ARCHIVED—Natural Gas Trade Sector Review — Discussion

Natural Gas Trade Sector Review

A Discussion Paper on Establishing an Appropriate Level of Measurement Canada Intervention in the Natural Gas Sector

March 2002

A Message from the President

An integral component of Measurement Canada’s mandate is to ensure that Canadians have a fair, efficient and competitive marketplace in which to do business. Our commitment is to continue to ensure accuracy and equity in trade in all business sectors in the most effective way possible.

In order to better accomplish our mission of ensuring equitable and accurate measurement of goods and services, Measurement Canada is committed to the process of conducting trade sector reviews. Through these reviews, Measurement Canada will identify trade sectors where direct intervention is necessary to assure the accurate measurement of goods and services and other sectors where less intervention is possible with reasonable risk to the parties involved in the measurement transaction. This will allow us to focus our resources on those areas which provide the greatest return for Canadians.

In launching our Trade Sector Reviews, we are seeking the informed views of marketplace stakeholders to help us ensure that we are doing the right things in the right ways and to help us find ways in which can we can do the right things better. Market place stakeholders views, opinions and perspectives will be used to determine the level of intervention in any particular trade sector.

Levels of intervention may range from direct intervention through accredited organizations or other private sector partnering arrangements to industry self regulation. Measurement Canada will maintain oversight of measurement accuracy and equity through regular monitoring of the sectors to ensure the intervention levels are appropriate and operating effectively.

The Natural Gas Trade Sector Review Team was created to establish, in consultation with clients, businesses and consumers, the appropriate level of intervention for this sector and to explore possible alternate service delivery mechanisms.

Our challenge is to provide stakeholders with the information needed to participate in an informed manner. This is your opportunity to have your views heard and to influence the manner in which the accurate measurement of goods and services is achieved in your sector. I would like to extend a special invitation to natural gas consumers to actively participate in this process. We look forward to continuing to serve all Canadians in the best way we can.

Alan E. Johnston
President, Measurement Canada

Table of Contents

A Message from the President

Table of Contents

Foreword

Regulatory Context for the Natural Gas Trade Sector Review

Consultation and Negotiation Methodology

Criteria for making decisions

Overview of the Natural Gas Industry

Disclaimer
Introduction
Description
Price Deregulation
Measurement

Sector Subdivision

Production
Midstream
Transmission
Distribution

Action plan Natural Gas Trade Sector review Process

Open Forum Session Expectations

Appendix A
Measurement Canada’s Current Lines of Business

Appendix B
Team Members of the Natural Gas Trade Sector Review

Appendix C
Glossary of Terms

Foreword

The purpose of this report is to explain the Natural Gas Trade Sector Review project and to define the Natural Gas trade sector and sub-sectors: detailing the current levels of Measurement Canada’s intervention within this sector. This report is intended as the starting point for discussions on appropriate levels or forms of Measurement Canada’s intervention within this trade sector.

Measurement Canada’s mission is accomplished in the sectors that Measurement Canada has intervened in traditionally through several key programs such as the;

• calibration of measurement standards,
• mandatory approval of device types intended to be used in trade,
• mandatory initial inspection and certification of individual devices before they are placed in service,
• re-verification and monitoring of trade devices,
• verification of net quantity content and lelling of commodities,
• investigation and resolution of disputes and complaints related to measurement,

** See appendix A for a more detailed description of Measurement Canada’s current lines of business.

Historically, these programs have been implemented exclusively by Measurement Canada and have satisfied the definition of equity in the marketplace in the traditional trade sectors.

Measurement Canada has established a strategic direction that is designed to optimize the use of its resources in fulfilling its mission and mandate. As part of its strategic direction, Measurement Canada will continue to:

• estlish rules and requirements for trade metrology;
• resolve complaints and disputes;
• monitor the marketplace; and
• where necessary, take action to ensure appropriate levels of compliance.

Measurement Canada will conduct reviews of the sectors where trade measurement is significant in order to establish appropriate levels of intervention. This will be done through consultation with stakeholders. The informed views of dependant stakeholders is deemed essential to these reviews. Sectors reviews will be conducted periodically to ensure that established levels of intervention are appropriate to ensure equity and accuracy of measurement.

Trade Sector Reviews are future oriented. They are initiated in anticipation of changing marketplace conditions. The purpose of the review is to put in place the regulatory environment which will be needed as the marketplace changes. The intent is to be proactive not reactive.

During a Trade Sector Review, Measurement Canada seeks to obtain the views from marketplace participants on questions such as:

• To what extent is Measurement Canada involvement needed in this business sector and in which particular sub-sector (e.g. transmission or distribution transactions, new technology evaluation, standards development, enforcement, etc.)?
• What measurement programs/services are needed and what is the best role for Measurement Canada in them (e.g. traceable calibration of test equipment, approval of new measuring devices, initial verification and reverification of measuring devices)?
• How can the needed programs/services or parts of them be delivered economically through Alternative Service Delivery methods?
• What information should be used for monitoring and reporting accuracy and equity performance and how should this be done?

