NOVA Gas Transmission Ltd.
7.0
THE NEXT MODEL
7.1
Introduction
NEXT Model Implementation Application
Section 7.0: The NEXT Model
Page 1 of 28
1
This section explains the detailed operation of the NEXT Model. Section 7.2 outlines
2
factors NGTL considered in developing details for NEXT implementation including:
3
minimizing change, minimizing complexity, and fostering the development of a more
4
liquid and transparent ER marketplace. An overview of the NEXT Model is provided
5
in Section 7.3. This is followed by details of the three main steps of the NEXT
6
Model (allocation of ER in Section 7.4, transfers of ER in Section 7.5, and daily
7
Banding processes in subsection 7.6). A summary of the NEXT model is provided in
8
Section 7.7.
7.2
Design Considerations
In developing the details of implementation of NEXT, NGTL was mindful of the
9
10
following:
11
(a) Minimize Change: To the extent possible, NEXT has been designed to align with
the Current Convention;
12
(b) Keep it Simple: NEXT has been designed to minimize complexity and workload
13
for CSOs, Customers and Extraction Plant Operators; and
14
(c) Facilitate Development of an ER Marketplace: NGTL’s design of NEXT is
15
16
intended to promote the development of a more liquid and transparent market for
17
ER.
7.2.1
Minimize Change: Alignment with the Current Convention
18
The NEXT Model retains many of the key elements of the Current Convention,
19
including:
20
•
Customers may transfer their ER to other Customers (pooling);
21
•
ER are allocated to Customers for a particular Extraction Location and can only
22
be used at that Location (Multi-Pool Model);
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1
•
NEXT Model Implementation Application
Section 7.0: The NEXT Model
Page 2 of 28
Customers holding ER will send Banding Instructions to NGTL to request that a
2
portion of the total flow available be directed to one or more Extraction Plants or
3
to Bypass; and
4
•
FT-X contracts will be used to administer:
5
•
deliveries of gas to Extraction Plants;
6
•
deliveries of Shrinkage;
7
•
the return of the Residual Gas to NGTL; and
8
•
the allocation of Shrinkage as a debit to the Customer Account of the FT-X
9
Customer.
10
The main difference between NEXT and the Current Convention is which NGTL
11
Customers are allocated ER. Under the Current Convention, Delivery Customers are
12
allocated ER (each day at each Extraction Location based on their daily nominations
13
for deliveries to markets downstream of the Extraction Plants). Under NEXT,
14
Receipt Customers are allocated ER (monthly for each day at each Extraction
15
Location based on their proportionate contribution of NGL value to the Integrated
16
Alberta System in the second prior month).
17
For comparison purposes, many of the key elements of the Current Convention and
18
NEXT are set out in Table 7-1.
Table 7-1: Comparison of Current Convention to NEXT
What are ER?
Who gets ER?
How are ER
determined?
Current Convention
• The right to direct a portion of the
System Common Stream to the inlet
of one or more Extraction Plant or to
Bypass
• Delivery Customers
• Based on deliveries by Customer
downstream of each Extraction
Location
NEXT
• Same
• Receipt Customers
• Based on pro rata share of
NGL value contributed to the
System by Customer in the
second prior month at
Eligible Receipt Points under
all Services other than IT-S
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Section 7.0: The NEXT Model
Page 3 of 28
Table 7-1: Comparison of Current Convention to NEXT
How can ER be
Used?
When are ER
Allocated?
Unit of
Measure for
ER
ER Transfers
(Pooling)
Banding
Instruction
Current Convention
• ER are allocated to Delivery
Customers each day based on their
deliveries at points downstream of
an Extraction Location each day.
NEXT
• ER are allocated to Receipt
Customers for each
Extraction Location for each
day in the month
• ER allocated for an Extraction
Location can only be used at that
Extraction Location
• At time that deliveries are scheduled
for each NAESB nomination cycle
(3 NAESB effective times at export
points)
• Volume (103m3)
• Same
• Scheduled Delivery nominations in
GJ are converted to volume using
the estimated heating value at
downstream Delivery Point(s)
• Allowed
• In volume (103m3) or % of volume
• A direction to NGTL to flow a
portion of the flow available at an
Extraction Location to the inlet of an
Extraction Plant or to Bypass.
• Expressed in volume (103m3) or %
of volume
Extraction
Plant Set Point
Treatment of
Unbanded ER
• % of total volume flowing at an
Extraction Location to be delivered
to the inlet of an Extraction Plant;
• Equals sum of Banding Instructions
(103m3) to an Extraction Plant, then
converted to percentage of all
Banding Instructions to all
Extraction Plants at that Extraction
Location
• Bypassed at East Gate.
• At other Extraction Locations the
Unbanded ER is allocated to
Extraction Plants.
• Approximately the 25 day of
the prior month.
• % (of Common Stream at an
Extraction Location on a
Day)
• Allowed
• In %
• Same
• Expressed in %
• Same
• Equals sum of Banding
Instructions (%) to an
Extraction Plant
• Allocated pro rata to all
Extraction Plants at an
Extraction Location
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Section 7.0: The NEXT Model
Page 4 of 28
Table 7-1: Comparison of Current Convention to NEXT
Over/under
takes by an
Extraction
Plant
7.2.2
Current Convention
• Set Points adjusted the next Day
NEXT
• Same
Keep it Simple
1
The design of NEXT is intended to minimize complexity and workload for CSOs,
2
Customers and Extraction Plant operators. Administration of many of the NEXT
3
processes described in Table 7-1 are the responsibility of NGTL, not stakeholders.
