ARCHIVED—Natural Gas Trade Sector Review — Recommendations For Establishing Measurement Canada’s Level of intervention in the Natural Gas Trade Sector

Table of Contents

1.0 Introduction

1.1 Purpose of the Report
1.2 Structure of the Report
1.3 Reference Material
1.4 Methodology of Consultation
1.5 Decision Making Criteria
1.6 Impact of Recommendations on Other Trade Sector Reviews
1.7 Stakeholder Reach
1.8 Conclusion

2.0 Acronyms

3.0 Recommendations (Summary)

4.0 Recommendations (Detailed)

4.1 Implementing
4.2 Performance Based Specifications
4.3 Impact analysis
4.4 Monitoring of the performance of measurement devices
4.5 Role of Measurement Canada should be publicized
4.6 Measurement Canada accelerate discontinuing its inspection services
4.7 Measurement Canada use a Standards Council of Canada accredited Standards Development Organization
4.8 Physical Measurement Standards
4.9 Approval of type for measuring devices
4.10 Varying degrees of intervention

Appendix A

1.0 Introduction

1.1 Purpose of the Report

This report contains the recommendations for establishing an appropriate level of intervention for Measurement Canada (MC) in the natural gas trade sector. These recommendations are the result of extensive consultation with sector stakeholders. The informed views of dependant stakeholders was deemed essential to this review. This review was conducted to ensure that established levels of intervention are appropriate to ensure equity and accuracy of measurement at a reasonable cost and risk to the parties involved in the measurement transaction.

The goal of this report is to summarize the consensus positions established through the consultation process and to provide MC senior management with the supporting rationale and considerations behind each recommendation.

1.2 Structure of the Report

The report has been structured to:

1.2.1 define the recommendation, provide some key considerations and define the basic implementation strategy;
1.2.2 identify the stakeholder groups who participated; identify the different measurement applications within the sector;
1.2.3 identify the current services and programs provided by MC and those recommended by the stakeholders.
1.2.4 provide an understanding of the consultation process used for this project;

1.3 Reference Material

Throughout the consultation, minutes were prepared for all stakeholder meetings. A Natural Gas Trade Sector review report entitled, A Discussion Paper on Establishing an Appropriate Level of Measurement Canada Intervention in the Natural Gas Sector, was issued to sector stakeholders in March 2002. The comprehensive information obtained since the inception of this project has been used to formulate this final sector report. All public documentation on this sector review, can be found on the MC Web site under the Trade Sector Review section.

1.4 Methodology of Consultation

A total of five multi-stakeholder consultations were held across the country that contributed to the recommendations for this final report. The Natural Gas Trade Sector Review (NGTSR) team conducted multi-stakeholder consultations to gain consensus from all of the stakeholders within the Natural Gas Trade Sector. The forums were scheduled to allow for the participation of all stakeholders regardless of geographic location.

The NGTSR team facilitated all of the consultations. The Measurement Canada team members did not negotiate the outcome of the sessions. At the first multi-stakeholder session conducted in Halifax the team presented MC’s current lines of business; Establishment of measurement specifications; maintenance and calibration of measurement standards; pattern approval of new measurement devices; initial inspection of new devices (verification); periodic inspection of in-service devices (re-verification); inspection of installations; dispute resolution; and accreditation to perform inspection work. These current lines of business were the basis of the discussions and the resulting recommendations came from these discussions.

The recommendations resulting from the discussion in Halifax were recorded in the minutes from that meeting. The minutes from the Halifax meeting were provided to all participants at the next session held in Montreal. The format of the discussions in Montreal followed the same structure as the meeting in Halifax; the recommendations from the Montreal session built on the recommendations from Halifax. All participants at each session were provided the minutes of the previous session or sessions.

Every person who attended any of the sessions was provided the results of each subsequent session and were provided the opportunity to voice any concerns regarding the changes made to recommendations that were agreed to at the session that they attended. The final recommendations have taken the results of all of the sessions any concerns raised into consideration.

1.5 Decision Making Criteria

Throughout the consultation, the team strived to achieve consensus amongst sector stakeholders for all recommendations. The following conditions were used to guide the discussions:

Stakeholder Support - all stakeholders involved in the consultation were encouraged to actively participate to the degree possible, however, certain conditions were established:

1. All stakeholders participating in the natural gas trade sector review had to be informed of the issues for discussion,
2. Consensus of the vulnerable parties had to support all recommendations and decisions of the trade sector review (level of intervention and Alternate Service Delivery (ASD) );
3. general agreement from all stakeholders on all recommendations. Preferred weighting was given to stakeholders in trade transactions;
4. general support from third party (those who are not parties to the trade transaction);
5. those stakeholders who express dissenting opinions during the consultation were given the opportunity to have their opinions recorded for future reference.

In Line With MC Mission and Strategic Direction - all decisions reached during the consultation had to agree with the mission and strategic direction set out by MC.

Sustainable - It was an important consideration that the recommendations can be implemented and be sustainable into the future.

International Competitiveness - The recommendations of the sector had to 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.

1.6 Impact of Recommendations on Other Trade Sector Reviews

It is understood that some recommendations contained within this report will impact on other trade sector reviews. The NGTSR recommendations may be reviewed and possibly considered by other trade sector reviews for adoption, however, the NGTSR recommendations remain applicable within its scope.

1.7 Stakeholder Reach

MC has ensured that the stakeholders who participated in the consultation were representative of the sector. It was deemed essential to have the input of the vulnerable parties¹ to the trade transaction and all informed comments were taken into consideration.

Representation from the sector included the major production companies; mid-stream companies; all of the transmission companies; local distribution companies (utilities); consumers both residential and industrial; and other provincial and federal regulatory bodies.

