energy states the following:

Creative Energy had the NEFC Certificate of Public Convenience and Necessity (CPCN) application before the Commission in 2015, and the NEFC NEA application before the Commission in 2016.

94.9 Please quantify the regulatory costs associated with these two proceedings. Response: Please see Attachment BCUC IR 2.94.9

94.10 Are any of the costs related to these two proceeding recovered in 2016 or 2017 rates, either through the Steam rate or the NEFC’s Hot Water Rate? Response: Yes, they are recovered through the NEFC Hot Water Rate.

94.10.1 If yes, under with GL account number are they recorded? Response: These are recorded as Predevelopment Costs in rate base to NEFC, per Appendix 9, Schedule 2.

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94.10.2 If not, where are these costs being recorded? Response: N/A, please see above response to BCUC 2.94.10.1

Creative Energy recently filed a Connection Agreement application with the Commission.

94.11 Please quantify the forecast regulatory costs associated with that proceeding. Response: There are no forecast regulatory costs that were estimated with that proceeding for 2016 and 2017.

94.11.1 Are any of those costs recovered in 2016 or 2017 rates either through the Steam rate or NEFC’s Hot Water Rate? Response: N/A, please see above response to BCUC 2.94.11

94.11.2 If yes, under what account number? Response: N/A, please see above response to BCUC 2.94.11

94.11.3 If not, where are these costs being recorded? Response: N/A, please see above response to BCUC 2.94.11

M. SPECIAL SERVICES DEFERRAL ACCOUNT

Reference: DEFERRAL ACCOUNTS Exhibit B-1A, p. 51; Exhibit B-11, BCUC IR 1.33; Exhibit B-8, CEC IR 1.24.16

Special Services Costs Deferral Account

Any order approving a deferral account should define specifically which variances are allowed to be captured in the deferral account. In response to BCUC IR 1.33, Creative Energy identified the line items in account #923 that variance protection is being requested for; however, the title of the expense is not sufficient to determine if approval should be granted.

95.1 Please list each item that Creative Energy is requesting variance protection for and provide a description of exactly what the cost relates to. Response: The description of exactly what the costs relates to follows: all third party expenses to meet regulatory requirements such as those set forth on page 51, lines 19-27. Creative Energy also expects to incur third party expenses for the following regulatory requirements:

BCUC BCUC quarterly payments

PACA Funding All proceedings

LTRP To be filed in June 2017

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2016-17 RRA and RD Current Proceeding

Costs of model for RRA Robert Half-modelling/temp help

Rate Design Appl’n To be filed before November 2016

MS Project Expenditures Design and Implementation of Expenditure Tracking Program

For each item that variance protection is being requested please address the following:

(i) whether the cost is outside of managements control;

(ii) the materiality of the costs;

(iii) the impact on management’s incentive to control and manage costs; and

(iv) any impact on intergenerational equity.

When asked how regulatory costs that are directly related to NEFC will be treated, Creative Energy states the following in BCUC IR 1.33.2:

In response to CEC IR 1.24.16, Creative Energy states the following:

95.2 Please explain why regulatory costs directly related to NEFC service will not be allocated to NEFC and why regulatory costs directly related to Steam service will not be allocated to Steam. Response: In respect of each item for this deferral account, Creative Energy provides the following response in the same order to the list provided in 95.2.

i) Whether the cost of outside of management control -- all costs are driven by regulatory requirements and are outside of management control

ii) The materiality of the costs --- all costs are material, in fact, the budget estimates for PACA funding in this proceeding will have a rate impact of approximately 0.33%.

iii) The impact on management’s incentive to control and manage costs --- Creative Energy is a Stream B utility with significant competitive pressures and a load that has been declining for the past five years. Management’s

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incentive to control and manage costs is significant and the costs to meet regulatory requirements are material and will adversely impact Creative Energy’s competitive position. Creative Energy will continue to make submissions to the Commission in order to reduce these costs; thermal networks should be regulated by the Commission, but the regulatory burden needs to be proportional. Recently, there has been a significant increase in the regulatory burden placed on Creative Energy that is inconsistent with the policy objectives of the CoV and the province.

iv) An impact on intergeneration equity. Creative Energy expects the amortization period for recovery of the items in this account will be one or two years.

95.3 Is Creative Energy proposing that 100 percent of the regulatory costs are recovered from Steam Customers? Response: No, the regulatory costs will be shared costs and are not directly assigned to any class of service.

95.4 For each item that Creative Energy is requesting variance protection from, please explain if the costs are exclusively related to Steam service. If not exclusively related to Steam service, please explain what other projects they relate to and explain why Creative Energy is proposing that all the Special Service expenses are recovered from Steam customers. Response: As per BCUC IR 95.3, Creative Energy is not proposing that 100 per cent of regulatory costs be recovered from Steam customers. Given the nature of regulatory costs, Creative Energy proposes to simplify the recovery for regulatory costs by not allocating Special Services expenses to any specific class of service. Creative Energy acknowledges that from time to time there may be regulatory costs primarily related to a class of service, but has not yet identified such regulatory costs. Interveners argued that even the NEFC proceeding included issues relevant to Steam service customers.

N. COST ALLOCATION AND SHARE COSTS

Reference: COST ALLOCATIONS Order G-98-15: Exhibit B-1A, Appendix 4; Exhibit B-6, BCOAPO IR 1.2.3.1; Exhibit B-7, BCSEA IR 1.12.1 Steam - Core

On page 34 of the Creative Energy 2015-2017 RRA Decision, the Commission expressed concerns with costs being recovered from Steam ratepayers that potentially were not related to Steam service and directed the following: “Creative Energy is also directed to file a cost allocation methodology with the Commission within 24 months of this Decision, to address resource sharing, cost allocation policies and the Panel’s concerns on potential cross subsidization expressed in this Decision.”