Measurement Canada will assess the use of alternate service delivery mechanisms to perform programs determined as necessary by the sectors such as:

• calibration of measurement standards
• device approvals
• initial certification of devices
• re-inspections or periodic re-verifications of devices

The primary purpose of the Natural Gas Trade Sector Review is to recommend an appropriate level of intervention that will ensure accuracy in trade measurement. This will be an opportunity for stakeholders, and especially vulnerable parties, to express their views on the need for Measurement Canada intervention.

Regulatory Context for the Natural Gas Trade Sector Review

The Electricity and Gas Inspection Act (EGIA) sets out the Minister of Industry’s duties and powers with respect to natural gas trade measurement which are administered by Measurement Canada. The Electricity and Gas Inspection Act states that any meter, which includes any apparatus used for the purpose of making measurement of, or obtaining the basis for a charge for electricity or gas supplied to a customer must be approved, inspected and sealed. The Electricity and Gas Inspection Act applies broadly to any type of measuring apparatus and accessories used for selling and purchasing energy.

The Electricity and Gas Inspection Act also specifies rights and responsibilities for contractors, owners of gas meters and purchasers of natural gas. These rights and responsibilities are designed to ensure equity and accuracy for both purchaser and contractor. They include, for example; the right of a purchaser to be billed through a sealed and approved meter; the right of a contractor or an owner of a meter to have access to metering points for maintenance; the right of contractors and purchasers to call for a Measurement Canada arbitrated dispute process; responsibilities for maintenance of gas meters; and, responsibilities for record keeping associated with the metering devices and the bills generated from them.

Measurement Canada has sole jurisdiction with respect to the administration and enforcement of the statues which regulate trade measurement in Canada. There is little current overlap, duplication or shared responsibility with any other federal, provincial or municipal department or agency.

Measurement Canada is accountable to Parliament through the Minister of Industry. This means that all its expenditures, program activities, public policy goals and reporting of results must be in keeping with Industry Canada and Treasury Board rules. As well, the operational information and program results of Measurement Canada are subject to the Access to Information and Privacy Acts.

Our mandate at Measurement Canada is to ensure equity and accuracy. We want to achieve this goal in the most efficient and effective way possible and intervene in the marketplace only to the extent necessary. We see this goal supporting the competitive position of Canada.

Measurement Canada recognizes that it is accountable for equity and accuracy in trade measurement. It also recognizes, however, the need for cost-effective and efficient delivery of programs and services. Consequently, Measurement Canada is moving from a regime of intervening directly in the marketplace, to one of consulting with stakeholders on the appropriate level, methods and targets for intervention. Making maximum use of private or public sector partnerships, we will deliver only the intervention programs and services that are needed to ensure that our mandate is met.

Measurement Canada must balance establishing modern intervention techniques which are demanded by the stakeholders with maintaining the trust and confidence of marketplace participants, and without compromising Measurement Canada’s legislative responsibilities. Establishing, the appropriate role for Measurement Canada in the natural gas trade sector is the overarching objective of this Trade Sector Review.

Consultation and Negotiation Methodology

In order for the Natural Gas Trade Sector Review consultation process to be successful, the direct input from interested and informed stakeholders is critical. We hope that the issues identified in this paper will provoke further discussion and analysis for the project.

Measurement Canada’s Natural Gas Trade Sector review process is highly dependant on the input from interested and informed stakeholders. It is the responsibility of the Natural Gas Trade Sector Review Team (NGTSRT) to solicit the informed views of stakeholders who have an interest, namely:

• Natural gas purchasers including residential, commercial and industrial consumers and the associations which represent them
• Natural gas sellers including wholesalers, retailers, contractors and the associations which represent them
• Natural gas meter service organizations either accredited already or those considering accreditation
• Natural gas meter and measurement equipment manufacturers and dealers
• Other government agencies who provide marketplace, regulatory, or measurement related services in this business sector
• Any other individual or group who has a stake and wishes to be heard

It will be an important consideration that sufficient input is received to represent the interests of vulnerable parties during the consultation process.

Direct mail outs and the Measurement Canada web site have been used to distribute the discussion paper.

Criteria for making decisions

During the consultation process, MC will strive to reach consensus among the stakeholders in determining the appropriate level of intervention for the sector. Decisions regarding the appropriate level of intervention must be determined based on the input from all parties to the trade transaction.