The team made a special effort to involve vulnerable parties. The residential consumer was represented on the NGTSR team by Patrick Vanasse, (Option Consumateurs was represented at all of the sessions by Mr. Vanasse) at the session in Halifax by Mr. Walter Nolan of the Halifax Regional Homeowners Association and in Toronto, Calgary and Vancouver by Mr. Peter Dyne of the Consumers Association of Canada. Industrial gas consumers were represented by the IGUA ( Industrial Gas User Association) and several of their members at the sessions in Montreal and Toronto. Industrial users in the Atlantic, Prairie and Northern and the Pacific regions were contacted and they chose not to attend or indicated during other discussions that they agreed with the position of their LDC or gas supplier. Other mid level consumers or consumer associations were approached to participate. Several of these groups chose not to participate and some of these consumers indicated that they agreed with the position of their service provider or gas supplier.

1.8 Conclusion

The NGTSR team would like to express sincere thanks to all participating stakeholders involved with this consultation. The exchange of information and dialogue throughout the project was always conducted in a courteous and professional manner. The team believes that it has met the stated objective of the project of achieving consensus through consultation. The principal goal of determining an appropriate level of intervention for MC in the Natural Gas sector has been achieved.
The team would also like to thank the staff of MC for their continued support and valued input received during the project. The team encourages the Senior Management Committee (SMC) of MC to review this report with the expectation of accepting and implementing the recommendations contained herein.

2.0 Acronyms

A list of acronyms used in this document is provided below for the reader’s reference.

ASDM - Alternate Service Delivery Mechanism
EUB - Energy and Utilities Branch (Alberta)
ISD - Innovative Services Directorate
LDC - Local Distribution Company (Utilities)
MC - Measurement Canada
NEB - National Energy Board
NIST - National Institute of Standards and Technology (U.S.)
NGTSR - Natural Gas Trade Sector Review
PDD - Program Development Directorate
NRC - National Research Council (Canada)
TSR - Trade Sector Review
SMC - Measurement Canada Senior Management Committee
SPS - Agreement on the Application of Sanitary and Phytosanitary Measures: a sub agreement of the World Trade Organization focussing on Food and health standards that affect international trade
TBT - Technical Barriers to Trade Agreement
WTO - World trade Organization

3.0 Recommendations (Summary)

1. Measurement Canada work closely with all stakeholders in moving quickly in implementing all of these TSR recommendations.
2. Measurement Canada continue to move to a more performance based approach to requirements and eliminate prescriptive based requirements where appropriate.
3. Measurement Canada develop impact and cost benefit analysis for changes to its intervention programs. Measurement Canada, through a consultative approach, determine the criteria that will define the triggers for implementing this analysis.
4. It is recommended that the role of Measurement Canada should be publicized and that this publicity should be directed towards consumers who believe that they have a problem with their gas meter that can not be resolved with their Local Distribution Company.
5. Measurement Canada should accelerate its efforts in discontinuing its inspection services of metering devices in order to promote viable alternate service delivery by accredited organizations.
6. Measurement Canada, in consultation with stakeholders, should develop effective mechanisms to allow for the ongoing monitoring of the performance of measurement devices within the natural gas trade sector.
7. It is recommended that Measurement Canada use a Standards Council of Canada (SCC) accredited Standards Development Organization (SDO) to develop written standards for measurement and performance specifications. This includes the criteria for approval of type and other technical specifications, ensuring that Measurement Canada is represented on the “Technical Committees” responsible for each specification.
8. Measurement Canada, while retaining its legal and statutory accountability, develop an ASD mechanism for the certification of physical measuring standards, including recognizing international certifying bodies, where the criteria for the certification of the measuring standards are deemed to be, as a minimum, equivalent to the requirements in Canada.
9. Measurement Canada , while retaining its legal and statutory accountability, develop mechanisms for the timely, responsive and efficient “approval of type” of measuring devices. This may include alternate service delivery mechanisms, as well as recognizing the test results of international certifying bodies, where the criteria for the approval of type are deemed to be, as a minimum, equivalent to the requirements in Canada.
10. Measurement Canada’s inspection services in the initial and periodic inspections of devices and installations for various trade transactions in the Natural Gas Sector should be subject to varying degrees of intervention justified by the degree of sophistication of the parties involved. Criteria must be developed to define the different transaction types and the parties involved in each transaction.

¹party who is generally the purchaser of a product and who does not own or control the measurement equipment usedin the transaction. The degree of vulnerability may vary from nil to high depending upon the capacity and ability of thevulnerable party to detect measurement errors, re-measure the product and have corrective measures taken where appropriate.

4.0 Recommendations (Detailed)

General

The recommendations resulting from the natural gas trade sector review can be divided into two separate but connected groups. The first group of recommendations can be described as general or philosophical in nature. These recommendations outline a direction or philosophy that Measurement Canada (MC) should take or adopt. If these recommendations are accepted then the next group of recommendations will be easier to implement. The second group of recommendations are based on MC’s current lines of business and would require some direct action or changes to the current processes currently in use by MC.

Recommendations one through four and the philosophy behind recommendation number seven are general or philosophical in nature. The implementation for most if not all of these recommendations can be completed with little or no extra resource implications. However, it will take a major shift in the corporate mind set of MC to effectively implement them. The second group of recommendations require direct action on the part of MC to be implemented.

Note: The priorities stated after each recommendation are defined as follows:

High: This recommendation has to be implemented to allow other recommendations to be effectively implemented or the stakeholders have expressed a need for this recommendation to be implemented as soon as possible.

Medium: This recommendation if accepted can be started immediately or can be delayed until such time as adequate resources are available. The implementation of other recommendations are not dependant on the implementation of this recommendation.

Low: This recommendation, while still important to stakeholders, does not require immediate implementation. Other recommendations are not dependant on this one. MC may already be addressing this recommendation through another sector review or through another ongoing program.