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In Exhibit B-1A (Application), Appendix 4, Creative Energy states “Creative Energy believes the cost allocation methodology proposed in the NEFC Application an in this Application satisfy this directive.” In response to BCSEA IR 1.2.3.1, Creative Energy states the following:

In response to BCSEA IR 1.12.1, Creative Energy further states:

96.1 Given that Creative energy has six additional projects underway in addition to NEFC and has an aggressive growth strategy why does Creative Energy consider that the cost allocation to NEFC put forward in this Application fulfill the Commission directive on page 34 of the 2015-2017 RRA decision? Response: Creative Energy has a strategy to reduce GHG emissions and to meet GHG performance targets established by government at all levels. A strategy to reduce GHG emissions and to meet such targets may be framed as this information request does as “an aggressive growth strategy” of Creative Energy, but it would be far more accurate to characterize Creative Energy as having a strategy to reduce GHG emissions. Creative Energy is uniquely positioned to contribute to the reduction of GHG emissions, and efforts to do just that should be supported, not frustrated. Each of the six additional projects are designed so at to reduce GHG emissions.

Creative Energy interprets the Commission’s directive to be concerned with cost allocations to NEFC. In the updated Application, Creative Energy has abandoned the cost allocations to NEFC and requests to apply the Steam Rates to NEFC.

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Creative Energy submits that by abandoning the cost allocations, it has addressed the Commission’s concerns.

Additionally, as directed in the 2015 Decision, Creative Energy continues to include only 25% of the salary and benefits of the VP Business Development position in the steam rates. Since the Application was prepared the VP Business Development has left Creative Energy; however, the costs of providing those services are not expected to change. Creative Energy submits that this approach appropriately addresses any resource sharing concerns, at a level of detail that is proportional to the absolute dollar amounts involved.

96.2 Please confirm that the diagram below accurately represents Creative Energy’s proposed structure for allocating costs. If not, please provide an alternate diagram.

Response: Not confirmed. The “Allocation of Shared Cost” and the arrow below should be deleted from the diagram.

Allocation

of Shared Cost

Allocation

of Direct Cost

Creative Energy

Vancouver Platforms Inc.

Creative Energy Canada

Platforms Corporation

(the Parent)

Steam

Class

of Customer

Hot Water

Class

of Customers

Steam

Class of Service

NEFC

Class of Service

Current Customers

Other

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96.3 Please confirm, or explain otherwise, that all of Creative Energy Vancouver Platform Inc.’s directly attributable costs are allocated to Steam, NEFC or Other. If not, why not? Response: Confirmed.

96.3.1 If not confirmed, does Creative Energy allocate all its costs to Steam and then allocate out of Steam any directly attributable costs to NEFC and Other?

Response: N/A

96.4 What percentage of total costs incurred by Creative Energy Vancouver Platforms Inc. is allocated to Steam? Response: The percentage of costs incurred by Creative Energy Vancouver Platforms Inc. that form part of the revenue requirement to establish the steam rates exceeds 90% are have been examined in considerable detail during this proceeding.

96.5 What policies and procedures does management have in place to ensure there is no cross subsidization, and only costs directly attributable to the Steam class of service are charged to Steam customers? Response: All costs that are directly assigned are costs that relate to unique, specific service requirements of the class of service. Creative Energy has proposed that all customers, whether in the steam class of service or in the hot water class of service pay the same rate for steam service. For these two reasons, there should be no cross-subsidization between classes of service.

96.6 At what point in time does Creative Energy believe a cost allocation study may be warranted? Response: Creative Energy does not believe a cost allocation study is necessary for the same reasons that it does not believe that there is cross-subsidization between classes of service.

NORTH EAST FALSE CREEK (NEFC) HOT WATER

O. COMPLIANCE WITH PAST DIRECTIVES

Reference: COMPLIANCE WITH PAST DIRECTIVES Order C-12-15, Decision, p. 35; Exhibit B-1A, Appendix 4 and Appendix 9, schedule 3; Exhibit B-11, BCUC IR 1.9.2(ii) NEFC – Project development costs

In the Decision on Creative Energy’s CPCN Application for a Low Carbon Neighborhood Energy

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System for NEFC (NEFC CPCN) the Commission approved in principle the capitalization of project development costs incurred by Creative Energy for direct recover from NEFC ratepayers, but made no determination on the appropriate recovery period or on the amount of the project development costs. The Commission directed Creative Energy to file for approval of project development costs as part of the future rate application (p. 35). In Exhibit B-1A (Application), Appendix 4, Creative Energy states that in this Application Creative Energy is not seeking final approval of project development costs because such costs continue to be incurred. However, project development costs that have been incurred are included in the direct assignment costs in this Application.

97.1 If greater than $10,000 in 2016 and 2017 combined, please provide a list of the project development costs that have been included as direct assignment costs in this Application, and identify which line in Appendix 19 to BCUC IR 1.9.2(ii) these cost are reported or where in the NEFC’s Plant-in-Service, Appendix 9, schedule 3, they are reported. Response: The Predevelopment costs is included in the "Other Distribution Equipment" in Appendix 9, Sch.3 line 27 for 2016.

97.2 What is the proposed recovery period for the project development costs that are included in this Application and how was it determined? Response: The amortization rate for the "Other Distribution Equipment is at 5% which represents 20 year. This was arrived at based on the assumption that the majority of the work to be done at the DEA is distribution infrastructure related and that this would be a reasonable basis to amortize Predevelopment cost.

97.3 When is Creative Energy anticipating seeking final approval for the NEFC project development cost if not through this Application? Response: It will be through this application that Creative is anticipating to seek final approval for NEFC project development costs. The amount of predevelopment costs as of December 31, 2015 is currently at $931,500. Any additional amounts incurred will be recovered in future rate application.

P. GENERAL

Reference: GENERAL Exhibit B-1A, Appendix 9 and 17; Exhibit B-11, BCUC IR: 1.9.2(ii), 1.49.3, 1.53.1, 1.57.4.1 Clarification

98.1 Creative Energy filed an updated revenue requirements schedule in response to BCUC IR 1.9.2(ii). Please explain why the “Revenue Requirement after Allocation” for NEFC shows on that schedule, does not agree to Appendix 9, schedule 1 “Total Revenue Requirement.”

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Response: The "Amortization of Non-Rate Base Deferred Expense" in response to BCUC IR 1.9.2(ii), line 15, for NEFC that shows $8,600 should reflect the $6,500 that is in Appendix 9, Sch. 1, line 18.

In response to BCUC IR 1.49.3, Creative Energy proposes to apply the Steam rates to NEFC in lieu of the cost allocation methodology proposed in the Application.