The following criteria will be used to formulate decisions during the consultation process:

1. Stakeholder Support - all stakeholders involved in the consultation are encouraged to actively participate to the degree possible, however, certain conditions must be established:

• All stakeholders must be informed of the issues for discussion, however, the general consensus of the vulnerable parties must support all recommendations and decisions of the trade sector review (level of intervention and ASD);
• general agreement from all stakeholders on all recommendations. Preferred weighting will be given to stakeholders in trade transactions;
• general support from third party (those who are not parties to the trade transaction);
• those stakeholders who express dissenting opinions during the consultation will have the opportunity to have their opinions recorded for future reference.

2. Stakeholder Reach - MC will seek to ensure that the stakeholders who participate in the consultation are representative of the sector. All affected parties must be adequately represented during discussions and all informed comments will be taken into consideration.

3. In Line With MC Mission and Strategic Direction - all decisions reached during the consultation must agree with the mission and strategic direction set out by MC. The use of viable ASD options are to be actively explored and implemented in areas where the sector believes it is appropriate. All recommendations from the NGTSR are subject to the review and acceptance by senior management of MC.

4. Sustainable - The implementation of the sector recommendations will require a period of time after the NGTSR is completed. It is an important consideration that the recommendations can be implemented and be sustainable into the future as well. The costs to MC and industry to monitor the sector in the future should be cost effective and designed so as not to suppress the emergence of new technology.

5. International Competitiveness - The recommendations of the sector must be both practical and acceptable and not deviate from international metrology standards or practises so as to shed Canada in a negative light in international markets.

Overview of the Natural Gas Industry

Disclaimer
All documents published by the review team are intended to generate discussion. All efforts are made to ensure that no “errors in fact” are published in this discussion paper. In the case that this has inadvertently happened, any such error will be corrected in an updated version of this document which will be posted/published on our web site. No formal redistribution of this document will occur solely for this reason.

Introduction
This section of the discussion paper will provide a description of each defined sub sector within the natural gas sector and include: a general description of the sub sector; the measurement practices and level of metrological control; a description of the current level of intervention within that sub sector and a general listing of the stakeholders within the sub sector.

Description
Canada is the world’s third largest natural gas producer, after Russia and the United States. Natural gas is essentially a continental commodity because it is not easily transported other than by pipeline. This fact has helped to make natural gas one of Canada’s major exports. In 1999, exports to the United States amounted to $11 billion.

The natural gas trade sector is very broad in scope, the industry affects most Canadians in some manner. The NGTSR team has broken the sector into sub sectors as follows; production dealing with producers taking the gas out of the ground; mid stream natural gas processing facilities and the pipelines that tie the gas fields and processing plants together; transmission companies that move the gas from the fields and processing facilities to the major users and utilities; and finally the distribution companies or LDC’s.

In the residential sector, over four million homes rely on natural gas accounting for approximately 20% of the demand. The manufacturing commercial and industrial users account for approximately 80% when the Canadian electricity generation demand is included. In total, sales of Canadian natural gas to domestic markets represents 45% of total production, while the balance is sold to markets in the United States.

Most of Canada’s natural gas production now comes from the three most westerly provinces, particularly Alberta. A large, newly developed offshore Nova Scotia natural gas project, the Sable Offshore Energy Project, delivers natural gas to buyers in the New England states, and is developing markets in the Maritime provinces.

The production and midstream sectors of the natural gas industry comprise hundreds of small and large companies that find and develop natural gas reserves and operate gathering pipelines and processing plants. Most gas requires processing after it has been extracted from a well to remove contaminants such as moisture, hydrogen sulphide (H2S) and carbon dioxide (CO2). About one third of Western Canada’s raw gas production contains hydrogen sulphide and requires special processing at gas plants, which convert most of the hydrogen into sulphur. Sulphur and other natural gas by-products that are removed at the gas plants are not considered in this Trade Sector Review. The Downstream Petroleum Sector Review that was completed early in 2002 considered many of the natural gas by-products such as ethane, butane, propane that are major commodities in themselves.

While the small pipelines needed for natural gas production and processing are part of the upstream and midstream sectors, large long-distance natural gas transmission pipelines and the local distribution pipelines that take gas directly to consumers comprise industry sectors of their own. In Canada, almost 80,000 kilometers of transmission pipelines carry natural gas from processing plants to consuming regions and export points. At the end of these pipelines, local distribution companies (LDCs) deliver natural gas to residential, commercial and industrial users. In most provinces, natural gas is also delivered directly to large industrial users and electric generating plants.

Price Deregulation
Prior to 1985, federal and provincial regulators were involved in establishing natural gas prices, but in 1985 an agreement between the federal government and the producing provinces determined that the market should set prices. This agreement on natural gas markets and prices enables the National Energy Board, a federal regulatory body to allow the free market system to determine prices. However, provincial authorities and regulatory boards ensure that local distribution companies pass on the natural gas commodity costs on to consumers without marking them up, and that the LDCs buy gas prudently and manage costs on behalf of consumers.

