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 Ontario The 8 Consumers' Gas Company Ltd., carrying on business as 9 Enbridge Consumers Gas, for an order or orders approving 10 or 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 S.K. HALLADAY Presiding Member 16 P. VLAHOS Vice Chair and Member 17 18 19 20 Hearing held at: 21 2300 Yonge Street, 25th Floor, Hearing Room No. 1 22 Toronto, Ontario on Monday, May 29, 2000, 23 commencing at 0931 24 25 26 HEARING OF MOTION 27 28 VOLUME 1 Les Services StenoTran Services Inc. 613-521-0703 2 1 APPEARANCES 2 JENNIFER LEA/ Board Technical Staff 3 HIMA DESAI Board Technical Staff 4 5 6 MICHAEL JANIGAN Vulnerable Energy Consumers 7 Coalition (VECC) 8 9 ROBERT WARREN Consumers Association of 10 Canada (CAC) 11 12 PETER THOMPSON Industrial Gas Users' 13 PETER FOURNIER Association (IGUA) 14 15 FRED CASS/ Enbridge Consumers Gas (ECG) 16 THOMAS LADANYI 17 18 MICHAEL JANIGAN Vulnerable Energy Consumers 19 Coalition (VECC) 20 21 PATRICIA JACKSON Union Gas 22 23 IAN MONDROW Heating, Ventilation and Air 24 Conditioning Coalition Inc. 25 (HVAC) 26 BETH SYMES Alliance of Manufacturers & 27 Exporters Canada (AMEC) 28 Les Services StenoTran Services Inc. 613-521-0703 3 1 Toronto, Ontario 2 --- Upon commencing on Monday May 29, 2000 3 at 0931 4 THE PRESIDING MEMBER: Thank you. Please be 5 seated. 6 Good morning. The Board is sitting this 7 morning to hear a Motion for Review and Variance brought 8 by the Industrial Gas Users' Association, the Consumers' 9 Association of Canada, and the Vulnerable Energy 10 Consumers Coalition, requesting the Board to review and 11 vary those portions of the Board's RP-1999-0001 Phase I 12 Decision relating to the Board's determination of the 13 Consumers' Gas Company Limited's operating and 14 maintenance expenses, rate base, depreciation and 15 amortization expenses, return on rate base, income taxes 16 and gross revenue deficiency for the company's 2000 17 test year. 18 The moving parties are also requesting the 19 Board to issue a procedural order declaring that the 20 2000 rates are interim pending the final disposition of 21 the request for review and variance, directing the 22 company to make full and complete disclosure of the 23 particulars of the outsourcing plan which it implemented 24 on January 1st, 2000 with its affiliate Enbridge 25 Commercial Services Inc., including directing the 26 company to record all payments made in appropriate 27 deferral accounts, providing for direction for a hearing 28 and a determination by the Board of the extent to which Les Services StenoTran Services Inc. 613-521-0703 4 1 the 2000 rates ought to be adjusted as a result of the 2 outsourcing plan, and directing the company to file rate 3 base and cost of service information for the 2000 bridge 4 year and the 2001 test year in the traditional cost of 5 service format in its next rates application. 6 My name is Sheila Halladay. With me today is 7 Paul Vlahos. 8 May I have appearances, please? 9 MR. CASS: Good morning, Madam Chair. 10 Fred Cass for Enbridge Consumers Gas. 11 THE PRESIDING MEMBER: Good morning, Mr. Cass. 12 MR. THOMPSON: Peter Thompson, Madam Chair, 13 for the Industrial Gas Users' Association. With me is 14 Mr. Fournier, the Executive Director and President of 15 the Association. 16 THE PRESIDING MEMBER: Good morning, 17 Mr. Thompson, Mr. Fournier. 18 MR. WARREN: Robert Warren for the Consumers' 19 Association of Canada. 20 THE PRESIDING MEMBER: Good morning. 21 MR. JANIGAN: Michael Janigan from the 22 Vulnerable Energy Consumers Coalition. 23 THE PRESIDING MEMBER: Good morning, 24 Mr. Janigan. 25 MS JACKSON: Patricia Jackson for Union Gas. 26 MR. MONDROW: Ian Mondrow for HVAC Coalition. 27 THE PRESIDING MEMBER: Good morning, 28 Mr. Mondrow. Les Services StenoTran Services Inc. 613-521-0703 5 1 MR. MONDROW: Good morning. 2 MS LEA: Jennifer Lea for Board Technical 3 Staff. 4 THE PRESIDING MEMBER: Excuse me, Ms Lea, I 5 think there are still -- 6 MS LEA: I'm sorry. 7 There you are, Beth. I didn't see you there. 8 I'm sorry about that. 9 MS SYMES: Beth Symes of the Alliance of 10 Manufacturers and Exporters Canada. 11 THE PRESIDING MEMBER: Thank you, Ms Symes. 12 Now, Ms Lea. 13 MS LEA: Well, having already identified 14 myself, I will say it again: Jennifer Lea for Board 15 Technical Staff. 16 THE PRESIDING MEMBER: Thank you, Ms Lea. 17 Are there any preliminary matters? 18 I take that silence as no. 19 Mr. Thompson, it's your motion. 20 MR. THOMPSON: Thank you, Madam Chair. 21 I plan initially to make some introductory 22 remarks. That will be the first part of my submission. 23 The second component of it will address the 24 statutory and rules authority for the motion. 25 The third component will review the facts and 26 evidence. 27 The fourth component will summarize and 28 conclude the submission that we make in support of the Les Services StenoTran Services Inc. 613-521-0703 6 1 relief requested. 2 As you noted in your introductory -- 3 PRELIMINARY MATTERS 4 MR. CASS: I'm sorry, Mr. Thompson. Pardon 5 the interruption. 6 I guess I should have spoken up during 7 preliminary matters, Madam Chair. 8 As the Board would be aware, the company has 9 stated repeatedly its position that the threshold issue 10 with respect to this motion should be determined first. 11 I'm not sure whether that is where Mr. Thompson is going 12 at this point or not, so I thought I should just speak 13 up to clarify that. 14 It most certainly is the company's position 15 that the threshold issue needs to be addressed and I 16 certainly can make submissions as to why that is so, if 17 necessary. 18 THE PRESIDING MEMBER: Mr. Thompson. 19 MR. THOMPSON: Yes. I certainly recognize we 20 have to address the threshold issue and, as you pointed 21 out in summarizing the relief that we seek, we submit 22 that we do meet the threshold and what we are proposing, 23 assuming that we meet the threshold, is the issuance of 24 a procedural order which falls within the ambit of your 25 powers under the Rules. 26 So I will address the threshold question. The 27 relief requested assumed that you will make a finding on 28 the threshold question and, if you are satisfied we meet Les Services StenoTran Services Inc. 613-521-0703 7 Preliminary Matters 1 the threshold, the relief requested is the issuance of a 2 procedural order. 3 So the point that Mr. Cass raises will be 4 covered in these remarks. 5 THE PRESIDING MEMBER: Is that satisfactory to 6 you, Mr. Cass? 7 MR. CASS: I think we are ad idem, 8 Madam Chair. It sounds like it, yes. 9 THE PRESIDING MEMBER: Thank you. 10 MR. CASS: Thank you. 11 SUBMISSIONS 12 MR. THOMPSON: You have accurately summarized, 13 Madam Chair, the nature of the relief that we are 14 seeking here. 15 The materials in support of the motion consist 16 of our Motion Record, which was served some time ago. 17 I apologize that there is an error in the 18 Style of Cause in this Motion. Mr. Cass picked this up 19 when he delivered his submission a couple of weeks ago. 20 But you will notice on page 1, the cover sheet of the 21 Motion Record, the third recital refers to: 22 "AND IN THE MATTER OF a Notice of Motion 23 of the Coalition of Eastern Natural Gas 24 Aggregators and Sellers". (As read) 25 That should be eliminated from the Style of 26 Cause of the Material, please. 27 I did place on the dais this morning a 28 Supplementary Motion Record. This Motion Record Les Services StenoTran Services Inc. 613-521-0703 8 Submissions by Mr. Thompson (IGUA) 1 contains excerpts from the Statutory Procedures Act, the 2 Ontario Energy Board Act and your Rules, as well as the 3 further correspondence that was exchanged by the parties 4 leading to the issuance of your Procedural Order on 5 May 19th, which is found at Tab 14 of that Supplementary 6 Motion Record. 7 I apologize for not being able to deliver this 8 material earlier, but by virtue of my involvement in the 9 Union Gas Settlement Conference proceeding it was just 10 impossible to get it compiled and delivered. I did 11 leave Mr. Cass a voice mail message telling him that it 12 was coming, so I don't believe there is any problem with 13 the filing of this material. 14 MR. CASS: That's correct, Madam Chair. 15 THE PRESIDING MEMBER: Thank you. 16 MR. THOMPSON: I would like, in the 17 introductory portion of my remarks, to highlight that 18 there is no responding affidavit material from the 19 company. The absence of responding affidavit material 20 is, in my submission, significant when you are 21 considering the threshold question. 22 We have no denial of the inference that the 23 company's plan to outsource all customer care functions 24 was being formulated when Mr. McGill and Mr. Kent 25 testified here before the Board in the RP-1999-0001 26 proceedings on September 2, 1999. 27 The impact of the failure to file the 28 affidavit is recognized by Mr. Cass, in my submission, Les Services StenoTran Services Inc. 613-521-0703 9 Submissions by Mr. Thompson (IGUA) 1 in an item of correspondence that I would like to draw 2 your attention to. 3 At Tab 4 of the Supplementary Record you will 4 see Mr. Cass' letter of April 5, 2000. In this letter, 5 in the third paragraph on page 1 at the bottom of the 6 page, Mr. Cass states as follows: 7 "However, IGUA's motion materials contain 8 certain assertions which even for the 9 purposes of the threshold question should 10 not remain unanswered. In particular, we 11 refer to the allegation by IGUA that 12 during the RP-1999-0001 proceeding, there 13 was a failure to disclose an outsourcing 14 plan by the company." (As read) 15 So that the implication of the failure to 16 deliver affidavit evidence is recognized by Mr. Cass in 17 that correspondence. 18 The other aspect of the record that I submit 19 is significant when considering the threshold question, 20 is the company's resistance to making Mr. McGill 21 available for examination. You will see that reflected 22 in the letter found at Tab 13 of the supplementary 23 record. There, Mr. Cass -- and he is referring to 24 correspondence that preceded this letter pertaining to 25 the right to examine Mr. McGill, and Mr. Cass' position, 26 as of May 17, 2000, as I understand it, was that we have 27 no right to insist that the company bring forward a 28 witness for cross-examination on their motion. Les Services StenoTran Services Inc. 613-521-0703 10 Submissions by Mr. Thompson (IGUA) 1 Under the Rules of Civil Procedure, you do, of 2 course, have a right to examine a witness in connection 3 with a motion, but it appears to me -- and I make the 4 submission that the company is refusing to produce 5 Mr. McGill, and the failure of Mr. McGill to testify is 6 again another factor that is relevant to the inferences 7 and findings that you should make with respect to the 8 threshold question on this motion. 9 These two factual aspects of the matter are 10 very telling when it comes to a consideration of the 11 inferences to be drawn from the evidence as to the 12 threshold question of whether the matter should be 13 reviewed or whether there is reason to believe that the 14 RP-1999-0001 order should be varied. 15 You observed, in your opening remarks, Madam 16 Chair, that this motion is brought by three parties, 17 IGUA, CAC and VECC, each of whom are separately 18 represented. 19 Because the procedure order was issued on 20 May 19, and because counsel for each of these 21 intervenors were heavily involved in the Union 22 settlement conference, we have really had no time to 23 collaborate and consolidate our submissions on this 24 motion. 25 Subject to your directions, our plan is for 26 IGUA to lead off, and then, Mr. Warren and Mr. Janigan 27 will add any points that I have missed before Mr. Cass 28 responds and hopefully, that plan meets with your Les Services StenoTran Services Inc. 613-521-0703 11 Submissions by Mr. Thompson (IGUA) 1 approval. We are trying to avoid duplication, but we 2 really haven't had time to collaborate to make sure that 3 we do. 4 THE PRESIDING MEMBER: I understand, 5 Mr. Thompson. 6 Mr. Cass, do you have any problems with that? 7 MR. CASS: Not at all, Madam Chair. 8 MR. THOMPSON: Let me move to the second 9 topic, being the authority for this motion. 10 The motion is brought under the auspices of a 11 combination of section 21.2 of the Statutory Powers 12 Procedures Act and the OEB Rules. If I could just 13 briefly draw your attention to the Act and the Rules. 14 The Statutory Powers Procedures Act is found 15 at Tab 3 of the Supplementary Motion Record. The 16 relevant section, as you are aware, is section 21.2, 17 which reads: 18 "A tribunal may, if it considers it 19 advisable and if its rules made under 20 section 25.1 deal with the matter, review 21 all or part of its own Decision or order 22 and may confirm, vary, suspend or cancel 23 the Decision or Order." (As read) 24 Your Rules do in fact deal with rehearing, 25 review or variation, and you will find those reproduced 26 at Tab 1 of the Supplementary Motion Record. 27 The first relevant rule is Rule 62, and under 28 62.03, 60.02 and 1: Les Services StenoTran Services Inc. 613-521-0703 12 Submissions by Mr. Thompson (IGUA) 1 "A review proceeding can be commenced by 2 a motion..." (As read) 3 There is also a power in the Board to indicate 4 its intention at any time to review or rehear any 5 matter. The only reason I mentioned that section is 6 that there was correspondence that preceded the filing 7 of the notice of motion here. It's attached to 8 Mr. Fournier's affidavit, where IGUA, CAC and VECC were 9 in effect inviting the Board to initiate the review 10 process. The Board declined to do that and directed us 11 to bring the motion, which we brought. 12 The grounds on which a motion for a review can 13 be based are listed in Rule 63 and include, for the 14 purposes of this motion, a change in circumstances -- 15 that's in 63.01(a)(3) -- and new facts that have arisen 16 since the Decision or Order that we seek to have 17 reviewed was rendered. 18 It is important to note, I submit, that the 19 list of grounds in Rule 63 is not all encompassing. 20 63.01(a) reads, in the last part of (a): 21 "...which grounds may include...". 22 And so other grounds can be relied to support, 23 I submit, a motion for review. 24 The additional ground that we rely heavily on 25 in our motion material is what we submit is the 26 company's breach of its obligation to make full and 27 complete and timely disclosure of the complete customer 28 outsourcing plan before the Decision in RP-1999-0001 was Les Services StenoTran Services Inc. 613-521-0703 13 Submissions by Mr. Thompson (IGUA) 1 rendered. 2 This additional ground pertains to the nature 3 of the perspective test year rate making process. The 4 prospective test year rate making process allows the 5 utility to have its rates determined on the basis of 6 forecasts. 7 We submit that, central to the integrity of 8 this process, is an obligation on the company to make 9 full and timely disclosure of the plans which it will be 10 following in the test year. The prospective rate making 11 is not intended to provide the company with an 12 opportunity to seek approval for rates based on a plan 13 which may not be followed at all because it is only one 14 of several options under consideration and maybe not the 15 preferred option. 16 We submit that to have rates set 17 prospectively, the obligation is on the company to file 18 evidence with respect to a business plan for the test 19 year which is realistic. If plans change and either 20 narrow or broaden before the Board's Decision is 21 rendered, the obligation is on the company to make full, 22 plain and timely disclosure of the changed plans and 23 their impact for rate making purposes. Full and timely 24 disclosure is the stuff upon which the integrity of the 25 process depends. 26 I will review with you a little bit later. We 27 submit that the uncontradicted evidence on this motion 28 indicates that the company was in the process of Les Services StenoTran Services Inc. 613-521-0703 14 Submissions by Mr. Thompson (IGUA) 1 formulating its complete customer report information 2 management and fleet services, outsourcing plan long 3 before the Board's Decision was rendered. 4 The uncontradicted evidence, we submit on this 5 motion, supports the inference that the company had no 6 real intention of following the business plan for fiscal 7 2000 on which its application for rates was based, but 8 planned to implement an entirely different plan once the 9 Decision and Order were rendered. 10 Such a course of conduct, in our submission, 11 misleads and undermines the integrity of the perspective 12 test year process. Such a course of conduct, in our 13 submission, inevitably requires the Decision and Order 14 to be reviewed in the context of the changed plan that 15 has been adopted and varied to the extent necessary to 16 reconcile its parameters with the reality of the 17 situation. 18 Let's turn then to the facts and the evidence 19 pertaining to the facts. The first fact I would like to 20 emphasize at the outset is that Enbridge is not 21 operating under a comprehensive PBR plan. It is 22 currently subject to cost of service regulation with 23 respect to all components of its revenue requirement 24 except O&M expenses. The O&M expenses are subject to 25 the PBR formula and base determined by the Board in 26 E.B.R.O 497-01, subject to adjustment as directed in 27 that Decision and abandonment in certain very limited 28 circumstances. Les Services StenoTran Services Inc. 613-521-0703 15 Submissions by Mr. Thompson (IGUA) 1 The focus however of this motion is not on O&M 2 expenses and the PBR plan only, as the company seems to 3 think. Its primary focus is all components of the 4 revenue requirement determined by the Board of which O&M 5 expenses is only a very small part. Rate base, 6 depreciation, amortization, return on rate base, income 7 taxes are all subject to the cost of service regime and 8 not any PBR regime. 