B-8 GAZ MÉTRO RESPONSE TO IR No 1 from TCE (Gaz Métro Documents ) (English Translation)

Transcription

1 B-8 GAZ MÉTRO RESPONSE TO IR No 1 from TCE (Gaz Métro Documents ) (English Translation)

2 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Category A Costs Reference: (i) Gaz-Métro-1, Document 1, Page 14, Lines Preamble: As mentioned above, the connection of the reception point to the interconnection point of the Gaz Métro network will be performed by the help of new distribution pipelines manufactured by Gaz Métro and the costs of these new pipelines must be recovered through a reception tariff. Moreover, if new investments regarding the actual distribution network (i.e. downstream the interconnection point) were requested only for the needs of the producers, the costs related to these investments would be also at the expense of the producers. (emphasis added) 1.1 Will any new investment made with regard to the existing required distribution network (i.e. downstream the interconnection point) so as to allow Gaz Métro to supply the acceptance service be at the expense of the producers? If not, please specify how Gaz Métro will determine the part of the costs for the modification of the existing distribution network that will be paid by the clients of the distribution service. Yes. In the case where new investments are required solely for producer needs. Original: Gaz Métro 1, Document 1.37 Page 1 of 1

3 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Looping Reference: (i) Gaz-Métro-1, Document 1, Page 9, Lines Preamble: The construction of pipelines allowing the connection of the production sites to the gas network of Gaz Métro may allow looping certain segments of the Gaz Métro network besides the routing of the volumes towards the existing networks, having the additional advantage that it serves certain areas and new markets, mainly in agriculture. This looping would also allow increasing the injection potential of natural gas in the network, from the producers point of view, by increasing the access and safety regarding the supply of the clients. (emphasis added) 2.1 Please give an example of looping necessary due to the introduction of a connection pipeline. [Refer to corresponding.pdf file to view image]. 2.2 Please explain how the looping would allow to increase the injection potential. Looping could increase client access to gas produced within Gaz Métro s territory without going through TQM/TCPL. In addition, the local production of natural gas could increase the network capacity in saturated sections. Original: Gaz Métro 1, Document 1.38 Page 1 of 2

4 2.3 If the construction of a connection pipeline led to the looping of the existing distribution network, would the clients of the distribution service incur a part of the costs of the connection pipeline? If affirmative, please specify how Gaz Métro will determine the part of the costs incurred by the clients of the distribution service. Network looping by only one connection pipeline is highly unlikely. However, the development of gas production over several years and the construction of several connection pipelines may actually allow certain network portions to be looped in the long term. In this case the connection pipeline costs would be reallocated so that consumer clients would assume a part of them. Given that these looping possibilities should not occur in the next few years, Gaz Métro has not determined the way in which the costs will be reallocated. At a suitable time, Gaz Métro will develop and propose new cost allocation methods. 2.4 If the construction of a connection pipeline led to the looping of the existing distribution network and if this looping increased the natural gas injection potential, would the clients of the acceptance service incur a part of the costs of the looping? If affirmative, please specify how Gaz Métro will determine the allocation of these costs between the producer and the clients of the distribution service. Yes. See answer to request for information 2.3. Original: Gaz Métro 1, Document 1.38 Page 2 of 2

5 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Treatment of income differences related to the tariff at the suggested reception point Reference: (i) Gaz-Métro-1, Document 1 Preamble: Gaz Métro s request does not refer to the treatment of the income differences related to different acceptance tariff elements suggested (rate at the reception point, unit rate at the volume delivered within territory, unit rate at the volume delivered outside the territory). 3.1 Please specify how Gaz Métro proposes to recover the opportunity cost of the reception service. The Régie s approval of investment projects will allow for determining the applicable receiving point rates and also the volumes applicable to these projects. As per the Régie in its decision D , costs and income associated with investment projects of more than $1.5 million must first be approved before being included in a rate case via the use of a deferred fee account in order to process the spreads. As a result, income will be anticipated upon the rate cause based on the predicted volumes and rates in effect in the Service Conditions and Rates, like all other distribution income. Any spread between the anticipated income at the start of the year (rate cause) and the actual income declared at the end of the year (annual report) will enter into the calculation for determining an overpayment or shortfall and will be shared in accordance with the terms set out in the incentive scheme, on the basis that a new regulatory regime may also be in place. Original: Gaz Métro 1, Document 1.39 Page 1 of 2