The structure of the gas industry has changed since deregulation. Producing companies now sell to many different kinds of buyers. These include industrial customers, independent marketers, local distribution companies, and other sales organizations. The change to “market determined pricing” of natural gas created greater competition. The most striking example of this change comes from Ontario where 40 percent of the provinces natural gas customers (residential, commercial, industrial and institutional) now obtain their supplies through direct purchases from agents, brokers and marketers.

Measurement
The natural gas commodity exchanges custody numerous times from production to the end user. Generally each time the commodity changes custody a measurement device or devices are installed, calibrated and maintained by the producers, transmission companies or LDC’s. At most points of custody transfer Measurement Canada inspectors verify the accuracy of the devices following Measurement Canada procedures. The focus of the Natural Gas Trade Sector Review is the level of intervention at each of these points.

Sector Subdivision

Production
The production sub sector includes more than 700 exploration and production companies ranging from large multinationals operating thousands of producing wells to small producers with a few wells.

The natural gas producers within the production sub - sector are involved in production of oil and gas and in services incidental to oil and gas production and in pipeline transport industries. Crude Oil and Gas Production represented by the Canadian Association of Petroleum Producers, is the largest component with revenues of $25.307 billion in 1995. The majority of the sector is in Alberta and based in Alberta with a growing and significant presence in Saskatchewan, British Columbia, Newfoundland and Labrador and Nova Scotia. The more than 700 exploration and production companies employed 83,000 people in 1997.

Generally there is a measurement device at each well site. These devices are approved by Measurement Canada and in some instances are initially verified at the manufacturers location. These devices, usually orifice meters, are rarely verified as a metering installation. The devices in use at the wellhead locations are involved in the accounting methodology for determining royalties but may not be the device that determines the volume the royalties are actually paid against. These wellhead devices are used within the process determining well production.

The devices used to measure the gas entering the mid stream processing plants are of an approved type, have usually been inspected by Measurement Canada prior to being put into service and are reverified at prescribed intervals. In most instances these are the devices used to establish royalties and producer’s volumes.

The primary stakeholders in this sector are the producers themselves, midstream companies, transmission companies, LDC’s various government agencies provincial and Federal and gas marketers. The gas meters used to determine the accuracy of measurement can be owned by any of the stakeholders and in most cases (except the marketers and government agencies) each of the stakeholders within the transaction will measure the commodity using their own measuring devices. The degree of vulnerability within this sector is generally small with both parties within the trade transaction having the measurement expertise or the ability to obtain this expertise. Secondary stakeholders in this sector are gas measuring device manufacturers and metering service companies.

Measurement Canada’s current level of intervention within this sub sector can vary from level six to a combination of levels five and three. The current level of Measurement Canada’s intervention for the purposes of dispute resolution is also very small.

Midstream
The next sub sector is commonly referred to as “Midstream”. The sector is primarily the processing facilities and the pipelines that connect these facilities together and to the transmission companies. The vast majority of natural gas coming out of the ground requires some further processing to make it a usable commodity. The gas may require the removal of moisture, hydrogen sulphide (H2S) and or carbon dioxide (CO2). The gas may under go several stripping processes to remove other valuable hydrocarbons from the gas stream. Ethane, propane, butane and other condensates are removed as natural gas liquids (NGL’S) and are marketed separate from the natural gas.
The activity of the Midstream sector generally occurs within close proximity to the producing gas fields. However some Midstream activities like NGL stripping can occur along the transmission pipelines at “straddle plants” (so called because these plants straddle the pipelines) where the plants strip the NGL’s and then reinject the gas back into the pipeline. Other midstream activities that may occur away from the producing fields is underground storage facilities. The gas is shipped to these facilities where it is compressed and injected into storage caverns underground. When demand increases the gas is then removed from storage and shipped to the end consumer.

Measurement occurs at the inlet to the processing facility, as described in the production sector, and again at the outlet of the plant where generally the transmission companies take custody of the commodity. The meter at the outlet of the plant or the inlet to the transmission pipeline is generally owned by the transmission company or at least operated by the transmission company.

These devices are maintained, calibrated and serviced by the Midstream company or the transmission company. These measuring devices are generally Measurement Canada approved, verified prior to being installed and reverified at intervals prescribed by the Electricity and Gas Inspection Act.

The primary stakeholders in this sector are the Midstream companies, producers, other government regulatory bodies and transmission companies. The midstream sector is by and large a service industry. The midstream companies take possession of the gas from the exploration and production companies and process it for them. They provide this service to enhance the final product or to strip more desirable products from the raw gas. The product is then moved to the end user through the pipeline system.

Although there is a vulnerable party in each transaction within this sector the degree of vulnerability is relatively low. Each party to the transactions has a fairly high degree of sophistication. Each party either has the expertise required to ensure accurate and fair measurement or has the resources to obtain the expertise. This general statement is true except in the case of the gas marketers, where they do not take possession of the commodity and rely on the transmission, production or LDC’s measurement capabilities. The end consumer may be vulnerable in that instance. Secondary stakeholders in this sector are gas measuring device manufacturers and metering service companies.

