1 1 RP-1999-0001 2 3 THE ONTARIO ENERGY BOARD 4 5 IN THE MATTER OF the Ontario Energy Board Act, 1998; 6 7 AND IN THE MATTER OF an Application by The Consumers' 8 Gas Company Ltd., carrying on business as Enbridge 9 Consumers Gas, for an order or orders approving or 10 fixing rates for the sale, distribution, transmission 11 and storage of gas for its 2000 fiscal year. 12 13 14 B E F O R E : 15 H.G. MORRISON Presiding Member 16 P. VLAHOS Member 17 S. HALLADAY Member 18 19 Hearing held at: 20 2300 Yonge Street, 25th Floor, Hearing Room No. 1 21 Toronto, Ontario on Tuesday, June 22, 1999, 22 commencing at 9:32 a.m. 23 24 VOLUME 1 25 26 27 28 2 1 APPEARANCES 2 JENNIFER LEA Board Technical Staff 3 DAVID BROWN Coalition of Eastern Natural 4 Gas Aggregators and Sellers 5 (CENGAS) 6 GEORGE VEGH Coalition for Efficient 7 Energy Distribution (CEED) 8 JERRY FARRELL Enbridge Consumers Gas 9 MARK MATTSON Energy Probe 10 MARK STAUFT TransCanada Gas Sevices 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 INDEX OF PROCEEDINGS 2 PAGE 3 Preliminary matters 5 4 Argument by Mr. Brown 11 5 Argument by Mr. Vegh 40 6 Argument by Mr. Mattson 49 7 Argument by Mr. Janigan (read by Ms Lea) 56 8 Examination by Ms Lea 57 9 Argument by Mr. Farrell 65 10 Argument by Mr. Stauft 81 11 Reply Argument by Mr. Brown 87 12 Ruling 119 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 EXHIBITS 2 NO. DESCRIPTION PAGE NO. 3 4 1 CENGAS Outline of Argument 63 5 2 CRTC Decision filed by CENGAS 64 6 3 Book of Materials provided by 64 7 Mr. Vegh 8 4 Respondent's Brief of Authorities 64 9 and References 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 Toronto, Ontario 2 --- Whereupon the hearing commenced on 3 Tuesday, June 22, 1999 at 9:32 a.m. 4 THE PRESIDING MEMBER: Good morning. 5 We are sitting today to consider 6 matters relating to a motion brought by the Coalition 7 of Eastern Natural Gas Aggregators and Sellers 8 (CENGAS). The motion is advanced under section 29 of 9 the Ontario Energy Board Act within the proceeding 10 under File No. RP-1999-0001, Enbridge Consumers Gas 11 application for rates for the fiscal year 2000. 12 The motion requests that the Board 13 exercise its power to forbear from regulating certain 14 aspects of service provided by Enbridge Consumers Gas 15 on the basis that these are more appropriately provided 16 by a competitive market. 17 The company resists the motion as 18 premature and, in the alternative, submits that it 19 should not be heard within the context of the 20 RP-1999-0001 proceeding. 21 Today we are considering only whether 22 the motion is one that the Board is required to hear, 23 and if we determine that it is to be heard another date 24 will be set to consider the merits of the motion. 25 With me today are Paul Vlahos and 26 Sheila Halladay. My name is Gail Morrison. 27 Could I have appearances, please? 28 MR. BROWN: Good morning, Madam 6 1 Chair. David Brown on behalf of the moving party, 2 CENGAS. 3 THE PRESIDING MEMBER: Good morning, 4 Mr. Brown. 5 MR. VEGH: Good morning, Madam Chair. 6 George Vegh on behalf of the Coalition for Efficient 7 Energy Distribution, which is currently comprised of 8 CanEnerco Limited and Sunoco Inc. 9 THE PRESIDING MEMBER: Good morning, 10 Mr. Vegh. 11 MR. FARRELL: Good morning, Madam 12 Chair. My name is Jerry Farrell, I represent -- 13 THE PRESIDING MEMBER: Mr. Farrell? 14 MR. FARRELL: Is my microphone not 15 working again? 16 --- Off record discussion 17 MR. FARRELL: I will just take a 18 moment and put me in a more direct line. It's 19 obviously a ploy to throw me off. 20 THE PRESIDING MEMBER: By whom, 21 Mr. Farrell? 22 MR. FARRELL: We're not sure. 23 --- Laughter 24 MR. FARRELL: Is that better? 25 THE PRESIDING MEMBER: Other 26 appearances? 27 MR. MATTSON: Good morning, Madam 28 Chair. Mark Mattson, counsel to Energy Probe. 7 1 THE PRESIDING MEMBER: Good morning, 2 Mr. Mattson. 3 MR. SCOTT: Good morning, Madam 4 Chair. Mark Stauft on behalf of TransCanada Gas 5 Services. 6 THE PRESIDING MEMBER: Good morning, 7 Mr. Stauft. 8 MS LEA: Jennifer Lea for Board 9 Technical Staff. 10 THE PRESIDING MEMBER: Good morning, 11 Ms Lea. 12 MS. LEA: Good morning, Madam Chair. 13 THE PRESIDING MEMBER: Are there any 14 other appearances? 15 Seeing none, to complete the record 16 we should note that we have received and reviewed 17 correspondence from counsel for Consumers' Association 18 of Canada; the Alliance of Manufacturers & Exporters 19 Canada; the Industrial Gas Users Association; and the 20 Ontario Association of School Business Officials and 21 Metropolitan Toronto Separate School Board stating 22 their positions with respect to this matter and 23 advising that they will not attend today. That 24 correspondence has been made part of the file. 25 To ensure that there is no 26 misunderstanding at a later date, the panel that is 27 sitting today is not necessarily the one which will 28 hear the company's rate application. If there are any 8 1 objections to this matter being determined by a panel 2 other than the one which will hear the main rate case, 3 those objections should be raised now. 4 Seeing none, it may assist counsel to 5 note that Panel Members have read all the submissions 6 and correspondence received to date in relation to this 7 matter and express submissions this morning can be 8 limited to highlighting the respective positions. 9 Do all counsel who have made 10 appearances expect to make submissions on this matter? 11 MR. BROWN: Yes. 12 MR. FARRELL: Yes, Madam Chair. 13 THE PRESIDING MEMBER: Mr. Vegh? 14 MR. VEGH: I do, Madam Chair, yes. 15 MR. STAUFT: Yes. 16 MR. MATTSON: Yes. 17 MS LEA: Madam Chair, for Board 18 staff, we do not expect to be making submissions with 19 respect to this motion this morning, except as it may 20 be necessary to assist the Board, with one exception. 21 I received an e-mail from Mr. Janigan 22 who represents the Vulnerable Energy Consumers 23 Coalition. He has asked me to put brief submissions on 24 the record on behalf of that Coalition. He did not 25 feel it necessary to appear in person today. So I will 26 do that during the middle of the submissions on his 27 behalf. 28 THE PRESIDING MEMBER: Thank you, 9 1 Ms Lea. 2 MR. FARRELL: Madam Chair, I should 3 note for the record, we have copies of the letters from 4 the Alliance of Manufacturers & Exporters Canada, IGUA 5 and Schools, but not CAC. So perhaps we could get a 6 copy. I see Ms Lea handing me one. 7 Thank you. 8 MR. BROWN: We are in the same 9 position, if Ms Lea has some extra. 10 MR. FARRELL: Madam Chair, I should 11 also note that -- 12 THE PRESIDING MEMBER: We are getting 13 more copies. 14 MR. FARRELL: -- you and your 15 colleagues should have a copy of three documents that I 16 will be referring to in the course of my argument. 17 One is my letter of June 14, 1999. I 18 am providing it to you only. That will be my guide as 19 I take you through my submissions when my time comes. 20 Another is the Board's Letter of 21 Direction dated February 10, 1999 to which is attached 22 the Forms of Notice of the RP-1999-0001 proceeding, and 23 I will be making reference to that in the course of my 24 submissions. 25 The other is something that is 26 grandly called Responding Parties Brief of Authorities 27 and References and it just contains some material in 28 relation to the CRTC and its forbearance powers that I 10 1 will be making reference to in the course of my 2 submissions. 3 In addition, of course, I will be 4 referring to the Motion Record that was filed in April. 5 THE PRESIDING MEMBER: Mr. Farrell, I 6 have the June 14 letter. 7 The second document you spoke of was 8 dated again, February -- 9 MR. FARRELL: Tenth 1999. It is the 10 Board's Letter of Direction. 11 THE PRESIDING MEMBER: Right. 12 Thank you. 13 MR. FARRELL: The third is a cerlox 14 bound volume -- booklet rather, entitled Responding 15 Parties Brief of Authorities and References. 16 THE PRESIDING MEMBER: I have that 17 as well. 18 Thank you. 19 MR. BROWN: Madam Chair, for the 20 Board's use I have also prepared an outline of the 21 argument that I will be presenting today and I will 22 provide you with copies of that now. 23 THE PRESIDING MEMBER: Thank you, 24 Mr. Brown. 25 --- Pause 26 MR. FARRELL: Perhaps before we start 27 I will just hand a copy of my material to the court 28 reporters so they have it for transcribing purposes. 11 1 THE PRESIDING MEMBER: Thank you, 2 Mr. Farrell. 3 MR. VEGH: To just identify the rest 4 of the paper that is in front of you, I put together a 5 book of materials with excerpts from the record and the 6 correspondence which I will be referring to in my 7 submissions. It is entitled Book of Materials, 8 June 22, 1999. 9 THE PRESIDING MEMBER: Thank you, 10 Mr. Vegh. 11 MR. BROWN: Madam Chair, I have had 12 some discussion with the case manager on this in terms 13 of the order of procedure today, and I understand that 14 since it is our motion and the Board is querying 15 whether it should hear the motion that I will lead off 16 and then my friends can follow after that. 17 THE PRESIDING MEMBER: I think that 18 is appropriate, Mr. Brown. 19 I think we would hear from you, hear 20 from any of the parties who are here who would be in 21 support of your position and then hear from Mr. Farrell 22 and those would oppose hearing the motion today. 23 So would you like to begin, 24 Mr. Brown? 25 ARGUMENT 26 MR. BROWN: Absolutely, Madam Chair. 27 As I indicated in the appearances, I 28 appear today on behalf of the moving party, CENGAS. 12 arg. (Brown) 1 The hearing that has been scheduled today, as I 2 understand it, is limited to two questions. 3 First, whether the Board is required 4 to hear the CENGAS motion. 5 Second, if it is, whether the motion 6 should be heard within the Consumers Gas rate 7 proceeding. 8 It is important, I submit to you, to 9 highlight exactly what is before the Board today 10 because, as I will deal with later, some of the 11 objections or concerns that have been raised with 12 respect to the CENGAS motion go more to the merits, 13 that is concerns about what the Board might do in 14 disposing of CENGAS' motion when it hears it. 15 Those concerns are certainly 16 something that can be raised, debated, argued and 17 submissions can be made upon them at the appropriate 18 time, but they go to the merits of the motion. 19 As I understand the procedure that we 20 have here today, the Board is not asking us to argue on 21 the merits of the motion or concerns about the effect 22 of the order that CENGAS is asking for. The issue is 23 simply: Should the Board hear the motion. 24 I wish to come back to that later in 25 my submissions because some of the letters that you 26 have received from various parties, in my submission, 27 go more to concerns about the merit from what they 28 would like to see being done and the disposition of the 13 arg. (Brown) 1 motion then actually whether the Board should hear the 2 motion. 3 In terms of the matter that is before 4 you today, Members of the Board, in my submission this 5 is a most important hearing. There is new Act in 6 place. It came in place last November. Under that Act 7 this Board was accorded powers that it did not have 8 before and some of its existing powers were continued. 9 The Act contained certain statutory 10 objectives and it will be my submission later on -- and 11 I will take you to those objectives -- that in 12 interpreting provisions of the Ontario Energy Board 13 Act, as you are effectively being asked to do today, 14 you must, in interpreting them, keep in mind the 15 statutory objectives that have now been clearly laid 16 out by the Legislature with respect to the regulation 17 of gas in this province, particularly the first 18 objective of the Act, which is the facilitation of 19 competition in the sale of gas. 20 This motion, or this hearing, I 21 submit, is somewhat extraordinary. It is not often 22 that counsel is called upon to explain to a Tribunal 23 why the Tribunal should hear a motion that counsel has 24 filed with the Board. 25 I highlight the extraordinariness of 26 the hearing today because, in my respectful submission, 27 the motion which CENGAS has filed is one that has been 28 duly filed, not only in accordance with the Board rules 14 arg. (Brown) 1 but, more importantly, with the provisions of the 2 Ontario Energy Board Act, 1998, which is now the 3 governing statute in this province regarding what is 4 going to happen with respect to gas regulation and, to 5 a certain extent, the procedure with respect to gas 6 regulation. 7 It will be my submission at the end 8 of the day that because the motion has been properly 9 filed before this Board, it is really incumbent upon 10 those opposing the Board hearing the motion to provide 11 this Board with cogent reasons why the statute does not 12 allow the Board to hear this motion, because the 13 statute will be the governing document. 14 With that by way of background, 15 before getting into why the Board should hear the 16 motion I would first like to recall and describe what 17 motion is actually before the Board. As I apprehend 18 some of the correspondence going back and forth, the 19 motion has not been described properly in its entirety. 20 As I have noted in the outline of the 21 argument, there are certain simple market imperatives 22 which prompted CENGAS to bring the motion before the 23 Board. The first is a very simple proposition that 24 there does now exist in North America a market for 25 billing services which are the crux of the motion that 26 we are bringing. These services are no longer a 27 monopoly service. 28 Second, Enbridge as the regulated 15 arg. (Brown) 1 utility at this present point of time treats billing 2 services as what I have termed a bottleneck; a 3 bottleneck monopoly service that is not equally 4 accessible to all who wish to provide the competitive 5 service. 6 It will be my submission on the 7 merits of the motion, if we get that far, that 8 certainly the new statutory regime that is in place in 9 this province requires the Board to look very carefully 10 at bottleneck facilities and the guiding principles 11 that those should be broken in the sense that they 12 should be made available and accessible to all who want 13 to provide the competitive service. That is the new 14 statutory reality, if I can call it that, with the 15 advent of the new act. 16 What CENGAS' motion is endeavouring 17 to do is, through the Board, to enact steps which will 18 break this now artificial bottleneck so that the 19 competitive market can operate with respect to the 20 billing and customer care services. 21 Those are the market imperatives 22 which found the motion which CENGAS is bringing. 23 In terms of describing the motion, 24 Madam Chair, when you introduced the motion this 25 morning you indicated that this is a motion under 26 section 29 of the Ontario Energy Board Act, and in part 27 it is. I think it is important to highlight for the 28 Board that there are four provisions of the Ontario 16 arg. (Brown) 1 Energy Board Act upon which CENGAS relies in bringing 2 this motion, and these are laid out in the motion 3 itself. 4 The four sections are section 23, 5 section 29, section 36(2) and section 36(4). 6 I will go through the application to 7 highlight how each of those sections come into play. 8 I raise the point because although 9 this motion does have a large section 29 component to 10 it, it is not only or simply a section 29 motion. 11 CENGAS is also relying on section 36 and section 23 to 12 obtain the relief that it is seeking. 13 What are the components of the relief 14 requested? 15 In my outline I have broken down the 16 four components as CENGAS sees them and as they are 17 articulated in the Notice of Motion, and I have tried 18 to indicate to the Board the various provisions of the 19 act which relate to each one. 20 The first is, if the Board hears the 21 motion, we are asking the Board to make a factual 22 finding, a determination as contemplated by section 29. 23 That factual finding is regarding the competitiveness 24 of billing, collection, customer accounting and other 25 related services, which I have called customer care 26 services. That factual finding is one in respect of 27 which we have filed evidence, as you know, from Messrs. 28 Trebilcock and Overcast, and that will be evidence that 17 arg. (Brown) 1 we will rely upon to urge the Board to make the 2 findings that we are asking for. 3 We are relying on section 29 as the 4 source of the Board's jurisdiction to make that factual 5 finding. 6 The second thing that we are asking 7 the Board to do is to refrain from exercising any power 8 in respect to customer care services, which it has 9 traditionally exercised through its ratemaking process. 10 Again, section 29 is the section we rely on. 11 The third part, however, that we are 12 asking for is as part of the traditional exercise of 13 jurisdiction by this Board under the Just and 14 Reasonable Rate section. Now it is section 36. We are 15 asking as part of your order fixing just and reasonable 16 rates in the rate case that you issue an order in the 17 case removing costs relating to the customer care 18 services from Enbridge's cost of service and rate base. 19 We are relying both on section 29 and 20 also on section 36(2) of the act which gives you the 21 power to do that. 22 When we get down to item number 3, we 23 are not simply relying on the forbearance provision; we 24 are relying upon the traditional powers which you will 25 have to bring as a matter of course to Enbridge's rate 26 application under section 36 of the act. 27 Finally, what we are also asking this 28 Board to do is to issue an order directing Enbridge to 18 arg. (Brown) 1 undertake such practices or steps as are necessary to 2 enable gas marketers to provide customer care services 3 in respect of general service gas consumers. We will 4 be asking you to do that again as part of your 5 traditional jurisdiction in fixing just and reasonable 6 rates. 7 For this part of the motion we will 8 be relying on section 36(4). 9 Perhaps I could ask you to briefly 10 turn to that. I have appended to my outline extracts 11 from the Ontario Energy Board Act, 1998. You will see 12 on the third to last page section 36. 13 Section 36(4) provides that as part 14 of your approval of rates you may make an order: 15 "...including conditions, 16 classifications or practices 17 applicable to the sale, 18 transmission, distribution... 19 including rules respecting the 20 calculation of rates." 21 In our motion we are asking you under 22 that section of the Act to make orders with respect to 23 certain practices -- and I will generally call them the 24 "breaking the bottleneck practices" -- that will be 25 required in order to implement these. 26 The other portion of the act that we 27 are relying on is section 23 of the act, which again I 28 have reproduced a few pages before. It is the general 19 arg. (Brown) 1 provision which provides that the Board in making any 2 order under the Act may impose such conditions as it 3 considers proper. 