9 In your Decision in RP-99-0001, which was 10 revised in an amendment, I believe that was issued 11 shortly after the Decision was rendered -- I don't think 12 you need to turn this up, you can take it to subject to 13 check -- the total revenue requirement of Enbridge 14 Consumers Gas, as approved by the Board, was $2 billion 15 and 37.1 million. That includes the revenue deficiency 16 of $36.8 million. And all of that revenue requirement, 17 except the $232.5 million remains subject to cost of 18 service regulation. So this motion is brought in the 19 context of cost of service regulation primarily. 20 The second fact that I would like to emphasize 21 to the Board is that the company's application for rates 22 presented in RP-1999-0001 was based on its forecast of 23 rate base depreciation, amortization, return and taxes 24 under a business plan where utilities staff, using 25 utility assets, would provide customer care services, 26 information technology services and fleet management 27 services. 28 The evidence in the case was to the effect Les Services StenoTran Services Inc. 613-521-0703 16 Submissions by Mr. Thompson (IGUA) 1 that outsourcing would be limited in scope to a transfer 2 of CIS software to an affiliate which over the course of 3 the test year would lead to a reduction in utility staff 4 levels of about 10 people. 5 This limited outsourcing plan confined to the 6 transfer and maintenance of CIS software to Newco and 7 the associated fees to flow back and forth between Newco 8 and ECG was the subject of extensive scrutiny in the 9 case as well the nature of the adjustments to be made to 10 rate base cost of service and O&M expenses base having 11 regard to the limited outsourcing plan which the company 12 said it would be adopting were the subject of extensive 13 scrutiny in the RP-1999-0001 case. 14 Those were the issues which the Board resolved 15 in its Decision which was rendered on December 16, 16 2000 -- sorry, December 16, 1999. Shortly after the 17 Decision was rendered, parties to the proceedings who 18 happened to be registered as parties to a proceeding 19 ongoing between HVAC and the company received a copy of 20 an affidavit sworn by Mr. McGill on January 17, 2000 and 21 I would like to draw your attention to that affidavit. 22 It's part of Mr. Fournier's affidavit and it is found at 23 Tab 2(d). This is at page 45 of the Motion Record. 24 In the second paragraph -- well, Mr. McGill in 25 the first paragraph of this affidavit identifies in 26 paragraph 1 in the last sentence that he is responsible 27 for supervising personnel who are collectively managing 28 the ECG's procurement of customer care services from Les Services StenoTran Services Inc. 613-521-0703 17 Submissions by Mr. Thompson (IGUA) 1 Enbridge Commercial Services Inc. (ECS). This, as far 2 as I am aware, is the first time that anyone heard of 3 ECS. 4 Second paragraph of this affidavit is also 5 illuminating: 6 "ECG is also procuring information 7 technology and fleet management services 8 from ECS". (As read) 9 So that's customer care, fleet information 10 technology and fleet management, the three sets of 11 services have replaced ECG's former customer care 12 information services and fleet management functions. 13 These outsourcing arrangements became 14 effective January 1, 2000. More detail of these 15 arrangement is described over in paragraph 5 of 16 Mr. McGill's affidavit where he says: 17 "ECS is a wholly known direct subsidiary 18 of Enbridge. ECS was established to 19 provide customer care information 20 technology and fleet management services 21 to regulated and unregulated affiliates 22 of Enbridge and potentially to third 23 parties as well. ECS began operations 24 January 1, 2000 with approximately 1,140 25 employees. Approximately 1,100 employees 26 were transferee from ECG. ECS's initial 27 customers are ECG, Enbridge Gas 28 New Brunswick Inc., ESI and GazifŠre Les Services StenoTran Services Inc. 613-521-0703 18 Submissions by Mr. Thompson (IGUA) 1 Inc." (As read) 2 Paragraph 6 of this affidavit describes the 3 purchase by ECG of services from ECS, effective 4 January 1, 2000, describes all of the activities that 5 are encompassed by customer care services, information 6 technology and fleet management services. 7 Now, ECS cannot provide these services without 8 assets. The assets -- to provide them must come 9 from ECG. 10 Leaving aside the O&M expense implications of 11 this plan, there are, we submit, significant rate base 12 and rate base related implications of this plan. 13 The details of the transfer of assets or the 14 arrangements that are in place pertaining to the use 15 thereof have not been disclosed. 16 We submit that as a result of however there 17 must be some rate base adjustments to follow. The 18 creation of Enbridge Consumers Services and the transfer 19 of staff and assets results, in my submission, an Order 20 in RP-1999-0001, which grossly overstates the components 21 of rate base appreciation, amortization, return and 22 taxes. These need to be reviewed to make sure they are 23 in order with the plan that has been implemented. 24 We submit you cannot countenance the 25 continuance of a grossly overstated rate base and 26 revenue requirement components related to rate base. 27 Now, this information is within the control of 28 the company. The company has refused to disclose it to Les Services StenoTran Services Inc. 613-521-0703 19 Submissions by Mr. Thompson (IGUA) 1 this point in time. 2 There has never at any time during the course 3 of the RP-1999-0001 proceedings of a plan to outsource 4 all of these activities to a new affiliate. 5 Now, in this context it is important, for the 6 purposes of the threshold question, to consider when did 7 the company commence formulating this plan. 8 The first anybody knew any details of it was 9 in January 2000, when Mr. McGill's affidavit surfaced. 10 In our Motion Record we attached excerpts from 11 a portion of the cross-examination of Mr. McGill. These 12 are found at Tab 2(b) of the Motion Record. 13 This was Mr. McGill's testimony. He appeared 14 with Mr. Kent. I believe it was on September 2, 1999. 15 We provided this material because, in our view, it 16 strongly supported the absence of full, timely and 17 complete disclosure. There are some excerpts from 18 material that Mr. Cass provided subsequently that I will 19 refer to in a moment that suggests that at this time the 20 company was considering this complete outsourcing plan. 21 I will take you to that in a moment. What I 22 would like to do first is take you through this 23 testimony of Mr. McGill because it is, again, in my 24 submission, very relevant to the threshold question. 25 This testimony came up in the context of who 26 would be providing billing service for Enbridge Services 27 Inc. to whom the rental assets were to be transferred, I 28 believe, in October 1999. It also came up in the Les Services StenoTran Services Inc. 613-521-0703 20 Submissions by Mr. Thompson (IGUA) 1 context of the adjustment to PBR base that the company 2 was proposing with respect to ABC T-service. The 3 evidence being, as I recall it, that the company would 4 provide that service for about 6 months and there would 5 be an adjustment of $3 million but after that someone 6 else would be providing the service. 7 The testimony was also relevant to the 8 question of the availability of outsource services from 9 other entities which related to the question of the fair 10 market value of outsourcing services and the fair market 11 value of the CIS software function that the company 12 supposedly planned to implement. 13 What I would like to do is take you through 14 pages 26 to 31 of this testimony. Starting at line 3 -- 15 this is, I believe, the tail end of a response by either 16 Mr. Kent or Mr. McGill pertaining to how long the CIS 17 software was going to be used in Newco that was then 18 being contemplated. 19 "As the CIS ultimately reaches the end of 20 its useful life, as it were, we may, at 21 that stage, be able to find among the 22 packaged solutions available something 23 that does meet the company's needs and 24 something that could be implemented more 25 economically than what we are doing now. 26 But as we stand right now, this is our 27 best choice. Just on alternatives ..." 28 (As read) Les Services StenoTran Services Inc. 613-521-0703 21 Submissions by Mr. Thompson (IGUA) 1 And this is my question: 2 "Q. There is an indication in the 3 material that the rental program is going 4 to assist them other than the one you 5 offer at the moment and your affiliate 6 expects to offer, is that right? 7 "MR. McGILL: What is said in the 8 evidence, and specifically in HVAC 9 No. 11, is that for a transition period 10 of up to 6 months, beginning October 1, 11 the company would bill rental charges on 12 behalf of Enbridge Services Inc. as part 13 of the company's non-utility agent 14 billing collection service. To the 15 extent that we do that during the 16 transition period, we will be using the 17 same CIS system as the utility is using 18 as part of Enbridge Consumers Gas. 19 MR. THOMPSON: My question really was, 20 where do you go then in terms of 21 alternatives? 22 Is an outsourced package option as 23 selected being examined? 24 MR. McGILL: After the transition period, 25 yes. At the moment we are looking at a 26 number of options with respect to how we 27 can support the utility needs and ESI 28 (Enbridge Services Inc.) is looking at Les Services StenoTran Services Inc. 613-521-0703 22 Submissions by Mr. Thompson (IGUA) 1 how they can support their own needs. 2 We are considering outsource options 3 for various parts of the functions that 4 need to be required. As of yet, we 5 haven't made a firm decision how 6 Enbridge, as a whole, is going to move 7 forward in this area. 8 Is it the plan to move forward as 9 the Enbridge group? What I am interested 10 in is this: What do other company's in 11 the Enbridge group use to perform the CIS 12 component of customer support services?" 13 (As read) 14 This, again, was focusing on fair market value 15 of CIS services. 16 "During the transition there will be two 17 billing services essentially provided to 18 Enbridge Services Inc. One will be for 19 line items that appear on the utility 20 bill and those things that will be done 21 through the agent billing and collection 22 services for non-utility activity. This 23 and other billing support services 24 provided to Enbridge Services Inc. in the 25 way of stand alone and non-recurring 26 bills, if it is just for a jobbing 27 contract or a one-time apprentice repair 28 or something like that, we will be Les Services StenoTran Services Inc. 613-521-0703 23 Submissions by Mr. Thompson (IGUA) 1 providing a stand alone Enbridge Services 2 bill and doing that under the 3 requirements of the Code of Conduct, the 4 Affiliate Code of Conduct. I am asking 5 who is going to provide it? What is the 6 software that you are going to be using 7 for these other functions down the road 8 for the rental, the MFP? What does the 9 pipeline company use? They are not using 10 their clunker, that is for sure. They 11 only have 40 customers, Mr. Thompson. It 12 is a completely different kind of 13 concept. The Cornwall Electric group 14 uses a different software package that is 15 appropriate for small utilities, as does 16 St. Lawrence Gas. GazifŠre uses the same 17 set of systems as the Ontario Utility. 18 The short-term plan, as Mr. McGill 19 has mentioned, is in effect to use the 20 CIS software for Enbridge Services Inc. 21 in a transition period. The CIS software 22 is capable of meeting the trend needs of 23 Enbridge Services. It may not be the 24 best choice for them longer term, 25 depending on where they want to take 26 their business. They being the rental, 27 MFP, GazifŠre, who else do we have to 28 wean off the system. Les Services StenoTran Services Inc. 613-521-0703 24 Submissions by Mr. Thompson (IGUA) 1 MR. KENT: Why would we want to wean 2 anybody off the system? 3 Obviously you don't. But you are 4 telling us that nobody is going to use it 5 other than long term -- nobody is going 6 to use it other than the utility. 7 I haven't said that." (As read) 8 And then Mr. Farrell says: 9 "MR. FARRELL: Just to be clear, when 10 Mr. Kent was speaking of Enbridge 11 Services Inc. he didn't include GazifŠre 12 in his comments, for example. 13 MR. McGILL: In our revised prefiled 14 testimony I think we indicated that part 15 of the thinking around transferring the 16 CIS software asset outside the utility is 17 that it would provide the potential to 18 make it available to other Enbridge 19 organizations. 20 Before I leave this, who are the 21 software providers that Cornwall uses, 22 for example, and St. Lawrence? 23 MR. KENT: Cornwall is in the process of 24 transitioning. It is to do with the year 25 2000 issues. I am not sure what they are 26 using currently. 27 St. Lawrence outsources to an 28 American organization. I can't remember Les Services StenoTran Services Inc. 613-521-0703 25 Submissions by Mr. Thompson (IGUA) 1 now which one for reasons of the 2 magnitude of their customer base, the 3 size of their system and the adaptions 4 that are necessary because of US 5 accounting and tax differences. 6 You are not able to identify the 7 outsource? I could probably undertake to 8 find out for you, Mr. Thompson, but I am 9 at a complete loss to understand the 10 relevance of that. 11 Maybe it is irrelevant. 12 MR. McGILL: You gave the impression that 13 the utility is looking at a number of 14 options for outsourcing various functions 15 that are within the customer support 16 category of functions at this time. Did 17 I understand that correctly? 18 Yes, we outsource some functions now 19 and we are considering outsourcing some 20 others. 21 The functions that you outsource now 22 are what? 23 Meter reading and payment 24 processing. 25 Does the unbundled budget base 26 reflect outsourcing of that function? 27 The PBR budget, base budget does 28 reflect outsourcing of those two Les Services StenoTran Services Inc. 613-521-0703 26 Submissions by Mr. Thompson (IGUA) 1 functions. 2 And the functions that you are 3 contemplating outsourcing, could you just 4 give me a list of those within customer 5 care? 6 The biggest, most significant one 7 that we are looking at at the moment is 8 the printing, inserting and mailing of 9 the actual bills. 10 Are you looking at that currently? 11 Yes, we are. 12 Anything else that you are contemplating 13 outsourcing? 14 There are other things that could be 15 outsourced, but that is the one that is 16 closest on the horizon and the one that 17 we are most likely to go ahead with." 18 (As read) 19 We then went on and asked could you give us a 20 list of what could be outsourced. Over at line 13 21 Mr. Kent answered: 22 "There is `almost an unimaginable 23 spectrum of variations on this', 24 Mr. Thompson." (As read) 25 So that was the full extent of the outsourcing 26 plan discussion during the context of the RP-1999-0001 27 proceedings. 28 That, in my submission, was not any disclosure Les Services StenoTran Services Inc. 613-521-0703 27 Submissions by Mr. Thompson (IGUA) 1 whatsoever of the contemplation of the type of 2 outsourcing plan that the company implemented effective 3 January 1, 2000. 4 It is interesting to note, in my submission, 5 that the company appears to rely on the evidence as 6 fulfilling its obligation to make full, complete and 7 timely disclosure of this type of outsourcing plan. 8 You will see that in the material prepared by 9 Mr. Cass, which is found at Tab 10 of the Supplementary 10 Motion Record. 11 If you go to page 3, Mr. Cass is responding to 12 this alleged failure to disclose. You will see what he 13 refers to in the first three paragraphs of that section. 14 The first four paragraphs of that section is 15 the transcript references that I just read to you. 16 He concludes: 17 "In short, the company fully and plainly 18 disclosed during the RP-1999-0001 19 proceeding that it was considering a 20 range of outsourcing options." (As read) 21 And he basically goes and says it is our job 22 to push them, to find out what that means in terms of 23 rates for 2000. 24 I submit it is not our job. It is their job 25 to fully disclose the details of plans and the 26 rate-making implications that they are considering 27 adopting in the prospective test year for which they are 28 seeking rate relief. Les Services StenoTran Services Inc. 613-521-0703 28 Submissions by Mr. Thompson (IGUA) 1 And they did not do that, in my submission. 2 There is no way that the transcript references from 3 Mr. McGill could be construed to be full and complete 4 disclosure of a plan to completely outsource customer 5 care information services and fleet management services. 6 In fact, when you look at Mr. McGill's testimony, what 7 he said was -- in response to the question -- anything 8 else that you were contemplating outsourcing? There are 9 other things that could be outsourced, but that is the 10 one that is closest on the horizon. 