Measurement Canada’s current level of intervention, is similar to the production. A formal dispute resolution process exists however the current level of Measurement Canada’s intervention for the purposes of dispute resolution is very small.

Transmission
The next sub sector is transmission. The transmission pipeline sector transports oil and natural gas from the production and midstream sectors to the distribution networks and to export. Together, these sectors operate a complex 540,000-kilometre pipeline system that is made up of three types of pipelines. In the production sector, oil and gas producers operate flowlines or gathering lines that move raw products from remote wells to processing facilities or directly to transmission lines. Transmission pipelines, carry oil and gas from producers to local distribution companies or directly to large industries. Distribution companies move the products through distribution pipelines that deliver natural gas to homes and businesses. The transmission sector is represented by the CGA (Canadian Gas Association) and CEPA (Canadian Energy Pipelines Association) respectively. CEPA is a national association representing all the major crude oil and natural gas transportation companies in Canada. Collectively CEPA members operate over 100,000 kilometres of pipelines and associated facilities in Canada, and operate in eight provinces and two territories.

Measurement occurs at the inlet to the transmission system, at outlets to “straddle plants” and inlet back to the transmission pipeline and at the final outlet to either large end users or LDC’s. The measurement devices installed at these points are installed maintained calibrated and adjusted by the transmission companies, production companies or midstream companies technicians. These measurement points generally use metering devices that are Measurement Canada approved, initially inspected (verified) and subsequently reinspected (reverified) by Measurement Canada inspectors at intervals prescribed by the Electricity and Gas Inspection Act.

The primary stakeholders in this sector are the transmission companies, producers, midstream companies, distribution companies, marketers, other government regulatory bodies and some large industrial users who purchase the gas direct from producers or from marketers. Although there is a vulnerable party in each transaction within this sector the degree of vulnerability is relatively low. Each party to the transactions has a fairly high degree of sophistication. Each party either has the expertise required to ensure accurate and fair measurement or has the resources to obtain the expertise. This general statement is true except possibly in the case of the gas marketers, where they do not take possession of the commodity and rely on the transmission, production or LDC’s measurement capabilities to ensure accurate measurement. The end consumer may be vulnerable in that instance. Secondary stakeholders in this sector are gas measuring device manufacturers and metering service companies.

Measurement Canada’s current level of intervention within this sector is at a level six. However in recent years due to budget restraints the sector has been receiving less active intervention from Measurement Canada with regards to device reverification. The amount of devices in service that are beyond the required reverification periods continues to grow. A formal dispute resolution process exists however the current level of Measurement Canada’s intervention for the purposes of dispute resolution is very small. This sector currently employs Measurement Canada’s accreditation program as an ASD mechanism. At least one transmission company is accredited to verify and reverify certain specified measuring devices.

Distribution
The next and last sub sector is the distribution sector. This sector is the component that distributes natural gas to final demand users and is usually a utility. Statistics Canada reports indicate that there were 4,716,775 natural gas customers (meters/bills) in Canada in 1996. 4,196,228 (88.9%) were residential customers accounting for 26% of sales. 504,171 (10.7%) were commercial customers accounting for 19% of sales. Only 16,376 (0.4%) were industrial customers but they account for 55% of natural gas sales. The sector has 193,000 km of distribution pipelines.

The distribution sector has companies ranging in size from small municipally owned systems with hundreds of customers to systems owned by large multi national companies with hundreds of thousands of customers. The sector represented by the CGA (Canadian Gas Association) owns and maintains millions of meters and services approximately five million customers.

Measurement in this sector occurs at all of the inlets to the distribution system from the transmission system, at several points within the system and at all residential, commercial, and industrial locations. Measurement Canada approved measuring devices are used at all of these points within the sector. The measuring devices are verified initially at either the manufacturers location, the distribution companies facilities or at a meter calibration services facilities. The devices are verified by either Measurement Canada inspectors or by accredited meter verifiers. The devices are reverified at intervals prescribed by the Electricity and Gas Inspection Act .

The primary stakeholders within this sector are the LDC’s, transmission companies, gas marketers, commercial consumers, industrial consumers both large and small, and residential consumers represented by the various consumer associations. There is a vulnerable party in each transaction within the sector with the degree of vulnerability ranging from very small to potentially completely vulnerable. In the transactions between the LDC’s and the transmission companies and some of the large industrial users each party to the transaction has a fairly high degree of sophistication. Each party either has the expertise required to ensure accurate and fair measurement or has the resources to obtain the expertise. Residential consumers, commercial users and some industrial users may not have the level of sophistication to adequately protect themselves in all transactions. These stakeholders may not have the resources to obtain that required level of sophistication.

