Rep: OEB
Doc: 128RN
Rev: 0













ONTARIO ENERGY BOARD

Volume: 8

April 15, 2002


BEFORE:



M. JACKSON

PRESIDING MEMBER

G. DOMINY

VICE CHAIR AND MEMBER

P. SOMMERVILLE

MEMBER



1
HEARING RP-1999-0017

2
IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998 c.15 (Sched. B);

3
AND IN THE MATTER OF an Application by Union Gas Limited for an order or orders approving or fixing just and reasonable rates and other charges for the sale, distribution and transmission and storage of gas as of January 1, 2001 and January 1, 2002;

4
AND IN THE MATTER OF the Performance Based Rate mechanism provided by the Ontario Energy Board through proceeding RP-1999-0017.


5
APPEARANCES

6

PAT MORAN

Board Counsel

JAMES WIGHTMAN

Board Staff

CHRIS MACKIE

Board Staff





MICHAEL PENNY

UNION GAS

MARCEL REGHELINI

UNION GAS

TOM BYNG

UNION GAS

DAVID DENT

UNION GAS

ROBERT WARREN

CAC

MURRAY KLIPPENSTEIN

POLLUTION PROBE

MALCOLM ROWAN

CME

TOM MOUTSATSOS

CME

GEORGE VEGH

CEED

ALICK RYDER

CITY OF KITCHENER

DWAYNE QUINN

CITY OF KITCHENER

MICHAEL JANIGAN

VECC

SUE LOTT

VECC

TOM BRETT

"THE SCHOOLS"

VINCE DeROSE

IGUA

PETER THOMPSON

IGUA

DAVID POCH

GREEN ENERGY COALITION

RANDY AIKEN

LPMA & WGSPG

AARON DETLOR

LPMA & WGSPG

RICHARD KING

LPMA & WGSPG

TIBOR HAYNAL

TRANSCANADA PIPELINES

BARBARA BODNAR

ENBRIDGE CONSUMERS GAS

ROBERT ROWE

ENBRIDGE CONSUMERS GAS



7
TABLE OF CONTENTS

8

PRELIMINARY MATTERS:

[16]





UNION GAS - PANEL 5

[30]




QUESTIONS FROM THE BOARD:

[32]





FURTHER CROSS-EXAMINATION BY MR. POCH:

[117]





FURTHER RE-EXAMINATION BY MR. PENNY:

[153]






GREEN ENERGY COALITION - PANEL 1

[161]




EXAMINATION BY MR. POCH:

[163]





CROSS-EXAMINATION BY MR. PENNY:

[244]





QUESTIONS FROM THE BOARD:

[372]





RE-EXAMINATION BY MR. POCH:

[403]






POLLUTION PROBE - PANEL 1

[430]




EXAMINATION BY MR. KLIPPENSTEIN:

[432]





CROSS-EXAMINATION BY MR. PENNY:

[497]





QUESTIONS FROM THE BOARD:

[545]






SUPPLEMENTARY MATTERS:

[599]





9
EXHIBITS

10

EXHIBIT NO. F.8.1: POTENTIAL DSM SAVINGS INCLUDED IN 1999 RATES, APRIL 15, 2002

[24]









EXHIBIT NO. F.8.2: REPLY TO INFORMATION REQUESTS AND UPDATES TO MR. NEME'S EVIDENCE, APRIL 15, 2002

[197]









EXHIBIT NO. F.8.3: CURRICULUM VITAE OF JACK GIBBONS

[440]









EXHIBIT NO. F.8.4: EXCERPT FROM EBO 169-3, JULY 1993

[443]









11
UNDERTAKINGS

12

13
--- Upon commencing at 9:43 a.m.
14
MR. JACKSON: Good morning. Please be seated.

15
Mr. Penny, I understand you may have some preliminary matters this morning.

16
PRELIMINARY MATTERS:

17
MR. PENNY: Yes, I do, Mr. Chairman, and I -- just so the Board wouldn't be surprised into thinking that Mr. Baker liked it so much that he was just coming back for more, I did alert the Board and the parties present that -- due to the fact that the -- as a result of the questions that the Board had asked about the possibility -- about whether there was any DSM-related savings embedded in the regression analysis, that -- some analysis, as Mr. Baker indicated a couple of times, some analysis was being done. It turned out that there's more to it than scanning quickly through a chart, so it seemed to us that it would benefit the Board in answering the question that you posed, that Mr. Baker be here and actually speak to it. So that's why Mr. Baker is back, is to address this and in a moment we can turn to identifying it.

18
The other preliminary matters I wanted to let you know about, Mr. Chairman, are first of all, we've filed this morning Exhibit G.5.2, which is answer to an interrogatory that, I believe, Mr. Dominy had asked to break out the deferral account amounts by gas supply, non-gas supply and rate retroactivity and this exhibit does that and the -- Mr. Mondrow had specifically asked for an Exhibit 21.1 to reflect the Duke transactions' impact on Westcoast and so we've provided that as an updated answer to written interrogatory. I'm sorry, it isn't really to reflect the Duke transaction per se, it's to reflect Westcoast's internal re-organization in connection with that transaction.

19
And the other issue I wanted to address -- the other two issues are that all of the interrogatories that are outstanding, of which I think there may be four or five, will be answered today. So that will all be done today. They are all almost finished, they just need final proofreading and so on. And with respect to the Board's questions about the financial statements, there may have been some misunderstanding on Ms. Elliott's part about the scope of what the Board wanted which gave rise to the estimate of time, but with the benefit of the Board's clarification of what I was looking for, at least in the short term, I've been advised that that information will be generated -- is being generated this morning and I expect that will also be filed today.

20
MR. JACKSON: Thank you, Mr. Penny. I appreciate that. We do appreciate that.

21

MR. PENNY: Thank you, sir. So turning to the issue of whether there was any DSM savings embedded in the regression analysis, those were questions that the Board members had posed to Mr. Baker. My notes did not indicate that there was actually an undertaking number given to that. And, if I'm right, then perhaps the best thing to do would be to give it an exhibit number but I was just going to ask through you, Mr. Moran, to just confirm that it wasn't, just so we don't get our wires crossed. But I don't believe it was given, actually given an undertaking number.

22
MR. MORAN: I think that's right, Mr. Chair. The exhibit -- the number for this would be F.8.1.

23
MR. JACKSON: Thank you, Mr. Moran.

24
EXHIBIT NO. F.8.1: POTENTIAL DSM SAVINGS INCLUDED IN 1999 RATES, APRIL 15, 2002

25
MR. JACKSON: How would we caption that?

26
MR. MORAN: There's a -- sorry, there's nothing describing this document on the record. It's a series of tables, the top page is entitled: Potential DSM savings included in 1999 rates; there's a date at the bottom April 15, 2002.

27
MR. JACKSON: Thank you, Mr. Moran.

28
MR. PENNY: So with the Board's leave, perhaps Mr. Baker could just walk you through what he's done.

29
MR. JACKSON: Yes, thank you.

30
UNION GAS - PANEL 5

31
S.BAKER; Resumed.

32
QUESTIONS FROM THE BOARD:

33
MR. BAKER: Thank you, and good morning.

34

Just by way of brief, very brief overview, we were discussing the NAC decline last week and in particular the EBRO-499 ADR agreement and the approach to determining NAC in that agreement, or normalized average consumption. And our position that we're trying to articulate was that the NAC decline has many many factors that contribute to it; much more than simply Union's DSM efforts at that point in time. And also, that our 499 evidence in the ADR agreement ask did not include a specific adjustment for the 1999 DSM planned savings that were projected. So the Board's question, really, was by virtue of using the actual consumption, as we did in the ADR agreement from 1992 to 1997 to determine normalized average consumption in the 499 ADR agreement: Did this result in some incremental amount of DSM savings or recovery that were incorporated into 1999 rates? That was the discussion we were having last week that we undertook to try to put a schedule together, do some thinking to try to get at that.

35
So the schedule that we've prepared which has now been labelled Exhibit F.8.1, there's a lead sheet schedule and there's also three supporting schedules which just show, for ease of reference to the Board, where we got the numbers, in particular the DSM saving numbers, those come from exhibits in EBRO 499.

36
So we've done our best to prepare a schedule to try to get at the question that the Board was asking on Friday. And what this schedule does is look at the actual DSM amounts and savings in the years since Union's DSM efforts have been in existence up until 1997 which, as I noted, was the last year of actuals that we used for purposes of determining consumption in the 499 ADR agreement.

37
You can see for Centra, or the former Centra, the DSM efforts started in 1995 and for Union they started in 1996. So lines 1 to 5 take the DSM volume savings for each rate class and convert that to an amount which is metres cubed per customer. That simply divides the DSM savings which is a volume in 10 3, M 3 and divides that by the number of customers in each year to produce an amount per year in metres cubed. Lines 6 and 7 take the total cumulative decline over that period and divide it by 5 which is again consistent with the approach that we took in the 499 ADR agreement, where we took the average annual rate of decline for those five years. So that produces an average annual rate of decline and that's on line 7. And if you just look at the first column on the left, on residential rate M-2 produces an annual average decline of 2 metres cubed.

38
So then on lines 8 to 10, what we did was take that average annual decline, and again, we had applied a methodology that we used in 499 which was to apply that average annual rate of decline to the '97 volumes. So we've taken that two cubic metre actual rate of decline, assumed it was in place for '98 and assumed it was in place for '99 as well so what it produced was an incremental impact on normalized average consumption for 1999 and again, taking the residential rate M-2 column for example, that produced a four metres cubed reduction.

39
So then on line 12 what we've done is we've taken the incremental impact on use in 1999 which I just mentioned was on line 10, the four cubic metres. We've multiplied that by the total number of customers in 1999 to produce a total 1999 volume that one could say is attributable to the incremental impacts of DSM.

40
Then we've then taken that '99 volume, multiplied it approximately by the average margin applicable in that rate class to produce a total 1999 margin impact and again, with reference to the residential rate M-2, you can see on line 14 that's $258,000.

41
So we've shown the impact of this for all the rate classes and the total amount on the right-hand column again, coincident with line 14, is $438,000.

42
So it could be taken by looking at this analysis that there was an incremental $438,000 in 1999 rates that would go towards the incremental or new 1999 DSM plan savings that we had forecast.

43
What we also showed on the schedule, which is lines 15 to 17, we've showed the 1998 DSM savings and the associated financial impact. And while 1998 was not a year where Union sought rate change, we obviously did continue to pursue DSM, we had our DSM plan, and 1998 produced incremental DSM savings. What this shows is that the financial impact of the 1998 DSM savings, they will impact margins and volumes subsequent to 1998, at least for the life of the equipment -- is approximately $1.7 million.

44
So it illustrates that while it can be argued, I think, that there is some incremental DSM recovery that's arguably in 1999 rates, based on the NAC approach that we adopted in the 499 ADR agreement, the 1998 DSM impacts have not been reflected either in rates or in the LRAM balances that Union's seeking to go recover in this case.

45
This was one of the issues that I was trying to struggle with on Friday directionally, is that -- to the Board's question, was there some amount that was notionally in rates based on the methodology that we adopted, and trying to get my mind around what would really happen in terms of 1998 as well.

46
In thinking about this a little bit more, again, it's clear to us that in the EBRO 499 there was no specific adjustments for the 1999 DSM plan savings. And I would put it another way for the Board, that our approach in determining normalized average consumption in the 499 ADR agreement would have been the same in our mind and would have been unchanged even if we had planned to cease doing any DSM in 1999. If we assumed that we were no longer going to continue DSM in 1999, the methodology that we used in the 499 ADR agreement would have been, in my view, exactly the same.

47
So there was no incremental amount built into the base rate in 499 for fiscal 1999 save and except for the $438,000 that we've tried to articulate in this schedule. And as I've noted, it -- it's quite a bit less than the 1998 amount that is not incorporated into rates and we're not seeking recovery in the LRAM account as well.

48
So it's really on this basis that we've deferred or recorded the LRAM amounts that we have in this case and why we're seeking recovery. I also wanted to point out that these amounts have also been reflected in our financial statements for years 1999, 2000, and 2001 as well.

49
Subject to any questions that the Board panel had, that was -- those were my comments in trying to walk through and explain the schedule.

50

MR. JACKSON: Okay. One of the questions that occurred to me -- so I'm happy to see you back -- is: When would the journal entries have been posted that would put the money into the deferral accounts? In other words, given that half of the journal entry would probably affect earnings in that year, I was curious as to which year's earnings were affected, when the amounts that are in the deferral accounts were put there. So, for example, in getting ready for this hearing, did you have adjustments to set up certain deferral accounts that maybe reflected DSM savings in prior periods but journal entries would have been passed in the current period and affected current period earnings? And I was just wondering whether you can maybe track that for us through the years, in which the deferral account balances were set up, just so that we know how much went up and in which year.

