1 1 RP-1999-0017 2 THE ONTARIO ENERGY BOARD 3 4 IN THE MATTER OF the Ontario Energy Board Act, 1998, 5 S.O. 1998, c. 15 (Sched. B); 6 AND IN THE MATTER OF an Application by Union Gas Limited 7 for an order or orders approving or fixing just and 8 reasonable rates and other charges for the sale, 9 distribution, transmission and storage of gas in 10 accordance with a performance based rate mechanism 11 commencing January 1, 2000; 12 13 AND IN THE MATTER OF an Application by Union Gas Limited 14 for an order approving the unbundling of certain rates 15 charged for the sale, distribution, transmission and 16 storage of gas. 17 18 B E F O R E : 19 G.A. DOMINY Vice-Chair and Presiding Member 20 M. JACKSON Member 21 22 Hearing held at: 23 2300 Yonge Street, 25th Floor, Hearing Room No. 1 24 Toronto, Ontario on Monday June 12, 2000, 25 commencing at 1330 26 27 PROCEDURAL/MOTIONS DAY 28 VOLUME 1 Les Services StenoTran Services Inc. 613-521-0703 2 1 APPEARANCES 2 JENNIFER LEA/ Board Staff 3 MICHAEL LYLE/ 4 JAMES WIGHTMAN 5 6 MICHAEL PENNY/ Union Gas Limited 7 MARCEL REGHELINI 8 9 MICHAEL WARREN Consumers Association of Canada 10 (CAC) 11 12 THOMAS BRETT Ontario Association of School 13 Business Officials 14 15 PETER THOMPSON Industrial Gas Users' 16 Association (IGUA) 17 18 MICHAEL JANIGAN Vulnerable Energy Consumers 19 Coalition (VECC) 20 21 MURRAY KLIPPENSTEIN Pollution Probe 22 23 IAN MONDROW Heating Ventilation and 24 Air Conditioning Contractors 25 Coalition Inc. 26 27 BETH SYMES Alliance of Manufacturers 28 and Exporters Canada Les Services StenoTran Services Inc. 613-521-0703 3 1 APPEARANCES (Cont'd) 2 3 MARK MATTSON/ Energy Probe 4 THOMAS ADAMS 5 6 GEORGE VEGH/ Duke Energy, Coalition for 7 ZIYAAD MIA Efficient Energy Distribution 8 (CEED), TransCanada Gas 9 Services, PanCanadian 10 Petroleum, Dynegy Canada, 11 Suncor/Sunoco, CanEnerco 12 Limited 13 14 DAVID WAQU COMSATEC INC. 15 16 STANLEY RUTWIND TransCanada PipeLines Limited 17 18 RICHARD KING/ The Wholesale Group and the 19 CHARLES KEIZER/ Major Energy Consumers And 20 PETER BUDD Producers (MECAP) 21 22 PETER SCULLY Association of Municipalities 23 of Ontario 24 25 TANYA PERSAD Enbridge Consumers Gas 26 27 ANDREW DIAMOND/ Enron Capital Corp. 28 JOHN ROOK Les Services StenoTran Services Inc. 613-521-0703 4 1 APPEARANCES (Cont'd) 2 3 DWAYNE QUINN/ City of Kitchener Utilities 4 ALICK RYDER 5 6 DAVID POCH Green Energy Coalition (GEC) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 5 1 Toronto, Ontario 2 --- Upon commencing on monday June 12, 2000 3 at 1330 4 THE PRESIDING MEMBER: Thank you. Please be 5 seated. Good afternoon. 6 The Board is meeting today to hear procedural 7 motions related to RP-1999-0017, Union Gas Limited's 8 application dated March 5, 1999 for an order or orders 9 approving or fixing just and reasonable rates and other 10 charges for the sale, distribution, transmission and 11 storage of gas in accordance with a performance-based 12 rate mechanism commencing January 1, 2000; 13 The Application also sought an order approving 14 the unbundling of certain rates charged by Union for the 15 sale, distribution, transmission and storage of gas. 16 My name is George Dominy and with me is 17 Dr. Malcolm Jackson. 18 Today we are assembled to deal with any 19 outstanding motions and procedure and other 20 administrative matters, including the setting of a 21 hearing schedule for the issues of this proceeding. The 22 hearing of evidence is scheduled to commence tomorrow 23 morning at 9:00 a.m. 24 The Board notes that the initial application 25 was dated March 5, 1999. The evidence was filed on 26 December 10, 1999. The interrogatory responses were 27 completed in May. A Settlement Conference was held 28 starting May 10, 2000. The Board received, at close of Les Services StenoTran Services Inc. 613-521-0703 6 1 business on June 7, 2000, a Settlement Agreement in 2 respect of certain issues related to unbundling. 3 With that background, please may we have 4 appearances? 5 MR. PENNY: Thank you, Mr. Chairman. 6 My name is Michael Penny. I appear as counsel 7 for the Applicant, Union Gas. 8 THE PRESIDING MEMBER: Good afternoon, 9 Mr. Penny. 10 MR. WARREN: Robert Warren for the Consumers 11 Association of Canada. 12 THE PRESIDING MEMBER: Good afternoon, 13 Mr. Warren. 14 MR. BRETT: Good afternoon, Mr. Chairman. 15 Tom Brett for the Ontario Association of 16 School Business Officials. 17 THE PRESIDING MEMBER: Good afternoon, 18 Mr. Brett. 19 MS LEA: Jennifer Lea, appearing for Board 20 Staff. Co-counsel with me in this matter will be 21 Mike Lyle, L-Y-L-E. 22 THE PRESIDING MEMBER: Good afternoon, Ms Lea. 23 MR. THOMPSON: Peter Thompson for the 24 Industrial Gas Users' Association. 25 THE PRESIDING MEMBER: Good afternoon, 26 Mr. Thompson. 27 MR. THOMPSON: Good afternoon, sir. 28 MR. JANIGAN: Michael Janigan for the Les Services StenoTran Services Inc. 613-521-0703 7 1 Vulnerable Energy Consumers Coalition. 2 THE PRESIDING MEMBER: Good afternoon, 3 Mr. Janigan. 4 MR. JANIGAN: Good afternoon. 5 MR. KLIPPENSTEIN: Good afternoon, Mr. Chair 6 and Dr. Jackson. 7 Murray Klippenstein appearing for Pollution 8 Probe. 9 THE PRESIDING MEMBER: Good afternoon, 10 Mr. Klippenstein. 11 MR. MONDROW: Good afternoon, sir. 12 Ian Mondrow appearing for the Heating 13 Ventilation and Air Conditioning Contractors Coalition 14 Inc. or HVAC Coalition. 15 THE PRESIDING MEMBER: Good afternoon, 16 Mr. Mondrow. 17 MS SYMES: Good afternoon. 18 Beth Symes, appearing for the Alliance of 19 Manufacturers and Exporters Canada. 20 THE PRESIDING MEMBER: Good afternoon, 21 Ms Symes. 22 MR. MATTSON: Good afternoon, Mr. Dominy, 23 Dr. Jackson. 24 Mark Mattson, counsel for Energy Probe. 25 THE PRESIDING MEMBER: Good afternoon, 26 Mr. Mattson. 27 Please come forward. 28 MR. VEGH: Good afternoon, sir. Les Services StenoTran Services Inc. 613-521-0703 8 1 George Vegh, appearing today on behalf of Duke 2 Energy for the motion and also appearing for the 3 Coalition for Efficient Energy Distribution, which in 4 this case consists of TransCanada Gas Services, 5 PanCanadian Petroleum, Dynegy Canada, Suncor/Sunoco and 6 CanEnerco Limited. 7 THE PRESIDING MEMBER: Good afternoon, 8 Mr. Vegh. 9 MR. VEGH: Thank you. 10 Also with me on behalf of CEED is -- 11 THE PRESIDING MEMBER: I'm sorry, the 12 reporter. 13 THE COURT REPORTER: I'm sorry, could you come 14 forward and use this microphone perhaps? 15 THE PRESIDING MEMBER: Come to the witness 16 microphone. It's probably easier. 17 Court Reporter, do you have his appearance? 18 THE COURT REPORTER: Could you repeat just 19 that last part, the add on? 20 MR. VEGH: My co-counsel in this case on 21 behalf of CEED is Ziyaad Mia. 22 THE PRESIDING MEMBER: Thank you, Mr. Vegh. 23 MR. VEGH: Thank you. 24 THE PRESIDING MEMBER: Next, please. 25 MR. WAQU: Good afternoon, Mr. Chair, 26 Dr. Jackson. 27 David Waqu‚ on behalf of Comsatec. 28 THE PRESIDING MEMBER: Good afternoon, Les Services StenoTran Services Inc. 613-521-0703 9 1 Mr. Waqu‚. 2 MR. RUTWIND: Good afternoon, Mr. Chair, 3 Dr. Jackson. 4 My name is Stan Rutwind and I am here on 5 behalf of TransCanada PipeLines Limited. 6 THE PRESIDING MEMBER: Could you spell your 7 name for the reporter, please? 8 MR. RUTWIND: It is R-U-T-W-I-N-D, first name 9 Stanley. He has my business card, sir. 10 THE PRESIDING MEMBER: Thank you. 11 MR. KING: Mr. Richard King on behalf of two 12 intervenors, The Wholesale Group and MECAP, which stands 13 for the Major Energy Consumers and Producers. 14 Appearing with me today as co-counsel is 15 Mr. Charles Keizer and Mr. Peter Budd from our office 16 who will be dealing with unbundling matters. 17 THE PRESIDING MEMBER: Good afternoon, 18 Mr. King. 19 MR. SCULLY: Good afternoon, Mr. Dominy, 20 Dr. Jackson. 21 Peter Scully on behalf of the Association of 22 Municipalities of Ontario. 23 THE PRESIDING MEMBER: Good afternoon, 24 Mr. Scully. 25 MS PERSAD: Good afternoon. 26 Tanya Persad for Enbridge Consumers Gas. 27 Persad, P-E-R-S-A-D. 28 We don't anticipate we will be playing an Les Services StenoTran Services Inc. 613-521-0703 10 1 active role in the hearing, so you need not call on us 2 for cross-examination. 3 THE PRESIDING MEMBER: Good afternoon, 4 Ms Persad. 5 MR. DIAMOND: Andrew Diamond on behalf of 6 Enron. Mr. John Rook will be lead counsel, but sends 7 his regrets for not being able to attend this afternoon. 8 THE PRESIDING MEMBER: Good afternoon, 9 Mr. Diamond. 10 MR. QUINN: Good afternoon, Mr. Dominy, 11 Dr. Jackson. 12 I am Dwayne Quinn from the City of Kitchener 13 Utilities. Alick Ryder will be our counsel and he was 14 unavailable also for today. 15 THE PRESIDING MEMBER: Good afternoon, 16 Mr. Quinn. 17 MS LEA: Mr. Dominy, I should also indicate 18 that David Poch, who represents the Green Energy 19 Coalition (GEC), has written to indicate that in the 20 interests of cost efficiency he will not be attending 21 the hearing this afternoon, but he will be attending 22 later in the hearing. 23 THE PRESIDING MEMBER: Thank you, Ms Lea. 24 Are there any other parties who wish to 25 register an appearance? Are there any late intervenors? 26 There being none -- 27 So the first order of business is the four 28 motions that we have before us, and I believe, Les Services StenoTran Services Inc. 613-521-0703 11 1 Mr. Penny, they are your motions. Would you deal with 2 them one at a time, please? 3 MR. PENNY: Yes, I shall. 4 As the Board knows, a Settlement Agreement has 5 been filed with the Board dealing with most of the 6 unbundling issues. Partly as a result of that, a number 7 of the issues that were raised by the motions have gone 8 by the board. 9 As I understand it, TransCanada PipeLines has 10 withdrawn the evidence that was the subject of our 11 motion and Union has accordingly withdrawn its motion. 12 That was a provision of the Settlement Agreement that 13 has been reached on the unbundling issues. 14 As I also understand, CEED -- and perhaps 15 Mr. Vegh can speak to this in a moment -- agrees that, 16 subject to the Board's acceptance of the Settlement 17 Agreement, that the evidence that is the subject of our 18 motion that was contained in the CEED evidence, will 19 also be withdrawn. So Union's motion will accordingly 20 be withdrawn. That was, in particular, paragraphs 50 to 21 57 of CEED's evidence. 22 The third motion was a motion in respect of 23 some evidence of Dr. Hall that was filed by Duke Energy. 24 Mr. Vegh and I have come to an agreement on this as well 25 in which Duke is prepared to withdraw the evidence and 26 Union will withdraw its motion. 27 Mr. Vegh and I discussed some language around 28 that which perhaps Mr. Vegh can provide to you in a Les Services StenoTran Services Inc. 613-521-0703 12 1 moment. When Mr. Vegh speaks to that, perhaps he could 2 also confirm the CEED Agreement as I have outlined it. 3 That would deal with three of the motions and means that 4 the only outstanding motion is the motion in respect of 5 the Energy Probe evidence which will proceed today. 6 THE PRESIDING MEMBER: Thank you, Mr. Penny. 7 Perhaps I can ask the counsel, Mr. Rutwind for 8 TransCanada PipeLines, if he confirms that? 9 MR. RUTWIND: On behalf of TransCanada 10 PipeLines, the submission made by counsel on behalf of 11 the Applicant is indeed correct and the motion has been 12 dealt with appropriately. 13 THE PRESIDING MEMBER: Thank you, Mr. Rutwind. 14 I hope I have it right, Mr. Rutwind. Is that 15 correct? 16 MR. RUTWIND: Yes. 17 THE PRESIDING MEMBER: Thank you. 18 Perhaps Mr. Vegh could speak to the motions of 19 CEED and Duke Energy? 20 MR. VEGH: Thank you, sir. 21 With respect to the CEED motion, as Mr. Penny 22 advised, that is addressed in the ADR Agreement, subject 23 to the Board's acceptance of that agreement CEED is 24 prepared to withdraw the paragraphs which are the 25 subject matter of the motion, that is paragraphs 50 to 26 57, and Union is prepared to withdraw the motion. 27 With respect to the Duke evidence, as 28 Mr. Penny advised, we have had an agreement on how to Les Services StenoTran Services Inc. 613-521-0703 13 1 address that issue. 2 I'm not sure if everyone has received a copy 3 of the paper that is being referred to -- there are 4 additional copies on the window sill -- but, in effect, 5 the agreement between Union and Duke is that Dr. Hall's 6 paper should be treated, for the purposes of these 7 proceedings, as an academic or scholarly work, but not 8 as evidence which has been filed and made part of the 9 record. 10 In other words, this evidence may be referred 11 to in argument, but will not be included as part of the 12 evidentiary record in these proceedings. 13 THE PRESIDING MEMBER: Thank you, Mr. Vegh. 14 With regard to the settlement agreement, as I 15 understand, it is a condition that we accept the second 16 agreement with regard to the CEED evidence. Is that 17 correct, Mr. Vegh? 18 MR. VEGH: Yes, that's right. 19 THE PRESIDING MEMBER: The Board just received 20 it last Thursday and we will work expeditiously to 21 review it and make our finding. We may in the course, 22 and I am using this opportunity to raise the issue, that 23 we may in reviewing it seek some clarification, but at 24 this time we have no particular issues of clarification 25 to be asking at the moment. 