98.2 It appears that certain BCUC IR No.1 responses relating to NEFC were prepared without consideration of the change in the allocation methodology. Please identify each BCUC IR No.1 where the response is no longer relevant under the proposed change in allocation methodology. Response: All IR1 responses were prepared after deciding on the change in allocation methodology. Creative Energy provided answers to questions such as BCUC series 1.54 (regarding CE’s prior proposal to use the Massachusetts allocation for corporate overheads) to be responsive to staff, though Creative Energy is no longer seeking this allocation methodology. In the response to BCUC 1.53.2, Creative Energy discussed issues of cost retention and contributions towards embedded costs. As was described in the response to BCUC 1.49.3 and elaborated on in BCUC 1.53.1, Creative Energy has concerns about the use of the steam rates over the long term, but is of the view that for a variety of reasons, the steam rates are a reasonable and appropriate methodology for the near term.

Creative Energy states the following in response to BCUC IR 1.53.1:

98.3 Please confirm, or explain otherwise, that a new customer will be paying rates just like every other customer, which is their contribution to embedded costs. Response: Confirmed that new core steam customers pay the same rates as all other core steam customers. However, Creative Energy notes that typically, some share of the revenues provided by a new customer of any utility go towards covering the cost to extend the system to serve that customer. The rates paid by a new customer are not only contributions to embedded costs; some share of that revenue is used to cover the new customer's incremental costs of service.

In response to BCUC IR 1.57.4.1 Creative Energy states the following:

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98.4 Does GAAP allow Participant Assistance/Cost Award (PACA) funding to be capitalized to a project? If yes, under what section of the handbook is this allowed? If not, why does Creative Energy capitalize PACA funding? Response: Under section 3061, Property, Plant and Equipment, (b):

(b) Cost is the amount of consideration given up to acquire, construct, develop, or better an item of property, plant and equipment and includes all costs directly attributable to the acquisition, construction, development or betterment of the asset including installing it at the location and in the condition necessary for its intended use. Cost includes any asset retirement cost accounted for in accordance with ASSET RETIREMENT OBLIGATIONS, Section 3110.

PACA funding is directly attributable to the costs of developing the project and as such should be capitalized as per above section.

On June 21, Creative Energy filed a consolidated application marked as Exhibit B-1A.

98.5 Please update and file Exhibit B-1A, Appendix 17 to reflect the changes to NEFC as set out in Exhibit B-1A, Appendix 9. Please ensure all the values tie into Appendix 9, or explain any differences. Response: Please see attached updated Appendix 17. Whilst updating the Schedules, an error was found in the calculation of the interest to the deficiency account. This should have been at WACC instead of WACD. This won't have an impact on the rates that Creative is seeking for approval but will affect the deficiency balance.

98.6 In the Application Creative Energy has put forward a two year test period for NEFC and requests approval for final rates for 2016 and interim rates for 2017. Normally a TES with levelized rates that are determined through an RDDA request rates for a longer period. Please explain why Creative Energy did not request permanent rates for NEFC for a longer period of time, such as five years.

Response: In principle, Creative Energy supports a longer period of time for rate-making purposes, especially for Stream B utilities. However, Creative Energy proposed a three year test period in the last 2015-17 RRA, which was denied. In this Application, Creative Energy proposes a period of two years. In the future, Creative Energy expects to seek approval for a longer period of time, but expects that such an application will necessarily propose rates for both classes of service.

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Reference: GENERAL Exhibit B1-A, p. 64; Exhibit B-11, BCUC IR 1.39.2 Tariff sheets

99.1 Please explain why the rate proposed for NEFC on page 64 of the Application is different than the rate scheduled filed in response to BCUC IR 1.39.2. Response: In the fixed portion of the rate proposed on page 64 of the Application, it is shown monthly, the rate schedule filed is annually, otherwise they are the same

99.2 Please explain what the reference to “Per meter squared” in the tariff schedule filed in response to BCUC IR 1.39.2 refers to. Is it connected floor area? If yes, why does the tariff not disclose that? Response: Per meter squared references the connected floor area. The tariff will be updated to disclose this.

99.3 Please explain why there is no indication that the rate is per month or per year or some other period of time on the Hot Water Tariff. Response: The rate is per year. The Hot Water Tariff will be updated to disclose this.

99.4 Please refile the Hot Water Tariff sheet making the necessary updates and please do not indicate an effective date or order number on the Tariff sheet as the Commission will populate those areas. Response: See Attachment BCUC IR2.99.4.

Q. ALLOCATION OF COSTS FROM STEAM

Reference: ALLOCATION OF COSTS Exhibit B-11, BCUC IR 1.49.3 Updated costs allocation methodology

In response to BCUC IR 1.49.3, Creative Energy proposes to apply the Steam rates to NEFC in lieu of the cost allocation methodology proposed in the Application. Creative Energy proposes the following three part allocation methodology:

100.1 Please confirm, or explain otherwise, that the only difference between Creative Energy’s proposed allocation methodology and the way it charges the core Steam customers relates to the charges for fuel costs.

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Response: The charges shown in the referenced box above, are direct charges to NEFC rather than an allocation. Using the direct charge method, NEFC is a steam customer that is charged the tariff rate, with a different charges for fuel.

100.1.1 Specifically, please confirm, or explain otherwise, that current Steam customers and new core Steam customers are charged for fuel through the FCAC and NEFC will be charged for fuel base on Parts 2 and 3 of the proposed formula. Response: Steam customers are charged for fuel through the FCAC and the 41 cents per mmBTU in the Tariff. NEFC will pay for their total sum of fuel used, but a credit must be remitted for the 41 cents in the tariff to avoid double charging for a portion of the fuel costs.

Reference: ALLOCATION OF COSTS Exhibit B-11, BCUC IR 1.49.3 Costs allocation – Part 1

The following sets out the details for Part 1 – Steam Rates Paid by NEFC:

101.1 Please confirm, or explain otherwise, that the proposed NEFC Steam Rates (Part 1) are the same rates charged to all other core Steam customers. Response: Confirmed.

101.2 Please confirm, or explain otherwise, that NEFC will have a meter similar to any other core Steam customer to determine its Metered Consumption. Response: Confirmed.

101.2.1 If not, please discuss the advantages and disadvantages to NEFC having a similar meter to other Steam customers. Response: Please see the response to BCUC IR 2.101.2.