11 So I urge you to find a breach of the 12 obligation to make full and complete disclosure. 13 Now, it is clear from Mr. McGill's evidence in 14 the HVAC proceeding that this outsourcing plan wasn't 15 hatched over night. It wasn't a response to the Board's 16 Decision which was rendered on December 16, 1999. It 17 was in formulation stages well before that Decision was 18 rendered. 19 You can see that from is affidavit found again 20 at Tab 2(d) of the Motion Record. In paragraph 11 of 21 that affidavit, you will see -- it reads as follows: 22 "When ECG filed its application for 23 limited exceptions, ECG was working on 24 the outsourcing arrangements, but at that 25 time ECG was not certain that the 26 outsourcing arrangements would become 27 effective as scheduled on January 1, 28 2000. ECG consequently specified Les Services StenoTran Services Inc. 613-521-0703 29 Submissions by Mr. Thompson (IGUA) 1 January 31, 2000 instead of December 31, 2 1999, as the expiry date of the limited 3 exemptions that it was seeking for 4 Enbridge to provide the services to ESI." 5 (As read) 6 Now, the reference to the filing of the 7 application for limited exemptions is to, I believe, a 8 letter found at Tab (f) of this Motion Record. This is 9 the letter that Mr. Gill's wrote to the Board. It is 10 dated December 7, 1999. 11 So this is before December 16th, when your 12 Decision was rendered. This is the exemption that 13 Enbridge Consumers Gas is seeking for certain provisions 14 of the affiliates transactions code. On page 2 of this 15 letter you will see that the exemption was being sought 16 until January 31, 2000. 17 So that is what Mr. McGill is referring to in 18 paragraph 11 of his affidavit. The upshot of all of 19 that is that the outsourcing arrangements, which were 20 implemented, were certainly in formulation before 21 December 7th. It could not have been scheduled for 22 January 1, 2000, without having been formulated 23 considerably earlier than that. That evidence, in my 24 submission, reinforces the inference that when the 25 witnesses testified on September 2nd, this plan was on 26 the books. There is nothing to refute it. 27 So what we have, in my respectful submission, 28 in RP-1999-0001, is a company leading down the garden Les Services StenoTran Services Inc. 613-521-0703 30 Submissions by Mr. Thompson (IGUA) 1 path of the in-house plan. That was the thrust of the 2 evidence, that was the thrust of the argument in-chief 3 and the reply which was concluded on October 21, 1999. 4 Even if that plan was formulated after October 21, 1999, 5 the company, in my submission, was under an obligation 6 to disclose it to the Board before it rendered a 7 Decision on the basis of a plan which was no longer 8 going to be implemented and which had rate based 9 implications considerably different than what have 10 ensued. 11 The conduct, in my submission, was misleading 12 and constituted a breach of the obligation to make full, 13 complete and timely disclosure of changes material to 14 the prospective test year rate making process. The 15 conduct has resulted in an order which is excessive 16 insofar as rate base items is concerned, and having been 17 based on such a course of action is an order that is 18 neither just nor reasonable. 19 What did the company achieve by this conduct, 20 by taking us down this garden path of the in-house plan 21 which it never implemented? First of all, as I have 22 noted, excessive rate base and revenue requirement items 23 related to rate base and it avoided scrutiny of all rate 24 base transactions relating to the establishment of the 25 ECS as an outsource provider, including the transfer of 26 assets or whatever arrangements were made pertaining to 27 the ECS's use of utility assets. The company avoided a 28 consideration of the fair market value of all of the Les Services StenoTran Services Inc. 613-521-0703 31 Submissions by Mr. Thompson (IGUA) 1 outsource services. 2 The whole object, as I understand it, of the 3 affiliate transaction code is to assure that what the 4 utility pays for services is no more than fair market 5 value and what the utility is charged for services is no 6 more than fair market value. The parties have been 7 deprived of the opportunity to scrutinize that issue. 8 Thirdly, the conduct avoided scrutiny of any 9 further adjustments to the PBR base being considered in 10 RP-1999-0001. Had the Board known, in RP-1999-0001, 11 that the company was planning to reduce utility staff by 12 1,000, it would either, in my submission, have reduced 13 the PBR base or it would have examined the situation to 14 consider whether it constituted such a drastic change as 15 to warrant abandonment of the PBR plan which had been 16 derived, you will recall, from a utility cost of service 17 where the utility had more than 3,330 employees and 18 associated utility assets. This is outlined in 19 Mr. Fournier's affidavit, paragraphs 10 and 17. 20 In summary, then, with respect to the facts 21 and evidence, what we have in this case, in my 22 submission, is changed circumstances and we have new 23 facts that have arisen following the Board's Decision. 24 These changed circumstances and new facts which have 25 arisen subsequent to the Decision are compounded, in my 26 submission, by the company's failure to disclose the 27 changed business plans and its resulting breach of 28 obligations in a prospective test year rate-making Les Services StenoTran Services Inc. 613-521-0703 32 Submissions by Mr. Thompson (IGUA) 1 regime. 2 We have, as a result, a Decision and an Order 3 which is based on a plan that did not materialize, and, 4 in my submission, based on a plan that the company never 5 really intended to follow. 6 Clearly, the Decision and resulting rate Order 7 needs to be reviewed in the light of the plan that has 8 been adopted. There is, in the circumstances of this 9 case, clearly a reason to believe that the order should 10 be varied. 11 So coming back, then, to the rules, your rules 12 and the threshold question and the remedy that the Board 13 should consider and the remedy which we suggest you 14 should grant. 15 Rule 64.01 reads: 16 "The Board shall determine, in respect of 17 a motion brought under Rule 62, the 18 threshold question of whether the matter 19 should be reheard or reviewed." 20 (As read) 21 I submit, on the basis of the uncontradicted 22 facts and inferences from those facts that are before 23 you, you should not hesitate to find that the matter 24 should be reviewed. 25 The Rule goes on: 26 "...or whether there is reason to believe 27 that the order should be rescinded or 28 varied." (As read) Les Services StenoTran Services Inc. 613-521-0703 33 Submissions by Mr. Thompson (IGUA) 1 There is, in my submission, on the basis of 2 the uncontradicted facts and inferences to be drawn, 3 clearly reason to believe that the order should be 4 varied. The information pertaining to that variance, 5 the company will have to provide. That is why we 6 suggest what follows, in my submission, in the ambit of 7 the next part of the rule, which reads: 8 "If the Board finds that the matter 9 should be reheard or reviewed or that 10 there is reason to believe that the order 11 should be rescinded or varied, it may, in 12 its discretion, either dispose of the 13 motion or issue procedural orders with 14 respect to the conducting of the 15 rehearing or review on the merits." 16 (As read) 17 That is the relief that we are proposing. It 18 is relief in the nature of a procedural order. 19 I should perhaps, in closing, just try and 20 quickly summarize why we believe what we have proposed 21 should be encompassed in the procedural order pertaining 22 to the conducting of the review. 23 The relief requested is described in the 24 notice of motion, and you referenced it this morning, 25 Madam Chair. In paragraph 2 of the notice of motion, we 26 describe or request the issuance of a procedural order. 27 The following paragraph is a description of the types of 28 things that should be included. Les Services StenoTran Services Inc. 613-521-0703 34 Submissions by Mr. Thompson (IGUA) 1 In subparagraph (a) we are suggesting that the 2 rates that arose out of the 99-01 proceeding be made 3 interim. Mr. Cass, in his submission to you in writing, 4 takes issue with the making of the rates interim. 5 Perhaps the word "interim" isn't appropriate. My 6 understanding is that the Board, in the past, when it 7 has made rates subject to adjustment in the future, has 8 used the word "interim". 9 But what I am proposing in substance is that 10 existing rates be made subject to adjustment at the 11 conclusion of the review if the Board considers such 12 adjustments to be required. That's the meaning that I 13 was attributing to the word "interim". 14 The second topic that the procedural order, in 15 my submission, needs to cover is what I call information 16 directives. Subparagraph 2(b) was an attempt to capture 17 what I submit is the type of information that will be 18 required to conduct a review proceeding. 19 At a very high level, what we are suggesting 20 is that directions need to be provided to ensure that 21 the Board and interested parties have sufficient 22 information to evaluate the rate base and cost of 23 service implications of the outsourcing plan which has 24 been implemented January 1, 2000 compared to the rate 25 base and cost of service reflected in the 99-0001 rates. 26 It is in that context, therefore, that we make 27 the suggestions with respect to information contained in 28 item (ii), subparagraph (b)(ii), particulars of the Les Services StenoTran Services Inc. 613-521-0703 35 Submissions by Mr. Thompson (IGUA) 1 company's cost of service and rate based budgets for the 2 test year before and after implementation of the 3 outsourcing plan together with details of all budget 4 expenditures, and so on. 5 I really rely on the Board to specify the 6 amount of detail that is in the Board's view a 7 requisite. This is not obviously intended to be a 8 definitive, but it's directionally to the kind of 9 information that we believe is necessary. 10 Similarly items (iii) and (iv) relate to the 11 fair market value issue which the Board indicated in 12 99-0001 that the onus is on the company to establish a 13 fair market value. I am making reference there to 14 paragraph 4.5.5 where the Board was addressing the 15 services agreement that the company had put forward 16 between ECG and Newco and the Board noted that: 17 "The services agreement is governed by 18 the Affiliate Relationships Code for gas 19 utilities. The onus is on the company to 20 establish by independent credible 21 evidence that the fees to be paid to 22 Newco for CIS services are fair market 23 value in relation to the services being 24 provided". (As read) 25 So that is why we suggest that the information 26 directions address that topic. In Item (v) -- roman 27 numeral 5 -- on page 3 of the motion, this is 28 information pertaining to the transfer of assets to ECS Les Services StenoTran Services Inc. 613-521-0703 36 Submissions by Mr. Thompson (IGUA) 1 or agreements pertaining to the use thereof which the 2 board will need to determine the rate base implications 3 of the plan. 4 In order to protect ratepayers pending the 5 completion of the review, we have suggested that an 6 accounting order type of order is appropriate and that 7 is what we tried to capture in paragraph 3 of the motion 8 where we suggest that there be an order directing the 9 company to record appropriate deferral accounts, 10 payments made by the company to the ECS and payments 11 made by the ECS to the company during the 2000 test 12 year. This is to ensure that appropriate relief can be 13 granted if it is determined either Enbridge is paying 14 too much to the affiliate, or what it gets or the 15 affiliate is paying too little to Enbridge for what 16 it gets. 17 Again, I remind the Board that for everything 18 but O&M expenses, Enbridge is operating under a cost of 19 service regime where these accounting orders are 20 entirely appropriate and if the shoe was on the other 21 foot, the company would be in here asking for accounting 22 orders to keep them whole if they were incurring 23 substantial increased expenses. 24 The procedure order that we propose should 25 have provisions dealing with the hearing. I think we 26 had originally contemplated it might be most expeditious 27 to hear the review, or conduct the review, in the 28 context with the company's next rate case, but the Les Services StenoTran Services Inc. 613-521-0703 37 Submissions by Mr. Thompson (IGUA) 1 rumour in the street is that the company may now be 2 trying to not come in with a 2001 rate case. I don't 3 know whether that is accurate or not. 4 If that's the situation, then this review 5 proceeding will need to be a stand-alone hearing so that 6 it can be heard within a reasonable period of time -- 7 and I say reasonable period of time recognizing the 8 significant constraints that the Board has on available 9 hearing time. 10 Paragraph 5 of the motion again relates to 11 procedural order and suggests directions pertaining to 12 the filing of cost of service information in the 13 traditional cost of O&M expense component in the 14 traditional cost of service format. 15 The reason why this is, I submit, appropriate 16 for consideration is that if what has taken place is 17 found at the review hearing to amount to a situation 18 which justifies either a further adjustment or a 19 situation which justifies abandonment, then this 20 information, it seems to me, will be relevant to a 21 disposition of the review proceeding. But I emphasize 22 and repeat that the focus of this motion is not the PBR 23 process and base, as Mr. Cass seems to think. Its focus 24 is on the overall order and rate-making order that 25 evolved from the 1990-01 proceedings. 26 In conclusion, may I suggest that the Board's 27 approval and Mr. Cass' written submission seem to 28 suggest that because we have had PBR it doesn't really Les Services StenoTran Services Inc. 613-521-0703 38 Submissions by Mr. Thompson (IGUA) 1 matter what happens. Stop whining is basically his 2 statement. 3 My submission is the Board's approval of a 4 targeted PBR plan in E.B.R.O. 497 did not provide the 5 company with an opportunity to have rates established on 6 the basis of a business plan that it did not intend to 7 follow. There is not opportunity to adopt a process 8 where a plan is put forward to in effect achieve 9 excessive allowances for rate base and then proceed to 10 implement a different plan. That's not what the process 11 was all about and that is not operating to achieve 12 efficiencies within the PBR context. 13 The company was obliged to sustain, not 14 undermine the integrity of the perspective test year 15 rate-making process. It has not fulfilled that 16 obligation. The Board has been misled, the parties have 17 been misled, the revenue requirement is excessive. 18 Clearly the matter needs to be reviewed and in my 19 submission the relief in question ought to be granted. 20 If there are any questions, those are my 21 submissions. 22 THE PRESIDING MEMBER: Thank you, 23 Mr. Thompson. 24 The panel does have some questions, but we 25 think it might be easier if we ask those questions after 26 all of the moving parties have made their submissions. 27 So we may come back to you with some more questions. 28 Mr. Warren, are you next? Les Services StenoTran Services Inc. 613-521-0703 39 Submissions by Mr. Thompson (IGUA) 1 SUBMISSIONS 2 MR. WARREN: Thank you, Madam Chair. I adopt 3 the submissions of Mr. Thompson. I will be very brief 4 on three points that the CAC would like to emphasize in 5 its submission. 6 The three particular concerns which the CAC 7 has to supplement Mr. Thompson's submissions are first 8 the fairness and integrity of the specific hearing 9 process involved; secondly the integrity of the Board's 10 specific Decision, and thirdly the integrity of the PBR 11 regime going forward. 12 First of all, with respect to the issue of the 13 integrity or fairness of the hearing process itself, I 14 would like to underscore a point that Mr. Thompson 15 referred to in reciting the facts. If the Board would 16 look at the primary Motion Record at Tab B to 17 Mr. Fournier's affidavit. That's Tab 2(b). 18 This is the transcript of the 19 cross-examination of Mr. McGill. Mr. Thompson passed 20 over this quickly, but I want to return to it for a 21 somewhat greater emphasis. 22 If you look at -- this is page 31 of the 23 primary Motion Record, page 1365 of the transcript. The 24 following exchange is found, beginning at line 13: 25 "Anything else that you are contemplating 26 outsourcing? 27 MR. McGILL: There are other things that 28 could be outsourced, but that is the one Les Services StenoTran Services Inc. 613-521-0703 40 Submissions by Mr. Warren (CAC) 1 that is..." 2 And I underscore the following four words: 3 "...closest on the horizon and the 4 one..." 5 And I underscore the following words: 6 "...that we are most likely to go ahead 7 with." 8 Now, what conclusion would the Board or senior 9 counsel draw from those words? It is that there is 10 nothing else of significance that anybody has to pay 11 attention. It is what the words were intended to convey 12 and it is reasonable for the Board and the intervenors 13 to conclude that. 14 Now, juxtaposed to that, Mr. Cass' take on 15 those words in part, at Tab 10 of the Supplementary 16 Motion Record that was filed this morning, page 3 of 17 Mr. Cass' letter -- sorry, of his submissions. 