26 MR. VEGH: Thank you. 27 MR. PENNY: Mr. Chairman, I should have made 28 it clear with respect to the connection of the Les Services StenoTran Services Inc. 613-521-0703 14 1 settlement agreement to both pieces of evidence, that is 2 TransCanada and feed, that those issues are dealt with 3 in the settlement agreement, so if the settlement 4 agreement were not accepted, then we would have to 5 return to the beginning. 6 It may be that if that were -- in the unlikely 7 event that that would happen, we would have to revisit 8 the issue, but I think the understanding is that, 9 subject to the Board's acceptance of the agreement, that 10 the issues have been dealt with as per the terms of the 11 agreement. 12 THE PRESIDING MEMBER: Thank you, Mr. Penny. 13 Now it is TransCanada Pipelines and CEED 14 evidence is under the same -- 15 MR. PENNY: Yes. They are both dealt with in 16 the settlement agreement. 17 THE PRESIDING MEMBER: Thank you. 18 MR. PENNY: The only other clarification I 19 would seek to make is that I think Mr. -- it was 20 probably a slip of the tongue, but Mr. Vegh referred to 21 Dr. Hall's piece as evidence. Of course, the point of 22 our agreement is that it is not evidence. It's simply a 23 paper that has been written by someone and published. 24 As Mr. Vegh has indicated, the agreement is 25 that they can make reference to it in argument, but it's 26 not evidence, so it's not tendered for the proof of 27 anything in this case. 28 THE PRESIDING MEMBER: Thank you, Mr. Penny. Les Services StenoTran Services Inc. 613-521-0703 15 1 I understood Mr. Vegh to say that it would be treated as 2 an academic treatise, but not as evidence. 3 Mr. Penny, then I think the ball falls in your 4 court. 5 MR. PENNY: Yes. Thank you, Mr. Chairman. 6 The remaining motion then is a motion that 7 deals with evidence that was filed by Energy Probe dated 8 April 3, 2000, authored by Mr. Tom Adams. There was a 9 Notice of Motion which I believe you have filed on April 10 28 and a brief written submission which was filed at the 11 time because we had suggested that the motions might be 12 dealt with in writing. 13 I won't just read from that. Perhaps what I 14 will do is simply outline Union's submissions on why we 15 say this is not appropriate evidence to be tendered in 16 this case. 17 This motion seeks to strike out the evidence 18 of Mr. Adams filed on behalf of Energy Probe. There are 19 three grounds upon which Union submits that the evidence 20 is not properly before the Board. 21 First, it advances a proposal for an 22 independent gas system operator which the Board has no 23 jurisdiction to implement. Second, it advances a 24 proposal for an ISO which by its own admission is 25 incapable of implementation. Third, it does not arise 26 out of any of the issues on the Board approved issues 27 list. 28 Dealing first with the evidence itself, by way Les Services StenoTran Services Inc. 613-521-0703 16 1 of a quick overview, pages 1 to 7 are really no more 2 than an outline of Union's evidence on unbundling with 3 some commentary from Mr. Adams on various issues that he 4 doesn't like about Union's proposals. Those pages, in 5 my submission, are not really evidence but are more in 6 the nature of argument. 7 The guts of the submission start at part 7 8 with a description of the electricity independent market 9 operator and its function under the Electricity Act in 10 Ontario. The IMO is one of two examples uses to found 11 the Energy Probe-ISO proposal that is the subject of the 12 evidence. 13 Page 9 then gets into the second example which 14 is the Victoria Energy Network Corporation. This is 15 also a creature of statute created by the Gas Industry 16 Act which was passed by the Parliament of the State of 17 Victoria in Australia in 1994. Copies of the relevant 18 passages from the Ontario Electricity Act and the 19 Victoria Gas Handling Act are in the materials which I 20 have submitted on this motion. I believe copies were 21 made available to members of the Board. 22 Page 15 of the Energy Probe evidence then 23 takes off from these two examples and starts a 24 discussion of an alternative approach to unbundling, 25 being a proposal to have a staff ISO. There then 26 follows a discussion of the alleged benefits of the gas 27 ISO and at page 26 there is a conclusion containing the 28 recommendation that a comprehensive competitive Les Services StenoTran Services Inc. 613-521-0703 17 1 restructuring of Union's Dawn Trafalgar system should be 2 undertaken involving the introduction of an independent 3 system operator. 4 In essence, Union's position on this motion is 5 that this evidence and the proposal for the introduction 6 of a gas ISO has no place in this hearing. 7 Dealing with the question of jurisdiction, the 8 first paragraph of the evidence admits that it does not 9 extend to analysing the legal issues without dealing 10 with implementing the proposal for a gas ISO. This, in 11 my submission, is, to say the least, an understatement. 12 The two examples held out as examples of how 13 we should do it prove, in my submission, the 14 impossibility of this Board doing anything along these 15 lines. This is because without a legislative mandate, 16 the Board has no jurisdiction to implement a proposal 17 like this. 18 Take the case of the IMO. The IMO is a 19 creature of statute created by section 4 of the Energy 20 Act. Its objects are defined by statute in section 5. 21 Indeed, the entire Part II of the Electricity Act is 22 given over to defining what the IMO is and how it 23 operates. Governance and virtually every aspect of its 24 existence and function are prescribed in sections 6 to 25 25. The powers and functions of the IMO are then set 26 out in sections 26 to 39 in which it is given the power, 27 among other things, to make rules, establishing and 28 governing markets, conduct investigations and prepare Les Services StenoTran Services Inc. 613-521-0703 18 1 emergency plans. 2 Clearly, there can be no entity like the IMO 3 without comprehensive legislation to create it and to 4 form its powers and functions. 5 Mr. Chairman, in my submission, the same is 6 true in the Australian context. VENCorp, the Australian 7 ISO, which is the second example relied upon by Energy 8 Probe is also a creature of statute. In the excerpts I 9 have provided, you will see that section 16(a) of the 10 Victoria legislation, at page 20 of the handout, 16(a) 11 creates the entity, so it is clearly a creature of 12 statute. 16(c) sets out its functions and powers 13 relating to the gas industry. Section 16(d) sets out 14 certain general corporate powers or enabling powers to 15 enable it to carry on business. Sections (e), (f) and 16 (g) establish the manner of VENCorp's governance. 17 Then 16(h) provides that VENCorp may give 18 directions to, among other things, to facilitate the 19 reliability of the supply, facilitate the security of 20 the system, operate or use any equipment or 21 installation, control the flow of gas and the power to 22 direct any other matter it deems necessary to be done 23 for the security of the system. 24 In both examples there is an extensive 25 legislative framework which provides for the very 26 creation and regulation and powers and duties and 27 responsibilities of the independent operator. 28 The Ontario Energy Board Act obviously Les Services StenoTran Services Inc. 613-521-0703 19 1 contains no provisions for an ISO. Without such 2 provisions by legislative enactment or amendment, there 3 is simply no way for a gas ISO to come into existence in 4 this province. 5 It is worth noting that there actually was a 6 mechanism for consideration of this very issue through 7 the ten year market review in which Energy Probe tried 8 and failed to get the gas ISO on the agenda for future 9 gas deregulation. 10 The background to that is in September of 1996 11 the Board issued a report on the ten year market review 12 of natural gas deregulation. The Board set out the 13 issues that the Board felt needed to be examined 14 concerning the development of a more efficient natural 15 gas market in Ontario. Those issues did not include a 16 gas independent system operator. The Board's report 17 established, however, a working group on natural gas 18 markets. 19 Energy Probe floated a proposal for the 20 creation of an ISO in the working group. The working 21 group report of May 31, 1997, mentions the concept of an 22 ISO and says that the group did not consider it -- 23 excuse me -- but says that the group did not consider it 24 as an option. 25 The working group's report described a 26 desirable end state for a deregulated natural gas market 27 and the concept of an ISO wasn't in it. 28 The Board then went on to consider the working Les Services StenoTran Services Inc. 613-521-0703 20 1 group's report and other submissions during a 2 stakeholder consultative process in August of 1997, 3 which was instituted in response to a request from the 4 Minister of Energy for a report on requirements for a 5 legislative change to enhance further natural gas 6 deregulation. 7 Energy Probe participated in that process and 8 made written submissions to the Board in September of 9 1997. Those submissions explicitly contained a 10 recommendation almost identical to the one that is 11 before you today on a proposal for a gas ISO written by 12 Mr. Adams. There is no mention in the Board's advisory 13 report to the Minister in that proceeding of the need or 14 desirability of a natural gas ISO. 15 As the Board knows, draft legislation was 16 introduced following that process, which ultimately led 17 to the repeal of the old Act and the enactment of the 18 Electricity Act and the Ontario Energy Board Act 1998. 19 That occurred in October of 1998. 20 While the 1998 legislation involved very 21 dramatic changes to the structure of regulation of 22 natural gas and while the Electricity Act enacted at the 23 same time made provisions for the creation of an 24 electricity independent market operator, there is 25 obviously nothing in the new OEB Act about a gas ISO. 26 I would also note in passing that there was a 27 second stage of industry and market consultation 28 following the ten-year market review, the Market Design Les Services StenoTran Services Inc. 613-521-0703 21 1 Task Force, and again, the concept of a gas ISO was not 2 included in the terms of reference of the Market Design 3 Task Force in either Phase I or Phase II. 4 So not only is there no legislation providing 5 for the kind of thing that Energy Probe is proposing 6 here, but it is a proposal Energy Probe is already 7 floating before the ten-year market review working group 8 and other forms dealing with legislative amendments 9 without success. The OEB, in the context of a specific 10 inquiry and to legislate amendments for further 11 deregulation and greater efficiency in natural gas 12 declined to even mention the issue. 13 The issue of gas ISO, in my submission, does 14 not get to first base without the necessary legislative 15 underpinnings. Mr. Adams' views on the subject do not 16 belong in this hearing. Whatever may be the merits of 17 the issue, Energy Probe's submissions should be to the 18 Minister of Energy, not to the Board in the context of 19 Union's proposed unbundling and PBR. 20 There is nothing, in my submission, that the 21 Board can order or direct as a result of the Energy 22 Probe evidence without a legislative mandate to 23 encompass it. Without that mandate, there is simply no 24 jurisdiction and therefore, no basis for further 25 consideration. 26 The second reason for rejecting this evidence 27 is, in my submission, that by its admission, it is 28 incapable of being implemented. Altogether, apart from Les Services StenoTran Services Inc. 613-521-0703 22 1 the question of whether the Board could, if it had the 2 jurisdiction act on the idea, Energy Probe admits, on 3 page one at paragraph two, that the evidence is: 4 "...meant to be illustrative and is not 5 developed to the level that would permit 6 its implementation without further input 7 from the OEB and the stakeholders." 8 (As read) 9 I first observe that Energy Probe needs a lot 10 more than further input from the Board and stakeholders. 11 What Mr. Adams means is input from the Legislature. 12 But secondly, I ask rhetorically, why should 13 we be concerned with the illustrative at all? We are 14 here in contested litigation before the Board. Union 15 has an application before you which requires 16 determination. This is not a brainstorming session or a 17 new version of the Market Design Committee. We are here 18 to deal with contested issues in a contested 19 application. Alternative proposals being considered for 20 illustrative purposes will not assist the Board in 21 deciding this case and, in my submission, have no place 22 in this hearing. 23 Finally, in my submission, it really follows 24 from my first two submissions and it is apparent from 25 the issues led that the consideration of illustrative 26 alternative proposals which the Board has no basis or 27 jurisdiction to implement is not an issue on the issues 28 list. Energy Probe was represented by counsel on issues Les Services StenoTran Services Inc. 613-521-0703 23 1 day when the issues were determined. Nothing was said 2 about carving out scopes for the consideration of 3 alternative proposals, particularly alternative 4 proposals which lack both legal foundation and 5 sufficient detail to permit implementation. 6 These, as I said, are legal proceedings, not a 7 consultation about the full range of possible ways to 8 structure a market. These proceedings are governed by 9 the ambit of the application and the issues, as approved 10 by the Board. Whether there should be a gas ISO in the 11 province of Ontario is not amounted. 12 So, in conclusion, Mr. Chairman, I submit that 13 the evidence should be struck. First, the sole purpose 14 of the evidence is to float an idea which the Board 15 cannot possibly implement as it is without 16 jurisdictional foundation. Mr. Adams' submission should 17 be to the Minister, not to the Board. 18 Second, the Energy Probe's submission is, by 19 its own admission, illustrative only and incapable of 20 implementation. 21 Third, the alternative proposal for a gas ISO 22 does not arise out of Union's application, its evidence 23 or the issues list approved by the Board. 24 Those, Mr. Chairman, are my submissions. 25 THE PRESIDING MEMBER: Thank you, Mr. Penny. 26 Are there any parties who wish to speak in support of 27 the motion? 28 MR. THOMPSON: Mr. Chairman, I think he was Les Services StenoTran Services Inc. 613-521-0703 24 1 sort of in the middle. I don't know whether you want me 2 to go before we hear Mr. Mattson or after. 3 THE PRESIDING MEMBER: Normally, we would go 4 with for and then against, letting the party who opposes 5 the motion lead and then the others supporting him 6 follow. Unless there is someone in between, that would 7 be preferable. 8 MS LEA: I would recommend that we hear from 9 IGUA now, the reason being that that would give both 10 Mr. Mattson and Mr. Penny an opportunity to reply to 11 those submissions if they wish to, so that Mr. Mattson 12 hears everything. 13 MR. MATTSON: I don't object to going before 14 Mr. Thompson. 15 MS LEA: It was just my suggestion that 16 Mr. Thompson go first, but I don't think it matters much 17 in the circumstances. 18 Thank you, Mr. Mattson. 19 THE PRESIDING MEMBER: So then, Mr. Mattson is 20 prepared to go ahead. 21 Are there any parties who wanted to speak in 22 favour of the motion, then? There being none -- 23 Then, Mr. Mattson, what I was proposing is 24 that you would go and then anyone who wants to speak in 25 support of your position or, as Mr. Thompson does 26 somewhere in between, would follow. Is that all right 27 with you, Mr. Mattson? 28 MR. MATTSON: No problem, Mr. Chairman. Les Services StenoTran Services Inc. 613-521-0703 25 1 THE PRESIDING MEMBER: Thank you, Mr. Mattson. 2 So Mr. Mattson, please proceed. 3 MR. MATTSON: I understand that because we 4 don't have any written submissions, really, the parties 5 only have notice of my friend's objection to the 6 evidence, so I think it's only fair that maybe we hear 7 full argument and then maybe they can decide where they 8 fit on these issues. 9 Mr. Chairman, first of all, I think my friend, 10 Mr. Penny, has set up a straw man before you with which 11 he then directs all his ammunition to tear down, that is 12 that we have to begin with the issues list and what is 13 at issue in this hearing. 14 My friend has brought an unbundling proposal 15 before you. They have put the issue on the issues list. 16 This is a very substantial change that they are asking 17 the Board to approve, and the onus is upon my friend to 18 satisfy this Board that the status quo should no longer 19 maintain and that we should move forward as they 20 suggest. 21 The evidence of Mr. Adams, as I will 22 articulate in a moment, really is not only critique of 23 that proposal by Union, but is it any criticism of the 24 utility's lack of research, lack of research of 25 alternatives, lack of evidentiary base upon which this 26 Board can make a decision in the interest of consumers 27 as to whether or not this proposal is the right one or 28 not? Les Services StenoTran Services Inc. 613-521-0703 26 1 Now, you will note from the ADR agreement and 2 the wording in the ADR agreement -- and my friends has 3 parodied the words of Mr. -- reiterated the words of 4 Mr. Adams in his proposal itself, which suggest that 5 there isn't a request in this hearing for immediate 6 implementation of Energy Probe's recommendations, 7 Mr. Adams' recommendations. 8 What we have here is, first of all, whether or 9 not Union, in the evidence before you, can meet the 10 burden of proof upon them to show that this is in the 11 public interest in lieu from the status quo. 12 Secondly, the evidence of Mr. Adams provides 13 the Board with some input with respect to timing and 14 whether or not the Board can accept this application in 15 the interim as a transitional measure on the condition 16 that the company come back with a more extensive 17 proposal, that it looks at other alternatives and if 18 those alternatives seem to be reasonable and doable and 19 they are in the public interest the utility take them 20 seriously and they show some willingness to implement 21 those proposals. 22 That's at some time in the future when Energy 23 Probe is requesting that the company come forward with 24 that evidence. It certainly isn't for this hearing to 25 determine implementation of Mr. Adams' recommendations. 26 What we have here really is a critique of the 27 issue that have been put on the Issues List as resolved 28 from Union's proposal. The standard, then, with respect Les Services StenoTran Services Inc. 613-521-0703 27 1 to whether or not this evidence should be heard is 2 obviously one of relevance and assistance to the Board, 3 and I will get to that, but my friend has put, more 4 importantly, a new issue into play here and something 5 that's very, very important to this Board to take notice 6 of and to consider very seriously, and that is the issue 7 of your jurisdiction. 8 What Union has done has raised the issue of 9 Mr. Adams' evidence into something that will not only 10 affect the Board's hearing of the evidence in this 11 hearing, but ultimately will affect the Board's powers 12 as it goes forward under the new Act. My friends 13 suggest that Energy Probe should be going to the 14 Minister of Energy and Environment to make this argument 15 that there are better ways to unbundle than Union's 16 proposal, and that it's not for this Board to review 17 that, it's not for this Board to critique that approach, 18 and it's not for this Board even to hear evidence about 19 alternatives because it would require legislative 20 change. 21 Now, this, Mr. Chairman, is a dramatic change 22 from past practices before this Board. I note that all 23 the parties were here at E.B.R.O. 489 when the evidence 24 with respect to a separation study of the distribution 25 and merchant function came before this Board, and there 26 were many arguments at the 489 that that would require 27 legislative change, it would require Board processes 28 with respect to the parties and input from the parties, Les Services StenoTran Services Inc. 613-521-0703 28 1 and it was just far too draconian, far too outside what 2 the Board's jurisdiction was in terms of determining 3 rates for E.B.R.O. 489. 4 Now, the Board in that hearing -- there was a 5 lot of argument and the Board simply said: Yes, we are 6 going to hear it. The Board has extensive jurisdiction 7 under the Act. This is an administrative Tribunal. We 8 have a public policy interest. We consider policy 9 issues all the time. Policy issues have to be 10 determined by this Board and looked at by this Board; in 11 fact, that is the obligation of this Board to look at 12 these policy issues. Whether or not they can be 13 implemented or not, just as Mr. Adams suggests, will 14 depend on the willingness of the utilities and the 15 parties to co-operate. 16 We have the 10-year market review and many 17 other processes that came as a result of that 18 E.B.R.O. 489 hearing, and you did see that there was a 19 willingness on the part of the players as a result of 20 the Board's decision in that hearing and it didn't 21 require legislative change to get it going, and in the 22 end there was legislative change that incorporated many 23 of the recommendations made by that process. 24 So the Board, certainly in the past, had no 25 difficulty in hearing factual evidence, expert evidence, 26 all of which went to policy decisions which may or may 27 not require legislative change. 28 Now, because we are dealing with the Les Services StenoTran Services Inc. 613-521-0703 29 1 jurisdiction issue, let's just look at what Union is 2 proposing. 3 They are proposing a five-year plan. They do 4 not look at an end state. They don't know where they 5 are going with this plan. It's just an unbundling 6 proposal with no real direction. They don't indicate 7 where they are going. They argue the merits of their 8 unbundling plan without giving you an indication of 9 where it will end up and with no context for which you 10 are to compare it to other jurisdictions. 11 You are not even, in fact, as -- Mr. Adams at 12 least takes it to the extent that he looks at the 13 electricity reform here in Ontario that this Board is 14 very aware of. And we have heard both utilities before 15 this Board argue for a level playing field, we have 16 heard both utilities come before you and suggest that 17 really what we need here is equality and parity, and yet 18 they are arguing here, even though they are unbundling 19 issues on the Issues List, that you shouldn't look at 20 Mr. Adams' evidence with regard to what's going on in 21 the electricity restructuring with respect to an IMO and 22 unbundling. 23 They have no evidence in their package before 24 you on that section of the Ontario energy markets. They 25 don't have any evidence with respect to what the Market 26 Design Committee recommended or what the market review 27 process brought to bear. We have only heard that for 28 the first time here today in Mr. Penny's arguments. Les Services StenoTran Services Inc. 613-521-0703 30 1 So without Mr. Adams' evidence, we have an 2 application for major reform to the gas market for 3 Union's customers without a sense of direction, with no 4 indication on where the end state is and with no review 5 before this Board in this hearing of those issues. 6 That's what they want. No review. Go to the Minister. 7 I would suggest that Mr. Adams' evidence not 8 only helps complete Union's evidence with regard to 9 whether or not their proposal is better than the status 10 quo and, as I indicated in the Act, that the onus is on 11 the utility to demonstrate to you that their unbundling 12 proposal is better than the status quo. 13 What it also helps this Board understand is 14 whether it's the best approach, whether this can be seen 15 as a transitional step, whether this should be seen as a 16 transitional step and there is a better way to go. The 17 only way we are going to know that is if this Board 18 orders this utility to come back with a more 19 comprehensive approach that looks at other alternatives, 20 compares those alternatives to their approach and 21 provides this Board with an indication of where this 22 unbundling proposal will end up; in other words, what 23 the end state is that Union is seeking. 24 Mr. Adams' evidence is a high-level critique 25 of the unbundling proposal. It is not an argument. On 26 pages 1 to 7 it's a critique of the proposal. It does 27 look at alternative approaches to the standards of 28 review of Union's evidence, and it also does propose a Les Services StenoTran Services Inc. 613-521-0703 31 1 market-based alternative to delivering services. That's 2 all correct and I believe that that all is relevant 3 under the Board's Procedural Order with respect to the 4 Issues List. 5 Now, if we look at the Act what we find in 6 Bill 35 is that this Board has very broad powers. In 7 fact, the government, in drafting this Act has given the 8 Board extensive responsibilities with respect to the gas 9 market. 10 You have been reading, in "General, Part I, 11 Section (2), Board Objectives, Gas": 12 "The Board, in carrying out its 13 responsibilities under this or any other 14 Act in relation to gas, shall be guided 15 by the following objectives..." 16 (As read) 17 And you have five objectives: 18 "- to facilitate competition in the sale 19 of gas to users;" (As read) 20 I would say that objective of the Board itself 21 certainly would underscore the interests of the Board in 22 this unbundling process and whether or not what we have 23 here is a transparent process and something that will 24 prevent competition in the Province of Ontario or will 25 encourage it and whether or not it is the best way to 26 encourage competition in the Province of Ontario. 27 So certainly the objective of the Board there 28 with respect to this unbundling process is quite Les Services StenoTran Services Inc. 613-521-0703 32 1 significant. 