Reference: ALLOCATION OF COSTS Exhibit B-11, BCUC IR 1.49.3 Costs allocation – Part 2

The following sets out the details for Part 2 – Fuel Cost Paid by NEFC:

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102.1 Is the Part 2 charge based on actual fuel costs or forecast fuel costs? If based on forecast costs, please explain why NEFC would pay for forecast fuel costs while core Steam customers ultimately pay for actual fuel costs. Response: The amount put in the revenue requirement would be based on forecast but NEFC would pay for the actual fuel costs.

102.2 Please confirm, or explain otherwise, that the FCSA will account for variance in all fuel costs and volumes including the costs and volumes for NEFC fuel. Response: Not Confirmed. The FCSA will only account for variances in fuel costs for the Core. The volume of fuel used by NEFC and its associated cost will be independent of the FCSA.

102.3 Please confirm, or explain otherwise, that if the balance in the FCSA was $0 Creative Energy could charge NEFC for steam the same way it does for other Steam customers. Response: Because NEFC is a different class of service than the Steam Customers, CE would still wish to have some distinction between how they are charged.

102.4 Please confirm, or explain otherwise that if the balance in the FCSA remains relatively flat over the year the balance simply functions as a buffer and no customer actually gains or losses from the balance. Response: Confirmed.

102.5 In each of 2016 and 2017 what percentage is NEFC forecast load in relation to the total forecast Steam load? Response:

2016 2017

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0.507% 2.635%

102.6 How does the NEFC load in 2016 and 2017 compare to the average core Steam customer load? Is it about the same, smaller, or significantly larger? Response: In 2016 the NEFC load would be considered to be about the same as an average customer, by 2017 the load would be nearing the that of the top core Steam Customers.

102.7 Please explain why Creative Energy believes that NEFC should be treated differently than other new Steam customers? Response: Creative Energy believes NEFC should be treated differently because they are a different service class, where as a new Steam customer is entering into the same service class as existing core customers.

In response to BCUC IR 1.49.5, Creative Energy states the following:

102.8 Please confirm, or explain otherwise, that several of Creative Energy customers are not retail steam customers and they resell steam to the tenants in the building. Response: To Creative Energy’s knowledge all customers are retail steam customers. Costs may be passed on to tenants but steam is not resold.

Reference: STEAM COST ALLOCATIONS Exhibit B-11, BCUC IR: 1.49.3, 1.51.3 Costs allocation – Part 2

103.1 Under the proposed three part charge, who are the line losses recovered from? Response: It is assumed that the distribution efficiency is the same to all customers, Core and NEFC. Line losses are included in the tariff rate charged to NEFC and core customers.

In response to BCUC IR 1.51.3, Creative Energy states that there are losses associated with the 3 km length of pipe between the steam production plant to the two steam hot water converters.

103.2 Please indicate who is charged for the losses: Steam customers or the NEFC customers?

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Response: See Response BCUC IR 2 103.1.

Reference: ALLOCATION OF COSTS Exhibit B-11, BCUC IR 1.49.3 Costs allocation – $0.41 fuel cost

In the response to BCUC IR 1.49.3, Creative Energy states that: “As the Steam Rates include a share of fuel costs ($0.41 per mmBTU of fuel), this amount needs to be subtracted from the charges to NEFC to avoid double-counting.” Creative Energy also provides the formula for Part 3 to calculate the credit as shown below.

Part 3

104.1 Please confirm, or otherwise explain, that the credit will be provided to NEFC for fuel recovery in steam rates on a monthly basis. Response: Confirmed.

104.1.1 If confirmed, please explain if the “NEFC Metered Consumption/Total Metered Consumption” refers to monthly figures. Response: Yes, this refers to the monthly figures.

104.2 Please confirm that there are no other charges that may be double-counted for NEFC. Response: Confirmed.

104.2.1 If not confirmed, please explain with calculations how Creative Energy will

address each of them. Response: N/A.

104.3 Please confirm, or explain otherwise, that if NEFC was charged for fuel through the FCAC like any other core Steam customer, this adjusting Part 3 calculation would not be necessary. Response: Confirmed.

104.4 Please confirm, or explain otherwise, that the Part 3 credit used to calculate

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NEFC’s revenue requirement will be based on the forecast number of 41 cent units used to calculate the Steam revenue requirements. If not please explain how the difference between forecast and actual will be treated and address the risk to both Steam customers and NEFC customers. Response: Not confirmed. All charges to NEFC will be based on actuals. As explained in the response to BCUC IR 1.49.3, the “Credit to NEFC for fuel recovery in steam rates” will be calculated based on NEFC’s actual steam consumption in each month, and the total fuel consumption in each month. The Steam Rates charge is also calculated based on actual steam consumption by NEFC, so there is no risk of variances being borne by core steam customers, or by NEFC. This is illustrated in Attachment BCUC 1.49.3 to Exhibit B-11, which shows two sample calculations of the Steam Rates paid by NEFC, the Fuel Cost paid by NEFC, and the Credit to NEFC for fuel recovery in steam rates.

R. RATE BASE – PLANT IN SERVICE

Reference: RATE BASE Exhibit B-11, BCUC IR 1.57.1-3 and 1.58.1 NEFC account names and working capital

In response to BCUC IR 1.57.3, Creative Energy indicates its accounting system has the ability to track and maintain costs into appropriate categories such as: S2HW Converter Stations, Steam Line Extensions, distribution piping system, energy transfer stations, etc. For the Plant-in-Service (BCUC IR 1.57.1) and the Accumulated Depreciation (BCUC IR 1.58.1), Creative Energy indicates that the account names are the same to minimize the number of account numbers, and are distinguished by being tracked under a separate department.

105.1 To avoid possible confusion between Steam and NEFC related future costs and to have a better breakdown of costs more relevant to the NEFC system, would Creative Energy be open to create NEFC account names as asked in BCUC IR 1.57.3? Response: Yes, Creative Energy would be open to creating/renaming account names.

105.2 Would Creative Energy have any concerns with the Commission directing Creative Energy to use a more intuitive name for NEFC’s Plant-in-Service components for rate setting purposes? Response: Creative Energy would have no concern with the Commission directing Creative Energy to use a more intuitive name.

