GasEDI IMPLEMENTING THE GISB STANDARDS IN CANADA - ELECTRONIC GAS TRADING Ian Anderson Gas Reregulation in Ontario Toronto /11/30

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading2 OUTLINE +Background +GISB Standards +Canadian Situation +Standard Contracts +Enforceability of Electronic Contracts +Further Information

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading3 GasEDI +Sponsors: 6CAPP - Canadian Association of Petroleum Producers. 6SEPAC - Small Explorers and Producers Association of Canada. 6CGA - Canadian Gas Association. 6CEPA Canadian Energy Pipeline Association. +Mission: 6Promote the development and implementation of North American business and electronic information standards to improve the competitive position of natural gas. !We believe all participants in the gas industry - including end use consumers - are best served by a vibrant, efficient, industry - from well head to burner tip.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading4 GISB +Gas Industry Standards Board (US): 6Sponsored by the US gas industry. +Developing business and electronic commerce standards for the gas industry: 6Applicable across North America. 6Input from Canadians.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading5 FERC +Federal Energy Regulatory Commission (US). +Public Conference /09/21: 6Too many differences in basic gas services. 6Difficult and labour intensive to manage gas: !Company managing energy - coal, heavy fuel, electricity, gas: customer effort to manage gas = 6 times the customer effort to manage equivalent amount of other energy types.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading6 GISB STANDARDS (1) +GISB (Gas Industry Standards Board) is developing business practice and electronic commerce standards: 6Canadians participate. 6US interstate pipelines must implement: !FERC mandate. 6Voluntary in Canada.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading7 GISB STANDARDS (2) 6Canadians affected because: !>50% of Canadian gas to US consumers. !Additional Canadian gas to Canadian consumers through US facilities. !US gas imported for Canadian consumers. !Canadians hold capacity on US pipelines.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading8 GISB STANDARDS (3) +Canadian GISB Implementation Task Force: 6Developed recommendations for Canadian implementation. 6Published report on 1997/03/18: !On GasEDI web site ( !Task Force membership drawn from about 20 organizations.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading9 GISB STANDARDS (4) +Transacting in Energy +Gas Day +Nominations Schedule, Intra-Day Nominations +Accounting Issues +Electronic Delivery Mechanisms +Capacity Release

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading10 TRANSACTING IN ENERGY +The standard unit of measure for nominations, confirmations, scheduling, measurement reports, allocations and invoicing: 6US: Dekatherms (Dth) !1 Dth = 1,000,000 Btu(IT). 6Canada: Gigajoules (GJ) !1 Dth = GJ. 6Mexico: Gigacalories (GC) !1 Dth = GC. 6Btu(IT) = International Btu (British Thermal Unit).

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading11 GAS DAY (1) +Canadian operators comply with the GISB standard gas day - beginning and ending at 9:00 am central clock time. 6To be consistent with other North American operators.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading12 GAS DAY (2) +Canadian implementation: 6Nominations based on 9:00 am - 9:00 am central clock time (CCT). 6Measurement reports and allocations based on 9:00 am - 9:00 am central standard time (CST) all year. 6Avoid the twice a year shift, and the 23 hour and 25 hour days, for measurements and allocations. 6This approach will avoid costs estimated at US$200/meter/year to change meters back and forth between standard time and daylight time.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading13 GAS DAY (3) 6Use OBAs (Operational Balancing Agreements) to absorb the variances caused by the nomination 24 hour period being not identical to the measurement 24 hour period during the half year the two periods are offset by one hour.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading14 NOMINATIONS SCHEDULE, INTRA-DAY NOMINATIONS (1)