4
For example:
5
• NGTL will continue to measure the quantity of each NGL Component delivered to
6
7
the System each month at each Receipt Point;
• If a CSO chooses not to allocate the monthly quantity of each NGL Component
8
among Customers, NGTL will allocate NGL Components among Customers pro
9
rata using the current CSO allocation of energy among Customers at a Receipt
10
11
Point;
• NGTL will use monthly measured and allocated receipts of NGL Components and
12
the most current ADOE Reference Prices to determine and allocate ER to
13
Customers;
14
• NGTL will record and report ER Transfers among Customers;
15
• NGTL will record and report Banding Instructions submitted by Customers;
16
• NGTL will determine the Set Points each day for each Extraction Plant;
17
• NGTL will develop web-based input screens for CSOs to enter monthly allocations
18
of NGL Components, for Customers to enter ER Transfers and Banding
19
Instructions, and for Extraction Plant operators to enter Redirect Instructions;
20
• NGTL will develop web-based reports for Customers to monitor their ER Accounts
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Section 7.0: The NEXT Model
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on a real time basis incorporating ER Transfer and Banding Instructions; and
1
• NGTL will develop web-based reports for Extraction Plant operators to monitor the
2
quantity of ER Banded to their Plants and their Set Points on a real-time basis.
3
4
Further, administration of NEXT processes will be simplified by the use of a
5
consistent unit of measure, % (of the Common Stream), for all ER transactions (ER
6
allocations, ER Transfers, Banding, Set Points). Adoption of the Multi-Pool Model
7
instead of a Single-Pool Model will simplify administration by eliminating the need
8
for a reallocation process between Extraction Plants at different Extraction Locations
9
after 10:00 pm CCT each night after the downstream delivery nominations have been
finalized.
10
7.2.3
Facilitate Development of an ER Marketplace
11
NGTL has also sought to implement NEXT in a manner that would facilitate
12
development of a more liquid and transparent market for ER. ER will be allocated to
13
Receipt Customers prior to the start of the month and will be a consistent, fixed
14
quantity (in percent) for the month that can be sold (ER Transfers) to other
15
Customers. Similar to its administration of the NIT market, NGTL will implement
16
web-based electronic input screens for ER Transfers, reports of monthly ER
17
allocations, and real-time reports that Customers can use to monitor their ER
18
Accounts. To facilitate development of an ER market, NEXT will also be
19
documented in the NGTL Tariff to provide Customers and Extraction Plants with a
20
clear description of their rights and obligations.
7.3
Overview of the NEXT Model
21
The NEXT Model is comprised of three main elements or steps as described below.
22
Step 1: Monthly Determination and Allocation of ER to Receipt Customers
23
NGTL will allocate ER to each Receipt Customer each month based on that
24
Customer’s relative share of NGL value brought onto the Integrated Alberta System
25
at Eligible Receipt Points under all Services with the exception of IT-S in the second
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Section 7.0: The NEXT Model
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1
prior month. The value of NGL delivered to NGTL is determined by multiplying the
2
quantity of each NGL Component received onto the System by the price of each NGL
3
Component.
4
NGTL will determine and allocate ER to Customers on, or around, the twenty-fifth of
5
each month when the measurement and allocation of receipts of Gas and NGL
6
Components onto the Integrated System in the prior month have been finalized. ER
7
provide the Customer the right to instruct NGTL to direct (Band) a percentage of the
8
gas flow at each Extraction Location on each day of the upcoming month to a
9
particular Extraction Plant or Plants, or to Bypass.
10
For example, on the twenty-fifth of April receipts for the month of March are
11
finalized. NGTL uses this receipt data and NGL prices1 to determine each
12
Customer’s contribution of NGL value to the System in March. If we assume that
13
Customer A contributed 5.6% of the total NGL value received onto the Alberta
14
System in March at Eligible Receipt Points, then Customer A is provided ER of 5.6%
15
for the Month of May. This allocation of ER means that Customer A can Band 5.6%
16
of the flow each day in May at each Extraction Location to a particular Extraction
17
Plant or Plants, or Bypass.
18
Step 2: ER Transfers
19
Once Receipt Customers have been allocated ER for the upcoming month, they may
20
then transfer some or all of their ER to other Customers.
21
Customers may negotiate terms to sell ER directly to other Customers. Third parties,
22
such as NGX, may also provide Customers with the option of buying or selling ER
23
electronically and confidentially.
24
NGTL will track and record Customers’ ER Transfers and will provide Customers
25
with web-based, real-time reports of the quantity of ER in each Customer Account.
26
This is similar to the NIT process wherein NGTL tracks and reports Customers’ NIT
1
Appendix 4, Government of Alberta Gas Royalty Operations Information Bulletin, Attachment 1A.
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Section 7.0: The NEXT Model
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transfers of energy and their Customer’s Inventory.
2
Step 3: Daily Banding of ER to Extraction Plants
3
Customers holding ER for an Extraction Location on a day may send NGTL a
4
Banding Instruction which directs NGTL to Band a percentage of flow to one or more
5
Extraction Plants at that Extraction Location or to Bypass.
6
These three Steps are set out on an example timeline in Figure 7-1, below.
Figure 7-1: Example Timeline
Measurement of NGL
delivered to the System at
Eligible Receipt Points
March
ER Transfers among Customers
April
Allocate ER to Receipt Customers
based on their share of NGL value
delivered to the System in March as
percentage of total NGL value
delivered to the System in March by
all Customers at Eligible Receipt
Points under all Services other than
IT-S.
May
Use of ER to direct or
“Band” flows to
Extraction Plants or
Bypass
NGL values determined using
February ADOE NGL Reference
Prices.
7
These three Steps are described in more detail in Sections 7.4, 7.5 and 7.6
8
respectively.