105.3 Please explain why there is no working capital requirement for NEFC included in Rate Base. Response: There is a working capital requirement component for NEFC included in

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Rate Base. This can be found in Appendix 9A, Schedule 2, line 20.

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T. RATE DESIGN

Reference: RATE DESIGN Exhibit B1-A, p. 64; Exhibit B-8; Exhibit B-11, BCUC IR 1.44.1 Rates collected

106.1 Based on the data filed in response to BCUC IR 1.44.1, please fill out the staff prepared table under the 50 percent fixed and 50 percent variable costs construct.

Response: The requested table has been filled out and provided in Attachment BCUC IR 2.106.1 and reflects the 50% fixed / 50% variable rate structure requested by Creative Energy. The “Forecast Demand in M#” values show the forecast of steam demand at the NEFC steam to hot water converter stations. Please note that the values labeled as “F” in the table provided did not match the reference from Appendix 9, Schedule 1, Line 28. Our response has the correct values in “F”.

106.2 What would the fixed and variable rates be under a 40 percent fixed and 60 percent variable rate? Please prepare a similar table under this scenario. Response: The below table has 2016 and 2017 rates for a 40% fixed / 60% variable rate structure. Please note that the 40% fixed / 60% variable revenue split is based on total revenue over the 15 year analysis period, and does not necessarily result in a 40% fixed / 60% variable revenue split in each year. The total revenue for 2016 and 2017 under this approach would be slightly different from the total revenue under Creative Energy’s requested rates. Attachment BCUC IR 2.106.2 has the requested table of monthly revenues.

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2016 2017

Fixed Charge per m2 per Month

$0.26 $0.27

Variable Charge per MWh

$51.60 $52.63

106.3 What would the fixed and variable rates be under a 60 percent fixed and 40 percent variable rate? Please prepare a similar table under this scenario. Response: The below table has 2016 and 2017 rates for a 60% fixed / 40% variable rate structure. Please note that the 60% fixed / 40% variable revenue split is based on total revenue over the 15 year analysis period, and does not necessarily result in a 60% fixed / 40% variable revenue split in each year. The total revenue for 2016 and 2017 under this approach would be slightly different from the total revenue under Creative Energy’s requested rates. Attachment BCUC IR 2.106.3 has the requested table of monthly revenues.

2016 2017

Fixed Charge per m2 per Month

$0.40 $0.41

Variable Charge per MWh

$34.50 $35.20

106.4 What would the rate be if it was 100 percent variable? Response: Under a 100% variable rate structure, the 2016 rate would be $85 per MWh. The 2017 rate would be $87 per MWh.

U. REVENUE DEFICIENCY DEFERRAL ACCOUNT (RDDA)

Reference: RDDA Exhibit B-11, BCUC IR 1.44.4, 1.56.1; Exhibit B-1A, Appendix 9, Schedule 1; Decision on the NEFC CPCN, p. 60 Approvals for the RDDA

On page 60 of the NEFC CPCN Decision the Commission acknowledged Creative Energy’s proposed treatment and classification of controllable and non-controllable cost with regards to recording variances between forecast and actual amounts in the RDDA; however, the Commission deferred any determination on that issue to the rates application.

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Exhibit B-1A, Appendix 9, schedule 1, shows the revenue requirements components for NEFC:

107.1 Please confirm, or explain otherwise, that unless other approvals are granted in this proceeding the only amount allowed to be added to the RDDA is the difference between the forecast revenue requirement and the forecast total sales, which are $168,800 and $409,100 for 2016 and 2017 respectively. Response: Not confirmed. The First Panel approved the RDDA. Regarding the issue of variances between forecast and actual, the First Panel decided to “defer any determinations on this issue to the final rate application.” In Creative Energy’s view, there is no clear “default” interpretation of how the RDDA should be applied, in the absence of further approvals. However, Creative Energy is of the view that Creative Energy’s proposed use of the RDDA requires Commission approval.

107.2 Please confirm that by default the RDDA does not automatically allow the variance, between forecast demand and actual demand (variance in sales revenues) or the variance between forecast and actual non-controllable costs, to

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be recorded. Response: Please see the response to BCUC IR 2.107.1.

107.3 Please confirm that currently Creative Energy has no approval from the Commission to capture any variance regarding forecast demand or non-controllable costs in the RDDA. Response: Confirmed.

In response to BCUC IR 1.56.1 Creative Energy states that its intent is for the RDDA to accumulate revenue shortfall, based on actual revenues received, forecasted controllable costs, and actual amounts for all other non-controllable costs.

107.4 Please explain what Creative Energy means when it states that the RDDA should accumulate revenue shortfalls based on forecasted controllable costs? Response: For any given year, the revenue shortfall which accumulates in the RDDA would be calculated as follows: [Actual revenues] – [Actual non-controllable costs] – [Forecast controllable costs] = [Revenue shortfall which accumulates in RDDA] If actual controllable costs are different from forecast controllable costs, then the revenue shortfall which accumulates in the RDDA will not be equal to [Actual revenues – Actual costs].

In response to BCUC IR 1.44.4 Creative Energy states the following:

107.5 Please explain where approval has been granted for Creative Energy to capture any incremental costs above those forecast of $143,600 and $824,400 in 2016 and 2017 respectively. Response: This approval has not been granted. Assuming the variances were in non-controllable costs, they would be included in the RDDA under Creative Energy’s proposal for how the RDDA will be used.

Reference: RDDA Exhibit B-11, BCUC IR 1.56 Demand forecast and fuel costs

108.1 Please confirm or explain otherwise that Creative Energy is requesting that the

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RDDA capture variances in the demand forecast (variance between forecast revenues and actual revenues). Response: Confirmed.

108.2 In regard to fuel costs, is Creative Energy requesting that it be granted approval to record the variance between the forecast and actual cost relating to: (i) Natural Gas Commodity (line 2 of schedule 1, $53,000 in 2016), (ii) Cost Allocation from the Steam System ($43,00 in 2016) and (iii) NEFC Credit for Fuel Recovery ($-4,000 in 2016)? Response: Confirmed. Creative Energy notes that the costs referred to in the question are not all fuel costs; the NEFC Steam Rates Charge of $43,000 is for non-fuel costs and is a direct charge not a cost allocation, except for the amount captured in the Credit for Fuel Recovery in Steam Rates.

