UNION GAS - YEAR 2001 CONSTRUCTION

Trafalgar Line - NPS 48 Leave to Construct

Beachville-to-Bright and Owen Sound Value Site-to-Brantford Value Site

Briefing Notes and Questions

Background:

Union's Dawn-Trafalgar line serves a crucial essential gas transportation function in Southern Ontario. Effectively it is one of the two main conduits of transfer of gas from Western Canada to Ontario, Quebec, and the USA North East. Its operational function is integrated with Union's and Enbridge's Storage Facilities in the Sarnia area, with the Hub at Dawn.

In Summer, gas is pumped into storage at Dawn/Tecumseh from two sides: From the West, via Michigan and from the East (Parkway, near Oakville) where it is delivered by TCPL's Northern Ontario Line. The latter gas supply is pumped East to West (to Dawn) in summer. Summer flows are not a design criterium.

In Winter, the gas is pumped West to East, usually at close to maximum capacity from Dawn to Parkway/Kirkwall, providing an essential major contribution to the total available daily gas supply to Ontario/Quebec and the USA's North East.

The throughput capacity that must be met is therefore determined by the required demand, on the coldest winter day, when pumping gas from the West (Dawn) to Parkway/Kirkwall,

1) feeding the towns along the way (London/Brantford/Waterloo/Hamilton, etc.) in Union's Southern Ontario franchise area as well as:

2) delivering gas to TCPL in exchange for gas dropped off by TCPL on Union's behalf in Northern and Eastern Ontario and lastly,

3) the largest component, M12 gas delivered to Parkway/Kirkwall for further eastward transportation through the TCPL System, to Eastern Ontario, Quebec, Niagara and the USA.

The Dawn-Trafalgar line is again emphasised as a critical component of the transmission of gas from the West to the East of the continent. The capacity fo the Dawn-Trafalgar line has been increased steadily over the last decade to cater for the increased gas volumes that increased demand (mainly M12 transportation) has placed on the system. The annual trend for more West-East transportation demand and capacity continues. Physically, the Dawn-Trafalgar Line is made up of 3 ½ (yes!) parallel, gas pipelines operating at 6160 kpa (893 psi).

The pipelines are NPS (nominal pipe size in inches diameter) 26, 34 and 42 lines complete, parallel and contiguous to Kirkwall and NPS 48 pipeline, parallel, with "looping" partially complete. The existing NPS 48 Line loops approximately 50% of the contiguous smaller diameter lines covering a linear distance of 123 km, constructed through a step-wise process that has involved 6 distinct projects over 10 years.

This Application requests leave-to-construct for 19.9 and 15.9 kms of NPS 48 loop line between Beachville-to-Bright and Owen Sound valve site to Brandford valve site respectively. This looping would complete a contiguous NPS 48 section between Lobo, a little west of London, to around Cambridge and increase the Winter peak day flow capacity of the Dawn-Trafalgar line, West-to-East, from approximately 5.5 million GJ/day to 5.8 million GJ/day, an increase of about 5%, (when including delivery to the East end from other sources - see later for explanation).

Union requested that a Leave-to-Contruct Order be isssued prior to the end of April., 2001

Questions from Board Counsel to Union's witnesses will focus on:

(1)	Need and Demand for the year 2001 facilities applied for AND Capacity of the line and the meaning of this capacity.

(2)	Economic analysis and effect on Rate aspects.

(3)	Construction, Technical and Environmental aspects

(4)	Land Matters

O:\RP-2000-0110\TSTAFF\BRIEF\BriefingNotes.WT.Jan25.01.wpd

1. NEED and DEMAND FOR THE YEAR 2001 FACILITIES APPLIED-FOR AND CAPACITY of the LINE AND the MEANING OF THIS CAPACITY.

1.

This question is for the member of Union's panel responsible for facilities design:

Reference:	Response to Interrogatory #12, and section 4, page 3, paragraph 9.

Question:	Could you take us through how you convert the expected winter season volumes, to the winter design day volumes demand which the Trafalgar System facilities must deliver?

2.

Turning to section 4, schedule 8 we have a diagram representing the Winter Design Day 2001/2002 demands and the Winter 2001/2002 capacity AFTER the addition of the applied for facilities.

Our interpretation of this diagram is as follows:

Please confirm that this interpretation is correct, or clarify any misunderstanding if this interpretation is not correct:

Demand for all deliveries off the Trafalgar System in total is 5,805,835 GJ/Day on the Winter Design Day. Of this amount 780,545 1 GJ/day (or 13.4% of the demand) is delivered By Other Parties, through means other than the Trafalgar Line, to the Eastern end of the system at Parkway.

Question:	Is this Correct? (Answer should be "yes")

Question:	Firstly, what is nature of the 780,543 GJ/day or 13.4% of the deliveries expected from the Trafalgar System and that are delivered by other parties to the East end of the Trafalgar line? How does the gas get there? Who are the providers? Are they reliable?