4 So if you make an order under 5 section 29 or under section 36, you may impose such 6 conditions as are proper. 7 I wish to highlight the fact that we 8 are relying on sections 23 and 36 for two reasons: 9 first, to indicate to this Board that in terms of the 10 motion being an appropriate one to be heard within the 11 rate case, we have in part tailored our Notice of 12 Motion to be directed towards the powers which the 13 Board will have to exercise in determining the matters 14 raised in the rate case. 15 Secondly, in terms of section 23 of 16 the Act, a number of parties have written to the Board 17 expressing concerns about what the Board might do if it 18 heard the CENGAS motion and granted some of the relief. 19 The concerns ranged from timing -- that is, when will 20 the unbundling and forbearance happen -- through to 21 "well, we still want to be able on behalf of our 22 customers to buy a regulated service". 23 The motion that we have framed in 24 part relies upon section 23, and it is certainly open 25 to the Board, when you actually hear the motion on the 26 merits, to craft whatever order, including whatever 27 condition you think is appropriate for the time and 28 place that we are bringing this. 20 arg. (Brown) 1 So to a certain extent the concerns 2 that have been raised by others are already addressed 3 in our Notice of Motion in terms of the sections that 4 we are relying upon. 5 In my respectful submission, it is 6 important that the parties and the Board keep in mind 7 the various sections of the Act that we are relying 8 upon because this is not only a section 29 motion, it 9 is a motion that relies on the powers that you will 10 have to exercise as a matter or course in the rate 11 case. 12 With that by way of background, I 13 will turn to the second issue, which is why should the 14 CENGAS motion be part of the Enbridge rate case; in 15 effect, why should the Board hear the motion and why 16 should it hear it as part of the rate case. 17 My submissions to you on this 18 particular point are really not complicated at all. My 19 first submission is that you have to hear the motion 20 because the statute requires you to hear the motion. 21 I would ask you to turn to section 29 22 of the act, which I have appended, as our motion relies 23 in part upon this section. 24 Section 29 is quite clear in its 25 language. Section 29(1) in part deals with the 26 procedure, and it reads: 27 "On an application or in a 28 proceeding, the Board shall make 21 arg. (Brown) 1 a determination to refrain..." 2 And then it goes on. 3 The opening language of section 4 29(1), in my respectful submission, clearly 5 contemplates and indicates that the legislature has 6 clearly sent a signal to this Board and to the parties 7 and participants who appear before the Board that if 8 they are looking for relief under section 29 of the 9 act, they can seek that relief in one of two ways. 10 They can bring an application, and the Board's rules 11 have various procedures for bringing that application; 12 or the can seek that relief in a proceeding. 13 The proceeding that is before you and 14 on which CENGAS has brought this motion is the 15 Consumers rate case. 16 We have styled this motion as a 17 motion within the rate case and, as I submitted to you 18 earlier on, in my respectful submission, the motion has 19 been properly brought in accordance with the plain 20 language of section 29(1) of the statute. The statute 21 allows us to bring this motion in the context of a 22 proceeding. The statute does not require us to 23 commence an application to bring this relief before the 24 Board. 25 Enbridge, in my respectful 26 submission, is placing much weight on the fact that we 27 should have been bringing it by way of an application. 28 As I will deal with later on, they are also asking for 22 arg. (Brown) 1 other procedural requirements to be read into section 2 29. 3 Section 29 is quite simple. The 4 language in its plain and ordinary meaning allows us to 5 do what we are doing because that's what the 6 legislature has said. In my respectful submission, not 7 only does section 29(1) allow us to bring this motion 8 within the proceeding that is now before you, the 9 Consumers rate case, but it requires this Board to hear 10 the motion as part of that rate case. That is what 11 section 29(1) says. 12 In my respectful view, if you do not 13 hear our motion as part of the Consumers rate case, 14 then you are not exercising the jurisdiction which the 15 legislature has clearly given to you under section 16 29(1) of the Act. The language of that section is 17 plain. In my submission, it's clear as a bell. 18 Whatever debate may go on about the 19 merits of the CENGAS action and what at the end of the 20 day, what order, if any, this Board should give in 21 considering the CENGAS application, in my respectful 22 submission, the one thing about which there can be no 23 doubt is the fact that the legislature has given to the 24 Board new jurisdiction and has turned its mind as to 25 how the Board and under what circumstances it should 26 exercise that jurisdiction and that includes hearing 27 this motion in a proceeding, which is what we are 28 doing. 23 arg. (Brown) 1 So my first, in my respectful 2 submission, the most cogent submission and argument as 3 to why this Board should hear the motion and should 4 hear the motion in the Consumers rate case is because 5 that's what the legislature says can be done and 6 there's simply no way around the language in section 7 29(1). 8 My second submission, however, deals 9 with section 36(4) because section 36 is the section 10 under which Consumers in large part proceeds in these 11 rate cases. 12 Section 36(4), which I read to you 13 just a few minutes ago, indicates that when the Board 14 exercises its jurisdiction under 36 in setting just and 15 reasonable rates, it may include conditions, 16 classifications or practices applicable to the sale. 17 As I described the CENGAS motion, in 18 part what we are asking you to do is to direct the 19 utility, Enbridge, to embark upon certain practices 20 with respect to certain services relating to the sale 21 of gas. To the extent that the motion is brought 22 within a rate case, it's a motion in part which also 23 relates to section 36(4). 24 Finally, with respect to why you 25 should hear the motion apart from the fact that, in my 26 submission, the legislation says that you should hear 27 the motion is that this motion is not something that 28 has no connection whatsoever to the materials that are 24 arg. (Brown) 1 before you in the rate case. 2 Putting it another way, the motion 3 that we are bringing in this rate case is relevant to 4 the issues that have been raised in this rate case. 5 Both my friend and myself in our 6 materials have put before you the Procedural Order 7 No. 2 that you issued some time ago, which is appended 8 to my outline. On the last page, item number 7 deals 9 with the unbundling of services, an item that came on 10 to the issues list as a result of the issues 11 conference. 12 Item number 7 is very comprehensive. 13 It deals with the scope of unbundling, cost allocation 14 and rate design, terms and conditions and 15 implementation timetable. Enbridge has filed some 16 evidence in respect of that. Others may file their own 17 evidence. 18 There will no doubt be much dispute 19 over the issues and how you should resolve item 20 number 7, but the simple fact is the issue of 21 unbundling is four square before this Board and the 22 Consumers Gas rate case and the CENGAS motion relates 23 to that issue. It is relevant and, indeed, I would go 24 higher and submit that it is material. 25 So at the end of the day, in my 26 respectful submission, the legislature requires you to 27 hear this motion and, secondly, the motion is material 28 to issues that are before this Board. 25 arg. (Brown) 1 To the extent that some say that the 2 rules of procedure that the Board fashioned back in 3 1997 do not contemplate the motion that we are bringing 4 give the Board some discretion as to whether or not 5 they are going to hear this motion, in my respectful 6 view, those rules, although they still apply, were 7 crafted at a time prior to the enactment of the Ontario 8 Board Act, 1998, and where there is some conflict or 9 discrepancy between those rules and the plain language 10 of the Act, the plain language of the Act clearly 11 applies. Therefore, the 1997 rules of the Board must 12 be read in light of the Act. 13 As I have submitted to you, the Act 14 contains plain language which requires the Board to 15 hear this motion. 16 For the final part of my argument, in 17 my submission, those are the reasons why the Board must 18 hear this motion. However, much correspondence has 19 passed between Mr. Farrell and myself over the past two 20 or three months on this motion and a number of 21 arguments have been advanced. In anticipation of my 22 friend, I wish to address those since they have been 23 before the Board and Madam Chair, as you have 24 indicated, the Members of the Panel have read that 25 correspondence. 26 As I apprehend the matter, there are 27 essentially five arguments that have been raised as to 28 why the Board should not hear this motion. Most of 26 arg. (Brown) 1 them have been raised by Enbridge. Some of them have 2 been alluded to by other parties. I have tried to 3 summarize them and I wish to give you my response to 4 each. 5 The first argument that has been 6 raised and was raised at an early date is that the 7 CENGAS motion does not address any matter which arises 8 during a proceeding. That language comes from the 9 existing rule. I think it's rule 12 or so that deals 10 with motions before the Board. 11 As I just indicated to you, whatever 12 the rules of the Board may now say must be read and 13 interpreted in light of the plain language of the 14 statute, in particular section 29. Section 29 says we 15 can bring the motion in a proceeding and that is what 16 we are doing. 17 Secondly, in terms of whether our 18 motion relates to any matter which arises during a 19 proceeding, as I have indicated to you, we have issue 20 number 7 on the issues list. 21 The second argument that was raised 22 at the beginning is that the relief requested by CENGAS 23 could affect all gas and electricity utilities in 24 Ontario, so a generic hearing should be held. I have 25 three responses to that. 26 The first response, and I may sound 27 like a broken record but it's important to emphasize 28 the response, is that no such restriction is contained 27 arg. (Brown) 1 in section 29 of the Ontario Energy Board Act. 2 As to the extent that we are relying 3 on that section for relief, there is nothing in that 4 section that says "Thou shalt only seek this relief in 5 a generic hearing". Those who advocate that position 6 are simply trying to read in language into the section 7 that is not there which is why, in my submission, it's 8 critical for the Board in the disposition of the 9 hearing today to give a clear signal to the market 10 participants that from here on in issues of regulation 11 and competition are under a new regime, the procedure 12 has changed and a new life to a certain effect has been 13 breathed into the market as a result of the provisions 14 of the OEB Act, 1998. 15 My second response to this generic 16 hearing argument is that the Canadian Radio and 17 Telecommunications Commission, the CRTC, has had to 18 consider a similar argument in the course of its 19 interpretation of section 34 of this Act which is a 20 forbearance section. 21 I know my friend is going to take you 22 through some of the other cases that the CRTC has come 23 out with later on during his argument and certainly 24 when we get to the merits of the argument and what the 25 Board should do and whether it should do everything we 26 are asking or only part of it, whether it should do it 27 now or whether it should do it later, much of what the 28 CRTC has to offer I think will be of assistance to this 28 arg. (Brown) 1 Board. 2 Dealing, however, for the moment 3 simply with the procedural issue that is before us here 4 today, if I could ask you to look at the CRTC decision 5 95-19, which I handed up with my outline of argument. 6 It's a 1995 decision of the CRTC, in this case dealing 7 with the forbearance proceeding in respect of services 8 provided by non-dominant Canadian carriers. 9 Without getting into the merits of 10 the motion, the CRTC had to face a somewhat similar 11 argument that has been advanced before the Board in 12 some correspondence, that is, you shall hold a generic 13 hearing. 14 If I could ask you to turn to page 3 15 of 6 of the decision, the CRTC responds to that 16 argument. In the section marked "Conclusions", under 17 item (a), the CRTC writes: 18 "Certain parties to this 19 proceeding question the 20 Commission's jurisdiction to: 21 (1) forbear from regulating the 22 services of certain carriers 23 while continuing to regulate the 24 offering of the same services by 25 other carriers; or 26 (2) issue a blanket forbearance 27 order relating to all 28 non-dominant carriers. 29 arg. (Brown) 1 In the Commission's view, 2 section 34 does authorize it to 3 forbear with respect to services 4 of only certain carriers. 5 When there is a material 6 difference in circumstances 7 among carriers, such that the 8 conditions for forbearance in 9 subsection 34(1) or 34(2) would 10 not be met with respect to some 11 carriers, it would be 12 inappropriate for the Commission 13 to do otherwise. Indeed, 14 depending on the circumstances, 15 to do otherwise may impair 16 unduly the establishment or 17 continuance of the competitive 18 market. 19 The Commission also 20 considers that section 34 21 authorizes it to issue an order 22 with respect to the services of 23 a group of carriers when the 24 conditions for forbearance apply 25 equally to the services offered 26 by all of the carriers in the 27 group." (As read) 28 So you can see, when faced with that 30 arg. (Brown) 1 argument, the CRTC, in effect, said, "We can issue an 2 order with respect to all carriers; we can issue an 3 order with respect to some carriers. The main point is 4 section 34 of the CRTC Act doesn't limit us as to what 5 we can do. We have a broad discretion under section 34 6 of the CRTC Act." 7 In my respectful submission, this 8 Board enjoys an equally broad discretion on this point 9 under the OEB Act. 10 If I can ask you to go back to 11 section 29 of the OEB Act, especially section 29(1), 12 not only may the Board hear this motion on an 13 application or in a proceeding, but under a section 29 14 motion the Board: 15 "... shall make a determination 16 to refrain, in whole or in part, 17 from exercising any power or 18 performing any duty." (As read) 19 You have the discretion under 20 section 29(1) as to the extent to which forbearance 21 should be issued. 22 You also, under section 23, have the 23 power to impose conditions on any such order you make. 24 Your discretion is very, very broad. 25 Then in section 29(2) the legislature 26 indicates to the Board, "Those parties in respect of 27 which a forbearance motion may be brought", and in 28 respect of which you may make an order, and the list is 31 arg. (Brown) 1 a comprehensive one, which includes, in 2 subsection 29(2), "any licensee", "any person who is 3 subject to the Act", and in subsection (e): 4 "Any product or class of product 5 supplied or serviced or class of 6 services rendered within the 7 province by a licensee or a 8 person who is subject to this 9 Act." (As read) 10 Very, very broad language. Nothing 11 to suggest that when you embark upon hearing a 12 section 29 motion that every potential person who may 13 be affected by the Act must be included in the generic 14 hearing. That is not what section 29(2) says. You may 15 exercise your powers in respect of those persons and 16 entities listed in that section. 17 So, in my respectful submission, a 18 suggestion that there must be a generic hearing simply 19 does not hold water in light of the plain language of 20 the Act. 21 My third response to this second 22 argument is that we already have the other gas utility, 23 Union, which has filed its proposal for unbundling. 24 Unless someone has come in the door over the last 25 20 minutes, I'm not aware of a representative of Union 26 Gas being here who is asking for this Board to hold a 27 generic hearing. There certainly has been no 28 correspondence to date by Union Gas asking for that. 32 arg. (Brown) 1 So to the extent that there should be 2 a generic hearing, you aren't hearing the other utility 3 jumping up and down saying, "Yes, yes, yes. Us too, us 4 too", which is in accord with the language of 5 section 29. 6 The third argument which I wish to 7 address, and one that I suspect my friend, Mr. Farrell, 8 will be dealing with in his submissions because it was 9 contained in his most recent letter to the Board, is 10 the notion that unbundling by an LDC is somehow a 11 precondition to hearing a section 29 motion; that is, 12 section 29 can only be considered and applied to a 13 product, a class of product, a service or class of 14 service which is already unbundled and subject to 15 regulation. 16 Now, I may be doing injustice to the 17 argument that has been advanced by my friend. Perhaps 18 I don't understand it. But to the extent that there is 19 a suggestion by the utility that section 29 cannot be 20 looked to by other market participants until the 21 utility decides to unbundle, until the utility decides 22 to take certain services and break them out, in my 23 respectful submission, simply flies in the face of the 24 plain language of section 29. There is not a whiff, a 25 hint, a scintilla or whatever in section 29 that this 26 Board can only hear a forbearance motion if a utility 27 has taken it upon itself to unbundle certain 28 services -- absolutely nothing in the Act that suggest 33 arg. (Brown) 1 that that is a precondition before entertaining any 2 such motion. 3 Secondly, not only is there any 4 suggestion in section 29 of the Act that that is a 5 necessary precondition, on the contrary, such a 6 precondition would be contrary to one of the statutory 7 objectives which the legislature has outlined to guide 8 this Board in its deliberations. 9 If I could take you briefly to 10 section 2 of the Act, which I have reproduced in my 11 extracts from the OEB Act. 12 Under section 2 the legislature has 13 enacted that this Board: 14 "... in carrying out its 15 responsibilities under this Act 16 or any Act in relation to gas, 17 shall be guided by the following 18 objectives:" (As read) 19 The first objective is: 20 "... to facilitate competition 21 in the sale of gas to users." 22 (As read) 23 It then goes on about just and 24 reasonable rates and other matters. But the first 25 statutory objective that the legislature has put there 26 is that the provisions of the Act are there in part: 27 "... to facilitate competition 28 in the sale of gas to users." 