4.1 Implementing

Recommendation: Stakeholders recommend that:

1. MC work closely with all stakeholders in moving quickly in implementing all of these TSR recommendations.

Rationale: The stakeholders want the results of this review to move forward in a timely manner with MC's commitment to the implementation of these recommendations once approved.

Considerations (key factors): Establish a Stakeholder Implementation Team comprised of a representative of the major industry stakeholders and a MC member to coordinate the implementation of the recommendations as directed by MC’s Senior Management Committee or a steward from the SMC. The role of the team would be to facilitate the efficient, effective implementation of the NGTSR recommendations. The role of the industry member would be to help communicate the implementation plan to industry and to assist in ensuring that the resources required from industry for implementation were available. The role of the MC person would be to communicate the plan to MC personnel and all other stakeholders (primarily consumers) ensure that the resources required from MC for implementation were available and to represent the concerns of the vulnerable parties during any discussions.

Priority : High: In order to implement the rest of the recommendations this recommendation has to be accepted in principal first.

Responsibility Centre: SMC/ ISD /PDD

4.2 Performance Based Specifications

Definition: Performance criteria is less prescriptive and is based on the ability of the device or the organizations to meet performance related requirements. A performance based standard would describe the end result of a process and not how the end result should be achieved. Performance based specifications should specify, where possible, technical regulatory requirements in terms of performance rather than design or descriptive characteristics; give positive consideration to accepting as equivalent other forms of technical regulatory requirements, if satisfied that they adequately fulfill the objectives of the existing regulations; for Technical Barriers to Trade (TBT), ensure technical regulations treat products from one jurisdiction no less favorably than like products from another.

Current MC Practice: MC, generally speaking, develops specifications in isolation. The specifications prescribe to the end user how to meet the requirements. An example of a prescriptive specification could be the current sealing requirements. If the intent of the specification is to ensure that a device is sealed in a manner that prevents tampering or provides an indication of adjustment, then that is what the specification should say. The specification should not specify how to seal the device only what performance is expected of the sealing practice. To indicate that a seal is required at a specific location and another at a different location is prescriptive to indicate that it must be sealed to prevent tampering or to indicate any adjustments is performance based.

Recommendations: Stakeholders recommend that:

2. MC continue to move to a more performance based approach to requirements and eliminate prescriptive based requirements where appropriate.

Rationale: MC should develop and implement a policy requiring that all specifications, procedures, requirements be developed in a manner that ensures the requirements are performance based, where applicable. As stated in the Government of Canada Regulatory policy

• with regard to performance-oriented requirements specify, where possible, technical regulatory requirements in terms of performance rather than design or descriptive characteristics; give positive consideration to accepting as equivalent other forms of technical regulatory requirements, if satisfied that they adequately fulfil the objectives of the existing regulations; for TBT, ensure technical regulations treat products from one jurisdiction no less favourably than like products from another; for Agreement on the Applications of Sanitary and Phytosanitary Measures ( SPS ), ensure measures do not arbitrarily or unjustifiably discriminate where identical or similar conditions prevail; ensure technical regulations are no more restrictive of entry into markets than is necessary;
• with regard to international standards use available international standards, guidelines and recommendations where those standards achieve the regulatory objective;

Considerations (key factors): MC is currently heading in this direction in regards to specification development. To effectively implement this recommendation it will require an official policy fully endorsed by the SMC of MC. Some training for PDD and ISD personnel on the development of performance based specifications may be required.

Priority: ( High) Establish Policy investigate training requirements ASAP

Responsibility Centre: PDD
This recommendation may require additional resources beyond the Implementation team leader.

4.3 Impact analysis

Definition: An impact analysis is essentially a form of evidence based policy - making where proposals for specification or requirements are based on an objective assessment of available evidence. While there are different models for impact analysis they generally share four common aspects:

• An attempt to quantify the likely impacts or outcomes arising from specification proposals;
• A built in consultation requirement whereby affected parties and wider society can offer views before specifications are enacted;
• An indication of the alternatives which were considered before deciding on a specification (new or change) as the means of achieving the goals in question and ;
• An indication of how the specification or requirement will be enforced and what problems may be anticipated with achieving compliance.

Current MC practice: There is no indication that MC currently conducts an analysis of the impact of new or changes to specifications or requirements. The impact of new specifications or changes to existing specifications is not currently being done. A formal policy requiring consultation does not exist.

Recommendations: Stakeholders recommend that:

3. MC develop impact and cost benefit analysis for changes to its intervention programs. MC, through a consultative approach, determine the criteria that will define the triggers for implementing this analysis.

Rationale: The stakeholders indicated a high level of frustration when it came to reacting to new requirements that were developed by MC in isolation. The frustration grew from having these requirements dropped at their doorstep with the expectation of consultation after the fact. The stakeholders indicated that the specifications were brought forward without, in many cases, an explanation of the problem to be fixed, the extent of the problem, the inequity resulting from the problem or any indication of the expected costs to implement the requirements. With no formal policy requiring an impact of the proposed specifications or requirements and no formal policy requiring upfront consultation the frustration level of the stakeholders remains high.

Considerations (key factors): The following is a brief list of the considerations that will have to taken into account:

• How best might impacts be quantified e.g. through cost benefit analysis, order of magnitude analysis or other methods?
• To what extent should/ can policy making be evidence based? To what extent is such evidence (statistics and reports) available to policy makers and to what degree are information asymmetries likely to impede this approach?
• What effect will an analysis process have on the timing and throughput of policies?
• Under what circumstances will an impact analysis be conducted and what will be the impact on the quality of the specification?
• How do we ensure an implementation of an impact analysis process that is proportionate and effective?
• How will consultation processes be conducted?
• What are the implications on human resources?