3.

Question:	So the ACTUAL physical delivery capacity that the Trafalgar Line (after the addition of the applied-for facilities) is 5,025,920 GJ/day or thereabouts?

4.

Of the remaining 5,025,920 GJ/day, 21,081 GJ/day (or about 0.4%) is delivered by another party in the form of Winter-Peaking-Service, purchased by Union from a third party, leaving 5,004,839 GJ/day that must physically come off the Trafalgar Line on Winter Design Day.

Question:	Is this Correct? (Answer should be "yes")

5.

Question:	Who is the third party providing the anticipated Winter-Peaking-Service of 21,081 GJ/day?

Is the Winter Service supply actually confirmed as available?

Is it costly?

What is the maximum available?

6.

Question:	Examining the Diagram at section 4, schedule 8, with a different view, can we summarize it by saying that it shows the Winter of 2001/2002 demand as being 5,805,835 GJ/day made up of 374,496 GJ/day new additional demands, and 5,491,339 GJ/day are the old 2000/2001 demands? (Answer should be "yes")

7.

Question:	And the new capacity added by virtue of the applied-for NPS 48 loop pipeline is 332,828 GJ/day? (Answer should be "yes")

8.

Which should be an increase in the physical capacity of the Trafalgar line of a little less than 7% if the existing physical capacity of that line is actually about 5 million GJ/day...Is that correct?

9.

So with an increase in demand of 374,496 GJ/day and a physical capacity increase of 332,828 GJ/day, the capacity increase is not sufficient to satisfy this additional demand and you must supplement even more with "Deliveries-by-other Parties" than you had in 2000/2001? Is this correct?

10.

Question:	Let us continue to examine examine the year 2000/2001 demands: Can you tell us, for the winter of 2000/2001 to date, what was the maximum demand on the Trafalgar System on the same basis as compared with the forecast 2001/2002 amount of 5,805,835 GJ/day? ...(probably the witness cannot provide the exact figure ..) —could you undertake to provide this number? (It should be around 5,491,339).

11.

Question:	We would like to explore the composition of the present year 2000/2001 winter demand components and their continuance into the winter of 2001/2002 on which these facilities' justification is based. In the diagram in section 4, schedule 8, and the write- up-in section 4, page 5, paragraph 22 the current year's base demand is 5,491,339 GJ/day, on Winter Peak Design Day, and the capacity is a little bit less than this, made whole by the small amount of purchased Winter Peaking Service.

12.

Now we assume that a fairly large part of the current year's demand is supplied at Parkway by in-franchise customers in what you refer to as "The Supply at Parkway" (Section 4, page 4, paragraph 15) or "Parties may commit to deliver at Parkway for peaking days" (paragraph 16) or "Design day deliveries" (section 4, diagram schedule 9), shown as 780,545 GJ/day in the latter reference for 2001/2002.

Question:

What is the equivalent figure to this 780,545 GJ/day "Design day deliveries" figure in the current year, 2000/2001?

If so, please explain the reasons for the difference.

13.

Question:	Returning to the year 2000/2001 figure of 5,491,339 GJ/day demand, did this number allow for the release of 163,999 GJ/day of Trafalgar Line demand that TCPL released for the winter of 2000/2001 and two subsequent winters? (I believe that the answer will be that the released demand was given to someone else... -see below).

14.

Question:	In answer to Board Staff Supplementary Interrogating No. 3, Union mentioned that this "released" capacity would be assigned to in-Franchise customers and QUOTE "to allow them to deliver gas to Union at points other than Parkway" and that such "in- franchise customers required delivery point flexibility during the recent Performance Based Regulation proceeding RP-1999-0017 and agreed to pay for the costs associated with this flexibility in their rates".

Could you explain clearly what that means in terms of its effect on demand and capacity on the Trafalgar Line?.

15.

Question:	To date, has TransCanada's released demand actually been fully used at any point this winter? (Answer is probably "yes").

Can you provide more detail on how that released capacity was utilized?

16.

Question:	Turning now to additional demand requirements for the winter of 2001/2002, according to the diagram on section 4, schedule 8, you anticipate an additional demand of 314,496 GJ/day on Winter Peak Design Day, over the existing capacity of 5,491,339 GJ/day, which is already more than the existing demand and more than the fully extended capacity of the system - Is that correct?

17.

Question:	And the composition of the 314,496 GJ/day or a 5.7% increase, is:

24,896	GJ/day	In-franchise demand increase

107,000	GJ/day	Consumers Gas Firm contract demand

15,000	GJ/day	Sunoco Firm contract demand

50,000	GJ/day	Duke Energy Firm contract demand

117,600	GJ/day	HOPED-FOR contracts (not yet signed)

All totalling 314,496 GJ/day.

