1 1 Motions Hearing 2 RP-1999-0040 3 4 ONTARIO ENERGY BOARD 5 6 IN THE MATTER OF Ontario Energy Board -- Standard 7 Supply Service Code OEB File No. RP-1999-0040 8 9 AND 10 11 IN THE MATTER OF DTE/Probyn Energy Solutions' Notes on 12 the Behalf of Public Utilities Commission of Sault Ste. 13 Marie ("The PUC") for August 10th, 1999 OEB's Hearing 14 15 16 MOTIONS HEARING 17 18 19 B E F O R E : 20 GAIL MORRISON Presiding Member 21 PAUL VLAHOS Member 22 ANNE DROZD Member 23 24 25 Hearing held at: 26 2300 Yonge Street, 25th Floor, Hearing Room No. 1, 27 Toronto, Ontario on Tuesday, August 10, 1999, 28 commencing at 1303 2 1 APPEARANCES 2 JENNIFER LEA Board Counsel, Board 3 Technical Staff 4 FRED CASS Enbridge Consumers Gas 5 SANDRA FORBES/ Enbridge Inc. 6 ANDREA BURKE 7 TOM BRETT Ontario Association of 8 School Board Officials and 9 Metro Toronto School Board 10 PETER THOMPSON Industrial Gas Users 11 Association 12 ROBERT WARREN Consumers Association of 13 Canada 14 MICHAEL JANIGAN Ontario Coalition Against 15 Poverty 16 MARK MATTSON Energy Probe 17 18 19 20 21 22 23 24 25 26 27 28 3 1 INDEX OF PROCEEDINGS 2 PAGE 3 Preliminary matters 5 4 Submissions on Motion by Ms Forbes 8 5 Submissions by Mr. Cass 17 6 Submissions by Mr. Thompson 18 7 Submissions by Mr. Warren 22 8 Submissions by Mr. Janigan 28 9 Submissions by Mr. Mattson 33 10 Reply submissions by Ms Forbes 36 11 12 Submissions on Motion by Mr. Cass 42 13 Submissions by Mr. Thompson 64 14 Submissions by Mr. Brett 80 15 Submissions by Mr. Warren 88 16 Submissions by Mr. Janigan 106 17 Submissions by Mr. Mattson 110 18 19 20 21 22 23 24 25 26 27 28 4 1 EXHIBITS 2 3 NO. PAGE 4 5 7 Letter of Comment from 7 6 Ian Mondrow on behalf 7 of the HVAC Coalition 8 9 8 Manley Inc. et al v. 30 10 Fallis, Ontario Supreme 11 Court [Court of Appeal] 12 13 9 Package of cases from the 88 14 Consumers Association of 15 Canada 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 Toronto, Ontario 2 --- Upon commencing on Tuesday, August 10, 1999 3 at 1303 4 THE PRESIDING MEMBER: Good 5 afternoon. 6 The Board is sitting today to 7 consider a motion filed on June 11, 1999 by Enbridge 8 Consumers Gas requesting that the Board review or 9 rehear certain matters relating to portions of the 10 Board's Decision with Reasons, dated March 31, 1999, in 11 E.B.O. 179-14/15, on an application by the company for 12 certain approvals associated with the retention of 13 ancillary programs within the utility. 14 The portions of the Decision with 15 Reasons which are the subject of the request for review 16 or rehearing are those portions which address the 17 deferred taxes associated with the company's rental 18 program. 19 My name is Gail Morrison, and with me 20 today are Paul Vlahos and Anne Drozd. 21 Could we have appearances, please. 22 MR. CASS: Good afternoon, Madam 23 Chair. Fred Cass for Enbridge Consumers Gas. 24 MS FORBES: Good afternoon. Sandra 25 Forbes and Andrea Burke for Enbridge Inc. 26 THE PRESIDING MEMBER: Good 27 afternoon. 28 MS LEA: Jennifer Lea for Board 6 1 Technical Staff. 2 MR. BRETT: Good afternoon, Madam 3 Chair. Tom Brett for the Ontario Association of School 4 Board Officials and Metro Toronto School Board. 5 MR. THOMPSON: Peter Thompson for the 6 Industrial Gas Users Association. 7 THE PRESIDING MEMBER: Thank you, 8 Mr. Thompson. 9 MR. WARREN: Robert Warren for the 10 Consumers Association of Canada. 11 THE PRESIDING MEMBER: Mr. Warren. 12 MR. JANIGAN: Michael Janigan for the 13 Ontario Coalition Against Poverty. 14 MR. MATTSON: Good afternoon. Mark 15 Mattson for Energy Probe. 16 THE PRESIDING MEMBER: Are there any 17 other appearances? 18 Seeing none, are there any 19 preliminary matters? 20 Ms Lea? 21 MS LEA: Yes. Thank you, Madam 22 Chair. 23 An exhibit list for this proceeding 24 has been prepared. Have you been provided with copies? 25 THE PRESIDING MEMBER: Yes, we have, 26 thank you. 27 MS LEA: Thank you. 28 You will note that there are six 7 1 items on the exhibit list. 2 We have, since this list was 3 prepared, received a letter of comment from the HVAC 4 Coalition. Mr. Ian Mondrow called me, apologizing to 5 the Board for his inability to be here this afternoon, 6 and asks that this letter of comment be taken into 7 account by the Board. 8 You are now being provided with 9 copies, if you don't have them already. Other copies 10 are available on the table near the window. 11 I would ask that this letter be 12 marked as Exhibit No. 7 in this motion. 13 Thank you. That is all I have. 14 EXHIBIT NO. 7: Letter of 15 Comment from Ian Mondrow on 16 behalf of the HVAC Coalition 17 THE PRESIDING MEMBER: Thank you, 18 Ms Lea. 19 In its Notice of Motion the company 20 requested that the motion be heard by, quote: 21 "...the entire panel of 22 full-time Board Members or, 23 alternatively, by a panel which 24 includes the Chair and 25 Vice-Chair of the Board". 26 (As read) 27 As you see, that request has not been 28 acceded to. 8 1 It has been the Board's practice in 2 the past, where rehearings are requested based upon new 3 evidence, to have the matter considered by the original 4 panel of Board Members, Members who are already 5 familiar with the details of the application and who 6 can deal with the matter most efficiently and 7 expeditiously. 8 In this case an additional Board 9 Member, who is a chartered accountant, has been added. 10 If any party objects to the composition of this Panel, 11 we would like to hear and consider those objections 12 now. 13 Seeing none, before considering the 14 motion itself, the Board wishes to address the motion 15 from Enbridge Inc., which describes itself as the 16 ultimate parent company of the Consumers Gas Company 17 Limited, for intervenor status in this motion and in 18 any subsequent review or rehearing. 19 Could we hear from counsel for 20 Enbridge Inc., please. 21 SUBMISSIONS 22 MS FORBES: Thank you very much, 23 Madam Chair, and thank you for the opportunity to speak 24 to the Board this afternoon on the intervention motion. 25 For the purposes of our motion, I 26 believe the only material that you are going to need 27 before you are our motion record, which I note has been 28 marked as Exhibit 3; and the statement of evidence from 9 FORBES, submissions 1 Mr. Booth, which has been marked as Exhibit 6. 2 I have not yet seen the affidavit of 3 Mr. Booth, marked as Exhibit 5, but I am assuming that 4 it is identical to the statement that we were provided 5 with late last week. 6 For your assistance, Madam Chair and 7 Members of the Board, I have attempted to canvass the 8 other counsel in this proceeding, and I can tell you 9 that at least two of the intervenors are objecting to 10 Enbridge Inc. being granted intervenor status. 11 I have spoken with Mr. Thompson and 12 with Mr. Warren. 13 THE PRESIDING MEMBER: Thank you, 14 Ms Forbes. 15 MS LEA: Perhaps I can just 16 interject. I notice also that the letter that has been 17 marked as Exhibit 7 appears also to raise some 18 objection. 19 You have that letter? 20 MS FORBES: Yes, we have just 21 received that letter. 22 MS LEA: Thank you. 23 MS FORBES: Prior to making what I 24 hope are very brief submissions, Members of the Board, 25 let me say briefly, by way of introduction, that 26 Enbridge Inc. wishes to be a part of this proceeding 27 essentially because the decision of the Board on the 28 deferred tax issue was effectively a statement about 10 FORBES, submissions 1 shareholder responsibility. 2 Enbridge Inc. wishes to be here 3 because it has some serious concerns about the effect 4 of the Board's decision both on itself, the regulatory 5 and investment climate generally, and on its debtors 6 and shareholders. It is not here to repeat the 7 submissions that have already been made or to repeat 8 the submissions that will be made quite ably by 9 Mr. Cass but wishes to actively participate by 10 providing what we hope is the specific shareholder's 11 perspective. 12 In our submission, that perspective 13 is important for the Board in considering whether the 14 motion for a rehearing should be granted; and if 15 granted, how the rehearing should be disposed of. 16 With respect to our motion, we have 17 five points, which I will just list for you now and 18 then hopefully take you through very briefly. 19 The first point is that the test for 20 intervention status, as set out in Rule 29.03 of the 21 Board's Rules, has been passed. 22 Second, I would like to address the 23 timing of the intervention. 24 Third is the issue of prejudice. 25 Fourth is the issue of the existing 26 record. 27 And fifth, I would like to deal 28 briefly with just the evidence of the motion for 11 FORBES, submissions 1 intervention. 2 Let me move on then to the first 3 point, which relates to the test set out in the Board's 4 rules, in Rule 29.03. 5 That rule is quite clear, that in 6 order to be granted intervenor status Enbridge Inc. has 7 to satisfy the Board of two things: one, that it has a 8 substantial interest in this proceeding; and second, 9 that it intends to participate actively and 10 responsibly. 11 In my submission on the first point, 12 the issue of substantial interest, it is clear on the 13 face of the affidavits which have been filed before the 14 Board that Enbridge Inc. has a substantial interest in 15 this proceeding. 16 If I could point just to the major 17 facts, first of all, as the ultimate parent company of 18 Enbridge Consumers Gas, it is Enbridge Inc. which 19 immediately suffers the ultimate effect of the Board's 20 decision. 21 One effect, which has been described 22 by Mr. Truswell in his more substantive affidavit, 23 which is found at Tab 3 of our motion record, 24 Exhibit 3, is that one of the effects of the decision 25 is going to be a permanent decrease in shareholder 26 value, of $76 million. 27 As you will also have seen from 28 Mr. Truswell's affidavit at Tab 3, and specifically 12 FORBES, submissions 1 paragraphs 11 through 18, this effect in turn will 2 affect Enbridge Inc.'s credit strength and flexibility, 3 and it also impacts on Enbridge's ability to raise debt 4 and also impacts on the cost of that debt. 5 Another impact which is important, in 6 our submission, and which shows a substantial interest 7 of Enbridge Inc., is that this decision also has 8 ramifications for the debtors of Enbridge Inc. and for 9 its shareholders. 10 Further with respect to the 11 substantial interest requirement, this decision raises, 12 in Enbridge Inc.'s view, a fundamental policy concern. 13 It is a concern for Enbridge and for the accountants 14 and the investors which rely on its financial 15 disclosure. 16 The issue and the policy concern that 17 it is concerned about, and which it has a substantial 18 interest in, is the extent to which it can rely on 19 Board decisions and Board practice to both justify its 20 financial position and to formulate both its financial 21 and investment strategy going forward as we enter into 22 this new competitive marketplace. 23 In further support, of the 24 substantial interest requirement being satisfied, in my 25 submission, Mr. Booth's statement itself confirms that 26 Enbridge Inc. has that substantial interest and is 27 appropriately heard by this Board in the rehearing 28 motion, and I would point it to two statements that he 13 FORBES, submissions 1 makes in his affidavit -- sorry -- in his statement. 