34 arg. (Brown) 1 (As read) 2 Section 29 was enacted I submit, in 3 part, to give the Board the tools that it requires to 4 achieve that objective, a tool or a jurisdiction that 5 it didn't previously have. 6 For a utility, be it a gas utility or 7 an electricity utility, to come before this Board and 8 say, "Well, just wait a second. Before you get into 9 section 29, there are all of these preconditions that 10 must be met and those preconditions are solely within 11 our power as to when they are going to take place", 12 doesn't lend itself to facilitating competition. 13 Indeed, it retards and it hinders the development of 14 the competitive market for gas or electricity in 15 Ontario. 16 Through section 29 of the Act and 17 through the objectives in section 2 of the Act, I 18 respectfully submit that the legislature has indicated 19 to the gas and electricity markets in this province 20 that the timing of competition now rests in the hands 21 of this Board. 22 The Board has been granted powers to 23 facilitate competition. No longer will the ability to 24 provide competitive services rest, in part, with the 25 timing of the utility, the one that controls the 26 bottlenecks. Those days are over. 27 Although this Board must take into 28 account, when determining how to facilitate competition 35 arg. (Brown) 1 and how to exercise its forbearance powers, matters of 2 timing and how any order will affect other parties, at 3 the end of the day that is a determination of the Board 4 and the legislature has charged this Board with that 5 duty and it is no longer up to the utility to set the 6 timetable. 7 That is, in my respectful submission, 8 a critical point for this Board to remember when 9 considering what has been termed the threshold motion 10 today. 11 Whether at the end of the day the 12 Board throws our motion out of this hearing room after 13 it hears all the evidence is something that we will 14 have to deal with at that time, but the Board I submit 15 is charged to consider the matter when a market 16 participant has brought it before you. 17 Continuing further with this third 18 argument that has been advanced, that is that there 19 must be unbundled services there before the Board can 20 consider a forbearance application. There has been a 21 suggestion made in Mr. Farrell's June 14th letter that 22 somehow the customer care services, in respect of which 23 we are seeking relief, don't exist. 24 I'm somewhat baffled by that position 25 on the part of Enbridge because if the services didn't 26 exist none of us would be here today. We are fighting 27 over how those services should be provided to the 28 consumers, and CENGAS is bringing a motion saying there 36 arg. (Brown) 1 is now a competitive market for their services. 2 In my respectful submission, although 3 the services are currently provided by Enbridge in a 4 bundled form doesn't detract from the simple realistic 5 fact that they exist and that gas customers in this 6 province, through their rates, are paying for those 7 services and have for years and decades. 8 So for Enbridge to say that they 9 don't exist just doesn't make sense. 10 My final point on this argument is 11 that quite apart from Enbridge's position not making 12 sense, the evidence which we have filed, and which we 13 will be asking you to consider as part of our motion, 14 amply shows that a competitive market exists for those 15 services. 16 Now, I am straying over into the 17 merits of the case and probably I shouldn't be doing 18 that, but there is a certain air of unreality when a 19 utility comes before this Board and says, "Don't hear 20 the motion because what the other side is asking you 21 for relief on doesn't exist." That just doesn't make 22 sense, and it is not a proper interpretation of 23 section 29. 24 The fourth argument that has been 25 raised is that if CENGAS' motion is granted it would 26 result in a certain unfairness to Rate 1 and Rate 6 27 customers who cannot purchase regulated market 28 services. 37 arg. (Brown) 1 This is a position that has been 2 raised by Enbridge. To a certain extent I think both 3 Mr. Thompson and Mr. Brett, in their letters to you, 4 have alluded to that concern, or touched upon that 5 concern in different ways. 6 IGUA and the Schools have both 7 indicated that certainly for a certain period of time, 8 they think that their customers and clients would like 9 to buy a regulated service after unbundling. That is 10 really an argument, in my submission, that goes to the 11 merits of the motion. 12 As I have read to you, section 29 13 says that you, after making a factual determination, 14 may decide to forbear in whole or in part. Certainly 15 when considering the matter and exercising your 16 discretion in that respect you will have to consider 17 whether you should grant our motion in whole or in part 18 if we have allowed you to make the appropriate factual 19 determination. 20 It is at that point of time that the 21 concerns raised by Mr. Thompson and Mr. Brett, and by 22 Enbridge to a certain degree, can be argued before this 23 Board and you can make your decision. 24 But that is not an argument that goes 25 to whether or not you should hear the motion, that goes 26 to the order that should be crafted in the event that 27 you decide to grant the motion. 28 The fifth and final argument, as I 38 arg. (Brown) 1 apprehend the positions of various parties that has 2 been brought to say you shouldn't hear the motion now, 3 is a suggestion that in order to bring a section 29 4 motion CENGAS must bring a section 36 application. 5 I have already dealt with that. 6 Simply not in the plain language of section 29. 7 Section 29 says "On an application or in a 8 proceeding..." End of sentence. That is what the 9 Legislature has decided. 10 There is no requirement in the Act 11 that we must bring an application. The Legislature 12 says elsewise. 13 When the Board, in the fullness of 14 time -- and once it has been able to, I suppose, catch 15 its breath after the hectic pace of the last few months 16 and what will be a hectic pace for the next few 17 months -- gets around to revisiting the 1997 rules, no 18 doubt they will be brought up to date and those rules 19 will have to accord with the Act. One of the things 20 that will have to be brought into place is making sure 21 that the rules reflect the plain language of 22 section 29. 23 That is a matter of cosmetics for 24 later on down the line. The legislation is there. 25 By way of summary, those are the 26 arguments, as I understand them, that have been 27 advanced as to why you shouldn't hear the motion and 28 shouldn't hear the motion as part of the rate case, and 39 arg. (Brown) 1 I have given you my response. 2 Other arguments may be raised. I 3 will deal with those in reply. I may have 4 misapprehended some of Enbridge's positions. I can 5 deal with that in reply as well. 6 But at the end of the day, most of 7 the arguments that have been raised, in my submission, 8 boil down to Enbridge trying to get this Board to read 9 into the plain language of the Act, section 29 and 10 section 36, procedural requirements which simply are 11 not in the statute. 12 I have indicated to you, and I repeat 13 again, that in interpreting the language of the statute 14 you should be guided not only by the plain and ordinary 15 language of the statute, but also the principles that 16 the Legislature has now put before you in section 2, 17 which includes facilitating the competitive market. 18 In my respectful submission, this is 19 a simple matter. There is a motion that is relevant to 20 an issue in a proceeding that is countenanced, approved 21 and authorized by provisions in the Act. It is, 22 therefore, properly before this Board and I would 23 respectfully submit that the Board should order that 24 the motion should be heard as part of the Consumers 25 rate case. 26 Those are my submissions. 27 THE PRESIDING MEMBER: Thank you, 28 Mr. Brown. 40 arg. (Brown) 1 Are there parties who wish to support 2 Mr. Brown's position? 3 ARGUMENT 4 MR. VEGH: Thank you, Madam Chair. 5 If I can make my submissions now. 6 As I have indicated, I have prepared 7 a book of materials which I would like to take you to 8 briefly. 9 My client's submission is that the 10 CENGAS motion should be heard and it should be heard in 11 the context of the rates case. 12 Mr. Brown has made his submissions on 13 the basis that the Board has no discretion and must 14 hear his client's motion. My submissions don't have to 15 go that far. They are based on the assumption that the 16 Board does have discretion under its rules to hear the 17 motion, and the question therefore is whether and how 18 this motion should be heard. 19 I would like to take you, if I could, 20 to Tab 1 of my materials. Tab 1 is this Board's Rules 21 of Practice and Procedure and I would like to refer to 22 Rule 1.01. I think the numbering of this rule is 23 appropriate because it really is "Procedure 101". 24 The rule says that: 25 "These rules shall be liberally 26 construed in the public interest 27 to secure the most expeditious, 28 just, and least expensive 41 arg. (Vegh) 1 determination on its merits of 2 every proceeding before the 3 Board." 4 So the question that the Board is 5 asking itself today can, in my submission, be resolved 6 to the question of what is the most expeditious, just 7 and least expensive means to determine the merits of 8 these proceedings. 9 I am referring to both proceedings, 10 the Enbridge rates case and the CENGAS motion. 11 In my submission, the answer to that 12 question is that the Board should hear the motion and 13 the evidence in the context of this rates case and, in 14 particular, in the context of issue 7 in this rates 15 case which Mr. Brown took you to, unbundling of 16 services. 17 By reference to the criteria in 18 Rule 1.01, approaching it this way is just because 19 Enbridge has already provided evidence on its proposal 20 for unbundling customer care in this case, and it is 21 just to hear alternative proposals on the same issue. 22 It is expeditious and it is the least 23 expensive approach because, again, the issue of 24 unbundling is on the table in this case, and in my 25 submission there is no need to convene a new panel or 26 to start a new process to deal with that issue. 27 Now, this may seem a rather 28 simplistic response in light of the complex road by 42 arg. (Vegh) 1 which this motion arrived here today, but really it has 2 arrived here by a complex road, or a twisted road, but 3 it is at a fairly familiar place. 4 We are in a case where there is an 5 issue on the table of unbundling. Enbridge has filed 6 evidence, CENGAS has its own proposal, other parties 7 may come up with their own proposals on unbundling, the 8 deadline for filing evidence still hasn't passed and 9 there is no reason, in my submission, why this motion 10 and this evidence should not be heard. 11 As I have mentioned, the road here 12 has been twisted, and I think it has become an overly 13 complicated issue in light of the fact that this matter 14 is now on the issues list. So I think it is helpful to 15 address briefly how the process around this motion 16 became so complicated and, in my submission, overly 17 complicated, and why it is that this issue is no longer 18 complicated and may be simply dealt with as part of the 19 rates case. 20 The important point for this purpose 21 is that when CENGAS originally commenced its motion 22 unbundling of customer care was not addressed in the 23 context of the rates case. 24 If you turn to Tab 2, which is the 25 Board's letter of April 1 to Mr. Brown on this motion, 26 the second full paragraph starts: 27 "The Board notes that the 28 subject matter addressed in the 43 arg. (Vegh) 1 CENGAS motion is not part of the 2 pre-filed evidence provided by 3 Enbridge Consumers Gas." 4 Well, the subject matter of the 5 motion is now in the evidence filed by Consumers Gas, 6 in the supplementary evidence. It was largely because 7 this evidence was not on the table that the Board 8 required the parties to make submissions on how this 9 matter should be addressed but, as I said, since then 10 this evidence is on the table and the CENGAS motion and 11 evidence is really directed towards the same issue as 12 the evidence put forward by Enbridge, it is an 13 alternative proposal and it should therefore be treated 14 as part of that issue. 15 At Tab 3 of the issues lists -- which 16 I don't have to refer you to, Mr. Brown has already 17 done that. 18 If we could just go to Tab 4, this is 19 a portion of Enbridge's evidence on unbundling of 20 customer care. I don't want to get, obviously, into 21 the merits of this evidence, but I would just like to 22 address Enbridge's statements in that evidence on the 23 purpose and function of its evidence. 24 If you could go to Question 5, the 25 question is: 26 "Why is the Company bringing 27 forward its proposal...?" 28 This is its unbundling proposal 44 arg. (Vegh) 1 including customer care. 2 The second last full sentence in that 3 paragraph reads: 4 "Since the Board has elected to 5 await the determination of these 6 other matters..." 7 That is some matters that aren't 8 relevant here: 9 "...the Company believes that 10 bringing forward its views is 11 essential at this time to 12 maintain the forward momentum in 13 the development of a more 14 competitive natural gas 15 marketplace in Ontario." 16 So the proposal and its relation to 17 the development of a more competitive natural gas 18 marketplace in Ontario is an issue in this case and it 19 is addressed in the evidence. 20 Obviously there are concerns with how 21 Enbridge proposes to deal with this -- we don't have to 22 deal with that now -- but the point is that the CENGAS 23 evidence is an alternative view on this same issue, 24 that is, how to bring about a more competitive natural 25 gas marketplace in Ontario. That alternative should be 26 heard at the same time that Enbridge's evidence is 27 heard. 28 Again, without getting into the 45 arg. (Vegh) 1 merits, CENGAS has filed its material. It is 2 substantive material. The reason I say that is because 3 it is not the sort of evidence that this Board should 4 just summarily dismiss. A substantial piece by Michael 5 Trebilcock, who is well-known to this Board and served 6 as the Research Director on the Market Design 7 Committee. It is not the sort of evidence that would 8 typically be summarily dismissed on a preliminary 9 basis. 10 Question 6, turning the page. There 11 is an important point here. The question is: 12 "Does the proposal attempt to 13 find industry agreement...?" 14 The answer is basically no. 15 But if you look at the sentence 16 starting -- the third sentence from the end, the 17 sentence starting "Enbridge Consumers Gas". It says: 18 "Enbridge Consumers Gas is of 19 the opinion that bringing 20 forward a detailed proposal..." 21 Which it has done: 22 "...that garners both the 23 Board's and other industry 24 stakeholders' feedback will 25 provide insight on the process, 26 and will favour the resolution 27 of issues." 28 Skipping a sentence, it reads: 46 arg. (Vegh) 1 "The Company believes that 2 gaining approval in principle 3 for its proposal at this time 4 will assist in resolving these 5 outstanding issues." 6 The evidence says that the company is 7 seeking approval. Obviously what the company needs is 8 some direction on these issues from the Board, and it 9 is seeking that direction in this case. 10 For the Board to give Enbridge some 11 direction, in my submission, the Board should clearly 12 be hearing what are alternative proposals. So what 13 alternative directions can the Board give to Enbridge 14 apart from just the Enbridge proposal. 15 The same point is made a few times 16 throughout the evidence and I don't want to take you to 17 all of them. Just perhaps in Question 9 there is 18 evidence on the targeted implementation date, and 19 Enbridge says the first step of meeting the 20 implementation date is: 21 "Approval in principle ... on 22 the Company's proposal." 23 Turning over the next page, the 24 detailed work plan, point 1, is to: 25 "Garner feedback and direction 26 from both the Board and other 27 stakeholders on this proposal". 28 Well, that is what this CENGAS motion 47 arg. (Vegh) 1 is, it is an alternative proposal. Again, there may be 2 evidence from other parties. 3 So my submission is that the CENGAS 4 motion should clearly be heard in the context of this 5 rates case because Enbridge has already filed evidence 6 on this same matter and the Rule 1.01 says the 7 appropriate approach is what is just, expeditious and 8 least expensive. 9 I would just like to refer briefly to 10 the document at Tab 5, which is where Enbridge sets out 11 detailed reasons for its preferred approach. This is 12 the Enbridge proposal. 13 If you turn to page 5, paragraph 2, 14 it sets out how Enbridge conceives of these matters 15 proceeding. This is page 5, number 2 at the top: 16 "We would produce the witnesses 17 who sponsor our unbundling 18 evidence in the main hearing." 19 That is the evidence I referred to. 20 "CENGAS could produce its 21 witnesses in support of its 22 motion in the subsequent 23 hearing..." 24 So the idea is to have a subsequent 25 hearing. 26 "...and, if it wishes, the same 27 or other witnesses in the main 28 hearing as well. Other parties 48 arg. (Vegh) 1 could choose either or both of 2 the hearings. We would retain 3 the right to produce reply 4 witnesses in the main hearing, 5 as would CENGAS in the 6 subsequent hearing." 7 So you are talking about having two 8 hearings to address the same subject matter, perhaps 9 using the same evidence and the same reply evidence. 10 When we go back to Rule 1.01, this is 11 not the expeditious way to do it, and it is certainly 12 not the least expensive way to do it, to have two 13 hearings on the same issue. 14 Enbridge says this is necessary in 15 paragraph 3 because its notice is not sufficient to 16 accommodate the hearing of the CENGAS motion. That is 17 beyond me. Of course it is sufficient to accommodate 18 the hearing of the CENGAS motion. Enbridge filed its 19 proposal on how to proceed in the context of this rate 20 case and in the context of this rate case Notice of 21 Application. 22 So Enbridge must be of the view that 23 its proposal can be accommodated. Well, if Enbridge's 24 proposal can be accommodated in this rate case, then 25 alternative proposals can be accommodated in this rate 26 case. 27 Thank you; those are my submissions. 28 THE PRESIDING MEMBER: Thank you, 49 arg. (Vegh) 1 Mr. Vegh. 2 Mr. Mattson, are you speaking on the 3 same side? 4 MR. MATTSON: Yes, I am, Madam Chair. 5 ARGUMENT 6 MR. MATTSON: To be clear, my client 7 Energy Probe supports the CENGAS motion to the extent 8 that we agree that the motion should be heard in Rate 9 Case RP-1999-001, as part of the rate case, for all the 10 reasons put forward by Mr. Brown, and in addition also 11 by counsel following Mr. Brown. 