load-balancing service

load-balancing service OVERVIEW COST OF LOAD-BALANCING SERVICE Load-balancing service involves managing variations between summer and winter consumption. While there may be significant seasonal fluctuations in customers natural gas consumption, Gaz Métro receives natural gas uniformly, i.e. the same quantity every day. Gaz Métro therefore has to find a balance between the time it receives the gas from Western Canada and the time it is consumed by the customer. Service Components Natural gas storage, the main tool for managing seasonal volumes, is done primarily in two ways: 1 Underground in gaseous state: > Union Gas at Dawn in southwestern Ontario (600 million cubic metres) > Intragaz at Pointe-du-Lac, near Trois-Rivières (29 million cubic metres) > Intragaz at Saint-Flavien, on south shore of Quebec City (28 million cubic metres) 2 In liquid state: > Gaz Métro s liquefaction, storage and regasification plant (LNG Plant) in the Montreal area (57 million cubic metres). Regulated Rates Storage in Ontario is regulated by the Ontario Energy Board. The other storage sites and the liquefaction plant in Quebec are regulated by the Régie de l énergie. Storage is the main load-balancing tool. Natural gas is stored in summer, when consumption is lower, and withdrawn during the winter, when customers energy needs are greater. Each year, Gaz Métro evaluates the load-balancing tool needs. The costs of those tools and their impact on loadbalancing service prices are then submitted to the Régie de l énergie for approval. Gaz Métro bills load-balancing at the same price it pays its various suppliers for the tools, which means it does not make any profit on this service. STORAGE LNG Plant Storage sites for natural gas awaiting delivery to Gaz Métro s customers. The percentages shown for each site represent the annual average portion of the total volume of natural gas stored. kilometres

load-balancing service GAZ MÉTRO S LOAD-BALANCING TARIFF Peak and Space Tools Gaz Métro s load-balancing service includes charges for storage tools, which are classified according to peak and space functions. What are these two types of tools specifically used for? > Peak tools are used for peak winter days. Gaz Métro s LNG plant is the main peak tool. > Space tools are used to serve seasonal winter volumes. Underground storage of natural gas during the summer for withdrawal in the winter is the main tool. Load-balancing Service Price The peak and space tools are billed based on customers consumption patterns. Three consumption parameters P, W and A, are calculated and used to determine the price: > P is the daily peak load; > W is the winter average daily load (November to March); and The difference between the winter peak load and the average winter volume (P W) equals the peak tools volume use, which will be billed at the rate for those tools. The difference between the average winter load and the annual average load (W A) equals the space tools volume use, which will be billed at the rate for those tools. The calculation is as follows: > A is the annual average daily load. Load-balancing price = Peak rate x (P - W) + Space rate x (W - A) Annual volume

Impact of Consumption Profile on Rate The rate paid by customers reflects their consumption profile because it recognizes each customer s different loadbalancing needs the bigger the differences between the parameters, the higher the load-balancing rate, and vice versa. Heating Customer The difference between the winter peak and the average winter load (P - W) and the difference between the average winter load and the annual average load (W - A) will be greater for heating customers whose consumption profile requires natural gas storage in the summer to supply volumes required in winter. Peak tools will also be necessary to supply peak winter consumption. Stable Consumption Customers In contrast, customers who always consume the same volume, regardless of the season, do not require any storage. There is therefore no difference between the parameters and they do not have to pay any loadbalancing costs. Other Consumption Profiles What happens if a customer only consumes in summer? Not only does this type of profile not require any loadbalancing, but it also allows Gaz Métro to reduce its overall load-balancing needs. The benefits are therefore passed on to the customer. The W and P parameters are zero for that type of customer, which translates into a zero peak rate and a credit rate for space. The result will therefore be a load-balancing price credit.

Time-lag between Volume Used for Calculation and Application thereof We have seen that the load-balancing rate varies according to the different consumption profiles. This is also true for customers whose consumption profile changes from year to year. Customers load-balancing rate is established on October 1 each year based on their consumption for the past 12 months. This rate is then billed for the next 12 months. The example shown makes it possible to visualize the impact of a change in consumption profile during a year on the price paid the following year. The example shows that the price calculated based on the heating profile for Year 1 will have an impact on the amount paid during Year 2 when the volumes are much higher. Similarly, the beneficial impact of consumption stability during Year 2 will only be felt in Year 3, when the volumes are lower again. Load-balancing Service Settlement A customer who has consumed for at least 12 months can elect a load-balancing service billing method that includes a service settlement as at September 30. A second calculation is then made to determine what the load-balancing rate would have been if it had been calculated based on the current year s consumption (instead of the preceding 12 months). The difference between the two amounts is billed or credited to the customer at the end of the year.

Average Price As the A, W and P parameters are based on the last 12 months consumption, a customer who does not have a 12-month consumption history will be billed an average load-balancing price, which will differ depending on the distribution tariff applicable to the customer. The average prices reflect the consumption pattern of all customers for each tariff. General Distribution Tariff D 1 customers will also be billed based on an average price. What happens then if actual deliveries differ from the uniform delivery? The impacts on the load-balancing (LB) needs are summarized in the following table: Impact of Delivery Profile and Volume Transposition In addition to the consumption profile, the natural gas delivery profile also has an impact on the load-balancing service used by a customer. For customers who use Gaz Métro s natural gas supply service and have a uniform delivery profile, the load-balancing service is simply the result of the consumption profile. However, for customers who provide their own supply service, the load-balancing price will also depend on their delivery profile. The load-balancing service tariffs assume uniform gas supply throughout the year. Uniform delivery is simply equal to the total deliveries divided by 365 days. To make it possible to recognize the non-uniform delivery profile in the load-balancing price, it is converted to a uniform basis, which means volume transposition. The transposed consumption is established as follows: Transposed consumption = Actual consumption Actual + delivery Uniform delivery The calculation is made each day in order to obtain the new transposed consumptions. The new A, W and P parameters, which are required to determine the loadbalancing price, are then evaluated on this basis.

To illustrate the transposition, assume a customer has an annual volume of 7,300,000 m 3 and withdraws 40,000 m 3 during a particular day. If, during that day, the customer delivers 10,000 m 3, the customer s load-balancing need for the day is: 40,000 m 3 10,000 m 3 = 30,000 m 3. Load-balancing needs as at January 15 based on actual delivery profile (before transposition) Based on the example above, the uniform delivery profile of that customer is 7,300,000 m 3 /365 days = 20,000 m 3 /day. That day s transposed consumption is therefore 50,000 m 3, i.e. 40,000 m 3 10,000 m 3 + 20,000 m 3, which gives the same load-balancing need of 30,000 m 3. Load-balancing needs as at January 15 based on actual delivery profile (after transposition) CUSTOMER-PROVIDED SERVICE Under certain conditions, customers may provide their own load-balancing service. In such cases, every day they have to deliver the exact volume they consume. Published by the Communications and Marketing Department of Gaz Métro, 02-2007, 22,44 g.