2 This is the document which is Exhibit 6. 3 --- Pause 4 MS FORBES: Ms Burke has just 5 confirmed for me that the affidavit is the same so I am 6 hoping that the paragraphs will correlate, but we can 7 check that afterwards. 8 On page 2 of his statement -- and 9 this is under the question, "Does the company regard 76 10 million as material?" -- Professor Booth indicates that 11 any company should regard $76 million as material. 12 The second reference which I would 13 like to point out to the Members of the Board is on 14 page 3 of the statement, which is under the question, 15 "In your judgment, is Enbridge's financial integrity 16 damaged by this decision?" After saying, in his view, 17 not significantly, Mr. Booth goes on to say that any 18 decision which goes against the shareholder, by 19 definition, damages the financial integrity of the 20 company but it is a question of materiality. 21 Now, I would remind the Board that 22 the test that it is concerned about is substantial 23 interest and, in our view, the facts, as I have just 24 laid out for you, shows that that interest exists. 25 Further, to the extent that 26 Mr. Booth's affidavit is going to be relied on by OCAP 27 in the motion for a rehearing, and in the rehearing 28 itself, it is only fair and appropriate, in our view, 14 FORBES, submissions 1 that Enbridge Inc. have the status of an intervenor in 2 order to fully respond to the issues which are raised 3 by Mr. Booth in his affidavit. 4 The second part of the test is the 5 requirement that the intervenor participate actively 6 and reasonably. In my submission, by virtue of the 7 filing of the evidence of Mr. Truswell, our presence 8 today and my assurance to you as counsel that we do 9 intend to do so, that requirement has been satisfied. 10 If I could move on to the second 11 point I wanted to address, which is the timing of the 12 intervention motion. 13 As you will see from its Notice of 14 Motion, Enbridge Inc. is seeking to participate in the 15 rehearing and it is asking to do that because, as I 16 said before, it is concerned about the effects of the 17 decision that has already been made on itself and other 18 stakeholders in the process. 19 You will know from the record that we 20 sought to intervene on June 22, which was approximately 21 within two weeks of Consumer Gas' motion for a 22 rehearing. The question might be raised in your mind, 23 and raised by the intervenors, as to why Enbridge did 24 not seek to intervene in the original hearing if it was 25 concerned about the effect of different taxes. As this 26 Board knows, it is quite rare for a shareholder to 27 intervene in these types of proceedings. 28 From Enbridge Inc.'s perspective, 15 FORBES, submissions 1 based on its understanding of the past Board practice, 2 it reasonably anticipated that the Board would confirm 3 its longstanding understanding about deferred taxes or 4 it felt that if the Board felt there was a need to 5 alter that position or that understanding, it would not 6 do so without permitting Enbridge Inc., as shareholder, 7 to have a realistic opportunity to deal with what would 8 be a new risk. 9 If I could move on to the third 10 point -- and that was just briefly the issue of 11 prejudice. It is our submission that there is no 12 prejudice to any of the parties in this proceeding by 13 reason of either the timing or the fact of our seeking 14 intervention status. We did so relatively soon after 15 the motion for rehearing was brought and, as I 16 indicated in my opening remarks, we have no absolutely 17 intention to repeat what has already been done and hope 18 to be able, in quite a brief way, to provide a 19 perspective to the Board which we hope will be helpful 20 in considering these motions. 21 Fourth, with respect to the record, I 22 can assure the Board that Enbridge Inc. is willing to 23 accept the record as it now stands in the proceeding. 24 And lastly, fifth, with respect to 25 the issue of evidence on this motion, it is our 26 submission -- and I took you through the reasons along 27 with the first submission dealing with the test on an 28 intervention motion -- it is our position that on the 16 FORBES, submissions 1 basis of the affidavits alone, which before you, it is 2 undeniable that Enbridge Inc. has more than met the 3 burden of proving a substantial interest and proving 4 that it intends to reasonably and fully participate. I 5 am not sure who could have more of an interest than the 6 100 per cent shareholder who is going to suffer the 7 effect of the decision. 8 In light of this fact, and what I am 9 sure the Board has seen are some of the overlapping 10 issues in the three motions which are now before you, 11 and also in the interest of having a just and 12 expeditious hearing, it is Enbridge Inc.'s submission 13 that the Board should consider this motion on the basis 14 of the affidavit evidence and the submissions of 15 counsel and in the absence of cross-examination. 16 It is our conclusion, or we urge the 17 conclusion on the Board, that the motion should be 18 granted and then we should proceed to deal with the 19 main motions at which the appropriate 20 cross-examinations on the various evidence that has 21 been presented can be conducted. 22 I am happy to answer any questions 23 that the Board has. Those are our submissions on the 24 intervention motion. 25 THE PRESIDING MEMBER: Thank you, 26 Ms Forbes. 27 Mr. Brett? 28 MR. BRETT: I have no submissions on 17 FORBES, submissions 1 this matter. Thank you, Madam Chair. 2 MR. CASS: Madam Chair, I did hope to 3 offer just a very few brief comments and perhaps it 4 would -- 5 THE PRESIDING MEMBER: Okay, 6 Mr. Cass. I'm sorry. 7 MR. CASS: -- be appropriate for me 8 to go first. 9 SUBMISSIONS 10 These are very brief, Madam Chair, 11 and I don't have an argument, per se. I think I have 12 three comments to offer to the Board, or observations. 13 First of all, Madam Chair, from the 14 perspective of a party, Enbridge Consumers Gas, which 15 participated in the deferred tax issue in the main 16 hearing, I am aware, as the Board is aware, that there 17 were a number of intervenors who addressed submissions 18 to this issue, even including, for example, the HVAC 19 Coalition. So my first observation to the Board is: 20 If parties such as these are going to make submissions 21 to be entertained by the Board -- and we do now have a 22 written submission from HVAC, for example -- on the 23 deferred tax issue, how can the parties directly 24 involved -- that is, the shareholder -- not have its 25 submissions entertained by the Board? 26 That is my first observation, by way 27 of a rhetorical question. 28 My second observation, Madam Chair, 18 CASS, submissions 1 is -- my understanding is that the immediate parent of 2 Enbridge Consumers Gas, Consumers Gas Energy Inc., was 3 an original intervenor, as was Consumers first. So I 4 ask rhetorically again: To what extent it really makes 5 a difference, from the point of view of the 6 intervenors, that the ultimate parent now seeks an 7 opportunity to put its perspective before the Board? 8 Finally, Madam Chair, I have received 9 Exhibit 7, which is the letter on behalf of the HVAC 10 Coalition. I see the comment there that should the 11 Board grant leave to intervene, it is submitted that 12 the order of submissions and the Board's usual 13 procedure with respect to minimizing unnecessary 14 repetition should reflect the seeming identity of 15 interest between the company and its parent company. 16 As Ms Forbes has said, and I can 17 confirm, there is no intention, that I am aware of, of 18 being repetitive. To the extent that the Board has any 19 concerns as the hearing proceeds, I agree completely 20 that the Board can move to minimize any unnecessary 21 repetition. 22 Those are my comments, Madam Chair, 23 and thank you for the opportunity to do that. 24 THE PRESIDING MEMBER: Thank you, 25 Mr. Cass. 26 Mr. Brett, you had no submissions. 27 Mr. Thompson? 28 SUBMISSIONS 19 THOMPSON, submissions 1 MR. THOMPSON: Yes. Thank you, Madam 2 Chair. 3 Let me begin by saying it is very 4 seldom, if ever, that IGUA would oppose a motion to 5 intervene in any proceedings, but this is a very 6 unusual situation and we do oppose the motion by 7 Enbridge Inc. 8 I would like to put the proceeding in 9 context because we are here dealing with a motion for 10 intervenor status in a motion for review of a case in 11 which Enbridge Inc. apparently made a conscious 12 decision not to participate. In that connection, I 13 draw your attention to the affidavit of Mr. Truswell, 14 at Tab 2 of my friend's motion record, paragraph 5. 15 The conscious decision not to 16 participate was apparently based on a judgment by 17 Enbridge at the time that the shareholder of the 18 company was not at risk for deferred taxes. 19 Well, that was a judgment made in the 20 context of the position that intervenors had outlined 21 in a settlement conference. Intervenors had filed 22 evidence and there were all kinds of interrogatories 23 asked that made it perfectly clear it was the 24 intervenors' position that the ratepayers were not 25 responsible for deferred taxes. 26 So we have a conscious decision here 27 by Enbridge, in the context of all that was going on in 28 the case, not to participate, it decided not to 20 THOMPSON, submissions 1 participate in the proceeding for which one of the 2 parties is now seeking a review or rehearing. 3 So it is very unusual in a process 4 context for Enbridge to be now seeking late intervenor 5 status. 6 The other point I would like to make 7 by way of context is the nature of Enbridge Inc. as a 8 party to these proceedings on the motion for review. 9 Really, they are a co-applicant. To characterize 10 themselves as an intervenor I think is a stretch. 11 So I suggest to you the threshold 12 question that you really need to consider in the 13 context of this motion is: Having made a deliberate 14 decision not to participate in the case, can Enbridge 15 Inc. now come forward and seek status to participate in 16 a request to review that case and in the context of the 17 decision which it says had an impact on the 18 shareholder? 19 There is a further point that I think 20 needs to be made and it is this, that Enbridge Inc. 21 surely has no status to participate in the debate of 22 the threshold issue as to whether a review or rehearing 23 ought to be granted. If they are to be accorded any 24 status, in my submission, it should only be if the 25 company succeeds in getting over the threshold issue. 26 Now, in terms of the rules, just 27 quickly, my friend has referred to Rule 29. Rule 29.01 28 indicates that the Board shall rule on the status of 21 THOMPSON, submissions 1 persons applying for intervenor status. Rule 29.03 2 says that the burden is on the party seeking status, 3 and 29.06 indicates that the Board has a discretion to 4 grant or refuse the request, or to grant conditions, 5 impose conditions if the request is to be granted. 6 My submission is that your discretion 7 ought not to be exercised in favour of Enbridge 8 because, as I have indicated, it deliberately opted not 9 to participate in the proceedings which resulted in the 10 decision. It must have been taken to have made that 11 decision being aware of the risks. 