For implementation in the short term ( 4^th Quarter 2002 / 2003 ) a joint working group could be established under the direction of the Stakeholder Implementation Team. In the medium term (September 2003 ) the JWG would define instances where a formal impact analysis would be required. T his JWG would also define the degree of analysis required and the process for completing this formal analysis in the long term ( April 2004 ).

The intent of the recommendation is not to have an impact analysis completed every time MC decides to do anything. However the impact (as simple as an order of magnitude) of the action should be thought out prior to implementing or proposing the action.

Priority: High ( Establish the JWG after first meeting of Implementation Team)

Responsibility Centre: PDD
This recommendation may require additional resources beyond the Implementation team leader.

4.4 Monitoring of the performance of measurement devices

Definition: Monitoring of measurement devices is a program established to gather objective evidence of the compliance of measuring devices within the natural gas trade sector. This monitoring program can be achieved through the gathering of data supplied by the industry stakeholders with MC verification of the veracity of the data, to MC conducting inspections of devices through product audits surveillance activity or any other method deemed appropriate by MC.

Current MC practice: MC does not have a monitoring process in place currently.

Recommendations: Stakeholders recommend that:

4. MC, in consultation with stakeholders, should develop effective mechanisms to allow for the ongoing monitoring of the performance of measurement devices within the natural gas trade sector.

Rationale: It is a part of MC’s strategic direction to monitor all sectors in an ongoing manner. MC has to ensure that there is a process in place that will allow MC to definitively state the level of compliance of measuring devices in use in Canada. This performance monitoring would be in addition to any monitoring that MC establishes for the purposes of “Market Place Monitoring”.

Consideration (key factors): This recommendation will be the largest commitment on MC’s behalf in regards to resources. If this recommendation is accepted it will require MC to dedicate resources on an ongoing basis. If we require data to be reported to us for aggregation MC will have to analyze the data and report on it.

For implementation in the short term (February 2003) review the progress made in the ETSR implementation and determine if the possibility of harmonizing resources exists. In the medium term (June 2003) the JWG established in recommendation #3 could and should be responsible for establishing some standards matrix of what data should be collected and reported on. The following is a brief list of possible data that could be used for monitoring the performance of devices within the natural gas trade sector.

• Dispute Data
• Compliance Sampling Data
• Acceptance Sampling Data
• Product Audit results
• Surveillance Audit results

Priority: Medium

Responsibility Centre: PDD / ISD
This recommendation may require additional resources beyond the Implementation team leader.

4.5 Role of MC should be publicized

Definition: The role of MC in the dispute process for natural gas customers is not widely known. The general public does not have a comprehensive understanding of their rights to a dispute.

Current: MC’s Marketing and Business Operations (MBO) is responsible for publicising MC’s role and responsibilities. This directorate fulfills this role through the MC web site and through public forums like the CFTM (Canadian Forum and Trade Measurement).

Recommendation: Stakeholders recommend that:

5. It is recommended that the role of MC should be publicized and that this publicity should be directed towards consumers who believe that they have a problem with their gas meter that can not be resolved with their Local Distribution Company.

Rationale: The consumer stakeholders indicated through their research that the role of MC was not well known. It was also indicated that consumers were not aware of their right to have a dispute investigation of their measuring device. The recommendation is specific as to the target for the publicizing of MC’s role. This recommendation is intended to be directed at the consumer who already believes that they have a problem with their gas meter, it is not intended to be a general publicity campaign.

Considerations (key factors): The intent of this proposal is to reinforce the importance of informing the consumer of their right to a MC conducted investigation or dispute. It was understood that the task of publicizing MC’s role is the responsibility of MC’s Marketing and Business Operations. This recommendation can be implemented by MC’s Marketing and Business Operations. MBO should review and analyse the data that was gathered in the Environics’s survey Data paper. MBO should also survey the LDC’s to determine when an enquiry is forwarded to MC for dispute action and determine if this is adequate.

For implementation follow the detailed implementation plan as outlined by Marketing and Business Operations Directorate : “DPSR stakeholders recommend that MC take a more proactive approach to providing information about the services available to address measurement related complaints.

A medium term priority was also given to a similar recommendation made by the electricity sector stakeholders. MBO will address both sector recommendations simultaneously.

The Federal Government has undertaken a number of initiatives to improve Canadians’ understanding of and access to government services. One of MC’s Government On Line (GOL) commitments is the establishment of an automated consumer and business complaint system. In addition to honoring GOL commitments, modifying MC’s Internet site and developing a more plain language approach to communication with business and consumers, MBO will pursue opportunities to participate in other Government of Canada initiatives (e.g., the Canadian Consumer Information Gateway Complaint Courier), as appropriate. Partnering with other departments will provide business and consumers with more visibility to MC’s services.”

Priority: Medium to Low

Responsibility Centre: MBO

4.6 MC accelerate discontinuing its inspection services

Current: This is currently an ongoing activity within MC. Innovative Services Directorate is currently responsible for the “meter shop questionnaire ” and determining when services will be withdrawn.

Recommendations: Stakeholders recommend that:

6. MC should accelerate its efforts in discontinuing its inspection services of metering devices in order to promote viable alternate service delivery by accredited organizations.

Rationale: MC’s current strategic direction regarding removing our direct intervention in the delivery of inspection activities corresponds with this recommendation. MC should not be a competing partner in the market place. Accelerating the removal of MC’s inspection services will promote the accreditation program and provide for a viable alternate service delivery mechanism.

MC’s human resources could be reallocated to the development of program delivery as a result of the strategic direction of this Trade Sector Review.