6 3.2 Please specify how Gaz Métro proposes to manage the reverse situation (surplus) of the one described in paragraph 3.1. See answer to request for information 3.1. Original: Gaz Métro 1, Document 1.39 Page 2 of 2

7 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Determining the rates for costs not related to the gas network Reference: (i) Gaz-Métro-1, Document 1, Page 27, Line 19 to Page 28, Line 18 (ii) Gaz-Métro-1, Document 1, Page 28, Lines Preamble: Point a) identifies the costs not related to the gas network for which Gaz Métro established a causal relation with the acceptance service. Point b) suggests hypothetical scenarios that separated the 2.8% and 5.6% of the amounts invested for these costs (i) (ii) Gaz Métro analyzed each of the distribution costs in order to establish a causal relation between the supply of the producers and these costs (see column 1 of table 2) in order to determine if they were applicable or not. ( )» (emphasis added) For this purpose, Gaz Métro established several hypothetical scenarios concerning the level of the volumes injected in the network as well as the investments made by Gaz Métro to serve these new clients. Subsequently, a ratio has been calculated dividing the distribution costs allocated to producers (different from the royalties) by the investments according to the hypotheses of different scenarios. The ratios vary from 2.8% to 5.6%. (emphasis added) 4.1 Among the costs available at point a), which are those that can be related to the level of the investments? Allocation factors can be related directly (return based on pricing) or indirectly (administration expenses) on the basis of investments. Allocation factors that vary on the basis of income or volume are also related, but indirectly with investments. See also answer to request for information 9.4 of the ACIG (Gaz Métro-1, Document 1.21). Original: Gaz Métro 1, Document 1.40 Page 1 of 2

8 4.2 Please submit the scenarios analyzed by Gaz Métro including the data necessary for understanding the ratios generated. See answer to request for information 9.1 of the Régie (Gaz Métro-1, Document 1.9). 4.3 Please explain the causes for the variations among the ratios resulting for different scenarios. Costs vary depending on volume and investments. 4.4 Please describe and explain all the elements, analyses and reasons allowing Gaz Métro to choose the suggested ratio of 4%. See answer to request for information 9.6 of the Régie (Gaz Métro-1, Document 1.9). 4.5 Did Gaz Métro establish a correlation between the level of the investments and the distribution costs allocated for all scenarios of the analyzed projects? If affirmative, please provide all data and all necessary graphs for understanding this correlation. No. For further information, see answer to request for information 9.4 of the ACIG (Gaz Métro-1, Document 1.21). Original: Gaz Métro 1, Document 1.40 Page 2 of 2

9 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Modification of rates at the reception point Reference: (i) Gaz-Métro-1, Document 1, Page 34, Lines 3-7 (ii) Gaz-Métro-1, Document 1, Page 32, Line 15 to Page33, Line 2 (iii) Gaz-Métro-1, Document 1, Page 33, Lines 2-11 Preamble: (i) (ii) (iii) The rates at the reception points will be approved by the Régie [Public Bureau] for each new project when investment requests are made according to the method suggested in this section. Note that the rates can be consequently modified, because of subsequent [tariff causes] based on the evolution of the Costs (yield rates, taxes etc.) (emphasis added) The rates at a reception point can be revised if there are new producers who wish to use the same connection pipelines or if Gaz Métro connects the new clients to the pipelines that were previously used only to connect the production sites to the gas network (emphasis added) For example, if the existing assets allow, another contract can be signed to allow a producer to have access to a connection pipeline already used and this, increasing the use of the investment, would reduce the rate necessary to recover the costs incurred. If another producer wished to inject the same level of volume (additional 500 Mm 3 ) and no additional assets are necessary, the income necessary would be of $7,525,000 per year divided by the new volumes of 1,000 Mm 3 /year and this would be equal to a rate of 0.75 /m 3. Gaz Métro will revise the rates of the reception points concerned at the time of the subsequent tariff cause to the investment request. (emphasis added) 5.1 Based on point a), will any modification made at the level of one or more budget elements determining the costs used to establish the rates at the reception points (yield rate, taxes etc.) automatically lead to a review of these rates at the time of the subsequent tariff causes, as it is the case for the distribution tariffs? If not, why? Original: Gaz Métro 1, Document 1.41 Page 1 of 4