12 Secondly, the shareholder interest, 13 which Enbridge Inc. represents, is identical to the 14 shareholder interest which the company represents, and 15 you ought not to exercise your discretion to permit an 16 identical interest to the applicant to have status in 17 the proceedings. An applicant ought not to have two 18 voices in the proceedings, which is what in my 19 submission is the transparent and sole purpose of 20 Enbridge Inc.'s application. 21 Its position here is to duplicate the 22 company's position as to the shareholder impact of the 23 decision. 24 For all these reasons I therefore 25 submit it is inappropriate to grant Enbridge Inc. 26 status, certainly inappropriate to grant them status 27 for debate on the threshold issue, and if you do grant 28 them status in the event a review or rehearing is 22 THOMPSON, submissions 1 ordered, it should be only on conditions that they do 2 not duplicate anything that the company asserts. 3 Those are my submissions. 4 THE PRESIDING MEMBER: Thank you, 5 Mr. Thompson. 6 Mr. Warren, do you have submissions? 7 SUBMISSIONS 8 MR. WARREN: Thank you, Madam Chair. 9 The CAC, like IGUA, opposes the 10 addition of Enbridge Inc. as a party and does so for 11 the following two reasons. 12 First, and this is a point which 13 Mr. Thompson made but I want to elaborate on, is that 14 there is a common interest -- that is, that Enbridge 15 Consumers Gas and Enbridge Inc. will represent the same 16 interest, namely those of its shareholders. 17 I think it is important to remember, 18 Madam Chair and Members of the Panel, that the 19 interests of the shareholders were represented and 20 vigorously represented in the original hearing. 21 The arguments and the evidence were 22 directed to the protection of the interests of the 23 shareholders and to the financial integrity of the 24 company. 25 Now, in that context, Madam Chair, I 26 would like to refer very briefly to two passages in the 27 argument-in-chief of Consumers Gas. You don't need to 28 turn it up, but in the argument-in-chief in the main 23 WARREN, submissions 1 case at page 61, you will see reference there to the 2 evidence of Ms McShane with respect to the fact that 3 the shareholder was assumed not to be at risk for 4 deferred taxes. So Ms McShane spoke to the question of 5 the shareholders' interest in this matter. 6 Then, turning over to the next page, 7 the top of the page: 8 "Mr. Hills subsequently 9 explained the position of the 10 shareholder...." 11 I emphasize that: 12 "...explained the position of 13 the shareholder in no uncertain 14 terms." 15 The quote from Mr. Hills' evidence 16 is: 17 "To the extent that we've been 18 able to expand the business, 19 we've..." 20 "We've", common interest: 21 "...we've had more opportunities 22 to invest equity and earn a 23 return, but if that was at the 24 expense of eating deferred 25 taxes, we would not have 26 invested those dollars." 27 We. Who is "we"? The shareholders. 28 "If we were at risk for $448 24 WARREN, submissions 1 million and we have a $1 billion 2 equity investment; in other 3 words, 40 per cent of our equity 4 was at risk, we would not 5 have invested in this business." 6 With typical and characteristic 7 muscularity Mr. Hills defended the interest of his 8 shareholders. 9 Then, a little further down on 10 page 62 and this is in the argument portion. 11 "Mr. Hills left absolutely no 12 room for uncertainty when he 13 provided his view of the notion 14 that some portion of the 15 deferred taxes might be 16 allocated to the Company's 17 shareholder." 18 And then on the next page, page 63 of 19 the main argument, under the heading "Investor 20 Reporting and Financial Markets", this is what the 21 argument says: 22 "It is trite to say that 23 investors and the financial 24 marketplace in general must be 25 able to rely on the Company's 26 published financial statements." 27 This is precisely the point that my 28 friend made in her argument this morning, or rather 25 WARREN, submissions 1 this afternoon. 2 "In this regard, Mr. Hills gave 3 the following evidence about the 4 Company's disclosure of its 5 accumulated deferred tax 6 liability." 7 The quote from Mr. Hills' evidence 8 is: 9 "...I think it is just part of 10 normal continuous and good 11 disclosure that everybody 12 understand the method of 13 accounting that we were 14 following and why we were 15 following it. And that's why we 16 put it in every audited 17 financial statement, every 18 annual report, every prospectus, 19 particularly in every prospectus 20 because we raised billions of 21 dollars on the understanding 22 that we'd be able to collect 23 these deferred taxes when they 24 become payable." 25 My point simply is to illustrate the 26 point, Madam Chair, that Mr. Hills, in his evidence and 27 in the argument, vigorously defended the interest of 28 the shareholders, the very interests that my friend 26 WARREN, submissions 1 says now must be separately represented by Enbridge. 2 In my respectful submission, there is 3 no reason why the interests of the shareholder needs to 4 be separately represented. I have every respect for my 5 friend Mr. Cass and for his partner Mr. Farrell, that 6 they can do and have done an effective job at 7 representing the interests of the shareholder. Why do 8 we need a separate voice on the same issue? 9 But I want to raise a point not 10 raised by my friend Mr. Thompson and there is, in my 11 respectful submission, a good reason why they should 12 not be separately represented. So I ask the question 13 rhetorically: If Mr. Cass' firm doesn't represent the 14 interests of the company and shareholders, who do they 15 represent? Is there a distinction between the 16 company's interest and that of its shareholders? I 17 say, with respect, not. 18 It will set, in my respectful 19 submission, a bad precedent if individuals or 20 individual segments of a group supposedly represented 21 in the case can then decide to break off from that 22 group and say, "I want to appeal the decision." In the 23 interests of the finality of the Board's decisions and 24 the confidence that people have in that finality, an 25 interest which is identical should not be separately 26 represented in an application for review. 27 Our second reason, Madam Chair, for 28 opposing the request to be entered as a party is that 27 WARREN, submissions 1 the only reason, as I read the materials -- my friend 2 may be able to help me on this, but the only reason, as 3 I read the materials, that my friend's client seeks 4 standing is on the issue of the Board's -- what I will 5 call, the consequences of the Board's decision. In my 6 respectful submission, which I will argue somewhat 7 later this afternoon, that is not a valid ground for a 8 review. 9 In addition, the issue of the adverse 10 impact on shareholders in the company was the subject 11 of considerable evidence and argument in the original 12 case. There is nothing new in this case, nothing new 13 in the material which is presented to you that the 14 Board hasn't considered or that wouldn't, with 15 reasonable diligence, have been put before the Board 16 for consideration. So my friend seeks to intervene on 17 a point for which there should not, in my respectful 18 submission, be a rehearing. 19 For those reasons, I ask that the 20 Board exercise its discretion under Rule 29 to deny 21 status. If the Board is inclined, however, to grant 22 status, in my respectful submission, it should be on 23 the condition that any award of costs not be against 24 the ratepayers in the matter; in other words, Enbridge 25 Inc. should not be entitled to recover its costs from 26 the ratepayers. 27 Those are my respectful submissions. 28 THE PRESIDING MEMBER: Mr. Janigan? 28 WARREN, submissions 1 MR. JANIGAN: Thank you, Madam Chair. 2 THE PRESIDING MEMBER: Anything new 3 and different to add? 4 SUBMISSIONS 5 MR. JANIGAN: I will try. 6 OCAP, in addition to IGUA and CAC, 7 also opposes the application of Enbridge Inc. to be 8 added as a party in this matter. Our opposition stems 9 from the very definition of "intervenor status" that is 10 contained Rule 29.03. That rule sets out that the 11 burden of establishment to the satisfaction of the 12 Board that a person applying for intervenor status has 13 a substantial interest in the proceeding. 14 In our view, Enbridge Inc. does not 15 have a substantial interest in this proceeding. It is 16 not an interest in any sense that should be recognized 17 by the Board in this proceeding. In any event, to the 18 extent that their interest is an interest that should 19 be recognized by the Board in this proceeding, it is 20 identical to the company's. 21 First of all, with respect to the 22 matter of a substantial interest, my friend referred 23 earlier to Dr. Booth's affidavit. The material in that 24 affidavit shows that the dollar amount in question for 25 the company is approximately 46 cents per share and 26 that is about one-fifteenth of the variation in share 27 price that Enbridge Inc. has experienced over the last 28 year. Its impact is less than one and a half per cent 29 JANIGAN, submissions 1 of its market value. 2 Further, in Dr. Booth's affidavit, he 3 references a press release from Enbridge to the effect 4 that Enbridge did not regard this matter as so 5 substantial as to alert its investors. We would 6 suggest within the meaning of substantial that Enbridge 7 Inc. does not have a substantial interest in this 8 matter. 9 Secondly, the interest, as expressed 10 by Enbridge Inc. is not an interest that should be 11 recognized by the Board. The Board must be indifferent 12 to the financial status of the investor company. If an 13 investor company has an interest which is unique and 14 separate from the utility, it must be on the basis of 15 its particular characteristics which are not, in and of 16 themselves, relevant in any determination of how the 17 utility should be treated from a regulatory standpoint. 18 This case concerns the regulatory 19 treatment of the deferred tax liability of Consumers 20 Gas. The impact upon the parent company can be of no 21 concern to the regulator, except under the general 22 regulatory requirement of fairness to shareholders in 23 general. To add Enbridge Inc. is to recognize an 24 interest particular to the parent that must be 25 protected and advanced in the course of the review 26 proceedings. It is precisely that interest, as 27 represented by a specific party corporation, that 28 should not enter the fray to determine an issue 30 JANIGAN, submissions 1 involving the correct regulatory treatment of the 2 utility. 3 Finally, our view is, to the extent 4 that that interest may be appropriate, it is the same 5 as the utility. Despite the differing corporate forum, 6 the interest of the parent company is identical to the 7 interest of the utility. Both represent an undivided 8 interest for the purpose of this proceeding. 9 The treatment of a parent and a 10 subsidiary as one entity for purposes of law is not 11 something which is unusual. I have a case which I 12 would like to give to the Board. 13 MS LEA: Shall we mark this, for 14 convenience, as Exhibit 8 in these motion proceedings, 15 please? 