18 The last full paragraph on that page, third 19 sentence: 20 "At no time did counsel for IGUA suggest 21 that the responses by the witnesses to 22 his questions were inadequate or 23 incomplete. Neither did counsel for IGUA 24 contend that further disclosure would be 25 necessary as the company's outsourcing 26 plans were developed and implemented. At 27 no time during the RP-1999-0001 28 proceeding did counsel for IGUA intimate Les Services StenoTran Services Inc. 613-521-0703 41 Submissions by Mr. Warren (CAC) 1 that in his view, implementation of the 2 plans discussed by the witnesses would 3 affect the Decision to be issued by the 4 Board at the end of the RP-1999-0001 5 case." (As read) 6 Why would Mr. Thompson or anyone else do any 7 of the things that Mr. Cass has suggested, in light of 8 the answer which is found at page 1365? For that to 9 stand, in my respectful submission, would undermine 10 fundamentally the fairness of the process. 11 Mr. Thompson referred, at various points in 12 his submission, to the obligation to disclose. 13 Proceeding before the Board is not simply an adversarial 14 proceeding. It is not just a case of cat-and-mouse in 15 the disclosure and the finding of information. There is 16 an overriding obligation on this Board to make rates 17 which are just and reasonable. There is an overriding 18 obligation on the applicant to disclose all relevant 19 information so that the Board may make a finding. 20 That's the source of the obligation. 21 This is not just a narrow adversarial 22 proceeding, and that obligation, in my respectful 23 submission, is exemplified by that exchange at page 1365 24 that's been violated in this case. 25 This leads to the second point that the Board 26 has not made its decision, is not engaged in making a 27 finding of just and reasonable rights on the basis of 28 all of the relevant information. That, at minimum, it Les Services StenoTran Services Inc. 613-521-0703 42 Submissions by Mr. Warren (CAC) 1 must do. 2 The public, looking to the Board in carrying 3 out its statutory obligation, must be satisfied that 4 this expert tribunal makes its decision on the basis of 5 all of the relevant information and not the kind of 6 cat-and-mouse game clearly being played by Mr. McGill in 7 his answers. 8 The third point: The issue of adjustments to 9 the PBR rate base was an issue that was in play in the 10 RP-1999-0001 proceeding. It was a narrow one, 11 admittedly. But it would have been open to the 12 intervenors and indeed to the Board to say that a 13 broader scope of adjustments were appropriate in light 14 of the massive change in the very nature of the company 15 before the Board. 16 But intervenors were deprived of an 17 opportunity to make that submission, the Board was 18 deprived of an opportunity to reach that conclusion on 19 its own by the failure to disclose. 20 It was never the intention of a PBR regime, in 21 my respectful submission, to draw a cloak over the 22 operations of this company. On the contrary, for a PBR 23 to operate effectively, there must be full and timely 24 disclosure of all relevant information. 25 The decision on this motion, in addition to 26 speaking to the issues that Mr. Thompson has 27 articulated, speaks as well to the confidence which the 28 Board and the public and the intervenors can have in the Les Services StenoTran Services Inc. 613-521-0703 43 Submissions by Mr. Warren (CAC) 1 integrity of the PBR regime going forward. 2 Those are my submissions. Thank you. 3 THE PRESIDING MEMBER: Thank you, Mr. Warren. 4 Mr. Janigan. 5 SUBMISSIONS 6 MR. JANIGAN: Thank you, Madam Chair. I will 7 also be brief. I also adopt the submission of 8 Mr. Thompson and Mr. Warren as part of my submissions. 9 I think I would like to emphasize a point made 10 by Mr. Warren and Mr. Thompson that it is not necessary 11 to make a finding that the outsourcing constitutes an 12 off-ramp to the PBR plan to grant us relief under this 13 motion. 14 It may well be arguable, but a PBR plan 15 targeted to driving O&M productivity gains is 16 effectively subverted by an outsourcing of this 17 magnitude or that a formula based on numbers from 18 internal company productivity may as well be subverted, 19 but that is not necessary to be considered today. 20 We do not also have to visit the questions 21 regarding what happens in recapturing productivity 22 benefits for the utility at the end of the plan as a 23 result of the outsourcing or the effect of the 24 development of the comprehensive PBR. These are good 25 questions raised by this, but perhaps for another day. 26 The question is rather, what effect does the 27 outsourcing have on the tasks that were before the Board 28 in RP-0001 and the revenue requirement that was derived Les Services StenoTran Services Inc. 613-521-0703 44 Submissions by Mr. Janigan (VECC) 1 from that Decision? 2 It is difficult to believe that an outsourcing 3 of this magnitude does not impact upon some of the 4 adjustments made in RP-0001 or also made in follow-up to 5 the E.B.R.O., which were made in follow-up to the 6 E.B.R.O. 497-01 Decision. 7 For example, how would the rationalization of 8 the $13.4 million in rental program allocated costs have 9 been treated had the outsourcing been known? Would the 10 same allowance of one-half over a three-year period have 11 been allowed by the Board? 12 Similarly, there is strong reason to believe 13 that the determination of issues such as rate base, and 14 in particular, the capitalization of O&M overheads might 15 have been different. In this case, the removal of only 16 one-half of the $7.2 million costs might not have been 17 arrived at by the Board and an entirely different 18 conclusion might have been reached had the full extent 19 of the outsourcing plans been known. 20 As well, my friends have touched upon the 21 disclosure of the company and whether or not the 22 disclosure of the outsourcing by the company was 23 sufficient. This disclosure took place under 24 cross-examination, more or less to the effect that 25 outsourcing was considered without details, numbers or a 26 plan to allow consideration of effect within the ambit 27 of RP-1999-0001. 28 Now, the Board has previously dealt with Les Services StenoTran Services Inc. 613-521-0703 45 Submissions by Mr. Janigan (VECC) 1 expectations associated with disclosure in E.B.R.O. 452. 2 I have some copies of the relevant portions of the 3 Decision I would like to refer to. 4 In this case the Board had cause to consider a 5 problem that arose with respect to utility income being 6 different than -- far different than what was forecast 7 in the previous rate case. 8 In paragraph 6.5 the Board noted that: 9 "Regulation is intended to be a surrogate 10 for competition in the marketplace and 11 the legislation intended that the Company 12 has the opportunity to recover its costs 13 and to earn a fair rate of return on its 14 shareholders' equity. In recent years, 15 the prospective test year was adopted 16 because inflationary circumstances placed 17 the shareholders' return at risk. The 18 Board believes that this continues to be 19 an acceptable system, when viewed 20 overall. It enables the utility to 21 reflect changing costs (up or down) in 22 its rates without undue regulatory lag. 23 The system requires the regulator to act 24 on faith with the utility, bearing in 25 mind the prospective nature of the 26 evidence. The regulator expects the 27 utility, in return, to provide the best 28 possible forecast data that can be made Les Services StenoTran Services Inc. 613-521-0703 46 Submissions by Mr. Janigan (VECC) 1 available on a timely basis." (As read) 2 One might ask in passing whether or not we had 3 the best possible forecast data in RP-1999-0001 to 4 attend to the tasks that were before the Board at that 5 time. We would suggest that the company response is a 6 serious lowering of the bar of the company's obligation 7 and affects, in particular, such matters as the 8 appropriateness of ADR negotiations when important 9 information may not be disclosed. 10 In conclusion, we believe that we have met the 11 threshold test for the Board to review this Decision and 12 that it is imminently fair and reasonable to request 13 that a review take place with the appropriate evidence 14 before the Board as to what should be the revenue 15 requirement in the RP-1999-0001 case and to make 16 whatever adjustments may be required to that revenue 17 requirement and, subsequently, to rates. 18 Thank you. 19 THE PRESIDING MEMBER: Thank you, Mr. Janigan. 20 Is there anyone else who would like to speak 21 in support of this motion now? 22 MR. MONDROW: Madam Chair, I believe with the 23 Board's indulgence, I have some brief comments to add 24 from HVAC Coalition's perspective. 25 THE PRESIDING MEMBER: Thank you, Mr. Mondrow. 26 SUBMISSIONS 27 MR. MONDROW: HVAC Coalition, Madam Chair, 28 Member Vlahos, is not a moving party but, nonetheless, Les Services StenoTran Services Inc. 613-521-0703 47 Submissions by Mr. Mondrow (HVAC) 1 has a keen interest in this proceeding. 2 We view the transfer of Enbridge's customer 3 care facilities and functionalities to Enbridge 4 Commercial Service really as part of the ancillary 5 business unbundling, and I would submit that a review of 6 Mr. McGill's evidence filed in the HVAC Coalition Code 7 of Conduct proceeding provides the clarify of connection 8 between the ESI, Enbridge Services Inc., billing and 9 call centre problems, on the one hand, and the 10 outsourcing plan that is now revealed, on the 11 other hand. 12 As with the separation of the ancillary 13 businesses, HVAC Coalition is concerned that, first, the 14 transfer price be right. Mr. Thompson has alluded to 15 this in respect of this outsourcing arrangement, which 16 is really, it is submitted, a further unbundling 17 arrangement. 18 Second, that cost of service be properly 19 adjusted to reflect removal of non-utility activity. 20 Failing that proper adjustment, the shareholder 21 over-earns and effectively there is a cross-subsidy to 22 competitive businesses at the expense of ratepayers, a 23 matter of concern to HVAC Coalition. 24 Now, Mr. Thompson and my friends have reviewed 25 the three applicable so-called grounds for rehearing, or 26 the threshold test as set out in Rule 63.01 of the 27 Board's rules. 28 I would just like to emphasize, as Les Services StenoTran Services Inc. 613-521-0703 48 Submissions by Mr. Mondrow (HVAC) 1 Mr. Thompson alluded to, that the actual test is found 2 in Rule 64.01, the Rule 63 enumerations being 3 non-exhausted. 4 The test is whether the matter should be 5 reheard or reviewed, or whether there is reason to 6 believe the order should be rescinded or varied. It is 7 respectfully submitted that that is the test the Board 8 should focus on in considering the submissions of the 9 parties before you today. 10 My friends have covered the change in 11 circumstance and the new facts, or facts not previously 12 in evidence and not reasonably discoverable grounds. 13 There is a third ground that we submit is 14 relevant to the Board's consideration and that is with 15 respect to an important matter of principle being raised 16 in connection with the order in issue. 17 First, with respect to the change in 18 circumstance or new or newly discoverable facts, just by 19 way of context my friends have not referred to some few 20 salient facts that we submit should be considered. 21 The utility has transferred 40 per cent of its 22 staff, three physical call centres and an as yet unknown 23 information technology and fleet services assets to 24 Enbridge Commercial Services. This is a disposition out 25 of the ordinary course of business and thus qualifies, 26 it is submitted, as a matter of fact, as a change in 27 circumstances. 28 Now, without intending to muddy the Les Services StenoTran Services Inc. 613-521-0703 49 Submissions by Mr. Mondrow (HVAC) 1 distinction that Mr. Thompson and my friends have raised 2 between cost of service and the targeted PBR, I would 3 note that the disposition out of the ordinary course of 4 business, in our respectful submission, satisfies both 5 the Rule 63.01 threshold in respect of a change in 6 circumstances and the PBR off-ramp concept. 7 I would refer the Board to Dr. Johannes 8 Bauer's evidence in the PBR proceedings, 9 E.B.R.O. 497-01. Dr. Bauer's evidence was filed as 10 Exhibit E2.1, and at page 16, in the third full 11 paragraph of that evidence, Dr. Bauer has the following 12 sentence in respect of off-ramps. He writes: 13 "Off-ramps are contingency provisions, 14 usually major unexpected events that 15 trigger an early plan review." (As read) 16 In our submission, this transfer of 40 per 17 cent of staff and an untold percentage of utility 18 assets, qualifies as a major unexpected event, which 19 justifies reconsideration of the targeted PBR and, in 20 addition, justifies, as Mr. Thompson and my friends have 21 submitted, review of the cost of service aspects of the 22 RP-1999-0001 proceeding. 23 I would also note that in the PBR proceedings, 24 as the Board noted at paragraph 2.3.21 of its Decision: 25 "The utility itself proposed a $500,000 26 O&M threshold for Z-factor consideration 27 resulting from capital investments." 28 (As read) Les Services StenoTran Services Inc. 613-521-0703 50 Submissions by Mr. Mondrow (HVAC) 1 We would submit the same threshold should 2 apply if an O&M change results from capital divestments. 3 In paragraph 3.0.17 of the PBR Decision, the 4 Board noted that such Z-factor considerations would be 5 subject to rate case approval and, as I understand the 6 moving parties' request for relief, that is essentially 7 what is advocated here, that this Board consider, in 8 Enbridge's next rate case -- or one is not to be brought 9 sooner -- the impacts on the O&M PBR of this threshold 10 change. 11 The company itself also agreed in the 12 RP-1999-0001 proceeding -- and for the Board's reference 13 you can find this at Volume 7 of the transcript, 14 page 1258 -- that the CIS Z-factor would be subject to 15 annual review. Information technology, which 16 encompasses, as I understand it, CIS, is part of the 17 transferred functionality that the parties have raised 18 before you today and so, presumably, the company would 19 agree that impacts on the PBR plan are properly subject 20 to annual review by the Board. 21 Again, as I understand the request for relief, 22 such a review is part of what is being contemplated. 23 One more comment as a matter of context. When 24 the ancillary businesses were transferred -- and the 25 Board will recall the extensive review of that transfer 26 and the impacts of that transfer on cost of 27 service --573 people or about 17 per cent of the then 28 utility workforce was involved. Here we learn of a Les Services StenoTran Services Inc. 613-521-0703 51 Submissions by Mr. Mondrow (HVAC) 1 transfer of 40 per cent of the remaining utility 2 personnel, certainly in our submission significant. 3 Now to just narrow down on the PBR shield 4 argument raised by the company, it's our submission that 5 an important matter of principle is raised here which 6 would justify under the terms of the Board rules an 7 order that the matter be reviewed and determined on its 8 merits. 9 I have already stated that in HVAC's view, the 10 transfer to ESC, Enbridge Commercial Services, is really 11 a transfer of an affiliate transaction that is part of 12 divestiture of Enbridge's non-core businesses. The cost 13 of service was adjusted for the balance of that 14 divestiture prior to the PBR proceeding in the 15 EBO 179-1415 case which examined that divestiture. The 16 PBR-based O&M was then adjusted for the subsequent 17 development in respect of the rental program to the 18 497-01 Decision and then again in the RP-1999-0001 19 proceeding. 20 In our submission, this further divestiture is 21 part of the same set of transactions, the fundamental 22 utility restructuring and is outside of the proper scope 23 of a limited PBR. This is not, in our submission, a 24 freedom to manage the issue, as the company would have 25 us believe. 26 A PRB incentive plan is supposed to drive 27 efficiencies in the conduct of ongoing business, not 28 shift pre-existing and fundamental utility restructuring Les Services StenoTran Services Inc. 613-521-0703 52 Submissions by Mr. Mondrow (HVAC) 1 cost of service reductions to the shareholder. As 2 Mr. Thompson alluded, the Board did not intend, in our 3 submission, approval based on a plan the company did not 4 intend to follow, and yet that has been the result. 5 At its highest, this failure to disclose is a 6 gaming of this PBR plan by the shareholder resulting in 7 windfall profits from rates that are higher than is just 8 and reasonable. And to quote Dr. Bauer again: 9 "In our submission, the shareholder has 10 taken advantage of information 11 asymmetry". (As read) 12 And we agree with Mr. Thompson that the onus 13 is on the company to put this information on the table. 14 Other parties, including the Board, simply don't have 15 this information. 16 There is one more transcript reference that I 17 would like to put on the record as well, and this is in 18 Volume 7 of the RP-1999-0001 transcripts, at page 1261. 19 I was cross-examining Mr. McGill, starting at line 20 20 and there is a just a brief excerpt which I will read 21 into the record. 22 I asked: 23 "Once the CIS system is up and running 24 will it be Newco..." 25 This is the company that was to receive the 26 CIS system. 