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Section 7.0: The NEXT Model
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7.4
Step 1: Monthly Determination of Each Receipt Customer’s ER Allocation
7.4.1
Overview
1
Each month, NGTL will determine each Receipt Customer’s ER based on the value
2
of NGL brought onto the System in the second prior month by that Receipt Customer
3
at Eligible Receipt Points under any Rate Schedule other than IT-S as a ratio of the
4
total value of NGL brought onto the System in that month by all Receipt Customers
5
at all Eligible Receipt Points under any Rate Schedule other than IT-S. For example,
6
ER for May would be determined based on March receipts of NGL onto the System
7
as set out in the following equation:
Customer A Allocation of
Extraction Rights for May
(%)
Value of NGL brought onto the
System under any Rate Schedule
other than IT-S at Eligible Receipt
Points by Customer A in March
=
X 100
Value of NGL brought onto the
System under any Rate Schedule
other than IT-S at Eligible Receipt
Points by all Customers in March
8
Note that ER are expressed in percent (%) and provide the Customer with the right to
9
Band or direct that percentage of the total Common Stream flow at each Extraction
Location to a particular Extraction Plant or to Bypass.
10
7.4.2
Eligible Receipt Points
11
As described in Section 6.2, only NGL delivered at Eligible Receipt Points will be
12
included in the determination of Customers’ ER. Eligible Receipt Points are those
13
Receipt Points located upstream of Extraction Locations. NGTL will revise the list of
14
Eligible and non-Eligible Receipt Points as new Receipt Points and Extraction Plants
15
are added to the Integrated Alberta System, and in the event that an existing Receipt
16
Point or Extraction Plant ceases operation.
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7.4.3
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Section 7.0: The NEXT Model
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Eligible Services
1
The monthly determination of ER allocated to Customers will be based on receipts of
2
NGL onto the System at Eligible Receipt Points under all Rate Schedules with the
3
exception of IT-S. NGL entrained in Gas Receipts under Rate Schedules FT-R, IT-R,
4
FT-RN, FT-P, LRS, LRS-2 and LRS-3 will be included in the calculation of ER.
5
IT-S receipts will be excluded since gas withdrawn from storage will have previously
6
been received onto the System under another Rate Schedule and will have already
7
been included in the determination of ER.
7.4.4
Value of NGL
8
The value of NGL brought onto the System is the product obtained by multiplying the
9
quantity of each NGL Component received onto the System in a month by the ADOE
reference price of each NGL Component in the prior month. Mathematically:
10
Value of NGL ($) = (C2 quantity x C2 price) + (C3 quantity x C3 price) +
(C4 quantity x C4 price) + (C5+ quantity x C5+ price).
7.4.5
NGL Quantities
11
Under current NGTL measurement processes, the quantity of each component of the
12
Gas stream delivered is determined using either a field gas chromatograph, which
13
provides continuous Gas sampling and component measurement at the meter station,
14
or by collecting Gas samples for analysis using a chromatograph in a laboratory. The
15
results of this component measurement are currently used to establish the heating
16
value of Gas receipts and the total energy, expressed in GJ, received at each Receipt
17
Point.
18
NGTL provides the total monthly measured Gas receipts, in volume and energy, to
19
the CSO. The CSO then allocates both the volume and energy among NGTL
20
Customers who brought gas onto the Integrated System at that Receipt Point during
21
the month. NGTL uses the CSO volume allocations to calculate Customer
22
transportation invoices for receipt services. NGTL uses the CSO energy allocations
23
to establish the quantity of energy credited to each Customer’s Account.
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Section 7.0: The NEXT Model
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1
With NEXT, NGTL will also give each CSO the option to allocate the total measured
2
quantity of each NGL Component among Receipt Customers, consistent with their
3
existing role in allocating volume and energy among Receipt Customers. Should a
4
CSO choose not to allocate NGL Components among Receipt Customers, NGTL
5
would allocate the quantity of each NGL Component among Receipt Customers pro
6
rata based on the CSO’s allocation of energy among Receipt Customers at that
7
Receipt Point.
8
Table 7-2 sets out an example of this allocation methodology. For Receipt Point
9
BigRock, NGTL has measured the total monthly volume (16 000 103m3), total energy
10
(616 000 GJ) and the total quantity of each NGL Component (C2: 12 000 GJ,
11
C3: 8 000 GJ, C4: 5 000 GJ, and C5+: 2 000 GJ). This data is provided to the CSO
12
who, under current processes, allocates the total monthly volume and energy among
13
the three Customers at Receipt Point BigRock. In this example, the CSO has
14
allocated 3 000 103m3 and 112 200 GJ to Customer A.
15
With NEXT, the CSO will also be given the option of allocating each NGL
16
Component among the three Customers at Receipt Point BigRock based on the
17
composition of the gas delivered by individual producers upstream of the Delivery
18
Point. Table 7-2 provides an example of the default methodology that will be used by
19
NGTL assuming the CSO at BigRock has not allocated the monthly quantity of each
20
NGL Component among Customers. In this example, NGTL allocates the total
21
monthly measured quantity of each NGL Component among Customers pro rata
22
based on the CSO’s allocation of total energy among Customers. In Table 7-2, the
23
CSO allocated 112 200 GJ of energy to Customer A. This represents 18.2% of the
24
total measured energy of 616 000 GJ at BigRock. NGTL would then allocate
25
Customer A 18.2% of the total measured quantity of each NGL Component. Of the
26
total 12 000 GJ of C2 delivered to NGTL, Customer A would be allocated 18.2% or
27
2 186 GJ. NGTL would similarly allocate Customer A 18.2% of the total measured
28
quantity of C3, C4 and C5+ delivered at BigRock in the month.