2 "- to maintain just and reasonable rates 3 for transmission, distribution and 4 storage of gas; 5 - to facilitate rational expansion of 6 transmission and distribution systems; 7 - to facilitate rational development and 8 safe operation of gas storage; and 9 - to facilitate opportunities for energy 10 efficiency consistent with the policies 11 of the Government of Ontario." (As read) 12 What we have here is an administrative 13 Tribunal with very, very broad objectives as set out in 14 the Act in regards to gas, not just with respect to 15 electricity but certainly in regards to gas as well. 16 Section 15: 17 "The Board shall make a report annually 18 to the Minister containing such 19 information as the Minister will 20 require." 21 We have some discussion, then, here between 22 the government and the independent adjudicative board 23 and the government. 24 Section 19, we have the power of this Board to 25 determine all matters and hear all matters within its 26 jurisdiction of law and fact. 27 Certainly in terms of your decision in respect 28 to your own jurisdiction, it's an important one, and if Les Services StenoTran Services Inc. 613-521-0703 33 1 you accept Mr. Penny's premise that this Board should 2 not be considering any matters that would require 3 legislative change, then as that section 19 indicates, 4 you have the power to do that, but certainly it would 5 be, I would suggest, a very important decision. 6 I'm glad many of the other parties are here to 7 follow up my arguments because certainly there may be 8 times in the future when it's not their motion that's 9 being attacked, but they may want to talk about policy 10 issues that would require legislative change and 11 certainly the argument by my friends from Union here 12 today. 13 If the Board agree with those suggestions, it 14 would in fact severely curtail the jurisdiction of this 15 Board to hear these matters, but certainly you have the 16 power to hear this motion. 17 Section 21, the Board's powers and 18 miscellaneous, the Board may at any time on its own 19 motion and without hearing give directions or require 20 the preparation of evidence incidental to the exercise 21 of the powers conferred upon the Board by this or any 22 other Act. 23 That is from Mr. Adams. That is what he has 24 been seeking, that this Board, if it is going to accept 25 the unbundling proposal of Union, that it make it 26 subject to some conditions and order that Union come 27 back with a more extensive, a more full and complete 28 proposal that looks beyond its own interest, looks at Les Services StenoTran Services Inc. 613-521-0703 34 1 some of the public interest, looks at some of the 2 alternatives of the jurisdictions, and provides the 3 Board with some opportunity to make a reasonable and 4 informed decision as opposed to what we have before us 5 now, which is just Union's preference. 6 I don't blame Union for bringing forward its 7 preferred unbundling proposal, but you would think it 8 would have to look beyond just its own interest, 9 particularly before a public Board such as yourself that 10 is really asked to protect the public interest. 11 So you have the power to order Union to do 12 what Energy Probe suggests in its evidence. I note 13 section 36(3) then, approving or fixing just and 14 reasonable rates, the Board may adopt any method or 15 technique that it considers appropriate. 16 Again, there is an invitation in there for the 17 Board in this hearing in considering just and reasonable 18 rates to use a technique and that's it, to push Union, 19 bring it forward, try and do a more complete and 20 thorough review of the alternatives to its unbundling 21 proposal. Again, that is well within the jurisdiction 22 of the Board. 23 Section 36(6) was the burden of proof I was 24 referring to earlier, in an application with respect to 25 rates, the sale, transmission or distribution or storage 26 gas, the burden of proof is on the applicant. Again, 27 it's the applicant's onus here to prove that the status 28 quo is not acceptable and that their unbundling proposal Les Services StenoTran Services Inc. 613-521-0703 35 1 should be accepted. 2 Finally, section 44. Now, section 44 is a 3 brand new section, new powers given to the Board that 4 may deal with rule making. It sets out the Board may 5 make rules. Really what you have here is the Board 6 making regulations, the Board acting less like an 7 independent adjudicative Board and more like a policy 8 maker. 9 You will note that under section 44 the Board 10 may make rules. There's extensive powers given to the 11 Board with processes they can put in place. I would 12 suggest, and I am not going to make the argument today, 13 but certainly an argument could be made that Mr. Penny 14 is completely wrong, that you don't need legislative 15 authority to force Union into considering the proposals 16 and recommendations put forward by Energy Board. That 17 is the Board may under its rule-making powers be able to 18 establish rules and establish an ISO on its own. That's 19 something we may not be considering for two years, but 20 you don't need to consider it for the purposes of this 21 hearing. 22 We are not asking the Board -- this evidence 23 is not asking the Board to implement or to accept that 24 an ISO is the best way to go. The evidence is merely 25 for seeking Union's proposal and asking the Board to 26 order that Union come back with something more 27 comprehensive as opposed to its five year plan with no 28 discussion of end state, with no discussion of Les Services StenoTran Services Inc. 613-521-0703 36 1 alternatives. That's what Mr. Adams' evidence is 2 seeking to do. 3 If you look at the rule-making powers under 4 section 44, you will note how extensive those new powers 5 are. This morning I was looking over them. I think 6 that an argument could be made and may be made in time 7 that the Board could certainly, maybe of its own accord, 8 implement an independent system operator in Ontario for 9 Union Gas, but again, it need not be determined at this 10 hearing. 11 We would suggest with respect to the 12 jurisdictional argument, Mr. Chairman, that this Board 13 should show and has the obligation to show an openness 14 to reviewing important public interest concerns, has 15 broad powers with respect to reviewing, analysing the 16 evidence brought forward by the utilities. The utility 17 has an obligation to demonstrate to the Board that it is 18 in the interests -- that their proposal is better than 19 the status quo. 20 I would suggest that the Board, in the past 21 certainly, has considered policy issues, although not 22 always able to implement, but has considered them. 23 Certainly it is within your jurisdiction to consider 24 them. 25 Even if the Board is not able to implement all 26 the evidence that it considers, it's still within its 27 jurisdiction to consider it and to make recommendations 28 or to use whatever powers it has within the Act to try Les Services StenoTran Services Inc. 613-521-0703 37 1 and seek the willingness of the utility or the party or 2 in fact to deny the utility's application unless it is 3 contingent upon conditions, one of which could be a 4 broader, more substantial review of the unbundling and 5 what's in the public interest in Ontario. 6 Now, I think the second issue that has been 7 put in issue by my friends is whether or not, outside 8 the jurisdictional issue, whether or not the Board 9 should hear this evidence. In other words, is it 10 appropriate to review this evidence. 11 Mr. Chairman, the Ontario Energy Board and 12 these hearings that I have been party to for over a 13 decade and the process that we go through in terms of 14 this Board making its decisions and findings with 15 respect to rates is premised on the idea of an open. 16 public, transparent process. 17 What we have here, there is an important 18 principle that these issues, particularly ones that 19 affect the vested interests of the utilities and a 20 number of the vested interests around the table, that 21 the decisions be made openly, publicly, transparently, 22 important decisions such as changing the market as it 23 relates to Union's services. 24 Energy Probe would suggest, and as you can see 25 from the ADR agreement, Energy Probe believes that this 26 needs to be done on the record, open to the public. 27 This should not be just be because it's agreed to by a 28 number of the parties. That does not make it enough for Les Services StenoTran Services Inc. 613-521-0703 38 1 this Board to accept. This is a very, very substantial 2 change to the market and it should be done in an open, 3 public, transparent process. 4 What the Board then needs to determine is: Is 5 Mr. Adams' evidence relevant and is it of assistance to 6 the Board in reviewing Union's very important evidence 7 and request for change. For example, Mr. Chairman, if 8 this were an intervenor funding hearing after issues day 9 and the Board was looking at whether or not this 10 evidence is necessary or relevant and would you fund it, 11 we don't even need to make that determination. But 12 should it be funded, should the action be brought, is it 13 important to the public that all of these issues be 14 looked at? We would suggest yes. 15 What we have here is an expert who has been a 16 part of the process for ten years. Mr. Penny has gone 17 over and over how Mr. Adams through non-public processes 18 or less public, less formal processes has been making 19 these arguments. He has been diligent. He has gone 20 through all the hoops. 21 Here we have a public hearing with rules, due 22 process, transparency, binding decision-making and Mr. 23 Penny on behalf of Union says this shouldn't even be 24 heard. 25 Mr. Adams has gone through the process, has 26 been there from the beginning. He is well known. His 27 expertise has been heard from the Board before. There 28 is no duplication here. There is no reiteration. Union Les Services StenoTran Services Inc. 613-521-0703 39 1 doesn't even deal with these issues. Union doesn't look 2 at alternatives. Union doesn't look at whether or not 3 its unbundling proposal should be one end state or 4 another. Union is just putting forward its preferred 5 preference, period. 6 Now, they are saying nobody else should 7 critique it, nobody in this job shouldn't be able to 8 change it. Well, that is not true, because obviously, 9 we are going to cross-examine on the issues and make 10 arguments. 11 But the question is whether the Board wants to 12 hear from Mr. Adams, wants to hear what's going on in 13 Victoria, wants to hear what's going on in the 14 electricity restructuring in Ontario and wants to hear 15 what Mr. Adams has to say about what the failings are of 16 the current unbundling approach and whether or not Union 17 should come back with something more substantial and 18 review all these other issues before the Board, except 19 for the long term, that Union's proposal is in the 20 public interest. 21 That marketplace is a complex, complex market. 22 However, Mr. Chairman, it's possible within a modern 23 administrative hearing -- and certainly, Ontario Energy 24 Board has shown that it is a modern administrative 25 process -- that it is within this Board -- it is in the 26 Board's interest to hear evidence about market 27 mechanisms for unbundling services. This does not usurp 28 the role of Parliament, it's not outside the Les Services StenoTran Services Inc. 613-521-0703 40 1 jurisdiction of the Board. It seems relevant and 2 necessary for it to be a full public scrutiny of this 3 issue. 4 Energy Probe is not a vested interest. We 5 cannot just say, in response to its supporters, oh well, 6 it works for this group, it works for this customer 7 group, it works for my factory, it works for public 8 interest groups. We have no vested interest here. We 9 believe that this matter should be reviewed thoroughly, 10 publicly and completely and we believe that this is the 11 mechanism, the Ontario Energy Board and its hearing 12 process, where that review should take place. We 13 believe the government has indicated that and has 14 reiterated that throughout the Act giving the Board that 15 power, and we don't believe that there is any benefit in 16 accepting Union's argument that somehow there should be 17 some artificial barrier set up to try and prevent the 18 hearing of this evidence which goes directly to the 19 issues list, directly to my friend's proposal and, we 20 would argue, assist the Board in understanding Union's 21 application. 22 If the Board disagrees with Mr. Adams and no 23 recommendations flow, well, then, no party to the 24 process can complain. Nobody can say, oh, there was, 25 you know, there was any sort of suspicious activity on 26 the part of the vested interests to agree to this and it 27 wasn't publicly aired. This is what the Ontario Energy 28 Board must always remember. It has to be seen to do Les Services StenoTran Services Inc. 613-521-0703 41 1 things publicly and transparently. And we would suggest 2 that, certainly, in this case, we need a full review of 3 this hearing. It is relevant. 4 I note that Mr. Adams' evidence may take 5 approximately one hour. I don't know what his 6 cross-examination is. I have given my friend an 7 estimate of cross-examination of his panel of two hours. 8 So we are talking about potentially half a day to a day 9 to deal with all these issues. Certainly, this is not a 10 lot of time, but certainly, we think it's the 11 appropriate amount of time for the importance of the 12 issue. 