10 Yes. Any change of one or more budgetary items will indeed lead to a rate revision. 5.2 According to the parameters of the example suggested by Gaz Métro at point c), please specify if this tariff review affecting the reception point in question will be made so as to maintain the break-even point at 20 years. Yes. Gaz Métro will target a break-even point of approximately 20 years if there are no additional investments. However, if investments were necessary in order to increase capacity, the investment period may be reviewed for new investments. 5.3 Generally, please specify if any tariff review affecting the reception point will be made so as to maintain the break even point at 20 years. Yes. Gaz Métro will target a break-even point of approximately 20 years if there are no additional investments. 5.4 According to the parameters of the example suggested by Gaz Métro at point c) and if no amount, indemnity or guarantee is available for compensation purposes, please specify if the interruption of the activities of the additional producer or the previous producer will lead to a review to the increase of the rate at the reception point concerned, for the remaining producer, at the time of the subsequent tariff cause. In the case where the discontinuance of a producer s business is not related to bankruptcy, the client must pay fixed fees up to the expiry date of his contract or the allowance after the initial period of the first 10-year contract. The rate paid by the other producer at the same receiving point will not be subject to an adjustment. In the case where the discontinuance of a producer s business is as a result of bankruptcy and that it is not possible for Gaz Métro to recover the allowance, the rate paid by the other producer at the same receiving point will be subject to a slight adjustment. See answers to requests for information 17.5 and 17.6 of the ACIG (Gaz Métro-1, Document 1.29). Original: Gaz Métro 1, Document 1.41 Page 2 of 4

11 5.5 Point b) suggests that it is possible to connect a new client to the pipelines that were previously used to connect the production sites to the gas network. If this new client is a client of the distribution service: a) please specify whether the arrival of this new client leads to: i) a review to the decrease of the rate at the reception point; ii) iii) a review to the decrease of the level of investments used for the calculation of the rate at the reception point; a review to the decrease of the amount generated by the application of the rate of 4% on the investments used for the calculation of the rate at the reception point. b) please specify if the interruption of the activities of this new client will lead, in the absence of an indemnity, guarantee or contract obligations for compensation purposes, to: i) a review to the increase of the rate at the reception point; ii) iii) a review the to increase of the level of investments used for the calculation of the rate at the reception point; a review to the increase of the amount generated by the application of the rate of 4% on the investments used for the calculation of the rate at the reception point. Yes. The connection of new consumer clients will lead to a revision at the decline of the receiving point rate due to a reallocation of investments initially used only by producers. The proposed 4% for costs unrelated to the gas network is an initial proposal in order to be in a position to allocate costs even though this new clientele is not Gaz Métro s clientele. As soon as Gaz Métro has a few producer clients, this could readjust the costs allocated to this client category based on the cost allocation study with or without changing the factors currently in use. No matter the situation, the proposed 4% may change as soon as Gaz Métro has producer clients. In the case where this new consumer client subsequently discontinues their business, the receiving point rate will indeed increase. 5.6 If the connection pipeline was partially used by the producer and a new client for distribution (e.g., connecting a client to the distribution service at the middle of the Original: Gaz Métro 1, Document 1.41 Page 3 of 4

12 connection pipeline), please specify how Gaz Métro intends to allocate the level of the investment used for the calculation of the rate at the reception point. See answer to request for information 11.4 of the ACIG (Gaz Métro-1, Document 1.23), as well as answer to request for information 1.8 of the APGQ (Gaz Métro-1, Document 2.1). 5.7 In all situations, please specify how Gaz Métro intends to follow the investments related to each of the reception points based on the clients added or retreated. The investment follow-up method related to each receiving point between producers and consumer clients has not been determined for the moment. Gaz Métro will proceed with their thoughts on this subject. It must be noted that Gaz Métro does not foresee the connection of consumer clients to connection pipelines with respect to projects currently under study. Original: Gaz Métro 1, Document 1.41 Page 4 of 4