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading15 NOMINATIONS SCHEDULE, INTRA-DAY NOMINATIONS (2) +Notes: 6All times are Central Clock Time (CCT). 6Firm Evening and Firm Intra-Day 1 Nominations have priority over (ie: can bump) scheduled interruptible service. 6Firm Evening and Firm Intra-Day 1 Nominations to a primary point do not have priority over scheduled firm service to a secondary point. 6Firm Intra-Day 2 Nominations do not have priority over scheduled service.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading16 NOMINATIONS SCHEDULE, INTRA-DAY NOMINATIONS (3) +Canadian implementation: 6Be aware that GISB standards are evolving towards a continuous, contiguous, transactionally based business process and that GISB members are exploring ways to reduce the amount of time required to approve a nomination.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading17 NOMINATIONS SCHEDULE, INTRA-DAY NOMINATIONS (4) 6Migrate to electronic transactions. The gas industry can only meet the GISB nomination / confirmation schedule through the use of standard electronic transactions. !Fax is not electronic, because an inbound fax is not automatically computer processable. 6Pipelines should adopt this schedule except in situations where current practices exceed the GISB standards.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading18 ACCOUNTING ISSUES (1) +GISB Standards: 6Measurements by the 5th business day. 6Allocations before or with the invoice. 6Invoice by the 9th business day. 6Settlement not standardized (anti-trust issue). !Expect settlement earlier than now, maybe as early as 12th business day. 6Prior period adjustments limited to 6 months. !Settle within 3 more months.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading19 ACCOUNTING ISSUES (2) +Gas production: 6Canada: !Wells produce gas. !Production in working interest shares. !Unmarketed gas carried with marketed gas. 6US: !Well owners produce gas. !Production per individual owner instructions. !Unmarketed gas stays in the ground.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading20 ACCOUNTING ISSUES (3) +Canadian implementation: 6Utilize financing arrangements to bridge any timing differences between Canadian and United States settlement dates. 6Examine implementation of OBAs at more interconnects.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading21 ELECTRONIC DELIVERY MECHANISMS (1)

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading22 ELECTRONIC DELIVERY MECHANISMS (2) +FERC requires migration to internet only by 2000/06/01. +Canadian Implementation: 6Implement GISBs electronic delivery mechanism standards. 6Adopt GISBs standard formats for transmitting electronic documents.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading23 CAPACITY RELEASE +The Task Force does not recommend implementation of GISBs capacity release standards in Canada. 6The Task Force is not aware of any problems with Canadas current practices. 6National Energy Board, 1995/02/02: !Secondary market … working well without regulatory oversight … continue to evolve according to the needs of the parties involved …

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading24 CANADIAN SITUATION +Already exceed many GISB standards. +Some challenges: 6Energy. 6Accounting deadlines. 6Electronic transactions. 6Change.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading25 STANDARD CONTRACTS (1) +Not mandated by FERC. +Developing usage momentum. +Electronic Commerce Trading Partner Agreement: 6On paper, signed in ink. 6Parties agree to be obligated to perform per electronic documents.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading26 STANDARD CONTRACTS (2) +Short-Term Gas Sale / Purchase Agreement: 6On paper, signed in ink. 6Standardized contract designed for gas sale / purchase up to 1 month. 6Actually being used for gas sale / purchase up to 1 year. 6GISB version in use for a few years. 6Canadian amendment being developed - should be available for use early !See

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading27 STANDARD CONTRACTS (3) +Electronic Contracting: 6Tape recorded telephone short-term gas sale / purchase agreements now fairly common. 6During 2000, GasEDI expects to develop: !Guidelines for electronic gas transportation contracting. !Data elements for electronic contracting. !See

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading28 GasEDIS ENFORCEABILITY OF ELECTRONIC CONTRACTS WORKING GROUP +Mission: 6Develop standards for enforceable electronic contracting for use by the Canadian gas industry. !These standards are to be compatible with GISB ((US) Gas Industry Standards Board) standards, and/or lead to requests for modifications to GISB standards. !Review legislation and monitor legislative proposals to assure the requirements of the Canadian gas industry are satisfied. !Monitor establishment of Certification Authorities.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading29 ISSUE: UNCERTAINTY +There is sufficient uncertainty regarding the enforceability of an electronic contract that commerce may be significantly adversely affected.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading30 OBJECTIVE: LEGISLATION +Create a legal environment in which electronic commerce can be carried out with ease and certainty. 6Commerce is a provincial issue.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading31 PROPOSED UNIFORM ELECTRONIC COMMERCE ACT (UECA) +The Uniform Law Conference of Canada (ULCC) has adopted a Uniform Electronic Commerce Act and has recommended it for enactment in all provinces. 6Purpose: Reduce legal risk for doing e-business across the country by eliminating uncertainty about the law that applies and by making the law suit the needs of modern commerce. 6Application: Beyond the scope of commerce to almost any legal relationship that may require documentation. 6See