13 Unless there are any questions, Mr. Chairman, 14 Dr. Jackson, those are my submissions. 15 THE PRESIDING MEMBER: Thank you, Mr. Mattson. 16 What we propose, unless some party objects, is 17 that other parties now speak, then, Mr. Mattson, we 18 propose, if there's anything that they wish say to which 19 you wish to respond which haven't been raised before, we 20 give you an opportunity and then, we give Mr. Penny the 21 last word. The Board -- If we have questions, we will 22 ask you questions after your submission and after 23 Mr. Penny's submission. 24 MR. PENNY: Thank you, Mr. Chairman. 25 THE PRESIDING MEMBER: Just before Mr. Penny's 26 submissions. So if there are other now who would like 27 to speak, I would suggest, if there's anyone who wishes 28 to speak directly in support of Mr. Mattson's motion, Les Services StenoTran Services Inc. 613-521-0703 42 1 they speak first, and then, those who are in the middle. 2 So if any party wishes to speak now -- 3 Mr. Vegh. 4 MR. VEGH: Thank you. 5 CEED supports maintaining the Energy Probe 6 evidence. This is not to say that CEED will 7 specifically endorse the Energy Probe proposal or even 8 agree with much of the analysis, but the point instead 9 is that in CEED's submission, this process will be 10 diminished if this evidence is struck. 11 To put that a little more positively, in our 12 submission, the Board's perspective will be enriched and 13 enhanced if it considers the Energy Probe's position as 14 part of this case. 15 And I say this for three reasons: First, it 16 highlights the importance of Union's independence as a 17 system operator or at least, the issue of independence 18 as a system operator. Second, I don't think the Board 19 should be restricting the issue that it is willing to 20 consider to the models which it may have jurisdiction to 21 impose -- and I will address that more fully. And the 22 third reason is that, in our submission, the analysis of 23 the issues go well beyond a tight little box of rate 24 unbundling that Union is characterizing in this case. 25 Let me just go to these three issues. The 26 first is of independence. One of CEED's concerns in 27 this case, and perhaps the concerns of others as well, 28 is that Union's proposal of PBR and unbundling would Les Services StenoTran Services Inc. 613-521-0703 43 1 make it both a system operator and trading in the 2 transportation and storage markets. 3 This, at least, creates the perception of 4 conflict of interest. We don't have to argue that issue 5 here. Whether Union is or is not in conflict will be 6 addressed in the hearing and in argument. But we should 7 at least have Energy Probe's evidence on why 8 independence is important for a system operator. 9 In other words, Energy Probe's independence is 10 about an independent system operator. Union is saying, 11 implicitly, at least, that it can operate the system and 12 a IMO is not necessary -- I'm sorry, an ISO is not 13 necessary. Energy Probe's evidence provides a contrary 14 view. It says that independence is necessary to operate 15 the system. In my submission, the Board should at least 16 consider that perspective. 17 Turning to the relevance of jurisdiction, 18 Union says that the Board should strike this evidence 19 because it doesn't have jurisdiction to impose an 20 independent system operator. 21 CEED's response to this submission is that 22 even if Union is correct and the Board does not have 23 jurisdiction to grant the ultimate remedy of an 24 independent system operator, the Board may find, after 25 hearing this evidence, that there are elements of 26 independence in system operation that the Board does 27 find attractive or necessary and that it does have 28 jurisdiction to implement. Les Services StenoTran Services Inc. 613-521-0703 44 1 Seen this way, Energy Probe's evidence may -- 2 what it may do is demonstrate an unattainable ideal. It 3 may set out an aspiration which is beyond our reach in 4 this case. It may even be utopian. 5 But that should not be a reason for saying 6 that the Board should not address issues from this 7 perspective and should not allow Energy Probe to even 8 express this sort of ideal of an independent system 9 operator. 10 Finally, in terms of the scope of the breadth 11 of issues that should be addressed here, it is very 12 common in Board proceedings for parties to talk about an 13 end state. Now, the Board may not always have 14 jurisdiction to implement that end state, and it's not 15 always clear that parties will ever meet that end state. 16 An example that springs to mind is an end 17 state that has been around for several years now about 18 this fully competitive gas market in the ten-year market 19 review. Parties talked about the end state from the 20 merchant function. The Board didn't have jurisdiction 21 at that stage to order the utilities out of the merchant 22 functions. Part of the ideal of the fully competitive 23 gas market was for burner tip sales, direct transactions 24 in the province. Until very recently, the Board had no 25 jurisdiction toward a direct transaction. 26 It's not unusual in these proceedings to look 27 at an end state, even appreciating that we may not get 28 to that end state, but something should be driving us. Les Services StenoTran Services Inc. 613-521-0703 45 1 So it may be that at times our reach will exceed our 2 grasp, but that hasn't prevented this Board from working 3 towards directions or soliciting views from parties of 4 what the direction is that we are trying to achieve. 5 Finally, what is at stake in this proceeding 6 is the design of the wholesale gas market in Ontario. 7 This is a market rules case. Union would have the Board 8 and the parties restrict the options in this case 9 through a minor refinement of the status quo. In 10 Union's vision, unbundling is just another rate option 11 and it should be addressed incrementally and addressed 12 within the box of how rates have been traditionally 13 defined. 14 The Energy Probe evidence shows some thinking 15 which is out of the box. It is this out-of-the-box kind 16 of thinking that is something which, in my submission, 17 we would all benefit from, and my submission is that the 18 evidence should be maintained. 19 THE PRESIDING MEMBER: Thank you, Mr. Vegh. 20 --- Pause 21 THE PRESIDING MEMBER: Thank you, Mr. Vegh. 22 The next party who wishes to speak? 23 Mr. Mondrow. 24 MR. MONDROW: Thank you, sir. Very briefly. 25 HVAC Coalition would like to speak in support 26 of Energy Probe's position, that is, in resistance to 27 Union's motion. 28 HVAC Coalition is not directly interested in Les Services StenoTran Services Inc. 613-521-0703 46 1 the unbundling issues in any detail, but we are 2 concerned with the view which we interpret to have been 3 propounded by Union on this motion that the scope of the 4 Board's considerations are subject to restriction by the 5 Applicant unilaterally. In this respect, I would 6 endorse the submissions of my friend Mr. Vegh who I 7 think expanded on that concern eloquently. 8 In our submission, the Board should consider 9 which portions of Energy Probe's evidence assisted in 10 evaluating Union's proposals and the benefits claimed by 11 Union with respect to its proposals. We note that there 12 is no request for implementation of any ISO alternative 13 at this stage and therefore submit that it's somewhat 14 premature to attempt to argue down to conclusion the 15 issue of the Board's jurisdiction in that respect. We 16 understand the Energy Probe evidence to be holding up a 17 bench mark for evaluation of the matter clearly before 18 you and, as such, commend the Board's consideration of 19 the substance of that evidence in considering Union's 20 submissions on this motion. 21 Thank you. 22 THE PRESIDING MEMBER: Thank you, Mr. Mondrow. 23 Mr. Janigan. 24 MR. JANIGAN: Yes. Thank you, Mr. Chair. 25 The Vulnerable Energy Consumers Coalition 26 supports the maintenance of the Energy Probe evidence 27 for the reasons outlined by Mr. Vegh. 28 THE PRESIDING MEMBER: Thank you, Mr. Janigan. Les Services StenoTran Services Inc. 613-521-0703 47 1 Mr. Thompson. 2 MR. THOMPSON: I assume we are to the people 3 in the middle? 4 THE PRESIDING MEMBER: I see no one else 5 stretching for the microphone. 6 MR. THOMPSON: For the purposes of my 7 submissions, Mr. Chairman, I assume, for the sake of 8 argument, that Mr. Adams' paper provides some context 9 for evaluating the reasonableness of Unions' unbundling 10 proposals. So IGUA takes no position on the issues that 11 Mr. Penny raises about jurisdiction, lack of detail 12 outside the scope of issues. 13 The approach that we urge you to consider when 14 evaluating this evidence and whether it should be 15 received in this proceeding as evidence is to consider 16 whether, in the context of the settlement of unbundling 17 issues, the document that Mr. Adams has authored should 18 be received as evidence in this proceeding or whether 19 the more appropriate approach is simply to treat it as 20 an academic treatise like the way Dr. Hall's paper is to 21 be treated. 22 I want to draw your attention, if I might, to 23 the provisions of the Settlement Agreement, and I hope 24 you have a copy of it there in front of you, because at 25 the bottom of page 2 of this document -- just let me 26 back up a bit. 27 The only issue outstanding on unbundling as a 28 result of the settlement is upstream transportation. If Les Services StenoTran Services Inc. 613-521-0703 48 1 you accept a settlement, that's the remaining issue to 2 be debated in the hearing. 3 There is text in the Settlement Agreement that 4 was inserted as a result of Energy Probe in Union's 5 consultation and I would like to read it: 6 "Energy Probe has submitted prefiled 7 evidence which addresses, at a high 8 level, the unbundling of upstream 9 transportation and storage through market 10 mechanisms. A motion was brought by 11 Union to strike this evidence and remains 12 outstanding. Energy Probe's evidence 13 does not suggest immediate 14 implementation. However, Energy Probe's 15 agreement on the settled issues is 16 without prejudice to Energy Probe arguing 17 that the unbundling issues as settled and 18 contained within this Agreement, should 19 apply for a limited time horizon..." 20 So duration of the settled unbundling issues 21 is an issue that they wish to argue: 22 "...and not preclude an examination of 23 the appropriate end state market 24 structure for natural gas. Energy Probe 25 also agrees that it will cross-examine 26 only on the unsettled issues...." 27 In the context of this settlement, then, I 28 urge you to consider: Do you need to receive this paper Les Services StenoTran Services Inc. 613-521-0703 49 1 as evidence in these proceedings where we are subject to 2 examination and cross-examination and we know how these 3 things tend to drag on? In this context, I urge you to 4 consider whether you need Energy Probe's evidence to 5 consider what is going on elsewhere. I submit you can 6 take judicial notice of what's going on elsewhere 7 without having to receive Mr. Adams' paper as evidence 8 in these proceedings. 9 In terms of the appropriate end state market 10 structure for natural gas, that's a very broad topic. 11 Do you need to receive this paper in evidence in these 12 proceedings to consider that issue? I submit not. You 13 could treat it as an academic treatise and allow people 14 to refer to it in argument with respect to that issue to 15 the extent people want to rely on that paper to make 16 submissions on the appropriate end state market 17 structure for natural gas. 18 So it's in this context that IGUA urges you to 19 consider the motion. Striking out the material as 20 evidence, I submit, is too severe, but I submit one 21 option that is open to you is to decline to receive the 22 paper in these proceedings as evidence without prejudice 23 to it being referred to during argument as an academic 24 treatise just as you have accepted Dr. Hall's paper to 25 be treatise. 26 Those are my submissions. 27 THE PRESIDING MEMBER: Thank you, 28 Mr. Thompson. Les Services StenoTran Services Inc. 613-521-0703 50 1 --- Pause 2 THE PRESIDING MEMBER: Ms Lea, do you have any 3 comments you wish to make at this stage before 4 Mr. Mattson and Mr. Penny -- 5 MS LEA: Thank you. Board staff takes no 6 position on the motion. Unless I can be of assistance, 7 I have no comments. 8 THE PRESIDING MEMBER: There was one question 9 I would have of you or maybe of Mr. Thompson and that's 10 the question of treating something as an academic 11 treatise and using it in argument. Is there any 12 comments on that issue as to what weight the Board could 13 give to that information in the context of a decision on 14 the material before it? 15 MR. THOMPSON: Well, I guess it would be less 16 weight than testimony before the Board that was subject 17 to the rigours of cross-examination. My sense of this 18 particular paper in this particular proceeding is there 19 may not need to be the rigour of cross-examination to 20 allow Energy Probe to make the submissions it wishes to 21 make on the basis of the document. 