TERASEN GAS CNG SERVICE AGREEMENT AND CNG/LNG TERMS & CONDITIONS EXHIBIT A2 6

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ERICA M. HAMILTON COMMISSION SECRETARY Commission.Secretary@bcuc.

1 ERICA M. HAMILTON COMMISSION SECRETARY web site: SIXTH FLOOR, 900 HOWE STREET, BOX 250 VANCOUVER, BC CANADA V6Z 2N3 TELEPHONE: (604) BC TOLL FREE: FACSIMILE: (604) Log No VIA regulatory.affairs@terasengas.com December 15, 2010 Ms. Diane Roy Director, Regulatory Strategy and Business Analysis Terasen Inc Fraser Highway Surrey, BC V4N 0E8 TERASEN GAS CNG SERVICE AGREEMENT AND CNG/LNG TERMS & CONDITIONS EXHIBIT A2 6 Dear Ms. Roy: Re: Terasen Inc. Project No /Order G An Application for Approval of a Service Agreement for Compressed Natural Service and for Approval of General Terms and Conditions for Compressed Natural and Liquefied Natural Service Commission staff submits the following document for the record in this proceeding: British Columbia Utilities Commission Terasen Inc. Response to BCUC Information Request No. 2 Questions 68.0 to 69.1 (September 11, 2009). Yours truly, /yl Enclosure Erica M. Hamilton PF/TGI_CNG LNG/GenCor/A2 6_ _TGI Rsp to BCUC IR 2_ 68.0 to 69.1

2 A2-6 ~ Terasen Inc. rtgi", "Terasen ' or the 'Company') Response to British Columbia Utilities Commission rbcuc' or the "Commission') Information Request ("JR') NO.2 Page Reference: Energy Efficiency and Conservation and Alternative Energy Solutions Exhibit B-4, BCUC BCUC , p.96 Natural Vehicles ("NGV") Compression and Refuelling Service 68.1 What utilities in North America are engaged in the compression and refueling service? What was the target market and did the program benefit existing customers. If the program was subsidized please indicate that as well. TGI,has information linkages to other utility programs through industry associations such as the Can~dian Natural Vehicle Alliance and NGV America. Through discussions with these parties, we are not aware of any other Canadian utilities that offer compression and dispensing services at present, although Gaz Metro is aware of TGl's proposed program and has expressed interest in establishing a similar approach. Through similar discussions, we are aware that there are a number of utilities in the US who provide a complete fueling service, including compression and dispensing services. Examples of US Utility programs are provided below: 1. National Grid (New York State) - National Grid was formerly known as KeySpan. Their program is described on the US DOE Website as follows: "National Grid offers a NGV incentive program that provides rebates for NGVs on a case-bycase basis and special competitive rates for compressed natural gas (CNG) fueling. National Grid will also help secure CNG fueling station financing, and provide technical assistance and other services to NGV fleets on a case-by-case basis. Financial awards are made depending on the fleet size, amount of fuel used, and vehicle type" 2. Questar (Utah) - A description of Questar's services is included on the company's website at php "Natural Vehicles (NGV's) With growing public concern over high gasoline prices, dependence on foreign-oil imports, global warming and air quality, Questar is focused on providing safe, clean-burning natural gas for vehicles.

3 Terasen Inc. ("TGI". "Terasen " or the "Company") Information Request ("IR") NO.2 Page 190 There are 21 natural gas vehicle (NGV) fueling stations within Questar 's service area (19 in Utah and 2 in Wyoming). In addition to these sites, the state of Utah has opened six of its NGV fueling stations to help meet demand. Questar and the state are working to increase NGV fueling capacity by more than 40 percent over the next several months. Read more information on station updates and Governor Huntsman's initiative to build the 1-15 CNG (compressed natural gas) corridor below." 3. DIE Energy (Michigan) DIE Energy owns and operates a set of 10 NGV fueling stations providing complete fueling service to the public and to NGV fleets. The company's program is described at!\ttp:llwww.dteenergy.com/businesscustomers/productsprograms/gas/natvehicle.htmia listing of their sites is available at: 4. PG&E (California) A description of PG&E's NGV program is available at: ''PG&E is actively involved in the development of natural gas as a vehicle fuel. We operate over 1,138 natural gas vehicles in our own fleet. PG&E opened California's first public access natural gas fueling station in March of 1990 in Concord (east of Oakland). We now operate 37 compressed natural gas (CNG) stations, of which more than half are publicly accessible. " There are a number of incentive programs in the US market to encourage the adoption of NGV's. The specific circumstances vary by state and county and TGI does not have detailed information regarding the specific levels of incentives available in each region.