108.2.1 If not, please fully explain what variances relating to fuel cost Creative Energy is requesting and explain where in schedule 1 they are captured. Response: Please see the response to BCUC IR 2.108.2.

Reference: RDDA Exhibit B-11, BCUC IR 1.56; Exhibit B-1A, Appendix 9, schedule 1 and 14 Non-controllable costs

109.1 Please confirm that the non-controllable interest cost that Creative Energy identified in response to BCUC IR 1.56.5 relates to the interest component on the Return on Rate Base identified on line 19 of Appendix 9, schedule 1. If not, please explain. Response: Confirmed.

109.1.1 Is Creative Energy requesting to capture the variance between the difference in the forecast interest rate and the actual interest rate only, or for the variance in the forecast interest expense and actual interest (which is dependent of rate base)? Response: Creative Energy is proposing to capture the difference between forecast interest expense and actual interest expense.

Schedule 14 of Appendix 9 lists NEFC’s O&M accounts. For the following non-controllable costs listed in response to BCUC IR 1.56.6, please indicate which O&M expense account they are captured in: Power (pumping), Operator Costs, and Space Leased for Converter Stations.

109.2 For each non-controllable cost listed in response to BCUC IR 1.56.6 please address the following:

(i) whether the cost is outside of managements control;

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(ii) the materiality of the costs; and (iii) the impact on management’s incentive to control and manage costs.

Response: The preamble should have referred to the response to BCUC IR 1.56.5. In the response to BCUC IR 1.56.5, Creative Energy was providing supplemental information to the response to BCUC IR 1.25.1 in the NEFC CPCN Proceeding. The table in 1.56.5 was not intended to be exhaustive, but was in addition to information on non-controllable costs previously provided in 1.25.1 in the CPCN proceeding. The below table provides the requested information for all costs which Creative Energy considers non-controllable, i.e. including those not listed in the response to BCUC IR 1.56.5 from the current proceeding. Creative Energy is requesting that the RDDA capture all variances in the costs listed in the table below. The only other variances captured in the RDDA would be variances in the demand forecast, which will impact revenues. The Carbon Rider was included in the response to BCUC IR 1.56.5; it has been excluded from the below table as it no longer applies to this project. Variances in all non-controllable costs would be captured within the RDDA, so the shareholder does not gain or lose from variances in these costs. However, all costs would remain subject to prudency review, so the shareholder is still strongly incentivized to control costs for non-controllable items.

In Management’s Control?

Materiality[% of total 2016 NEFC revenue requirement]

Steam Rates paid by NEFC

No 14%

Fuel Cost paid by NEFC

No 17%

Credit to NEFC for fuel recovery in steam rates

No -1% (credit)

Insurance No; dependent on available rates.

1%

Power (pumping) No. BC Hydro rate increases cannot be controlled.

0.4%

Operator Costs No. Labour market conditions cannot be controlled.

5%

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Space lease for converter stations

No 8% in 2016, declines thereafter

Municipal Access Fee No 0.6%

Depreciation No 0% as no depreciation recorded in first year. 14% in 2017.

Interest No 14%

ROE No 25%

Income Taxes No 0% as no income tax recorded in first year. 2% in 2017.

Power (pumping) is captured in the 502 account. Operator Costs are captured in the 870 account. Space leases for converter stations are captured in the 502 account.

109.3 Please confirm that Creative Energy is not requesting to capture variances in the

RDDA for any other O&M expense accounts listed in schedule 14 of Appendix 9, other than the non-controllable cost listed in response to BCUC IR 1.56.6. Response: Please see the response to BCUC IR 2.109.2.

109.4 Please confirm, or explain otherwise, that Creative Energy is not requesting to capture any other variance in the RDDA other than the variance in the demand forecast, the fuel cost and the non-controllable costs identified in response to BCUC IR 1.56.6. Response: Please see the response to BCUC IR 2.109.2.

109.5 Given that the Application is only for 2016 and 2017, will Creative Energy be filing a Revenue Requirements Application for 2018 and beyond? Response: Yes.

109.5.1 If not, please explain how the variance will be calculated if a base cost has not been approved. Response: Please see the response to BCUC IR 2.109.5.

109.6 Would Creative Energy be opposed to the Commission approving the requested variances to the RDDA but only for the test period? If not, please explain why not. Response: Creative Energy prefers that the Commission approve the requested variances to the RDDA without a restriction to the test period. Creative Energy submits that the issue can be addressed adequately in this proceeding and does not require further regulatory effort.

Reference: RDDA Exhibit B-11, BCUC IR 1.9.2(ii), 1.18.3, 1.56.8; Exhibit B-1A, Appendix 9,

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schedule 1 Amortization of non-rate based deferrals

On schedule 1 of Appendix 9 Creative Energy shows the “amortization of non-rate base deferred expenses” as $6,500 in both 2016 and 2017.

110.1 Please confirm, or explain otherwise, that this amortization expense relates to the amortization of the RDDA? If not, what does it relate to? Response: Confirmed.

In response to BCUC IR 1.56.8 Creative Energy states the following:

110.2 Please explain why there is amortization on the RDDA in years where there are forecast additions. Please confirm, or explain otherwise, that this will simply increase the amount that is added to the RDDA in the test year and does not change the timeframe to get the RDDA to zero. Response: Confirmed.

110.3 Please explain why the “amortization of non-rate base deferred expenses” for NEFC filed in the Appendix 18 attached to BCUC IR 1.9.2(ii) shows a different amortization expense of $8,600 in 2016 and 2017. Response: The amount should have been updated to $6,500 as per Appendix 18 attached to BCUC IR 1.9.2(ii).

V. INTERIM 2017 RATES - NEFC

Reference: RATES Exhibit B-1A, p. 14; Exhibit B-11, BCUC IR 1.44.2 Interim rate for 2017 - NEFC

In the Application on page 14, Creative Energy proposes that the test period 2017 NEFC rates be interim only and made final following the application to be filed by Creative Energy on or before November 1, 2016, to update the 2017 demand forecast and update the revenue deficiency for 2017.

111.1 Will the application filed in November 2016 include adjustment for the demand forecast as well as updates to the revenue deficiency?

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Response: No. In the Application at page 15, Creative Energy stated: On or before November 1, 2016, Creative Energy proposes to file a simplified application to update the 2017 demand forecast and to update the revenue deficiency for 2016 projected year-end balances, including amortizations for deferral accounts.