22 This is a fairly unusual approach, but it does 23 accord with the manner in which Dr. Hall's evidence, 24 so-called evidence, was to be treated. It seemed to me 25 it might be an appropriate middle of the road approach 26 for the Board in this case. 27 THE PRESIDING MEMBER: Thank you, 28 Mr. Thompson. Did you want to add anything? Les Services StenoTran Services Inc. 613-521-0703 51 1 MS LEA: My only comment was that because you 2 are an expert Tribunal, you can be expected to be aware 3 of the issues involved in the subjects in which this 4 Board regulates. That would include the literature on 5 the subject, the appropriate background literature to 6 the types of proposals that are put before you. 7 If you are presented with a paper by a party 8 which is not evidence but they are asking you to look at 9 it as an academic treatise, I think that you do not 10 accord it the weight of evidence, but it is an 11 illustration of the types of ideas that thinkers in this 12 area have come up with. 13 It has some -- I don't want to use the word 14 weight -- it has some use as an understanding of the way 15 that thought is going in this area. However, if you 16 were to ground a part of your decision on it, I think 17 that it would probably be something you would want to 18 say to the applicant "We are looking at this article. 19 We are inviting you to address its relevance and its 20 appropriateness to your application in your submissions 21 on your application". 22 I think that you would want to give the 23 applicant notice that this particular academic treatise, 24 if I can call it that, was being considered by the Board 25 in terms of the types of ideas it put forward. 26 The only other comment I had with respect to 27 the motion is has the parties considered whether or not 28 parts of this evidence would be useful on the record and Les Services StenoTran Services Inc. 613-521-0703 52 1 not objected to? For example, "Mr. Mattson, would there 2 be any utility in having this evidence on the record in 3 your view if section 9, which deals with the proposal 4 for the ISO, was in fact deleted or is the thrust of the 5 evidence that section 9 is essential". 6 And, "Mr. Penny, if section 9 was deleted from 7 this evidence as the first part of the evidence seems to 8 deal largely with criticisms on Union's proposals and 9 illustrations of what other jurisdictions have done. If 10 section 9 were removed, would your objections to the 11 evidence still stand?" 12 Now, that may not be a good solution and I am 13 inviting parties to comment on it. 14 THE PRESIDING MEMBER: Thank you, Ms Lea. 15 Mr. Mattson, would you like to respond now? 16 MR. MATTSON: Sure. That's fine, 17 Mr. Chairman. 18 I'm not sure if Mr. Thompson has read all the 19 evidence, but certainly Mr. Adams' paper is not an 20 academic treatise. It is a piece of evidence that has 21 been filed in this hearing as a response to Union's 22 application. 23 Whether or not TransCanada or some of the 24 vested interests may find it in their interests to deal 25 with Union and withdraw their evidence, certainly as I 26 suggested in my argument, that wasn't something that we 27 are prepared to do. We don't think we have some -- 28 there's nothing really that interests you other than, Les Services StenoTran Services Inc. 613-521-0703 53 1 Mr. Chairman, to have these issues heard, on the record, 2 cross-examined, and for you as the Board to determine 3 whether or not, as Mr. Adams suggests, that Union should 4 come back with something more comprehensive. Other than 5 the current five year plan, there is no envisaged end 6 state. 7 We are not in a position to -- we don't treat 8 this as an academic treatise. Issue No. 9, and I will 9 turn to the unbundling approach, again, Mr. Chairman, I 10 don't accept my friend's argument that somehow this 11 should not be heard by this Board, that there is a 12 jurisdictional issue, that it won't assist the Board. 13 It's a regular occurrence at these hearings 14 where the Board through experts who come before them, 15 the Board is informed of other approaches. We have 16 heard of other approaches to PBR. We have heard of 17 other approaches to market design. It's important for 18 the Board to hear these approaches in terms of trying to 19 decide whether or not Union's proposal is in the public 20 interest. 21 My friend, Mr. Thompson, seems to suggest that 22 somehow in the ADR agreement that we have agreed to all 23 the issues but for that. I think it should be noted 24 that we have not agreed to the issue of rationale, an 25 overview. In fact, it is an open issue. We still 26 intend to cross-examine and make our points through 27 cross-examination. 28 We will argue, regardless of whether Les Services StenoTran Services Inc. 613-521-0703 54 1 Mr. Adams' evidence is heard or not, that this shouldn't 2 be accepted without the Board putting conditions on it 3 with respect to it making an acceptance for this year 4 contingent on Union coming back with something more 5 fuller, a more comprehensive approach to this issue. 6 That's going to be our argument. That's 7 certainly well within our rights to do so. If you look 8 at the second part, look to insert "A", look at the 9 second part of Energy Probe's evidence. Energy Probe's 10 evidence suggests that overview and rationale of 11 unbundling should include consideration of fully 12 unbundled market based. It goes on. We say the end 13 state is not in Energy Probe's view contemplated in 14 Union's evidence. 15 We will make the argument. The question is 16 whether or not we are allowed to bring evidence to 17 support that argument. That's really what this is 18 about. We will be cross-examining on that panel. We 19 will be arguing that Union's evidence does not meet the 20 test. They have not met the onus. But we are prepared 21 to accept it. 22 We worked diligently through the ADR process 23 to find something that we think in the interim can be 24 accepted as long as it is seen to be transitional, as 25 long as the company is required by the Board, where it 26 certainly does have jurisdiction to do this, that is 27 make it contingent upon the approval, contingent upon 28 Union coming back with something more comprehensive. Les Services StenoTran Services Inc. 613-521-0703 55 1 That's where we have our ability as a public 2 interest intervenor. This is the time to make the 3 argument. If you don't accept it but Mr. Thompson's 4 argument is accepted and this is seen as just a 5 treatise, I guess we can try and use our leverage 6 somehow to get Union to bring back a proposal in a 7 couple of years. I highly doubt that we have any 8 leverage to that extent. 9 I think the only leverage we have is right now 10 in this hearing, through this process, through making 11 our argument completely and thoroughly before you now 12 and asking you to make any acceptance of the unbundling 13 contingent upon the company doing a more thorough and 14 extensive review of their proposal, in particular with 15 respect to whether it is in the public interest and 16 where they are going, what is the end state of this 17 proposal and why should the Board accept it. That's 18 what Energy Probe is asking for here. 19 Just in response to Mr. Thompson then, we 20 would not agree with what TransCanada accepted or what 21 Dr. Hall accepted. We would prefer that the Board just 22 threw out the evidence and gave us reasons for it and we 23 will then act accordingly. We are not prepared to make 24 the concessions that my other friends have made. 25 I believe that is the only real response to my 26 friend's submissions I need to make. 27 Thank you, Mr. Chairman. 28 THE PRESIDING MEMBER: Thank you, Mr. Mattson. Les Services StenoTran Services Inc. 613-521-0703 56 1 Mr. Penny, your turn now. 2 MR. PENNY: Thank you, Mr. Chairman. 3 Just perhaps three or four points in reply. 4 In my submission, Mr. Chairman, Mr. Mattson and the 5 others in support of his position have completely 6 avoided the central issue. 7 Mr. Mattson talked about a straw man. In my 8 submission, he is setting up his own evidence as a straw 9 man. What Mr. Mattson has described as the Energy Probe 10 evidence is not the evidence of Energy Probe. Their 11 evidence is not a general generic criticism of Union's 12 proposal. We have nothing to hide. We don't mind 13 criticism of our proposal. This motion is not brought 14 in an effort to squelch criticism or to constrain debate 15 about the issues that are in this application. 16 When you look at Mr. Adams' evidence, the 17 evidence is about the creation of an ISO. And if you 18 look at his conclusion on page 26, he says that he 19 recommends a comprehensive, competitive restructuring of 20 Union's Dawn Trafalgar system be undertaken, facilitated 21 via gas ISOs to further producer and customer choice. 22 That's what this evidence is about. 23 So when Mr. Mattson talks about, well, all we 24 want is to make sure that the Board orders Union to come 25 back with something that is more comprehensive or more 26 thorough, that's not what this evidence is about. This 27 evidence is recommending the Board that it direct -- 28 what I now hear is that the Board direct Union to go off Les Services StenoTran Services Inc. 613-521-0703 57 1 and study the concept of an ISO and come back and tell 2 the Board whether it thinks it's a good idea or not. 3 That goes to the very heart of our motion, 4 because in my submission, in the absence of legislative 5 mandate to create an ISO, there is no basis upon which 6 the Board can order anybody to go out and study that 7 proposal, because it's simply not relevant. There is 8 nothing to support it. There is no underpinning for it. 9 So the point, in my submission, is not whether 10 there are criticisms available to Union's proposal. The 11 point is that this evidence is recommending something 12 that cannot be done without legislative change. 13 Now, Mr. Mattson correctly points out that 14 there have been circumstances -- and Mr. Vegh alluded to 15 this as well, I think -- there have been circumstances 16 in the past in which parties, the industry, the 17 stakeholders have gone together and agreed on certain 18 kinds of things to be done, even though there wasn't an 19 explicit legislative mandate to do so, and I would be 20 the first to say that there have been positive features 21 of regulation and the development of the industry in the 22 past that have benefitted from that approach. But 23 that's not the situation. 24 In effect, Energy Probe is trying to have that 25 one both ways in this situation, because Energy Probe 26 did participate in those processes. It participated in 27 the ten-year market review, it participated in the 28 hearing and consulted into legislative amendments and it Les Services StenoTran Services Inc. 613-521-0703 58 1 participated in the Market Design Task Force. It 2 floated these proposals and they weren't accepted. 3 And now, Energy Probe is in effect end-running 4 that consensual process that it tried to get this into 5 by coming into this hearing and asking the Board to 6 order something that they couldn't talk anyone else into 7 doing. 8 Mr. Mattson used the example at one stage of 9 intervener funding. In my submission, that's perhaps a 10 good example. This Board has no power to grant advance 11 intervener funding, and as the Board knows, there was an 12 occasion in the 1980s when it sought to do so and the 13 Divisional Court overturned that decision on the basis 14 that the Board did not have the jurisdiction to grant 15 intervener funding. Legislation was required and that 16 legislation came into force. There was intervener 17 funding for a period of time and that legislation is 18 gone. 19 The lesson of the analogy is that this 20 evidence is exactly the same as the situation if Energy 21 Probe were coming forward in this hearing asking the 22 Board to order Union to study and report on the benefits 23 of advanced intervener funding. In my submission, it 24 would not be in a position to do that, because there is 25 no legislative authority. 26 The suggestion Mr. Mattson has given you 27 repeatedly is that Union's unbundling proposals are just 28 hanging out there -- just a five-year plan, I think he Les Services StenoTran Services Inc. 613-521-0703 59 1 said, or just an unbundling proposal. I'm not sure how 2 useful or insightful an analysis that is of our 3 proposal. I suppose I could equally say that Mr. Adams' 4 is just a proposal for an ISO. 5 But the point is our approach does not just 6 pop up like a mushroom overnight in the woods. Our 7 approach is totally consistent with and arises out of a 8 long history of development in the marketplace and 9 arises out of the unbundling of the commodity in 1985; 10 the work of the ten-year market review ten years after 11 that happened, and the product of legislative change 12 arising out of the Board's hearing in that process and 13 the Market Design Task Force. So it's not just 14 something that's popped up, with great respect to 15 Mr. Mattson. 