13 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Determining the proportion of the gas network in the transmission and distribution pipelines Reference: (i) Gaz-Métro-1, Document 1, Page 37, Lines 1-3 (ii) Gaz-Métro-1, Document 1, Page 15, Lines Preamble: At point (i), Gaz Métro indicates the proportion of pipelines of the gas network considered as transmission pipeline based on the application of the allocation factor of the CONDPRIN service cost. At point b), Gaz Métro makes a distinction between the distribution network and the transmission network based on the pressure of the pipelines. (i) The application of this allocation factor within the study of the cost allocation 2008/2009 allowed identifying that 32% of the pipelines of the gas network are transmission pipelines. (emphasis added) (ii) There is a distinction made within the same gas network, that is the distribution network and the transmission network of Gaz Métro. The distribution network includes essentially low-pressure pipelines,... (emphasis added) 6.1 Please explain how the application of CONDPRIN factor allowed Gaz Métro to identify that 32% of the pipelines of the gas network are transmission pipelines. See answer to request for information 13.1 of the ACIG (Gaz Métro-1, Document Please provide all necessary calculations sustaining the conclusion of Gaz Métro that 32% of the pipelines of the gas network would be transmission pipelines. Original: Gaz Métro 1, Document 1.42 Page 1 of 2

14 The cost allocation study led Gaz Métro to conclude that 32% of costs related to gas network pipelines (and not 32% of the gas network pipelines) are carrier pipeline costs. See answer to request for information 13.1 of the ACIG (Gaz Métro-1, Document 1.25). 6.3 Please specify what percentage would be obtained if the analysis were founded on the exclusive use of the CAUCPA factor. The percentage would have been 100%. 6.4 Please specify the pressure level differentiating the distribution pipelines from the transmission pipelines. See answer to request for information 5.1 of the Régie (Gaz Métro-1, Document 1.5). 6.5 Please indicate what percentage of pipelines of the gas network would be considered as transmission pipelines if the distribution were founded on the pressure level. Gaz Métro estimates the percentage at 27%. Original: Gaz Métro 1, Document 1.42 Page 2 of 2

15 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Update of unit rate to volumes delivered outside the territory Reference: (i) Gaz-Métro-1, Document 1, Page 39, Lines 25 and 26 (ii) Gaz-Métro-1, Document 1, Page 39, Lines Preamble: At point a), Gaz Métro requests the Régie to set the applicable rate of 0.70 /m 3 to the volumes delivered outside the territory through this file. Then, it specifies at point b) that this rate can be updated as part of the subsequent tariff causes. (i) (ii) Gaz Métro requests the Régie to set the applicable rate of 0.70 /m 3 to the volumes delivered outside the territory and this through this file. (emphasis added) The resulting unit rate is thus of 0.70 /m 3 and this is the rate applicable to producers. Consequently, this rate can be updated for these subsequent tariff causes. (emphasis added) 7.1 Please explain all the reasons why Gaz Métro wishes to set as of this file the applicable rate to the volumes delivered outside the territory. Contrary to the establishment of applicable receiving and distribution point rates within the territory that depend on data specific to each investment project, the information required to establish the applicable rate for volumes delivered outside the territory was already known at the time this case was submitted. This rate, having already been established and not subject to change at each investment request, is therefore not an item for discussion with respect to an investment request and for which a decision does not have to be rendered. Original: Gaz Métro 1, Document 1.43 Page 1 of 2

16 7.2 Does Gaz Métro suggest automatically updating the rate applicable to the volumes delivered outside the territory at the time of the subsequent tariff causes, as it is the case of the distribution tariffs. If not, why. The applicable rate for volumes delivered outside the territory will be updated upon subsequent rate causes. Original: Gaz Métro 1, Document 1.43 Page 2 of 2

17 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Financial Guarantees Reference: (i) Gaz-Métro-1, Document 1, Page 43, Lines (ii) Gaz-Métro-1, Document 1, Page 52, Lines Preamble: Consider a connection pipeline installed for a single producer serving only this client. Consider the case where this single client interrupts its operations 10 years before reaching the neutral rate of its reception point and there is no other amount or guarantee available than the 12 month security deposit to pay the indemnities provided in the contract. (i) (ii) Gaz Métro will request that the initial contracts be concluded for at least 10 years for clients subject to the acceptance tariff. When the initial contract entered into with the producer expires, the latter may renew the contract or, in certain cases, pay compensation. If the producer decides not to renew the contract and if the neutral rate is not reached, the producer must pay compensation to Gaz Métro. This compensation would be equal to the book value of the assets at that moment plus the opportunity cost (difference between its tariff and the income requested) that the producer will pay if it is bound by a contract until the neutral rate is reached, which must correspond, in the majority of situations, to the duration of the amortization, i.e. 20 years. (emphasis added) The present provisions in terms of deposit authorize Gaz Métro to request a security deposit equal to two months the consumption is the highest. In the regular context of the Gaz Métro operations, this coverage of two months is appropriate. Moreover, in the context of the production of natural gas in Quebec, Gas Métro considers that this protection level would be insufficient and suggests a security deposit equal to 12 months of service. (emphasis added) 8.1 Referring to point b), why does Gaz Métro consider that a security deposit equal to two service months is insufficient in the context of the production of natural gas in Quebec and the creation of a reception tariff? Original: Gaz Métro 1, Document 1.44 Page 1 of 3