51
MR. BAKER: Certainly.

52
MR. JACKSON: Thank you.

53
MR. BAKER: I think the easiest way to go at that is to look at the continuity schedule on the LRAM balances in Ms. Platis's updated evidence. And, I'm looking at table 4, which is three or four pages from the back of that yellow page update package.

54
MR. JACKSON: Yes, thank you.

55
MR. BAKER: So you can see the amounts on line 7 for each of the years. So 1999, 1.372 million; 2000, 2.089 million and 2001, 5.088 million.

56
MR. JACKSON: Yes.

57
MR. BAKER: So the amounts that would have been recorded in the LRAM deferral account in each year would correspond to the timing of those numbers.

58
MR. JACKSON: And would have included any adjustments for the prior year that needed to be made, if there were minor adjustments being made or are there minor adjustments being made as you go along?

59
MR. BAKER: I think what we were trying to reflect is the -- is trying to accrue and record what we believe to be the actual incremental DSM savings in those years. We always knew that that would be subject to the review of those amounts through the consultative and through the audit so we knew that there was the potential for adjustments to be made to those balances. But we would have recorded or set up those amounts in the LRAM deferral account on a basis consistent with the schedule in the years.

60
MR. JACKSON: Right. So this would be your -- in each year, there this would be your best estimate and it would have would have been posted into the financial statements of that year.

61
MR. BAKER: Would have been, that's correct.

62
MR. JACKSON: Yes. Thanks. That was one question I had.

63
MR. POCH: Mr. Chairman, I should interrupt you and advise -- I think Mr. Baker may not be aware of this, that these yellow pages take into account the settled issues, the 20 settled issues between GEC and the company. So I think in -- just so the record's clear, I think these were probably not the numbers that would have been inscribed in the LRAM back in 1999 and 2000. These were adjusted a week ago.

64
MR. DOMINY: They are not the numbers that are in -- reflected in the financial statements, then?

65
MR. BAKER: Sorry, I didn't hear the question.

66
MR. DOMINY: Mr. Poch was saying that these are the numbers that resulted from a discussion you've had recently between yourselves and GEC about what you agree are the reasonable estimates of the savings.

67
MR. BAKER: That's correct.

68
MR. DOMINY: And therefore, you said that these would have been reflected in the financial statements; but not these numbers, the previous numbers.

69
MR. BAKER: Not these specific numbers. I was really trying to refer directionally what would have been in there. So we would have taken, for 1999, our best estimate in terms of what we thought the incremental DSM savings would have been and we would have reflected those in the financial statements. I think Mr. Poch is right, there have been some adjustments obviously through this process, so if I stated that it was these specific numbers, I apologize, that's not what I was trying to say.

70
MR. DOMINY: I was just trying to clarify my own understanding, thank you.

71
MR. JACKSON: Because, Mr. Baker, I had taken it that these were the specific numbers and that in the next year, for example, the 1437 number might have been, for the most part, related to the year 2000 but might have included a small adjustment to the 1372, which had been previously posted. But what I'm learning now through Mr. Poch is that the 1372 doesn't really reflect what would have gone to the financial statements, it merely reflects what's the result of a settlement process; is that correct?

72
MR. BAKER: That's correct.

73
MR. JACKSON: Okay. Now, the 1372, in settling with Mr. Poch and his group, did you possibly arrive at a very Solomonic settlement such that maybe the number was twice that that went to the balance sheet? It's also in the record, so I guess I can look that up but it's not -- it's not a large amount different from what went to the balance sheet; is that what I can take it? It's within 10 percent of what would have gone to the --


74
MR. BAKER: I believe that's right.

75
MR. POCH: I think just ballpark, Mr. Chairman, just to help you, for 1999, I think the original number that Union's filing is 1.6 and now it's 1.37, so that's the range.

76
MR. DOMINY: These are the schedules shown in Exhibit B, tab 10, schedule 1, 2, and 3 would be the base number, the yellow page numbers are, I understand, are update to that as a result of the discussions.

77
MR. BAKER: That's correct.

78
MR. JACKSON: Okay.

79
MR. POCH: Mr. Chairman, there -- the cumulative effect over the three years that you'll see, the 9269 in the 2001 column, I think that was 11.1 a few weeks ago.

80
MR. JACKSON: Thank you, that does help me. Okay. Now the other question I had was just a very quick look at this schedule F.8.1. Mr. Dominy may be able to help me here afterwards but you have three years out of the five where you've got "not applicable," and you want a good predictor of 1998 and 1999. Why would you divide by five instead of by two?

81
MR. BAKER: What we've done here is remain consistent with the methodology that we used in the 499 ADR agreement. So what we did in the 499 ADR agreement was we took actual normalized consumption for those years and we looked at the rate of decline between each of those years to get an average annual rate of decline over those five years. So what we've done is, again, trying to pull out the incremental DSM impact that would have been included in 1999. We had to stay consistent with the methodology that we had used in the 499 ADR agreement.

82
MR. JACKSON: In the trend analysis the other day and I'm sorry, I'm just thinking of which document to turn up this morning, but didn't we see a number, was it 22 or was it 2.2?

83
MR. BAKER: It was 22 and that was arrived at by virtue of the same -- of the methodology which we've tried to maintain consistency with on this schedule. So it goes back to my earlier point that there are a lot of factors that are leading to the declining trend in normalized average consumption aside from Union's specific DSM efforts. So what we were trying to -- that's a --

84
MR. JACKSON: That gave rise to the 22, only part of which could be attributed to DSM.

85
MR. BAKER: That's correct. And what we were trying to do in this schedule is to break out explicitly the piece that one could argue is specifically related to Union's DSM efforts in those years.

86
MR. JACKSON: But it seems like the best evidence, based on the two years of results that we have, '96 and '97, suggest that the number should be five. And you're saying, well let's add those two together and divide by five and get two; is that right?

87
MR. BAKER: What we've done is pursued DSM, let's stick with Union and the rate M-2, we've pursued DSM in '96 and '97 and that would have produced DSM savings. And to the extent that those DSM savings reductions are reflected in actuals, they're already picked up in the '97 actuals.

88
MR. JACKSON: Yes.

89
MR. BAKER: So what we are really trying to do, we're saying -- I think to say it another way, the '97 actual consumption should be lower by the amount of DSM savings that we have undertaken in all years prior and up to and including 1997.

90
MR. JACKSON: And your best estimates without the DSM savings, they would have been five higher?

91
MR. BAKER: That's correct.

92
MR. JACKSON: Right.

93
MR. BAKER: So we're saying that the actual consumption in 1997 is lower by those amounts and that is reflective of the DSM savings that we generated in those years. What we're now trying to do is say, based on the methodology that we used in the 499 ADR agreement, what's the incremental amount of normalized average consumption decline that it would have been built into the 1999 average consumption which one could argue is then recovered and would go to recover some of the incremental 1999 DSM planned savings because they are incremental in each year.

94
MR. JACKSON: Yes. So to the extent that we thought that five out of the -- out of a -- the forecasting number of 22 was significant with respect to DSM, we might assume that that -- to the extent that 22 has any basis, we can strongly rely on that there was an offsetting increase of 5 somewhere because the 22 is the trend line amount that results from of looking from 1993 to 1997; is that right? It's when you start to pick apart the components of something that gave rise to a trend line that we say that, well, five of the 22 is related to DSM, then the logical extension is that some other factors have -- the 22 didn't move in '96, well --

95
MR. BAKER: It's really --

96
MR. JACKSON: It gets harder and harder to interpret it. But it seems to me that the best evidence you have is that the DSM program, when introduced, started to give rise to five a year and you only had two years of data to look at.

97
MR. BAKER: Let me step back and try this another way. I think when you're looking at -- if you want to compare the relativity to the 22 metre cubed reduction --

98
MR. JACKSON: Yes.

99
MR. BAKER: -- What we are saying on here is that is built into the 22, and again, we didn't do it this way when we went through the ADR, but built into the 22 is roughly two metres cubed of decline.

100
MR. JACKSON: Right. I hear what you're saying.

101
MR. BAKER: And what I was trying to say is that the declines that we saw on an actual basis in '96 and '97, we are saying that those were due to Union's DSM efforts. So we had pursued DSM, they had reduced our consumption in those years by an increment of 5 in '96 and another increment of 5 in '97.

102
MR. JACKSON: And that seems to indicate that going into the future, you'd have a further reduction of two per year.

103
MR. BAKER: That's right. And I agree with you that going forward, there is -- the trend that you see in '96 and '97 would suggest that we are going to continue to see more than an average of two due to DSM.

104
MR. JACKSON: Yes.

105
MR. BAKER: The question we're really trying to get at is, based on the methodology that we used in 499, how much of that was actually -- what was the incremental amount that was actually built into the 1999 forecast based on the methodology that we used in the 499 ADR agreement. And in our view, that's the two.

106
MR. JACKSON: That's the two.

107
MR. BAKER: And then we assumed that the two -- the incremental two was in there for '98 and it was also in there for 1999.

108
MR. JACKSON: Okay. Thank you. I think you've put that very clearly. Thank you very much.

109
MR. POCH: Mr. Chairman, I'm wondering if I might, through you, ask one question which is -- this deals with the residential/commercial because that's, as we saw in the ADR, those were the ones that were dealt with through this different approach. I just wanted --


110
MR. JACKSON: If Mr. Penny has no objection. We haven't -- I guess, what I'm thinking is we haven't seen this before, Mr. Penny. Can we hear his question and see whether --

111
MR. PENNY: Absolutely, I think we should --

112
MR. JACKSON: I'm sorry, I was just expecting --

113
MR. PENNY: It sounded like just one, so I think --

114
MR. JACKSON: I was expecting you to object. Okay.

115
MR. PENNY: If it will help clarify it, I think we should hear what Mr. Poch has to say and I'll indicate whether I object or not after we hear the question.

116
MR. JACKSON: That's a good idea. Thank you.

117
FURTHER CROSS-EXAMINATION BY MR. POCH:

118
MR. POCH: Mr. Chairman, I put -- my only question, Mr. Baker, on that was on the industrial side. I take it to figure out what was in this -- in effect what you've done here is not what's in any regression analysis. What you've tried to do is pull out what was in the alternative approach that was taken for the residential/commercial sectors in 499; correct?

119
MR. BAKER: That's correct.

120
MR. POCH: Right. And in 499 for the industrial sector rates, you did rely on the -- agreed to rely on the regression analysis; is that correct?

121
MR. BAKER: We relied on the forecast that he we had filed, that's right. There was no adjustment in the ADR agreement.

122
MR. POCH: And that forecast was based on an regression analysis?

123
MR. BAKER: For the industrial it would have been more end-use consumption related.

124
MR. POCH: So in that case, if it was -- it would be based on the actual end-use trends that you noticed in the industrial sector in consultation with your customers.

125
MR. BAKER: That's correct.

126
MR. POCH: So can we take it from that then the industrial forecast would have captured whatever was happening in DSM in the industrial sector but you've not been able to pull that out?

127
MR. BAKER: It would have would have tried to capture that; that's correct. And the reason we didn't put the industrial numbers on the schedule in the same way was: One, that once we started adding three more columns we probably wouldn't be able to see the print on the schedule; but the second thing is that the margin impact on the industrial DSM is very small. So when you get into the large industrial, the average margin per thousand cubic metres is under two. So, for instance, if you look at the supporting schedules that we had filed with respect to this schedule, the first one you can see industrial information under 1995, and you see 4,208, 10 3, m 3. Again if you take that volume times the -- times the margin for the large industrial rate class, it's a very small amount. So what we tried to capture on this schedule was the -- well, basically the small margin rate where the impacts are significant.

128
MR. POCH: So I take it -- what you are saying, the margin is smaller in industrial, but you'd agree that on the other hand the volumes are larger?

129
MR. BAKER: Yes, they are.

130
MR. POCH: Thank you.

131
MR. DOMINY: Mr. Baker, can I just ask a simple question. I'm not an accountant and, therefore, I have difficulty following some of these things that are reflected in the financial statements, but we did have filed an F.1.2, which is the 2001 actual financial information. And in there, you have operating revenue, gas sales and T-service revenue. Are you telling me that in fact -- and I'm not sure it's the right number -- but if I looked at Exhibit B.10, schedule 3, at the bottom of that page there's a number $2,443,000 for the lost revenue adjustment mechanism forecast. Would that $2,443,000 be reflected in your operating revenue? I'm just trying to understand when you say it's reflected in your financial statements.

132
MR. BAKER: Now that I've got the schedule in front of me could you just refer me to the schedule you are looking at.

133
MR. DOMINY: I'm looking at F.1.2 which is 2001, schedule 1, which is the summary of the statement of income.

134
MR. BAKER: Correct.

135

MR. DOMINY: And then I was looking as a complement, Exhibit B, tab 10, schedule 3 white page or blue page. Never mind, there's a yellow page but we know those aren't the numbers because there's been adjustments subsequent. But is that two-point-something million, and I say that because there are three different numbers there, is that reflected in the operating revenues? Is that what happens?