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Section 7.0: The NEXT Model
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Table 7-2: Example Allocation of Receipt Point NGL Components
Receipt Point: BigRock
Month: May (based on March receipts onto the Integrated Alberta System)
Volume
Allocation of NGL
Heating
% of
Energy
(103m3) 1
Components for Purposes of
Value
Total
(GJ) 1
Calculating ER(GJ) 2
(MJ/m3)
Energy
Customer A
Customer B
Customer C
Receipt
Point Totals
Measured
by NGTL
C2
C3
C4
C5+
3 000
8 000
5 000
37.4
39.1
38.2
112 200
312 800
191 000
18.2%
50.8%
31.0%
2 186
6 094
3 721
1 457
4 062
2 481
911
2 539
1 550
364
1 016
620
16 000
38.5
616 000
100.0%
12 000
8 000
5 000
2 000
1. Volume and Energy are allocated by the CSO to each Customer.
2. This example assumes the CSO has chosen to not allocate NGL Components. In this case NGL
Components are allocated to each Customer based on the percentage of energy allocated to that
Customer by the CSO.
7.4.6
NGL Market Prices
1
NGTL will calculate each Customer’s NGL value contribution to the system on
2
approximately the twenty-fifth of each month using the most recently published
3
ADOE monthly NGL Reference Prices for each NGL Component. The ADOE
4
determines Reference Prices based on NGL purchase prices reported to the ADOE by
5
purchasers of NGL2.
7.4.7
Example Calculation of ER for a Customer
6
An example calculation of ER for Customer A for the month of May is provided in
7
Table 7-3.
2
Appendix 4, Government of Alberta Gas Royalty Operations Information Bulletin, Attachment 1A.
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Section 7.0: The NEXT Model
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Table 7-3: Example of NEXT Model ER Calculation
Month: May
Receipts onto
the System in
March
(TJ)
ADOE
February,
Reference Price
($/GJ) (i)
C2
850
5.04
4,284,000
C3
500
13.85
6,925,000
C4
290
15.67
4,544,300
C5+
150
16.69
2,503,500
Total Value
18,256,800
NGL
Component
Customer A
All Customers
NGL Value
($)
C2
21,000
5.04
105,840,000
C3
9,000
13.85
124,650,000
C4
4,000
15.67
62,680,000
C5+
2,000
16.69
33,380,000
Total Value
326,550,000
(i) The ADOE publishes average NGL reference prices on a monthly basis. At the time that ER allocations for the month of
May are determined in late April, the most current published ADOE Reference Prices will be for the month of February.
The ethane price applied in the calculation of ER is applied as posted in $/GJ. The ADOE publishes prices for propane, butane,
and pentanes plus in dollars per cubic meter ($/m3) units. Since NGTL measures these components in terms of energy, the
prices applied to calculate ER must also be converted to $/GJ. This conversion is done using a GJ/bbl factor as stated by Gas
Processors Association (GPA) Standard 2145. These conversion factors are: Propane 4.03 GJ/bbl; Butane 4.47 GJ/bbl; and
Pentanes+ 5.26 GJ/bbl.
1
In this example, Customer A’s ER Allocation for May would be 5.6% ($18,256,800 /
2
$326,550,000). Using these ER, Customer A would be able to Band 5.6% of the
3
available inlet flow at each Extraction Location on each day in the month of May.
4
Customer A’s allocation of ER is illustrated below in Table 7-4.
Table 7-4 Example Allocation of ER for Customer A
Month: May
Villeneuve
Edmonton
Paddle River
Golden Spike
East Gate
West Gate
Joffre
Waterton
Day
1
2
3
4
5
Etc.
Fort Sask.
Extraction Location
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
5.6%
5.6%
5.6%
5.6%
5.6%
…
NOVA Gas Transmission Ltd.
7.4.8
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Section 7.0: The NEXT Model
Page 13 of 28
Reporting of Monthly ER Allocation
1
NGTL will develop a monthly report of each Receipt Customer’s allocation of ER.
2
NGTL will post this report of ER for the upcoming month publicly on its website on
3
or about the twenty-fifth day of each month.
4
NGTL believes that a public report will help promote the development of a more
5
transparent marketplace for ER. A public report will ensure that all parties, and in
6
particular the Extraction Plants, know which Customers have been allocated ER, and
7
what quantity of ER they have been allocated.
7.5
Step 2: Transfer of ER Among Customers
7.5.1
Introduction
8
Once a Receipt Customer receives its allocation of ER for the upcoming month, it has
9
the following options:
10
1. Transfer its ER to another Customer; or
11
2. Retain its ER and
i. enter into a contractual arrangement with an Extraction Plant to Band its ER;
12
or
13
14
ii. band its ER to Bypass the Extraction Plant(s); or
15
iii. do nothing (i.e. leave its ER Unbanded).
16
This Section describes the process for Customers who choose to sell (Transfer) their
17
ER. Section 7.6 outlines the process for Banding and Bypass.
18
Note that a Transfer of ER under NEXT is the same as Pooling of ER under the
19
Current Convention. The terms ER Transfer and Pooling are synonymous.
7.5.2
20
Tracking Transfers and Reporting Account Balances
NGTL will not participate in the ER marketplace and will have no role in establishing
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Section 7.0: The NEXT Model
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1
terms and conditions of ER buy/sell agreements between Customers. Rather, NGTL
2
will simply track and report each Customer’s balance of ER in their ER Accounts on
3
a real-time basis, incorporating transfers of ER among Customers. NGTL’s role will
4
be identical to the role it plays in support of the NIT market for gas whereby NGTL
5
tracks and reports each Customer’s Inventory, reflecting Customer’s NIT
6
transactions.
7
NGTL will develop a new ER Account Balance Report within its existing web-based
8
reporting systems. This new report will enable Customers to monitor their balance of
9
ER on a real-time basis including ER Transfers to and from other Customers. These
10
reports will be Customer-confidential.