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading32 SALE OF GOODS ACT +A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses. 6United Nations Convention on Contracts for the International Sale of Goods. 6This Convention has been adopted by Canadas federal government and several provinces.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading33 STATUTE OF FRAUDS +The Statute requires a note or memorandum of the contract signed by the party to be charged or the partys authorized agent. 6The memorandum must contain all the essential terms of the contract, including the identity of the parties. 6There is a strong argument that the note or memorandum need not necessarily be on paper, but the information must be accessible so as to be useable for subsequent reference.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading34 EVIDENCE ACT +Information should not be denied legal effect or enforceability solely by reason that it is in electronic form. 6A digitally signed document should be given equal weight to a manually signed document as evidence. 6If both a hardcopy and electronic version of a document are executed both should be kept.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading35 INTERPRETATION ACT +A legal contract should be interpreted to be in writing provided the information is accessible so as to be useable for subsequent reference. 6The law has endeavoured to take cognizance of, and to be receptive to, technological advances in the means of communication: !Teletype. !Fax.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading36 CANADA BILL C-6 (FORMERLY CANADA BILL C-54) +Restricted (mostly) to communications with the Canadas federal government. 6Will only apply to to situations specified in a schedule (opt in statute). +This bill also covers privacy issues. +Canada House of Commons passed on 1999/10/26, Canada Senate first reading on 1999/11/02. 6See ent/C_6/C_6_3/C_6_cover_E.html ent/C_6/C_6_3/C_6_cover_E.html

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading37 ELECTRONIC COMMERCE TRADING PARTNER AGREEMENT +Prior to passage of appropriate legislation, electronic transactions will likely be enforceable provided they are preceded by a paper-based Electronic Commerce Trading Partner Agreement. 6An Electronic Commerce Trading Partner Agreement should address the issues of enforceability, authenticity and integrity of the electronic transaction.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading38 ENERGY BOARDS +Alberta Energy and Utilities Board (AEUB): 6Electronic filing is being adopted. +National Energy Board (NEB): 6The NEB Act does reference documents being in writing and having a signature. !Nevertheless the NEB is moving to mandatory electronic filings for the fall of 2000 and is working on changing systems from paper to electronic to support this. +Ontario Energy Board (OEB): 6The OEB is cooperating with the NEB in developing electronic filing standards.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading39 WORKING GROUP REPORT +The Working Group will present its findings: 6Canadian Association of Petroleum Producers: ! Avenue SW, Calgary. 6Thursday, December 9, !9:30 am, Calgary time. !Tele-conference will be available. 6RSVP: Ian Anderson !Tel: !Fax: Further information:

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading40 DISCLAIMER +Information is published by GasEDI as a service - such information should not be considered a comprehensive treatment of any subject. Comments published by GasEDI reflect the views of individual authors and are not intended to provide legal advice. Readers should not act or rely on information provided by GasEDI without seeking specific legal advice.

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading41 SUMMARY +Background +GISB Standards +Canadian Situation +Standard Contracts +Enforceability of Electronic Contracts

GasEDI 1999/11/30GISB Standards in Canada - Electronic Gas Trading42 FURTHER INFORMATION +Contact: 6Ian Anderson !Project Manager, GasEDI jTel: jFax: jCell: jWeb:

GasEDI IMPLEMENTING THE GISB STANDARDS IN CANADA - ELECTRONIC GAS TRADING Ian Anderson Principal Consultant - I. S. Anderson & Associates Limited Business Reengineering Electronic Commerce EDI Avenue SW, Calgary, Alberta, Canada T2T 0B2 Tel: Fax: Cell: