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Investigating the Possible Installation of Natural Gas Along Island View Drive

On May 22, 2018 several members of the IVDAARA Board of Directors met with an Union Gas representative, the Mayor and CEO of the Township of Georgian Bluffs to discuss the process and likelihood of Grey Road 1 being given the opportunity for the installation of natural gas lines.

It was determined that the installation of natural gas lines along Grey Road 1 would be a very expensive project. Keeping in mind that there are grants available for such a project, the end result would still be a prohibitive expense to the people wishing to support the project. The terrain along Grey Road 1 presents many engineering challenges. Union Gas is a private company who will support most communities by installing natural gas lines if it is profitable for them to do so.

At the initial stages of finding out whether a community is interested in the installation of natural gas, community people have to spearhead the project. Union Gas has surveys that the community group can use to determine whether the community is in favour of the project. The people supporting the project will be expected to make a financial commitment. When the community group have a hard and fast number of the people in support of the project, they can share their results with Union Gas. Union Gas then will make a determination to support or not support the project. If it is a profitable project for Union Gas, they will then take on more of a leadership role to move the project forward.

Those people not wishing to take advantage of the natural gas lines going pass their property will not incur any costs.

LETTER:

Updated:  June 2, 2018

 

Dear Brad Kuhn

 

 

We met on May 22nd, 2018; representing the municipality were Mayor Al Barfoot and CAO Rick Winters, as well as several members of the IVDAARA Board of Directors. Everyone was engaged at this meeting with interest in obtaining natural gas service.

We had an open conversation involving questions and answers. We discussed the steps to initiate a project with Union Gas to service an area. Further questions arose during the meeting, which I hope I was able to answer for everyone. I have provided some following correspondence below, in a frequently asked questions format, to further assist in clarity, with some of my responses.

Union Gas must comply with the Ontario Energy Boards economic guidelines when providing gas service to new customers. There appears to be approx. 400 potential attachments along the route to lay approx. 26,000 meters of pipe. We discussed potential costs, acknowledging at this time there were a number of unknown factors, which could heavily influence the costs and viability of this project.

I believe we concluded the meeting with everyone in attendance understanding that in our experience providing natural gas service to this area is not viable. Thank you for your inquiry to obtain natural gas distribution service from Union Gas.

 

If you have further questions, please feel free to contact me.

 

Sincerely,

 

Derrick Cunningham

New Business Project Coordinator

Union Gas Limited | An Enbridge Company

TEL: 519-376-6970 EXT. 5336002 | Cell: 519-270-0305 | drcunningham@uniongas.com

1602 23rd St East, Owen Sound, Ont. N4K 6H6

 

 

 

Q&A   

  1. How do you calculate the costs for new gas service projects?
    We base our cost estimates on the most current actual construction costs for related projects in a similar geographic region.  This includes the capital costs of the project (construction costs, materials, labour, equipment, permits and survey costs), plus the ongoing operating and maintenance costs to maintain the new infrastructure over the life of the project.

 

 

  1. How do you calculate the revenue that a new gas service project will generate?
    We include all revenues that would be generated from distributing natural gas to each customer served by the project, over the life of the project. The project life is assumed to be 40 years for residential customers, 20 years for commercial customers and 10 years for industrial customers. The number of customers that would connect to the new natural gas pipeline is based on the information supplied by the requesting customers plus a forecast of additional future customers, which is based on our many years of experience with similar projects. The following assumptions were taken into account when determining the projected revenue

 

  1. (area to be served);
  2. Most current construction costs in summer conditions for the geographic area;
  3. “(number)” of existing homes and businesses who expressed an interest in natural gas service, were assumed to connect to natural gas service in the first year;
  4. “(number)” of commercial customers were assumed to connect to gas service in the first year; and
  5. Gas service to an additional ‘x” new homes over a 3 year-period, with “x” assumed to connect in the first year.

 

 

  1. Please provide a breakdown of the costs / detailed estimate?
    Union Gas does not provide a detailed breakdown of construction costs for customers as in many areas we source construction from third party contractors and this is commercially sensitive information. Our installation contractors are selected based on a rigorous selection process which includes the contract costs and their safety record.

 

 

  1. How do you determine what each customer needs to pay?
    We use an Ontario Energy Board approved economic model to evaluate the economic viability of all proposed new business projects prior to construction. This model takes into account the cost to provide both gas main and gas services to the customer plus ongoing operating and maintenance costs and compares this to the net present value of the revenues we expect to receive from each customer type that will be served by the project, over the life of the project.  Any resultant economic shortfall is covered by a financial contribution from the customer(s).  Union Gas has over 100 years of experience in providing gas service to communities across Ontario, and this history has provided us with a high degree of confidence on our estimates.

 

 

  1. Why do we have to pay to have a gas main extended?
    Union Gas must comply with the Ontario Energy Board’s economic guidelines when providing gas service to new customers. This includes a requirement that existing customers not subsidize the costs to provide gas service to new customers. Based on our analysis, the cost to provide gas service to this area is greater than the revenue that the project will generate. A customer contribution is required to close this gap to ensure existing customers do not subsidize an economic shortfall in the project.

 

  1. Does the amount of natural gas I use impact the cost of the natural gas main pipeline extension and service installation?
    Our calculation of the amount of revenue the project will generate takes into account the amount of natural gas a customer will use over the life of the project. This is assumed to be 40 years for residential customers, 20 years for commercial customers and 10 years for industrial customers.

 

 

  1. Do I have to provide a financial contribution to Union Gas in full up front? Can it be added to my gas bill after installation?
    Yes, we do offer financing.

 

  1. I believe I can construct the pipeline cheaper than Union Gas or its contractors. Can I do so?

Union Gas has over a century of experience in constructing pipelines.  Based on this history we are confident that our cost estimates are reasonable and accurate taking into account stringent quality and safety standards to ensure our pipelines remain in safe operating condition at all times.

 

  1. Once the pipeline is built, will new customers be able to receive the same gas service I paid for, for free?
    Part of the process for extending gas service to new customers includes canvassing the neighbourhood to ensure all eligible customers wishing gas service have an opportunity to participate, and that the costs are shared between them. Once the pipeline is in place, if a new gas service request is received, the existing rules as established by the Ontario Energy Board to not allow for Union Gas to go back in time and readjust the project economics and/or refuse them access.  New customers can make arrangements with the neighbours who paid to get the project installed but they are under no obligation to do so.

 

  1. If a new customer connects to this new section of pipeline in the future, can I get reimbursed for their portion?
    Currently there is no mechanism for Union Gas to go back in time and readjust past project costs and any resulting customer contributions, for future changes. New customers can make arrangements with the neighbours who paid to get the project installed but they are under no obligation to do so.

 

 

 

  1. If I am required to make a financial contribution to the pipeline project, do I own the pipeline?

A customer contribution is provided to close the shortfall between the costs to provide gas service and the revenue the new service will generate.  It does not give the paying party any right or claim to any pipeline that is constructed. The ownership of the pipeline shall be and remain with Union Gas Limited, which shall have the right to use the pipeline as it deems necessary.

 

 

  1. Why does Union Gas rely on the project requestor to determine whether other customers have an interest in receiving gas service?

We receive hundreds of new gas service enquiries a month.  The most efficient way to investigate these enquiries is for the requesting customer to provide information on others in the immediate vicinity who may also be seeking natural gas service.

 

  1. If I canvas the neighbourhood, will Union Gas install my natural gas service for free?

No, all new gas requests are required to meet the Ontario Energy Board’s economic guidelines. These costs include the customer contribution towards construction of the natural gas main pipeline on the road, and the standard cost to run a natural gas service line from the road to their home.

 

 

  1. Can I / my community access Provincial government monies that were recently announced for new community expansion projects?

The details on how the funds will be accessed / distributed in 2018- have been defined by the Provincial government.  The Ministry of Economic Development, Employment and Infrastructure recently launched a consultation process to support the development of a related framework. We are currently uncertain if further funding will be provided.

