Interruptions:  Forecasting likely and maximum numbers

Do you know how our team determines the number of planned and maximum interruption days in winter, without a crystal ball? Here is an overview of a complex and very important process.

overview

In developing its supply plan, Gaz Métro determines the planned number of interruption days based on a "basic scenario," which considers a projected demand at the normal temperature1, as well as various supply plan tools available for the winter period. Let's examine each element more specifically.

1- Projected demand
Gaz Métro initially develops a monthly forecast of ongoing and interruptible demand (component A and B) for the fiscal year. Using a mathematical model, this demand is then allocated daily based on projected weather conditions (temperature and wind).

2- Supply
The supply tools are established to meet:
    1. ongoing demand on peak days
    2. the total demand (ongoing and interruptible) during an extreme winter

 The March 2015 Major Industries Blue bulletin describes these different tools and their use in detail.  

3- Assessing interruptions
For each winter day (November 1 to March 31), Gaz Métro simulates the use of available supply tools to meet demand by prioritizing ongoing demand. An interruption day is triggered when Gaz Métro's tools do not enable it to meet the total demand (ongoing and interruptible). Normally, the colder the temperature, the higher the total demand and the greater the risk of interruption. However, depending on the duration of cold spells and when they occur in winter, the supply tools may no longer operate at their full capacity. Therefore, it is sometimes necessary to consider an interruption day or maintain an existing interruption when temperatures are mild.

As required, Gaz Métro may interrupt supply for some or all interruptible service customers. The order in which interruptions occur is based on each customer's rate level (see our Conditions of Service and Tariff, section 16.4.6). Over the last few years, several interruptible customers have switched to firm service, leading to in a reduction of interruptible volumes. The result of this migration is that interruptions are often triggered in two main blocks: "levels 5.7-5.8-5.9" and "all levels." For information purposes, for the 2016 winter, the total volume of interruptibleservice customers represents 44,000 GJ/day, or more than two times less than the prevailing volume for the winter of 2013. This quantity represents slightly less than 3°C in temperature variation.

The maximum number of interruption days presented in the Conditions of Service and Tariff document is determined according to the demand forecast based on extreme weather conditions.

Obviously, since real demand differs from projected demand, and since the same goes for temperatures, the real number of interruption days differs from the number expected at the beginning of the winter. It could even reach the maximum number in the event of extreme weather conditions.

In closing, the planned number of interruption days is only an estimate to help interruptible service customers plan their alternative supply during interruption days. However, given that the maximum number of interruption days indicated in the Conditions of Service and Tariff document is higher, customers should not rely solely on the planned number of interruption days based on a normal temperature to plan their alternative supply.

Regulatory and rate monitoring

TransCanada PipeLine Limited (TCPL) in the Energy East file

In its notice made public on January 7, 2015, the Régie stressed that the Energy East Project had to be reviewed to ensure that gas shipping companies will not have to finance the oil component of the project and that they will not have to assume a greater risk than they currently do.
 

Bolstered by this notice and the government's support, Gaz Métro, along with its Ontario distribution partners, Union Gas and Enbridge, signed an agreement in principle with TCPL on August 17, 2015 regarding Québec and Ontario's gas supply as part of the Energy East Project.

This agreement resolves several uncertainties for eastern Ontario and Québec consumers regarding the gas market context. TCPL will therefore amend its application for the Energy East and Eastern Mainline projects before the National Energy Board (NEB) to reflect the content of the agreement. As such, TCPL will assume the construction risks associated with the project. The transport capacity offered will be based on the call for tenders for the new 2017 capacity, will include an excess capacity of 50,000 GJ/day put at the disposal of the Eastern Canada market and will generate $100M for Eastern Canada customers by 2050.

The final agreement between distributors and TCPL should be concluded by October 30, 2015 at the latest.

consultations regarding the review of the interruptible service

A new gas environment, a high number of migrations to firm service over the last few years and a request from the Régie regarding the possibility of implementing interruptible service to cover the demand recorded on the coldest days have led Gaz Métro to seek alternative solutions to its current interruptible offer.

In this context, from September 14 to 22, Gaz Métro held a series of meetings with several major industry customers to present new offers available for the interruptible service. These meetings served to obtain customers' opinions and assess their potential interest in participating in the new interruptible offer, based on the different scenarios contemplated.

Gaz Métro plans to submit an application for approval to the Régie regarding the new interruptible natural gas option in the fall of 2015. For more information regarding the consultation, please contact your advisor.

regulatory backlog in the process of being cleared

In order to catch up on the delay in its approval of the Conditions of Service and Tariff, in June 2014, the Régie began its concomitant review of 2015 and 2016 rates in a single regulatory file. As part of this file, the Régie heard Gaz Métro and the stakeholders at hearings held from September 8 to 17, 2015.

Gaz Métro suggested that the Régie render a partial decision on all rate aspects as of November 2015 in order to be able to apply final rates for 2016 as of January 1, 2016. At the time of writing, the Régie had not yet indicated whether it would approve this request. If it does, the regulatory backlog seen over the last few years would be completely cleared.

transportation rate update

As announced at the last bi-annual meetings with major industry customers, the Régie has approved the abolition of the "compression service" element from the pricing. As such, starting November 1, 2015, Gaz Métro will supply all the required compressor fuel to transport natural gas in the different sections to the facilities of customers who use its transportation service. The compression costs will now be integrated into the transportation rate.

The transportation rate and the Conditions of Service et Tariff will be modified to include these modifications as of November 1, 2015.

Reinforcing the transmission network in Saguenay

On January 21, 2015, Gaz Métro tabled an investment request to the Régie to increase the capacity of the Saguenay network in order to meet current and future customer demand.

Gaz Métro thus recommended upgrading the existing Saint-Maurice compression station ($31 M) and adding a compression station near the city of La Tuque ($50 M). These investments will increase the Saguenay network's capacity by 59,000 m³/hr, or 51%. Although these investments total $81 M, the realization of the new volumes should nevertheless generate a rate reduction for customers.

Good news: on July 22, 2015, the Régie authorized the investment project. The project will extend over three years and should be completed in the winter of 2017–2018. In the meantime, contractual agreements have been made with TCPL to ensure the supply reliability of this transmission network.


  CATS:  Purchase of emission units from our heavy emitters customers

In order to cover its needs in connection with the cap-and-trade system for greenhouse gas emission allowances (CATS) while reinjecting funds into Québec, Gaz Métro would like to purchase emission units from its heavy emitter customers who want to dispose of units that exceed their needs, whether they were acquired as part of previous transactions or obtained free from the Québec government. 

A call for interest was issued through your advisor in mid-September to discuss offers that could translate into short-term transactions, where applicable. The deadline to submit your proposals is October 16, 2015. To indicate your interest, please contact Hugo Levert, Carbon Market Senior Advisor at Gaz Métro, at 514 598-3186.

Retirement of Pierre Chouinard

After a career spanning more than 30 years in the gas sector, most notably at Gaz Inter-Cité, Consulgaz and Gaz Métro, our colleague Pierre Chouinard retired in late September. Pierre, who spent most of his career in Sales Major Industries at Gaz Métro, worked in our Québec City regional office. We wish Pierre well-deserved happiness in his retirement.

1 The normal temperature corresponds to the average temperature recorded since 1970, adjusted to take into account climate change.