16 THE PRESIDING MEMBER: Thank you, 17 Ms Lea. 18 EXHIBIT NO. 8: Manley Inc. et 19 al v. Fallis, Ontario Supreme 20 Court [Court of Appeal] 21 MR. JANIGAN: It's the case of Manley 22 Inc. versus Fallis, a decision of the Ontario Court of 23 Appeal, a judgment of Mr. Justice Lacourciere. 24 In this case, a defendant attempted 25 to escape liability by claiming that his actions, in 26 competing with his employer's enterprise, were really 27 competition that was directed only against the parent 28 company of his employer and, as such, the claim should 31 JANIGAN, submissions 1 be dismissed. The court did not accede to the request 2 of the defendant in this case. 3 I draw your attention to Mr. Justice 4 Lacourciere's judgment on page 279 of the case, about a 5 third of the way down the page: 6 "This is a case where the Court 7 is not precluded from lifting 8 the corporate veil and, in 9 effect, regarding the closely 10 related respondent companies as 11 essentially one trading 12 enterprise, in the interests of 13 the affiliated companies, in a 14 circumstances where the refusal 15 to do so would allow the 16 appellant to escape the 17 consequences of his breach of a 18 fiduciary trust." 19 It goes on to quote from the textbook 20 of Professor Gower and further a reference to a case in 21 the House of Lords, Harold Holdsworth & Co. versus 22 Caddies. 23 "This is a decision of the House 24 of Lords which in our opinion 25 supports the author's analysis, 26 which we adopt because of its 27 brevity, as set out at p. 206... 28 In referring to the essential 32 JANIGAN, submissions 1 unity of a group enterprise, he 2 says: 3 `Perhaps the most remarkable 4 illustration is afforded by 5 Holdsworth & Co. v. Caddies. 6 There, Mr. Caddies had been 7 appointed managing director of 8 the parent company upon the 9 terms that he should `perform 10 the duties and exercise the 11 powers in relation to the 12 business of the company and the 13 businesses ... of its existing 14 subsidiary companies ... which 15 may from time to time be 16 assigned to or vested in him by 17 the board of directors of the 18 company.'" 19 THE PRESIDING MEMBER: That is much 20 too fast, Mr. Janigan. We do have a reporter here. 21 MR. JANIGAN: I am sorry. 22 "After disagreements between him 23 and the board he was directed to 24 confine his attentions to one of 25 the subsidiaries only. This was 26 held not to be a breach of 27 contract by the company, 28 notwithstanding that it 33 JANIGAN, submissions 1 prevented him from working for 2 the company employing him. The 3 argument `that the subsidiary 4 companies were separate legal 5 entities each under the control 6 of its own board of directors' 7 was described as `too 8 technical,' since `an agreement 9 in re mercatoria ... must be 10 construed in the light of the 11 facts and realities of the 12 situation,' which were that the 13 parent company had full control 14 of the internal management of 15 the subsidiaries." 16 In this case, Madam Chair, I would 17 submit that it is certainly open to the Board to 18 decline intervenor status to Enbridge Inc. on the basis 19 that any substantial interest that it may possess is 20 one and the same as that by the company. So we would, 21 accordingly, request that you dismiss the motion of 22 Enbridge Inc. 23 THE PRESIDING MEMBER: Thank you, 24 Mr. Janigan. 25 Mr. Mattson, do you have a comment? 26 SUBMISSIONS 27 MR. MATTSON: Thank you, Madam Chair, 28 just briefly. 34 MATTSON, submissions 1 I would just ask the Board to really 2 direct your attention to the grounds for the motion. 3 This is what my client has the greatest concern with. 4 If you look to the grounds, paragraph (b), these are 5 the grounds for the motion. 6 It reads: 7 "Enbridge's late application for 8 intervenor status in these 9 proceedings is due to the fact 10 that until the issuance of the 11 decision Enbridge has always 12 fully and reasonably expected 13 that deferred taxes would be 14 recoverable in their entirety in 15 rates when they become due and 16 payable." (As read) 17 Well, these grounds aren't only just 18 controversial, but they go to the very heart of the 19 Board's original decision and the request for 20 rehearing. If the Board finds now that these 21 grounds -- that it was a fact that Enbridge had fully 22 and reasonably expected that the deferred taxes would 23 be payable, how does that sit with the Board's original 24 decision that Enbridge should not have reasonably 25 expected that deferred taxes would be recoverable 26 entirely in rates, and in fact that Enbridge should 27 have raised this issue with the Board earlier. 28 So here we have almost an attempt by 35 MATTSON, submissions 1 the parent to bring in evidence -- because that is what 2 this is, it is really evidence -- new evidence that 3 contradicts the Board's decision in the original 4 hearing. 5 So if Mr. Cass wishes to bring 6 forward the shareholders and put them in the witness 7 box and have them testify in a rehearing, we can 8 discuss whether or not we think that is appropriate or 9 whether they should have come forward earlier. I mean, 10 I don't see a problem if they -- I'm sure they could 11 bring them forward and file affidavits and put it 12 forward and we can cross-examine, but to use it as the 13 grounds for a motion just seems not only controversial 14 but rather odious, and if you accepted the grounds for 15 the motion you would be in fact prejudicing your 16 original decision and, I would suggest, possibly 17 prejudicing the threshold question on rehearing. 18 So those are our concerns. 19 It might lead to other process issues 20 such as cross-examination: Can one company 21 cross-examine the other company? So if the shareholder 22 puts in the witness and they have to lead the evidence, 23 can the other company come in a cross-examine that 24 evidence? 25 These are just issues that I am not 26 so certain about, and they all stem from that 27 paragraph (d) in the grounds for the motion. 28 Otherwise I don't take objection to 36 MATTSON, submissions 1 the fact that they have a substantial interest and they 2 may have some submissions to make, but I certainly 3 don't think that the shareholder should be able to 4 apply for intervenor status at this time and bring in 5 new evidence which would prejudice the original 6 decision. 7 Thank you. 8 Otherwise, I support the submissions 9 of my friends before me in objecting the motion. 10 THE PRESIDING MEMBER: Thank you, 11 Mr. Mattson. 12 Ms Lea, do you have anything to add? 13 MS LEA: Thank you. 14 We are not taking a position with 15 respect to the motion for intervenor status of Enbridge 16 and we have nothing further to add. 17 THE PRESIDING MEMBER: You have no 18 questions that might clarify the matter for us? 19 MS LEA: I don't think I have 20 anything that will truly clarify. 21 Thank you. 22 THE PRESIDING MEMBER: Ms Forbes. 23 REPLY SUBMISSIONS 24 MS FORBES: Thank you, Madam Chair. 25 Considering the comments that have 26 been made I certainly don't intend to repeat anything, 27 but maybe I can just deal briefly with some of the 28 comments that were raised by my friends in objecting to 37 FORBES, reply sub. 1 the intervention motion in no particular order. 2 First, one of my friends was 3 referring to the fact that a conscious decision was 4 made by Enbridge Inc. not to participate in this 5 decision -- I'm sorry, to participate in the original 6 hearing. 7 Again, it is not the usual realm for 8 a shareholder to be participating. 9 But also, I point you to really what 10 our intentions are with respect to participating in 11 this proceeding. It is the effects of the decision 12 that have caused the concern and have led to Enbridge 13 Inc. asking the Board's leave to allow it to make 14 submissions concerning the specific consequences of the 15 decision that the Board actually made. 16 So in light of what the basis for our 17 motion is, in my submission, whether or not Enbridge 18 Inc. intervened at the original proceeding is just not 19 relevant. 20 Second, with respect to the comments 21 about having identical interests. 22 I guess my first submission would be 23 with respect for a motion for intervenor status, that 24 submission is completely irrelevant. The test is 25 substantial interest and reasonable participation. In 26 fact, if overlapping interests was relevant to the 27 test, then I think probably some of the entities here 28 who are intervenors wouldn't be here. 38 FORBES, reply sub. 1 But even if that is a relevant 2 consideration for the Board, with respect, Enbridge 3 Inc. has very different interests from Enbridge 4 Consumer Gas. They are not the same company. They 5 have different shareholders. There are different 6 stakeholders involved in relying on their financial 7 disclosure and decision. 8 Enbridge Inc. has its investors which 9 are different from Enbridge Consumers Gas. 10 When Mr. Hills and the various other 11 Enbridge Consumers Gas witnesses were speaking at the 12 original hearing, they were speaking from the 13 perspective of the impact on the shareholder which was 14 Enbridge Inc. The submissions of Enbridge Inc. with 15 respect to the effects of the decision in this hearing, 16 what we would like to present to you, go beyond that 17 and would assist you in understanding the effects of 18 the decision on the other stakeholders such as Enbridge 19 Inc.'s shareholders and debt-holders, et cetera. 20 So there are different audiences here 21 that are being addressed. While the interests may to 22 some respect be similar, they are not identical and, in 23 my view, when you look at that the test is substantial 24 interest, they clearly satisfy that. 25 I would just point out that I don't 26 think that my friend's submission of the Manley case is 27 in any way relevant to this issue. Again, the issue 28 is: Is there an interest. He has referred to a case 39 FORBES, reply sub. 1 which has set out one of the common exceptions to the 2 general rule that two corporate entities are considered 3 to be different. The court in this case said that it 4 was prepared to essentially treat two the same where to 5 do so otherwise would allow a company to effectively 6 evade a legal responsibility. 7 Well, that is not what we are talking 8 about here. 9 With respect to the threshold issue, 10 I am having trouble understanding why if the Board was 11 satisfied that we met the intervention test we should 12 not give submissions on the threshold issue. 13 If I look at the test and the factors 14 that are relevant as set out in Rule 63, to the extent 15 that Enbridge Inc. can provide the Board with 16 information about the existence of any of those factors 17 it seems to me it is appropriate for them to make 18 submissions on that, especially in relation to sub (6) 19 of Rule 63.01(a) which deals with important matters of 20 principle which have been raised by the decision. 21 With respect to the issue of costs, 22 Enbridge Inc. has not asked for its costs. There is no 23 issue with respect to that. 24 With respect to the logistical 25 concerns that Mr. Mattson raised, Mr. Cass and I have 26 certainly done our best, at least at this point, to 27 make sure that there aren't awkward situations in 28 dealing with witnesses and submissions, and to the 40 FORBES, reply sub. 1 extent that issues arise during the rehearing motions 2 I'm sure that we can effectively address that as a 3 procedural issue. 