27 "... will it be Newco that will be 28 processing and sending the utility bill?" Les Services StenoTran Services Inc. 613-521-0703 53 Submissions by Mr. Mondrow (HVAC) 1 Mr. McGill responds: 2 "At this point in time, I believe for at 3 least the first half of the 2000 fiscal 4 year it will be the utility. At the 5 moment we have discussions under way with 6 third party vendors with respect to bill 7 printing and it may be that the bill is 8 printed and inserted in mail by the third 9 party under contract to the utility, but 10 again that's outsourcing, it's not 11 unbundling a function". 12 In fact, what we have is the unbundling of a 13 function in the result, not a simple outsourcing to a 14 limited service provided by a third party. 15 And then jumping down the page -- well, let me 16 read the rest so there is no gap in the record. I am on 17 page 1262 of the transcript. 18 At line 3, I asked: 19 "That's fair enough. I guess I'm just 20 speaking around the contract provisions 21 that were raised earlier..." 22 This is the services agreement. 23 "... for example, with respect to 24 termination rights or lack of termination 25 rights and the utilities locked in here 26 for the first three years". 27 Mr. Kent then responds: 28 "Locked in with respect to the provision Les Services StenoTran Services Inc. 613-521-0703 54 Submissions by Mr. Mondrow (HVAC) 1 of the software and in essence 2 outsourcing the hosting of that 3 application, though that outsourcing is 4 kind of a circular thing that comes back 5 to the utility". 6 I want to emphasize the following passage -- 7 Mr. Kent is still speaking: 8 The bill printing is not a Newco 9 responsibility. Newco provides software 10 that is able to provide an electronic 11 output that a printer can turn into a 12 bill, but Newco itself does not print 13 that bill". 14 Mr. McGill adds: 15 "Newco will convey a bill print file to 16 the utility. The utility will print the 17 bills and mail them. Newco could just as 18 easily convey that print file to a 19 contractor that's printing the bills for 20 the utility". 21 At its highest, Madam Chairman, Member Vlahos 22 we have a change in circumstances. 23 From HVAC's particular perspective, we would 24 add one point and that is that the Board should be very 25 concerned about the economics of this transaction. The 26 evidence in the Code of Conduct proceeding RP-1999-0058 27 suggests other shareholder objectives beside economics 28 for this fundamental restructuring. Les Services StenoTran Services Inc. 613-521-0703 55 Submissions by Mr. Mondrow (HVAC) 1 The Board will determine, and HVAC Coalition 2 has raised in that proceeding issues of branding and the 3 utilities, indeed the shareholders' intention to retain 4 a customer billing relationship and the, in HVAC's 5 submission, obstacles that Enbridge has had placed 6 before its rebranding and customer relationship path by 7 the National Gas LDC affiliate Code. Enbridge's choices 8 in dealing with ancillary business spin-offs and the 9 affiliate Code, some of which certain customer 10 communications have been questioned by the Board itself, 11 and others of which have been put in issue by HVAC 12 Coalition and the Code proceeding, indicate, in our 13 submission, additional potential motives for putting 14 cost centre customer care interfaces in an 15 Enbridge-branded affiliate rather than leaving them in 16 the utility. 17 The point is that given these other potential 18 motives, in our submission the Board should scrutinize 19 ratepayer economics with care because it may not be 20 solely economics from a ratepayer perspective that drove 21 this restructuring. 22 We note that again in the RP-1999-0001 23 proceeding in respect of rental program removal the 24 Board ruled that: 25 "While such asset removal may not be on a 26 fully allocated cost bases, and such 27 program removal may not be on a fully 28 allocated cost basis, there should over Les Services StenoTran Services Inc. 613-521-0703 56 Submissions by Mr. Mondrow (HVAC) 1 time be a further rationalization". 2 (As read) 3 In that case, the Board landed on a 4 $6.7 million number. So the issue of economics driving 5 this transaction and the issue of the impact on cost of 6 service, O&M and rate base was subject to review and 7 indeed ruling by the Board in respect of rental program 8 removal and this removal seems in context to be of even 9 larger magnitude and the Board should be very concerned 10 about that. 11 Finally, we note statutory provision in 12 section 21 in the Ontario Energy Board Act which was not 13 previously noted which allows the Board to direct 14 preparation of evidence incidental to the exercise of 15 its power to rehear this matter and we command that 16 section to the Board in the context of the release 17 sought. 18 Thank you for your indulgence. 19 THE PRESIDING MEMBER: Thank you, Mr. Mondrow. 20 Ms Symes. 21 SUBMISSIONS 22 MS SYMES: Thank you. The Alliance supports 23 the motion brought by IGUA, CAC and VECC and will not 24 hopefully repeat the prior submissions. Instead I will 25 limit my submission to the impact on Enbridge's PBR. 26 Why? The PBR is a new form of regulation of 27 the utilities in Ontario and it flows, in part at least, 28 from the new Ontario Energy Board Act and Enbridge was Les Services StenoTran Services Inc. 613-521-0703 57 Submissions by Ms Symes (AMEC) 1 the first utility to bring a PBR formula to the Board 2 for scrutiny. 3 It is our submission then that this motion is 4 not a normal or run of the mill request for a rehearing 5 or variance, but instead has been brought or is being 6 brought to you under unusual circumstances. In fact, we 7 submit that one of the applicable portions of the Rules 8 of Practice with respect to rehearing is under 9 section 63.0(1)(a)(vi) which is that an important matter 10 of principle has been raised. That important matter of 11 principle is the obligation to disclose -- the mandatory 12 obligation to disclose -- for the commencement of the 13 PBR process. 14 The Alliance and other parties in the last go 15 around with respect with Enbridge -- we are of course 16 concerned about the PBR process of regulating in 17 general, and the limited O&M PBR- proposed by Enbridge 18 in particular. 19 And not only did the Board in its Decision and 20 the parties in their submissions struggle with the 21 appropriate formula, but also the inputs for the 22 formula, customer growth, inflation and productivity, 23 but as this motion raises -- and other parties have 24 referred to -- where to begin the process, that is on 25 what base to begin to apply the formula. 26 In your Decision, in paragraph 3.0.7 you 27 ordered that the O&M-PBR is to begin with the 28 Board-approved fiscal 2000 O&M expense base minus taking Les Services StenoTran Services Inc. 613-521-0703 58 Submissions by Ms Symes (AMEC) 1 out certain materials with no further adjustment or 2 true-ups based upon experience. 3 And in 2.6.2, that was set at $240.6 4 million for three years, that is for the 2000 through 5 2002 increases weight years. The Board said that it 6 was doing so as a transitional step toward 7 comprehensive PBR. 8 The Alliance submits that the Board, in doing 9 so, must have done so on the clear understanding that 10 Enbridge was being both forthright and honest about its 11 plans for divesting services to its affiliates, that is, 12 honest and forthright with respect to its plans, 13 material plans that would affect its face, and that both 14 the Board and the parties, in making their submissions 15 and in making its Decision, did so on the basis that 16 Enbridge was not trying to gain the system or in any way 17 mislead the Board with respect to where to begin the 18 process for the next three years. 19 It is our submission that Mr. McGill's 20 affidavit, in Tab 2(d) and 2(e), reveals that Enbridge 21 did not disclose significant or material information 22 which it should have done so to enable the Board to come 23 to the significant decision as to where to begin the 24 PBR base. 25 This is not a minor matter. This is -- 26 Mr. Mondrow quantified it as a loss of 40 per cent of 27 the utility's employees. 28 In PBR, unlike cost of service where the Les Services StenoTran Services Inc. 613-521-0703 59 Submissions by Ms Symes (AMEC) 1 utility files its evidence and then the intervenors 2 probe, test the evidence by asking questions and then 3 the Board makes its decision by assessing the strengths 4 and weaknesses of the evidence, in contrast to that, the 5 PBR starts with the assumption that the utility has 6 filed all relevant and material evidence on which to 7 base the PBR formula for the next three years. 8 Without that assumption, without that basis, 9 the Board cannot have any comfort that the rates set for 10 the next three years are in any way fair or just. 11 So the Alliance submits in support of this 12 motion. It's concerned with respect to the PBR and in 13 particular, the O&M PBR that Enbridge proposed and the 14 Board accepted, and asks that in making its decision, 15 you, in making your decision whether to reconsider, you 16 do so using Rule 63.01(a)(vi) that an important matter 17 of principle that the utility is obliged to file all 18 material information on which PBR is based. And for the 19 reasons submitted by the counsel that preceded me, it is 20 our submission that they have failed to do so, and 21 therefore, the Board should reconsider and vary its 22 previous Decisions. 23 Those are my submissions. 24 THE PRESIDING MEMBER: Thank you, Ms Symes. 25 Ms Jackson, do you have anything to add? Are 26 you going to be speaking on this motion? 27 MS JACKSON: My submissions will be confined 28 to issues of principle. In a sense, I don't take a Les Services StenoTran Services Inc. 613-521-0703 60 Submissions by Ms Symes (AMEC) 1 formal position on the motion, but I think the issues of 2 principle that I would seek to raise would put me more 3 on the Consumers' Gas side of this discussion than 4 otherwise. 5 THE PRESIDING MEMBER: That doesn't 6 surprise me. 7 --- Laughter 8 THE PRESIDENT MEMBER: Thank you, Ms Jackson. 9 Now might be an appropriate time for a break. 10 It is now 20 after 11:00. We will reconvene at 25 to 11 12:00. 12 Thank you. 13 --- Upon recessing at 1120 14 --- Upon resuming at 1135 15 THE PRESIDING MEMBER: The Panel decided to 16 consolidate all our questions until the end of all of 17 the argument. 18 So Mr. Cass, I believe it is your turn. 19 MR. CASS: Thank you, Madam Chair. 20 SUBMISSIONS 21 MR. CASS: Madam Chair, as the Board and 22 parties are aware, the company has provided written 23 submissions on the threshold issue. I know that the 24 company still stands by those written submissions. I 25 believe that the points have very much validity and I 26 will try not to repeat them. 27 What I will do now is try to respond to some 28 of the things I have heard in the oral submissions. Les Services StenoTran Services Inc. 613-521-0703 61 Submissions by Mr. Cass (ECG) 1 To begin with, Madam Chair, in my submission, 2 it's important to go back to what the evidence provided 3 in support of this motion really is. I made a note 4 during Mr. Thompson's argument of his statement that, in 5 the RP-99-0001 proceeding, the evidence was that 6 outsourcing would be limited to CIS. In my submission, 7 that is not the evidence. 8 Secondly, I made a note where Mr. Warren, in 9 his submissions, went to, with respect, what I would 10 call one isolated piece of the evidence in RP-99-0001 11 about what outsourcing was closest on the horizon. 12 However, there was much more than that. There was much 13 more than just what was closest on the horizon. 14 So with your indulgence, Madam Chair, I would 15 like to take you back to the Motion Record, Tab 2(b) and 16 the evidence that actually was elicited during the 17 RP-99-0001 proceedings. So for that purpose, I would be 18 starting at page 26 of the Motion Record, page 1360 of 19 the transcript. 20 At line 17, on page 1360 of the transcript, 21 Mr. McGill refers to a response to an HVAC Interrogatory 22 No. 11, which you may recall. Mr. McGill's evidence is: 23 "What we have said in the evidence, and 24 specifically in HVAC No. 11, is that for 25 a transition period of up to six months, 26 beginning October 1st, the company would 27 bill rental charges on behalf of Enbridge 28 Services Inc...." Les Services StenoTran Services Inc. 613-521-0703 62 Submissions by Mr. Cass (ECG) 1 So it is clear that Mr. McGill was talking 2 about something that was only going to last partially 3 into the test year. 4 Mr. Thompson, then, at line 27 asks: 5 "My question really was: Where do you go 6 then in terms of alternatives? Is an 7 outsourced package option selected being 8 examined?" 9 So Mr. Thompson brought the issue directly to 10 an outsource package option. Mr. McGill said: 11 "After the transition period? 12 Mr. Thompson said: 13 "Yes." 14 And Mr. McGill said: 15 "At the moment we are looking at a number 16 of options with respect to how we can 17 support the utility needs and ESI, 18 Enbridge Services Inc., is looking at how 19 they can support their own needs. 20 We are considering outsource options 21 for various parts of the functions that 22 need to be required..." 23 So just pausing there, two things are clear, 24 in my submission. One, it was a range of options that 25 was being considered, it was not just one thing. And 26 number two, it was something that would happen in-year, 27 during the test year. Very clearly, in this context, 28 that was under discussion. Les Services StenoTran Services Inc. 613-521-0703 63 Submissions by Mr. Cass (ECG) 1 Then, just over a little further, at page 30 2 of the Motion Record, Madam Chair, Mr. Thompson himself 3 comes back to it at line 14: 4 "Mr. McGill, you gave me the impression 5 that the utility is looking at a number 6 of options for outsourcing various 7 functions that are within the customer 8 support category...." 9 So it's customer support that we are talking 10 about, not just CIS functions at this time. 11 "Did I understand that correctly? 12 MR. McGILL: Yes." 13 It was understood correctly. Yes, there are a 14 number of options being looked at. 15 "We outsource some functions now..." 16 Mr. McGill said. 17 "...and we are considering outsourcing 18 some others." 19 It is true, Madam Chair, as others have 20 alluded to, that Mr. Thompson pressed to get some more 21 description of what's on the list within customer care. 22 Again, that's at the top of page 1365, lines 3 to 5: 23 "And the functions that you are 24 contemplating outsourcing, could you just 25 give me a list of those, within customer 26 care?" 27 And Mr. McGill refers to the biggest ones, 28 which was printing, inserting and mailing of bills. Les Services StenoTran Services Inc. 613-521-0703 64 Submissions by Mr. Cass (ECG) 1 Yes, he does later on say that that is the one that's 2 closest on the horizon. 3 But in my submission, Madam Chair, the entire 4 context of that was that there was a list or a range 5 that was under consideration, and certainly, one was 6 closest on the horizon, but that does not detract from 7 the fact that it was one of a list. And it goes on, 8 Madam Chair, to some other parts as well. 9 Mr. Thompson took you as well, at the bottom 10 of page 1365, starting at line 19, on page 1365, where 11 he asked for the list, and Mr. Kent came in and he said: 12 "I think the list would be common for any 13 company.... You can outsource printing 14 functions, you can outsource ... legal 15 functions..." 16 He's talking about the Law Department, so I 17 think that gives some idea of the range that we are 18 talking about here, a very broad range. There are a 19 number of things that we could be doing. And the answer 20 concluded: 21 "As Mr. Thompson has pointed out to 22 you,..." 23 At lines 12 and 13, on page 1366: 24 "There are an almost unimaginable 25 spectrum of variations on this, 26 Mr. Thompson." 27 Mr. Thompson said: 28 "All right." Les Services StenoTran Services Inc. 613-521-0703 65 Submissions by Mr. Cass (ECG) 1 So yes, there was some evidence about what was 2 closest on the horizon, but in my submission, the 3 evidence was very clear that there was a range of things 4 being looked at. 5 And then, if we could go on further, Madam 6 Chair, to some excerpts we haven't looked at today, if 7 you don't mind. On page 33 of the Motion Record, in the 8 middle of the page, at line 11, it's pursued some more 9 by Mr. Thompson. He says: 10 "Let's assume that you get what you are 11 asking for and that the total customer 12 support costs, including CIS..." 13 They were talking about total customer 14 support, including CIS. 15 "...go from the $67 million roughly, that 16 is shown for 1999 in the IGUA 17 interrogatory, and Mr. Stephen's schedule 18 up to the $80 million roughly..." 19 So the total customer share up to $80 million. 20 "...it's about a $14 million increase -- 21 and then you outsource and you cut your 22 CIS costs in half. Under the PBR regime, 23 what happens?" 24 Mr. Kent explains: 25 "I think, in the case of the arithmetic 26 calculations that you have put forward 27 the lower operating costs would be to the 28 benefit of shareholders for the term of Les Services StenoTran Services Inc. 613-521-0703 66 Submissions by Mr. Cass (ECG) 1 the PBR arrangement and would then be 2 incorporated in the PBR base for 3 subsequent years and enjoyed thereafter 4 by the ratepayer. 5 That's my layman's understanding..." 