136
MR. BAKER: I think what you're referring to is the specific amount associated with the 2001 DSM amount, that's right, and we would have -- but in the year 2000 we would have also been looking at the amounts that were being generated from the 2000 and the 1999 DSM plan as well.

137
MR. DOMINY: So when you've given us an audited financial statement for 2001, the revenues there include a forecast of the LRAM number in 2001?

138
MR. BAKER: That's correct. We would take our best estimate in terms of the rate relief that we would be getting upon going through subsequently the customer-review process that we are going through now.

139
MR. DOMINY: And then subsequently, if there was a change there would be an adjustment to a future year's account.

140
MR. BAKER: That's correct.

141
MR. DOMINY: Thank you. I just wanted to understand. Thank you.

142
MR. JACKSON: So what I think I just heard you say to Mr. Dominy, and it's just -- I've got to compute this through my mind too -- is that if there were LRAM savings of 100 units, you would credit revenue and debit a deferral account on the balance sheet to that amount; is that correct?

143
MR. BAKER: That's correct.

144
MR. JACKSON: So the revenues are now higher than they would have been without this benefit, but that's the only year in which it affects it. When you get the recovery of the deferral account balance, it comes in through a rate rider or something else, you've got a similar journal entry which you're posting in that year in order to reduce the deferral account and reduce the revenues?

145
MR. BAKER: No, you wouldn't reduce the revenues if there was an exact match once we -- once the Board had approved a specific recovery. That money would come in so the journal entry at a high level would be we would debit cash, credit the deferral account. So we would have already -- we tried to recognize the revenue --

146
MR. JACKSON: Because you've's already booked the revenues --

147

MR. BAKER: -- In the period that it had accrued.

148
MR. JACKSON: No, it flows through. I see what -- I see what Mr. Dominy was getting at. Thank you for that additional help.

149
Okay. Any other questions? Mr. Moran, have you any questions?

150
MR. MORAN: No, Mr. Chair.

151
MR. JACKSON: About this schedule?

152
Well, Mr. Baker, thank you very much for that help in trying to understand this.

153
FURTHER RE-EXAMINATION BY MR. PENNY:

154
MR. PENNY: Mr. Chairman, could I just ask one clarifying question arising out of what Mr. Poch asked, it was, I think, perhaps left a bit hanging.

155
Mr. Baker had indicated that the industrial effects weren't included. I think you said because the margins were so small; can you just give us a sense of how small?

156
MR. BAKER: The average margin for large industrials would be in the range of $1.80 to $2 a thousand cubic metre. So if you looked at the industrial savings in 1995 on the supporting schedule, although it's the largest number there that was had $4,208, 10 3, m 3 and at $2 per 10 3 margin that would be around $8,000.

157
MR. PENNY: Thank you, Mr. Chairman.

158
MR. JACKSON: Thank you.

159
MR. POCH: Mr. Chairman, I think Mr. Gibbons has been kind enough to allow Mr. Neme to go ahead since he has a plane to catch at some point today, hopefully.

160
MR. JACKSON: Well, that's fine with us, thank you.

161
GREEN ENERGY COALITION - PANEL 1

162

C.NEME; Sworn.

163
EXAMINATION BY MR. POCH:

164
MR. POCH: Mr. Neme, you've appeared before this Board on several occasions.

165
MR. NEME: Yes, that's correct.

166
MR. POCH: And in addition you've filed evidence in other proceedings, dockets where you have not had to appear I take it?

167
MR. NEME: Yes, on numerous occasions.

168
MR. POCH: And you prepared or supervised the evidence GEC prepared in this case, including D.18 and updates.

169
MR. NEME: Yes, that's correct.

170
MR. POCH: And the interrogatories in the C.19 series, and responses to Board staff and Pollution Probe requests for LRAM calculations.

171
MR. NEME: Yes, that's correct.

172
MR. POCH: And you adopt that as your evidence?

173
MR. NEME: I do.

174
MR. POCH: And I understand today, there are a -- we couldn't resist, Mr. Chairman, a few more pages --

175
MR. PENNY: I'm convinced, Mr. Chairman, that Mr. Poch is just trying to confuse us with these --

176
MR. POCH: No, no. It's a war of attrition, Mr. Chairman.

177
MR. PENNY: A flurry of updates that keep coming at us like a snowstorm.

178

MR. JACKSON: Mr. Poch will appreciate it when I say it reminds us of a Hydro hearing.

179
MR. POCH: Yes, this is just a pale comparison to a Hydro hearing.

180
Mr. Neme, I'll ask you to take us through just what those of pieces of paper are before we ask for it to be made evidence.

181
MR. NEME: Sure. There are essentially four sets of documents here. The first set, the first three white pages that you have in front of you, are GEC's response to a Pollution Probe request that was made on Friday, I believe, provided in the format in which it was requested.

182
MR. POCH: So just interrupting you, that was where Pollution Probe had asked Union to run the numbers, and the Board preferred Pollution Probe to do it and, just to clarify, Mr. Chairman, they invited us to do it for them. Thank you, go ahead, Mr. Neme.

183
MR. NEME: The second set of tables are the yellow ones that you have in front of you and those are updates to my evidence. They basically correct for two issues that we discovered in responding to the Pollution Probe request, both of which affect the 1999 variance, the variance from budgeted savings for fiscal 1999.

184
The first one of those -- let me take a step back. When GEC and myself originally put these tables together in my evidence, we had to make or develop estimates of -- for the variance method -- how much savings would say in the forecast. And the number that, I believe if my memory serves me right, that we came up with at the time was $1.44 million in the test year.

185
Subsequently, we have -- then considering the -- and that represented a -- the confusion here is that there were several different 1999 forecasts that are on the table. There was the company's originally-filed forecast and then there was a forecast that came out of the ADR process, and those were two different numbers. So what we've -- the approach that we've taken here is to say that in fiscal year 1999, if you were to assume that the company had included forecasted DSM in its rates, you would have had to have assumed that they used the pre-ADR forecast.

186
In fiscal year 2000, with respect to the effects of the 1999 DSM, we would have assumed that they used the post-ADR forecast. So rather than using the number that we had previously used, which was kind of in between those two numbers, for both of those periods, we used the pre-ADR number for 1999 and the post-ADR number for the year 2000. So that's the correction that's reflected on the two yellow pages.

187
The third table of the third group here is a single blue page, and that is a response to the information request from Board staff and this is simply a correction to a previous response that addresses the issue I just discussed with respect to the yellow pages.


188
The last piece of paper here, the white piece of paper, hopefully also makes this a little more clear. This is a response to an informal request that was made, as I understand it, by Union on Friday to lay out what was assumed to be the budgeted lost revenues in the forecast. And you can see, in this case, we've shown that in 1999 there were two different ones used; one for the actual 1999 numbers and the other for the effective 1999 and year 2000.

189
The year 2000 and 2001 numbers here are the same as the ones that Ms. Platis referred to on Friday.

190
MR. POCH: Just to be clear, for that top number, '99 test year, I take it you would have used 50 percent of that number in the scenario that Pollution Probe had us run?

191
MR. NEME: That's correct.

192
MR. POCH: And similarly in the footnote to your table where you offer that alternative approach?

193
MR. NEME: That's correct.

194
MR. MORAN: Mr. Chair, perhaps we should mark this an exhibit?

195
MR. JACKSON: Yes, I think so.

196
MR. MORAN: F.8.2, reply to information requests and updates to Mr. Neme's evidence, April 15th, 2002.

197
EXHIBIT NO. F.8.2: REPLY TO INFORMATION REQUESTS AND UPDATES TO MR. NEME'S EVIDENCE, APRIL 15, 2002

198
MR. POCH: Thank you.

199
MR. JACKSON: Yes, thank you.

200
MR. POCH: Now, Mr. Neme, there was, I think, some confusion on the record and perhaps you could just clear this up, as to whether or not the tables you've generated capture -- which tables you've generated capture the updates that Union filed in its yellow sheets that were the result of the discussions between -- the recent discussions between the company and GEC. Can you clarify that?

201

MR. NEME: Sure. All of the information that's provided here today includes the effects of the changes that were worked out for the resolution of the 20 of the 22 issues I had originally had in my original evidence that we had worked out with the company about a week ago.

202
MR. POCH: Okay. Thank you. Okay, let's turn to the -- briefly then to the LRAM methodology issue. Mr. Baker was just speaking to in part, I take it you did not, in fact, review that.

203
MR. NEME: That's correct.

204
MR. POCH: And you do not express any opinion today?

205
MR. NEME: I do not.

206
MR. POCH: With that, let's go to the timing issue. Mr. Baker has said that a six-month assumption for LRAM in the year of implementation is unfair to the company; do you agree with that?

207
MR. NEME: No, I do not. The company, following the corrections that resulted from the discussions that we have had with them, has estimated that there are about 31 million cubic metres of savings as a result of their 1999 DSM plan. It's important to note that those are annualized numbers. Some of those savings will result from measures that were installed in January of '99, some will result from measures that were installed in July of '99, some were results from efficiency measures installed in December of '99. An efficiency measure installed on February 1st will only generate 11 months in 1999, 11 months worth of savings, and therefore, 11 months worth of lost measures. An efficiency measure implemented on December 1st will only produce one month of savings and one month of lost revenues.

208
It is reasonable, in my view, absent better data, to assume that on average, the measures installed in 1999 will produce six months of savings in 1999 and, therefore six months of lost revenues. For the company to suggest that they should get 12 months of savings for 12 months of lost revenues, I should say, associated with all measures installed in 1999, or for that matter all measures installed in 2000, 2001 or any other subsequent year, would be unfair to the ratepayers because it's indisputable that the quantity of lost revenues resulting from 1999 DSM activity in calendar year 1999 is not equal to the margin times the total annualized savings for those times.

209
MR. POCH: Thank you. Now what about the company's rejoinder that if the Board accepts, that actual DSM impacts should be used in the way you've just outlined, that they should then award LRAM for six months of DSM that was installed in 1998?

210

MR. NEME: Well, leaving aside the fact that there was no LRAM in place for 1998, the company's argument ignores the fundamental purpose of the LRAM mechanism in the first place. LRAM -- as Mr. Baker eloquently articulated on Friday, the purpose of LRAM is to make the company indifferent as to the amount of energy savings generated by its DSM programs. The Board decision creating the LRAM account went into effect or came out on, as I understand it, on January 20th of 1999. Given that, there is no basis for suggesting that, and in fact it would have been impossible for the LRAM mechanism announced in January of 1999 to influence the company's DSM actions in 1998 or any other previous year.

211
MR. POCH: With that, let's turn to the other main issue covering your evidence which is the free-drivers issue, that is the high-efficiency furnaces information and the related Quantec study. Let me start by asking that in -- in re-examination, Mr. Penny asked his witness if Union would be inclined to spend money on education efforts if they thought it was having no impact on the market.

212
Are you suggesting that, in fact, in -- in advocating that the free drivers not be counted, are you suggesting that in fact he should not spend money on these efforts?

213
MR. NEME: No, I'm not. In fact, I'm on the record both in this proceeding and in others as saying that educational efforts can and should be important elements of DSM programs. However, it is very difficult to isolate and quantify the effects of those efforts alone. It's not impossible, but it's difficult. And in my view, the Quantec study upon which the company is relying for its estimate of the impacts of its educational efforts is insufficient as a basis for developing a precise number with that issue. And I can go into some detail if need be, but I'll just highlight what I think are two of the fundamental problems with it.

214
First, in the residential HVAC market, in my experience, decisions are often driven much more by the HVAC contractors than by consumers, in many cases, without the consumers even realizing it. Now why is that important? Because the Quantec study looked -- in fact it was a survey only of consumers. There was no attempt to talk to contractors and get their perspective on the relative effectiveness or impact of the educational efforts the company had undertaken.

215
Secondly, even with respect to discussion of -- with consumers, in my view, if you look at the questionnaire that's in the appendix of that study, there were four or five questions that were asked about consumer awareness of Union's educational efforts, and they're all leading questions. They specifically mention certain Union activities. In my mind, this was a design flaw. It's not necessarily a bad thing to ask those questions, but what they should have asked first is an open-ended question to consumers about whether there was any -- whether they had done any research, collected any information to help inform their decision, and make the consumer tell them yes, we used some Union information. If the consumer truly relied on that information they would respond affirmatively and you can go from there. But this study did not do that.

216
MR. POCH: Ms. Platis offered the explanation that the Quantec information was about 79 percent free-rider's rate and a 75 percent net-to-gross, this was the information that was redacted until the other day, was sensitive as it disclosed market penetration of high-efficiency furnaces in the Union territory. Can you comment on that concern about sensitivity?

217

MR. NEME: Sure. I guess I'm a little confused by this whole issue. To begin with, the information in question was information that was gathered with ratepayer dollars. This is also the kind of information that is routinely made public in other regulatory jurisdictions. In addition, GEC had signed a confidentiality agreement that should have removed any concern about this information getting out into the public. And I guess lastly, the thing that has me perhaps most perplexed is that the -- even if you accept the company's argument that information on market share of high-efficiency furnaces is sensitive and should be held close to the vest, the redacted information with respect to free riders and net-to-gross ratios is something that's very different. Free-rider rates are not the same thing as market share for high-efficiency equipment. And, in fact the Quantec study noted that the free-rider rate was 79 percent and the market share for high-efficiency equipment was 63-and-a-half percent. So if the concern was protecting against the discloser of market share information, not revealing the free-rider rate didn't advance that cause.

218
MR. POCH: Now, can you comment on how important the information that was redacted, the two items I've spoken to, how important is that information, that particular information?

219
MR. NEME: In my opinion, it's very important. As I indicated earlier, I don't think the Quantec constituted -- is sufficient basis for establishing an estimate of spillover or free drivers, if you will. But if you disagree with that perspective, it's important to be able to look at the whole Quantec study in its totality. And, Quantec essentially reported in its conclusions three numbers: They reported the free-rider rate of 79 percent; a spillover rate of 15 percent; and a net-to-gross ratio of 75 percent. The company selectively used only one of those three numbers, and in fact not the one that the Quantec folks actually recommended that they use. The Quantec study on -- I believe it's page 5-4 says, and I quote: "As both approaches yield nearly identical net-to-gross estimates of 75 percent, it is appropriate for Union to use this figure" -- and I personally emphasize the term, "this figure," -- "in future DS strategist cost-effectiveness calculations for the high-efficiency furnace replacement program." That is not the figure that the company used and that figure was also a -- one of the redacted figures from the original version of the report that we saw.

220
Now why is that important? It's important because even if you accept the Quantec study, the net-to-gross ratio that they are recommending is actually closer to the one that I'm recommending than to the one that the company has used. In assuming no free drivers and a 60 percent free-rider rate. I'm in essence recommending a 40 percent net-to-gross ratio. Quantec recommends a 75 percent net-to-gross ratio and the company, by my calculations for 1999 and 2000, is using, in essence, 123 percent net-to-gross ratio. So 75 is actually closer to the numbers that I had recommended than to the numbers the companies had recommended. And it's important for that information to have been on the table.

221
MR. POCH: At volume 7 of the transcript, paragraph 1058, in response to my queries and again in response to Mr. Penny at paragraph 1427, Ms. Platis suggested that the 79 percent rate is somehow out of date because it doesn't account for Union's previous influence in the market or at least it shouldn't be used for that reason. Can you comment on that?

222
MR. NEME: Sure. I'll say two things with respect to that: First, there's no evidence that's been presented to demonstrate that, in fact, Union has had those market transformation effects; but, second, and more importantly, even if they did, it's irrelevant with respect to lost revenues in 1999 or any subsequent year.

223

If at the beginning of 1999, if in January 1 of 1999, the free-rider rate was 79 percent and so for every 100 participants the company enrolled, only in the rebate portion of their program, only 21 of them would not have done it anyway, then in reality the lost revenues to the company are still associated only with those 21. The -- if the free-rider rate had been 60 percent in some previous time and had -- in say '95 or '96 and had grown say in 1998 up to 79 percent, that has no bearing on revenues lost in 1999 as a result of 1999 DSM activity. The suggestion that you would want to account for a lower free-rider rate is implicitly suggesting that you want to claim lost revenues for previous year's lost DSM activities.

224
MR. POCH: Thank you. Let's turn to this question of disclosure a little more generally. In your evidence you expressed concern that the audit has not been broad enough to catch problems that an evaluation study may have found, and indeed on Friday, the panel -- the Board inquired of me about the relationship between GEC's concerns over adequacy of disclosure and the audit process. Can you elaborate on that?

225
MR. NEME: Yes. First, as was discussed on Friday, the terms of reference for the 1999 audit did not permit the auditor to review, critique, suggest changes to savings assumptions. And in fact, interestingly, the 1999 auditor was Quantec, the same firm that had done the evaluation of spillover for the furnace program, and in their evaluation for the furnace program they had recommended a free-rider rate of 79 percent. The company had been using 60 percent and the -- when they did the audit of the company's evaluation report, they did not suggest making that change. Again, it was outside of their terms of reference. So that's one problem, is the terms of reference have not been adequate but even -- the company has suggested that that's going to change going forward, and we welcome that -- I welcome that -- but even with a broader set of terms of reference, there is still a problem.

226
These are somewhat complex issues at times. Auditors make mistakes. In fact, in the 1999 SSM claim that Enbridge put on the table, most of the reduction in the SSM claim that came out of the consultative process resulted not from the auditors's corrections to savings assumptions the company had developed, but to issues, critiques, that GEC and others had put on the table. So it's important for the -- to have more than one set of eyes looking at these things, and I would also note that we could also use the example of this proceeding. The company has made corrections to savings-related assumptions for a number of measures, all of which were issues or measures whose assumptions I had questioned in my original filing. And in being able to talk those through with the company, to review some of the evidence supporting them, we have reached what I think is a reasonable resolution to those that resulted in $1.9 million, by the company's estimate, in the LRAM claim.

227
So again, I think there is -- these are complex issues and there is significant value in having more than one set of eyes reviewing the evidence on the table.

228
MR. POCH: Okay. At paragraph 1272 of the transcript from Friday, there is a discussion of the audit, the RFP for the audit having been vetted by the consultative. First of all, can you confirm you were working with GEC at that time and can you give us some information about your understanding of what has occurred.

229

MR. NEME: Yes, I've been working with the GEC since '93 or '94 and have been involved in all of the DSM proceedings for both of the gas companies since then. And my understanding is that, with respect to the consultative process and the terms of reference for the audit, is that GEC had, on numerous occasions, recommended changes to the terms of reference and that the company had chosen not to adopt those recommended changes. So I just want to make it clear that GEC did not bless the terms of reference as they had gone out in those cases.

230
MR. POCH: Now in -- Ms. Platis in discussing this on Friday, and the reference in the transcript is paragraphs 1037 and 1038, suggested that the audit was not supposed to go back and look at these assumptions, and her words are: "More recently, we have agreed to use the best available information to clear the LRAM account." Can you talk about the -- tell us about the timing of that agreement to use best information relative to the audits.

231
MR. NEME: The agreement to use best available information was first struck in the negotiation of the ADR in August of '98 on -- and then supported by the Board in its order in January of '99. So that's -- that requirement has been on the table for quite some time.

232
MR. POCH: And I take it on its face that would have pre-dated the audits of the '99 and the 2000 results?

233
MR. NEME: It would have had to, yes.

234
MR. POCH: All right. Now Union has now agreed to an evaluation committee as part of this discussion in settlement from the GEC in the last week. Will that help this problem?

235
MR. NEME: I am optimistic that it will help. In the past, Union has ignored some of the feedback we have provided but they've made a commitment, a renewed commitment, to have a more interactive and consultative process going forward with respect to evaluation issues. We welcome that and we'll work with them in good faith to make that as an effective process as possible.

236
MR. POCH: Thank you, Mr. Chairman. That's the examination-in-chief.

237
MR. JACKSON: Good. Thank you, Mr. Poch. I think this would be an appropriate time to take a morning break so we will -- sorry, Mr. Penny -- we will return then, by me, at about ten after 11:00. Thank you.

238
--- Recess taken at 10:50 a.m.
239
--- On resuming at 11:20 a.m.
240
MR. JACKSON: Please be seated.

241

Now who is going to question this witness first?

242
MR. PENNY: Well, there's only two of us left and Mr. Klippenstein has just indicated that he has no questions for Mr. Neme so I think that probably means that it's over to me.

243
MR. JACKSON: Yes, I think it does, Mr. Penny. Thank you.

244
CROSS-EXAMINATION BY MR. PENNY:

245
MR. PENNY: Mr. Neme, I'm probably going to be just referring to your report and any updates that you filed so if you will just have those handy I think we'll have everything we need. If not, we'll just pause and we'll try to find it somewhere else.

246
Can you agree with me that the purpose of an LRAM is to make the utility indifferent to variances in gas through-puts which are the result of demand-side management activities?

247
MR. NEME: Yes.

248
MR. PENNY: And it is supposed to be a revenue-neutral mechanism to track distribution margin impacts attributable to DSM activities as compared to forecast levels reflected in the utilities rates?

249
MR. NEME: Yes.

250
MR. PENNY: Indeed, I think your report says that Union Gas is entitled under the lost revenue adjustment mechanism to compensation for lost revenues if its DSM programs generated more savings than were incorporated into the sales forecast upon which its rates were based.

251
MR. NEME: That's correct.

252
MR. PENNY: And similarly, UNION would be obliged, I take it, to reimburse customers if its DSM savings were less than the volumes that were incorporated into the sales forecast upon which Union's rates were based.

253
MR. NEME: Yes.

254
MR. PENNY: Now your report raises two basic issues, and the first is whether projections of the savings Union would realize under its DSM plan from 1999 to 2001 were incorporated into the sales forecast upon which rates were based.

255
MR. NEME: Correct. I did not address that issue.

256
MR. PENNY: Yes. And if -- I'm just asking you about the principal, though, if the DSM targets were not reflected in 1999, 2000, or 2001 rates, I take it that Union would be entitled to recovery of all of its lost revenue for the period.

257
MR. NEME: Yes, the general principle that I've laid out is that the purpose, as you stated earlier, of LRAM is to make the company indifferent between -- or with respect to the amount of savings that its DSM programs in a particular year are generating. And to the extent that they have underperformed relative to what was is in the forecast that was incorporated into rates, they owe the ratepayers money; to the extent that they overperformed, the ratepayers owe them money.

258
MR. PENNY: To the extent they overperformed relative to what is embedded in the rates, they are entitled to reimbursement.

259
MR. NEME: That's the general principle of LRAM.

260
MR. PENNY: Thank you. And, as you pointed out, you do not deal with this issue and you express no opinion on it.

261
MR. NEME: That's correct.

262
MR. PENNY: And you agree that the question of whether DSM savings were embedded in 1999, 2000 and 2001 is a question of fact for the Board to decide.

263
MR. NEME: That's correct.

264
MR. PENNY: Now there are a number of tables in your report and I want to ask you, I'm going to focus on tables 3 and 4.

265
MR. NEME: The original versions or the updated versions?

266
MR. PENNY: Well, just in general terms, first of all, before we get to the specifics, who prepared these tables?

267
MR. NEME: They were prepared under my direction by Mr. Millyard.

268

MR. PENNY: And is there a model are or a program underpinning these programs?

269
MR. NEME: They were the output of a spreadsheet analysis.

270
MR. PENNY: And whose spreadsheet analysis is that?

271
MR. NEME: Again, it was a spreadsheet file that was developed by Mr. Millyard.

272
MR. PENNY: Now your original evidence, just looking at the -- at table 4 on page 8 of your report that sets out a scenario in which there is, as I understand it, no recovery for anything under the furnace information program, that the Board accepts your approach to the 50 percent in the first year and it also -- I'm going to come back to what is embedded in rates in a moment, but in terms of the principle, it assumes that forecast DSM savings for 1999, 2000 and 2001 are all embedded in rates; is that right?

273
MR. NEME: Yes, there are a number of things embedded in this table. Our approach on the timing issue is embedded in this table as you indicated, our approach with respect to exclusion of information, quote unquote, information participants from the furnace program is in this table, and this program also assumes that 100 percent of the savings that resulted from the company's DSM efforts in a given test year are incorporated into the budget and rates for that test year. There is a footnote below it which explains that and which describes how the numbers would be different if only 50 percent of the savings projected for a particular test year were incorporated into rates.

274
MR. PENNY: And then if we looked at your yellow page update of table 4, page 3 of 4, April 15, 2002, the comparable number is now -- page 8 of your original report is saying that on that scenario, that we're going to claw-back $9.6 million from the utility; right?

275
MR. NEME: Yes.

276
MR. PENNY: And your updated April 15, 2002 is now down to saying that you're only going to -- under that scenario you'd only be clawing-back 3.8 million.

277
MR. NEME: Yes. And there --

278
MR. PENNY: And I know there may well be a number of factors, but one of them is that the new number reflects the adjustments that were made that you agreed to with Union.

279
MR. NEME: That's one of several factors that would explain the difference between these two tables.

280

MR. PENNY: Well, let me just cut to the chase, Mr. Neme. I just want to ask you, was there an error made in the calculation in -- that's shown on page 8 of 9 that was corrected and shows up and is reflected in the number that's at the April 15, 2002 update?