Perhaps the reference to “revenue deficiency” was ambiguous. It is a reference to the 2017 “revenue deficiency” not to the 2016 “revenue deficiency” that is being carried forward from 2016 to 2017 for rate smoothing purposes. In any case, in response to BCUC 3.1, Creative Energy has stated that the Commission could provide final approval of the forecast 2017 revenue requirements, and it then would not be subject to the November 1, 2016 update. The simplified application would then only include an update of the load forecast for the two classes of service.

111.1.1 If updates to the revenue deficiency for 2017 will be submitted in November 2016, please clearly state what Creative Energy is requesting the Commission approve if not the final rate or the total revenue requirements for 2017. Response: Please see the response to BCUC 111.1 above.

In response to BCUC IR 1.44.2, Creative Energy states the following:

111.2 If the Commission approves the RDDA to capture differences between forecast demand and actual demand, and Creative Energy does not expect to file updates to the revenue deficiency in November 2016, would it make sense for regulatory efficiency purposes for Creative Energy to apply for approval for final rates in 2017, rather than interim rates? If not, please explain. Response: Although rates for hot water service customers will not change due to the RDDA, the rates for steam service customers will change with changes in the NEFC load forecast. With this Application, Creative Energy could have applied for final rates for hot water service customers but chose not to because of the connection between the NEFC load forecast and the rates for steam service customers. In the future, the approach suggested by this IR may be adopted. Although it is necessary for dramatic advances in regulatory efficiency related to Creative Energy applications, Creative Energy does not expect significant if any

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regulatory efficiency benefits from this change in approach.

111.3 For NEFC, please quantify the expected cost to prepare the November 1, 2016 application, and the expected cost for the proceeding. Where in the NEFC revenue requirement are these costs captured? Response: Creative Energy has not quantified the costs for the November 1, 2016 application. And expects the Application to only address issues related to changes to the hot water service and steam service load forecasts, and other issues to comply with Commission orders. As stated in response to BCUC 95.3 above, Creative Energy proposes that all regulatory costs be shared costs.

111.4 For Steam service, please quantify the expected cost to prepare the November 1, 2016 application, and the expected cost for the proceeding. Response: Creative Energy proposes that all regulatory costs be shared costs.

CREATIVE ENERGY VANCOUVER PLATFORMS INC.2016-2017 REVENUE REQUIREMENT APPLICATIONSTEAM CAPITAL STRUCTURE AND COST OF CAPITAL Schedule 13

2011 2012 2013 2014 2015 2015 2016 2017Line # Item Actual Actual Actual Actual Approved Unaudited Forecast Forecast Reference

1 MID-YEAR RATE BASE 24,200,871 24,312,663 24,456,546 24,925,550 25,861,873 25,909,320 25,555,346 26,192,35223 CAPITAL STRUCTURE %4 Equity 37.79% 35.89% 35.20% 34.72% 42.50% 42.50% 42.50% 42.50%5 Long tem Debt 44.22% 43.36% 42.37% 40.84% 19.33% 19.30% 19.57% 19.09%6 Short Term Debt 17.99% 20.75% 22.43% 24.44% 38.17% 38.20% 37.93% 38.41%7 Total 100% 100% 100% 100% 100% 100% 100% 100%89 CAPITAL STRUCTURE $

10 Equity 9,145,509 8,725,815 8,608,704 8,654,151 10,991,296 11,011,461 10,861,022 11,131,75011 Long tem Debt 10,702,403 10,542,256 10,361,578 10,178,514 5,000,000 5,000,000 5,000,000 5,000,00012 Short Term Debt 4,352,959 5,044,592 5,486,264 6,092,885 9,870,577 9,897,859 9,694,324 10,060,60213 Total 24,200,871 24,312,663 24,456,546 24,925,550 25,861,873 25,909,320 25,555,346 26,192,3521415 COST OF CAPITAL % (Actual & Proposed)16 Equity 13.70% 7.66% 5.58% 5.74% 9.50% 4.71% 9.50% 9.50%17 Long tem Debt 4.07% 4.07% 4.11% 4.30% 4.52% 4.52% 4.30% 4.30%18 Short Term Debt 3.50% 3.50% 3.30% 3.50% 3.74% 3.74% 3.50% 3.50%1920 COST OF CAPITAL $21 Equity 1,253,039 668,209 480,714 496,570 1,044,173 519,159 1,032,000 1,058,00022 Long tem Debt 435,588 429,070 425,861 437,676 226,000 226,000 215,000 215,00023 Short Term Debt 152,354 176,561 181,047 213,251 368,818 369,838 339,000 352,00024 Return on Rate Base 1,840,980 1,273,840 1,087,622 1,147,497 1,638,991 1,114,997 1,586,000 1,625,000252627 RATE BASE RETURN 7.61% 5.24% 4.45% 4.60% 6.34% 4.30% 6.21% 6.20%

3.77% 3.77%

NEFC Tariff BCUC No. 2 Page 1

CREATIVE ENERGY VANCOUVER PLATFORMS INC.

1. RATE SCHEDULE Applicability: NEFC area serviced by the Utility. Class of Service: District Hot Water Service is distributed to the territory served through

mains of sufficient size and in such locations as to supply Customers’ requirements.

Fixed Rate per m2 (connected floor area)$ 4.00/yr (33.33 cents per month) Variable Rate per MWh $43.00

Accepted Issued by _________________________ for Filing ________________________________ Robert Hobbs ________________________________________ Acting President & CEO Secretary Creative Energy Vancouver Platforms Inc. British Columbia Utilities Commission Suite 1, 720 Beatty Street Vancouver, B. C. Effective (Applicable to consumption on and after) V6B 2M1 August 1, 2016 (Interim) Order No. G-49-16

CREATIVE ENERGY VANCOUVER PLATFORMS INC. Schedule 62016-2017 REVENUE REQUIREMENT APPLICATIONSTEAM CONTRIBUTIONS IN AID OF CONSTRUCTION

2011 2012 2013 2014 2015 2015 2016 2017Line # Item Actual Actual Actual Actual Approved Unaudited Forecast Forecast Reference