18 The rate terms proposed by Gaz Métro will not eliminate the risk of bad debt, but seek to limit it (see answers to questions 10.3 and 10.4 of the Régie in document Gaz Métro-1, Document 1.10). Remember that current applicable terms, with a guarantee equal to income over two winter months, apply to overall client billing, and not only distribution income. These terms that are currently in effect cover the risk of loss of supply costs that represent an important part of income collected over the year. In the case of development of this new segment of clientele, we consider that a protection of 12 months will cover, at a minimum, the income spread before being able to adjust the rates in a future rate case. 8.2 Based on the example available in the preamble, please describe how Gaz Métro will use the security deposit: b) if the situation occurs at the beginning of the [tariff year]; c) if the situation occurs in the middle of the tariff year; d) if the situation occurs at the end of the tariff year. Deposits are automatically reimbursed upon the conclusion date of an account regardless of when it occurs during a pricing year. As set out in Articles and of the Service Conditions and Rate, the distributor can apply the deposit to a client s unpaid bill. 8.3 Also based on the example presented in the preamble, once the security deposit is totally disposed of, please specify whether the clients of the distribution service continue to pay the costs related to the investments necessary for the creation of this reception point. In the preamble example, the initial 10-year client contract is concluded. The 12-month deposit was probably reimbursed five years prior because the proposed retention period is 60 consecutive months, unless at least one bill was not paid on the due date during the retention period of the deposit. In the case where the discontinuance of a producer s business is not due to bankruptcy, the client must pay the fixed fees up to the expiry date of his contract (if he signed a new contract after the initial 10-year contract) or the allowance after the initial period of the first 10-year contract if he did not sign a new contract. Current distribution service consumer clients have not paid and will not pay for costs related to investments allocated to the producer. Original: Gaz Métro 1, Document 1.44 Page 2 of 3

19 In the case where the discontinuance of a producer s business is due to bankruptcy and that it is not possible for Gaz Métro to recover the allowance, the rate paid by the other producer at the same receiving point will be subject to a slight increase, like current distribution rates applicable to consumer clients. See answers to requests for information 17.5 and 17.6 of the ACIG (Gaz Métro-1, Document 1.29). 8.4 Based on point b), please provide and explain all the elements and all the reasons why Gas Métro considers that a security deposit equal to 12 months of service can be sufficient for a client subject to the acceptance service? See answer to request for information 8.1 of TCE. Original: Gaz Métro 1, Document 1.44 Page 3 of 3

20 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Financial Guarantees Reference: (i) Gaz-Métro-1, Document 1, Page 43, Lines (ii) Gaz-Métro-1, Document 1, Page 15, Lines 4-22 Preamble: Consider a connection pipeline installed for a single producer serving only this client. Consider the case where this single client interrupts its operations 10 years before reaching the neutral rate of its reception point and there is no other amount or guarantee available than the 12 month security deposit to pay the indemnities provided in the contract Validity of the contract, renewal and indemnity (i) Gaz Métro will request that the initial contracts be concluded for at least 10 years for the clients subject to the acceptance tariff. When the initial contract concluded with the producer expires, the latter can renew the contract or, in certain cases, pay an indemnity. If the producer decides not to renew the contract and if the neutral rate is not reached, the producer must pay compensation to Gaz Métro. This compensation must be equal to the book value of the assets at that moment plus the opportunity cost (difference between its tariff and the income requested) that the producer would pay if it were bound by a contract until the neutral point is reached, which must correspond, in the majority of situations, to the duration of the amortization, i.e. 20 years. (emphasis added) Back stop agreement (ii) In such a situation, Gaz Métro must have the necessary protection to make sure the costs incurred during the construction period will be reimbursed by the producer if the producer abandons its production site. The investments would be made, in the majority of cases, before entering into force of a reception tariff contract of natural gas with the producers. Gaz Métro intends thus to sign with each producer a back stop agreement. This agreement would describe the circumstances and conditions leading to the reimbursement of expenses incurred. These agreements have the purpose to recover the amounts Gaz Métro will have invested to ensure the connection of the reception Original: Gaz Métro 1, Document 1.45 Page 1 of 2