16 Mr. Mattson and Mr. Vegh talked about the need 17 to have the ability to think outside the box and to 18 consider other potential issues. Again, I have no 19 difficulty with that. That's not the point of this 20 motion, however. You don't need this evidence to 21 consider issues regarding independence or conflict of 22 Union operating the Dawn Trafalgar system. Union has 23 been operating the Dawn Trafalgar system for decades. 24 It owns that asset. 25 But my point is that it is not necessary to 26 have evidence about a restructuring of the market which 27 would require legislative amendment in order to consider 28 whether Union is truly independent in its operation of Les Services StenoTran Services Inc. 613-521-0703 60 1 the Dawn Trafalgar system or whether, by virtue of it 2 being a player in transportation markets, have some kind 3 of conflict of interest. There is simply no connection 4 between these two things at all. 5 The fact that parties have issues about that 6 independence may or may not be a live issue in this 7 proceeding, given that the settlement agreement -- I 8 won't comment on that at this stage. My only point is 9 that you do not need Mr. Adams' evidence to consider 10 those issues. 11 My last point, Mr. Chairman, is -- Well, I 12 guess I have two points. My second-last point is that 13 what I now understand the concession to be from 14 Mr. Mattson is that this evidence is not suggesting that 15 the Board should implement a gas ISO, but simply ask 16 Union to come back with a more comprehensive proposal. 17 That could only have any meaning, in relation to the 18 Energy Probe evidence, if that more comprehensive 19 proposal were a gas ISO. Because if it's just a more 20 comprehensive proposal at large, there is simply no need 21 for this evidence. 22 So the only possible basis for the argument 23 Mr. Mattson has advanced is that the Board direct Union 24 to come back with a more comprehensive proposal, i.e. 25 something about a gas ISO. That is really what goes to 26 the heart of the motion and the reason why the motion 27 was brought, and that is to reiterate that without the 28 legislative underpinnings to enable that to take place, Les Services StenoTran Services Inc. 613-521-0703 61 1 in my submission, the Board has no jurisdiction to 2 direct that kind of study. 3 This is pre-eminently an issue for 4 consideration by the Ministry of Energy, by the 5 Minister, and if it were regarded as being an issue 6 worthy of note, there would no doubt be some form 7 established, perhaps through this Board, to conduct a 8 study of that issue and it would be properly constituted 9 and it would not be using up our time in our application 10 structured in our way, because we are the applicant to 11 deal with things that don't need to be dealt with in the 12 context of our application. 13 My final point was a very brief response to 14 Mr. Thompson's suggestion. It's my understanding, the 15 way I was raised in the practice of litigation, was that 16 there's arguments and there's evidence and that they are 17 two separate and discrete things. I understand, and 18 Mr. Mattson has confirmed, that they want this before 19 the Board on the basis of evidence and it's on the basis 20 of evidence that we are bringing this motion and I'm 21 making these arguments. 22 So it has to be one or the other, and I agree 23 with Mr. Mattson on the basis of the argument he's made, 24 the Board has to decide whether it should be evidence or 25 not. Thank you, Mr. Chairman. 26 THE PRESIDING MEMBER: Thank you, Mr. Penny. 27 --- Pause 28 THE PRESIDING MEMBER: The Board would like to Les Services StenoTran Services Inc. 613-521-0703 62 1 consider this overnight and we will make a decision on 2 the motion tomorrow. I'm saying tomorrow. I hope that 3 hopefully it is tomorrow. 4 But that would conclude the hearing of this 5 motion. I don't believe there are any other outstanding 6 motions. 7 Now we move on to Item No. 2 on the agenda, 8 which is the hearing schedule. Before we discuss that, 9 I want to highlight, I believe, Mr. Wightman's -- 10 Dr. Wightman will have already advised you that the 11 Board is unable to sit on the afternoon of Wednesday the 12 14th, on the day of the 20th of June, and on the morning 13 of the 22nd of June. 14 I further want to alert you to the fact that 15 if this thing goes into July for a period of time that 16 the afternoon of July the 12th would be difficult, 17 hopefully we don't reach that far, but the afternoon of 18 July the 12th will be difficult, and the day of July the 19 14th would be difficult. 20 Now can we speak to the schedule? 21 Dr. Wightman, are you going to introduce this or is 22 Mr. Penny going to introduce the question of the 23 schedule? 24 MR. PENNY: Well, I'm happy to introduce that, 25 Mr. Chairman, but Mr. Wightman can speak to it as well 26 if he wishes. 27 There was a notice June 8, 2000 that was 28 circulated to the intervenors and to Mr. Wightman from Les Services StenoTran Services Inc. 613-521-0703 63 1 Mr. Birmingham, the Vice-President of Market Management, 2 and it sets out an approach, and that attached a 3 schedule for the panel. This is not, I suppose, a 4 schedule in the timing sense but simply the proposed 5 order of proceeding. I take it when you are speaking of 6 scheduling, Mr. Chairman, that that's what you had in 7 mind was what we were going to start with tomorrow. 8 THE PRESIDING MEMBER: Yes. 9 MR. PENNY: So it is proposed that we start 10 tomorrow with a panel that will address the issues that 11 are in the first box, that is, 2.1 and 2.2, and then 12 proceed -- and I can say in brief that the idea there is 13 that the various aspects of the fixed price cap are very 14 interrelated and so the thinking is that those be dealt 15 with as a piece, excluding of course Union's expert 16 evidence on the subject, and that we would then move on 17 and deal with the non-price cap aspect of the proposal 18 in the next box dealing with the off ramps, the system 19 expansion and additional risks and benefits issues, to 20 then proceed -- and those panels would be the same 21 people, Mr. Birmingham and Ms Elliot, to then deal with 22 reporting/monitoring requirements, customer view, and 23 second generation price cap, which would also be 24 Mr. Birmingham, Ms Elliott and Mr. Byng would join that 25 panel. 26 We would then propose to hear -- we were 27 hoping we could fix the evidence of our expert for June 28 the 21st so that we can make arrangements for them to be Les Services StenoTran Services Inc. 613-521-0703 64 1 here and know they are going to proceed, and then to 2 deal with the SQI and DSM issue. 3 Then -- I mean I don't need to go through 4 it -- to then deal with the remainder of the issues in 5 the boxes as we have outlined them there with a question 6 mark for intervenors, assuming that the intervenors come 7 from various different positions and viewpoints and so 8 they would each constitute separate panels presumably. 9 THE PRESIDING MEMBER: My understanding is 10 that the expectation is that prior to Issue 1.1, 11 "Unbundling Overview and Rationale", it would be 12 necessary for the Board to make its findings with regard 13 to the unbundling issues on the Settlement Agreement. 14 I think of course the Applicant, I'm sure the 15 parties would be advantaged by having the Board's 16 determination of the Settlement Agreement as early as 17 possible, but I think it would be fair to say certainly 18 by that time, because if there are issues around that 19 Settlement Agreement and -- for example, in a worst-case 20 scenario, if there were no agreement then the approach 21 to this issue would be entirely different. 22 THE PRESIDING MEMBER: We have heard the 23 proposal for a schedule. Are there parties who would 24 like to make comments on the proposed schedule? 25 MR. WARREN: Yes. Mr. Chairman, certainly 26 among Mr. Thompson, Mr. Janigan and me, who tend to be, 27 perhaps for legitimate reasons, the longest in 28 cross-examination on the major issues, we have had some Les Services StenoTran Services Inc. 613-521-0703 65 1 discussion about how to achieve some efficiencies by 2 parcelling up the lead role on some of the issues. 3 We -- and we had raised this with Mr. Penny 4 briefly before the commencement of this afternoon's 5 session -- felt there would be some advantage if we were 6 able to deal with overview and rationale, which is 2.1, 7 and then the cluster of issues in 2.1 as one discrete 8 issue in its entirety. We think there are some 9 analytical links between overview and rationale and what 10 I will call the base issues, have those dealt with 11 discretely and comprehensively, and then go on to the 12 balance of the fixed price cap plan which would be 2.2.2 13 and 2.2.3. 14 In addition to what we think are the logical 15 connections among the issues, it would enable us to do 16 our divvying up of lead roles in a way that we hope will 17 achieve some efficiencies. So that is a proposal that 18 we would advance to the Board for its consideration and 19 to Mr. Penny. I think Mr. Penny was going to get 20 instructions on whether or not that was acceptable to 21 his client, but that's a variation we would propose on 22 the theme. 23 Now, the same bodies will be in the box 24 answering the questions, it's just that we would propose 25 that those issues, 2.1 and 2.2.1, be dealt with in their 26 entirety and then move on to the balance of them. 27 So that's the counterproposal we advance for 28 the Board's consideration. Les Services StenoTran Services Inc. 613-521-0703 66 1 THE PRESIDING MEMBER: Thank you, Mr. Warren. 2 Are there any other parties who would like to 3 speak to this issue? 4 MR. VEGH: Perhaps just in response to this 5 point. This was the first I heard of it. 6 It may be that that is the proper solution for 7 the parties that were involved in -- that Mr. Warren has 8 spoken to, and it is maybe that parties will take 9 different approaches. For our purposes at least it 10 would be more efficient if we could deal with all of 2.2 11 together, otherwise we will be making a couple of trips. 12 So what I would suggest is that -- and I'm 13 sorry we haven't spoken to you about this before, but 14 what I would suggest is that there be some flexibility 15 within 2.2 so that those who want to address all of 2.2 16 at the same time as 2.1 be entitled to do so, and those 17 who, for logistical reasons, would find it more 18 efficient to split some of their cross-examination that 19 they be entitled to approach it that way. 20 THE PRESIDING MEMBER: Any other parties who 21 wish to comment? 22 MR. JANIGAN: Yes. Mr. Chair, I would like to 23 reiterate the submission made by Mr. Warren. I would 24 also draw to the Board's attention that one of the 25 critical phases of this proceeding is of course the 26 preparation of argument. Certainly splitting the issues 27 in the manner that we have proposed makes for a much 28 easier record at the end of the day for the purpose of Les Services StenoTran Services Inc. 613-521-0703 67 1 both putting together argument and in analysing and 2 deciding upon the issue, we would assume, by the Board 3 itself. So we would strongly support the idea of 4 splitting this panel in the way that we suggested. 5 THE PRESIDING MEMBER: Mr. Brett. 6 MR. BRETT: Mr. Dominy, I have a related 7 matter which I think I should throw on the hopper now. 8 It really is maybe more of a question than anything 9 else, but it relates to the way this table is organized. 10 I see under 2.1, "Overview and Rationale", 11 which was part of the panel as proposed and then down at 12 2.6 I see "Additional Risks and Benefits" which, as 13 proposed, part of the second panel. Now, my broad 14 understanding of the issue of overview and rationale is 15 that that evidence includes a discussion to some extent 16 of the risks and benefits to both ratepayers and 17 shareholders in moving to a PBR system. 18 What is entitled 2.6, "Additional Risks and 19 Benefits", I think talks about some other risks and 20 benefits, both to the shareholder and the ratepayer, a 21 different part of the evidence, maybe a supplemental 22 later part of the evidence. 23 I just want to -- my question is: I want to 24 be clear from the company's point of view where they 25 anticipate questions coming or do they really care very 26 much on the issue of the risks and benefits to the 27 shareholders and the ratepayers of the move to PBR 28 because that matter is treated extensively in their Les Services StenoTran Services Inc. 613-521-0703 68 1 evidence in different places, in their 2 evidence-in-chief. 3 That's my comment. 4 THE PRESIDING MEMBER: Thank you, Mr. Brett. 5 Any other parties? 6 MR. RUTWIND: TransCanada PipeLines, a brief 7 matter also in relation to 2.2 which comes up in the 8 first box on the schedule and also 2.3, pricing 9 flexibility, TransCanada does have at issue in relation 10 to, I guess, storage and transmission in the same 11 basket. Our view is it should properly be within 2.3, 12 dealt with there. 13 In a sense, we want confirmation from the 14 applicant that this is acceptable. What is happening is 15 that we are going to have a witness coming in and also I 16 will have to come in from Alberta. Presumably we could 17 most easily deal with it under the squares or brackets 18 that are there under 1.1, 1.2.1, 1.2.2 as well as 2.3 in 19 preference to having to come twice. 