11
An example of an ER Account Balance Report dated April 27, for the month of May
12
is set out below in Table 7-5.
Table 7-5: Example ER Account Report
Report Date: April 27
Customer: Customer A
Extraction Location: X Month: May
ER Transfers
ER
Allocation
Day
Debits
Credits
5.6%
0
+3.0%
1
5.6%
0
+3.0%
2
5.6%
0
+3.0%
3
5.6%
-5.6%
0
4
5.6%
-5.6%
0
5
5.6%
-5.6%
0
6
5.6%
-5.6%
0
7
5.6%
0
0
8
5.6%
0
0
9
5.6%
0
0
10
Etc.
…
…
…
Inventory
8.6%
8.6%
8.6%
0
0
0
0
5.6%
5.6%
5.6%
…
Banded
0
0
0
0
0
0
0
0
0
0
…
Unbanded
8.6%
8.6%
8.6%
0
0
0
0
5.6%
5.6%
5.6%
…
13
This example report shows the ER Inventory for Customer A for the first 10 days of
14
May for Extraction Location X as of April 27. In this example, Customer A has a
15
monthly allocation of 5.6% as determined in the example set out in Section 7.3.
16
Customer A has purchased 3% from other Customers for the first 3 days of the
17
month; has sold all 5.6% for days 4 through 7; and has made no purchases or sales for
NOVA Gas Transmission Ltd.
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days 8 through 10.
1
7.5.3
ER Transfer Flexibility
2
NGTL will provide flexibility to accommodate different types of ER Transfers among
3
Customers. For the ER allocated at each Extraction Location, Customers may:
4
(a) transfer all, or any portion of, their ER;
5
(b) transfer ER for a single day, or for any number of days in the current month; and
6
(c) submit standing instructions to transfer all, or a percentage of, their ER to another
7
Customer in future months.
8
NGTL will also facilitate Customers’ use of third party electronic trading systems,
9
such as NGX, similar to the process used by NGTL to accommodate NGX electronic
10
gas trading instruments in the NIT market.
11
Extraction Plants may themselves participate directly in the ER marketplace.
12
Extraction Plants are Customers of NGTL by virtue of their FT-X Service
13
Agreements and have the same ability as any Customer to purchase ER. An
14
Extraction Plant that owns ER may then use these rights to Band to its own facility or
15
to another Extraction Plant. (Please refer to Section 7.6 for details on Banding).
16
NGTL will develop new web-based input screens to enable Customers to enter their
17
ER transfers electronically.
18
Note that Customers may not transfer ER from one Extraction Location to another
19
Extraction Location. Receipt Customers are allocated ER at each Extraction Location
20
each month as illustrated in Table 7-4. ER are location-specific and can only be used
21
at the designated Extraction Location.
22
Further, ER cannot be transferred from one day to the next or accumulated over
23
several days. ER are allocated for each individual day in the month and must be used
24
(i.e. used to issue a Banding Instruction) for the specified day.
NOVA Gas Transmission Ltd.
7.6
Step 3: Daily Banding Process
7.6.1
Banding Options
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1
Apart from transferring ER to another Customer, as described above in Section 7.5,
2
Customers holding ER may choose to:
3
(a) use their ER to Band flow to an Extraction Plant,
4
(b) use their ER to Band flow to Bypass, or
5
(c) do nothing.
6
This section describes the timing and process for Customers to submit Banding
7
Instructions and how NGTL uses the Banding Instructions to apportion the available
8
flow among the Extraction Plants at an Extraction Location.
7.6.2
Banding and Banding Instructions
ER provide Customers with the right to direct a percentage of the gas flowing on the
9
10
Integrated System at an Extraction Location to a particular Extraction Plant or to
11
Bypass. Banding Instructions are the instructions Customers with ER provide to
12
NGTL. NGTL will direct flows at an Extraction Location in accordance with the
13
requests of Customers as set out in their Banding Instructions.
14
For example, assume a Customer holding 2% ER at East Gate for May 17 sends
15
NGTL a Banding Instruction to Band 2% to the BP Empress I Plant. In accordance
16
with this Banding Instruction, the BP Empress I Plant may take and process 2% of the
17
total volumes flowing at East Gate on May 17.
18
Alternately, if that Customer sends NGTL a Banding Instruction to Band 2% to
19
Bypass at East Gate on May 17, then NGTL will direct that 2% of the total volumes
20
flowing at East Gate Bypass all of the East Gate Extraction Plants on May 17.
7.6.3
21
Two Commercial Structures for Banding Arrangements
There are two alternatives for Customers to structure their commercial arrangements
NOVA Gas Transmission Ltd.
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Section 7.0: The NEXT Model
Page 17 of 28
1
with Extraction Plants for ER. First, they can sell their ER to an Extraction Plant and
2
advise NGTL to Transfer their ER from their ER Account to the ER Account of the
3
Extraction Plant. Using these ER, the Extraction Plant would then submit a Banding
4
Instruction to NGTL to direct a percentage of the available flow to their facility.
5
Second, the Customer could retain its ER and submit the Banding Instruction to
6
NGTL to direct that portion of the flow to that Extraction Plant. Both approaches
7
work equally well. The difference is who holds the ER and sends the Banding
8
Instructions to NGTL; the Extraction Plant or individual Customers.
9
NGTL will only accept Banding Instructions from the Customer that holds the
10
associated ER, or its designated Agent.
11
The form of commercial arrangement between the ER seller and buyer is entirely
12
within the control of the parties, be they a purchase and sale, swap, product in kind,
13
etc. NGTL is not involved in these commercial arrangements.