6 And then Mr. Thompson comes back to it again: 7 "During the course of the three-year PBR, 8 if you manage to, through outsourcing, 9 reduce the CIS component of what you are 10 seeking here, that would accrue to the 11 benefit of the shareholder until 12 rebasing. Is that your understanding? 13 MR. McGILL: Don't forget, there is also 14 a productivity adjustment in the PBR 15 formula that goes to the customers during 16 the three years of the PBR." 17 And then Mr. Vlahos interjects and there is 18 some discussion with Mr. Thompson. 19 Then, at line 19, Mr. Vlahos points out that 20 there has been reference to CIS, but there is also 21 something larger than the CIS fee that the company would 22 be paying to its affiliate, and he concludes by asking: 23 "Is it something beyond that. It is the 24 total customer support service area?" 25 Mr. Thompson says: 26 "Includes -- yes." 27 And then, if you could just skip over to the 28 top of the next page, if you don't mind, Madam Chair. Les Services StenoTran Services Inc. 613-521-0703 67 Submissions by Mr. Cass (ECG) 1 That's page 35 of the Motion Record, line 6. In 2 response to this question by Mr. Vlahos, Mr. Thompson 3 says: 4 "They are talking about outsourcing 5 generally, that there are a lot of things 6 that could be outsourced, including CIS." 7 It's very clear, in my submission, Madam 8 Chair, that at that time, the evidence was understood to 9 be a general concept of outsourcing with a wide range of 10 options which simply included CIS. 11 Mr. Thompson goes on to say: 12 "I wanted to know what happens to the 13 money. 14 As I understand the witnesses, they 15 are telling me it accrues to the benefit 16 of the shareholders." 17 And then, there's some further discussion in 18 the same vein. 19 So in my submission, that wrap-up, if I could 20 call it that, by Mr. Thompson in response to the 21 Presiding Member, at the top of page 35 of the Motion 22 Record, makes very clear what was understood from the 23 evidence at the time of the proceeding. 24 So in my submission, Madam Chair, there are a 25 number of things that are clear from that evidence. The 26 company was going to be doing something in-year, because 27 there was a six-month transition period during which it 28 was providing services to Enbridge Services Inc. It was Les Services StenoTran Services Inc. 613-521-0703 68 Submissions by Mr. Cass (ECG) 1 considering a range of outsourcing options. There was a 2 wide range under consideration which Mr. Kent called an 3 almost unimaginable spectrum, and that in the event of 4 an outsourcing, to the extent that benefits could be 5 achieved under the PBR plan, that was expected to flow 6 to the shareholders. That was on the record in that 7 proceeding. 8 Madam Chair, at no time did any witness say 9 there will be no outsourcing. At no time did any 10 witness say, there will be an outsourcing but not in the 11 test year. If those types of things had been said, I 12 would agree we have a review case here, at least on the 13 threshold. We have something for the Board to think 14 about, whether it needs to review and get passed the 15 threshold. 16 If the witnesses had said there will be no 17 outsourcing in the test year and then there was one, 18 that would be a different matter. In fact, Madam Chair, 19 in my submission, the evidence is the opposite of that. 20 Far from saying there would be no outsourcing in the 21 test year, in my submission, the evidence that we just 22 looked at makes it clear that something was going to 23 happen in the test year and it was only a question of 24 what. 25 Now, just also, building on this evidence as 26 we have now seen it, Madam Chair, a number of times, in 27 Mr. Thompson's argument, he referred to what he called 28 the inference from this. As I understood it, the Les Services StenoTran Services Inc. 613-521-0703 69 Submissions by Mr. Cass (ECG) 1 inference he was describing was one of some kind of 2 subterfuge or misbehaviour on the part of the company; a 3 failure to disclose, for example. 4 The starting point, in my submission, is this 5 evidence that we are looking at, this is the moving 6 parties' evidence. They brought this motion and had the 7 ability to choose what evidence they submitted in 8 support of it. They chose to put these transcript 9 references in as evidence they considered to support 10 their motion. 11 In my submission, it's their evidence in 12 support of their motion. And in my submission, there's 13 no inference to be drawn from that evidence of any 14 subterfuge from the company or any failure to disclose. 15 The reasonable inference, if one needs to start drawing 16 inferences, is that the witnesses testified about 17 options that were under consideration at the hearing, 18 and then subsequently, the company implemented an 19 option. 20 That's the inference from the evidence that 21 the moving parties have put forward. Any other 22 inference more or less asks you to assume that these 23 witnesses under oath were not telling the truth and 24 there hasn't been evidence presented to you that would 25 cause you to make that assumption. 26 So to the contrary of what Mr. Thompson is 27 saying, my submission is that if you take what the 28 witnesses said under oath and what the moving parties Les Services StenoTran Services Inc. 613-521-0703 70 Submissions by Mr. Cass (ECG) 1 put into their Motion Record, the inference is, as I 2 have described it, that the company was considering 3 options at the time of the hearing, and subsequently 4 made a decision to implement an option. 5 I will come to this in a moment, but my 6 submission is that the targeted PBR plan, in common with 7 PBR generally, encourages the company to take new 8 initiatives. In my submission, the fact that that may 9 happen in-year, so to speak, particularly when the 10 witnesses have specifically talked about something 11 happening in-year, is not a reason to reopen a case. 12 In my submission, and I think it probably is 13 repeating a little bit what is in the written 14 submission, but the company can't be expected to be 15 paralysed between rate cases and think, well, because we 16 want to do something in-year, even though we told people 17 we were considering options, we can't do it in between 18 rate cases. Variances occur between rate cases; that's 19 known. And in my submission, the company should act as 20 decisively between cases as it acts at any other time. 21 This is all the more so, in my submission, 22 where the PBR plan is set up in a way to encourage the 23 company to find new productivity. I'm going to come to 24 that part of PBR in just a moment. 25 But before I leave this evidence from 26 RP-99-0001, one other point I wanted to touch on is, 27 there was a submission made a number of times by 28 Mr. Thompson, I think, repeated by perhaps Mr. Mondrow, Les Services StenoTran Services Inc. 613-521-0703 71 Submissions by Mr. Cass (ECG) 1 that the company described a plan it did not intend to 2 follow, thereby implying that at the very time this 3 evidence was given, the company did not intend what it 4 was saying. 5 There is no evidence of that, in my 6 submission, Madam Chair. I don't think that should be 7 given any weight or credence at all. 8 There is no evidence that the company did not 9 intend what it was saying at the time of the 10 RP-1999-0001 proceeding. 11 I have said a couple of times that I want to 12 flip over to the PBR plan that, in my submission, that 13 in fact the plan encourages the company to take new 14 initiative. 15 At the risk of repeating principles that are 16 understood by all of us, I do want to come back and talk 17 about what the targeted PBR plan is all about. This is 18 summarized at paragraph 2.0.7 of the 497-01 Decision. 19 What the targeted PBR plan is all about, as 20 that paragraph describes, is that there is a guaranteed 21 productivity benefit to ratepayers. The targeted PBR 22 plan is a formula that will, just by means of the 23 formula itself, deliver that productivity benefit to 24 ratepayers on an annual basis. 25 Above and beyond that, the targeted PBR plan 26 is supposed to have an incentive to the shareholder to 27 exceed the guaranteed productivity benefit. And then at 28 the time of rebasing to the extent that that incentive Les Services StenoTran Services Inc. 613-521-0703 72 Submissions by Mr. Cass (ECG) 1 has brought out new productivity that can be maintained 2 on a lasting basis, that is shared with the ratepayers. 3 So as we all know, the formula itself is 4 designed to have that effect. 5 What the Board did in its 497-01 Decision, is 6 it took those benefits of the PBR plan. And from the 7 ratepayers point of view, it built on those further by 8 adding a stretch factor. So the Board established a 9 stretch factor in addition to what the company had 10 proposed as guaranteed productivity benefits and the 11 Board specifically said, at 3.0.15 of its Decision, that 12 the stretch factor was to reflect opportunities for 13 efficiency gains and to challenge management. The Board 14 was challenging management to find new productivity. 15 Not only was the company to deliver the 16 benefits that it felt it could guarantee, it was being 17 challenged to do even better than that. That is the 18 basis for my submission to the Board, the company is 19 effectively under the PBR plan being challenged to come 20 up with new initiatives and new ways of finding 21 productivity. 22 In my submission, the effect of this Motion 23 today is that, despite this challenge that the company 24 has to meet, there is like an invisible set of rules 25 around this challenge. You can go out -- you have to go 26 out and try and find new productivity if this plan is 27 going to work. But if you take a step that other people 28 perhaps think is too large or -- I am not sure what the Les Services StenoTran Services Inc. 613-521-0703 73 Submissions by Mr. Cass (ECG) 1 complaint is -- but if you take a step that other people 2 complain there is this invisible box and now you are 3 outside of it, and your case is going to be reopened. 4 In my submission, Madam Chair, no PBR plan is 5 ever going to work in that kind of a context. If the 6 company is being challenged to find new initiatives the 7 company has to be able to understand if it finds one 8 that that will work in the way that the PBR formula was 9 intended, to the extent that it is a lasting benefit, 10 the ratepayers will benefit at the time of rebasing -- 11 it is only a three year term for this plan -- and in the 12 meantime, the company should have some comfort of 13 knowing when it takes a new initiative there is not 14 going to be an invisible rule brought along that says, 15 no, sorry, that one went too far, or somehow got outside 16 the box. 17 Madam Chair, just a different point on PBR. 18 This ties in perhaps a little more with something that 19 Mr. Warren said and some things that Mr. Mondrow said. 20 I made a note that Mr. Warren referred to the need to 21 still have full disclosure -- full and timely 22 disclosure, I think were his precise words -- but full 23 disclosure even under PBR. 24 I made a note that Mr. Mondrow said that the 25 impacts on the PBR plan are properly subject to an 26 annual review. 27 In my submission, this is bordering on if not 28 reaching a submission and a position that the Board Les Services StenoTran Services Inc. 613-521-0703 74 Submissions by Mr. Cass (ECG) 1 dealt with quite explicitly in RP-1999-0001. The Board 2 will recall there was discussion around a line-by-line 3 constant service type of scrutiny of the PBR plan during 4 its term. This was in the context of monitoring and 5 reporting because there certainly was an issue in 6 RP-1999-0001 as to what the monitoring and reporting 7 should be under the PBR plan. 8 Today we are certainly not talking about a 9 monitoring and reporting issue, but, in my submission, 10 we end up at the same place, which is the Board being 11 urged there should somehow be this scrutiny on a PBR 12 plan that springs from a cost of service type of 13 regulation. 14 Although the context is different, in my 15 submission, the ultimate issue is the same. Just before 16 I forget about it, this is referred to in our written 17 submission. But it comes out very plainly in the Notice 18 of Motion. I believe it is paragraph 5 on page 4 of the 19 Motion Record where there is a request for cost -- 20 information in a cost of service format for the 2000 21 year and the 2001 year, including the O&M expense 22 component of the company's operation. I am quite sure 23 that is page 4 of the Motion Record. 24 So it comes out extremely clearly, in my 25 submission, that we are talking about the same sort of 26 line-by-line scrutiny as the Board considered when it 27 dealt with the monitoring and reporting issue in 28 RP-1999-0001. Les Services StenoTran Services Inc. 613-521-0703 75 Submissions by Mr. Cass (ECG) 1 In the RP-1999-0001 Decision, in my 2 submission, the Board made a number of illuminating 3 comments all around this issue. I hesitate to read them 4 all because, of course, the Board would be more aware of 5 them than I am. They start at 5.2.2 and go right over 6 to 5.2.5. 7 In my submission, much if not all of what you 8 have heard on this Motion from the moving parties is 9 answered right in these paragraphs. 10 Again, the context was different. It was 11 monitoring and reporting. But the end result of what 12 you were being told was the same. 13 So just to take a couple of small excerpts, if 14 I may, at 5.2.3 the Board said that the Board is 15 concerned that acceptance of the intervenors suggestions 16 will compromise the PBR process before it has been given 17 a chance to begin. It will inevitably result in a 18 line-by-line scrutiny of the O&M budget, as if under 19 cost of service regulation. 20 I take you back to the Request and the Notice 21 of Motion for 2000 and 2001 numbers and the traditional 22 cost of service format. It is the same thing we are 23 talking about, as well as these references I have given 24 you from oral argument about making the PBR plan subject 25 to an annual review. 26 The Decision goes in 5.2.3: in E.B.R.O. 497-01 27 the Board accepted the suggestion that any party could 28 ask for an off ramp; however, the off ramp provision is Les Services StenoTran Services Inc. 613-521-0703 76 Submissions by Mr. Cass (ECG) 1 not to be construed as a licence for intervenors to 2 request and receive information as if nothing has 3 changed from cost of service regulation. 4 Using such information for purposes of 5 reviewing and regulating issues in annual rate cases 6 would be contrary to the incentive and regulatory 7 reasons -- sufficiency reasons for establishing a PBR 8 plan in the first place. This plan is supposed to have 9 an incentive. 10 In my submission, the Board has recognized 11 here in 5.2.3 that that incentive will be weakened by 12 the very type of thing that you are now being asked to 13 do. How can there be an incentive when the company 14 taking a new initiative all of a sudden has this box put 15 around it and it is told that calls for a reopening. 16 In my submission, no PBR plan in this province 17 is ever going to work properly if that sort of 18 limitation can be dropped upon the incentive that is 19 built in the formula. 20 The other point that, in my submission, seems 21 to lie somehow at the heart of the complaints that I 22 have heard about how this transaction relates to the 23 targeted PBR plan is somehow, as I understand it, a 24 sense that you cannot be sure that you now have just and 25 reasonable rates; but, in my submission, that overlooks 26 precisely the way in which PBR works. 27 The Board in its recent Decision on the PBR 28 handbook for Electricity Distributors made note of the Les Services StenoTran Services Inc. 613-521-0703 77 Submissions by Mr. Cass (ECG) 1 fact the effect of PBR is to decouple, I think was the 2 word, prices or the rates from cost. And, I think, that 3 actually was taken from a Board document and repeated in 4 that RP-1999-0034 Decision. So PBR is decoupling rates 5 from costs. 6 Rates are just and reasonable under PBR, under 7 the targeted PBR plan because in the 497-01 Decision, 8 the Board looked at what the formula does -- and I have 9 been through that, guarantees productivity benefits to 10 the ratepayers, incentive to the shareholder to do more 11 and delivers lasting additional gains at the time of 12 rebasing. But the application of the formula itself 13 creates the just and reasonable rates. There is no 14 longer the need as in cost of service regulation to do 15 the underlying scrutiny of all the numbers to be sure 16 you have just and reasonable rates. The formula 17 delivers it. That is what PBR is all about in my 18 submission and I think I am repeating arguments that I 19 made in RP-1992-0001 on the monetary reporting issue, 20 but to take cost of service scrutiny and tack it on to 21 the PBR formula is really putting together the worst of 22 all worlds in my respectful submission. 23 The formula itself delivers the just and 24 reasonable rates because it is designed to do that, and 25 as the Board is aware, and I think Ms Symes referred to 26 the statute, the new OEB Act, and I think it's 27 subsection 36(3) specifically contemplates that just and 28 reasonable rates are going to be set in new ways. I Les Services StenoTran Services Inc. 613-521-0703 78 Submissions by Mr. Cass (ECG) 1 think the words are: 2 "Any method or technique the Board 3 considers appropriate". (As read) 4 So there an explicit recollection -- sorry, 5 explicit recognition -- in the statute that just and 6 reasonable rates are going to be set in ways that maybe 7 they weren't under cost of service regulations. 