Measurement Canada’s current level of intervention within this sector is at a level six. However Measurement Canada’s direct inspection role regarding domestic size meters has been fulfilled using and alternate service delivery mechanism. This sector currently employs Measurement Canada’s accreditation program as an ASD. A formal dispute resolution process exists.

Action plan Natural Gas Trade Sector review Process

January: Start position Paper.

February: Preliminary meetings with as many stakeholders as possible.

March: Draft of position paper ready for CGA National Operations Conference March 10-12

April: Distribute position Paper and gather comments.

May: June 6 and 7 Session in Kelowna B.C.

June: June 19 and 20 Session in Halifax

July / August: Continue preliminary meetings with stakeholders. August 28 and 29 third session Montreal.

September: Sessions September 11 and 12 Toronto. September 25 and 26 Calgary.

October: Final session October 9 and 10 Vancouver.

November: Validation session or Consensus session to coincide with the CFTM in Toronto. Issue paper containing the recommendations of the proposed levels of intervention required for the trade sector.

December: Complete the final paper for presentation to SMC.

January 2003: Present recommendations of the Natural Gas trade sector review to the Senior Management Committee (SMC) of Measurement Canada.

Open Forum Session Expectations

The following elements are not negotiable with stakeholders:

• MC’s mission, mandate and strategic direction
• The services MC intends to provide directly, namely
  • establishing rules and requirements
  • resolving complaints and disputes
  • monitoring the marketplace to ensure appropriate levels of compliance

MC’s decision in its intent to use alternate service delivery (ASD) mechanisms for the following services:

• standard calibration
• prototype device approvals
• meter inspections
• installation inspections
• All stakeholders must be informed of the issues for discussion, however, the general consensus of the vulnerable parties must support all recommendations and decisions of the trade sector review (level of intervention and ASD)
  • General agreement from all stakeholders on all recommendations. Preferred weighting is given to the stakeholders in the trade transaction.
  • General support from third parties (those who are not parties to the trade transaction)

The following expectations of the trade sector review team will be fulfilled:

Measurement Canada Natural Gas Trade Sector review team members will facilitate the discussions not negotiate the outcome.

We will respond to all requests for information about or clarifications of the forum processes.

The final results of the review will be made available as soon as possible.

We will ensure that all input is heard and recorded equitably as defined in the decision criteria section of this paper.

We will make available all relevant background material to stakeholders.

We will provide a record of all forum discussions or results as soon as available.

As a participant in the open sessions these are our expectations of you:

We expect that you will bring forward your informed point of view.

We expect that you will listen to the views of others.

We expect that you will understand the framework of the sessions.;

We expect that you will demonstrate a willingness to participate in the process of obtaining consensus.

Appendix A

Measurement Canada’s Current Lines of Business

Measurement Canada fulfills its mission through the following programs:

a) Establishment of measurement specifications - the Program Development division of Measurement Canada is responsible for the development of specifications, regulatory amendments, policies and procedures for measuring devices. When a new measurement technology emerges on to the marketplace, it will be approved and inspected against regulatory specifications and test procedures. Specifications are consulted and developed with industry representatives.

b) Maintenance and calibration of measurement standards - Measurement Canada, through its Calibration Services Laboratory, owns and maintains measurement standards (reference) that are traceable to the National Research Council primary base units of measurement. Standards of mass, length, volume, temperature, pressure, and electricity are calibrated and certified. These measurement standards are used by government inspectors and accredited and non-accredited parties. Measurement Canada also calibrates industry standards that are used to calibrate or certify measurement devices.

c) Pattern approval of new measurement devices - Measurement Canada, through its Approval Services Laboratory, must approve all measuring devices intended for trade use in Canada. All new and modified devices are examined and tested with respect to legislative requirements for design, composition, construction, and performance. This service is intended to ensure a population of measuring devices which are reasonably accurate throughout their lifetime.

d) Initial inspection of new devices (verification) - Measurement Canada, through its field inspection staff, or accredited meter verifiers must inspect (initial inspection) measuring devices, unless exempted by the Act and Regulations, before they are used in trade. The intent is to ensure the devices meet approval criteria, are installed correctly and operate within the prescribed accuracy requirements before its service life begins.

e) Periodic inspection of in-service devices (re-verification) - meters for measuring electricity and natural gas are verified at specific intervals as set out by legislation pursuant to the Electricity and Gas Inspection Act. The intent is to ensure that previously verified gas meters, after being in use for a period of time, continue to operate within the applicablelimits of measurement error.

f) Inspection of installations - Measurement Canada, through its field inspection staff, inspect installations of electricity and gas metering systems where the impact of measurement error is high. The nature of some electricity and gas device installations are such that installation inspections are required to be performed on a periodic basis.