4 Terasen Inc. ("IGI", "Terasen " or the "Company") Information Request ("IR") NO.2 Page What is the expected load from the NGV market for the period 2010 to 2015? How many vehicles are in the TGI market currently (cars and trucks) and what is the expected potential growth by 2015? TGI has prepared a business plan that looks out to 2013 and is based on our knowledge of the market. The total forecast load, if TGI were successful in its sales targets between 2009 and 2013, is approximately 520,000 GJs. The total target market is approximately 8,600 potential NGV vehicles. The forecast capital asset growth during this period would be approximately $13 million. #of Average Potential Vehicle Vehicle Vehicle Vehicle Vehicle Total Load Market Share Market Seament Vehicles Gj Load Addition Addition Addition Addition GJ's (Vehicles) ForkOift % Waste Haulers % Municipal % YVR (mixed load) % Transit Buses % School Buses % Total Comment on the relative share of TGl's target transportation market that electric, hybrid and hydrogen fuelled vehicles are expected to have within 5 years. Within 10 years. This question is identical to TGVI RRAIRDA BCUC IR This response is identical to the TGVI response to that IR, with the exception of the name change to TGI. Predicting market share for alternative energy technologies is extremely difficult and highly subjective. Historically, projections for rapid adoption rates have proved to be wildly optimistic. Historical records indicate the adoption of new technologies takes decades - for example the adoption of unleaded fuel in North America took more than 20 years even with a government mandated transition. The exhibit below shows typical adoption rates for new technologies.

5 Terasen Inc. ("TGI", "Terasen " or the "Company") Information Request ("IR") No.2 Page 192 Hybrid electric vehicles have recently enjoyed some level of market success and may achieve more than niche penetration over the next 10 years, but it is important to recognize that hybrid's do not necessarily have to be powered by gasoline engines. Therefore, at this point, TGI cannot predict what relative market share natural gas would have compared to electric, hybrid or hydrogen vehicles. However, we believe natural gas vehicles, specifically in the return to home fleet segment, will increase its market share as customers realize the economic and environmental benefits What has been BC Transit's experience with NGV and what are the future plans for NGV buses? Public bus transportation experience in BC spans both BC Transit and Translink (through the Coast Mountain Bus Company, an operating subsidiary). Currently, BC Transit serves Vancouver Island and remote BC cities while Translink serves the Greater Vancouver Region. Both have experience with NGV buses.

6 Terasen Inc. rtgi", "Terasen " or the "Company") Submission Dale: Revenue Requirements Application September Information Request ("IR") No.2 Page 193 BC Transit purchased 25 CNG buses in The 25 vehicles were delivered and placed into service beginning in November The buses were 12 metre suburban transit coaches built by New Flyer, and were equipped with DOC series 50G engines, and include underfloor CNG tanks. BC Transit purchased the vehicles as a pilot fleet to identify the impacts of regular revenue service with state of the art vehicles. BC Transit has been testing and demonstrating various CNG technologies since However, the New Flyer/DOC pilot program represented the first large scale adoption of CNG for urban transit use in Western Canada. The results from the 25 bus pilot fleet are summarized in an April 1997 report developed by Sypher:Mueller International Inc. which is available at: BC Transit followed up the initial pilot program with a purchase of an additional twenty-five 1998 model year New Flyer buses also powered with Detroit Diesel engines modified for CNG servtce. \ In 1999, the Greater Vancouver Region of BC Transit became the Coast Mountain Bus Company, an operating subsidiary of Translink. In 2006, Translink took delivery of 50 NGV buses powered by the Cummins ISL-C+ engine and a 5 speed Allison B400R5 transmission. These buses remain in the fleet on active service while the Detroit Diesel powered buses have since been removed from the CNG fleet. Over the time line from the initial pilot program in 1994 to 2009, there have been many advances in the NGV technology being used in the transit fleet. The initial fleet powered by the Detroit Diesel engines were reported to have operating issues such as lower power and high maintenance costs. OEM vendor sources have also indicated that the engine and transmission specifications on these vehicles were not properly matched resulting in non-optimal performance. The second generation buses powered by the C+ class Cummins engines are reported to have had much better performance and reliability. Translink in early 2009 borrowed a bus powered with the ISL-G engine and performed emission and performance testing. The results were favorable. In 2009, Translink engaged Clean Energy to expand the capacity of the NGV fueling station at the Port Coquitlam facility. This work is scheduled to be completed Jan It is not clear whether this work has been done in anticipation of expanding the NGV fleet or not.

7 Terasen Inc. ("TG'", "Terasen " or the "Company") Response to British Columbia Utilities Commission CBCUC" or the "Commission") Information Request ("JR") NO.2 Page What facilities are currently owned or operated by TGI that is related to NGV? TGI presently owns and operates small scale fueling assets at the following locations: Kelowna School District (please see the response to acuc IR 2.7.2); Kelowna Muster - TGI Service vans; Richmond Muster - TGI service vans; and Albion Muster - TGI service vans How much money has TGI expended on each of the NGV physical facilities, NGV grant and NGV operating costs to date? The following table lists by year from 2000, when the NGV Compression and Dispensing assets for the NGV Marketing program were sold to 4Pro Systems Inc. and the City of Surrey, through 2009 projected the NGV facilities purchased, NGV Grants made and the NGV operating and maintenance expense. NGV Physical NGV Grants O&M Year Facilities Gross Tax Offset Net Expense 2000 $ $ 55 $ (24) $ 31 $ $ $ 161 $ (70) $ 91 $ $ $ 141 $ (54) $ 87 $ $ $ 106 $ (39) $ 67 $ $ $ 62 $ (21) $ 41 $ 2005 $ $ 48 $ (16) $ 31 $ 2006 $ $ 72 $ (24) $ 48 $ 2007 $ $ 15 $ (5) $ 10 $ 2008 $ $ 105 $ (33) $ 72 $ 2009P $ $ 80 $ (24) $ 56 $ The year to date actual costs in 2009 for a pilot project in Kelowna is $288,098 for NGV compression and dispensing facilities which are currently still in Work in I?rocess. The projected