Considerations (key factors): MC must consider the capacity of accredited meter verifiers to provide the required inspections. MC is currently working with its district offices, as well as accredited clients, in order to acquire accurate data. MC will obtain data on the capacity of accredited organizations to provide services during surveillance audit activities. The demand for services still provided by MC will be obtained from MC district offices. MC will continue to provide meter shop services for the following types of meters until such time as decisions can be made regarding the further withdrawal of inspection services:

1. Multiple Customer Metering Systems
2. Telemetering Devices (includes AMRs, prepayment systems, pulse transmitters, etc. - refer to Bulletin GEN-19, a copy of which can be obtained from the MC's web site at the following direct link: Bulletins - General.)
3. Temperature Sensors, Digital Recorders, and Pulse Recorders
4. Rotary Meters
5. Turbine Meters
6. Mechanical Conversion Devices
7. Electronic Conversion Devices (includes flow computers)
8. Orifice Plates, Orifice Meter Runs
9. Compressed Natural Gas Dispensers (also known as NGVs)

For implementation in the short term ( May 2003) review the data gathered during surveillance activities in 2001. Determine if the current data is sufficient to make a decision regarding the removal of further inspection services. In the medium term ( September 2003 ) determine priorities for which inspection services to remove MC from first. Identify barriers to removing inspection services and develop incentives to support the removal of those services. Long term ( April of 2004 ) complete the removal from all inspection services for which adequate ASD mechanisms exist.

Priority: Medium ( AMV capacity has to be obtained)

Responsibility Centre: ISD

4.7 MC use a Standards Council of Canada accredited Standards Development Organization

Definition: The National Standards System (NSS) is the system for developing, promoting and implementing standards in Canada. The NSS is a complex rule-setting and rule-enforcing system with explicit formal processes to govern the relationships among its many member organizations. The NSS is coordinated by the Standard Council of Canada (SCC). There are currently four Standards Development Organizations (SDO) accredited by the SCC in Canada: the Canadian Standards Association (CSA), the Underwriters’ Laboratories of Canada (ULC), the Canadian General Standards Board (CGSB), and the Bureau de Normalisation du Quebec ( BNQ).

Current: MC does not currently participate in the NSS system although MC is participating in the development of international standards through OIML.

Recommendations: Stakeholders recommend that:

7. It is recommended that MC use a Standards Council of Canada (SCC) accredited Standards Development Organization (SDO) to develop written standards for measurement and performance specifications. This includes the criteria for approval of type and other technical specifications, ensuring that MC is represented on the “Technical Committees” responsible for each specification.

Rationale: This recommendation was brought forward in the position paper prepared by the Canadian Gas Association (CGA) recommendation # 7.1 and was fully supported by Option Consommateurs position paper recommendations #9 and #15. A NSS process of developing specifications ensures balanced representation on the Technical committees developing specifications. It ensures that all affected stakeholders have a say in the development. A formal process for developing specifications would ensure that stakeholders are involved early in the process eliminating, partially, the frustration experienced by some stakeholders. This recommendation is inline with the Government of Canada’s guidelines for development of regulations.

Consideration (key factors): The costs associated with standards development may be prohibitive. There are four SDOs in Canada. The SDOs make their money through either the sale of the standards they develop or through charging for the service of facilitating the development of the standards. The potential for the sales of any standard developed for MC is minimal. MC could develop a documented program and become accredited by the SCC as a SDO for performance standards for metrological devices. This option would be applicable to all trade sectors recommending a formal NSS process for specification development.

For implementation in the short term research the benefits of the NSS within other federal regulatory agencies, establish firm costs of contracting an SDO and of becoming an SDO and review the current state of MC’s gas related specifications. Investigate the process made in the ETSR implementation regarding this recommendation with the possibility of harmonizing resources and activities. In the medium term (June 2003) consult with stakeholders on prioritizing a list of specifications that require development or enhancement that could be developed using a NSS based process. Investigate the possibility of combining these efforts with the ETSR pilot process currently being developed.

In the long term (April 2005) implement the preferred method of using the NSS (either contract with an SDO or become accredited as an SDO).

Priority: High

Responsibility Centre: PDD
This recommendation may require additional resources beyond the implementation team leader, depending on the option or options selected.

4.8 Physical Measurement Standards

Definition: Physical measurement standards include pressure gauges, temperature gauges, linear measures , bell provers, transfer provers etc. Physical measurement standards also include any instrument used in calibrating or determining accuracy of measuring trade devices.

A trade device includes any ancillary measuring equipment that is used in the determination of the final quantity.

Current MC practices: Physical measurement standards owned by MC, owned by organizations accredited under the MC’s accreditation program, intended to be used for the inspection of trade devices are traceable to the national standard and are required to be calibrated and certified periodically by MC.

Physical measurement standards owned and used by industry for the repair and calibration of trade devices (other than for certification), are not required to be calibrated and certified by MC. Certain industry physical measurement standards may be traceable, while others may not.

Recommendations: Stakeholders recommend that:

8. MC , while retaining its legal and statutory accountability, develop an alternate service delivery (ASD) mechanism for the certification of physical measuring standards, including recognizing international certifying bodies, where the criteria for the certification of the measuring standards are deemed to be, as a minimum, equivalent to the requirements in Canada.

Rationale: It is recognized that measurement standard traceability is the foundation for the metrology practices in the natural gas industry in Canada. The use of improper or inaccurate standards may have severe consequences in terms of financial losses for trading partners. Stakeholders want to have the assurance that when standards are used to calibrate trade devices, the measurement standards and equipment used are appropriate, traceable and certified. Stakeholders consider that MC has a prime role to play in this area.

The discussion regarding this recommendation focused on the process that MC currently has in place. A lack of choice, turn around times, potential for damage during shipping were stated as reasons for the recommendation. Recognition of the test results from other international certifying bodies was suggested It was also suggested that recognition of SCC accredited calibration and testing laboratories should be investigated.