8 Just one other point that I want to touch on 9 because it links in with the transcript references that 10 Mr. Thompson took you to at Tab 2(b) of the Motion 11 Record and that I have taken you to as well. 12 As the Board is aware, a major part of the 13 outsourcing discussion in RP-1999-0001 related to CIS 14 and it's considered in the Board's Decision at page 27. 15 At paragraph 4.2.2., the Board refers to the proposal of 16 the transfer of CIS to an affiliate. At 4.2.4. the 17 Board indicates that the proposal was the affiliate's 18 annual fee would be a Z-factor and in the initial year, 19 the test year it would be reduced by some offsets. So 20 in 4.2.5., as the Board indicates, the proposed CIS 21 Z-factor for the test year was $5.7 million. 22 Now that was rejected by the Board. The Board 23 did now allow that $5.7 million Z-factor from 24 outsourcing of CIS. As the Board has seen from 25 Mr. Fournier's affidavit, the outsourcing which actually 26 occurred includes CIS and that is for example in 27 Exhibit D of Mr. Fournier's affidavit. So I don't know 28 that there is any dispute about this, but in my Les Services StenoTran Services Inc. 613-521-0703 79 Submissions by Mr. Cass (ECG) 1 submission it should be clear that if there were to be a 2 reopening, if anything is going to cross the threshold 3 by way of a reopening of the case, this outsourcing and 4 the CIS Z-factor that the Board rejected in its Decision 5 are clearly linked and clearly would need to be reopened 6 together. 7 I won't belabour it because I assume there is 8 not really any dispute about that. Again the transcript 9 reference at 2(b) of the Motion Record that we have just 10 been looking at repeatedly linked the CIS outsourcing 11 with customer care or customer service generally. 12 Just very quickly on off-ramps. I think this 13 is covered in the written submissions. Again, in the 14 notice of motion I don't actually see any specific 15 requests in relation to an off-ramp when one looks at 16 what the moving parties are requesting. 17 In any event, as discussed in the written 18 submission, the Board itself said in paragraph 2.7.1 of 19 its 497-01 Decision that: "Off-ramps are exogenous 20 factors". There is nothing exogenous here. 21 The additional point that I wanted to add is 22 also from the Board's recent Decision on the PBR 23 Handbook for Electricity Distributors. At 24 paragraph 2.1.11, the Board discusses the appropriate 25 term for a PBR plan and the fact that three years is an 26 appropriate term for a first generation plan. That's 27 the same term of course as the target PBR plan. And 28 then still at paragraph 2.1.11, the Board says that Les Services StenoTran Services Inc. 613-521-0703 80 Submissions by Mr. Cass (ECG) 1 given the relatively short period of that sort of first 2 generation PBR, it did not envisage the need for 3 off-ramps. 4 So I think that's something that could be 5 measured against this entire motion in terms of whether 6 within a three-year limited term targeted PBR plan, 7 where there is clearly going to be rebasing at the end, 8 if there is any need to be thinking about off-ramps at 9 all even aside from what is said in the written 10 submission which I won't repeat again. 11 I just have a number of other items that I 12 will try to deal with quickly that came out of the oral 13 submissions. Mr. Thompson took you, in his 14 Supplementary Motion Record, to my letter of April 5th 15 which referred to the filing of an affidavit. 16 There is no doubt it did refer to the filing 17 of an affidavit. It was very clear at that point that 18 the affidavit was intended to be on the threshold issue 19 and, in fact what happened was in response to the 20 prospect of an affidavit even just on a threshold issue, 21 we thought that the Board received in response 22 Mr. Thompson's letter at Tab 5 of the Supplementary 23 Motion Record about cross-examining, and then 24 Mr. Janigan's letter at Tab 6 which was even more 25 explicit. It talks about cross-examining, the need for 26 scrutiny, of company conduct, and so on. 27 So just in having heard the prospects of an 28 affidavit on the threshold issue, immediately this Les Services StenoTran Services Inc. 613-521-0703 81 Submissions by Mr. Cass (ECG) 1 concept of scrutiny came to the fore. 2 So in my submission it's probably quite clear 3 why the company decided that perhaps on the threshold 4 issue an affidavit would not be delivered. The very 5 basis of the motion, as is discussed in the written 6 submission, is to get disclosure. That's a big part of 7 the relief requested, the so-called full and complete 8 disclosure. And clearly the intent was as much as 9 possible if an affidavit goes in on a threshold issue to 10 cross-examine on that and get the scrutiny before the 11 threshold issue had even been crossed. 12 So the company just felt that that was 13 obviously not a satisfactory way to proceed, where the 14 parties would be proceeding to try to get their scrutiny 15 by way of cross-examining on an affidavit when were are 16 still at the threshold issue only. 17 Mr. Thompson referred also to the failure of 18 Mr. McGill to testify. There I think aside from the 19 change of heart about an affidavit, the company's 20 position has been consistent from the start that this 21 motion does not meet the threshold issue. 22 In my submission, it's up to the moving 23 parties to make their case on the threshold issue. If 24 they believe they have a case to persuade the Board to 25 conduct a review and variance, then it's up to them to 26 lead the case to do that. In my submission, on the 27 threshold issue there is no inference to be drawn from a 28 failure to testify in response. The company is not Les Services StenoTran Services Inc. 613-521-0703 82 Submissions by Mr. Cass (ECG) 1 obliged to come here and help the intervenors make their 2 case to get over the threshold and the company's 3 position consistently from the start has been that the 4 case before the Board now does not cross the threshold. 5 --- Pause 6 MR. CASS: Sorry, Madam Chair. I am just 7 quickly skipping through a number of points that I have 8 covered from the oral submissions. 9 --- Pause 10 MR. CASS: I didn't intend to harp too much on 11 the affiliate Code issues that I heard other than just 12 to observe a couple of things. This is a motion to 13 reopen a proceeding. It was a rates proceeding, 14 obviously, it was not an affiliate Code proceeding that 15 the motion seeked to reopen. 16 Further, there is no requirement under the 17 affiliate Code for some sort of a pre-approval 18 procedure. So I am not sure were the submissions you 19 have heard in relation to the affiliate Code take this 20 motion, but I just wanted to put that in the proper 21 context. This is to reopen RP-1999-0001 and in my 22 submission there was not an issue on the table there 23 about affiliate Codes in relations to the way it's now 24 being presented to you. It's not a reopening of 25 RP-1999-0001. 26 Mr. Mondrow made reference to the fact that 27 there is a loss of 40 per cent of employees. I think 28 it's important to keep this outsourcing arrangement in Les Services StenoTran Services Inc. 613-521-0703 83 Submissions by Mr. Cass (ECG) 1 context. 2 There is no evidence and there is no loss of 3 or change to the company's business needs or its 4 customer requirements. There is no evidence of that and 5 in my submission this motion can only proceed on the 6 basis that the business needs and the customer 7 requirements have not changed. 8 So to the extent that somebody tries to put 9 numbers on at like 40 per cent of employees, what it 10 really means is the company is needing the same business 11 needs, it's needing the same customer requirements and 12 it's complying with the service quality indicators under 13 the PBR plan or it is required to comply with them, and 14 it's doing that with employees under contract, contract 15 employees who used to be direct employees. That's what 16 the 40 per cent really tells you, nothing more nor less 17 than that. 18 So first and foremost, Madam Chair, the 19 company's submission is that the threshold issue has not 20 been met and the motion should be dismissed, and I don't 21 want to detract from that as being the primary 22 submission, but I do reiterate what was said in the 23 written submission to the extent that the Board feels 24 that there is something to cross the threshold. In my 25 submission, it would be very helpful for the procedural 26 order to be specific as to what there might be of 27 concern to the Board. 28 For example, if the Board agrees with my Les Services StenoTran Services Inc. 613-521-0703 84 Submissions by Mr. Cass (ECG) 1 submission that this should not be cause for a reopening 2 of a targeted PBR plan, in my submission it might be 3 helpful to have a procedural order that puts some 4 limitations on what is going over the threshold that the 5 Board considers appropriate. In that regard, of course, 6 my submission is that if this outsourcing transaction 7 goes over the threshold should the CIS Z-factor. 8 So for all of those reasons, Madam Chair, my 9 submission is that the motion should be dismissed. 10 THE PRESIDING MEMBER: Thank you, Mr. Cass. 11 Ms Jackson. 12 SUBMISSIONS 13 MS JACKSON: Madam Chair. As you are well 14 aware, Union Gas was not an active participant in the 15 proceeding that you are now being asked to reopen and I 16 am not here seeking to become an active participant in 17 anything that may follow from today. 18 But as everyone, I am sure, in the room 19 appreciates, Union Gas has pending a very comprehensive 20 PBR-based rate proposal and to the extent that in part 21 this motion -- and in larger part some of the 22 submissions made to you today -- raise the question of 23 whether a productivity initiative, depending upon its 24 timing or its size or its nature is a basis upon which 25 the Board should reopen a PBR-based rate proposal during 26 the cycle in which that proposal is alive. 27 There are some issues of principle that Union 28 Gas would ask the Board to keep in mind, and in doing Les Services StenoTran Services Inc. 613-521-0703 85 Submissions by Ms Jackson (Union Gas) 1 so, we do because, as has been pointed out to you, PBR 2 is in its early days in front of this Board and in every 3 case where the Board makes a decision on a PBR-based 4 issue, people will be taking significant signals as to 5 the principles that the Board thinks should underlie 6 the PBR. 7 So with that by way of background, let me 8 first of all say, I will be very brief and I would like 9 to just touch on the question of the principles of PBR, 10 what it does and how it does it, and why what you are 11 being asked today to do has the potential, depending 12 upon what you do and how you do it, towards those 13 principles and objectives. 14 The Board has in its guidelines referenced the 15 need for a PBR proposal to be both to create 16 opportunities for efficiency and to be flexible, and 17 amongst the many objectives, it strikes me that I think 18 reasonably well recognize that the proper objectives of 19 our PBR proposal are, first of all, to allow utilities 20 to operate with flexibility that would not be permitted 21 by the standard cost of service regime in order to 22 better serve customers, in an efficient manner when the 23 marketplace and the business are in a state of constant 24 change. 25 Secondly, to do so without the commitment of 26 Board resources that have traditionally been devoted to 27 the cost of service regime. And thirdly to incentivize 28 utilities to pursue productivity gains in creative and Les Services StenoTran Services Inc. 613-521-0703 86 Submissions by Ms Jackson (Union Gas) 1 sometimes unforseen ways. And in the first place, that 2 objective has, I suggest, it is an important means by 3 which a utility can live within the constraints and, 4 let's be frank, the increased risks imposed on a PBR 5 regime and not jeopardize its financial results. 6 Moreover, from the consumer's point of view, 7 to the extent that those opportunities produce as they 8 are expected and intended to do productivity gains 9 beyond the threshold productivity levels that are built 10 into a particular PBR-based rate. Those gains, to the 11 extent that they are of a long-term nature, are 12 anticipated to be shared ultimately with customers at 13 the end of the PBR cycle. But they will only 14 occur --and I emphasize this -- they will only occur if 15 the incentives are kept in place. 16 All, in my submission of those objectives, are 17 defeated if the Board accepts as a principle that the 18 achievement of a productivity improvement or a plan to 19 put in place such an improvement, is to become the basis 20 for a reopening and adjusting of the PRB-based rate. 21 In my submission, in the submission of Union 22 Gas, when it considers the principle upon which if ever 23 the PBR should be reopened, the Board should reflect on 24 these points, in my submission, merely because 25 circumstances have changed or facts are different from 26 when the PBR-based rate was set is not a basis upon 27 which the Board should consider it appropriate to reopen 28 the rate. Les Services StenoTran Services Inc. 613-521-0703 87 Submissions by Ms Jackson (Union Gas) 1 The whole thesis, in my submission, of 2 PBR-based rates and indeed the world we live in suggests 3 that circumstances in fact will be changing all the 4 time, and it is partly because it becomes harder and 5 harder to anticipate how and when they will change, that 6 a PBR-based rate is more appropriate in many instances 7 that the cost of service-based rates. 8 In my submission, it should not be an 9 appropriate basis to reopen rates, that the productivity 10 gains that system is set up to encourage are in fact 11 being achieved, or particularly if they are being 12 particularly successfully achieved. 13 Moreover, it's not, in my submission, 14 sufficient to say that only certain kinds of 15 productivity gains will be a basis for reopening the 16 rates -- the very big ones. In other words the more 17 successful you are, the more at risk you put yourself. 18 The unexpected ones. It is inherent in this regime that 19 some of the best initiatives may well be unexpected at 20 various points in time or the early ones, or the late 21 ones, or the ones which should have been considered by 22 the company at the time the rate was put in place, or 23 maybe the ones that arise from one of the number of 24 alternatives that the company was considering when the 25 rate was put in place. Or some other unspecified 26 characteristics that tell the utility, "while we would 27 like you to pursue and achieve productivity gains, be 28 cautious because if you do we are going to bring you Les Services StenoTran Services Inc. 613-521-0703 88 Submissions by Ms Jackson (Union Gas) 1 back in". 2 If those kinds of considerations, in my 3 submission, are the basis upon which rates should be 4 opened up -- and I think it's implicit in what is being 5 suggested to you today -- should be adjusted downwards. 6 Or I guess alternatively, that the company and the Board 7 and others at the minimum should down tools and embark 8 on a detailed cost-of-service type review of the 9 particular plan and its impact. 10 In my submission, the incentives will be 11 exactly what the Board -- and I frankly think many of 12 the people in this room don't really want. If that is 13 the basis upon which it's appropriate to reopen a 14 PBR-based rate, the message to a utility is: Don't 15 pursue productivity gains, or at least don't pursue very 16 significant ones. 17 The further message is base land rates should 18 be set higher because the opportunity to assess results, 19 financial results to creative and successful 20 productivity gains is minimized. 21 Lastly from the Board's perspective, the Board 22 will have to assume, I think, that regularly whenever 23 there is an unanticipated step, an unanticipated 24 productivity gain, a sub affect of productivity gain, or 25 whatever else any intervenor chooses to use as the 26 qualifier for the particular productivity gain in 27 question, will be a basis upon which the Board will be 28 asked to entertain a motion just like this and the next Les Services StenoTran Services Inc. 613-521-0703 89 Submissions by Ms Jackson (Union Gas) 1 step, both the reopening and the examination. 2 And at a time when resources, I think, it is 3 generally believed are better spent elsewhere, that is 4 exactly not the kind of incentive, in my submission, 5 that the Board should be thinking of imposing. In a 6 sense, taken to a logical outcome, it invites a form of 7 regulation that is more resource intensive for the Board 8 and for parties than the one that PBR is intended to 9 achieve. 10 So in deciding the motion today, and without 11 speaking to any of the other issues raised by the 12 motion, Union Gas would ask the Board to keep those 13 issues in mind. 14 Thank you. 15 THE PRESIDING MEMBER: Thank you, Ms Jackson. 16 With respect to reply, we greatly appreciated 17 the comments of all the people speaking in support of 18 the motion. However, we would appreciate it if you 19 could consolidate your reply to one person. You might 20 want to have five minutes or so to -- I don't know if 21 you want to have five minutes to be able to collect your 22 thoughts. 