  1. I am considering building in “x” area in the future. Do you have plans to expand natural gas service to this area and what is the timing?

We have no plans to expand natural gas service to “Presqu’ile – Oxenden” area at this time.  We do not construct natural gas pipelines on speculation. If you wish to apply for natural gas service, please complete a new business inquiry form at https://www.uniongas.com/switchtogas , and we will evaluate your request.

 

 

  1. Why does Union Gas use Contractors? In some of our service areas Union Gas uses contractors for the construction of natural gas pipelines. Union Gas has had these construction alliance relationships for over 15 years. The construction alliance model has fostered a shared culture of innovation that continues to drive improvements in safety, quality and savings.

 

  1. Do not remove your equipment. Do not disconnect your fuel source or remove any equipment until after your new natural gas service has been installed and the appointment for your meter activation has been booked.

Your heating contractor will make an appointment to install your new equipment and remove the old equipment.  At the same appointment, your contractor will arrange for your meter to be installed and activated.  Your new equipment will be turned on, and we will then conduct a safety inspection.

 

 

  1. How long is this estimate effective? Please note this costing is based on our current construction season only.  If your affirmative response comes in later than Aug. 1 we may have to re-calculate your project cost next year, as we do not install gas mains during the winter season.

 

 

  1. Gas Service activation: How long to I have to active my gas service?  The Union Gas account must be activated and natural gas in use, within one year of the gas main installation.  If the Union Gas account has not been activated, or if natural gas is not in use at this time, Union Gas reserves the right to seek full and immediate cost recovery for the first 30 metres of the service installation, in addition to the costs of the main extension and the costs of any excess footage charges that apply.

 

 

  1. Requests to reduce costs through non-standard pipeline configurations or use of remote meters.

The natural gas pipeline system in a neighbourhood is configured to maximize safety and efficiency, and to ensure costs are fairly allocated.  For that reason, our standard installation approach includes the placement of the natural gas main pipeline along the street with individual services running from the main to each home or business, and meters which are attached to the home or business.

In this way we can ensure that our main pipelines are on the street where they can be quickly accessed for maintenance and in emergency situations, and that natural gas meters are safeguarded from unintended damage by road traffic or snow removal equipment.  In addition, only the pipelines up to the meter are documented on utility mapping systems.  As such, no record of pipelines located after the meter and within a private yard, would be available if needed for future construction or excavation needs.

These practices have changed over time as we continue to incorporate new safety standards.

 

  1. Delays to construction – summer to winter

This Aid to Contribution is based on current costs of construction in normal, summer conditions.  If the project is delayed until winter conditions apply due to changes from the developer, the project costs will be adjusted to accommodate winter construction costs, or the project will be delayed until the next construction season.  If the delay is related to Union Gas operations, no adjustment will be required.

 

  1. Why do I have to pay for a residential replacement?

Union Gas has a standard replacement service agreement which applies when the residential service for a lot serviced by Union Gas is abandoned and subsequently replaced with a new service on the same property. In these situations, the replacement service is installed at a rate of $80 per metre plus $210 for the meter and initial inspection work, before tax. Charges are applied based on length of service installed from the property line or the connection point (if inside the property line) to the meter location. Customers are notified of these charges prior to Union Gas initiating work to install the replacement service.

The standard cost recovery for a new service to replace one which was previously installed and then abandoned was established to meet the Ontario Energy Board’s economic guidelines when providing gas service to new customers. Under these guidelines:

  • The cost of a gas service installation is recouped over a 40 year timeframe for a residential service
  • Existing customers will not subsidize the costs to provide gas service to new customers.

 

A gas service that is removed prior to the 40 year timeframe (plus the cost to safely abandon the service), and then installing a replacement service at no cost, results in unrecovered costs that would be borne by existing customers.  As such, Union Gas charges the replacement costs in this scenario to comply with these guidelines.

Customer Request

 

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