g) Commodity inspection - Goods and services traded on the basis of measure are inspected periodically to ensure that they are measured with prescribed tolerances. Commodities are generally inspected on a product/industry specific basis with emphasis placed on problem product/industries.

h) Complaint investigation - Measurement Canada, through its field inspection staff, will investigate complaints and advise affected parties of the result of the investigation, including where warranted, any corrective action instituted however, any compensation would normally be left up to the action of the parties involved.

i) Dispute resolution - Measurement Canada, through its field inspection staff, will investigate and resolve disputes via the dispute resolution process administered under sections 23 and 24 of the Electricity and Gas Inspection Act. This occurs when the buyer or seller of electricity or gas is dissatisfied with the condition of the registration of a meter or installation and cannot resolve the difference with the other party of the contract. MC authorizes compensation when warranted.

j) Accreditation of qualified organizations to perform inspection work of approved devices - An organization may be granted the authority to initially verify, re-verify, and certify trade weighing and measuring devices on behalf of Measurement Canada provided that it meets the requirements of the program. Accredited organizations are periodically audited by Measurement Canada to ensure that the program is being carried out according to the standard.

Appendix B

Team Members of the Natural Gas Trade Sector Review

The following are the team members of the Natural Gas Trade Sector Review:

Rick MacKay
Team Leader
Natural Gas Trade Sector Review
4940 93 Avenue
Edmonton, Alberta T6B 2L6
Tel: (780) 495-5331 Fax: (780) 495-7724
E-mail: mackay.rick@ic.gc.ca

Garry Larouche
Team Member
Natural Gas Trade Sector Review
875 Avenue Notre-Dame
Sudbury, ON P3A 2T2
Tel: (705) 671-0634 Fax: (705) 671-0635
E- mail: larouche.garry@ic.gc.ca

Benoit Montpetit
Team Member
Natural Gas Trade Sector Review
6850 rue Sherbrooke est
Montréal, Québec H1N 1E1
Tel: (514) 283-2847 Fax: (514) 283-1864
E-mail: montpetit.benoit@ic.gc.ca

One of the goals of the trade sector review process was to be open and transparent. To assist the team in achieving this goal two members external to Measurement Canada were requited. One from the consumer or end user side of the sector and one member from the natural gas industry.

Patrick Vanasse, Msc.
Option Consommateurs ( l’association des consommateurs du Québec)
2120, rue Sherbrooke est, Bureau 604
Montréal, Québec H2K 1C3
Tel: (514) 598-7288 poste 228 Fax: (514) 598-8511
E-mail: vanasse@option-consommateurs.org

Mr. Vanasse was recruited to the team to represent the position and perspective of the consumer, particularly the residential consumer, and the consumer associations. Mr. Vanasse’s experience in the Electricity Trade sector review process and his position at Option Consommateur makes him an invaluable member of this team.

Bob Kane
SaskEnergy
800 - 1777 Victoria Avenue
Regina, Saskatchewan S4P 4K5
Tel: (306) 777-9229 Fax: (306) 522-2217
E-mail bkane@saskenergy.com

Mr. Kane was recruited to the team to represent the industry position and perspective. Mr. Kane volunteered to be the representative from the Canadian Gas Associations Task Group for the trade sector review process. Mr Kane observed the Electricity trade sector review process on the behalf of the CGA giving him a unique understanding of trade sector reviews. His position at SaskEnergy gives him a thorough understanding of all facets of the natural gas industry.

Appendix C

Glossary of Terms

Accreditation Program - An alternate service delivery (ASD) program to recognize the competence of and enforce the performance of through auditing, of Accredited Meter Verifier’s (AMVs) to test and inspect measuring devices and installations on Measurement Canada’s behalf. Today, approximately 90 % of all new and reverified natural gas meters are inspected by Accredited Meter Verifiers.

Accuracy - Refers to the closeness of agreement of the measurement result of a meter under test with the true value as indicated by a certified standard.

Alternate Service Delivery (ASD) Mechanism - Is a creative and dynamic process of public sector restructuring that improves the delivery of services to clients. Examples of ASD:

The Measurement Canada’s Accreditation program that allows organizations to be granted the authority to provide inspection services on behalf of Measurement Canada provided that they implement a quality assurance program and comply with all of the requirements of the program;

Other delegated arrangement where organizations are conferred the authority and responsibility, under specific contract or not, to deliver a Measurement Canada program or service.

Approval process - The testing, evaluation and regulatory granting of approval for commercial use of a particular model or series of models (the type) of natural gas meter including any accessory device which may have an effect on the accuracy of measurement. The Electricity and Gas Inspection Act requires that all devices used for the sale of natural gas in Canada be subjected to this process to ensure that only gas meters capable of measuring natural gas accurately reach the marketplace. Once a meter type has been tested it will either be rejected or receive a Notice of Approval and approval number assigned to the specific meter type or model.