4 Unless the Board has any questions, 5 that is my response. 6 THE PRESIDING MEMBER: Thank you. 7 One moment, please. 8 --- Pause 9 THE PRESIDING MEMBER: Ms Forbes, can 10 we just clarify your understanding of what the 11 consideration of the threshold issue will consist of? 12 It appeared from listening to you 13 that you expect there to be examination on the 14 affidavits on the threshold question. Is that your 15 understanding? 16 MS FORBES: I didn't intend to 17 suggest that at all. 18 I was referring specifically to the 19 test for the threshold issue to show you where I 20 thought Enbridge could be helpful in going through the 21 various factors that are relevant and I just pointed to 22 an issue of policy which, in my view, is already 23 addressed in the affidavit. So I'm sorry if I 24 suggested otherwise. 25 THE PRESIDING MEMBER: Thank you. 26 The Board would like to take a short 27 break, perhaps 15 minutes, to quarter past two. Thank 28 you. 41 FORBES, reply sub. 1 --- Upon recessing at 1350 2 --- Upon resuming at 1415 3 THE PRESIDING MEMBER: The Board has 4 considered the applicant's submission in relation to 5 Rule 29 and the intervenors' submissions relating to 6 duplication of interests and possible prejudice to the 7 process. The Board also accepts the submissions on 8 behalf of Energy Probe that the grounds for the motion, 9 other than those relating to Rule 29, cannot be 10 accepted. 11 In the result, the Board does not 12 believe that it would be assisted by an intervention on 13 behalf of Enbridge Inc. in its determination of the 14 threshold issue, given that Enbridge Inc. did not 15 actively participate in the original proceedings. 16 Should the Board determine that the 17 threshold has been met, the Board will reconsider 18 whether Enbridge Inc. might assist in the hearing of 19 the substance of the company's motion depending upon 20 which ground for rehearing, if any, it finds 21 persuasive. 22 Are there any questions? 23 MS FORBES: In light of your 24 decision, Madam Chair, with leave of the Board, I 25 request that we be permitted to remain in the hearing 26 to hear the submissions on the threshold issue. 27 THE PRESIDING MEMBER: That is fine. 28 MS FORBES: Thank you. 42 FORBES, reply sub. 1 THE PRESIDING MEMBER: Are there any 2 other preliminary matters, Ms Lea, before we go on to 3 the threshold question? 4 MS LEA: I am not aware of any, Madam 5 Chair. I don't see anyone -- 6 THE PRESIDING MEMBER: Mr. Cass? 7 MR. CASS: No, Madam Chair. Thank 8 you. 9 THE PRESIDING MEMBER: Perhaps, then, 10 we could proceed. 11 Mr. Cass, I think that would be you. 12 SUBMISSIONS 13 MR. CASS: Yes. Thank you, Madam 14 Chair. 15 Madam Chair and Members of the Board 16 Panel, the starting point for this motion I think is 17 obvious, and that is section 21.2 of the Statutory 18 Powers Procedure Act. That section, as the Board is 19 well aware, states that: 20 "A Tribunal may, if it considers 21 it advisable and if its rules 22 made under section 25.1 deal 23 with the matter, review all or 24 part of its own decision or 25 order and may confirm, vary, 26 suspend or cancel the decision 27 or order." (As read) 28 The comment I make in passing here 43 CASS, submissions 1 about section 21.2 is that it is a very broad power of 2 review with few, if any, restrictions on the Board's 3 power to review its own decisions. 4 The one apparent restriction is 5 really that the Board must have rules dealing with 6 reviewing or rehearing its own decisions or orders. 7 That, as I say, is apparent from section 21.2. 8 As we also know, the Board does have 9 its own rules addressing rehearing, review or variation 10 as the heading of Part X of the Rules of Practice and 11 Procedure reads, and Rules 62 to 65 address review or 12 rehearing of Board decisions. 13 The basic rule is 62.01, which 14 indicates that any person may bring a motion before the 15 Board to ask the Board to review or rehear any matter 16 or to rescind or vary any order under section 30 of the 17 Act or section 21.2 of the Statutory Powers Procedure 18 Act, which I have already referred you to. 19 Then there are, of course, detailed 20 provisions as to the procedure which the Board can 21 follow on such a motion. 22 The threshold issue, which is now 23 before the Board, arises from Rule 64.01, which 24 indicates that the Board: 25 "...shall determine, with or 26 without a hearing, in respect of 27 a motion brought under Rule 62, 28 the threshold question of 44 CASS, submissions 1 whether the matter should be 2 reheard or reviewed or whether 3 there is a reason to believe the 4 order should be rescinded or 5 varied." (As read) 6 So for our purposes, my submission is 7 that today the threshold issue is whether the matter 8 should be reviewed or reheard. 9 Then going back to Rule 63.01, we see 10 the provisions of the rules regarding the grounds for 11 such a motion. 12 This rule is set in the context of a 13 notion of motion, but in that context it provides quite 14 an explicit set of directions as to what the grounds 15 for a review or rehearing motion might be. 16 Rule 63.01(a) indicates that: 17 "The notice of motion shall set 18 out the grounds upon which the 19 motion is made sufficient to 20 justify a rehearing or review, 21 or raise a question as to the 22 correctness of the order or 23 decision, which grounds may 24 include the following 25 subparagraphs:" (As read) 26 So the two points that I want to make 27 to the Board about Rule 63.01 are, first of all, that 28 the test established here is that the applicant, the 45 CASS, submissions 1 moving party, should have grounds sufficient to justify 2 a rehearing or review or raise the question as to the 3 correctness of the order or decision, and the grounds 4 may include the following. 5 The first point is the test as to 6 sufficiency. The second point is that the grounds are 7 inclusive and not an exhaustive list. So the grounds 8 may well be other things that are not specified here, 9 but these are included in what the grounds might be. 10 So the grounds specified in Rule 11 63.01 include, for example, new facts or facts that 12 were not previously placed in evidence and could not 13 have been discovered by reasonable diligence, but the 14 grounds are by no means restricted to only those two. 15 It is not a situation where brand new evidence is a 16 requirement in any way of a motion for a review or 17 rehearing. 18 There are four other grounds 19 specified in Rule 63.01, in addition to the two I have 20 referred to, and again these are only inclusive. 21 Of the four others, the two that have 22 been given prominence in the moving party's notice of 23 motion, as the Board would be aware, are the second, 24 error in fact, and the sixth, an important matter of 25 principle that has been raised by the order or 26 decision. 27 Consequently, Madam Chair, in my 28 submissions I will address the applicant's position as 46 CASS, submissions 1 regards those two grounds. Finally, I will just make a 2 general submission about an additional category, as 3 well as those two. 4 I might say at the outset that in my 5 mind these categories are not hard and fast. There is 6 overlap, and you will, I think, hear some overlap in my 7 submissions. 8 One can categorize the grounds 9 different ways, but I will try to structure it in the 10 way I have described, to address the second heading of 11 this rule in terms of the grounds, the sixth heading, 12 and then just one other category, which does overlap 13 with some of my previous submissions. 14 Starting, first, with the moving 15 party's position that the decision contains errors of 16 fact or incorrect assumptions, as was stated in the 17 notice of motion, the starting point for that would be 18 paragraph 3.3.10 of the decision and that is found -- 19 or the specific bullet point of that paragraph that I 20 will refer to is at page 32 of the decision. 21 I am referring here to the last 22 bullet point on page 32. In this context, it is the 23 first sentence that I draw particular attention to. 24 "Even if one accepts that 25 earlier Board decisions did not 26 differentiate between taxes 27 relating to ancillary programs 28 and taxes relating to the 47 CASS, submissions 1 utility, it is remarkable that 2 the company did not alert the 3 Board to the deferred tax 4 problem when the question of the 5 costing of the ancillary 6 programs was under 7 consideration." (As read) 8 The costing of the ancillary 9 programs, as the Board is aware, was given its most 10 extensive and its real consideration in E.B.R.O. 495. 11 The evidence filed in support of this 12 motion has demonstrated that the company did alert the 13 Board to the deferred tax problem in E.B.R.O. 495. 14 Without going through it in detail -- 15 it is in the affidavit of Glen Hills, as the Board 16 would be aware -- the company alerted the Board to the 17 deferred tax problem in the written evidence filed in 18 that case. That is detailed in paragraphs 11 and 14 of 19 the affidavit of Mr. Hills. 20 It alerted the Board on two 21 occasions: in the oral testimony in E.B.R.O. 495. That 22 can be found in paragraphs 15 and 16 of the affidavit 23 of Glen Hills. 24 The company alerted the Board in an 25 undertaking answer in E.B.R.O. 495. That is in 26 paragraph 18 of the affidavit of Glen Hills. 27 The company alerted the Board in 28 certain submissions made by counsel in E.B.R.O. 495, 48 CASS, submissions 1 and that is paragraph 17 of the affidavit of Glen 2 Hills. 3 So that is the first point under the 4 initial category within the grounds for a review or 5 rehearing motion. 6 The second point also arising from 7 paragraph 3.3.10 is based on the sentence that appears 8 a little bit later in the same paragraph. 9 "Consideration of a different 10 costing treatment for the rental 11 program commenced as early as 12 1995." (As read) 13 With a reference to E.B.R.O. 490. 14 That's a further sentence in the last bullet point on 15 page 32 of the decision. It's about mid-way through 16 the last bullet point. 17 In the context of the sentence that I 18 previously read, that it is remarkable that the company 19 did not alert the Board, the meaning of the second 20 sentence I have now read is that the company's failure 21 to alert the Board started with E.B.R.O. 490 in 1995. 22 The testimony or the affidavit of 23 Mr. Hills has addressed that. The company did make the 24 Board aware of the deferred tax problems in the oral 25 testimony in E.B.R.O. 490 and that's at paragraph 19 of 26 the affidavit of Mr. Hills. Again, without taking the 27 time to go to the affidavit and read in detail what is 28 there, I am sure that the Board has done that. 49 CASS, submissions 1 Then the third item within this 2 ground for the motion arises from paragraph 3.3.7 of 3 the decision, and specifically, this would be the last 4 bullet point on page 29. In the last bullet point on 5 page 29, the statement is made: 6 "More than 10 years ago Board 7 staff argued for the exclusion 8 of the rental program from the 9 utility operation. At the time 10 the deferred tax situation was 11 not raised." (As read) 12 In the affidavit of Mr. Hills the 13 company has demonstrated, in fact two different cases, 14 not just one, of more than 10 years ago. First, when 15 Board staff questioned the removal of the utility 16 program and the evidence in response brought up the 17 deferred tax issue. 