281
MR. NEME: Most of the differences between the original table 4 and page 8 of my original evidence and with what you were seeing in the updated evidence, most of the difference is attributable to either changes in savings assumptions that were developed as a result of conversations with the company or updated evidence provided by the company with respect to such things as actual DSM volumes realized in fiscal year 2001 and the margins as well.

282
The only other factor that's different is the one I described earlier this morning which was, rather than using for fiscal year 1999 an almost blended, if you will, savings assumption between the pre-ADR and post-ADR savings estimates the company had produced, we became more precise and used the exact pre-ADR numbers for fiscal year 1999 and exact post-ADR numbers for fiscal year 2000's effects of the '99 DSM programs. One of the those changes works to the company's benefit, the other change works to the company's detriment. The net change as a result of those two things is fairly small.

283
MR. PENNY: All right. Well, let's just focus on what you assumed would be embedded in rates for the purposes of table 4 on page 3 of 4 in the yellow page update. Do I understand it that you -- on Exhibit F.8.2 first of all, --

284
MR. NEME: I'm sorry?

285
MR. PENNY: That was the single page that was in response to an information request from Union Gas.

286
MR. NEME: Yes.

287
MR. PENNY: You say at the beginning, Union asked for the budgeted lost revenue amounts; by that you mean the amounts that you assumed to be embedded in rates to reflect the forecast savings for '99, 2000 and 2001?

288
MR. NEME: Correct.

289
MR. PENNY: And, just so I'm clear, you're saying that the -- that those tables assume that Union was already recovering in respect of lost margin from DSM related savings for '99 in rates, $1.6 million in '99?

290

MR. NEME: No. What it says is that -- let me take a step back to put this in context. The 1999 DSM programs with respect to this proceeding are generating savings in lost revenues in 1999, 2000, and 2001. So there's three years of effects of the 1999 DSM programs. The first year of those effects, 1999, we used the pre-ADR savings projections that the company had filed and that was equivalent to the $1.34 million in budgeted lost revenues. The -- for the year 2000 and 2001, when the more recently-developed, post-ADR savings projections the company had put on the table were available, we used those volumes to generate the budget assumptions of -- with respect to lost revenues for the 1999 DSM programs, and that's the $1.647 million.

291
MR. PENNY: All right. I think I understand what you're saying. So for 1999 you assumed that there was already recovery of 1.341 million in rates?

292
MR. NEME: Yes.

293
MR. PENNY: For years 2000 and 2001 you assumed that there was rate recovery of 1.4 million in respect of 1999.

294
MR. NEME: That's correct.

295
MR. PENNY: And then for 2000 you assumed that there was already embedded in rates, rate recovery for 1.694 million.

296
MR. NEME: That's right.

297
MR. PENNY: And for 2001 you assumed that there was already embedded in Union's rates, in respect of DSM plans, $1.728 million.

298
MR. NEME: Yes, that's correct.

299
MR. PENNY: Thank you. And you have personally no idea whether those amounts were or were not embedded in Union's rates.

300
MR. NEME: I have not addressed that issue.

301
MR. PENNY: Now, Mr. Neme, you alluded to this a little bit, you -- in your examination-in-chief. You strongly support the notion that DSM programs, and particularly those designed to transform markets, should aim to generate spillover or free drivers.

302
MR. NEME: The -- yes. The aim of any DSM program, particularly a market transformation program, should be to maximize the amount of cost-effective savings that are available, and to the extent that you can maximize those benefits by generating spillover, that's great. Whatever is the -- whatever is the most effective way at maximizing cost-effective savings is, in my view, the way the program ought to go designed.


303
MR. PENNY: So information programs can result in market transformation?

304
MR. NEME: No. "Information programs" implies that there is a program whose sole function is to provide information, and in my experience I have never seen a program whose sole focus is information generate substantial energy savings. If you meant to say that having an information component to a program that has other facets to it that are designed to address simultaneously all the barriers in the market to implementing efficiency, then yes, I do believe that can and should be an important element of program design.

305
MR. PENNY: Well, information programs, you'll agree, I think -- I think you just said contribute to market transformation, in conjunction with other programs.

306
MR. NEME: We may be having an issue of semantics here. I guess I'm struggling with the word "programs." Information elements to a program that have other features can contribute to transforming the market.

307
MR. PENNY: All right. So information elements to programs with other features can contribute to market transformation.

308
MR. NEME: That's correct.

309
MR. PENNY: And market transformation generates spillover effects or generates free drivers.

310
MR. NEME: It can. It doesn't necessarily, but it can.

311
MR. PENNY: Yes. And -- now, just transforming markets, does that mean that you're trying to get to the stage where you are -- you no longer need to pay incentives to get people to engage in the desired activity?

312
MR. NEME: It's much more than that.

313
MR. PENNY: That would be an element of it.

314
MR. NEME: The general definition of market transformation, if I can summarize it, would be to fundamentally change the way the market works, so that if the DSM effort were to be terminated, a certain amount of the change that the program caused to happen would continue even in the absence of the program.

315

MR. PENNY: All right. Well, if you are successful in market transformation, are you going to expect free-rider rates to go up?

316
MR. NEME: Not necessarily.

317
MR. PENNY: Well, let me put it -- let me put it a different way, I'll come at it a different way. If you are successful in market transformation efforts, would you likely see free-driver rates going up -- sorry, yes, free-rider. Why do you say not necessarily?

318
MR. NEME: There are a variety of different approaches one can take to -- from a DSM program design perspective to transform a market. In some cases those efforts could lead to increasing free ridership over time, which is what you asked me about, in other cases, they need not necessarily lead to increased free ridership. It really depends on the structure of the program and the market that it's addressing and the market barriers inherent in that market.

319
MR. PENNY: All right. But I think you're agreeing with me that successful market transformation certainly could result in free-rider rates going up.

320
MR. NEME: Successful market transformation could result in free rider rates going up. Unsuccessful market transformation could result in free-rider rates going up. Non-market transformation programs could result in free rider rates going up if they are successful. Unsuccessful market transformation programs could also result in free-rider rates going up, and programs that don't have a market transformation focus could also see increasing free-rider rates. It really depends on the program design, the market that's being addressed and other changes in the market which are out of the control of the program.

321
MR. PENNY: Okay. So it depends.

322
MR. NEME: It depends.

323
MR. PENNY: Now you know that Union sends out bill inserts on all high-efficiency furnaces to its customers.

324
MR. NEME: Yes.

325
MR. PENNY: And it sends out cost comparison sheets to its customers.

326
MR. NEME: That's my understanding.


327
MR. PENNY: And it sends out wise energy use guides that contain information on the benefits of high-efficiency furnaces.

328
MR. NEME: Yes.

329
MR. PENNY: And we've heard that Union, with the endorsement and indeed at the urging of the DSM consultative, spends about a half million a year on information programs to promote high-efficiency home equipment.

330
MR. NEME: I'll take your word for it on the dollar amount, but my understanding is that information on efficiency is something that is supported by the consultative.

331
MR. PENNY: And will you agree with me that a utility would be spending that money in -- with some expectation that it will influence customer choices and result in more higher-efficiency furnaces being purchased than would otherwise be the case?

332
MR. NEME: If the company was spending money without any expectation that it would have some effect, they would -- I would criticize them for doing so. The real question here is whether the spending on that information or that education effort is having any effect in the market that's not already being captured by the participant counts that are associated with the other elements of the company's program.

333
MR. PENNY: Well, with respect, Mr. Neme, you're answering the inference rather than the question. My question is simply, is that -- is it reasonable for a utility spending that kind of money on an information program to expect that it will influence consumer choices and result in higher-efficiency -- more higher-efficiency furnaces been purchased than would otherwise be the case?

334
MR. NEME: It is reasonable to expect them to spend money in the expectation that it will make their programs more effective, yes.

335
MR. PENNY: And are you saying, in relation to this particular information furnace program, that none of Union's 23,000 customers who replace their furnaces each year with high-efficiency models and who are not otherwise participating in an incentive program, that none of them were influenced to do so by information provided to them by Union Gas?

336
MR. NEME: No, I'm not saying that.

337
MR. PENNY: And you'll agree with me that it is reasonable and indeed likely that customers were influenced to purchase high-efficiency furnaces as a result of Union's information program.

338

MR. NEME: I would hope that Union's efforts to educate consumers has led and will continue to lead more customers to invest in high-efficiency equipment.

339
MR. PENNY: Now can you agree with me that you want program evaluation costs to remain a reasonably small percentage of a total DSM planned budget?

340
MR. NEME: That question is difficult to answer in the abstract. I think it really depends on what issues are at stake. In general, the rule of thumb that I've used in -- in a variety of jurisdictions is that you should expect to spend something in the order of three to five percent of your DSM funds on evaluation activities, but if there are certain regulatory or other circumstances that require spending more or spending more in one year and less in future years, then that ought to be taken into consideration.

341
MR. PENNY: All right. But fair -- rule of thumb, you would be concerned if you were spending more than three to five percent on program evaluation, absent unique circumstances?

342
MR. NEME: If it was more than five percent, I would want to understand why.

343
MR. PENNY: Now can you confirm that this is the information-based program that Union is offering with respect to which Union is seeking recovery of DSM-related savings?

344
MR. NEME: That is my understanding.

345
MR. PENNY: And the total information program savings represent only about six percent of the total savings in issue here.

346
MR. NEME: I have done -- not done that calculation.

347
MR. PENNY: Does that sound directionally right?

348
MR. NEME: I'm not sure exactly with respect to the percent of savings. I know that in dollar terms it represents about $200,000, if my memory serves me right, per year of lost revenues. So we've got three years of 1999 effects, two years of 2000 effects, and one year of 2001 effects. So that's six program years, if you will; it would be about $1.2 million worth.

349
MR. PENNY: All right. Now, just on the timing issue, Mr. Neme, can I ask you, in an ideal world where, say evaluation and monitoring had little or no cost, you would want to track each and every program from its actual start date and then tally up the totals based on the actual length of time that the program had operated during the year that you're looking at.


350
MR. NEME: Are you referring to the program or to the individual efficiency measures?

351
MR. PENNY: I'm referring to the individual efficiency measures.

352
MR. NEME: In an ideal world, for LRAM purposes, you would want to be able to calculate the exact number of days in any given year that the efficiency measures that were installed during that year were generating savings.

353
MR. PENNY: And you don't recommend that in your report?

354
MR. NEME: No, I do not.

355
MR. PENNY: And that's because the cost of recovery and tracking that kind of data would be excessive, I take it.

356
MR. NEME: At that level of detail, I believe it would be excessive, yes.

357
MR. PENNY: So your 50 percent approach is a simplifying assumption?

358
MR. NEME: My 50 percent approach is a simplifying assumption. I think there are answers in between in terms of what may be ideal, but absent better information, the 50 percent approach I have used, I believe, is the best one.

359
MR. PENNY: But to simplify the exercise?

360
MR. NEME: Sure.

361
MR. PENNY: And, if the commencement date of DSM programs for a given year were more weighted to the beginning of the year, say, the 50 percent would reflect too small an amount of savings.

362
MR. NEME: Yes, and the converse is also true.

363
MR. PENNY: And the converse, of course, is also true; is that fair?

364
MR. NEME: That's correct.

365

MR. PENNY: Thank you, Mr. Chairman. Those are all my questions.

366
Thank you, Mr. Neme.

367
MR. JACKSON: Thank you, Mr. Penny.

368
Mr. Dominy, do you have any questions?

369
MR. MORAN: I don't have any questions.

370
MR. JACKSON: And Mr. Moran does not either. Mr. Sommerville?

371
MR. SOMMERVILLE: No, thank you.

372
QUESTIONS FROM THE BOARD:

373
MR. DOMINY: I have a very simple question. I should have asked it when questions were being asked by Mr. Penny but I was trying to track the numbers. We started going through series of different numbers, 1.341, 1.694 and 1.728, affecting the 1999, 2000 and 2001 savings, I believe. I wonder if you could point to me in your evidence where those numbers occurred. Mr. Penny, it was your very early questions.

374
MR. PENNY: Sorry, Mr. Chairman. I was jumping around a bit. I started referring everyone to the report and then flipped to F.8.2. And I think the numbers I was referring to were in F.8.2, which was a single white page that is headed "Response to information request from Union Gas to Mr. Neme," that was introduced this morning.

375
MR. DOMINY: Because I had marked, and probably inappropriately, all that package as F.8.2.

376
MR. NEME: It's the very last page.

377
MR. PENNY: I had understood that the updates would just be part of the evidence already filed and that we were marking that page separately. I apologize if I have confused anyone.

378
MR. DOMINY: Fair enough, I see them.

379

Mr. Neme, you've obviously had a great deal of experience in analyzing these programs and I'm taking advantage of your presence here to ask you. LRAMs, are there other jurisdictions that operate LRAMs and are they of a similar design that you're aware of?

380
MR. NEME: There are other jurisdictions which use LRAM. California, for example, has used LRAM for a long time. With respect to the precise nature of the designs, I'm not sure that I'm qualified enough to be able to answer that question.

381
MR. DOMINY: Well, let's change the question slightly. Your analysis of these programs -- what other jurisdictions have you analyzed similar programs, not necessarily specifically LRAM, but conservation or DSM programs or a regulated utility?

382
MR. NEME: In context in which there was -- in context in which there was an LRAM, you are asking specifically?

383
MR. DOMINY: Yes.

384
MR. NEME: I have been involved in analyzing efficiency savings in New Jersey, New York, -- I'm sorry, New Jersey, Massachusetts. In both states their utilities are making claims for lost revenue as a result of their programs. Those are the two most prominent examples, I guess.

385
MR. DOMINY: And in those states there is embedded in the revenue forecast an estimate of what they plan to try and achieve and then the LRAM is sort of a variance account against that plan.

386
MR. NEME: That's my understanding. Again, I -- my role in those jurisdictions has not been to go through the exercise of actually calculating what lost revenues the companies have been eligible for, but rather to review and critique the savings assumptions that have gone into those calculations.

387
MR. DOMINY: And in the context of a savings assumption, and I just want to clarify my understanding, it is essentially an estimate of what the savings a person or a company would achieve. For instance, say a high-efficiency furnace, it would be an estimate of the typical home if it introduced a high-efficiency furnace as opposed to a medium-efficiency furnace, how much gas savings it would achieve over an average heating season.

388
MR. NEME: Yes. It depends a little bit on the efficiency measure that you're talking about. With respect to things like high-efficiency furnaces where there are mass markets, there are thousands, tens of thousands of them potentially affected through the operation of the program, it doesn't make sense to -- the cost involved in trying to precisely estimate how much is being saved in each one of those 10,000 or 20,000 applications is just not worth it. And so what we do instead is develop an estimate of the average savings that could be expected from those measures across the entire population that ends up using them and that the savings estimates that we usually develop are the savings that you would expect from that efficiency measure relative to the base line mid-efficiency furnace over a 12-month period, irrespective of which month you are starting from.

389
For other efficiency projects, for example in large commercial and industrial applications where some of the circumstances related to the efficiency measure are maybe somewhat unique and where there is a large enough volume of savings to warrant the cost of more detailed analysis rather than developing a generic assumption, we often use a more precise site-specific estimate of what the savings are.

390
MR. DOMINY: So when you look at the savings that are estimates that are used within, say Union's area, you have a reference -- obviously they won't be the same because of geography and weather, but you have an indication of what a reasonable number might be by looking at them across other jurisdictions when you do the same exercise.

391
MR. NEME: Yes, or ideally, actually, not even so much referring to what was estimated in other jurisdictions, but I think this is one of the places, especially for measures that are major components of a utilities' DSM portfolio to invest in some evaluation activity in its own service territory to estimate what the savings would be. And then you could use that estimate for several years until you have reason to believe that it ought to change.

392
MR. DOMINY: And then, obviously, the key thing is the level of participation and then the free riders and the free drivers.

393
MR. NEME: Yes. Those are all critically important factors and also, again, factors that can be addressed through evaluation activity.

394
MR. DOMINY: Now this is a hypothetical question, but supposing you went on for 10 years, and I know that we've got an accumulating amount and Union's proposal to try and clear it rather than accumulate a large amount that has to be collected or paid back at the end of a 10-year period, but I'm assuming that as you go forward there are lifespans for the different initiatives; for instance, a furnace doesn't last forever.

395
MR. NEME: Sure. There are assumptions that we have used, the company has used, for each one of the different unique types of efficiency measures that it promotes through its various programs. In the case of furnaces it may be something like 20 years, for a low-flow showerhead it might be something less than half of that, I don't recall the exact number, and for some other applications it may be different. But, yes, we do need to have assumptions about the life of those measures because it does effect the stream of efficiency savings that you think that those measures are going to provide you over time.

396
MR. DOMINY: And then -- just to close this off. A bit of education, I apologize -- but the other side of it is that in the context then, I know you've had some disagreements with Union in terms of specific measures, but in terms of methodology and the process they are following you are generally in agreement with the way they do it, or do you dispute some of the numbers they use; is that correct?

397

MR. NEME: We -- I disputed a number of -- in my original evidence, I raise concern about a fairly large number of assumptions that they were using. Subsequent to that, they provided some additional documentation for us to review that they hadn't previously made available and we were able, over the phone, using that information and the information that we were able to bring to the table that perhaps hadn't been addressed in the past in the company's estimates of savings, in resolving all but two issues and all but one assumption related to the specific savings of one or more classes of efficiency measures. And that -- the one that we were not able to resolve is the issue of the spillover rate with respect to high-efficiency furnaces. But on all the others we are now in agreement with the assumptions being used by the company with respect to its calculation and our calculations of lost revenues.

398
And what really needs to be addressed, aside from this one issue with respect to spillover, are a couple of other policy questions that are in your hands.

399
MR. DOMINY: Thank you, Mr. Neme, that is helpful to me. Thank you.

400
MR. JACKSON: Thank you, Mr. Dominy.

401
Yes, any re-direct from you, Mr. Poch?

402
MR. POCH: Just one yes, Mr. Chairman.

403
RE-EXAMINATION BY MR. POCH:

404
MR. POCH: Mr. Neme, Mr. Penny asked you about the spreadsheet model and I note at page 8 of your evidence, D.18, you say: "The detailed LRAM adjustments and calculations from each year are shown in appendix B. All of appendix A, appendix B and tables 3 and 4 are on one Excel spreadsheet and are available electronically to any party on request." Did you receive any requests for that from the company?

405
MR. NEME: No, we did not.

406
MR. JACKSON: Thank you, Mr. Poch. And thank you Mr. Neme for coming.

407
MR. NEME: Thank you for having me.

408
MR. JACKSON: Now, it's -- I can't read that clock on the wall, so it's --

409
MR. PENNY: Two minutes to twelve, Mr. Chairman.

410

MR. JACKSON: Thank you. Well, I'm certainly slower than that this morning. So going by that clock, it would seem appropriate to break for lunch, but could we just take a little bit of a poll and find out what we have to do, what we have remaining to do today.

411
Mr. Klippenstein.

412
MR. KLIPPENSTEIN: Yes, Mr. Chairman. As I understand, Pollution Probe's evidence would be next, which would be Mr. Gibbons and the chief examination would be 15 minutes, give or take a bit. And, I think Mr. Penny has cross-examination and that may be it.

413
MR. PENNY: I do, Mr. Chairman but it is extremely brief.

414
MR. JACKSON: Thank you. And then Mr. Penny -- Mr. Moran, have you any questions for Mr. Gibbons at this point?

415
MR. MORAN: I will be very brief as well.

416
MR. JACKSON: Very brief, good. And then, Mr. Penny, I think that you said that you would have some additional material. Would you have any witnesses speaking to that material?

417
MR. PENNY: I think at this stage it's not our intention to have any further witnesses speaking to it. It's just a question of getting the specific pages, as we've typically done, finalized and delivered to you. So I think if that's the only outstanding issue it wouldn't be necessary, I don't think, to come back to open hearing we'll just deliver to them to your offices and send them out electronically or by fax to the various intervenors. But I expect that everything that's outstanding will be dealt with this afternoon.

418
MR. JACKSON: Okay. That's good. So if we had any questions about that material, we could deal with it briefly on Wednesday morning then are you thinking?

419
MR. PENNY: I hadn't actually turned my mind to that issue, but if you did have questions --

420
MR. JACKSON: I imagine they would be mainly of a clarifying nature, but if there were any outstanding questions perhaps we could address those to you Wednesday morning.

421
MR. PENNY: That might be the time to do it since we're scheduled to get back together Wednesday morning anyway.

422
MR. JACKSON: Good. Okay, let's resume at 1:30 then. Thank you very much.

423
--- Luncheon recess taken at 12:00 p.m.

424
--- On resuming at 1:43 p.m.
425
MR. JACKSON: Please be seated.

426
Mr. Klippenstein.

427
MR. KLIPPENSTEIN: Thank you, Mr. Chairman, --

428
MR. JACKSON: My apologies, I didn't have the sound system on but there you go. So Mr. Klippenstein.

429
MR. KLIPPENSTEIN: I'd like to ask if Mr. Gibbons could present his evidence on behalf of Pollution Probe and if he could be sworn.

430
POLLUTION PROBE - PANEL 1

431
J.GIBBONS; Sworn.

432
EXAMINATION BY MR. KLIPPENSTEIN:

433
MR. KLIPPENSTEIN: Just in preparation for that, Mr. Chairman and Board members, it might be convenient for you to retrieve the written evidence-in-chief pre-filed of Mr. Gibbons which is Exhibit D.34. That's Exhibit D.34 and --

434
MR. JACKSON: I think we have that, thank you.

435
MR. KLIPPENSTEIN: And two or three other documents, Exhibit F.8.2, filed this morning is some calculations, that's Exhibit F.8.2, which is entitled: Reply to information requests from Pollution Probe by Mr. Neme. It's a stapled package of white, yellow and blue paper.

436
MR. JACKSON: Yes, thank you.

437
MR. KLIPPENSTEIN: And then in addition, you may have before you, which is not yet an exhibit, a one-page curriculum vitae of Mr. Gibbons and it may also be useful to have. I believe it was placed before you and is not yet marked, an excerpt from EBO 169-3 from July of 1993.

438
MR. JACKSON: Thank you. The curriculum vitae is which exhibit number? What should we do with that.

439
MR. MORAN: F.8.3.

440
EXHIBIT NO. F.8.3: CURRICULUM VITAE OF JACK GIBBONS

441
MR. KLIPPENSTEIN: Perhaps I could ask that the excerpt from EBO 169 also be identified at this time.

442
MR. MORAN: And F.8.4 would be an excerpt from EBO 169-3, July 1993.

443
EXHIBIT NO. F.8.4: EXCERPT FROM EBO 169-3, JULY 1993

444
MR. KLIPPENSTEIN: So with that, perhaps I can proceed with Mr. Gibbons.

445
Mr. Gibbons, I understand that you are the principal of Public Interest Economics and the director of Pollution Probe's energy program and the chair of the Ontario Clean Air Coalition. Is that correct?

446
MR. GIBBONS: Clean Air Alliance, yes.

447
MR. KLIPPENSTEIN: And you are also a former Toronto Hydro commissioner and a former member of the Ontario Energy Board staff.

448
MR. GIBBONS: Yes.

449
MR. KLIPPENSTEIN: You've testified, I understand it, before the Ontario Energy Board on approximately 10 occasions.

450
MR. GIBBONS: I've produced written testimony and/or testified on approximately 10 occasions.

451
MR. KLIPPENSTEIN: And the curriculum vitae just identified as Exhibit F.8.3 is your CV?

452
MR. GIBBONS: Yes.

453
MR. KLIPPENSTEIN: And your testimony, in pre-filed form, is Exhibit D.34.

454
MR. GIBBONS: Yes.


455
MR. KLIPPENSTEIN: And that testimony was prepared by yourself or under your supervision, I take it?

456
MR. GIBBONS: Yes.

457
MR. KLIPPENSTEIN: And is that testimony correct to the best of your knowledge and belief?

458
MR. GIBBONS: Yes.

459
MR. KLIPPENSTEIN: Thank you. Could you please, briefly, proceed then to summarize your evidence for the Board?

460
MR. GIBBONS: Yes. It's my evidence that in EBRO 499, the Board approved a symmetric LRAM for Union Gas, and if you turn to Exhibit B of my testimony --

461
MR. KLIPPENSTEIN: Exhibit B or appendix B?

462
MR. GIBBONS: Sorry, appendix B, and then if you turn to page E-4 where there's the table E-1, and this is the excerpt from Union Gas's EBRO 499 pre-filed evidence which illustrates the symmetric LRAM where in the year of fiscal 1999, if they exceed their DSM target, then they are able to collect money from ratepayers, and if they fall short of their DSM target they are required to return money to ratepayers. So basically it's an LRAM that captures areas around the DSM target that was approved by the Board.

463
It's also my testimony that in the RP-1999-0017 case the Board, on Union's recommendation, reapproved a symmetric LRAM.

464
Now, it appears to me it is now the case that Union is asking the Board to retroactively approve an asymmetric LRAM methodology for calculating their EBRO 499 and RP-1999-0017 LRAM balances. And as I read Union's evidence or hear their oral testimony, it appears to me that Union's rationale for this retroactive proposal is that they have forgotten -- they forgot to include their DSM savings target in their load forecast. Now, I believe that this rationale for retroactively changing the LRAM methodology is problematic for a number of reasons.

465
First, as we've heard many times on Friday, in the EBRO 499 evidence Union stated that the DSM forecast was included in the load forecast. It was subtracted out from the load forecast in EBRO 499. That's the first reason why I think their request is problematic.

466

Secondly, it's not a generally accepted regulatory principal that variance account methodology should be retroactively changed to insulate the shareholder from management decisions, including errors. And I would suggest, in this case, such a retroactive adjustment would be especially inappropriate for a number of reasons.

467
First of all, I'd like to turn to the Exhibit F.8.4, which is an excerpt from the EBO 169-3 report. This was a report that came out in 1993 and established the ground rules for gas DSM. If you look on page 13 of this report of the Board, one of the questions that people have asked was how should utilities adjust their load forecasts to reflect DSM. And it was a consensus statement that you see on page 15, the bottom of page 15 and the top of page 16, that the expected impacts of DSM should be subtracted out from a gas utilities load forecast and that was approved in 169-3. And again, if you go back to page 13, you see the parties to that proceeding who agreed to that consensus statement, and both Centra and Union as well as Consumers Gas agreed to that statement which was approved by the Board.

468
MR. KLIPPENSTEIN: Mr. Gibbons, I wonder if you could identify again the exact statement that you're referring to on page 15 and 16?

469
MR. GIBBONS: Sure. The quote from page 15 and 16 is: "The expected volumetric effects of all adopted DSM programs, including test-marketed programs, should be included in the utility's demand forecast."

470
MR. KLIPPENSTEIN: Could you just mention what that means for this case?

471
MR. GIBBONS: Well, it means for this case, for EBRO 499 and for RP-1999-0017, Union should have taken their proposed DSM forecast, their DSM volume targets and subtract them from their load forecast that they used to come forward with their -- for their rates for OEB approval.

472
The second reason why I think it would be inappropriate to make a retroactive adjustment in the LRAM in this case, to deal with that question, I ask you to turn to appendix D of my testimony and go to the second page of appendix D which shows you the EBRO 499 rate order.

473
If you look at this rate order for the LRAM account from EBRO 499, the rate order provides for both debits and credits. That clearly means that the Board believed that it was going to be a symmetric LRAM, that the load forecast, the DSM load forecast, was being built into rates, and that clearly indicates a symmetric LRAM. If the Board believed that rates hadn't been included in the load forecast as Union believes, then this LRAM would just have credits. It would only have credits for the utility and it couldn't possibly have debits where the utility would give money back to the customers. So again, this rate order came out in EBRO 499, it was clear to Union Gas that the Board had approved a symmetric LRAM. And if Union was under the impression that it was an asymmetric LRAM, they should have notified the Board of that fact when this rate order came out, but to the best of my knowledge, they did not.

474

Finally on this issue, if you could turn to the RP-1999-0017 decision, page 165. Now on page 165, paragraph 2.617, and I believe this is the paragraph that the Board's counsel took us to on Friday, if I can just quote from there, this is the Board's decision: "The targets for reduced consumption have been reflected in volume forecasts for rate making in past cases. The Board approved a lost revenue adjustment mechanism, LRAM, to adjust for margins the company loses if its DSM programs are more successful during the period after rates are set than was planned in setting the rates."

475
Again, the Board's saying that we believe that the DSM load forecast has been subtracted from the overall company load forecast and again, that was clear notice from the utility of the Board's belief, and again, I believe that the utility did not come back to the Board as soon as that decision was issued and say, you've made a mistake, you misunderstood our evidence.

476
Finally, I would want to note that in the RP-1999-0017 decision which established the PBR framework for three years, there was only one off-ramp created, and that was that if the utility's rate of return on equity was either too high or too low, that would be an off-ramp, and that's the only off-ramp. And so I don't think it's appropriate to come before the Board and ask for a change in part of the decision because of -- for this LRAM issue, unless it's the utility's position that if the Board sticks with the status quo LRAM that it will lead to a rate of return on equity that is too low. And again I don't believe that is Union's position.

477
You know, quite frankly we have to -- the purpose of the PBR -- the purpose of the PBR was to establish rates for three years to minimize rate hearings and to encourage the company to focus not on regulatory proceedings but on improving customer service, reducing costs. And, their decision, their rate-filing course will be a factor of thousands and thousands of inputs. There are inevitably going to be errors and we just can't have a case where every time the utility discovers an error that's not in their interest they can come back to the Board and re-open the rate hearing. We could have a never-ending rate hearing if that principle was to be allowed. So I think the Board quite properly only established one off-ramp in the PBR case. And, since I don't believe Union is taking the position that this LRAM issue triggers the off-ramp, I don't think it's appropriate for the Board now to make an retroactive adjustment to the LRAM methodology.

478
MR. KLIPPENSTEIN: Mr. Gibbons, if the Board accepts your recommendations in the evidence with respect to the appropriate LRAM methodology as applied to this case, can you tell me something about what the LRAM balances would be for 1999 and 2000?

479
MR. GIBBONS: Yes. If we could turn to Exhibit F.8.2, which is Mr. Neme's new evidence that was filed this morning, and the first three pages show what the LRAM balances are according to the methodology that I'm recommending.

480
MR. KLIPPENSTEIN: Is this some kind of novel methodology that you're recommending?

481
MR. GIBBONS: No, it's not. It's the exact same methodology that has been approved and implemented by Enbridge Consumers Gas.

482

So on page 1, how this LRAM works is you've got in the first column of numbers the DSM target savings and rates. So this was the DSM target for 1999 in terms of what would be the likely volumes occurred over six months, the measures being in place for an average of six months. So that was a volume target of about 17 million cubic metres.

483
Their actual savings, on a six-month basis, was 14 million cubic metres. They fell short of their DSM savings target and so there's money that should be returned back to the customers because they sold more gas than forecast. And in this case, it's returning back to customers $83,000.

484
Now, one of the things that Mr. Baker emphasized in his testimony on Friday was from the EBRO-499 ADR agreement, the word "all"; that all DSM savings must be included in the LRAM methodology. And we certainly agree with him, absolutely, that all DSM savings must be included in the LRAM methodology and this table illustrates how that's the case. You've got the DSM savings target which is all of the volumes that were expected to be achieved in 1999 and you've got the actual savings which are all of the actual savings that actually were achieved in 1999. So again, to correct -- to calculate the LRAM balances, you use all of the LRAM savings that were achieved in that year.

485
So my recommendation is totally consistent with the EBRO-499 ADR agreement. Now if you turn the page to the second page, page 2, this shows the -- now we're getting to the issue of what the LRAM balance is for the year 2000, and there's a two-part process for that. First, there is the impact of the 1999 DSM programs, and secondly, the impact of the 2000 DSM programs. Now when Union came forward with their 2000 load forecast, what they should have done was backed out their expected 1999 DSM volumes and that is the first column which shows the expected impact of the 1999 DSM program if its bang-on target, and this gets 12 months' savings, the 12 months' savings that would have been produced in the year 2000. And so that's 37.9 million cubic metres.

486
The second column, again, shows what the actual DSM savings from the 1999 program were on a 12-month basis; 28.7 million cubic metres. There's a difference, and again that -- in the first stage of this analysis they need to give back $473,000 to customers, because their year 2000 gas sales will be greater because they didn't fully achieve their fiscal 1999 DSM savings target.

487
Then turning to the next page, page 3, the year 2000 LRAM balance is of course also a function of how successful the year 2000 programs were. And again we have in the first column the DSM savings target for the year 2000 program; again, that's assuming that on average, each measure runs for just six months. That gives you 19 million cubic metres. Again they came in under at 14.9, there was a deficit, and again that means monies need to be returned back to the customer because they sold more gas than they would have if they achieved their full DSM target.

488
And then on the bottom of that page, in the right-hand corner, you have the sum of the three-year effects. So the total LRAM balances for 1999 and the year 2000, going back to the customer under this methodology, are $799,000.

489
MR. KLIPPENSTEIN: Those are all the questions I have for Mr. Gibbons, Mr. Chairman.

490
MR. JACKSON: Thank you, Mr. Klippenstein.

491
I think, Mr. Penny, may be just about to ask you some of these same questions, but the numbers, I appreciate you taking us through this exhibit, but the number for the DSM target savings came out of what document, Mr. Gibbons?

492
MR. GIBBONS: Well, again they were prepared by Mr. Neme who would have got -- I know Mr. Millyard has a -- on his computer he has all these inputs in his computer and he has spreadsheet files. Now exactly which documents they all came out of, I don't know.

493
MR. POCH: Mr. Chairman, just to be helpful, there's that last page that was provided in response to my friend's request which sets out the assumptions, and Mr. Neme this morning explained how they came out of the filings, the two different filings that Union made on either side of that ADR in 499.

494
MR. JACKSON: All right. I'm just looking for that and yes, --

495
MR. PENNY: The last page has to do with the amounts that were assumed to be embedded in rates for the purpose of the calculation.

496
MR. JACKSON: Right. Okay. And then we have the possible implicit cubic metre numbers that Mr. Baker has referred to this morning, Mr. Gibbons, with respect to what Union might say was implicitly in the 1999 volume forecast representing DSM target savings; correct? And that's -- so their -- just trying to recall what their number is that might correspond to, for example, the 17.3 million, it's the total of their schedule. So anyway, we'll come back and ask you some more questions about this in a few minutes, but let me turn it over to Mr. Penny. But if you see a way to sort of make that comparison for us in the meantime, it might be helpful, otherwise we'll try and pull those documents up and make it for ourselves. So Mr. Penny.

497
CROSS-EXAMINATION BY MR. PENNY:

498
MR. PENNY: Thank you, Mr. Chairman.

499
Mr. Gibbons, I've read Mr. Gibbons' pre-filed piece and I've listened to what he has had to say here today. In my view the dispute is really around a matter of argument, around a set of facts that are now largely in the record. So as much as I enjoy arguing with Mr. Gibbons, I'm going to forgo the pleasure on this occasion and carry it on in the appropriate forum as we argue the case. But what I do want to do is ask a couple of questions around the factual record. And Mr. Chairman, the issue that you raised was the first one I want to touch on.

500

I just want to confirm that the three pages that you were just referring to, which was 1, 2 and 3 of F.8.2, they were not prepared by you, they were prepared by Mr. Neme.

501
MR. GIBBONS: That's correct.

502
MR. PENNY: And you do not know where the inputs came from that went into the column, for example, DSM target savings and rates.

503
MR. GIBBONS: No, I don't know the exhibit number for them.

504
MR. PENNY: And your answer is the same with respect to all three schedules or all three pages?

505
MR. GIBBONS: Yes, sir. I'm here to testify about the methodology.

506
MR. PENNY: And I appreciate that, but the quantification of that methodology was prepared by someone else.

507
MR. GIBBONS: Yes, sir.

508
MR. PENNY: And you had no involvement in the preparation of that analysis.

509
MR. GIBBONS: Well, I told them what I would like them to do, what methodology I would like them to use.

510
MR. PENNY: You told them the concept but you had no input into any of the inputs that went into this.

511
MR. GIBBONS: No.

512
MR. PENNY: All right. Thank you.

513
Now you said, for example, when -- in reference -- if my note is correct, in reference to the preparation of -- in relation to the year 2000, I think you said when Union prepared its 2000 load forecast. And I wanted to ask you when you say Union did a 2000 load forecast.

514
MR. GIBBONS: Well, in their PBR case, they came forward with a proposed load forecast or volume that should be used to set rates. It was the same as the EBRO 499 load forecast or volumes.

515
MR. PENNY: So Union didn't do a 2000 load forecast, it was relying upon the 499 forecast.

516
MR. GIBBONS: Yes, they were reusing the 499 load forecast, that's absolutely correct, but if I can just go on a bit to put it in context. Given that the LRAM methodology that Union was proposing, it was -- they were obliged to make sure that their load forecast properly reflected the impact of DSM volumes. And so presumably, if they were doing their job correctly, when they were recommending that the same load forecasts will be used again in RP-1999-0017, they were believing or should have believed that that load forecast would accurately capture the impact of DSM.

517
MR. PENNY: So you don't care whether any of these forecasts were in rates or not; your methodology applies whether, in fact, any of these forecasts were in rates or not, doesn't it.

518
MR. GIBBONS: Absolutely, sir. Our position is -- no sir, I gave you simple direct answer, yes, but I have a right to qualify it, I believe. Our position is very simple, there was a methodology that was approved and that's the methodology that should be used, and it's Union's obligation as the company to make sure that they come forward with a correct load forecast.