(Answer should be "yes")

18.

Question:	Can you update us on any "firming up" of contracts for the 117,600 GJ/day capacity that Union expected to sell, but had not yet firmed up, as per section 3, paragraph 14 write up, at the time of the application filing?

19.

Question:	Are you saying for these applied-for-facilities, the additional capacity available that has not been contracted for will be filled by a "built it and they will come" philosophy, or would you like to reiterate the reasons for expecting this capacity to be taken up?

20.

In response to Supplementary Interrogating No. 3 ----------- (see Elsewhere), Union indicated that the 163,999 GJ/day of Demand Capacity on the Trafalgar Line that TransCanada released had been "assigned to in-franchise customers to allow them to deliver gas to Union at points other than Parkway".

Question:	Could you please explain again what this means, and how this assignation does not basically reduce the demand on Trafalgar Line.

21.

Reference:	Response to Interrogatory #15 and Supplementary Interrogatory #7.

Both responses refer to Union's In-franchise customers requesting "greater delivery point flexibility", resulting in a requirement for additional facilities on the Dawn Trafalgar Line.

Question:	Please explain what this means, and how such "greater delivery point flexibility" results in the need for additional facilities on the Dawn Trafalgar Line.

22..

Turning now to the year after the Applied-for year 2001 construction, are you expecting that for the year after (2002/2003) the Winter Peak demand will rise from 5,803,835 GJ/day to 6,133,811 GJ/day or an increase of 5.6%, requiring further looping of 18.2 km upstream of London?

(Source: Diagram Section 4, Schedule 10 and Section 4, Schedule 1)

23.

RESPONSE TO INTERROGATORY #14

Reference:	Also Section 4, schedule 7 and reference section 4, page 4, paragraphs 15, 16 and 17

In Interrogatory #14, we asked Union whether the quantity of 780,544 GJ/day entitled "Design Day supplies at Parkway" that was to be delivered at Parkway by other parties at the East end of the Trafalgar Line, going to physically travel down the Trafalgar Line.

Union responded that this volume was not going to travel down the Trafalgar line, but would be delivered by other parties, i.e., In-franchise customers, through TCPL's Northern Ontario line.

Union then added the sentence. "TCPL would transport these volumes through their Northern Ontario facilities to Parkway" "or as a portion of the volumes they have contracted as M12 from Dawn to Parkway"

Question:	Could you explain the last phrase?

24.

Response to Enbridge's Interrogatory #1.

Question:	Union indicated that contracts for 117,600 GJ/day were at the time of application, still to be firmed up. Please tell us how much of this 117,600 GJ/day has been contracted for in the interim and the party signing up for any new contracted volumes.

2. ECONOMIC ANALYSIS AND EFFECT ON RATE ASPECTS

25.

Reference:	Union's Response to Interrogatory #1

Union mentioned that the use of long-term economics was, in particular used, and approved by the Board in cases E.B.L.O. 246 and E.B.L.O. 251 applications for looping Pipeline facilities on the Dawn Trafalgar Line.

Question:	Did the Board in these Decisions, specifically endorse the use of long-term economics or was that support implicit in the fact that the Board approved the applications?

26.

Reference:	Response to Interrogatory #2, section 5, paragraph 3, paragraph 12 and further:

Presumably, in a stage-wise facility-growth process, some of the individual stages viewed in isolation will show less attractive economics than other individual stages. In this application, the year 2001 constructed facilities, the individual P.I. (Profitability Index) is shown as 0.75 for a Stage 1 DCF type of economic analysis. This is somewhat less than the 0.8 P.I. considered a cut-off point for system expansions. However, the next stage of growth, the Brooke-Strathroy loop referenced in section 4, schedule 10, may show a considerably better P.I. when considered in isolation, as indicated by the low cost per unit capacity added, namely $137.5 GJ/day added versus $277.56fGJ/day or the application.

Question:	Can you provide the P.I. for a stage 1 analysis for the Brooke-Strathroy loop planned for year 2002 construction, or another economic measure that demonstrates the up-and- down nature of the economics for individual facility additions?

28.

Response to Enbridge's Interrogatory #1

Question:	Union stated, both in its Application, and in response to Enbridge's Interrogatory #1, that Union is committed to manage asset utilization risk. If the PBR Decision substantially endorses Union's requested PBR proposal and the customers for the 117,600 GJ/day do not materialize, are any of Union's Customer's Rates adversely affected, or are those customers immune to the consequences of non-materialization of customers for the full capacity after the construction to the facilities and the cost for such construction. Could you explain how this immunization works?

29.

Question:	And in the event that PBR is not approved, would rates to existing customers be affected adversely under a cost-of-service regime?

3. CONSTRUCTION,TECHNICAL AND ENVIRONMENTAL ASPECTS