8 Terasen Inc. ("TGI", "Terasen " or the "Company") Information Request ("IR") NO.2 Page plant additions do not include the pilot project in Kelowna. The actual to date NGV Grants in 2009 is $27,500 (gross before tax offset) and there has been no operating and maintenance expense for NGV. Historical Experience 68.7 How much of the expenditure in physical facilities related to NGV did the Company write off or amortize at an accelerated rate when compression and dispensing business was turned over to a non-regulated business and when Kinder Morgan sold all remaining interest in efuels to Clean Energy? Res~onse: In 1999 the Commission approved the disposal of TGl's NGV assets comprising of compression and dispensing equipment (BCUC Order No. G , dated December 23, 1999). In the Order the Commission approved a recovery of losses for $2,130,000 in a deferred charge account which was to be amortized over ten years. The ten years was approximately the remaining life of the assets. The following table details the accounting of the NGV assets when disposed of in Amount ($OOO's) Book Value of Compression & Dispensing Plant in Service Less: Accumulated Depreciation Less: Proceeds on Disposal of Assets Less: Amount Approved to Charge to Deferred Charges Less: Write Down of NGV Stations Contributions in Aid of Construction Loss on Disposal of Assets $ 7,402 (2,586) (2,122) (2,130) (108) $ 456 Remaining years to retirement Gross Book Value Less: Accumulated Depreciation Net Book Value $ 7,402 (2,586) $ 4,816 Depreciation Rate I Annual Provision Remaining Years 6.67% $

9 Terasen Inc. (''TGI", "Terasen " or the "Company") Information Request ("IR") NO.2 Page 196 There was no accelerated amortization of the net asset costs the Commission approved for recovery in deferred charges over ten years. The amount transferred to deferred charges was $2,130,000 and was amortized over ten years at $213,000 per year Please explain if the TGI shareholder was financially responsible for any NGV capital expenditures or NGV related operating expenses prior to the transfer of assets to the non-regulated business and the sale of the remaining NGV interest in efuels? Res~onse: The shareholder(s) of Terasen Inc. and its predecessor companies were not directly financially responsible for the NGV assets and operations but would be affected by the results of the NGV investment and contribution to the company's earnings. From the mid 1980's through to 1999 the NGV investments charged to gas plant in service were prudently incurred to provide service and approved by the Commission for cost recovery from utility customers. As explained in the response to BCUC IR the loss on disposal of the NGV assets was $456,000 which was charged to income in In Commission Order G ; $2,130,000 was to be charged to a deferral account (in 2000ff called NGV Compression Equipment Recovery) and amortized over 10 years starting in 2000, which the Company did do.

10 Terasen Inc. ("TGI", "Terasen or the "Company ) Response to British Columbia Utilities Commission ("BCUC or the "Commission") Information Request ("IR") NO.2 Page Reference: Energy Efficiency and Conservation and Alternative Energy Solutions Exhibit B-4, BCUC , p.99 NGV TGI states that: "Management determined that the compression and dispensing business did not fit into the core operations because of significant customer management efforts required. " 69.1 What has changed in management's view that compression and dispensing operations will now be included as a core business? The ~eferenced quotation from BCUC IR refers to TGl's experience in the late 1990s. Since the late 1990's, many changes have occurred in the NGV market which has changed management's view of offering compression and dispensing services as part of its core operations. First, external changes such as government policy, specifically the BC Energy Plan, have created the need to offer solutions to the transportation sector. We believe one solution is a comprehensive NGV service. Second, Clean Energy has ignored the market which has created opportunities for the Company to offer compression and dispensing services. The Company believes it is in the best position to meet customer requirements since compression and dispensing services is a natural extension of the natural gas service. Third, the growth of NGV Original Equipment Manufacturers ("OEM") and improvements in conversion technology has resulted in less reliance on the Company to be involved in the vehicle conversion process. Technology enhancements have led to customers in the transportation sector seeking a complete NGV solution which includes natural gas service (currently offered under Rate Schedule 6 and proposed under Rate Schedule 26) and a Compression and Refueling Service (proposed under Rate Schedule 6C). TGI has the knowledge and experience to install, operate and maintain the equipment which is similar to natural gas distribution equipment. TGI believes that the combination of these factors represents an emerging opportunity that should be pursued for the overall benefit of existing and future customers. TGI is also faced with a declining load particularly in the industrial sector. By offering a comprehensive NGV service, we will attract additional load which will benefit all TGI customers.

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