12 I think, Madam Chair, these are 13 rather interesting times. I have to address the 14 argument of Enbridge Consumers Gas counsel to some 15 extent, and I won't repeat the earlier submissions. 16 They are interesting in that this is 17 the first matter before you where an intervenor has 18 asked you to interpret the new Energy Board Act in such 19 a way as to provide that intervenor with some 20 procedural rights; in this case the procedural right to 21 be heard. It is a right that in some ways, I think, is 22 very similar to the old days under the Intervenor 23 Funding Project Act, where we would come before the 24 Board and we would try to argue the relevance of an 25 issue and whether or not the Board considers that there 26 is the timing and the resources to hear the issue and 27 whether or not they are prepared to give some 28 prefunding to that intervenor to bring that issue 50 arg. (Mattson) 1 before the Board. 2 We have here Mr. Trebilcock's 3 evidence. All the parties have read it, and now you 4 are being asked, except this time in accordance with 5 the new section under the Act, whether or not this is 6 the appropriate time to address that evidence. Your 7 resources are constrained. We all understand that. 8 The hearing has already been delayed. We are looking 9 at some time in July now for the start of the 10 hearing -- or maybe later in August. 11 However, we have to go back again to 12 the new Ontario Energy Board Act, which in effect gives 13 Mr. Brown -- I don't think there is any question 14 whatsoever, despite the arguments of my friend from 15 Enbridge, that it gives Mr. Brown the right to bring 16 forward this application and to have it heard by the 17 Board. 18 My friend argues that it is 19 premature; that it is not in the ratepayer's interest. 20 I believe Mr. Farrell's argument indicates that 60 per 21 cent of the ratepayers, in Rates 1 and 6 customers, are 22 not interested in direct purchase. These arguments 23 fell on deaf ears with respect to the Board in the last 24 six months when Enbridge has been urging this Board to 25 begin to interpret the new Ontario Energy Board Act in 26 such a way as to encourage competition. 27 We had the undertakings that came out 28 in late December of 1998. Enbridge argued that 51 arg. (Mattson) 1 although they came before the Board the night before 2 the hearing, that they had to come into compliance with 3 section 71 of the new Act. They wanted harmony between 4 electricity and gas distribution, and they wanted a 5 level playing field. 6 With respect to the PBR hearing, it 7 had to go forward although it wasn't a comprehensive 8 plan; it was a first step. They had to begin to get 9 the process under way in accordance with the new Act. 10 Then we had the appeal to the LGC, 11 another new part of the Act. That is going forward. 12 And now section 34, another section, the rehearing 13 section of the new Act, which is section -- I don't 14 have is listed here; I just had it marked. 15 Enbridge is definitely using the new 16 Act in order to ask the Board to proceed expeditiously 17 with bringing about competitive markets and putting 18 Enbridge on a level playing field with other energy 19 providers, to allow it to begin to operate in a 20 competitive market. It is using all the sections of 21 the Act to its advantage, and it is not concerned about 22 the Board's timing or resources. It is properly urging 23 the Board to bring these issues forward in a timely 24 manner and to be heard now. 25 We spent six months hearing from 26 Enbridge and its interpretation of the new Act and how 27 it affects its business. This is the first opportunity 28 the Board has had for an intervenor coming forward 52 arg. (Mattson) 1 under the new Act to say: This is a new competitive 2 market, and section 29 allows us to bring forward a 3 motion, or an application as a motion, and attach it to 4 any hearing. And here we are with a rate case where in 5 fact unbundling is on the issues list; where we have 6 evidence already prepared. 7 I believe it was filed in March. I 8 am not sure; I can ask Mr. Brown. 9 But I know the issue was raised by 10 this intervenor in March; that they wished to bring 11 this evidence forward in this rate case. 12 The argument from Enbridge is that it 13 is premature; the ratepayers aren't going to like it; 14 the Board should seek to tell CENGAS to use another 15 section of the Act, section 36. However, they won't be 16 able to use section 36 until Enbridge has done a 17 considerable amount of work to prepare itself for this 18 new competitive market. It is not quite ready for the 19 competitive market, it is saying. Therefore, Mr. 20 Brown's clients won't be able to use section 36 for 21 some time until Enbridge is prepared to hear from 22 CENGAS and hear their evidence with regard to that 23 issue. 24 On the one hand you are being urged 25 to get with the new Act and get on and encourage 26 competition as it applies to Enbridge, but when another 27 player comes before you and argues the same thing and 28 says to the Board: We believe there is a competitive 53 arg. (Mattson) 1 market here and it should affect the rate case, and you 2 should forbear when it comes to these services. 3 Enbridge is arguing to slow down. 4 I think it is a really important 5 decision of the Board with regard to this motion how 6 you are going to treat the proponent, the shareholders' 7 interests, the ratepayers' interests, the public's 8 interest. 9 Are you going to treat them in a 10 manner that is in compliance with due process where 11 Mr. Brown at least is given the right to be heard on 12 this issue? I would argue yes, you should welcome that 13 opportunity to allow the intervenor to be heard. 14 You are not being asked to decide on 15 the merits. You are just being asked to decide on 16 whether or not CENGAS should be heard and whether or 17 not this rate case this summer is the appropriate time. 18 In light of Enbridge Consumer Gas' 19 arguments over the last six months about its hurry to 20 get on with the new energy market, I think any of their 21 arguments that somehow you should now be urged to slow 22 down should be disregarded by the Board, and 23 Mr. Brown's request to be heard should be welcomed by 24 the Board. Certainly my client welcomes the attempts 25 by the intervenor to be heard. 26 Our position with respect to their 27 evidence is unclear as of yet. We have been working on 28 the unbundling of service issue as now listed on the 54 arg. (Mattson) 1 issues list, so we don't really have any comments with 2 respects to the merits as of yet. Certainly, we 3 support wholeheartedly the right of my friend to be 4 heard on this issue in the upcoming rate case. 5 Those are my submissions; thank you. 6 THE PRESIDING MEMBER: Thank you, 7 Mr. Mattson. 8 Mr. Stauft. 9 MR. STAUFT: I think I am more likely 10 to be on Mr. Farrell's side on this. I will perhaps 11 follow him. 12 THE PRESIDING MEMBER: Thank you. 13 Mr. Farrell, are you ready to 14 proceed? 15 MR. FARRELL: Yes. But before I do, 16 Madam Chair, I should ask whether you and your 17 colleagues intend to hear submissions on costs insofar 18 as this threshold hearing is concerned. 19 I plan to make submissions if you 20 wish to. I don't want to get into Mr. Vegh and 21 Mr. Mattson having a right of reply on that. If they 22 have submissions on costs, perhaps they should make 23 them now and I will respond to them during the course 24 of my remarks. 25 Mr. Brown, of course, has a right of 26 reply and he can address it then. 27 MR. MATTSON: I can address the issue 28 briefly, Madam Chairman. 55 1 There has not been a great deal of 2 time spent on this; it has been a couple of days. I 3 would just as soon that it would be part of the rate 4 case, and the costs would flow as a result of costs 5 coming out of that rate case. 6 I am not sure if the Board or if 7 Mr. Farrell is suggesting that this should be treated 8 separately. If so, I have no objections to that 9 either. 10 As the Board dealt with the costs in 11 the earlier motion by CAC, I would be prepared to 12 comply with that and have no submissions one way or 13 another. 14 Certainly, we would be requesting 15 costs for our preparation for reading the material of 16 Enbridge and the other parties and coming before you 17 today and making submissions. 18 THE PRESIDING MEMBER: Thank you, 19 Mr. Mattson. 20 Are there any other submissions as to 21 costs from the parties we have heard from? 22 MR. VEGH: I am invited to do this. 23 My client will be seeking its 24 reasonably incurred costs for preparation and 25 attendance at today's hearing. I hope that we have 26 acted responsibly and assisted the Board in its 27 deliberations on this matter. 28 I may reply to something that I hear 56 1 from Mr. Farrell. I am a little surprised that he has 2 asked us to address this directly, so there may be some 3 reply, depending on what I hear. Thank you. 4 THE PRESIDING MEMBER: Thank you, 5 Mr. Vegh. 6 ARGUMENT 7 MS LEA: Madam Chair, I think 8 probably this would be the appropriate time for me to 9 put in the submissions for Mr. Janigan. 10 On behalf of the Vulnerable Energy 11 Consumers Coalition, as I understand it, Mr. Janigan 12 does not have direct submissions with respect to the 13 threshold issue. However, if the Board rules that it 14 will not hear the motion, it is important to his client 15 that the issue of unbundling the customer care 16 functions as a separate rate not be foreclosed for the 17 purpose of examining the prudency of the expenditures 18 demanded of ratepayers in both the cost of service and 19 the rate base in this proceeding for the company's CIS 20 project. 21 It may be difficult to establish 22 market comparisons for rate setting for CIS, and his 23 client may wish to urge the Board to consider a process 24 to enable the rate for these functions to be separately 25 set and subject to competition. 26 Mr. Janigan's client would wish to 27 ensure that the Board have the benefit of evaluating 28 all the options in the resolution of the difficult CIS 57 arg. 1 issue. 2 I understand those are his 3 submissions with respect to the motion, and I gather 4 that those submissions are important if the Board 5 decides not to hear the motion in the context of the 6 case. 7 On the issue of costs, the Vulnerable 8 Energy Consumers Coalition is asking for its reasonably 9 incurred costs, and I should point out on their behalf 10 that they have acted responsibly in their viewing the 11 material and in choosing not to attend today when they 12 could make their submissions through more efficient 13 means. Thank you. 14 THE PRESIDING MEMBER: Thank you, 15 Ms Lea. 16 I think the Board will take a break 17 before we hear from you, Mr. Farrell. 18 MR. FARRELL: Thank you, Madam Chair. 19 THE PRESIDING MEMBER: We will resume 20 at 11 o'clock. 21 --- Upon recessing at 10:45 a.m. 22 --- Upon resuming at 11:10 a.m. 23 THE PRESIDING MEMBER: Please be 24 seated. 25 Before we hear from you, Mr. Farrell, 26 I think Ms Lea has a couple of questions of 27 clarification on the last submission. 28 EXAMINATION 58 ex. (Lea) 1 MS LEA: I do. Thank you, Madam 2 Chair. 3 I have one question for Mr. Brown and 4 possibly one question for Mr. Vegh also. 5 Mr. Brown, if you can help me with 6 your interpretation of section 29. When I read section 7 29, the section says: 8 "On an application or in a 9 proceeding, the Board shall make 10 a determination to refrain, in 11 whole or part --" 12 and so on. 13 "-- if it finds as a question of 14 fact --" 15 and so on. 16 As I understood your submission, your 17 submission was not only that the Board had to make a 18 determination to refrain if it made a certain finding 19 of fact, but as I understood you also, the Board had to 20 turn its mind to the finding of fact if any party in a 21 proceeding makes that request. 22 In other words, as I understood your 23 submission, once the question is asked of the Board, is 24 a class of services or whatever subject to sufficient 25 competition, the Board must direct its mind to making 26 that finding of fact whenever anyone asks it, however, 27 relevant or ridiculous that submission may be. 28 I wonder if you could clarify that 59 ex. (Lea) 1 for me in terms of your interpretation of the question 2 of the section. If the Board does have any discretion 3 to refuse to turn its mind to that finding of fact, 4 under what circumstances would that occur? 5 MR. BROWN: It's hard to answer a 6 hypothetical, but let me deal with -- yes, it's the 7 submission of CENGAS that in this proceeding the Board 8 must hear the motion. The word "shall" that appears 9 after the word "Board" in section 29(1), I agree 10 relates to what the Board must do if it makes certain 11 findings of fact and the word "shall" there mandates 12 the Board to take certain steps if as a finding of fact 13 it determines that certain products or services will be 14 subject to competition, so that's what "shall" 15 modifies. 16 In terms of the procedural 17 requirement to hear the motion, the submission that 18 CENGAS is making is that yes, there is an obligation in 19 this rate proceeding for the Board to hear the motion. 20 One, because the opening language of section 29(1) 21 makes it clear, we submit, that the issue of 22 forbearance can be brought before this Board in one of 23 two ways. One, by way of application and one "in a 24 proceeding" is the language. 25 "In a proceeding", in my submission, 26 clearly contemplates that you have a motion in the 27 proceeding. You don't need a separate hearing or a 28 separate process to deal with that issue. 60 ex. (Lea) 1 The statute requires the Board to 2 entertain the issue of forbearance either if the party 3 starts the process off by filing a notice of 4 application or if the party starts the process off by 5 filing a motion within the proceeding. 6 Does that then mean that the Board 7 must entertain such a motion, no matter I think, Ms 8 Lea, as the way you put it, how ridiculous it is. 9 Well, I don't like dealing with hypotheticals. I like 10 dealing with the facts that are before the Board, but I 11 did indicate in my submissions in section (b) "Why 12 should the CENGAS motion be heard as part of the 13 Enbridge rate case?" and also in response to the first 14 argument under section (c) you can see that I relied on 15 two things. 16 First, the plain language we can get 17 here by way of a motion, but second, that the issues 18 that we raised in our motion are material to the issues 19 that are before this Board in the issues list. This 20 isn't a case of an intervenor coming in and saying 21 "Well, this is an Enbridge rate case, but here's the 22 forbearance motion dealing with Union Gas on something 23 that has nothing to do with the Board". That would be 24 the case of the ridiculous. Obviously we aren't asking 25 for that. 26 I suppose that implicit in the 27 submissions that I have made to the Board I am saying 28 to the Board "Yes, you must hear the motion because the 61 ex. (Lea) 1 opening language of section 29 allows you to deal with 2 the forbearance issue by way of the motion", but I am 3 also saying to you "You must hear the motion because we 4 fall within the realm of reasonableness in the sense 5 that the issues that we are raising in our forbearance 6 motion do relate to and, indeed, I go further, they are 7 material to an issue that is before this Board in issue 8 number 7 of the issues list". 9 On the fact of this case, I say the 10 Board is required to hear the motion. Certainly the 11 Board in a very general sense is within the confines of 12 the statute a master of its own procedure, so to the 13 extent that at some other place and some other time 14 somebody comes in -- the example I gave, someone 15 bringing a motion for forbearance in respect of Union 16 Gas in an Enbridge hearing, that the Board can 17 reasonably say "Well, we have to hear your motion in an 18 Enbridge case or in a Union Gas case, but we don't have 19 to hear it in the Enbridge case. It simply doesn't 20 relate, it has no nexus with the proceeding that is 21 before us". I think that would be implicit in the 22 language of the Act. 23 The answer to the question I think is 24 very specific to the facts and the proceedings that are 25 before this Board and the issues that have been framed 26 by the issues list. I am not asking for the Board to 27 make a ridiculous interpretation of the statute. I am 28 asking the Board to follow the plain and ordinary 62 ex. (Lea) 1 meaning of the language in accordance with the purpose 2 and objectives of the statute. 3 MS LEA: Thank you. I wonder, Mr. 4 Vegh, if I could ask you for a clarification of your 5 submissions. 6 Correct me if I misunderstood you. I 7 was not fully understanding whether you were submitting 8 that this matter could be dealt with as a section 29 9 motion as part of the Consumers Gas rates case or as an 10 alternative proposal as part of issue 7 in that rates 11 case and whether it made any difference. 12 I would presume that if it was a 13 section 29 motion that the Board would be turning its 14 mind to making a finding of fact and then to refraining 15 in whole or in part from exercising certain duties, but 16 from your point of view, what are you recommending that 17 the Board do with this particular issue before it? 18 MR. VEGH: This motion should be 19 addressed in the context of the rates case. What the 20 notice of motion provides is some advance notice of the 21 grounds that CENGAS will be relying on the evidence 22 filed in accordance with that motion. 23 CENGAS could argue that because of 24 the evidence, the combination of evidence, of its own 25 evidence, the cross-examination of Enbridge's evidence, 26 that's a fact that is sufficient for a forbearance 27 order. 28 I'm not sure whether my client will 63 ex. (Lea) 1 make that argument, but my client would want to be in a 2 position to rely on the evidence filed by Enbridge and 3 by CENGAS to make an argument, say, on what is a just 4 and reasonable rate under section 36 or what direction 5 the Board should be giving to Enbridge if they are not 6 prepared to make an order with respect to rates in this 7 proceeding. 8 What the motion does is set out the 9 arguments and provide advance notice to CENGAS of what 10 it intends to argue. I think you could put forward the 11 evidence, the Board could hear the arguments from all 12 sides and make a determination based on that evidence 13 that for whatever reason it is not prepared to forbear 14 or it thinks the concept of forbearance is 15 inappropriate, but there may be other remedies which 16 are appropriate on the basis of that evidence and that 17 argument. 18 MS LEA: Thank you very much for that 19 clarification. 20 Just a housekeeping matter. I would 21 like to give exhibit numbers to the -- I count four 22 pieces of material that are new to this record and are 23 not pieces of correspondence. 