18 Then another case, where the Board 19 argued for removal and the company brought it up again, 20 in fact reminding Board staff of its previous argument 21 in which it appeared to have conceded that removal is a 22 difficult issue in light of the deferred tax problem. 23 So that is the third item under the 24 first ground for review, and that is discussed at 25 paragraphs 29 and 30 of the affidavit of Glen Hills. 26 Then the fourth and final item under 27 the first category is paragraph 3.3.9 of the decision 28 which can be seen at page 30. 50 CASS, submissions 1 Without reading the whole paragraph, 2 I am sorry I may not get the appropriate context, but 3 for the sake of expediency the company's point really 4 appears when one looks at the last sentence of the 5 paragraph and I apologize for the lack of context, but 6 the last sentence of paragraph 3.3.9 is that: 7 "It now appears that the 8 unrecorded deferred taxes 9 relating to the ancillary 10 programs were another such cost 11 and a large one." (As read) 12 What is being referred to there is 13 the costs that were, quote, "missing in the company's 14 cost allocation". 15 It is the company's submission that 16 this is the fourth item under the categories that I 17 have described of errors of fact or incorrect 18 assumptions. First of all, as the affidavit of 19 Mr. Hills has I think made very clear, and I have 20 already alluded to in these submissions, the deferred 21 taxes relating to the rental program were certainly not 22 missing in the E.B.R.O. 495 evidence. They were 23 revealed and brought to the attention of the Board. 24 Secondly, in my submission it is not 25 correct to say they were missing from the cost 26 allocation methodology in any sense, that that is a 27 criticism of anyone because, as Mr. Hills' evidence 28 makes clear, in my submission, the E.B.R.O. 495 51 CASS, submissions 1 evidence revealed to the Board that those, at least the 2 taxes, were beyond the scope of the cost allocation 3 methodology. 4 Mr. Hills indicates in his affidavit 5 a reference to a section of the company's prefiled 6 evidence called, quotes, "Implementation of Mr. Edgar's 7 Recommended Approach," which stated that the treatment 8 of income taxes was not within the scope of the study. 9 That was in the prefiled evidence in E.B.R.O. 495. 10 Then also, as Exhibit B to the 11 affidavit of Mr. Hills, there is a response to an 12 interrogatory in the 495 case. This was filed in the 13 495 case, which includes a fax transmission from 14 Mr. Edgar. At page 32 of the motion record, the 15 covering page of the transmission from Mr. Edgar 16 indicates that his only comments are as set forth on 17 the attached pages. 18 Then, in the first of the attached 19 pages, which is page 33 of the motion record, one can 20 see Mr. Edgar's handwritten notes, "The treatment of 21 taxes" -- and then there appears to be a slash and the 22 word "tax credits" with a somewhat faint line through 23 it, or at least a line through it: 24 "...for ancillary programs is a 25 distinct issue not addressed by 26 the methodology." (As read) 27 So that was in the material filed in 28 E.B.R.O. 495, as well as the reference in the prefiled 52 CASS, submissions 1 evidence that I have already given the Board and that's 2 also in the affidavit of Mr. Hills. 3 The reference for all of that 4 evidence about what was included in the cost allocation 5 methodology in E.B.R.O. 495 is paragraphs 8 and 9 of 6 the affidavit of Glen Hills. 7 So those are the items which the 8 company says quite squarely fall within the first 9 category of grounds for a review or a rehearing motion. 10 The second important category relied 11 upon by the company, as I have already said, is 12 important matters of principle and I will now turn to 13 that, if I may. There are a number of these. I will 14 not have attempted submissions on all of them because 15 there are a number, but the first couple I do want to 16 address in a little bit of detail. 17 The first appears from again 18 paragraph 3.3.10 of the decision, again at page 32, but 19 this time in the second bullet point. I will just read 20 from the conclusion of that second bullet point on 21 page 32. I am picking up, actually, in the middle of a 22 sentence, starting at the right-hand side of the page: 23 "...it is not entirely clear to 24 the Board that the CICA 25 guideline applied to the program 26 at all." (As read) 27 Referring, of course, to the rental 28 program. Certainly, when full costing of the rental 53 CASS, submissions 1 program was required, it is difficult to see how the 2 CICA guideline applied. The point was never raised 3 before the Board. 4 In the company's submission, the 5 applicability and impact of the CICA guidelines is 6 absolutely fundamental to the entire issue around 7 deferred taxes. A company can only use flow-through 8 accounting where the CICA guidelines are satisfied. 9 If there was any question about the 10 applicability of the CICA guidelines to the rental 11 program, clearly that raises a significant issue about 12 the treatment that the rental program has been accorded 13 for many, many years. 14 In my submission, if the Board is in 15 any uncertainty, if this matter is not clear to the 16 Board as indicated in this bullet point, it should be 17 clear to the Board. It should be made clear. 18 The evidence of David Warner, the 19 auditor, has been brought forward to address that 20 issue. For the purposes of the threshold issue, my 21 submission to the Board is that this is an important 22 matter or principle that the apparent uncertainty 23 arising from the decision must be clarified because the 24 applicability of the guidelines is, as I said, 25 fundamental to the entire deferred tax issue. 26 The second important matter or 27 principle arises from the immediately preceding bullet 28 point on the same page, page 32. That is the statement 54 CASS, submissions 1 that "the regulatory compact," in quotation marks, does 2 not operate in such a way as to prevent the Board from 3 considering new circumstances and changing its approach 4 in response to them. 5 Now, I said the second important 6 matter of principle. In my submission, this statement 7 raises quite a list, frankly, of important matters of 8 principle that ought to be considered. So I am 9 grouping them all in one category but, in my 10 submission, there are many of them. 11 The moving party, of course, the 12 company recognizes that, as I think it has said in the 13 past on this same issue to the Board, the general 14 principle that one decision -- that a decision of one 15 Board Panel does not bind a subsequent Board Panel. 16 However, this bullet point that I have just referred 17 to, at the top of page 32, is apparently an acceptance 18 that there was a regulatory compact around the deferred 19 tax issue. The indication is that it does not operate 20 in a way to prevent the Board from considering new 21 circumstances but it seems, definitely, to be implicit 22 in that, that there is a regulatory compact. 23 That being the case, given the 24 Board's acceptance of the regulatory compact, it is my 25 submission that there are many important matters of 26 principle that flow from that bullet point at the top 27 of page 32. 28 The first, and perhaps the foremost, 55 CASS, submissions 1 is, given the Board's acceptance of the regulatory 2 compact, in my submission, an extremely important 3 matter of principle is whether the regulatory compact 4 either must be allowed to survive to its logical 5 conclusion or if it is going to changed by the Board, 6 it is going to be changed by the Board whether the 7 party that has relied upon it must be given a fair and 8 reasonable opportunity to adjust to the change. That 9 is not addressed in the decision. In my submission, 10 that is a fundamental point that flows from the very 11 existence of a regulatory compact. If the compact 12 exists, it must mean something. 13 Certainly, there can be a change in 14 circumstances but, in my submission, what that then 15 gives rise to as an issue, if there is a perceived 16 change in circumstances, is: How is the party who 17 relied on the compact to be fairly treated and to be 18 given a fair and reasonable opportunity to adjust, 19 given the Board's decision that it is going to abrogate 20 the compact? In my submission, that is a vital matter 21 of principle. 22 Another matter of principle arising 23 from this is to identify just what the new 24 circumstances are that justifies a departure from the 25 regulatory compact in the case of deferred taxes. 26 In my submission, it is not 27 identified in the first bullet point of page 32. The 28 company has made efforts to identify what the change in 56 CASS, submissions 1 circumstances might be -- and I will come to that in a 2 moment -- but given the Board's apparent conclusion 3 that new circumstances can justify a change in 4 approach, in my submission, an important matter of 5 principle is to determine what the new circumstances 6 are. 7 Another matter of principle is once 8 the new circumstances are known is as to whether they 9 do justify a complete departure from the regulatory 10 compact and, if so, how the applicant can be 11 protected -- sorry -- how the party relying on the 12 regulatory compact can be protected in the case of a 13 complete departure. 14 Now, as will be apparent from the 15 affidavit of Mr. Hills, the company has endeavoured to 16 find the message of the Board on deferred taxes. The 17 company had concluded that the message seems to be that 18 E.B.R.O. 495 had a substantive relevance to all of 19 these issues. That being so, in the company's effort 20 to determine what are the new circumstances that allows 21 a departure from the regulatory compact as the best 22 answer that we have been able to find is -- apparently, 23 it is E.B.R.O. 495. 24 That may be wrong. If it is 25 E.B.R.O. 495, though, in my submission, that just 26 raises further important matters of principle. The 27 first being: What does E.B.R.O. 495 have to do with 28 deferred taxes and the ability of the Board to depart 57 CASS, submissions 1 from the regulatory compact? I have already shown the 2 Board the evidence from E.B.R.O. 495 that taxes were 3 beyond the scope of the costing methodology that was at 4 issue in that case. 5 Another important matter of 6 principle, if E.B.R.O. 495 is the new circumstances, 7 is: How does that affect responsibility for deferred 8 taxes that were accumulated prior to E.B.R.O. 495? 9 Another important matter of principle 10 that is alluded to in the affidavit of Mr. Hills is 11 that if the new circumstances are the 495 decision, how 12 can the Board issue its own decision on a policy matter 13 and say that that decision is the very same that allows 14 it to abrogate a regulatory compact? 15 I raise these only as issues but, in 16 my submission, these are all very important matters of 17 principle that arise directly from the first bullet 18 point on page 32. 