7.6.4
Unbanded ER
14
If a Customer does not send a Banding Instruction to NGTL for all of their ER by the
15
deadline for Banding, either by choice or omission, then NGTL will allocate the
16
Unbanded ER on a pro rata basis to the Extraction Plants at that Location based on
17
the quantity of ER Banded to each Plant. This approach will ensure that there is no
18
unintended Bypass of the Extraction Plants should a Customer accidentally forget to
19
Band or miss the deadline for Banding Instructions.
20
Tables 7-6, 7-7 and 7-8 illustrate how Unbanded ER are allocated and the resultant
21
flows to each Extraction Plant. Table 7-6 sets out an example Banding Report which
22
shows that Customer E has not Banded its 2.0% ER for May 17 at Extraction
23
Location X.
NOVA Gas Transmission Ltd.
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Section 7.0: The NEXT Model
Page 18 of 28
Table 7-6: Example Banding Report
Extraction Location: X
Gas Day: May 17
Straddle
X1
5.6%
Customer A
12.8%
Customer B
10.0%
Customer C
22.8%
Customer D
0.0%
Customer E
51.2%
Total
(Set Points)
Straddle
X2
0.0%
22.0%
20.1%
0.0%
0.0%
42.1%
Bypass
0.0%
0.0%
0.0%
4.7%
0.0%
4.7%
Unbanded
0.0%
0.0%
0.0%
0.0%
2.0%
2.0%
Total
5.6%
34.8%
30.1%
27.5%
2.0%
100.0%
1
Table 7-7 sets out the allocation of that 2.0% of Unbanded ER among the two
2
Extraction Plants at this Extraction Location. The allocation of Unbanded ER is
3
based on the quantity Banded to each Extraction Plant as a percentage of the total ER
4
Banded at that Extraction Location. Extraction Plant X1 has 54.9% of the total ER
5
Banded at Extraction Location X, and therefore is allocated 54.9% of the Unbanded
6
ER or 1.1%.
Table 7-7: Example Allocation of Unbanded ER
Extraction Location: X
Gas Day: May 17
Share of
Allocation of
Total Banded
Unbanded
Banding to Extraction Plants
ER
Extraction Plant X1
Extraction Plant X2
Total
51.2%
42.1%
93.3%
54.9%
45.1%
100.0%
1.1%
0.9%
2.0%
7
Table 7-8 shows the gas flows allocated to each Extraction Plant, which is based on
8
both the ER Banded to that Extraction Plant by Customers and the pro rata allocation
9
of Unbanded ER.
NOVA Gas Transmission Ltd.
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Section 7.0: The NEXT Model
Page 19 of 28
Table 7-8: Net Banding (Set Points) and Allocation of Flows
Extraction Location: X
Gas Day: May 17
Extraction Plant X1
Extraction Plant X2
Bypass
Unbanded
Total
Banded
51.2%
42.1%
4.7%
2.0%
100.0%
Allocation
of
Unbanded
1.1%
0.9%
2.0%
Set Points
52.3%
43.0%
4.7%
0.0%
100.0%
Allocation of
Gas Flow
(TJ)
2,458
2,021
221
0
4 700
1
Note that a Customer is entitled to Bypass all of the Extraction Plants at an Extraction
2
Location. However, in order to Bypass, a Customer must specifically direct NGTL to
3
Bypass by submitting a Banding Instruction to that effect. Failure to Band ER will
4
not result in Bypass. Rather, NGTL will allocate Unbanded ER to Extraction Plants
5
in the manner described above.
7.6.5
Banding Instructions Cannot Exceed ER Account Inventory
6
Upon receipt of a Banding Instruction, NGTL will first check to ensure that the
7
Banding Instruction does not exceed the quantity of ER in a Customer’s ER Account.
8
If a Banding Instruction exceeds the quantity of ER in a Customer’s ER Account,
9
then NGTL will reduce the Banding Instruction to the level of ER in their Account.
10
For example, if a Customer with 4.7% ER at East Gate submits a Banding Instruction
11
for 6%, then NGTL will reduce the Banding Instruction to 4.7%.
7.6.6
Timelines
12
The quantity of gas available to the Extraction Plants for processing at an Extraction
13
Location is primarily a function of the scheduled nominations for deliveries to
14
locations downstream of the Extraction Location. The timelines established by the
15
NAESB3 and utilized by NGTL for purposes of managing export delivery
3
NAESB is the North American Energy Standards Board which has established nomination and
scheduling timelines for the pipeline industry.
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1
nominations for the start of the Gas Day are set out in Figure 7-2.4
2
Customers may nominate on downstream interconnecting pipelines at both the
3
Timely and Evening Windows for deliveries commencing at the start of the next Gas
4
Day at 09:00 am CCT. The final deadline for submitting delivery nominations for the
5
start of the next gas day is 6:00 pm CCT. Transportation nominations for the start of
6
the next Gas Day are processed, confirmed, scheduled and reported by 10:00 pm
7
CCT.
8
NGTL proposes to align the deadline for Banding Instructions with the 6:00 pm CCT
9
deadline for submitting export delivery nominations for the start of the next day. This
10
will enable NGTL to provide the Extraction Plants with their Set Points by 10:00 pm
11
CCT for the 9:00 am CCT start of the next Gas Day.
4
NGTL permits intra-Alberta Delivery Customers to submit nomination changes every half-hour.
NOVA Gas Transmission Ltd.
Figure 7.2
Banding Instructions
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Page 21 of 28
Daily Timeline
NAESB
Transportation Nominations
11:30 AM
Timely Window: Nomination Deadline
3:30 PM
Timely Window: Complete Confirmation Process
6:00 PM
Deadline for Banding Instructions
6:00 PM
Evening Window: Nomination Deadline
9:00 PM
Evening Window: Complete Confirmations
10:00 PM
Report to Straddles: Final
Banding & Expected Flows
8:30 AM
Deadline for Re-Direct Instructions
• All times are in CCT
10:00 PM
Evening Window: Report Scheduled Quantities
9:00 AM
Start of Gas Day
NOVA Gas Transmission Ltd.