24 The first would be the CENGAS outline 25 of argument. I would like to give that Exhibit No. 1. 26 EXHIBIT NO. 1: CENGAS Outline 27 of Argument 28 MS LEA: The CRTC decision as filed 64 ex. (Lea) 1 by CENGAS as a separate stapled document. That would 2 be Exhibit 2. 3 EXHIBIT NO. 2: CRTC Decision 4 filed by CENGAS 5 MS LEA: The book of materials 6 provided by Mr. Vegh on behalf of his client, I would 7 like to give that Exhibit 3. 8 EXHIBIT NO. 3: Book of 9 Materials provided by Mr. Vegh 10 MS LEA: I believe the only piece of 11 material that is new to this proceeding that Mr. 12 Farrell is filing today is the responding party's brief 13 of authorities and references. I would like to give 14 that Exhibit 4. 15 EXHIBIT NO. 4: Respondent's 16 Brief of Authorities and 17 References 18 MS LEA: If I have missed anything 19 out, I'm sure my friends will let me know. 20 Thank you. 21 THE PRESIDING MEMBER: Thank you, Ms 22 Lea. 23 MR. FARRELL: Just by way of 24 clarification. We are assuming letters from CAC IGUA 25 Schools and the AMEC are part of the record without 26 being so dedicated. 27 MS LEA: Yes. 28 MR. FARRELL: And likewise the 65 ex. (Lea) 1 Board's Letter of Direction. 2 MS LEA: Yes. All the 3 correspondence, including the correspondence which 4 preceded this hearing date and that which was received 5 relevant to this hearing date in the last 24 hours I 6 think we can say are on the record already. 7 THE PRESIDING MEMBER: Thank you. 8 Mr. Farrell, are you ready? 9 MR. FARRELL: Yes. 10 ARGUMENT 11 MR. FARRELL: Thank you, Madam Chair. 12 I will begin my submissions to you by 13 asking you to turn to the CENGAS Notice of Motion and 14 to just briefly review the relief that CENGAS is 15 seeking. 16 On page 1 of the Notice of Motion in 17 paragraph (a), they are seeking an order under 18 section 29 finding that: 19 "-- competition exists in 20 respect of billing, collection, 21 customer accounting and other 22 related services for general 23 service gas customers in rates 1 24 and 6 sufficient to protect the 25 public interest." (As read) 26 Now, Mr. Brown has called them 27 services and I am quite happy to refer to them as 28 customer care functions at this point because, as Mr. 66 arg. (Farrell) 1 McGill's affidavit makes clear, and this is in our 2 motion record Tab 2, page 26, paragraphs 6 and 7. I 3 won't take you to them right now, but just for the 4 purposes of the record note them. 5 These customer care activities are 6 currently inherent functions in distribution service. 7 Simply to call them a service doesn't make them a 8 service for the purposes of section 29, and I will come 9 back to that in more detail in a couple of minutes. 10 The second order he is seeking is an 11 order under section 36 in effect that would create the 12 customer care services from which you are then asked to 13 refrain. It was for that reason in my July 14 letter 14 that I suggested that CENGAS had the cart before the 15 horse. 16 Without going through the details of 17 the mechanics whereby he would act under section 36, 18 they are mechanics and their process is one of 19 complicated mechanics and again I will just give you 20 this reference. You can refer to it in your 21 deliberations. Our motion record, Tab 2, the McGill 22 affidavit, paragraphs 13 to 18 on pages 28 to 30 of the 23 motion record and Exhibit A to the McGill affidavit. 24 In simplistic terms, CENGAS is asking 25 you to make a finding that competition exists in 26 relation to non-existent services and then to create 27 those services for the purpose of giving effect to the 28 finding. 67 arg. (Farrell) 1 I would also ask you to take note of 2 the scope of the relief that CENGAS is seeking. They 3 are seeking to remove customer care functions entirely 4 from rates 1 and 6. I will come back to this under the 5 rubric of procedural fairness because I believe that is 6 the Board's second threshold in terms of whether the 7 motion should be heard in the context of the 8 RP-1999-0001 proceeding. 9 Now, I will be making submissions on 10 what I call three threshold issues. They are set out 11 in my June 14 letter which I handed up to you and your 12 colleagues, Madam Chair, at the opening. They are 13 stated they are based upon the Board's Procedural Order 14 No. 1 and the letter from the Board to Mr. Brown that 15 was referred at Tab 2 of Mr. Vegh's book of materials. 16 I mention that specifically because 17 the first threshold issue is do circumstances exist in 18 which the Board is required to hear the motion. The 19 second is if the Board decides to hear the motion, 20 whether the motion should be heard in the rate case. 21 The third issue is if the Board decides to hear the 22 motion in the rate case, what is the preferred process 23 for hearing the motion and whether the notice in the 24 rate case is sufficient. I will be dealing with all 25 three of those in the course of my remarks and 26 submissions this morning. 27 On page 2 of my June 14 letter I 28 state the issue as follows: 68 arg. (Farrell) 1 "The circumstances in which the 2 Board is required to hear the 3 motion as put forward under 4 section 29 of the Ontario Energy 5 Board Act, 1998, or put another 6 way, whether the motion is one 7 regarding a product, service or 8 class of services that is 9 subject to the regulation of the 10 Ontario Energy Board." (As 11 read) 12 The latter part of that statement of 13 the issue is taken from paragraph number 2 of 14 Procedural Order No. 1. 15 The effect of the submissions on 16 pages 2 and 3 of my June 14 letter is to the effect 17 that the Board is not required to hear the motion on 18 its merits because there are no customer care services 19 for the purposes of section 29 and there will be none 20 under our application for rates for fiscal 2000 21 Mr McGill in his affidavit, 22 paragraphs 6 and 7 on page 26 of the motion record 23 indicates that the distribution of gas as a business 24 activity that includes numerous inherent functions, 25 including meter reading, billing, collection and 26 customer accounting, these functions are necessary for 27 Enbridge to carry on business. 28 Otherwise Enbridge would have no 69 arg. (Farrell) 1 means of obtaining payment for providing distribution 2 service to its customers. That is paragraph 6 and 3 paragraph 7. 4 Mr. McGill asserts that Enbridge 5 provides no customer care service, to paraphrase, to 6 any of its customers whether they are customers for 7 whom CENGAS members act as agents or otherwise. In 8 other words, Enbridge bills its customers for the 9 distribution service provided to them, collects the 10 corresponding accounts receivable and keeps its records 11 accordingly. 12 Mr. Brown made submissions to the 13 effect that the opening line of subsection 29(1) of the 14 Ontario Energy Board Act, 1998, in effect, compels the 15 Board to hear the motion. 16 I don't think it is as simple as 17 that. The Board is required, under subsection 29(1), 18 to refrain from regulating, in effect, a product or 19 service if it makes a finding of fact. The finding of 20 fact is based upon competition in relation to, in this 21 case, a service or class of services. 22 Subsection 29(2)(e) gives some 23 guidance in relation to what is meant in the first 24 subsection by the words "product or class of products", 25 "service or class of services". In my submission, 26 clause 29(2)(e) makes it a precondition of forbearance 27 that a product or a class of products is supplied or a 28 service or a class of service is rendered at the time 70 arg. (Farrell) 1 the Board exercises its power to refrain from 2 regulating any such product, class of products, service 3 or class of services. In other words, you don't make a 4 finding of fact that competition exists in a vacuum. 5 He also suggested, as I heard his 6 argument, that the utility controls this bottleneck 7 monopoly function and that it would be contrary to the 8 one stated objective of the Act, that is, to facilitate 9 competition, if the utility were able to control when 10 or how this bottleneck service was unbundled, 11 presumably under section 36. 12 A careful reading of section 36 13 doesn't indicate that only the utility can make an 14 application for rates or services under section 36. As 15 was suggested in my June 14th letter, on page 4, 16 paragraph 3, CENGAS is free to bring its own 17 application under section 36 to unbundle the customer 18 care services. Having the Board act to unbundle them, 19 they then become services in respect of which the Board 20 can make a determination or make a finding of fact 21 under section 29(1). 22 I won't take you through the steps of 23 logic as I see them, in any event, on pages 2 and 3 of 24 my June 14th letter, but the paragraphs are meant, in 25 sequence, to take you through that rationale for why we 26 say the motion is premature as a matter of the Board's 27 statutory framework. 28 I find some comfort in that argument 71 arg. (Farrell) 1 in terms of the way the CRTC proceeds. As Mr. Brown 2 acknowledged, the CRTC's practices and procedures can 3 be of assistance to the Board in terms of the 4 forbearance power. 5 Here I would like to refer you to the 6 responding party's Brief of Authorities, the cerlox 7 bound booklet that I gave you this morning. 8 At Tab 1 I have reproduced section 34 9 of the Telecommunications Act. There you will note 10 that the CRTC has broader, if you will, powers or -- 11 excuse me -- maybe more criteria, is perhaps the better 12 way to express it, in terms of forbearance. 13 Subsection (1) deals with the finding 14 of fact that forbearance, in effect, would be 15 consistent with the Canadian telecommunications policy 16 objective. 17 Subsection (2) is similar in nature 18 to your subsection 29(1). 19 Subsection (3) deals with the action 20 in circumstances where to refrain would be likely to 21 impair unduly the establishment or continuation of a 22 competitive market for service. There is no 23 counterpart to that subsection in your statute. 24 I just point those things out to you 25 before I take you to some of the other material. 26 Then at Tab 2 I have reproduced the 27 section 2 that defines the various terms that may 28 appear in the decisions that I am going to take you to 72 arg. (Farrell) 1 in a moment and enumerate the objectives of the 2 Canadian telecommunications policy. That is in 3 section 7. 4 Then, further on in the material, at 5 Tab 2 is reproduced the sections that are referred to 6 in section 34 in relation to the sections in respect of 7 which the CRTC can forbear. Against that background, 8 please turn to Tab 3. 9 I should note that the way I have 10 organized the material at Tabs 3 to 8, in respect of 11 each proceeding, is to give you, first, such as at 12 Tab 3, the CRTC's public notice, followed at Tab 4 by 13 the CRTC's decision in that particular proceeding. 14 Likewise, 5 and 6 contains notice and decision, and 7 15 and 8 contain notice and decision. 16 I will be coming back to this 17 question of notice when I get to the second threshold 18 issue. 19 But you can see on the first page, 20 under Tab 3, in the fourth paragraph of the notice, the 21 last four lines of the paragraph beginning at the end 22 of the fourth last line, and I quote: 23 "It appears to the Commission 24 that, under the Act, the sale of 25 terminal equipment by a Canadian 26 carrier would likely constitute 27 the provision of a 28 telecommunications service." 73 arg. (Farrell) 1 In other words, there is a finding, 2 at least on a preliminary basis, that there is a 3 service in respect of which the CRTC may refrain from 4 regulating. 5 Continuing with the quote: 6 "If this is correct, Canadian 7 carriers would be required to 8 file tariffs setting out the 9 rates to be charged for the sale 10 of terminal equipment." 11 Then in the next paragraph the 12 Commission makes reference to section 34 in relation to 13 its powers to refrain. 14 Then, if you turn to Tab 4, and turn 15 to the top of the fourth page behind Tab 4, the 16 paragraph at the top of the page, in that paragraph the 17 CRTC makes reference to the public notice wherein it 18 stated its preliminary view that the sale of terminal 19 equipment would constitute a telecommunications 20 service. 21 Then in the last sentence in the 22 first paragraph it makes a finding that such a sale 23 would indeed constitute a telecommunications service. 24 The first step. 25 The second step appears on the next 26 page. In the second last paragraph on the page the 27 Commission then finds, as a question of fact, that it 28 should refrain from exercising powers in performing 74 arg. (Farrell) 1 duties under certain of the sections that are listed 2 there. 3 The purpose of pointing you there is 4 to indicate that the CRTC goes about the process of 5 refraining in the same way that we are submitting to 6 you that you should go about the process. There has to 7 be a service first. You can't create a service by 8 simply calling something a service. 9 I won't take you to the other notices 10 and decisions. I would just ask you to look at them in 11 your deliberations. They, in effect, show the same 12 process in respect of two other CRTC forbearance cases. 13 The second threshold issue appears on 14 page 3 of my June 14th letter. I quote, "if the Board 15 decides to hear the CENGAS motion, whether the motion 16 should be heard within the RP-1999-0001 proceeding", it 17 is our submission that the motion should not be heard. 18 Our submission is not one that goes 19 to the merits. It doesn't go to your power to deal 20 with concerns by way of conditions under section 23. 21 It goes to procedural fairness; it goes to proper 22 notice. 23 We say, as I have indicated at the 24 top of paragraph 2 at the top of page 4 that it would 25 be unfair to customers in Rates 1 and 6 for the CENGAS 26 motion to be heard. In paragraph 2 I say that it would 27 be unfair because they have not had notice that the 28 CENGAS motion, if successful, would deprive the 75 arg. (Farrell) 1 customers of eventually purchasing unbundled 2 services -- excuse me -- of purchasing "bundled" 3 services -- that is a typo in my letter -- including 4 customer care. 5 There was some reference, I can't 6 remember now whether it was Mr. Vegh or Mr. Brown, 7 saying that issue 7 put unbundling into play, so to 8 speak, that if the notice of the hearing was good 9 enough for issue 7 it was good enough for the CENGAS 10 motion. We don't buy that, Madam Chair, and we ask you 11 and your colleagues not to buy it either. 12 The distinction is this. We have put 13 forward, in relation to issue 7, a proposal in which we 14 are seeking approval in principle. There would be no 15 ratemaking effect in fiscal 2000 as it stems from 16 issue 7. 17 CENGAS, on the other hand, would have 18 you have a ratemaking effect that would deregulate, if 19 you will, billing and collection without notice that 20 that could be done for ratemaking purposes. So it 21 would be unfair to the customers in those rate classes. 22 We also say it would be unfair -- and 23 this is not in my June 14th letter -- be unfair to the 24 customers of the CENGAS members who were signed up on 25 the basis, among other things, that they would receive 26 one bill from the utility. 27 Here I would ask you to turn to our 28 Motion Record, Tab 1, and Mr. Hamilton's affidavit. 76 arg. (Farrell) 1 That is page 3 of the Motion Record. 2 At the bottom of the page, in 3 paragraph 10, Mr. Hamilton makes reference to his 4 estimate that approximately 4,000 direct purchase 5 customers or 28 per cent of Rates 1 and 6 customers, 6 have appointed the members of CENGAS, Alliance, Apollo 7 and Direct as their principle -- excuse me -- as their 8 agent. 9 The next page, page 4, gives a 10 profile of the contract that each of the CENGAS members 11 have in terms of duration. 12 In paragraph 11, Mr. Hamilton 13 concludes, on the basis of the table, that five years 14 is the prominent duration of the gas purchase 15 agreements and gas transportation agreements that the 16 CENGAS members have in place. Five years. 17 The same applies to the corresponding 18 collection service agreements which Mr. Hamilton 19 addresses in paragraph 14 on page 5. 20 Then Mr. Hamilton goes on to discuss 21 the marketing material that the members of CENGAS have 22 used in signing up people that are now parties to those 23 five-year contracts. He describes Alliance's marketing 24 material on paragraph 16 on page 5, Apollo's marketing 25 material in paragraph 17 on pages 5 and 6. I note in 26 the second bullet on page 6: 27 "The utility will continue to 28 bill you and service your 77 arg. (Farrell) 1 account as in the past." 2 Then, in paragraph 18, he describes 3 Direct Energy's marketing material. 4 I think just to make the point I want 5 to make, if you turn to Tab C, which is Exhibit "C" to 6 Mr. Hamilton's affidavit, at page 19 of the Motion 7 Record, you will see this depiction of the flow, if you 8 will, of what happens and then just above the "Key 9 Benefits" bar on the right-hand column on page 19 you 10 will see a depiction of a bill opening and under it the 11 statement: 12 "Enbridge Consumers Gas will 13 send you one bill with your true 14 rate guaranteed pricing." 15 (As read) 16 There is no mention that I have found 17 in the marketing material that there could be another 18 billing regime in place, although I do concede, and 19 Mr. Brown will probably point out to you in his reply, 20 that on page 23 of the motion record in relation to the 21 Direct Energy True Rate Price Protection Program 22 Agreement, or what is commonly referred to as an agency 23 appointment letter, in the second paragraph in the 24 second sentence the agent has the right to change to a 25 different billing system. 26 I found that interesting in light of 27 the marketing material, particularly in the light of 28 section 2.6.1 of the Code of Conduct for gas marketers, 78 arg. (Farrell) 1 which requires the agreement to be consistent with the 2 offering material. 3 In any event, the thrust of 4 Mr. Hamilton's affidavit on this point is that the 5 CENGAS members have signed up people to longer term 6 contracts on the basis, among other things, that they 7 would receive one bill from the utility; whereas the 8 effect of the CENGAS motion would be to the contrary. 9 It is for that reason that we say, as 10 well, that it would be unfair to those customers, 11 without notice, to proceed to hear the CENGAS motion. 12 I will return on the issue of notice 13 to the CRTC practice. As you can see from the notices 14 and decisions that appear in our brief of authorities, 15 the CRTC's practice is to give public notice of a 16 proposal to refrain; to invite, if you will, 17 submissions or evidence in respect of which not only 18 should the CRTC refrain but is its preliminary 19 determination that something is a service indeed a 20 service? 21 So the CRTC's practice in this regard 22 is adequate public notice of a proposal to refrain. 