Considerations (key factors): The resources of MC’s calibrations services laboratory are being strained now. The current work load for this lab includes only those standards used by MC and accredited meter verifiers. If all of the recommendations contained in this sector review and the ETSR and DSPSR are accepted the work load for this lab will go beyond strained.

The stakeholders present indicated that it is important that MC continue to ensure that standards are maintained and calibrated and that they are traceable to national standards.

It was agreed to support the ongoing process within MC regarding the investigation into possible ASD for certification of physical standards such as pressure, temperature and linear measures. MC’s Innovative Services Directorate (ISD) is currently working on this process.

Priority: Medium

Responsibility Centre: ISD / Labs

4.9 Approval of type for measuring devices.

Definition: Testing prototype measuring instruments intended for trade use are evaluated for compliance with legislated requirements to ensure they are capable of measuring accurately under normal conditions of use and throughout their service lifetime and are approved for retail and/or commercial use.

Current: MC’s service standards indicate that a notice of approval will be issued within 90 calendar days of receipt of the instrument and all appropriate documentation if the instrument is found to be in compliance with the requirements.

Recommendations: Stakeholders recommend that:

9. MC , while retaining its legal and statutory accountability, develop mechanisms for the timely, responsive and efficient “approval of type” of measuring devices. This may include alternate service delivery mechanisms, as well as recognizing the test results of international certifying bodies, where the criteria for the approval of type are deemed to be, as a minimum, equivalent to the requirements in Canada.

Rationale: All stakeholders agreed that MC should be ultimately responsible for the approval of type process in Canada. The stakeholders agreed that there is value added to MC maintaining this responsibility and accountability for this process. This recommendation if accepted would address the perceived inefficiencies in the timeliness of the approval process. This recommendation could improve the process for approving new devices based on new technology.

Considerations (key factors): The recommendation is stated in a way that allows MC a great degree of flexibility. The stakeholders indicated that the intent of the recommendation was to make the approval process more responsive to the needs of the industry by improving the efficiency of the process.

For implementation in the short term (April 2003 ) establish a JWG ( industry and approval services laboratory personnel) review current service standards and establish realistic expectations for service delivery. Review efforts and progress in the ETSR implementation process to identify possibility of harmonizing efforts and resources. Medium to long term ( December 2003 / January 2004 ) review compliance to service standards and investigate possible ASD options if required.

Priority : Medium

Responsibility Centre: ISD / LABS

4.10 Varying degrees of intervention

Definition: Varying degrees of intervention means that all devices, all transactions, and all of the stakeholders within the natural gas trade sector do not require the same level of service or protection from MC. All devices or technologies should not be treated the same by MC. Not all devices should be treated the same in regards to frequency of verification or reverification. All parties involved in transactions of natural gas do not need the same level of intervention from MC. Different stakeholders have different needs in regards to their level of vulnerability and level of protection required by MC.

Current: MC generally regards all devices used for trade in the same way regardless of application and transactional parties. A domestic meter used to meter the consumption of a residential consumer is treated the same as an ultrasonic device used to measure the transaction between a transmission company and a LDC. Both of these devices are approved for use, both require initial verification, both require subsequent re-verification after a predetermined time in use ( seven years in both cases).

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 majority of the sector is based in Alberta with a growing and significant presence in Saskatchewan, British Columbia, Newfoundland and Labrador and Nova Scotia.

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.

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. Another midstream activity 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 local distribution company and onto the end user..

Metering in the upstream production sector and the mid stream processing sector is primarily orifice meters, flow computers, associated transducers, pressure both static and differential, and temperature. There are some energy determination devices (chromatographs) but they are not usually used in custody transfer situations. The energy determining devices are used for plant processing and energy in to energy out of the gas plant. There are some other measuring devices like vortex shedding ultrasonic, turbines but they are not a significant portion of the devices in this sub sector. Most of these devices are of a type approved by MC.

The devices may have been verified at the manufacturers location (in the case of orifice meters and orifice plates) but they are not usually re-verified in the field ( insitu ). MC does not currently have any inspections programs in this sector of the natural gas industry. Historically MC has not devoted resources in this area. The standards used for calibrating these devices are not certified by MC but they would have had traceability when first calibrated.

The transmission pipeline sector transports oil and natural gas from the production and midstream sectors to the distribution networks and to export. Together, the companies within this sector 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 flow lines 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.

Measurement occurs at the inlet to the transmission system (receipt), 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 MC approved, initially inspected (verified) and subsequently reinspected (re-verified) by MC 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.

Metering in the Transmission sub sector (including transmission to large industrial users, and transmission to local distribution companies) is primarily orifice meters, turbine meters, flow computers, associated transducers, pressure both static and differential, and temperature. East of the Alberta Saskatchewan border turbine meters become more prevalent. The industry has started introducing large ultrasonic devices, in the past several years, at those stations with high flow rates and a need for tighter or lower uncertainties. Energy determination devices are used extensively in this sub sector. Chromatographs are installed in line and at laboratories and are used to determine the energy delivered or transported down the pipeline. Some of these devices are used to determine the energy value of gas delivered to domestic, small commercial and light industrial users. Rotary meters and large diaphragm meters are used in this sub sector but not extensively.

All of the devices used for trade transactions within this sector are MC approved. All of the devices are verified initially, either at the manufacturers location or insitu. All of the devices are re-verified periodically as required. MC currently has an extensive inspection program within this sub sector.

The distribution 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 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. MC 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 MC inspectors or by accredited meter verifiers. The devices are re-verified at intervals prescribed by the Electricity and Gas Inspection Act .

Metering devices in this sub sector include small turbine meters, rotary meters, large and medium sized diaphragm meters, and auxiliary volume correcting devices both mechanical and electronic. Metering in this sub sector is under going a significant change in technology with the conversion to electronic devices and the introduction of new metering technologies like ultrasonic devices. This sub sector has the largest variance flow profiles and utilizes the most diverse types of metering devices.

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.

Recommendations: Stakeholders recommend that:

10. MC’s inspection services in the initial and periodic inspections of devices and installations for various trade transactions in the Natural Gas Sector should be subject to varying degrees of intervention justified by the degree of sophistication of the parties involved. Criteria must be developed to define the different transaction types and the parties involved in each transaction.

10 a) No Intervention:
Measuring devices used in trade transactions at points upstream of the transmission / receipt level of the market will be exempt from MC intervention with the agreement of the parties involved in the transaction.

Rationale: MC has little or no intervention in this sub sector now. The parties to the transactions have the resources to ensure that their interests are protected and that the metering is accurate. There are no truly vulnerable parties within these transactions.

10b) Low Intervention
Low level of intervention applies to the devices used in the following trade transactions: Transmission-Receipt, Transmission - Distribution utilities , Transmission /Distribution utility transactions with large industrial end use customers²
All devices used in trade will have MC approval of type (or ASD developed). The standards used for calibrating all measuring devices will be certified and traceable to national standards. All measuring devices will be installed and used to meet industry recognized standards for installation and use. The devices would be exempt from any requirement for initial or periodic verification.

Rationale: The transactional parties generally have the expertise to protect themselves in the transaction or they have the resources to obtain the expertise. Most of the metering installations have sophisticated metering with both parties to the transaction having duplicate or redundant measurement. Most transactions are governed by contracts that stipulate tolerance levels, dispute resolution, installation requirements etc. Physical measurement standards are traceable to recognized international standards. Measurement devices are approved by MC or an alternate service provider, with no MC mandated verification or re-verification. Installation design follows recognized standards (such as American Gas Association). Criteria for inspection are determined by the transactional parties. Contractual arrangements that are typically based upon daily loads are in place that includes a dispute resolution process. Both parties recognise a sophisticated measurement system is installed. The level and frequency of industry checks is such that MC intervention adds little value. The types of customers typically found in this criteria filter would include transmission company to LDC's plus large industrial customers such as power plants, pulp and paper mills, foundries, steel mills, manufacturing plants, etc. The total number of devices requiring exemption should not be very large.

10c) Medium Intervention
Applies to distribution sector transactions with small industrial and commercial customers

Rationale: This level of intervention includes all of the current intervention activities that MC employs. Devices in this level of intervention would be subject to approval of type, initial verification and subsequent re-verification, at the operational location in some cases. Standards used to calibrate these devices would be certified by MC or an ASD mechanism.

Devices in this level of intervention, particularly devices employing new technology should be evaluated and assessed against specifications developed using the NSS.

10d) High Intervention
Distribution sector transactions with residential customers.

Rationale: This level of intervention includes all of the current intervention activities that MC employs. Devices in this level of intervention would be subject to approval of type, initial verification and subsequent re-verification. Standards used to calibrate these devices would be certified by MC or an ASD mechanism.

Devices in this level of intervention, particularly devices employing new technology should be evaluated and assessed against specifications developed using the NSS.

Considerations (key factors): (No Intervention) The recommendation should require little direct MC involvement. The industry stakeholders should define the devices that they would like exemption for. If exemption by transaction is desired, or preferred, MC will have to investigate the regulatory implications. To exempt all devices based on trade transactions may require regulatory changes. Consideration should be given to defining the device types used and exempting based on the devices. The total number of devices requiring exemption should not be very large. Investigation regarding the numbers will have to be completed. The total number of companies who would fall within the exempted category again is not expected to be a large number.

(Low intervention) To exempt all devices based on trade transactions may require regulatory changes. Consideration should be given to defining the device types used and exempting based on the devices. The total number of devices requiring exemption should not be very large. Investigation regarding the numbers will have to be completed. The total number of companies who would fall within the exempted category again is not expected to be a large number. Investigation is required

This recommendation will provide the greatest saving to MC in regards to inspection related resources. The figures from the Prairie and Northern Regions year end report 2001-2002 indicate that the gas inspection program required approximately 2400 hours for almost 1400 devices with a focus on orifice meters and gas chromatography. Primary devices within this level of intervention.

(Medium and high intervention) The intent of these intervention levels is to ensure that vulnerable parties continue to be protected by MC mandated rules and enforcement activities. All devices will be subject to the requirements that are currently in place. Devices require approval of type, initial verification re-verification using standards that are certified and traceable. This level of intervention asks for flexibility in the criteria used for the verification and re-verification periods. It asks that the criteria take into consideration the technology of the metering device (one size does not fit all) and the degree of vulnerability of the parties to the transaction. The ASD of choice for any inspections required is the MC accreditation program

The resources required to fully implement this level of intervention is dependant on the acceptance of the other earlier recommendations. The flexibility of the criteria for verification is directly linked to the use of the NSS process for developing specifications.

Again defining the parties to this transaction and their respective degree of vulnerability should be the responsibility of the stakeholders with MC verifying the results. The parties to transaction applicable to this intervention level are clearly defined. A high level of intervention for the residential customer was strongly supported by both industry and consumers who participated in the discussions. MC resources for the accreditation program or the efficiency of the accreditation program may have to be reviewed.

For implementation MC will have to participate in the working group(s) established to determine the devices applicable to each level of intervention. To implement the “no intervention” level is logistically easy: continue with the status quo. To officially adopt this recommendation may require changes to the regulations, depending on how the recommendation is implemented. The process to exempt devices from verification and or sealing has to be defined within the context of the intent of the recommendation.

Implementation short term: Research the regulatory limitations and possibilities to accommodate the philosophy of varying levels of intervention in the inspection of devices and device installations. Determine acceptable levels of sophisticated stakeholders and measurement systems. Consult with stakeholders for each level of intervention ( none, low, medium and high). Consult with stakeholders to determine the most effective method of monitoring the agreements between transactional parties.(ie MC direct monitoring, industry monitoring and maintenance of data record and reporting....) Similar initiatives are pursued in the ETSR for Major Power Users over 3 Mwatts. Consult with ETSR implementation team to identify possible resource savings and synergies. Investigate current compliance levels.