20 THE PRESIDING MEMBER: Thank you. 21 MR. RUTWIND: Also one matter of clarification 22 and perhaps -- I'm not familiar with how this Board 23 operates, but just interested to know in relation to 24 intervenor witness panels, if it's contemplated that in 25 effect the cross-examinations all take place in sequence 26 in accordance with the numbers allocated on the left 27 side. 28 Further to that, if in fact there will then be Les Services StenoTran Services Inc. 613-521-0703 69 1 intervenor panels, that they will all come at the very 2 end of the proceeding or if it in fact it is meant that 3 the intervenor panels will come shortly after the panels 4 on behalf of the applicant on an issue by issue basis 5 which, of course, would be the most convenient, though I 6 wonder if that is what has been contemplated. 7 --- Pause 8 THE PRESIDING MEMBER: Thank you. I think 9 that's another issues that perhaps parties would like to 10 comment on. 11 My understanding of this schedule is that the 12 expectations that the company had was that the 13 intervenor panels would follow the company's panels. 14 I'm not sure if there are any comments on your 15 suggestion that intervenor witness panels that relate to 16 specific topics should perhaps be in the same grouping. 17 MR. PENNY: If I could start with that, 18 Mr. Chairman, since we are the applicant. 19 First of all, I didn't hear Mr. Rutwind to be 20 suggesting that. He was just asking whether that was 21 contemplated. From our perspective, that certainly is 22 not contemplated. We believe that the longstanding 23 practice of the Board and our right as applicant is to 24 put in our case without it being interrupted by other 25 evidence. It is out intention to put in our case in 26 advance of intervenor evidence. 27 THE PRESIDING MEMBER: Are there any other 28 comments on the scheduling question? Les Services StenoTran Services Inc. 613-521-0703 70 1 MR. THOMPSON: Yes, Mr. Chairman. You can't 2 see me, but I will speak anyway. I'm always behind CAC. 3 I support the suggestion that we subdivide the 4 first panel as Mr. Warren has suggested. If you look at 5 the topics that are in the issues list under one time 6 adjustment to base rates and under pricing formula, 7 there is a broad range of topics. It's a bit much I 8 think to chew off in terms of preparing for 9 cross-examination to take them all in one bite. 10 Mr. Vegh says he would like the liberty to do 11 that. I suppose no one can cut him off if he wants to 12 go that way, but I urge you to adopt the approach 13 suggested by Mr. Warren. 14 I agree with Mr. Penny, we should hear the 15 company's case completely before we get into 16 intervenors. The only other question I have is why 17 pricing flexibility doesn't follow issue 2.2. Is that 18 simply a scheduling problem for a witness? If it isn't, 19 it should, in my submission, come up following 20 issue 2.2. 21 THE PRESIDING MEMBER: Thank you, 22 Mr. Thompson. 23 MR. THOMPSON: Thank you. 24 Mr. Klippenstein: 25 MR. KLIPPENSTEIN: Thank you, Mr. Chair. 26 I don't think this is a problem, but I just 27 take note of Union's position in its memo that it wants 28 to ensure that when cross-examination proceeds on an Les Services StenoTran Services Inc. 613-521-0703 71 1 issue by issue basis that there not be 2 re-cross-examination on prior issues. I don't quarrel 3 with that. 4 Pollution Probe is particularly interested in 5 DSM, which is issue 2.5.2.5, but that overlaps quite 6 substantially with earlier issues, namely 2.7, reporting 7 and auditing requirement, and 2.8, customer review 8 processes. 9 We will certainly try and address DSM 10 questions on the earlier panels to those panels, but it 11 will be a bit of an exercise to make sure that we 12 don't -- we have no intention of re-cross-examination or 13 of duplication, but we will ask for the Board's and the 14 panel's understanding if we ask questions earlier on 15 which are actually addressed to the topic of DSM just to 16 make sure we don't get left stranded. 17 I don't know if we have any other alternative 18 to do that and I just ask for the Board's understanding 19 on that when it comes. 20 THE PRESIDING MEMBER: Thank you, 21 Mr. Klippenstein. I'm sure Mr. Penny will rise if he 22 feels that cross-examination is too often, twice or 23 three times. 24 Any other comment? Ms Lea? 25 MS LEA: Thank you. Just a brief one. 26 In terms of spreading the first panel as has 27 been suggested by Mr. Warren and others, Mr. Vegh's 28 desire I think is easily accommodated. We can put him Les Services StenoTran Services Inc. 613-521-0703 72 1 at the end of the first half and the beginning of the 2 second half. That way he can go through everything at 3 once and other folk can be the dividing line, as it 4 were, between the two panels. 5 Just in terms of a purely practical solution, 6 if no one else wishes to do everything at once, we can 7 accommodate both interests that way. 8 THE PRESIDING MEMBER: Mr. Penny, do you have 9 anything to add? I don't think there is anyone else who 10 wishes to comment. 11 MR. PENNY: Just on a couple. There was a 12 list of inquiries. Let me deal with those first. 13 I think Mr. Brett raised an issue about the 14 question of risk and benefits and where that set. I 15 think the intention is that the first portion, indeed 16 the first two boxes if you will, deal with more of the, 17 if I may call it, technical components of the price and 18 tap plan. The risks and benefits issues don't 19 necessarily follow easily with any of the technical 20 components, so to speak, such as the one time 21 adjustments to base rates or to the productivity factor, 22 inflation factor, whatever. 23 I think the intent is that that be dealt with 24 as a separate wraparound piece, if you will. I think 25 most of what Mr. Brett is interested in will come up 26 under the context of 2.6 rather than 2.1. 27 TransCanada had asked a question about their 28 issue being -- where their issue falls. I think it Les Services StenoTran Services Inc. 613-521-0703 73 1 raises the same issue as Mr. Thompson raised in his 2 question about the pricing flexibility. There are two 3 reasons why pricing flexibility is moved down to where 4 it is. 5 One is witness scheduling and the other is 6 fitting together like topics. The pricing flexibility 7 is where it is on this chart so that it is back to back 8 with rates, so that Mr. Packer, who speaks to those two 9 issues, only has to come here once. Mr. Packer in fact 10 had a scheduling issue. We are trying to have his 11 evidence be as late in the process as possible. Those 12 are the two reasons for that. 13 I think in answer to Mr. Rutwind's question, 14 it wasn't exactly clear to me where their issues would 15 fall, but it is certainly in the box containing the 16 unbundling issues, the box with the pricing 17 flexibilities or the box with the rates. Those are all 18 in a sequence, so I am sure we will be able to work out 19 and make it clear to him before we get to that precisely 20 where it falls. They are all one after the other in any 21 event is my point. 22 With respect to the overall proposal to split 23 up the first box into two pieces, I think I can only 24 reiterate my opening remark, which was that from the 25 company's point of view the one-time adjustments to base 26 rates and the various components of the fixed price plan 27 are all integrally related to one another and what you 28 push down in one place pops up in another kind of thing. Les Services StenoTran Services Inc. 613-521-0703 74 1 So the reason that we are suggesting putting that 2 group -- dealing with that group of issues together is 3 for that reason that the interconnectedness of those 4 issues. 5 Mr. Vegh's concern about wanting to do this 6 all at once, raising, in fact in my mind, a problem 7 around that because it seems to me not particularly 8 workable or conducive to an orderly hearing to have some 9 people wanting to examine on a bundle of three or four 10 issues that have been put together for a particular 11 reason and other people wanting to examine only on two 12 of them and wanting to hive that off and do 13 cross-examination later on two of the others. 14 So while we, of course, want to be as 15 accommodating as possible, it does seem to me, and it is 16 my submission, that we need to have, I think, one system 17 or the other in order for the cross-examination to 18 unfold in an orderly way. 19 So my proposal and my submission to you, 20 Mr. Chairman, is that we do it in the way that Union has 21 proposed to preserve the interrelatedness of those 22 issues. 23 --- Pause 24 THE PRESIDING MEMBER: Mr. Penny, we wonder 25 whether it would be possible to split 2.2.1 and 2.2.2. 26 I will give you the thought that is going through my 27 mind. 28 2.2.1 largely deals with the base from which Les Services StenoTran Services Inc. 613-521-0703 75 1 the PBR plan moves forward. 2.2.2 deals with moving 2 forward. There are a lot of specific issues in dealing 3 with the base which in some ways seem to be separate 4 from calculating the productivity factor going forward 5 and whether it would be possible to accommodate that 6 split, with that thought. 7 MR. PENNY: Mr. Chairman, if I may, I would 8 like to ask your indulgence on that overnight. The 9 people are the same and wherever we start -- the 10 starting place is presumably going to be the same -- 11 whether I could take instructions and have the 12 opportunity to consult with the witness panel and advise 13 the Board and parties first thing tomorrow morning on 14 that issue. 15 THE PRESIDING MEMBER: I think that would be 16 helpful. In fact, if the counsel could get together and 17 see if they can reach a compromise, that would be even 18 better. 19 Thank you. 20 MR. PENNY: Thank you very much. 21 THE PRESIDING MEMBER: Mr. Warren. 22 MR. WARREN: I should have raised this 23 earlier, but perhaps I could just put this on the record 24 for my friend, Mr. Penny, to think about. I understood 25 his earlier observation that Union wanted to complete 26 its case in its entirety before we began the 27 intervenors. 28 I am instructed that the joint witness for the Les Services StenoTran Services Inc. 613-521-0703 76 1 CAC and VECC, Dr. Bauer -- because of severe scheduling 2 constraints on his part, the optimum date for his 3 appearance would be the 28th of June, which logically 4 would put him at the end, I think, of the PBR case. 5 So the PBR case in its entirety would be in 6 and we would have then unbundling and the rates issues 7 follow. I'm wondering if my friend, Mr. Penny, would 8 consider the possibility of allowing intervenor 9 evidence, if you wish, on broad issues, to complete PBR, 10 put the intervenor evidence in the PBR and then move on 11 to other issues. 12 I simply leave that with him and with the 13 Board because of Dr. Bauer's difficulty. 14 MR. PENNY: I think the way to deal with that, 15 Mr. Chairman, is we will consider that and speak to 16 Mr. Warren about it and if it looks like there is a 17 problem brewing we will advise the Board. 18 THE PRESIDING MEMBER: Thank you, Mr. Penny. 19 I think that gives me a comment that there are 20 going to be questions of scheduling witnesses and I 21 think people could alert Dr. Wightman and Mr. Penny and 22 they can sort out what possible schedule arrangements 23 would have to be made to accommodate. 24 --- Pause 25 THE PRESIDING MEMBER: Are there any other 26 matters? 27 MR. MONDROW: Before you adjourn, 28 Mr. Chairman, I wonder if I could, through you, put a Les Services StenoTran Services Inc. 613-521-0703 77 1 request to Dr. Wightman with respect to the hotline, 2 just to advise us of the number. HVAC Coalition will 3 attempt to be somewhat discretionary in its attendance 4 and having the daily hotline update as well as the 5 transcripts to review would help in that respect. 6 MS LEA: I am advised that the hotline number 7 is 440-7608 and I will nag Dr. Wightman to say this at 8 the end of every day. I'm good at that. 9 MR. MONDROW: I will play backup to that 10 nagging, if you wish. 11 Thank you very much, sir. 12 THE PRESIDING MEMBER: So there are no other 13 administrative matters for today? 14 Well, before I close I just want to alert 15 people -- and I hope my voice has been heard by the 16 court reporter -- to speak close to the microphone 17 because we do run into some interesting recordings. 18 I have one of particular interest to me -- and 19 it is to Mr. Thompson that it applies -- which was in 20 the case of revised submissions on hearing a motion on 21 RP-1999-0001 and Mr. Thompson is reported saying that 22 the Board's: 23 "...approved rates in RP-1999-0001, 24 therefore, they are just unreasonable..." 25 --- Laughter 26 THE PRESIDING MEMBER: And it was repeated 27 later. 28 So I alert people to speak clearly and to Les Services StenoTran Services Inc. 613-521-0703 78 1 check the transcripts. 2 --- Laughter 3 THE PRESIDING MEMBER: Another one is "wholly 4 owned" became "wholly known". 5 --- Laughter 6 THE PRESIDING MEMBER: So I do ask people to 7 check the transcripts so they are not recorded for 8 posterity with those comments. 9 Thank you. 10 We will meet tomorrow morning. 11 --- Whereupon the hearing adjourned at 1533, 12 to resume on Tuesday, June 13, 2000 at 0900