23 I mentioned earlier that CENGAS is 24 not prohibited from bringing its own application under 25 section 36, which is the thrust of paragraph 3 on page 26 4 of my June 14th letter. 27 I also note in that paragraph the 28 cost consequences of CENGAS pursuing its commercial 79 arg. (Farrell) 1 objectives on its own pocketbook, so to speak, as 2 opposed to on the pocketbook of our ratepayers. 3 The third issue appears in my June 4 14th letter at page 4, and that is, and I quote: 5 "If the Board decides to hear 6 the CENGAS motion within the 7 RP-1999-0001 proceeding, the 8 preferred process for hearing 9 the motion, and whether the 10 RP-1999-0001 notice is 11 sufficient in this regard..." 12 And I then state what our preferred 13 process would be. The preferred process is based upon 14 our submissions as to what is and is not proper notice. 15 It was for that reason that we then suggested there 16 would have to be what I called a subsequent hearing. 17 In other words, there would be the 18 RP-1999-0001 proceeding, in which case there would be a 19 main hearing followed by a subsequent hearing so as not 20 to delay the main hearing, such that CENGAS could 21 publish at its own expense a notice giving people 22 adequate notice that such a motion would be before the 23 Board and allowing people to intervene as they might 24 choose. 25 Contrary to the way Mr. Vegh 26 characterized paragraph 2 at the top of page 5, it must 27 be read in the context of paragraph 1, which indeed is 28 structured to give effect to my submissions on what 80 arg. (Farrell) 1 must be in place to have a section 29 hearing; that is 2 to say, services or at least notional services, 3 adequate notice, and then the process would follow in 4 the paragraphs 1 through 5 on pages 4 and 5 of my June 5 14th letter. 6 Mr. Vegh and others -- I think 7 Mr. Mattson -- talked about you can't simply throw out 8 the evidence of Dr. Overcast and Professor Trebilcock. 9 We are not proposing that their evidence be thrown out. 10 As we have indicated in paragraph 2 at the top of page 11 5, that would be the place, if CENGAS chooses, to 12 produce those witnesses. It could also produce the 13 same witnesses in the context of pursuing its motion 14 when the proper circumstances exist to pursue the 15 motion. 16 On the matter of costs, the Board's 17 decision on what I call the CAC et al motion was 18 released on June 14th, and on page 7 it deals with the 19 matter of costs. 20 There the Board treated the moving 21 parties in that case -- or here the moving party 22 CENGAS -- differently than it did the intervenors or 23 the parties who appeared. There on page 7, in section 24 2.0.3, it appears, at least by our interpretation, that 25 the Board found that other parties may have felt 26 compelled to attend because of a potential impact of 27 the CAC et al motions on the shared savings mechanism 28 for demand side management. 81 arg. (Farrell) 1 There is no similar issue here. For 2 that reason, we would suggest that CEED and Energy 3 Probe are not entitled to their costs of this threshold 4 hearing. 5 Insofar as CENGAS is concerned, their 6 costs could be seen initially to rise or fall on the 7 success or failure today in relation to the threshold 8 issues. 9 I would like to point out that CENGAS 10 is an organization of gas marketers who, in their own, 11 would not be eligible for a cost award. We do have a 12 concern that gas marketers are using the regulatory 13 process as a means of advancing their commercial 14 interests. On the other hand, they are shifting this 15 particular cost of doing business to ratepayers by 16 banding together under a name such as "Coalition". 17 We find it troublesome under the 18 circumstances that an organization of two or perhaps 19 three otherwise ineligible gas marketers would enable 20 them, by virtue of a fancy name like "Coalition", to 21 recover their costs. 22 Those are my submissions on costs and 23 my submissions on the threshold issues, Madam Chair; 24 thank you. 25 THE PRESIDING MEMBER: Thank you, 26 Mr. Farrell. 27 Mr. Stauft. 28 ARGUMENT 82 arg. (Stauft) 1 MR. STAUFT: Thank you, Madam Chair. 2 To start off with, I would like to 3 indicate that TCGS does not have any objection to the 4 issues that have been raised by the CENGAS motion or 5 the proposals that CENGAS has made being dealt with in 6 the current rate case. 7 However, our view is that that has 8 already been provided for by the inclusion of Issue 7 9 or the set of issues under 7 in the issues list, and 10 that on that basis the motion as a separate matter or a 11 separate proceeding has basically been rendered moot. 12 Our view is that whatever proposal 13 CENGAS wants to make can and should be made in the 14 normal course in the RP-1999-1 proceeding. The date 15 for intervenor evidence is July 5th. TCGS intends to 16 be filing testimony on all of the issues under 17 number 7, including matters that arise out of CENGAS' 18 motion on that date. 19 In our view, CENGAS is free to do the 20 same and I don't think there is any prejudice to them 21 by simply requiring them to participate in a rate case 22 like any normal intervenor. 23 In that case, parties like ourselves 24 or Enbridge could ask them IRs. We may hopefully have 25 an opportunity to file reply or rebuttal testimony, and 26 the whole thing could just trundle along in the normal 27 course. 28 What we do not want to see is a 83 arg. (Stauft) 1 separate track or a separate hearing procedure for the 2 number 7 issues, the unbundling issues and the CENGAS 3 motion. 4 Mr. Brown, I think, indicated in his 5 correspondence that he would prefer a hearing of his 6 motion in July. As Mr. Farrell said, he would prefer a 7 hearing some time after the main rate case hearing. As 8 I said, I don't think either one of those is necessary 9 or efficient for purposes of having these matters dealt 10 with. 11 The basis for that, or the reason for 12 that, is that CENGAS' proposals I think are 13 inextricably bound up with a host of other issues that 14 are included within Issue 7. It would be wrong to 15 divorce consideration of CENGAS' proposal from 16 simultaneous consideration of all of the other 17 unbundling issues that are there. 18 I have a couple of points on that. 19 First of all, it is not clear to us 20 that what CENGAS is proposing really raises properly a 21 forbearance issue at all as opposed to a service and 22 rate design issue. I confess we have had some trouble 23 understanding what is being proposed; but as 24 Mr. Farrell pointed out, billing and collection is not 25 really a service, in our view. It is an activity that 26 is, as it happens, embedded in a number of services 27 that Enbridge provides under its tariff. 28 So when the relief sought by CENGAS 84 arg. (Stauft) 1 is removal of billing and collection costs from the 2 cost of service, we are not clear on what that means. 3 As Mr. Farrell I think said, it may 4 imply that if the motion is granted then Enbridge would 5 be prohibited from offering any service that includes 6 billing and collection. Another possibility is that if 7 the rates charged for that activity are to be 8 unregulated, that would seem to imply that Enbridge 9 could charge anything it wanted for any service that 10 happened to include billing and collection. 11 My client doesn't think either one of 12 those is a sensible result, frankly, but I guess if 13 CENGAS wants to make either of those suggestions in the 14 hearing it would be free to do so, in our view. 15 I think probably the proper solution 16 to CENGAS' problem is a wholesale distribution service 17 that provides for bills being sent by Enbridge just to 18 a marketer as opposed to individual retail customers, 19 and that is fine. Again, that is something that I 20 think can and should be raised under Issue 7. Enbridge 21 itself has proposed that, albeit not for this year but 22 eventually. 23 That kind of service, however, does 24 not require or involve any kind of forbearance or 25 deregulation. It is a straightforward service and rate 26 design issue. 27 The second point on the extent to 28 which the CENGAS issues are bound up with the other 85 arg. (Stauft) 1 unbundling issues that are included within Issue 7, in 2 our view the appropriateness of implementing or 3 approving CENGAS' request is itself a function of what 4 steps are taken with respect to the unbundling of other 5 aspects of Enbridge's services; particularly, I think, 6 upstream transportation and storage functions or 7 services. 8 In our view also, it is a function of 9 steps that should be taken in relation to customer 10 mobility issues. 11 That being the case, as I said, it 12 just doesn't make sense to us, and I don't think it 13 would be appropriate for there to be separate hearing 14 processes for the two sets of issues. 15 The sensible thing, in our view, is 16 to just let CENGAS, as I said, file their testimony or 17 advise that they will treat the testimony they have 18 already filed as responding to issue 7 on the issues 19 list and we will just carry on from there. 20 Those are my submissions. 21 THE PRESIDING MEMBER: One question 22 of clarification. 23 You don't, then, see any notice 24 problem with that? 25 MR. STAUFT: Frankly, I don't know. 26 I mean I would have to disagree with Mr. Farrell on 27 that. 28 My view is that once a rate case is 86 arg. (Stauft) 1 filed and notice is to be given, my assumption always 2 is that intervenors are free to propose anything they 3 want in a proceeding and they have the burden, 4 presumably -- they have some burden of persuasion with 5 respect to the Board, but once a rate case has been 6 filed I think that public notice of that would be 7 sufficient for dealing with these issues in this case. 8 THE PRESIDING MEMBER: Thank you. 9 Mr. Farrell, did you wish to make any 10 comment to that? 11 MR. FARRELL: No, I don't. My 12 submissions will stand as they are recorded. 13 I did want to correct what I said was 14 a typographical error when I was speaking about 15 paragraph 2 at the top of page 4 of my June 14th 16 letter. 17 I think I said that the word 18 "unbundled" was a typo, it should read "bundled". I 19 was referring to the third last line of paragraph 20 number 2. Unbundled is correct in that context. 21 Depriving customers of a bundled service is dealt with 22 in the previous sentence and so this sentence should be 23 left as it was written and not as I tried to correct 24 it. I apologize for that. 25 THE PRESIDING MEMBER: Thank you, 26 Mr. Farrell. 27 Mr. Brown, are you ready to proceed 28 again? 87 arg. (Stauft) 1 MR. BROWN: Yes. Thank you. 2 Briefly in reply. 3 REPLY ARGUMENT 4 MR. BROWN: The first issue that I 5 wish to reply to raised by my friend, Mr. Farrell, is 6 the submission by Enbridge that what we have called 7 customer care services, in fact, do not exist. They 8 are functions or activities, I think, were the words 9 that he used. I have two -- actually, I have three 10 answers to that I think. 11 The first, and I made this in chief, 12 but coming back to it, what something is doesn't depend 13 upon what the utility calls it. Enbridge customers 14 today pay something for the fact that they get a bill 15 from Enbridge. It is not something that is given for 16 free. It is given for consideration. 17 In my respectful submission, one 18 would masculate section 29 if the interpretation was 19 only when the utility gets around to labelling 20 something that they do as a product or a service can 21 you invoke section 29. 22 An element of common sense has to be 23 brought to that section. If the utility is doing 24 something, that is, it is selling a tangible thing, a 25 product, or it is providing a service to a customer of 26 some form or the other, that is a product or a service. 27 That is simply what it is. Whether it is bundled or 28 unbundled doesn't detract from the fact that it is a 88 reply arg. (Brown) 1 product or service. 2 It is very important that the Board 3 not interpret section 29 in such a way that it can only 4 be used under circumstances where the utility dictates 5 the timing. That, in my submission, is fundamentally 6 at odds with the objectives as stated in section 2 of 7 the OEB Act. 8 Also, and this is my second point, 9 Enbridge's interpretation gives rise to a bit of an 10 absurdity. 11 We have Dr. Overcast's evidence on 12 customer care services in Georgia. With great respect, 13 it doesn't make Ontario look very good if some of the 14 providers of customer care and billing services in 15 Georgia come up here and say, "Gee, we want to do the 16 same thing", and the answer is, "Sorry. You don't 17 offer a product or a service", and they say, "Of course 18 we do. We are doing it down in Georgia." "Well, no. 19 Up here it is not a product or service yet." 20 There is no ring of common sense 21 about that. So I would urge the Board to reject that 22 line of reasoning. 23 My third point in response to that is 24 Enbridge seems to rely heavily on the fact that at the 25 present time competition does not exist in Ontario in 26 respect of the customer care services. 27 Everyone is singing from the same 28 song sheet here. The utilities do have a monopoly in 89 reply arg. (Brown) 1 that respect right now. But the language of section 29 2 is quite important, and if I could just take you back 3 to that, Members of the Panel, in particular, section 4 29(1). 5 It talks about 6 "... the Board shall make a 7 determination ... if it finds as 8 a question of fact ..." 9 And it goes on: 10 "... that a ... product ... [or] 11 service is or will be subject to 12 competition ..." 13 The statute contemplates that you can 14 exercise your jurisdiction under section 29 in 15 circumstances where there is no existing competition 16 but the market conditions are such that there will be 17 competition sufficient to protect the public interest. 18 It is very important, I respectfully submit, to take 19 into account that language. 20 Second, if I can deal with my 21 friend's concern about notice, my first response is: 22 Who else can get notice? 23 We are now in a rate case. The 24 application has been widely published. There is an 25 extensive intervenor list. 26 When we brought the CENGAS motion we 27 served all of the people who have intervened. As new 28 intervenors have showed up we have served them. 90 reply arg. (Brown) 1 The Board has issued Procedural Order 2 No. 1 which dealt with the CENGAS motion; it has issued 3 Procedural Order No. 2 dealing with the unbundling; and 4 it has also issued the Notice of Hearing for this 5 motion. 6 In response you have a tonne of 7 consumer organizations that have responded. 8 Mr. Thompson wrote a letter, Mr. Brett wrote a letter, 9 Mr. Warren wrote a letter, and Mr. Janigan wrote a 10 letter, four counsel who represent four organizations 11 which traditionally have represented the lion's share 12 of gas consumers here in Ontario. Who else is there to 13 give notice to? There will be no prejudice. 14 Second, and this is very technical 15 and I say it perhaps somewhat facetiously: If one has 16 to give notice of everything that has to be done, has 17 sufficient notice been given to consumers in Ontario of 18 Enbridge's proposal under issue number 7 of the issues 19 list? As I recall the sequence of events, notice went 20 out before the issue was settled. 21 Issue number 7 is a new issue. Has 22 sufficient notice been given of that? Of course the 23 answer is of course it has, because all of the parties 24 affected have filed their interventions. 25 In my respectful submission, the 26 notice issue is a red herring. I just don't see it. 27 The next response which I wish to 28 deal with is my friend went to Mr. Hamilton's affidavit 91 reply arg. (Brown) 1 dealing with some of the marketing material saying that 2 some of the language there indicates to the consumer 3 that, "You will get your bill from the utility", and 4 indeed that is what the marketing materials say. 5 Time marches on, however. Market 6 conditions change. What we are asking for from the 7 Board in considering this issue is to be able to go 8 back to customers or, where agreement is provided, be 9 allowed to shift the mechanism of billing to allow 10 something else. The consumers of this product should 11 be allowed to have third parties coming to them and 12 saying, "You are getting your bills from the utilities 13 now. We think we can save you money by providing that 14 service at a lower cost", and they can decide whether 15 to do that. 16 That will be something that no doubt 17 will be discussed at the hearing of the motion if the 18 Board hears the motion. It is something that goes to 19 merit and it goes to the conditions upon which 20 forbearance may be ordered or the unbundling may be 21 granted. 22 That is a matter of detail. It is a 23 matter of importance. But markets change and the 24 offerings to consumers in the market must be able to 25 change accordingly, especially when they are designed 26 to take things out from a monopoly service and offer 27 consumers a product at a cheaper price. 28 In terms of the preferred process, if 92 reply arg. (Brown) 1 I can respond to my friends, both Mr. Farrell and 2 Mr. Stauft. 3 I must confess candidly that, as you 4 can see from our correspondence, CENGAS has been 5 pushing this motion very hard. We have been 6 endeavouring to get the Board's attention. We consider 7 this to be an important issue and one that should be 8 dealt with sooner rather than later. 9 In my last letter I propose that 10 since Enbridge has filed its proposal and we have filed 11 our evidence, the evidence of right to deal with the 12 matter before the rest of the hearing progressed, and I 13 suggest in mid-July. 14 If that is too aggressive, and I 15 recognize that we are pushing for this, then certainly 16 at a minimum the CENGAS motion should be considered at 17 the same time as issue number 7. The evidence that 18 Enbridge has filed and that we have filed relate in 19 part to the same thing. Others may file proposals on 20 that. If the Board considers, as a matter of 21 scheduling at the hearing, that they should be dealt 22 with together, there is a certain common sense to that. 23 What we do -- that is, what CENGAS 24 does wish to be able to do, however, is not only put 25 its evidence forward but also as a matter of argument 26 go back to our Notice of Motion and say to the Board, 27 "You have heard all of the evidence. Let's go back to 28 the relief that we are asking because we think, as a 93 reply arg. (Brown) 1 matter of fact, you can now make these determinations 2 and therefore we think the consequences flow from that 3 determination. 