1 GROSS CIAC2 Opening Balance (922,397) (922,397) (922,397) (922,397) (922,397) (922,397) (922,397) (1,022,397)3 Repayments4 Additions (100,000)5 Closing Balance (922,397) (922,397) (922,397) (922,397) (922,397) (922,397) (1,022,397) (1,022,397)67 CIAC ACCU. DEPRECIATION8 Opening Balance 181,898 200,411 218,461 236,059 259,119 253,217 276,317 299,4179 Depreciation 18,513 18,050 17,598 17,158 24,629 23,100 23,100 25,600

10 Closing Balance 200,411 218,461 236,059 253,217 283,748 276,317 299,417 325,0171112 NET CIAC13 Opening Balance (740,499) (721,986) (703,937) (686,338) (663,278) (669,180) (646,080) (722,980)14 Closing Balance (721,986) (703,937) (686,338) (669,180) (638,649) (646,080) (722,980) (697,380)15 Net Mid-Year CIAC (731,243) (712,962) (695,138) (677,759) (650,964) (657,630) (684,530) (710,180)

CREATIVE ENERGY VANCOUVER PLATFORMS INC. Schedule 72016-2017 REVENUE REQUIREMENT APPLICATIONSTEAM WORK-IN-PROCESS

2011 2012 2013 2014 2015 2015 2016 2017Line # Item Actual Actual Actual Actual Approved Unaudited Forecast Forecast Reference

1 Work-in-Progress Not Earning AFUDC2 Opening 350,785 392,232 137,446 317,890 754,262 754,262 1,011,496 1,186,4963 Closing 392,232 137,446 317,890 754,262 (46,262) 1,011,496 1,186,496 1,086,4964 Mid-year Average 371,509 264,839 227,668 536,076 354,000 882,879 1,098,996 1,136,496

CREATIVE ENERGY VANCOUVER PLATFORMS INC.2016-2017 REVENUE REQUIREMENT APPLICATIONSTEAM CAPITAL STRUCTURE AND COST OF CAPITAL Schedule 13

2011 2012 2013 2014 2015 2015 2016 2017Line # Item Actual Actual Actual Actual Approved Unaudited Forecast Forecast Reference

1 MID-YEAR RATE BASE 24,200,871 24,312,663 24,456,546 24,925,550 25,861,873 25,909,320 26,648,312 27,322,66223 CAPITAL STRUCTURE %4 Equity 37.79% 35.89% 35.20% 34.72% 42.50% 42.50% 42.50% 42.50%5 Long tem Debt 44.22% 43.36% 42.37% 40.84% 19.33% 19.30% 18.76% 18.30%6 Short Term Debt 17.99% 20.75% 22.43% 24.44% 38.17% 38.20% 38.74% 39.20%7 Total 100% 100% 100% 100% 100% 100% 100% 100%89 CAPITAL STRUCTURE $

10 Equity 9,145,509 8,725,815 8,608,704 8,654,151 10,991,296 11,011,461 11,325,533 11,612,13111 Long tem Debt 10,702,403 10,542,256 10,361,578 10,178,514 5,000,000 5,000,000 5,000,000 5,000,00012 Short Term Debt 4,352,959 5,044,592 5,486,264 6,092,885 9,870,577 9,897,859 10,322,779 10,710,53113 Total 24,200,871 24,312,663 24,456,546 24,925,550 25,861,873 25,909,320 26,648,312 27,322,6621415 COST OF CAPITAL % (Actual & Proposed)16 Equity 13.70% 7.66% 5.58% 5.74% 9.50% 4.71% 9.50% 9.50%17 Long tem Debt 4.07% 4.07% 4.11% 4.30% 4.52% 4.52% 4.30% 4.30%18 Short Term Debt 3.50% 3.50% 3.30% 3.50% 3.74% 3.74% 3.50% 3.50%1920 COST OF CAPITAL $21 Equity 1,253,039 668,209 480,714 496,570 1,044,173 519,159 1,076,000 1,103,00022 Long tem Debt 435,588 429,070 425,861 437,676 226,000 226,000 215,000 215,00023 Short Term Debt 152,354 176,561 181,047 213,251 368,818 369,838 361,000 375,00024 Return on Rate Base 1,840,980 1,273,840 1,087,622 1,147,497 1,638,991 1,114,997 1,652,000 1,693,000252627 RATE BASE RETURN 7.61% 5.24% 4.45% 4.60% 6.34% 4.30% 6.20% 6.20%

3.76% 3.75%

CREATIVE ENERGY VANCOUVER PLATFORMS INC.2016-2017 REVENUE REQUIREMENT APPLICATIONSTEAM LONG TERM DEBT CONTINUITY SCHEDULE Schedule 18

2011 2012 2013 2014 2015 2015 2016 2017Line # Item Actual Actual Actual Actual Approved Unaudited Forecast Forecast Reference

1 Debt2 Opening Balance 10,773,405 10,631,401 10,453,110 10,270,046 5,000,000 5,000,000 5,000,000 5,000,0003 New Issues 0 04 Repayments (142,004) (178,291) (183,064) (183,064)5 Closing Balance 10,631,401 10,453,110 10,270,046 10,086,982 5,000,000 5,000,000 5,000,000 5,000,0006 Mid-Year Balance* 10,702,403 10,542,256 10,361,578 10,178,514 5,000,000 5,000,000 5,000,000 5,000,0007 Annual Effective Interest Rate 4.07% 4.07% 4.11% 4.30% 4.52% 4.52% 4.30% 4.30%8 Interest Expense 435,588 429,070 425,861 437,676 226,000 226,000 215,000 215,0009

10 TOTAL MID-YEAR DEBT BALANCE 10,702,403 10,542,256 10,361,578 10,178,514 5,000,000 5,000,000 5,000,000 5,000,00011 TOTAL INTEREST EXPENSE 435,588 429,070 425,861 437,676 226,000 226,000 215,000 215,00012 ANNUAL EFFECTIVE INTEREST RATE 4.07% 4.07% 4.11% 4.30% 4.52% 4.52% 4.30% 4.30%1314 NOTES15 *Adjusted for timing of New Issues & Repayments

Attachment BCUC IR 2.94.9Regulatory Costs to Date

NEFC CPCN NEFC NEA

2016 10,623 24,920

2015 133,691

Total 144,315$ 24,920$