Priority: High ( Stakeholders indicated that portions of this recommendation should be a high priority)

Responsibility Centre: PDD
This recommendation may require additional resources beyond the implementation team leader.

²Each jurisdiction has its own definition for large industrial end use customers, but in general, they arecustomers such as users of raw stock, power plants, steel mills, smelters, fertilizer plants, pulp and paperoperations, glass plants, and cement plants, whose transactions are covered by a contract and tariff agreement.

Appendix A

Natural Gas Trade Sector Review List of Participants

• Mr. J. (Jamie) Morrison, Actaris Metering Systems
• Mr. Bill Cheung, AEUB
• Mr. Clay Wickstrom, Alberta Energy & Utilities Board (EUB)
• Edgar Ma, Alliance Pipeline
• Mr. Robert Denholm, AltaGas Utilities Inc
• Clint Hoffman, AOT Services Partnership
• Troy Sheridan, AOT Services Partnership
• Mr. Daniel Cloutier, AQGN (Association Québécoise du Gaz Naturel)
• Mr. Ray St. Denis, ATCO Gas
• Mr. Larry Bruce, ATCO Gas (North)
• Mr. Brent Myck, ATCO Pipelines Inc.
• Mike Tarr, BC Gas
• Kevin Harms, BC Gas
• Mr. David Zerr, BC Gas Utility Ltd.
• Mike Hill, BC Hydro
• Allen Stanbury, Canadian Electricity Association
• Mr. John P. Krill, Canadian Gas Association
• Shahrzad Rahbar, Canadian Gas Association
• John O'Neill, Canadian Standards Association
• Glenn Tubrett, Canadian Standards Association
• Josée Gauthier, Canadian Standards Association
• Tony Joseph, Canadian Standards Association
• Bill Burr, Canadian Standards Association
• Mr. Bert Gano, Chevron Canada Resources
• Mr. William Follett, City of Edmonton
• Mr. Berni Brunsch, Conoco Canada Resources Limited
• Peter Dyne, Consumers Association of Canada
• Rick Bell, Daniel Canada
• Murray Fraser, Daniel Canada
• Mr. Darren McRae, Daniel Industries Canada-Division of Emerson Process Management
• Mr. J. A. ( Tony) Waring, DI Canada, Inc (Dresser Canada)
• Malcolm Beattie, Duke Energy
• Gordon Holte, Duke Energy Gas Transmission
• John Woods, Electricity Consumers Alliance NS
• Mr. Barry Goulah, Enbridge Consumers Gas
• Mr. John Monroe, Enbridge Consumers Gas
• Ms. Janet Holder, Enbridge Consumers Gas. Enbridge New Brunswick
• Ed Keef, Federation of Alberta Gas Co-ops
• Frank Sparks, Foothills Industrial Products
• M. Serge Gagnon, Gaz Métropolitain
• Raymond Gauvreau, Gaz Métropolitain
• Gaston Leclerc, Gazoduc TQM
• Walter Nolan, Halifax Regional Homeowners Association
• Tony Galati, Hydro One
• John Butler, INCO
• Andy Lemay, INCO Limited
• Mr Peter Fournier, Industrial Gas Users Association
• Phil Barg, Kenonic Controls
• Mr. Brad Perin, Keyspan Energy Canada Inc.
• Jacques-Yves Bourque, Kronos Canada,Inc
• Jim Moats, M&RS Controls Corp.
• Keith Cuthbertson, Maritimes & Northeast Pipeline
• Terry Court, Metering Services Hamilton Hydro
• Franci Jeglic, National Energy Board
• M. Patrick Vanasse, Option Consommateurs
• Mr. Peter Walker, Romet Ltd, Mississauga
• Mr. Bob Kane, SaskEnergy/TransGas Ltd.
• Mr. Peter MacLachlan, SaskEnergy/TransGas Ltd.
• Kevin Ouderkick, Ste Anne National Gas Co-op
• Gord Sweitzer, Ste Anne National Gas Co-op
• Rick Rans, TransCanada
• Ken Leier, TransCanada
• Alan Ranseth, TransCanada Calibrations
• Damian Flegel, TransCanada Calibrations Ltd.
• Mr. Jim Krause, TransCanada Pipelines
• Mr. Martin Schlebach, Ultrasonic and Gas Coriolis
• Mr. John Kiviste, Union Gas Ltd.
• Rick Aikens, Measurement Canada
• Benoit Montpetit, Measurement Canada
• George Smith, Measurement Canada
• Harold Larsen, Measurement Canada
• Ron Willms, Measurement Canada
• Don MacDougall, Measurement Canada
• Steve Nelson, Measurement Canada
• Garry Larouche, Measurement Canada
• Jean-Gilles Poirier, Measurement Canada
• Jim Kavanagh, Measurement Canada
• Marjolaine Beaudry, Measurement Canada
• Augustin Chan, Measurement Canada
• Gilles Vinet, Measurement Canada
• Luc Tessier, Measurement Canada
• Dan Williams, Measurement Canada
• Bill Palidwor, Measurement Canada
• Terry Reid, Measurement Canada
• Sonia Roussy, Measurement Canada
• Steve Tester, Measurement Canada
• Alan Johnston, Measurement Canada
• Randy Latta, Measurement Canada
• Bruce Lyng, Measurement Canada
• James Welsh, Measurement Canada
• Bill Cochrane, Measurement Canada
• Larry Wood, Measurement Canada
• Gordon Mark, Measurement Canada
• Michael Korpesho, Measurement Canada