7.6.7
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Section 7.0: The NEXT Model
Page 22 of 28
Banding Instruction Flexibility
1
NGTL will provide Customers with the following flexibility in regards to Banding
2
Instructions:
3
(a) Customers may submit Banding Instruction at any time between the date that ER
4
are allocated (approximately the twenty-fifth of the prior month) until the 6:00 pm
5
CCT deadline on the day prior to gas flow.
6
(b) Customers may submit standing Banding Instructions that would apply to all or a
7
portion of the days in a month, or they may submit Banding Instructions
8
individually for each day in the month.
9
(c) Customers may submit standing Banding Instructions that would apply for future
10
months. Since Customers will not know in advance their quantity of ER for
11
future months, this option requires that the Customer specify the percentage of
12
their ER to be Banded. For example, they could Band 100% of their ER at an
13
Extraction Location to a particular Extraction Plant for a full year.
14
NGTL will develop web-based input screens that Customers will use to submit
15
Banding Instructions. Similarly, NGTL will provide reports on a Customer’s
16
Banding Instructions in the Customer’s ER Account Report as illustrated below in
17
Table 7-9.
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Section 7.0: The NEXT Model
Page 23 of 28
Table 7-9: Example ER Account Report1
Report Date: May 3
Customer: A
Extraction Location: X
Month: May
Day
ER
Allocation
1
2
3
4
5
6
7
8
9
10
Etc.
5.6%
5.6%
5.6%
5.6%
5.6%
5.6%
5.6%
5.6%
5.6%
5.6%
…
ER Transfers
Debits
0
0
0
-5.6%
-5.6%
-5.6%
-5.6%
0
0
0
…
Credits
+3%
+3%
+3%
0
0
0
0
0
0
0
…
Inventory
Banded
Unbanded
8.6%
8.6%
8.6%
0
0
0
0
5.6%
5.6%
5.6%
…
8.6%
8.6%
8.6%
0
0
0
0
0
0
0
…
0
0
0
0
0
0
0
5.6%
5.6%
5.6%
…
1. This is a summary report of a Customer’s ER Account. Reports will also be developed for
Customers that will provide additional details on individual ER Transfers and Banding Instructions.
1
In this example report dated May 3, Customer A has submitted Banding Instructions
2
for the first 3 days of May for all of their ER at Extraction Location X. For upcoming
3
days 4-7, Customer A has sold their ER to another Customer. For days 8-10,
4
Customer A has yet to sell or Band their ER.
7.6.8
Redirect Instructions Extraction Locations with Multiple Extraction Plants
5
At Extraction Locations with multiple Extraction Plants,5 NGTL will provide an
6
opportunity for Extraction Plants to fine-tune the Inlet Quantity to their facilities. A
7
similar process exists today for Extraction Plants at East Gate to enter into
8
commercial arrangements to redirect Inlet Quantity from one Extraction Plant to
9
another.
10
With Redirects, Extraction Plants will be able to instruct NGTL to transfer any
11
portion of their Set Point to another Extraction Plant at that Extraction Location
5
Currently East Gate is the only Extraction Location with multiple Extraction Plants.
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Section 7.0: The NEXT Model
Page 24 of 28
1
(Redirect Instruction). Redirect Instructions must be provided to NGTL by 8:30 am
2
CCT, in order to take effect at the start of the Gas Day at 9:00 am CCT.
3
NGTL will also permit Extraction Plants to submit Redirect Instructions at each of
4
the two NAESB intra-day Nomination Windows. The Deadline for these Redirect
5
Instructions will be 30 minutes prior to the effective time for the Intra-Day
6
Nomination Window. These intra-day Redirect Instructions will enable Extraction
7
Plants at an Extraction Location to adjust inlet flows among themselves as total flows
8
change as a consequence of intra-Day changes in delivery nominations to
9
downstream points.
10
An example of Banding Redirects is provided below in Table 7-10. In this example,
11
Extraction Plant X1 Redirects 3.9% to Extraction Plant X2. This results in a
12
reallocation of 183 TJ of flow from Extraction Plant X1 to Extraction Plant X2.
Table 7-10: Example of Banding Redirects
Extraction Location: X
Gas Day: May 17
Allocation
Set
Redirects To:
of Gas
Points
Flow
(Net
Extraction Extraction
(TJ)
Banding)
Plant X1
Plant X2
Extraction
Plant X1
Extraction
Plant X2
Bypass
Total
7.6.9
52.3%
2,458
43.0%
2,021
4.7%
100.0%
221
4,700
3.9%
0.0%
3.9%
Net
Banding
After
Redirects
Allocation
of
Gas Flow
After
Redirects
(TJ)
48.4%
2,275
46.9%
2,204
4.7%
100.0%
221
4,700
Managing Flow Variations During the Gas Day
13
Apart from Intra-Day Nomination changes, delivery flows can change during a Gas
14
Day due to operational factors such as unplanned outages on the System and
15
downstream interconnecting systems. The net Banding Instructions (Set Points), in
16
percentage, would be applied to the volumes flowing at any given time during the
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1
Gas Day at each Extraction Location to establish inlet volumes to each Extraction
2
Plant.
3
In the example above in Table 7-10, the total flow at X was projected at 4 700 TJ.
4
Extraction Plant X1 with a Set Point of 48.4% (after Redirects) would be allocated
5
48.4% of the 4 700 TJ of total flow, or 2 275 TJ. If the total flow increases during the
6
Gas Day to 4 800, Extraction Plant X1 would continue to receive 48.4% of the flow
7
or, in this example, 2 323 TJ.