23 MR. THOMPSON: We are slow thinkers, Madam 24 Chair. Would it be possible to break and come back? I 25 am unclear as to when you are posing your question. Is 26 that after reply or before reply? 27 THE PRESIDING MEMBER: Certainly. 28 MEMBER VLAHOS: I don't think I have any, Les Services StenoTran Services Inc. 613-521-0703 90 Submissions by Ms Jackson (Union Gas) 1 Mr. Thompson. Unless you come up with -- 2 MR. THOMPSON: I know people would like to get 3 out of here before one, so if we could have 10 minutes, 4 maybe we could finish up. 5 THE PRESIDING MEMBER: Why don't we say that 6 we will reconvene at 20 to 1:00? 7 Thank you. 8 --- Upon recessing at 1226 9 --- Upon resuming at 1244 10 THE PRESIDING MEMBER: Mr. Thompson, were you 11 elected? 12 MR. THOMPSON: Yes, I was, Madam Chair. 13 Thank you. 14 FURTHER SUBMISSIONS 15 MR. MONDROW: Madam Chair, just before 16 Mr. Thompson starts, I had asked if I could, not respond 17 substantively, but correct what may have been a 18 misinterpretation by Mr. Cass of some of my comments. 19 Mr. Cass lumped my comments in with those that 20 Mr. Warren had made in respect of advocating an annual 21 review. Perhaps, from the lack of clarity in my 22 submissions, that misperception was left with Mr. Cass. 23 What I had referred to was statements in a 24 decision and on the record by both the company and the 25 Board that contemplated annual review of the CIS part of 26 the activities that are the subject of this motion. My 27 reference is in the 497-01 Decision, at paragraph 2.3.21 28 of the Board's reasons, and specifically the statement: Les Services StenoTran Services Inc. 613-521-0703 91 Further Submissions by Mr. Mondrow (HVAC) 1 "The company also indicated that other 2 significant changes in O&M expense 3 resulting from capital investment would 4 be considered additional Z-factors if, in 5 aggregate, the total change in O&M 6 expense would be greater than $500,000 in 7 any year. I'm positive that a capital 8 divestment should have the same impact." 9 (As read) 10 And then, later in the same Decision, I 11 reference paragraph 3.0.17 under the heading 12 "Z-Factors", where the Board said: 13 "The Board accepts the amended list of 14 Z-factor categories presented by the 15 company during the hearing, noting that 16 the specific quantum relating to each 17 Z-factor will be brought forward for 18 approval from year to year in rates 19 proceedings. In the upcoming proceeding 20 for rates for the year 2000, for example, 21 the Board will expect to consider the 22 amounts proposed for such unusual 23 expenditures as Y2K costs and CIS 24 expenditures." (As read) 25 And finally, I referenced Volume 7 of the 26 99-01 transcripts, and at page 1258, beginning at 27 line 20, Mr. Kent said: 28 "It would be our expectation that the Z Les Services StenoTran Services Inc. 613-521-0703 92 Further Submissions by Mr. Mondrow (HVAC) 1 factor for CIS would be subject to annual 2 review by this Board." 3 And I questioned: 4 "Including the charges for the CIS 5 services." 6 And Mr. Kent responded: 7 "Yes." 8 And I questioned: 9 "And the details behind what services are 10 being similar to what you filed in this 11 proceeding." 12 And Mr. Kent responded: 13 "That would be my view of it, yes." 14 So again, I may have misspoken myself or not 15 been clear enough, but my submission really was with 16 respect to review of the CIS portion of the larger issue 17 that's before the Board today, and the proposition that 18 both the Board and the company anticipated annual rate 19 base review of that portion of the O&M expenditures. 20 I just wanted to clarify that for the record. 21 Thank you. 22 THE PRESIDING MEMBER: Thank you, Mr. Mondrow. 23 Mr. Thompson. 24 REPLY SUBMISSIONS 25 MR. THOMPSON: Thank you 26 The first point I would like to reply to is 27 Mr. Cass' repeated use of the phrase as to how the 28 Board's PBR formula works. He described the rates under Les Services StenoTran Services Inc. 613-521-0703 93 Reply Submissions by Mr. Thompson (IGUA) 1 which the company operates as PBR rates and made 2 reference to the Board's Electricity Hate handbook. 3 The point that I would like to make and 4 re-emphasize is that the company is not operating under 5 the auspices of PBR rates. It's not operating under the 6 auspices of a price cap. 7 You may recall that the intervenors in 8 E.B.R.0 497 wanted a comprehensive price cap plan, but 9 the company rejected that and came in with their 10 targeted PBR O&M expenses plan as a transition to 11 comprehensive PBR, and we were told repeatedly, we will 12 continue to have rate base related items managed and 13 regulated on a cost-of-service basis. 14 So this is not a PBR rate process that we are 15 trying to have reviewed. This is essentially a cost of 16 service rate process with a small PBR component that we 17 suggest should be reviewed. Because there has been a 18 major transfer of assets and people to an affiliate, 19 review is appropriate under the cost of service regime. 20 The magnitude of the plan which the company 21 proceeded with under a cost of service regime warrants 22 review of the implications for rate base and other rate 23 base related revenue requirement items. 24 Were the company operating under the auspices 25 of PBR price cap, then, by and large, I think IGUA would 26 support the submissions of Union Gas. Once you are into 27 a price cap situation, then, -- and subject to the 28 parameters of that price cap regime, whether there's Les Services StenoTran Services Inc. 613-521-0703 94 Reply Submissions by Mr. Thompson (IGUA) 1 earnings sharing or that kind of thing, the measures 2 adopted by a company would not be subject to reopening 3 the PBR and the cost of service format. It would 4 normally have to wait for the monitoring process and the 5 rebasing. 6 But that's not the situation here. This is a 7 very unique case. There's no precedent implications for 8 conducting the review in this case. In fact, the 9 precedent implications of not conducting a review, in my 10 submission, would be inappropriate and harmful. 11 Under the cost of service regime, and dealing 12 with Mr. Cass' point where he, in effect, is saying, 13 because you approved rates in RP-1999-0001, therefore, 14 they are just unreasonable, even if we adopt an 15 initiative where we transfer how many millions of 16 dollars of rate base to an affiliate, in my submission, 17 they are not just unreasonable in those circumstances. 18 That's something that should be reviewed. 19 Granting the review in this case is not a 20 precedent for allowing the adoption of productivity 21 initiatives to lead to a reopening of every PBR rates 22 base where comprehensive PBR rates have been 23 established. 24 The next topic I wanted to mention briefly is 25 this business of disclosure, the obligation on the 26 company to disclose the plans that it is considering 27 implementing. 28 Mr. Cass, in his submissions, if I understand Les Services StenoTran Services Inc. 613-521-0703 95 Reply Submissions by Mr. Thompson (IGUA) 1 him correctly, in effect concedes that this plan that 2 was ultimately implemented on January 1, 2000, was one 3 of the options being considered when Mr. McGill 4 testified. He, in effect, submits to you that the 5 evidence discloses clearly, fully and completely that a 6 comprehensive transfer of 1,100 people and the assets 7 associated with the provision of customer care 8 information, management and fleet management was 9 disclosed. 10 I ask you, Madam Chair, Mr. Vlahos, did you 11 understand that such a plan was within the range of 12 alternatives when you considered your decision in this 13 case? I submit it's not likely. The reason it's not 14 likely is that the company was seeking to include in 15 rate base in the utility costs associated with 16 information technology. They were seeking rate base 17 treatment for CIS-related expenditures in the past. 18 The Board denied that. So I find it a bit 19 incredible, quite frankly, that Mr. Cass comes in here 20 today and says that this plan was fully disclosed as 21 something that fell within the range of alternatives. 22 There is no basis, in my submission, on which 23 the evidence which we included in our material can be 24 characterized as full disclosure of the plan that was 25 ultimately eliminated. 26 The failure to file affidavit evidence, which 27 Mr. Cass referred to for Mr. McGill, you will recall in 28 the letter initially sent, he said the failure to Les Services StenoTran Services Inc. 613-521-0703 96 Reply Submissions by Mr. Thompson (IGUA) 1 disclose was the issue that had to be addressed and that 2 they would be filing an affidavit to deal with that. 3 That is the issue he did not want Mr. McGill 4 cross-examined on. Nothing about this scrutiny in 5 details business. They wanted to avoid the 6 cross-examination of Mr. McGill on that issue and that 7 is why you can, for the purposes of the threshold issue, 8 take the failure to file evidence and the failure to 9 testify into account in deciding whether we are or are 10 not over the threshold. 11 We are not seeking a PBR reopening. We are 12 not trying to rewrite the monitoring and review process. 13 The Board made it perfectly clear that is not to be 14 brought forward again. 15 What we are seeking is a review of all aspects 16 of the revenue requirement, as described in the Notice 17 of Motion. 18 Mr. Cass, in support of his submission, an 19 attempt to characterize what this Motion is as just 20 another run at monitoring and scrutiny of cost of 21 service expenses referred to the paragraph in the Notice 22 of Motion concerning the procedural Order. We suggest 23 that you might issue pertaining to the filing -- 24 requiring the company to disclose cost of service 25 information. I attempted to explain in my argument in 26 chief why we included that head of information in the 27 Notice of Motion. 28 The reason, once again, was that if what has Les Services StenoTran Services Inc. 613-521-0703 97 Reply Submissions by Mr. Thompson (IGUA) 1 taken place warrants further adjustments to the PBR 2 base, then it seems to us the Board will need that 3 information to consider what adjustments are necessary. 4 If it turns out that what has taken place in 5 the Board's view constitutes such a radical change that 6 the PBR O&M expenses plan ought to be abandoned, then, 7 that information will be of use to the Board and 8 interested parties. 9 But if you don't wish to have that information 10 as part of the broader scope of information that we have 11 described in the procedural Order that we propose, then 12 it can be left out at this time. 13 The point is that the information that we 14 suggest should be encompassed in the procedural Order 15 needs to be adequate to enable the Board to review the 16 entire revenue requirement implications of what has 17 happened compared to the Order that issued. 18 Mr. Cass said he didn't know what the 19 Affiliate Relationships Code had to do with the Motion. 20 I may not be characterizing this fairly. But as I 21 understood him, he made the point that there is no 22 pre-approval required for affiliate transactions between 23 Enbridge and its affiliate. I agree with that. That is 24 quite true. I accept that. 25 But the relevance of the Affiliate 26 Relationships Code is to the amounts recoverable in 27 rates for affiliate transaction. 28 We are not suggesting that Code compliance or Les Services StenoTran Services Inc. 613-521-0703 98 Reply Submissions by Mr. Thompson (IGUA) 1 that pre-approval is necessary, but that Code compliance 2 is relevant to the review of the level of rates. That 3 is why we suggested, in our procedural Order, that 4 accounting orders issue to provide protection for 5 ratepayers and the company with respect to payments made 6 by ECG to ECS and vice versa. 7 So some of this really isn't simply about PBR. 8 It is broader and goes far beyond O&M. 9 What is significant is the fact that the 10 company failed to disclose in its last case that it was 11 planning a fundamental restructuring. The change that 12 affects not only O&M but all other revenue requirement 13 impacts. 14 We submit that the Board has an obligation to 15 ensure that the rates are appropriate in the light of 16 this fundamental restructuring. No harm ensues to 17 Enbridge or the Board if the Board takes the necessary 18 steps to review its rate Order, in the context of what 19 has happened. There is perhaps a scenario that upon 20 disclosure of the requisite information the Board could 21 find that adjustments to rates are not warranted but the 22 review has to be conducted. The review has to be 23 conducted. And the power upon completion of the review, 24 as evident from the Statutory Powers Procedures Act, 25 include variance, great or small or none. 26 The timing of this review is now a matter of 27 some importance because we had, as I mentioned, 28 contemplated it being part of the next rate case. If Les Services StenoTran Services Inc. 613-521-0703 99 Reply Submissions by Mr. Thompson (IGUA) 1 there is to be no next rate case within the foreseeable 2 future, then the review, in my submission, must be 3 conducted within a reasonable period of time after the 4 procedural Order issues. 5 Now, that time frame, obviously, has to take 6 into account the resources shortage that Ms Jackson 7 referred to and which everybody knows the Board is 8 operating under. But this review, in my submission, 9 cannot be and should not be avoided. It is in the 10 public interest and it is necessary for the public 11 interest to be protected for the review to see. 12 Those are my reply submissions. 13 And with respect to costs, I don't know if you 14 wanted me to speak to that now or after the Board has 15 rendered its decision. 16 THE PRESIDING MEMBER: Sure. 17 MR. THOMPSON: The only submissions I would 18 make with respect to costs are essentially those that 19 were made at the time that the parties argued the Motion 20 for a review and of E.B.R.O. 497-01 and in that Decision 21 in that proceeding you concluded that the moving parties 22 were entitled to an award of costs -- bringing a Motion, 23 regardless of the success or lack thereof. I simply 24 adopt what was there said and submit that costs should 25 be awarded to the moving parties when you render your 26 decision in this case. 27 THE PRESIDING MEMBER: Thank you. 28 MR. THOMPSON: I did not consult with my Les Services StenoTran Services Inc. 613-521-0703 100 1 colleagues on costs, so they may want to add something 2 more exuberant than what I have just stated. 3 Thank you for your patience. 4 THE PRESIDING MEMBER: Thank you, 5 Mr. Thompson. 6 Is there anyone else who would like to make 7 representations as far as costs are concerned? 8 MR. WARREN: Madam Chair, I add only at this 9 point that Mr. Thompson, Mr. Janigan and I have made 10 every effort to make this as efficient as possible. 11 On the Motion that my friend Mr. Thompson has 12 just referred to I was the lead party in the sense of 13 preparing materials. In this it is Mr. Thompson. So we 14 have made every effort to try and be as cost effective 15 as we can. I would like the Board, if possible, to take 16 that into consideration. 17 Thank you. 18 MR. MONDROW: Madam Chair, in consultation 19 with Ms Symes, both HVAC Coalition and the Alliance we 20 also apply for the reasonably incurred costs of this 21 appearance in preparation therefor. 22 In my submission, the matter falls out of the 23 rates case in which both parties were found to qualify 24 and were, in fact, awarded costs. We hope we have been 25 of assistance to the Board. 26 THE PRESIDING MEMBER: Mr. Cass, do you have 27 anything? 28 MR. CASS: If I could very briefly make a Les Services StenoTran Services Inc. 613-521-0703 101 1 couple of statements, Madam Chair? 2 THE PRESIDING MEMBER: On costs? 3 MR. CASS: Yes, on costs, of course. 4 THE PRESIDING MEMBER: Thank you. 5 MR. CASS: Mr. Thompson referred to the review 6 motion in relation to the 497-01 Decision. Although I 7 was counsel on the 497-01 case itself, I, as it happens, 8 was not counsel on the review motion, but Mr. Ladanyi 9 has been good enough to point out to me that in fact, 10 the moving parties on that motion did not get 100 per 11 cent of their costs. They got 90 per cent of their 12 costs on that review motion in relation to 497-01. 13 I would just make the general observation, 14 Madam Chair, that a motion brought by these parties, in 15 my submission, it's a little different from a costs 16 point of view than intervening in the company's 17 application. In my submission, where parties take it 18 upon themselves to start their own proceeding, so to 19 speak, before the Board, there should be some 20 responsibility for costs in relation to that. So I will 21 leave it at that. 22 In the preceding review motion, it was 90 per 23 cent, but in my submission, there should be some 24 responsibility taken by a party for costs when it's 25 going to initiate a proceeding before the Board. 26 THE PRESIDING MEMBER: Thank you. 27 We have decided that, based on your 28 submissions, we have no questions. We also appreciate Les Services StenoTran Services Inc. 613-521-0703 102 1 that this is a very difficult issue and we would like 2 some time to think about the ramifications of what you 3 put forward. We are going to reserve our decision at 4 this time. 5 However, we realize that it is an important 6 issue that should be dealt with quickly, so we hope to 7 get our Decision out as soon as possible. So, I guess 8 we are adjourned for now. 9 Thank you. 10 --- Whereupon the hearing adjourned at 1308 p.m.