4 The relief that we are asking for 5 goes hand-in-hand with the evidence that we are 6 submitting. If my friend Mr. Stauft's proposal is 7 adopted by the Board, just cheer them together, we do 8 want the opportunity to argue the relief under the 9 CENGAS motion. We are not withdrawing the motion. We 10 want to be able to argue that relief in the rate case. 11 The final point is the issue of 12 costs. Part of me says that, just as when you are 13 before the court, a motions court judge can say, "Well, 14 we will deal with the costs in the main action at the 15 trial of the action." That is an option that is 16 available to the Board. This is the issue of cost of 17 today and of this particular proceeding can reasonably 18 be dealt with during the hearing of the main rate case, 19 regardless of the outcome of your determination today. 20 Alternatively, the standard order 21 should go and I submit that CENGAS should be entitled 22 to its costs. My friend Mr. Farrell says that we are 23 just a coalition and shouldn't be eligible. I read my 24 mail only quickly yesterday, but I think Mr. Pudge sent 25 me a letter in respect of the standard service offering 26 for the electricity that we were an intervenor and were 27 eligible for the standard cost treatment. I didn't see 28 anything different in that. 94 reply arg. (Brown) 1 So, in my respectful submission, if 2 we have to ask for costs today, the standard order 3 should go. This is not a frivolous motion by any 4 stretch of the imagination. This is the first time a 5 non-utility has -- well, that anyone has come before 6 the Board asking the Board to exercise its 7 jurisdiction, in part, under section 29. 8 How the Board responds to that is 9 extremely important and the parties that are before you 10 today making submissions certainly shouldn't be 11 penalized in respect of costs. 12 This is a matter of the public 13 interest and the public interest, if I conclude on this 14 point, is represented not only by the utilities who 15 have their customers but third party market 16 participants also have their customers, and the 17 customers that buy gas through direct marketers are 18 just as much consumers of gas in Ontario, in this case 19 being represented by their direct marketers. They are 20 not second-class citizens just because they choose gas 21 from their marketers. 22 So the fact that the marketer is 23 coming before the Board, sure there is a commercial 24 interest, but the history of deregulation in this 25 province shows that the commercial interests of those 26 in favour of deregulation goes hand-in-hand with the 27 commercial interests of the consumers in this province 28 by saving money and, certainly, there shouldn't be any 95 reply arg. (Brown) 1 penalty there. 2 So those are my submissions, 3 Madam Chair, in reply. 4 THE PRESIDING MEMBER: Thank you, 5 Mr. Brown. 6 Mr. Vegh, I see you looking at the 7 microphone. 8 MR. VEGH: Madam Chair, if I may, 9 just a moment to respond to Mr. Farrell's statements on 10 my client's entitlement to costs. 11 Mr. Farrell referred to the CAC 12 motion. My client wasn't at the CAC motion because 13 that motion did not raise issues that had a direct 14 impact on my client. This motion does and that is why 15 I'm here. The impact is twofold. 16 First, the members of CEED include 17 licensed gas marketers, so obviously the unbundling of 18 customer care is crucial to them. 19 The second things that goes to this 20 proceeding in particular, this motion in particular, 21 and the threshold issue, the point of our submissions 22 today is that we do not want to go through the costs of 23 having two separate hearings to deal with the same 24 matter. So there is a direct impact on my clients in 25 terms of their internal resources and their external 26 costs on having to go through two proceedings and that 27 is why they are directly impacted by the discretion -- 28 dealing with the merits of unbundling. 96 1 THE PRESIDING MEMBER: Thank you, 2 Mr. Vegh. 3 Mr. Mattson. 4 MR. MATTSON: Thank you, Madam Chair. 5 My friend, Mr. Farrell, addressed two 6 issues with respect to my argument. The first was, 7 just briefly -- 8 THE PRESIDING MEMBER: No, I'm sorry. 9 MR. FARRELL: Costs only. 10 THE PRESIDING MEMBER: If you have 11 anything on costs. I think it was costs that were the 12 only -- 13 MR. MATTSON: Oh. Mr. Farrell 14 indicated that I suggested that they throw out the 15 Trebilcock evidence. 16 THE PRESIDING MEMBER: Oh. 17 MR. FARRELL: I did say that, but he 18 has no right of reply, Madam Chair. 19 THE PRESIDING MEMBER: I understand 20 that. I just thought -- 21 MR. MATTSON: All right. 22 THE PRESIDING MEMBER: -- on the 23 matter of costs, had there been something that you 24 wished to add we would have heard from you. 25 MR. MATTSON: Madam Chair, briefly 26 with respect to costs, I note section 2 of the new Act, 27 section 2(1), the Board objective with respect to gas 28 indicates to facilitate competition and the sale of gas 97 1 to users. 2 I note my client is not a vested 3 interest group as much as a public interest group and 4 it is not just in the public interest that the DSM 5 initiatives, such as the CAC motion, are brought into 6 play or should be protected or that my client has an 7 opportunity to speak to those issues, but also my 8 client is very concerned about the issues that arise as 9 a result of the transition from the old to the new 10 regime with regard to gas regulation. 11 In that context, our participation 12 here is to ensure that the Board gets our comments with 13 respect to how we feel the Board, in the players' 14 vested interest, and the proponent should proceed or 15 should act in accordance with facilitating competition 16 and the sale of gas to users and that is why we are 17 here today. We see this issue as an important issue 18 with respect to how competition will come about in the 19 next two years with respect to gas and that is why we 20 are here to make our viewpoint known. 21 Those are really all my submissions 22 with respect to Mr. Farrell's comments on costs. 23 Thank you. 24 THE PRESIDING MEMBER: One moment, 25 please. 26 --- Pause 27 THE PRESIDING MEMBER: Ms Lea, do you 28 have any other questions of clarification that you wish 98 1 to put on the record? 2 MS LEA: No, thank you, Madam Chair. 3 MEMBER VLAHOS: Mr. Brown, can you 4 tell me what was contemplated by requesting a mid-July 5 hearing of the motion on the substance of the motion? 6 What was contemplated by CENGAS that we will hear the 7 substance and then there will be a Board decision on 8 that hearing before we are to proceed with the issue 7 9 of the issues list? Can you help me with that? 10 MR. BROWN: I don't think that is 11 what was contemplated. 12 I think I indicated in my letter that 13 Enbridge had filed its evidence and we had filed ours. 14 You know, time may have been ripe. 15 I think what we were contemplating 16 was to deal with this issue, the CENGAS motion and the 17 issue number 7, as sort of the early part of the rate 18 case rather than the latter part of the rate case. 19 As I indicated in my reply 20 submissions, CENGAS has been aggressive in trying to 21 move the Board to hear its motion. 22 We thought that given the state of 23 the evidence, it could be dealt with as the early part 24 of the hearing rather than the latter and the date of 25 mid-July was the date I picked out of the air that 26 sounded like it would be towards the beginning of the 27 rate case. 28 MEMBER VLAHOS: I would take it then 99 1 that by dealing with the early part of the proceeding, 2 you would be able to obtain some information that would 3 be relevant, I guess, to the CENGAS objectives that, 4 first, we have to identify what that service is, what 5 are the costs for that that are associated with that 6 service and if we would, to remove them from the costs 7 of service, what should be those costs. Would that be 8 fair? 9 MR. BROWN: Yes, in term of complete 10 forbearance, that is fair. 11 MEMBER VLAHOS: And do you have any 12 indication as to you would not be able to obtain this 13 kind of costing information if you were to go through 14 the normal rate case that has been filed by Consumers 15 Gas? 16 MR. BROWN: I'm sorry, that we would 17 not be able to? 18 MEMBER VLAHOS: Yes. Did you ask in 19 interrogatories? 20 MR. BROWN: No interrogatories were 21 asked, although I am told that we can determine the 22 costs from the evidence that has been filed. 23 THE PRESIDING MEMBER: You can't? 24 MR. BROWN: No. I think we can. I'm 25 sorry, we can't. Cannot. 26 MEMBER VLAHOS: You could not ask any 27 interrogatories? You could not have asked 28 interrogatories on that issue, on the costs that are 100 1 associated with the provision of the billing and 2 associated services? 3 --- Pause 4 MR. BROWN: I'm sorry for the delay, 5 Mr. Vlahos. I am told that we did not ask those 6 questions, although my friend Mr. Vegh's client did ask 7 those questions. 8 MEMBER VLAHOS: Did you have any 9 indication from Consumers Gas or from any other sources 10 that the information or evidence that has been brought 11 forward by CENGAS in relation to this motion that would 12 not have been accepted or admissible as part of 13 visiting issue 7 of the Issue List. 14 MR. BROWN: The responses I have had 15 from Enbridge have been through correspondence from my 16 friend, Mr. Farrell. I have taken the responses of 17 Enbridge to be that the issues as raised by CENGAS 18 should not be dealt with in the hearing, so I guess my 19 answer to the question is that I have been under the 20 impression from Enbridge's position that the issues 21 raised by CENGAS simply shouldn't be dealt with as part 22 of the hearing. 23 MEMBER VLAHOS: It was your 24 conclusion then that you would not have been able to 25 file the evidence that has been produced by your 26 experts in the rate case. 27 MR. BROWN: No. That hasn't been our 28 conclusion, that we wouldn't be able to file it. I 101 1 think the date for filing intervenor evidence is not 2 yet upon us. We will await the disposition of the 3 Board to the matter today. 4 We have filed the evidence in respect 5 of the motion. If the Board was to say "No, we will 6 not hear the CENGAS motion", then I would assume I 7 would receive instructions to file that evidence as 8 part of the intervenor evidence in respect of issue 9 number 7, but as I indicated to the Panel in my reply, 10 while there may be some attractiveness to dealing with 11 the CENGAS evidence and the Enbridge evidence as part 12 of dealing with issue 7, at the end of the day we do 13 wish to be able to make the submissions for the relief 14 that is requested in our Notice of Motion. 15 We simply haven't brought the motion 16 in order to be able to file evidence. We have brought 17 the motion to be able to file evidence and then after 18 the consideration of the evidence by the Board to ask 19 the Board to do certain things as spelled out in our 20 Notice of Motion. 21 MEMBER VLAHOS: Thank you. Just help 22 me with the process, Mr. Brown. If it is going to be 23 visited at the same time, the substance of the motion 24 as well as the rates case, then when do you see the 25 forbearance if the Board so chooses, if the Board so 26 finds? When do you see that happening? 27 MR. BROWN: What I would see, Mr. 28 Vlahos, is the Board won't have before it evidence that 102 1 we have filed, evidence that Enbridge has filed on 2 issue 7. It sounds that at least one intervenor will 3 be filing evidence which may or may not relate to these 4 customer care services, but you will have the evidence. 5 Having heard the evidence, you will 6 then have to hear argument on that evidence together 7 with, of course, the other issues in the rate case. At 8 that point of time CENGAS I expect will be wanting to 9 make a submission to the Board that given the evidence 10 that you have heard, you are in a position to make 11 certain factual findings or determinations as 12 contemplated by section 29. 13 We would be asking you to make those 14 findings and then also making submissions that if you 15 do make those factual findings, then the statute 16 requires you, that is you shall begin to march down the 17 road towards forbearance. What conditions may be 18 attached, what timing may be attached to that 19 forbearance will be a matter of argument and we will be 20 making the pitch to do it sooner rather than later. 21 In terms of the process, that would 22 be how I would see it unfolding, sir. 23 MEMBER VLAHOS: Fine. It would have 24 required this Board to approve new rates that would 25 have to flow out of separating the costs and provision 26 in providing certain services. 27 MR. BROWN: It may well. 28 MEMBER VLAHOS: And such opportunity 103 1 would have to be at the next rates case. 2 MR. BROWN: No. As a matter of 3 argument, under our section 29 motion, we would be 4 saying to the Board that when you exercise your 5 jurisdiction under section 29, if you find as a matter 6 of fact that competition is or will exist with respect 7 to the services, that is sufficient to protect the 8 public interest, that after making that finding you can 9 impose certain conditions. 10 It may well be that if you do make 11 that finding, a condition that you impose will be that 12 there has to be new rates given the findings that you 13 have made sooner rather than later and not in the new 14 rate case. 15 Section 29, we will be arguing, 16 injects a new element into the process. Rates are not 17 just simply determined under section 36 rate cases. A 18 section 29 motion can also bear upon that. 19 I am giving you a general answer, but 20 conceptually that would be the argument. 21 Also, as my friend, Mr. Vegh, has 22 kindly pointed out to me, one of the issues that the 23 Board will have to be considering on issue 7 itself is 24 issue 7.4 which is the implementation timetable as well 25 as 7.2 which is cost allocation and rate design, but 26 7.4 is an implementation timetable, so even within the 27 rate case, that is already a live issue before the 28 Board. 104 1 MEMBER VLAHOS: Thanks, Mr. Brown. 2 THE PRESIDING MEMBER: Mr. Brown, 3 just to follow up on that. If it's already a live 4 issue before the Board, what turns on this motion then? 5 I think my difficulty with the whole 6 thing is I hear your argument that somehow an 7 application under 29 comes as a motion before the Board 8 and should be answered by the Board as an answer to a 9 motion. It appears to me that there were other ways 10 this might have arisen. 11 For example, you might have asked 12 interrogatories, as Mr. Vlahos suggested, to get the 13 information that was required to go with the evidence 14 which you were going to file in the main rates case, 15 made your argument on section 29 as part of your 16 argument in the main rates case, resulting in a 17 decision with reasons by the Board at the end of the 18 rates case granting or not really what you thought. 19 I don't read anything in section 29 20 which suggests it can only be dealt with through a 21 motion. In fact, on the contrary. It says "on an 22 application or in a proceeding" which suggests to me 23 that it doesn't have to be a motion. It could be 24 argued for as part of your argument in the main rates 25 case. 26 Is that not possible? 27 MR. BROWN: That is possible. 28 Section 29 in its opening language allows a party to 105 1 bring its own application, which is quite distinct from 2 a motion, or it would allow for the matter to be dealt 3 with in a proceeding. A proceeding could involve 4 either a motion in the proceeding or, I suppose, 5 argument in the proceeding. 6 CENGAS elected to bring a motion in 7 the proceeding in large part because when that motion 8 was filed with the Board, issue number 7 was not on the 9 issues list. 10 THE PRESIDING MEMBER: I understand 11 that. Subsequently -- 12 MR. BROWN: But that is important 13 because section 29, and I guess sort of stepping back 14 and looking at the broader picture, the interpretation 15 CENGAS has of section 29 is as follows. 16 The legislature has now set out new 17 parameters for determining how the market should work 18 in Ontario for both gas and electricity. One of the 19 parameters that it set out in the Act is a completely 20 new power to the Board. 21 That is, as we go along in time, we 22 can identify products or services which in the past may 23 have been offered only by a monopolist, be it gas or 24 electricity, but now either are subject to competition 25 or will be subject to competition. 26 It is now open to really anyone to 27 take advantage of section 29 to come before the Board 28 and say "Look, in respect of these particular products 106 1 and services, there is or will be competition and 2 something should be done about that". 3 Indeed, the legislature went as far 4 as to make it mandatory that once you made a finding of 5 fact that something has to be done about it in terms of 6 going down forbearance. 7 I don't know whether that is a 8 complete answer, but the genesis of the motion is 9 pre-issue 7. Issue 7 wasn't on the radar screen yet. 10 Now that issue 7 is on the radar screen, in my 11 submission, that doesn't detract from the power and the 12 force of section 29 because we will want to make, if 13 this is heard as part of the rate case, something more 14 than the typical arguments that one traditionally hears 15 from intervenors as part of the rate case. 16 We will be wanting to take you to 17 section 29 and saying "Given the evidence that you have 18 heard, you should make these determined findings of 19 fact and if you do make them, then you have to do 20 certain things because that's what section 29 says". 21 THE PRESIDING MEMBER: And nothing 22 prevents you making that argument at the conclusion of 23 the rates case. 24 MR. BROWN: I'm not convinced of 25 that. The reason that we wished to have the motion 26 before the Board is that we then procedurally have 27 before the Board, before the applicant and all of the 28 other intervenors before the Board a notice of motion 107 1 that certain relief will be requested. 2 The concern I have, Madam Chair, is 3 if this motion is dismissed by the Board on the basis 4 that it shouldn't be heard in the hearing, what is 5 there to prevent the applicant or any other intervenor 6 from saying at the end of the hearing "Well, CENGAS is 7 rambling on about the section 29 stuff, but there is no 8 issue before you on section 29 because there is no 9 application or motion on section 29. You aren't being 10 asked to do anything". 11 By having the Notice of Motion there, 12 you will formally have before you the procedural device 13 that requires you to at least listen to our argument 14 and also the procedural device that has fairly given 15 notice to all of the other parties and intervenors in 16 this proceeding that you will be asked to listen to 17 that issue by CENGAS. 18 That is a very real concern that I 19 have. It is not sufficient, in my respectful 20 submission, to say: Well, you can really deal with it 21 under issue 7, because at the end of August, or 22 whenever we have final argument on that, parties may 23 say: Well, there is no section 29 application before 24 the Board. 