BCUC rejects Okanagan pipeline project due to climate action

Bill Andrews and Tom Hackney

18 January 2024

The BC Utilities Commission rejected FortisBC Energy’s [FEI’s] Okanagan Capacity Upgrade Project, in a December 22, 2023 decision that marks the first time the BCUC has rejected a utility gas pipeline expansion due to the likelihood that climate-action measures will curtail future gas load.

The OCU project would increase the diameter of a 30-kilometre length of the main gas distribution pipeline that runs north from Penticton to serve the Kelowna-Vernon area. FEI said the upgrade is needed to meet rising peak gas demand in the winter from existing and future customers in an area of the Okanagan that is seeing rapid population growth. The “need” for the expansion had been supported by load forecasts based on the typical methodologies.

However, the two-person BCUC panel said that “none of [FEI’s] forecasts have considered the potential for a flattening or even a reversal of the [load] curve [in the subject area] due to commitments in the Province’s CleanBC Roadmap (such as zero carbon requirements for new buildings in 2030) and the impacts of changes to the BC Energy Step Code, the Zero Carbon Step Code (ZCSC) and other planning guidelines or zoning bylaws.”

In its final argument in the proceeding, BCSEA argued that the proposal goes against the clean energy transition, as laid out in the CleanBC Roadmap to 2030. BCSEA did not dispute that there is a need for more resources to supply energy to utility customers at peak times in the project area. However, BCSEA said that the urgent need to reduce GHG emissions in BC should be tangibly recognized. BCSEA said that instead of increasing its pipeline capacity FortisBC should deploy resources that will not cause increased GHG emissions, such as capacity focused demand side management. (See our October 2023 article on the Okanagan Pipeline Project for background.)

The BCUC’s view that GHG emissions reduction measures will or may reduce the future load served by natural gas utilities was first expressed in its March 2023  non-final decision balking at approving FEI’s application to enlarge its Tilbury LNG storage facility in Greater Vancouver (see our article “We have several events to report from the BCUC”). While the BCUC adjourned the proceeding indefinitely, rather than rejecting the application, the panel stated:

“… given Federal and Provincial Government GHG reduction targets for 2030 through 2050, the Panel finds a significant probability that demand for natural gas will be reduced as compared to the demand today. It is therefore unclear to the Panel that there will be sufficient demand for natural gas to support the continued use of FEI’s pipeline system including Tilbury as currently configured for the next 60 years.”

The panel also linked its rejection of the OCU project to the fact that a partially different BCUC panel is currently deliberating on FEI’s application for approval of a revised “renewable gas” program and in particular a proposed “Renewable Gas Connections” program. In a nutshell, the Connections proposal is that all new gas connections for residential heating would get 100% RNG (biomethane) for life of premises at the price of conventional gas. In the renewable gas proceeding, FEI argued that rejection of the Connections program would mean no new residential gas customers. However, in the OCU proceeding FEI argued that rejection of the Connections program would not negate customer growth and the need for the OCU project. Puzzlingly for us, the panel in the OCU decision said that when the BCUC makes a decision in the renewable gas program proceeding FEI could “rescope the OCU Project, if necessary, or reapply with an application similar to the current one.” The panel continued that if the BCUC rejects the Connections proposal then “FEI is encouraged to consider this in preparing a new peak demand forecast which appropriately captures the impact this will have on the future of its natural gas business in BC.” Frankly, this is difficult for us to understand, because rejection of the Connections proposal would if anything reduce (not increase) future gas demand in the OCU project area and FEI had maintained (as stated above) that the OCU project would be needed even if Connections was rejected. In any event, the panel’s language about rescoping or reapplying may indicate that the OCU project, or some variation of it, is not completely dead.