7.6.10 Adjustments for Over/Under Takes by Extraction Plants
8
In the event that an Extraction Plant takes in more inlet flow than is scheduled
9
pursuant to the Banding Instructions and Set Points, NGTL will adjust the net Set
10
Points and inlet flows on the next Gas Day. This is identical to the process employed
11
by NGTL under the Current Convention.
7.7
Summary
12
The key elements of the NEXT Model are:
13
1. ER is allocated monthly to Receipt Customers based on their proportionate share
14
of NGL value delivered onto the Alberta System in the second prior month at all
15
Eligible Receipt Points under all Schedules of Service other than IT-S.
16
17
18
19
20
21
22
23
2. ER is determined and Receipt Customers are advised of their ER allocations on
approximately the twenty-fifth day of the prior month.
3. ER is expressed as a percentage of the gas available for processing by Extraction
Plants at each Extraction Location.
4. ER is allocated to Receipt Customers for each day in the month at each Extraction
Location.
5. Customers can transfer ER to other Customers for single or multiple days, at a
single or multiple Extraction Locations.
NOVA Gas Transmission Ltd.
1
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Section 7.0: The NEXT Model
Page 26 of 28
6. Customers use ER to Band a percentage of the gas available at an Extraction
Location to one or more Extraction Plants or to Bypass.
2
3
7. Customer may submit Banding Instructions for a single day or for multiple days.
4
8. Banding Instructions for a Day must be submitted by 6:00 pm CCT, aligned with
the NAESB Evening Nomination window deadline.
5
6
9. NGTL will sum all ER Banded to an Extraction Plant which will equal the Set
7
Point which represents the percentage of the gas available for processing at an
8
Extraction Location that the Extraction Plant may process.
9
10. NGTL will calculate each the Inlet Quantity for each Extraction Plant as the
10
product obtained by multiplying the Extraction Plant’s Set Point by the gas
11
available for processing at an Extraction Location.
12
11. Extraction Plants will be able to Redirect any portion of their Set Point to another
Extraction Plant at that Extraction Location.
13
14
12. Set Points will be adjusted daily to account for deliveries to an Extraction Plant in
excess of their Inlet Quantity on the prior day.
15
16
13. Extraction Plant owners or operators must execute an FT-X Service Agreement
6
17
in order to receive, and extract NGL from, the Alberta System Common Stream.
18
Only one FT-X Service Agreement will be permitted for each Extraction Plant.
19
14. Rate Schedule FT-X and FT-X Service Agreements establish the terms and
20
conditions of service for Extraction Plants including:
21
•
Inlet Quantity which is the product obtained by multiplying the Extraction
22
Plant Set Point percentage times the Gas available for processing at an
23
Extraction Location (Set Point is the sum of the ER Banded to that Extraction
6
Refer to Section 9.0 Tariff Amendments for further details on FT-X.
NOVA Gas Transmission Ltd.
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Section 7.0: The NEXT Model
Page 27 of 28
Plant).
1
•
2
Residue Gas which is the quantity of Gas returned to the Alberta System by
the Extraction Plant after the extraction process.
3
•
4
Shrinkage which is the net quantity of energy delivered by the Alberta System
5
to the Extraction Plant and equals the difference between the Inlet Quantity
6
and the Residue Gas quantity.
•
7
Shrinkage is recorded as a debit from the FT-X Customer Account. FT-X
8
Customers must obtain an equal quantity of energy (Make-up) through NIT
9
transfers or receipts to maintain their Customer’s Inventory within the
10
Balanced Zone specified in Appendix “D” of the Tariff7.
11
The design of NEXT incorporates the following design considerations:
12
(a) Minimize Change: To the extent possible, NEXT has been designed to align with
13
the Current Convention including ER Transfers, ER Banding, Set Points and the
14
use of FT-X to administer the quantities of gas delivered to Extraction Plants.
15
Consistent with the Current Convention ER are allocated to Customers for a
16
particular Extraction Location and can only be used at that Location (Multi-Pool
17
Model).
18
(b) Keep it Simple: To the extent possible NEXT has been designed to minimize
19
complexity and workload for CSOs, Customers and Extraction Plant operators.
20
NGTL will measure NGL quantities received on the System, will determine each
21
Receipt Customer’s ER allocation based on the NGL value delivered to the
22
system by Customers in the second prior month, will record Customer’s ER
23
Transfers and Banding Instructions, will determine Extraction Plant Set Points
24
and will record Set Point Redirects. NGTL will develop electronic input screens
25
for CSOs to enter NGL Component allocations, for Customers’ to enter ER
7
Refer to Section 3.0 for details on FT-X, Customer Accounts and Customer’s Inventory.
NOVA Gas Transmission Ltd.
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Section 7.0: The NEXT Model
Page 28 of 28
1
Transfers and Banding Instructions, and for Extraction Plants to enter Set Point
2
Redirects. NGTL will develop new electronic reports for Customers and
3
Extraction Plants to monitor their activities and accounts on a real-time basis.
4
(c) Facilitate Development of an ER Marketplace: NGTL’s design of NEXT is
5
intended to promote the development of a more liquid and transparent market for
6
ER. ER will be allocated to Receipt Customers prior to the start of the Month to
7
provide time for ER trading in advance of the Month. ER will be a consistent,
8
fixed quantity (in percent) for the month that can be sold (ER Transfers) to other
9
Customers. Similar to its administration of the NIT market, NGTL will
10
implement web-based electronic input screens for ER Transfers and real-time
11
reports that Customers can use to monitor their ER Accounts. NEXT will be
12
documented in the NGTL Tariff to provide Customers and Extraction Plants with
13
a clear description of their rights and obligations.