19 Now, the third category of important 20 matters of principle will overlap with what I just 21 said. I have already alluded to this. But the 22 applicant's best conclusion, on a reading of the 23 decision, is that apparently there was a message to be 24 taken from E.B.R.O. 495 that was relevant, 25 substantively, to this whole deferred tax issue. The 26 applicant takes that from paragraph 3.3.9, where there 27 is reference to E.B.R.O. 495, and also again 3.3.10, 28 the last bullet point, there is reference to 58 CASS, submissions 1 E.B.R.O. 495. 2 So, again, bearing in mind that there 3 is some overlap here with my previous submission, the 4 moving party's materials in support of a motion I think 5 have very solid evidence that, at least in the view of 6 experts such as Mr. Warner and as well Mr. Hills, the 7 495 decision does not impact on deferred taxes. So, 8 that being the case, another important matter of 9 principle which the applicant, the moving party, says 10 has been raised on this motion is whether the 495 case 11 does, in fact, have the significance which appears to 12 be attached to it in paragraphs 3.3.9 and 3.3.10. 13 Now, I am going to touch on some 14 other important matters of principle but I will try to 15 move through these more quickly. They do appear from 16 Mr. Hills' affidavit, or in one instance Mr. Truswell's 17 affidavit, and I will really just touch upon them to 18 categorize them for the Board. 19 In paragraphs 34 and 35 of the 20 affidavit of Mr. Hills, there is evidence about policy 21 initiatives which have occurred since the E.B.R.O. 495 22 decision. 23 Now, the Board is, of course, well 24 aware that major legislative change has occurred since 25 that decision. So the next important matter of 26 principle raised by the moving party is that if 27 E.B.R.O. 495 is to have the significance that the 28 decision in question appears to give to it, why has 59 CASS, submissions 1 attention not been given to the effect of later policy 2 initiatives on what may have happened in E.B.R.O. 495? 3 That is addressed in paragraphs 34 and 35 of the 4 affidavit, as I think I have said. 5 The next important matter of 6 principle raised in the company's material is the 7 setting of the $50 million limit on the notional 8 utility account allowed by the Board -- and when I say 9 "the setting of the limit", I mean the capping of it at 10 $50 million. This is covered in paragraphs 39 to 44 of 11 the affidavit of Glen Hills. 12 As indicated at page 35 of the 13 decision -- and here, I am referring to paragraph 14 3.3.19 -- the allowance of the notional utility account 15 sprung from the Board's statement that -- and I am 16 quoting from midway down paragraph 3.3.19, on page 35: 17 "The Board believes that there 18 should be some recognition of 19 the benefits they..." 20 That being ratepayers: 21 "...have received in the 22 past." (As read) 23 So, the affidavit of Mr. Hills raises 24 at least two important matters of principle in relation 25 to that, the first being that if the benefits have 26 already been delivered in the past -- and that is what 27 is being recognized, as Mr. Hills explains in his 28 affidavit -- the fair way to treat the notional utility 60 CASS, submissions 1 account would be to set it up in a way that gives 2 immediate recognition to the shareholder. Since the 3 benefits have already been delivered, the $50 million 4 account, as explained in Mr. Hills' affidavit as a 5 matter of fairness, given that it is in recognition of 6 the benefits, should be set up in a way so that 7 essentially carrying costs are recognized. 8 The second matter also discussing 9 Mr. Hills' affidavit, which I won't go through in 10 detail, is, given the Board's statement that the 11 benefits should be recognized, Mr. Hills has discussed 12 categories of benefits that he suggests ought to have 13 been included in that recognition. 14 The next important matter of 15 principle, again, in Mr. Hills' affidavit, at 16 paragraphs 45 to 48 -- and it is only a request, but I 17 think it is worthy of consideration by the Board, and I 18 submit that it is -- is that the company, as the Board 19 is aware, very specifically put forward what it thought 20 were five independent arguments in support of its 21 position on deferred taxes. 22 I am not aware that anybody took 23 exception to the company's position that they were 24 independent, stand-alone arguments. The company has 25 requested from the Board consideration and reasons on 26 the five arguments. It is a request. It is nothing 27 more than a request. But in my submission, it is still 28 an important matter of principle, from the point of 61 CASS, submissions 1 view of this issue, which is of such significance. 2 The final category or the final 3 important matter of principle to which I will allude is 4 in I think the concluding paragraph. I am sorry, it Is 5 the second last paragraph of the affidavit of 6 Mr. Truswell, paragraph 20, appearing at pages 149 and 7 150 of the motion record. 8 Mr. Truswell has testified about the 9 message sent to investors and potential investors. 10 Mr. Truswell has raised issues about attractiveness of 11 investing in Ontario and the effect that that has on 12 the policies of the Ontario government. Without going 13 into detail now on the threshold issue, in my 14 submission, that is an important matter of principle. 15 Here again I am going to touch on 16 another area of overlap. I have now, I think, listed 17 for the Board the errors of fact or incorrect 18 assumptions and the important matters of principle. 19 There is one other category that I would like to 20 describe to the Board and it does overlap with what I 21 have said already. 22 One can categorize it however one 23 wishes. I don't think that the rules require distinct 24 categories given that the list is only inclusive as to 25 what the ground for a review motion might be, but the 26 ground is simply the evidence that has been brought 27 forward primarily in the affidavit of Mr. Truswell 28 about the impact of the Board's decision. 62 CASS, submissions 1 Obviously, evidence about the impact 2 of the Board's decision could not have been brought 3 forward until the decision was released. This is 4 something which, in my submission, is relevant for the 5 Board to consider and is evidence which satisfies a 6 ground for the Board to embark upon the review and 7 rehearing motions. 8 So I have three broad categories or I 9 have made submissions on three broad categories with a 10 number of different items under the first two, Madam 11 Chair, and I would just like to make a few concluding 12 comments. 13 In my submission, it surely must be 14 beyond doubt that the role of the Board on this 15 threshold issue is not to decide whether each and every 16 one of these points that I have alluded to raised by 17 the company is right or wrong. That's the main motion, 18 in my submission. We are not talking here about 19 whether these points are right or wrong. 20 In my submission, based on the review 21 of the Rules that I did at the outset of this argument 22 in-chief, the Board is merely looking at whether the 23 company gets itself over the threshold issue that I 24 described and, in doing that, in my submission, it 25 doesn't really matter that much whether the company is 26 right or wrong. The Board needs to be satisfied that 27 there are important matters of principle or that there 28 are errors of fact and if those do exist, in my 63 CASS, submissions 1 submission, that gets the Board beyond the threshold 2 issue. On the main motion, the Board will decide who 3 is right or who is wrong. 4 So, in conclusion, Madam Chair, I 5 submit that with, I think -- I apologize that it was 6 extensive, but I think it was necessary to go through 7 the materials that have been put before the Board. I 8 think with that listing of the many grounds relied upon 9 by the company in support of the motion it surely must 10 be abundantly clear that the moving party has far and 11 away satisfied any standard that this Board might think 12 is appropriate to apply on a threshold issue. In my 13 submission, it's hard to imagine that an applicant or 14 moving party on a review or a rehearing motion could 15 come forward with more than what the company had done 16 in this case. 17 That is my submission in-chief, Madam 18 Chair. I thank the Board for their patience and, of 19 course, I will answer any questions, if there are any, 20 at this time. 21 THE PRESIDING MEMBER: Thank you, 22 Mr. Cass. 23 Mr. Brett? 24 MR. BRETT: Madam Chair, Mr. Thompson 25 has asked if he could precede me because of some other 26 commitments he has and I said that was fine. 27 THE PRESIDING MEMBER: Certainly. 28 Mr. Thompson, go ahead. 64 CASS, submissions 1 SUBMISSIONS 2 MR. THOMPSON: Thank you very much, 3 Madam Chair. 4 As a precursor to my submissions with 5 respect to the threshold question, there is a point 6 that I wish to raise in the context of what the company 7 seeks here, being a review or rehearing. It's 8 important, in my submission, to appreciate that what 9 can be reviewed or reheard under the Rules is any 10 matter. The matter that the company seeks to have 11 reviewed or reheard is the deferred tax matter which 12 was raised in its 179-14/15 application. 13 That matter, if it is to be reviewed 14 or reheard, in my submission, must be reviewed or 15 reheard in the context of that proceeding. The 16 question I ask you to consider is whether that 17 proceeding really has any life left because you will 18 recall the deferred tax issue in that proceeding was 19 raised in the context of the company's request to have 20 its rental program reclassified as core. There was no 21 stand-alone request for deferred tax relief. It was 22 tied to the reclassification of the rental program as 23 core. 24 Since the decision was rendered, the 25 company has made it perfectly clear it is moving the 26 program over to an affiliate. So, in that context, I 27 urge you to consider whether there is really any 28 proceeding left in which the matter that the company 65 THOMPSON, submissions 1 seeks to have reviewed or reheard can be reviewed or 2 reheard. I would submit the company really needs a new 3 proceeding to raise issues with respect to deferred 4 taxes on a stand-alone basis. So that's the first 5 point that I urge you to consider in whether to go 6 forward with this request for review or rehearing. 7 Even if there is a proceeding which 8 exists in which the matter can be reviewed or reheard, 9 the threshold test, in my submission, has not been met. 10 It's not really whether the decision raises important 11 questions of principle. The threshold, in my 12 submission, is whether those principles were raised in 13 the proceeding and decided and whether there is 14 anything new that was not considered or available at 15 the time those principles were fully argued. 16 The same goes for Mr. Cass' 17 characterization of what he called variance of fact or 18 assumption. The first threshold, it seems to me, that 19 he has to meet is to demonstrate that his 20 interpretation of the Board's decision is correct and 21 then, secondly, whether there is anything new with 22 respect to the facts that were considered by the Board 23 and fully argued in the case that has been decided. In 24 my submission, as you will see in a moment, he, 25 firstly, misconstrues the Board decision and, secondly, 26 there is nothing new being raised. 