Agreement on Enbridge System Reliability - Customer Impacts Will Vary

August 2010

• Enbridge is requesting Ontario Energy Board approval of an agreement reached with its stakeholders that sets out the terms for addressing system reliability concerns raised by Enbridge.
• The agreement has five components: assignment of short-haul capacity to certain agents, replacement of peaking supplies, changes to certain terms of service for large-volume customers, changes to curtailment provisions for interruptible services, and modifications to the capacity turnback policy.
• The terms of the agreement affect customers buying their supply from Enbridge and bundled transportation customers, to varying degrees.

In July, Enbridge Gas Distribution filed an application with the Ontario Energy Board (OEB) which addresses concerns Enbridge had raised about the reliability of its system on a peak day. Specifically, Enbridge is requesting OEB approval of an agreement reached with its stakeholders that sets out the terms for addressing Enbridge's system reliability concerns.

The discussion of the system reliability topic stems back to 2009 when the OEB released a decision on an Enbridge proposal to specify requirements for the contracting of upstream transportation by certain Ontario T-service customers. In its decision, the OEB directed that an interim measure be put in place for the winter of 2009/10 and remain in place until the OEB approved a long-term resolution to Enbridge's system reliability concerns. The regulator also directed Enbridge to consult with its stakeholders on the matter before coming to the OEB with a long-term approach.

Over the better part of the year since the OEB's decision, Enbridge and its stakeholders have engaged in discussions, which have resulted in the system reliability agreement that is now before the OEB. If approved, the agreement will replace the interim measure.

Components of the agreement and who is affected

Enbridge and its stakeholders settled on an approach to system reliability that has five main components. The terms of the agreement affect customers buying their supply from Enbridge (sales customers) and bundled transportation customers (Western T-service and Ontario T-service), to varying degrees. The five components are summarized below. For more detail, see Components of Agreement on Enbridge System Reliability.

1. Assignment of short-haul capacity

Enbridge will assign 50,000 GJ/day of its short-haul transportation capacity with TransCanada PipeLines from Dawn, Ontario to the Enbridge Central Delivery Area. The capacity will be assigned to certain agents for residential and general service customers, on a temporary basis. The agents who will receive the assignment will be identified according to specified criteria. Enbridge will replace the assigned capacity with Short-Term Firm Transportation (STFT) service with TransCanada, for the winter period.

The cost consequences of this component of the agreement will be recovered from Enbridge's sales and Western T-service customers. 2. Replacement of peaking supplies

Enbridge will reduce its contracted peaking supplies by 200,000 GJ/day and replace it with an equivalent volume of STFT service that it will contract for each year. The STFT service will cover a three-month period in the winter.

The costs associated with the replacement of the specified volume of peaking supplies will be recovered from all sales and bundled transportation customers.

3. Terms of service for large-volume customers

Certain terms of service for all large-volume customers will be modified to enhance the effectiveness and reliability of Enbridge's gas supply planning. The Enbridge Rate Handbook will be revised to require that large-volume customers give at least two business days notice to suspend deliveries, where the suspension is not for balancing a banked gas account. In addition to the Handbook revisions, Enbridge's contracts for service to large-volume customers will be revised.

4. Curtailment of interruptible customers

Since curtailment of interruptible customers (Rates 145 and 170) is a key element in Enbridge meeting peak demands, certain terms and conditions of the service will be modified to improve the effectiveness and reliability of curtailment. Of particular note is a change to the Rate 145 service; specifically, the option for curtailment of service with 72 hours notice will be eliminated. The penalty provisions for failing to comply with a curtailment notice will be strengthened for all interruptible customers.

5. Turnback

Enbridge's policy for turning back TransCanada Firm Transportation capacity will be modified to state that Enbridge will accommodate its customers' requests for turnback subject to certain considerations. The changes will apply to all Western and Ontario T-service customers. The new provisions will apply on a go-forward basis so that existing turnback arrangements or pending arrangements that have been accepted by Enbridge are unaffected.

Customer rate impacts

Only the components of the agreement related to the assignment of short-haul capacity and the replacement of peaking supplies have cost consequences that will make their way into Enbridge rates for sales and bundled transportation customers. It is estimated that on a total bill basis, the rate impacts represent percentage changes in the range of decreases of 0.1% to increases of less than 1%. To see representative unit rate impacts by rate group, see Components of Agreement on Enbridge System Reliability.

Status of application

The OEB is processing the Enbridge application through written submissions, and that process is scheduled to be completed by August 20. Barring the introduction of additional steps, the next step would be for the OEB to render a decision on the application.

The goal of the parties to the agreement is to have the various components implemented for the winter of 2010/11.