25 If that is your concern, if the Board 26 is going to deal with the hearing today on the basis of 27 saying: Any intervenor is free at any time during any 28 proceeding to raise a section 29 issue and ask the 108 1 Board to do things under section 29, that is a 2 procedural process that I guess the Board could embark 3 upon. 4 In my own view, the safer process is 5 if a party wishes to request the Board to consider a 6 section 29 issue, that party or intervenor should bring 7 a motion so that everyone is on notice that this is 8 going to take place and this will be an issue dealt 9 with in the proceeding. 10 I think that is a much safer 11 procedural way to go, especially, Madam Chair, in light 12 of the position that has been taken by the applicant in 13 this rate case that this matter should not be dealt 14 with in the hearing. I am not sure what argument I 15 would face at the end of August if after hearing all of 16 the evidence I then started to turn to section 29. At 17 that point in time my friend Mr. Farrell might well be 18 within his right to say: "Mr. Brown can't open his 19 mouth with respect to section 29. The Board said that 20 can't be an issue." 21 We are giving him notice and, by 22 giving him notice, saying that that is what we want to 23 argue and that is what we want to lead evidence on as 24 well. 25 That is one reason, in my submission, 26 that the Board should find that this motion should be 27 heard as part of the rate case; that the motion remain 28 there, and the parties can then address the issue in 109 1 argument at the appropriate time. 2 THE PRESIDING MEMBER: I am not sure 3 we differ in a practical sense, Mr. Brown. We may be 4 quibbling over words. 5 I think there is another question. 6 MEMBER HALLADAY: I just had a couple 7 of questions to ask. 8 Mr. Farrell, I am a little concerned 9 about your position. First of all, I appreciate that 10 the CRTC practice is to have notice that in fact they 11 have made a preliminary determination that a product or 12 service exists, and then in the decision actually 13 decide that the product or service exists and whether 14 they will exercise their right to forbear. 15 Are you submitting to this Board that 16 that is the procedure that we must take in exercising 17 our right to forbear? 18 MR. FARRELL: The position that I am 19 advocating is that there must be a service or class of 20 service -- I will leave product out of it; it would be 21 the same submission -- in order for your to exercise 22 your forbearance of power. 23 My interpretation rests on reading 24 not only subsection 29(1), but clause 29(2)(e). 25 I was pointing out the CRTC's 26 procedure only for the purposes of my submissions on 27 what I called the procedural fairness issue; and that 28 is that we have made a proposal in relation to 110 1 unbundling for approval in principle that would, as I 2 mentioned in my submissions, have no ratemaking effect, 3 whereas the CENGAS motion would have ratemaking effect 4 in relation to fiscal 2000. 5 It was for that reason that I raised 6 the notice issue and directed you to the CRTC's 7 procedure of giving notice in advance. 8 This Board is the master of its own 9 procedural house, so to speak. There is some merit, in 10 my view, in the CRTC's process, but it certainly isn't 11 binding upon you, and you can choose your own 12 procedure. It would seem to us, however, that 13 something that is in the nature of forbearance, 14 particularly something that has been traditionally 15 regulated, would be amenable to a notice procedure. 16 MEMBER HALLADAY: Are you submitting 17 that there are any restrictions on our rights to use 18 our forbearance power within the rate case? 19 MR. FARRELL: The only restriction, 20 Ms Halladay, would be that you would have to, in my 21 submission at least, notionally create the service from 22 which you are going to refrain. You need to have 23 something to compare with the marketplace in order to 24 make the finding. 25 If you conclude in the context of the 26 rate case that you know enough about what an Enbridge 27 regulated billing and collection service would look 28 like, what its features would be, what its costs would 111 1 be, in order to then compare that to what is available 2 in the marketplace and making a finding that what 3 Enbridge has is subject to sufficient competition so as 4 to protect the public interest, then you could make the 5 section 29 finding in the rate case. 6 MEMBER HALLADAY: I guess I am 7 concerned about your procedural fairness issue. 8 If in fact we exercise our power to 9 forbear, assuming we make the finding of the proper 10 definition of product or service, is there any 11 procedural problem with us exercising that power, 12 particularly in light of your argument that certain 13 customers would not have had notice as far as the 14 exercise of this forbearance power and it would have an 15 effect on the ratemaking process? 16 MR. FARRELL: If the Board decides to 17 hear the CENGAS motion in the context of the RP-1999-1 18 hearing, then your question is answered, in my 19 submission, by the paragraphs that start on page 4 of 20 our June 14th letter, which would in effect with the 21 proceeding have the main hearing and what I call the 22 subsequent hearing in order to accommodate the 23 submissions that are made in paragraphs 3 and 4 on page 24 5. That is to say, it would give time to have CENGAS 25 publish a notice of its motion such that if there were 26 any doubts about proper notice, it could be 27 accommodated in the context of RP-1999-1. 28 MEMBER HALLADAY: Mr. Farrell, I 112 1 appreciate that your favoured position is that it be 2 heard after the rate case. If this Board wants to hear 3 the determination within the context of the rate case, 4 including perhaps exercising its power to forbear, are 5 there any procedural problems with us doing that? 6 MR. FARRELL: Our submission is that 7 there isn't sufficient notice. If the Board feels that 8 there is, then there would be no problem. 9 You would make a finding that the 10 notice in the letter of direction is sufficient to 11 accommodate the section 29 motion, as well as the 12 normal section 36 ratemaking function. 13 If you made the finding that the 14 letter of direction and the notices attached to it are 15 sufficient, then you could proceed obviously, because 16 you found that there was no need for further notice. 17 MEMBER HALLADAY: If there is a 18 procedural problem with our determining that issue 19 within the rate case, do you have any proposal as to 20 how we could correct it before the hearing of the rate 21 case? 22 Or is it your proposal that it can 23 only be corrected by a separate hearing after the rate 24 case? 25 MR. FARRELL: No. We proposed a 26 separate hearing for two purposes: one was the notice 27 so as not to hold up what I called the main hearing by 28 having CENGAS publish a notice of its application, and 113 1 the effect that its application would have if 2 successful. 3 The second reason for the two 4 hearings within RP-1999-1 is found at the bottom of 5 page 4, where you would use the main hearing to create 6 what I call the notional service that you would then 7 look at to compare with the marketplace in order to 8 make a section 29 finding. 9 If you wanted to have one hearing, 10 then it would follow from what I have just said that 11 the matters dealt with in the CENGAS motion would be 12 heard at the end of that process rather than the 13 beginning, as Mr. Brown would have you do. 14 In other words, one hearing but the 15 matters to put the issue in focus would have to take 16 first. 17 MEMBER HALLADAY: Mr. Brown, you look 18 like you want to say something. 19 MR. BROWN: I have had a bit of time 20 to think about, Madam Chair, the comment that you made 21 that there really didn't seem to be much practical 22 difference in terms of the position; also in light of 23 the question asked by Board Member Halladay. 24 I suppose one way of looking at what 25 we are essentially asking the Board to do procedurally 26 is to take the issues list, to take issue number 7 and 27 add to it a 7.5, which is the CENGAS motion. If you 28 look at it that way, then the relief that we are 114 1 requesting remains a live issue; it is part of issue 7. 2 Then when issue 7 is actually heard, you have heard the 3 pitches from Mr. Farrell and myself; but ultimately 4 that is a matter for the members of the Board to decide 5 as a matter of scheduling. 6 Conceptually, that is another way of 7 making sure that not only is the evidence there as part 8 of the rate case, but then at the end of the rate case 9 the relief that we are asking for under sections 29 and 10 36 can be dealt with, because it is issue 7.5, the 11 CENGAS motion. 12 I submit that that is perhaps another 13 way of looking at it. 14 THE PRESIDING MEMBER: Thank you, 15 Mr. Brown. 16 Member Vlahos. 17 MEMBER VLAHOS: Mr. Brown, I want to 18 follow up on this one. Right now the way issue 7 19 reads, it does have 7.2, which deals with rate design 20 issues, rate design for unbundled services. 21 I would like to hear your response to 22 the argument by Mr. Stauft that what CENGAS is raising 23 is a rate design issue, not a forbearance issue. 24 Can I have your response to that, 25 please. 26 MR. BROWN: I suppose there are two 27 ways to go. As the next movement down the competitive 28 road, we are moving towards the direction of 115 1 unbundling. Both of the gas utilities in this province 2 have indicated and have put proposals before the Board 3 on unbundling. Also, the statute does indicate that in 4 addition to unbundling, you can have forbearance. 5 It may well be that my friend 6 Mr. Stauft's proposal would be to have the utility 7 offer an unbundled but regulated service for what we 8 have called the customer care services. That might be 9 an alternative model. That would be the design issue 10 perhaps way of going. 11 Equally possible, however, depending 12 upon the determinations of the Board, would be a 13 scenario under which not only would the customer care 14 service actually be unbundled, but it would be 15 unregulated so that the utility could offer that 16 service to customers, third parties could offer service 17 to customers, and presumably the better price wins. 18 Indeed, the evidence of Dr. Overcast 19 from Georgia indicated that as part of their 20 deregulation process the Commission down there required 21 the utility to offer a customer care package as an 22 unbundled service. Equally, third parties were able to 23 offer it, and at the end of the day nobody took the 24 utility's service, presumably because the others could 25 offer it on better terms and conditions. 26 So the design issue that my friend is 27 speaking to is certainly a way that certain parties 28 could approach the issue and proposals that they could 116 1 put before the Board, but it is not the only way of 2 looking at the end state market. 3 I don't know whether that is a direct 4 answer to your question. I hope it is. 5 MEMBER VLAHOS: Thank you. I am 6 reminded that this issue of billing and associated 7 services was one of the rate design issues which was 8 visited on the Market Design Task Force. 9 MR. BROWN: Indeed. 10 MEMBER VLAHOS: Which task force 11 dealt specifically with rate design issues rather than 12 forbearance issues. 13 MR. BROWN: I can't remember whether 14 the word "forbearance" came up, but that was a 15 consensus building exercise, so necessarily it was rate 16 design. 17 They also advocated a certain timing 18 for wholesale and retail unbundling of the billing 19 services, which would see it in by the end of the first 20 quarter 2000. 21 MEMBER VLAHOS: Thank you, Mr. Brown. 22 Mr. Farrell, as a follow-up on one of 23 the exchanges with Ms Halladay, I am going to give a 24 silly example here. If for some reason it is 25 determined that the legal department at Consumers Gas 26 has compared the service and that all services can be 27 rendered from the outside so therefore there should be 28 no employees of Consumers Gas, which is part of their 117 1 cost of service -- just follow that ridiculous example 2 with me. 3 Do we have to publish -- 4 MR. FARRELL: It sounds good so far. 5 MEMBER VLAHOS: I guess it goes back 6 to the issue of adequate notice. 7 How far do we go? Where do we stop? 8 A number of those things will come 9 up, going forward. As far as main rate cases, there 10 will be a number of services, products, activities that 11 may not fit under the definition of unbundled 12 regulation. 13 MR. FARRELL: I understand your 14 question, Mr. Vlahos. At some points, as I have listed 15 to submissions, I am getting confused between 16 unbundling and outsourcing and various other things. 17 As the applicant, we have made an 18 application and the Board directs us to publish a 19 notice of it. One of the concerns that we have is that 20 something not arise which would make the process 21 somehow invalid down the road. So we are acutely 22 sensitive to trying to ensure that there is adequate 23 notice such that something couldn't be upset later on a 24 technical ground. 25 I appreciate that during the course 26 of hearings intervenors file evidence proposing one 27 thing or another, and that is in the normal course. It 28 is just as long as our notice that we have been 118 1 directed to publish doesn't somehow upset the applecart 2 in terms of the process designed to lead to new rates 3 for the services we provide. 4 Even with a ridiculous example of 5 something coming along, someone making a proposal, do 6 you have to grind everything to a halt and re-publish 7 notice? That is really up to you and your colleagues 8 to determine whether something more is needed than what 9 has been put on the record. 10 I don't have an answer, quite 11 frankly, to Mr. Brown's point of who else can give 12 notice. I don't know the answer to that. I concede 13 that the typical crowd of intervenors is already part 14 of this proceeding. Whether that is adequate for 15 something which would be a radical change, which was 16 not included in the public notice process, is something 17 that you and your colleagues will have to wrestle with. 18 MEMBER VLAHOS: Thank you. 19 THE PRESIDING MEMBER: One moment, 20 please. 21 --- Pause 22 THE PRESIDING MEMBER: The Board 23 would like some time to consider its decision on this 24 matter but does believe it can deliver an oral decision 25 this afternoon. 26 We would like to reconvene at 2:30. 27 MR. MATTSON: If that decision or a 28 summary of that decision could somehow be put on the 119 1 hot line, I really have something else that demands my 2 attention this afternoon and I would love it if I could 3 just phone in. 4 THE PRESIDING MEMBER: I am sure that 5 can be arranged. 6 MS LEA: We will arrange something, 7 Mr. Mattson. I am not sure we have a hot line yet set 8 up for this rate case. Why don't you call me and I 9 will let you know how to get hold of it. 10 THE PRESIDING MEMBER: We will 11 reconvene at 2:30. 12 --- Upon recessing at 1:50 p.m. 13 --- Upon resuming at 2:37 p.m. 14 THE PRESIDING MEMBER: Please be 15 seated. 16 RULING 17 THE PRESIDING MEMBER: The Board has 18 considered the submissions by all parties, including 19 the written comments submitted by or on behalf of those 20 parties not in attendance. 21 The Board's ruling is as follows: 22 The CENGAS motion originally arose 23 from the lack of any evidence by the company in 24 RP-1999-0001 relating to unbundling. Discussions among 25 the parties subsequently resulted in the addition of 26 issue 7 relating to unbundling and the filing of 27 evidence by the company. 28 Once this issue had been agreed to, 120 Ruling 1 CENGAS agreed to the adjournment of its motion, but 2 having seen the evidence filed by the company CENGAS 3 renewed its application. 4 The Board regrets that CENGAS did not 5 pursue other means of addressing its concern. In the 6 Board's view, an orderly process involves the 7 consideration of unbundling issues and associated rate 8 design issues before the consideration of forbearance 9 as an aspect of rate implementation. This process will 10 unfold during the rates case and the parties will have 11 an opportunity to explore the extent and timing of the 12 company's plans to unbundle services. 13 CENGAS will be free to raise this 14 issue after the relevant evidence has been tested. 15 Therefore, the Board is not prepared to deal with the 16 substance of the motion prior to the rates case. 17 As to costs. While it is not the 18 Board's practice that costs automatically follow the 19 success or failure of a motion, having found this 20 motion to have been brought prematurely the Board finds 21 that CENGAS shall bear its own costs. 22 The costs of the other intervenors 23 and the Board's costs shall be dealt with as part of 24 the main rates case RP-1999-0001. 25 Are there any questions? 26 MR. BROWN: Madam Chair, you 27 indicated as part of the reasons that CENGAS would be 28 free to deal with certain matters in the rates case and 121 Ruling 1 I didn't get it down completely. 2 By that is the Board saying that we 3 would be free to deal with the issues that we raised in 4 our motion at the rates case? 5 THE PRESIDING MEMBER: It is the 6 Board's understanding that the issues of unbundling are 7 on the issues list and that relevant evidence relating 8 to unbundling will be filed in the rates case. It will 9 be open to the parties to raise their concerns about 10 that evidence in the rates case and we are not prepared 11 to deal at this time with the substance of the motion. 12 MR. BROWN: At the risk of asking for 13 further clarification -- because it is important to the 14 client and we need guidance for this hearing -- is it 15 open to CENGAS to raise the forbearance issue during 16 the hearing? 17 THE PRESIDING MEMBER: I don't think 18 we could stop you from raising the forbearance issue 19 during the hearing if there is relevant evidence upon 20 which you can argue that issue. I think it is not up 21 to the Board to tell the parties what their arguments 22 will be at the conclusion of the rates case. 23 What we are saying is there is an 24 orderly way of dealing with these matters and as far as 25 the Board is concerned we need to consider the general 26 issue of unbundling, the rate design issues that come 27 out of unbundling. Rate implementation is the place 28 where the question of forbearance comes up, that is you 122 Ruling 1 can't forbear from regulating something which is not 2 being regulated, not about to be regulated or part of 3 the regulatory process. 4 So we haven't seen all the evidence 5 that will be filed relating to unbundling. We have 6 seen the company's evidence and we understand that 7 other people are filing evidence. We haven't seen all 8 the -- we haven't reviewed all the interrogatory 9 responses. The evidence hasn't been tested. 10 At the conclusion of the rates case 11 it will be open to parties to argue where they think 12 the evidence in the rates case leads them. 13 MR. BROWN: We appreciate that 14 clarification. 15 THE PRESIDING MEMBER: Thank you very 16 much. 17 Thank you for your assistance. 18 --- Whereupon the hearing adjourned at 2:43 p.m.