519
MR. PENNY: You were -- Pollution Probe was an intervenor in RP-1999, matter 17?

520
MR. GIBBONS: Yes, sir.

521
MR. PENNY: And you personally appeared as Pollution Probe's representative in that case.

522
MR. GIBBONS: Yes, sir.

523
MR. PENNY: And Pollution Probe was represented by counsel as well?

524
MR. GIBBONS: Yes, sir.

525
MR. PENNY: That was Mr. Klippenstein.

526
MR. GIBBONS: Yes, sir.

527
MR. PENNY: You received the pre-filed evidence?

528
MR. GIBBONS: Yes, sir.

529
MR. PENNY: You received copies of the transcripts of the oral testimony?


530
MR. GIBBONS: Yes, sir.

531
MR. PENNY: You were in attendance during the DSM evidence.

532
MR. GIBBONS: Well, at least some of it.

533
MR. PENNY: Well, you made a cost claim for your attendance on the days that the DSM evidence was presented?

534
MR. GIBBONS: If I made a cost claim, I was there.

535
MR. PENNY: And Mr. Klippenstein cross-examined Mr. Fogwill on his evidence.

536
MR. GIBBONS: I believe that's true.

537
MR. PENNY: And Pollution Probe submitted argument on the DSM issues.

538
MR. GIBBONS: Yes, sir.

539
MR. PENNY: Thank you. Thank you, Mr. Chairman, those are all my questions.

540
MR. JACKSON: Mr. Moran, do you have any questions?

541
MR. MORAN: No, sir.

542
MR. KLIPPENSTEIN: Mr. Chairman, if I could have one question in re-examination.

543
MR. DOMINY: Mr. Gibbons -- I've got a question for Mr. Gibbons. Sorry, Mr. Klippenstein, unless you would like to proceed and then I could --

544
MR. KLIPPENSTEIN: Yes, I prefer before and after as well.

545
QUESTIONS FROM THE BOARD:

546

MR. DOMINY: I just want to go over the methodology. I tried to follow how you were describing it, your understanding of the methodology, Mr. Gibbons. I'm just wondering if you can help me.

547
As I understand it, on page 1 of 3, what you've got there in actual savings is half the savings of 1999.

548
MR. GIBBONS: Half the 12 months' savings. Half the savings that would be there if all the DSM measures were implemented on January 1, 1999.

549
MR. DOMINY: That's right. So, I know I can't quite reconcile the figures, but I believe that maybe what's happened in the second column is those are the position of Mr. Neme as to what the savings should be as opposed to the agreed position, excluding the two which is in the yellow sheet and divided by two.

550
MR. GIBBONS: The actual savings are Mr. Neme's belief of what they are excluding those furnace free drivers.

551
MR. DOMINY: So in other words, it's not the yellow sheet filed by Union, it's Mr. Neme's adjusted yellow sheet?

552
MR. GIBBONS: Yes.

553
MR. DOMINY: Okay. So that's what the actual savings are.

554
MR. GIBBONS: Yes.

555
MR. DOMINY: And in 1999, it's half the annual?

556
MR. GIBBONS: Yes.

557
MR. DOMINY: Okay. I go over to the next page, which is page 2. Now, what I didn't quite understand in what the actual savings are in there, is that the whole of 1999 plus half the 2000?

558
MR. GIBBONS: No. Again, the second page is just showing the impact of the 1999 DSM program.

559
MR. DOMINY: So it's the whole of --

560

MR. GIBBONS: So the -- for all the measures that were installed in 1999 it shows their volume impact on a 12-month basis. Because this is now -- we're now in the year 2000, all the 1999 measures were installed in 1999, so they have a full 12-month impact in the year 2000.

561
MR. DOMINY: So I multiply it by two, I see that I've just done the mental arithmetic. So now I go on to number, page number 3, and I've got 2000 actual. So that's half the estimate of the savings that have been accrued in 2000, a half year of the savings that were for 2000.

562
MR. GIBBONS: Yes, this is just with respect to the DSM measures that were implemented in the year 2000.

563
MR. DOMINY: And it's half the numbers?

564
MR. GIBBONS: So it's half, because on average they will come in on the six-month mark.

565
MR. DOMINY: Okay. So I think I understand those then.

566
Now, if I now come back to the targets, and I'm not quite sure of the source, but I'm making the assumption it's from 499, tab D Exhibit 1, I think was the reference, and subject to check, then I'm assuming that the DSM target savings in there would also be half the 1999 target.

567
MR. GIBBONS: Yes, absolutely.

568
MR. DOMINY: So when I go over to the 1999 impact on 2000, it's the full year. So if I multiply it first by two, I don't get twice in the second one.

569
MR. GIBBONS: Okay, Mr. --

570
MR. DOMINY: It must be a typo.

571
MR. GIBBONS: It's in the notes at the bottom of the page. Mr. Neme, on page 1, the 1999 target he used on page 1 was what the target was, Union's DSM target in their original filing. Then in the EBRO 499 case or in the ADR there was a slight adjustment to the volume target for 1999 and then he used that adjusted post-ADR number on page 2.

572
MR. DOMINY: For 1999, okay. So now I have -- it's clear to me what Mr. Neme was telling me this morning which I didn't completely follow; now it's absolutely clear. The pre-ADR is on page 1 and the post-ADR is on page 2 in terms of the targets.

573
MR. GIBBONS: Yes.

574
MR. DOMINY: Then I come over to the third page and that's half the target forecast for the year 2000 in the original plan unless there's been -- post-ADR?

575
MR. GIBBONS: Post-ADR, yes.

576
MR. DOMINY: So I think I know the sequencing of these numbers now. Okay. Thank you, I'm not going to ask you the specific numbers because you say you have no knowledge of them, but that's your understanding.

577
MR. GIBBONS: Yes, thank you.

578
MR. DOMINY: Thank you, Mr. Gibbons.

579
MR. JACKSON: So Mr. Gibbons, without focussing on the specific numbers, in terms of methodology though, you're assuming that, I take it, that the DSM target savings represented in this schedule at F.8.2, the first three pages, are the ones that should have been built into the volume forecast used by Union for rate-making purposes; correct?

580
MR. GIBBONS: Yes.

581
MR. JACKSON: And Union's saying well, they didn't build it in explicitly. And now they're saying that it may have been in there implicitly and that if we try to get at it by using a regression analysis technique, we would -- we might get at some number. And then they've gone into a little bit more detail this morning and said that the number would be two, and have you had a chance to review that schedule that they have put in?

582
MR. GIBBONS: Not really. I heard what they said when you were here --

583
MR. JACKSON: Two for residential, I should interrupt, and just clarify that, or I think, if I'm reading their schedule right, -- yes, two for residential customer which comes forward in their schedule to, I think, savings in line 12 of that schedule of I guess $5.58 million. I'm looking at F.8.1. And I know I may be -- may do everybody some good to just see where the Board members are in reconciling all these numbers at this point in the hearing, because then they can help us straighten it out in argument, but line 12 looks like the 1999 DSM savings and line 15 is the 1998 DSM savings, represented in volume. Can't be, one's positive and one's negative so I don't think Union is going to come up with that.

584
MR. PENNY: I think line 15 should have brackets.

585
MR. JACKSON: That certainly would help.

586
MR. PENNY: Because it's intended to be a reproduction for '98 of the same analysis in line 12.

587
MR. JACKSON: That's what I thought too. Thank you very much, Mr. Penny, for that help. You see lawyers can do mathematics.

588
MR. PENNY: I'll take that one and say no more.

589
MR. JACKSON: All right. So Mr. Gibbons, then, I think that possibly the comparison numbers may be the numbers on the far right of F.8.1, in lines 12 and 15. But I'll just confer very briefly with my mathematician on the panel here and maybe we'll have to sort it out or let you help us in argument.

590
Thank you. We'll look for more help.

591
Thank you very much. Mr. Klippenstein, may have --

592
MR. KLIPPENSTEIN: I have no questions, it was clarified in the Board's questions. Thank you.

593
MR. JACKSON: Thank you, Mr. Klippenstein, and thank you, Mr. Gibbons, for coming and speaking to us today.

594
MR. GIBBONS: Thank you, my pleasure.

595
MR. JACKSON: Yes, you didn't get in there did you, Mr. Moran? I think you said no thanks, though.

596
MR. MORAN: Just by way of clarification on the last comment that Mr. Penny made on line 15. Is that brackets on you all of the numbers on line 15?

597
MR. PENNY: Yes, right across, including the total.

598
MR. JACKSON: Good. Thank you.

599
SUPPLEMENTARY MATTERS:

600
MR. PENNY: So, Mr. Chairman, we'll -- I think -- I think -- I'm not proposing to call on any reply evidence so that concludes the evidentiary phase of the hearing, other than the filing of the outstanding interrogatories which I indicated to the Board would be -- that'll be done before the day is out, and those will be on your desk.

601
MR. JACKSON: And by that, when you say "interrogatories," you mean all the undertakings?

602
MR. PENNY: Sorry, that is what I meant -- I always get them flipped.

603
MR. JACKSON: No, that's fine. Yes, thank you. So I think that with that, then, --

604
MR. MORAN: Mr. Chair. I don't know when you wanted to deal with the timetable for written argument. At least one of the intervenors asked me to indicate to you that some of them are looking for at least two weeks from argument-in-chief because of their involvement in the ECG ADR process. So I'm not sure when you wanted to deal with the timing issue.

605
MR. JACKSON: Well, you raise a very good question, and we could send out a procedure of order to give that information. But, if you can advise us now about any consensus then we can set it and if there needs to be any change in it we can then only write parties in there's been a change.

606
MR. MORAN: I'm not aware of any consensus, just the expression of concern about how soon they might have to bring it in because of their involvement in the ECG ADR process.

607
MR. JACKSON: Right. Mr. Penny, have you put your mind to this?

608
MR. PENNY: Only in the general sense, Mr. Chairman. I mean obviously we're anxious to have this all done as quickly as possible so that the Board can turn its mind to the result because we were -- as you know, wanting to have rate effect by August. And the more -- of course the more time that's taken in argument the longer it will be before the Board will be in a position to come to grips with everything. I -- having said that, I obviously appreciate that there is another case underway which most of the parties in this one are also involved in and I think all we can do is try and balance those two competing objectives as most reasonably as we might.

609
I'm -- I don't have a calendar in front of me, so I'm not in a position to speak specifically to what days are occupied by what activities. All I can urge upon you is to make the time as short as is reasonably possible so we can keep the process moving.

610
MR. JACKSON: I think the Board would like to do that too. Mr. Moran, did you have a date that would get us past the process for reply argument of intervenors?

611
MR. MORAN: I think in light of Mr. Penny's comments, perhaps your suggestion about the procedure of order in due course is probably the best way to deal with it.


612
MR. JACKSON: All right, good. That would let us check with the ADR process in the ECG case. I don't want to let this go too long before we get a tentative date out. It may be on this one occasion that if we've -- if we're tight on time we'll just have to be a little flexible in accepting a submission a day late. But I don't want to wait until the ECG case is -- ADR is well underway before announcing the date.

613
MR. MORAN: Two weeks would be May 1.

614
MR. JACKSON: What day of the week that would be?

615
MR. MORAN: Mr. Wightman says Wednesday.

616
MR. JACKSON: Okay. And would that get us sort of several days beyond the end of the ECG ADR?

617
MR. MORAN: I believe so. I'd have to check.

618
MR. POCH: The ADR -- Mr. Chairman, my understanding is the ADR is scheduled for the five days of next week so that --

619
MR. JACKSON: Then let's tentatively set May 1 as the date. And as I said, we'll try to be a little bit indulgent of people's problems. And what would be reasonable for reply then?

620
MR. PENNY: I think ten days would be adequate, I think.

621
MR. JACKSON: So that would take us to the second Monday in May.

622
Ten days would take them to the Saturday you're saying. Okay. Well, I think we would give them until Monday.

623
MR. PENNY: Why thank you. We'll -- if that was -- I think that's reasonable, Mr. Chairman, and indeed what we would strive under those circumstances to file it even earlier if we could.

624
MR. JACKSON: Thank you. Yes, I think that would be good. So that takes us to which date, though, the 12th? 13th? Okay, it's Monday, around the 13th. I guess as presiding Chair I've got to bring a calendar with me other than this one on the computer that doesn't work.

625

MR. WIGHTMAN: May 13th is Monday, I think.

626
MR. JACKSON: Thank you very much. Okay. With all of that, then, we will adjourn the proceedings until Wednesday morning at which time there may be some questions, Mr. Penny, we'll just see, with respect to the materials but I imagine the day is mostly yours for argument-in-chief.

627
MR. PENNY: All right. Thank you. Apropos of that, Mr. Chairman, it might assist us in knowing what resources to have available, if possible, if the Board's -- could advise us in advance of the questions, or of the fact of the questions.

628
MR. JACKSON: Yes.

629
MR. PENNY: I appreciate that it may not be easy or doable, but to the extent it is, it would be useful for us.

630
MR. JACKSON: We'll take a quick look tomorrow and certainly before the end of the day and as early as possible we could maybe have staff contact staff and just indicate any areas where we think we need clarification.

631
MR. PENNY: That would be excellent. Thanks very much, sir.

632
MR. JACKSON: Thank you very much. So we are adjourned now until Wednesday morning.

633
--- Whereupon the hearing adjourned at 2:25 p.m.