21 (iii) point to the existing gas network, should the project of the producer be abandoned before the tariff contract enters into force. The back stop agreements would be valid as of the beginning of the construction and end at the moment the tariff contract between Gaz Métro and the producer enters into force. The observance of the agreements would be guaranteed by a bank letter of credit issued by an institution meeting the criteria defined before being valid until the tariff contract is signed with Gaz Métro. The value of the letter of credit should cover the costs incurred by Gaz Métro and would be progressively increased during the construction period. (emphasis added) 9.1 Referring to point a), in which case(s) the indemnity requested is not equal to the book value of the assets plus the opportunity cost? The allowance will always be equivalent to the book value of the assets plus the rate shortfall. The use of the conditional has no other purpose than to refer to a situation that has not yet occurred. 9.2 Please provide all reasons why Gaz Métro does not intend to request at the time the tariff contract is signed a guarantee from the producer in order to ensure the costs incurred and all opportunity costs will be reimbursed, as it is requested during the period for which the investments are made by Gaz Métro. Gaz Métro always expects a guarantee from the producer client. From the time that the rate contract is signed, the client s rate obligations become the guarantee for recovering transport service costs. In the case of producer clients, the rate is mostly fixed, the initial duration of the contract is 10 years and the required deposit is equal to 12 months of service with a retention time of 60 months and is renewable when the client fails to pay at least one natural gas bill, which constitutes non negligible guarantees. Furthermore, an allowance is anticipated in the case where the producer does not renew his contract if the break-even point is not reached. These guarantees seem fair, reasonable and sufficient in comparison with the guarantees required from other clients. Original: Gaz Métro 1, Document 1.45 Page 2 of 2

22 Gaz Métro Limited Partnership Creation of a Natural Gas Receiving Rate, R GAZ MÉTRO S RESPONSE TO A REQUEST FOR INFORMATION Origin: Request for information #1 dated August 19 th, 2010 Applicant: TransCanada Energy Ltd. Contract Renewal, Security Deposit and Indemnity Clauses Reference: (i) Gaz-Métro-1, Document 1, Page 43, Lines Preamble: At point a), Gaz Métro specifies that it will request that the initial contracts be concluded for at least 10 years and specifies that when the validity of the initial contract concluded with the producer expires, the latter can renew its contract or, in certain situations, must pay compensation. (i) Validity of the contract, renewal and indemnity Gaz Métro will request that the initial contracts be concluded for at least 10 years for the clients subject to the acceptance tariff. When the initial contract concluded with the producer expires, the latter can renew the contract or, in certain cases, pay compensation. If the producer decides not to renew the contract and if the neutral rate is not reached, the producer must pay compensation to Gaz Métro. This compensation must be equal to the book value of the assets at that moment plus the opportunity cost (difference between its tariff and the income requested) that the producer would pay if it were under contract until the neutral point is reached, which must correspond, in the majority of situations, to the duration of the amortization, i.e. 20 years. (emphasis added) 10.1 Please clarify the minimum period that Gaz Métro intends to request at the time of a contract renewal. The minimum contract duration required upon contract renewal is one year. See also answers to requests for information 59.1 of the APGQ (Gaz Métro-1, Document 2.59) and 17.2 of the ACIG (Gaz Métro-1, Document 1.29). Original: Gaz Métro 1, Document 1.46 Page 1 of 2

23 10.2 Please specify if all contract renewals will include a security deposit of 12 months similar to that suggested as part of the initial contract. A contract renewal will not systematically include a guarantee deposit. As stipulated in Article 8.4 of the Service Conditions and Rate, the retention period of the deposit can however be renewed if the producer has not upheld his commitments Please specify if all contract renewals will include an indemnity clause similar to that suggested as part of the initial contract. As mentioned in Article of the Service Conditions and Rate, the contract renewal will include an automatic renewal clause or, if the contract is not renewed, a requirement of the producer to pay an allowance as long as the break-even point has not been reached. Original: Gaz Métro 1, Document 1.46 Page 2 of 2