Canadian Forum for Trade Measurement (CFTM) - An annual face-to-face forum for discussing specific technical issues between Measurement Canada and industry and other stakeholders.

Consensus - general agreement, characterized by the absence of sustained opposition to substantial issued by any important part of the concerned interests and by a process that involves seeking to take into account the views of all parties concerned and to reconcile any conflicting arguments.

Note** consensus need not imply unanimity

Consumers’ groups - non-profit associations aimed at protecting the interests of the consumers. These associations intervene in various domains and their intervention aims at assuring that the political, legislative and statutory decisions take into account the needs and interests of consumers. These groups are invited to participate during Measurement Canada sector reviews.

Custody Transfer - point at where possession of the product changes carrier or ownership.

Dispute resolution service - Buyers and sellers of natural gas who are dissatisfied with the results of their measurement transaction and suspect a problem with the performance of the meter may request to have the matter investigated by Measurement Canada. A Measurement Canada inspector tests the disputed meter and reports the findings to all parties. Measurement Canada currently performs these dispute and complaint investigations and will continue to do so in the future.

Domestic metering - Refers to gas meters for residential or small business use.

Dominant Party - for the purpose of this discussion paper, the dominant party shall generally be considered the party in the transaction who owns the measuring device used in a trade transaction

Electricity and Gas Inspection Act (EGIA) - Sets out the rights and obligations of natural gas sellers (contractors) and purchasers and Accredited Meter Verifiers as well as the powers and duties of the Minister of Industry with respect to the natural gas trade. Measurement Canada administers and enforces the EGIA which applies broadly to any type of measuring apparatus and accessories used for the selling and purchasing energy.

Exchange Agreement - legal and binding contracts whereby one company agrees to trade products to each other with or without compensation.

Industrial gas meters - Gas meters for commercial and industrial use generally of high capacity

Intervention - The degree to which Measurement Canada involves itself in a given business sector or marketplace in terms of mandatory metrological programs, polices and requirements to ensure measurement accuracy and equity is achieved.

For instance, if trade measurement is important in a sector, as a minimum, it is necessary that the measurement standards in use be traceable to a recognized Canadian or international standard. Thereafter, depending on the characteristics of trade measurement used in that sector and the expressed needs of sector stakeholders, it may be necessary to ensure that either some or all of the following types of intervention are applied:

• Rules for fair product/service measurement are in place and are enforced, either reactively or proactively.
• Rules for device performance are in place and are enforced, either reactively or proactively.
• Redress mechanisms are established and enforced.

Legal Metrology - the science of measurement in legal trade transactions.

MC - Measurement Canada, an Agency of the Federal Department of Industry

Measurement Canada’s Marketplace Intervention Model - A decision making model that Measurement Canada uses to assess the relative potential need for intervention based on criteria developed in consultation with stakeholders and outlined in the report prepared by the firm KPMG entitled Recommended Structure for a Marketplace Intervention Model for Trade Measurement.

Meter - means a volumetric measuring device for use in trade

Metering installation - Encompasses the metering devices and service specific associated configurations.

Natural Gas Liquids (NGL’s) - a mix of liquids obtained during natural gas production and processing; it is a mix of ethane, propane, butane and pentanes (condensate) or portions thereof.

NIST - National Institute of Standards and Technology (U.S.)

NRC - National Research Council (Canada)

Quality management system - An organizational approach to management which is centred on quality, based on participation of all its members and which aims to achieve a long-term success through customer satisfaction and benefits to all members of the organization and to society.

Reverification - Periodically, each meter has its seal removed, is calibrated and reverified to start a new seal period life.

Seal extension - Involves extending the period of use of a specific group of gas meters of the same physical characteristics based on test results of a representative sample from the group. Based on the test results, the seal life of the group may be extended for a specified period of time.

Standards (Physical) - refers to the actual test equipment or physical measurement instrument usually calibrated or referenced to a national physical standard that is used to test trade measurement devices.

Standards (Written) - refers to written technical specifications, procedures and policies.

Trade - means the selling, purchasing, exchanging, consigning, leasing or providing of any
commodity, right, facility or service on the basis of measure and includes the business of
providing facilities for measuring.

Trade Sector Review - A decision making process, to review in consultation with informed
stakeholders, the appropriateness of our existing level of intervention in a sector. The result is a strategy and implementation plan outlining how Measurement Canada will work with the sector stakeholders on an ongoing basis into the future, to ensure equity and accuracy is achieved in a fair, cost-effective and transparent manner.

Vulnerable Party - party who is generally the purchaser of a product and who does not own or control the measurement equipment used in the transaction. The degree of vulnerability may vary from nil to high depending upon the capacity and ability of the vulnerable party to detect measurement errors, re-measure the product and have corrective measures taken where appropriate. The vulnerable party may be determined in some instances by the level of recourse available to them in a transaction, when measurement is suspect or inaccurate.