27 The last point he made about an error 28 in principle is he complains that the decision did not, 66 THOMPSON, submissions 1 apparently, in his view, address all of the arguments 2 that the company raised. He said the company raised 3 five arguments that he characterized as independent. 4 Each one of them, he contends, warranted the relief 5 that the company sought. 6 Intervenors, certainly IGUA, 7 responded to each and every one of those arguments and 8 it's not appropriate, in my submission, to grant a 9 motion for review or rehearing -- at least to proceed 10 with a motion for review or rehearing simply to respond 11 to an applicant's request that all of his arguments be 12 reconsidered again. So that aspect of my friend's 13 motion has no merit, in my submission. 14 The two major topics where Mr. Cass 15 suggests he has missed the threshold are the 16 shareholder responsibility issue and what I call the 17 sharing account issue, the $50 million account issue. 18 The shareholder responsibility issue, 19 to IGUA, really might be a more appropriate phrase, not 20 a ratepayer responsibility issue, because that is 21 really what the Board decided in its decision, that the 22 unrecorded deferred access associated with the rental 23 programs were not a ratepayer responsibility. The 24 company's evidence indicated pretty strongly that if 25 they were not a ratepayer responsibility, then they 26 would be recorded as a charge against retained 27 earnings. 28 Now, that issue, the shareholder/ 67 THOMPSON, submissions 1 ratepayer responsibility issue, was argued at length 2 under five topic headings. I am just here summarizing 3 those headings that appeared in the applicant's 4 argument, but they were responded to by all parties, as 5 I recall it. 6 The first was Board decisions and 7 regulatory precedent. 8 The second, related to the first, was 9 this regulatory compact notion. 10 The third was gas ratepayer and 11 societal benefits. 12 The fourth was shareholder risk and 13 return. 14 The fifth was investor reporting and 15 financial markets. 16 So the case covered all of these 17 topics. 18 Mr. Hills' evidence, which I will 19 come to in a moment, addresses the shareholder 20 responsibility or ratepayer responsibility topic. 21 Mr. Hills gives us his analysis of the Board's 22 decision, and I will come back to that in a moment. 23 I would like first, though, to deal 24 with Mr. Truswell's evidence in the context: Does this 25 evidence address a fact that was not before the Board 26 when it rendered its decision? 27 If you look at Mr. Truswell's 28 evidence, it is the disgruntled shareholder testimony 68 THOMPSON, submissions 1 basically saying the Board's decision has an 2 unfavourable impact on retained earnings. 3 That topic was fully addressed in the 4 evidence and in the argument. The position of 5 intervenors was that all of the unrecorded deferred tax 6 was not for the account of the ratepayers. The Board's 7 decision actually alleviated that position quite 8 considerably. 9 So that Mr. Truswell's evidence not 10 only addresses a topic that was covered and fully 11 argued, but his suggestion that the situation after the 12 decision was worse than the risks that the companies 13 face going in is quite wrong. Actually, the Board gave 14 them 50 million of the 126. 15 So from the perspective of what the 16 company was faced with, it is not a significant change 17 and, if anything, it is a benefit. 18 But the point is, Mr. Truswell's 19 affidavit does not address new facts and it does not 20 meet the threshold. It adds nothing. 21 I turn to Mr. Warner's affidavit. 22 This affidavit is interesting, 23 because you will recall in the case the company was 24 making all these assertions about what its auditors 25 concluded and didn't conclude based on their financial 26 statement reporting. IGUA, in its argument, not only 27 addressed the reasonableness of what the company was 28 saying the auditors inferred, but suggested that the 69 THOMPSON, submissions 1 failure of the company to lead evidence from the 2 auditors is something that the Board ought to take into 3 account in deciding what conclusions ought to be drawn. 4 So that topic, the topic of the CICA 5 Guidelines, what they meant, what they meant in the 6 context of the facts that were before the Board and 7 what the auditors concluded and did not conclude, was 8 fully argued. The company chose not to lead their 9 evidence. The issue was argued on the basis that the 10 failure to lead evidence could have an adverse impact 11 on the conclusions they were urging, and now they come 12 forward with the evidence from the auditor. 13 Surely that is not what a motion for 14 rehearing and review is intended to accommodate. 15 In terms of his evidence I just want 16 to make a further point about it. It is found at 17 Tab 4. 18 You will recall, on this issue of 19 ratepayer responsibility or no ratepayer responsibility 20 for taxes associated with the rental program, it was 21 IGUA's position in response to the company's position 22 that the Board had committed to hold ratepayers 23 responsible for these taxes by virtue of its prior 24 decisions. 25 It was our position that that 26 question, whether ratepayers were or were not 27 responsible for unrecorded deferred taxes associated 28 with the rental program, had never been brought 70 THOMPSON, submissions 1 squarely before the Board -- so that was point one -- 2 at any time. 3 The second point that we made and 4 which the company never addressed in its argument was 5 that in its rate of return presentations to the Board, 6 in both the marginal and fully allocated cost 7 approaches the company always showed taxes payable with 8 respect to the rental programs as an item of expense 9 for those programs. 10 In other words, the representations 11 in the company's own material were that taxes 12 associated with the rental program and other ancillary 13 programs when payable would be for the account of the 14 programs, i.e., they were not a ratepayer 15 responsibility item. 16 So that in the context of that 17 evidence, and the Board decisions where the company had 18 never expressly raised this issue, it was the position 19 of intervenors and others that the Board decisions in 20 the past could not possibly be construed, as the 21 company asserted, as a commitment by the Board to hold 22 ratepayers responsible for taxes associated with the 23 rental programs. 24 That was the issue that was addressed 25 at great length in the hearing. 26 Mr. Warner, in his affidavit, does 27 not address at all the implications of those rate of 28 return presentations to the Board where taxes payable 71 THOMPSON, submissions 1 with respect to the rental programs were ascribed to 2 those programs. That evidence was evidence of record 3 year after year after year after year. 4 So his conclusion that he is trying 5 to present here that in his opinion ratepayers were 6 responsible for taxes associated with the rental 7 programs, based on his analysis of financial 8 statements, will not stand the test of 9 cross-examination in my submission. 10 So if this case goes forward and we 11 are going to hear from Mr. Warner, the point I want to 12 make is: We wish to cross-examine him on his 13 conclusion. 14 But my point is, all of that, all of 15 what he is discussing here, plus, in addition, the 16 return schedules that the company presented in its 17 prefiled, that entire topic was fully discussed and 18 debated in the hearing and there is nothing new in 19 Mr. Warner's affidavit. It does not address a new 20 topic. 21 The other point he doesn't address, 22 which is really in the bullet point of the Board's 23 decision to which his affidavit refers -- this is the 24 second bullet point on page 32 talking about the CICA 25 guideline. 26 The context of these bullet points, 27 in my respectful submission, the company ignores in its 28 submissions. The context of the implications of the 72 THOMPSON, submissions 1 495 decision and the prior decisions was whether the 2 company's position that this commitment existed was a 3 valid position or not. 4 The intervenors were taking the 5 position it was never -- they did not support the 6 conclusion that a commitment was made because, first of 7 all, the point about ratepayer responsibility was never 8 raised squarely by the company. They were doing this 9 very oblique interpretation of their financial 10 statements, and I think in IGUA's submission we 11 suggested they were trying to pull themselves up by 12 their own bootstraps as a result of their inaction. 13 But Mr. Warner, in his affidavit, 14 doesn't respond to the last sentence in that bullet 15 point. The point was never raised before the Board. 16 The point, in my submission, that is being referred to 17 there is ratepayer responsibility for deferred taxes 18 associated with the rental program -- any taxes 19 associated with the rental program. 20 That point was never raised before 21 the Board and, in fact, the company always represented 22 that those taxes were not the responsibility of 23 ratepayers. 24 So that if you look, Mr. Cass 25 suggests that the decision marks a major change. 26 Really, it doesn't because it held the company to its 27 representation that taxes would be the responsibility 28 of the rental program if and when they became payable. 73 THOMPSON, submissions 1 This topic of CICA guidelines and 2 rate-of-return representations, I will just give you 3 references in IGUA's argument: page 17, paragraph 54 4 through to page 18, paragraph 60; and we also address 5 the topic again at page 45, paragraphs 142 and 6 following. 7 In coming to Mr. Hills' evidence, if 8 I may, basically he is focusing on some of the bullet 9 points in 3.3.10, which led to the conclusion that the 10 Board noted in paragraph 3.3.11. It was not only those 11 bullet points but other items that the Board had 12 described in prior paragraphs. 13 The point that I want to make here is 14 this: that those points in paragraph 3.3.10 supported 15 the conclusion that the Board made that it did not 16 accept the company's argument that its past decisions 17 implied a commitment. That is in the first sentence of 18 3.3.10 at the top of page 31. 19 The commitment is referenced on page 20 28, in paragraph 3.3.3. 21 The company relies heavily on earlier 22 Board decisions and the regulatory compact for its 23 contention that the deferred taxes should be recovered 24 in rates. According to the company, the Board's 25 decisions and the consequential regulatory precedence 26 imply, without questions, a commitment. The Board then 27 uses the term commitment to define that phrase later 28 on. 74 THOMPSON, submissions 1 The commitment encompasses, in my 2 submission, the effective Board decisions and the 3 regulatory compact. 4 So the conclusion that the Board 5 made, that there was this commitment, in my submission, 6 is a rejection of the regulatory compact argument, not 7 an acceptance of it. 8 So my friend, in framing all of his 9 principles that flow from the bullet point at the top 10 of page 32, does so on an assumption that the Board 11 accepted this regulatory compact argument. In fact, 12 the statement at the beginning of paragraph 3.3.10, in 13 the context of the earlier paragraph, indicates, I 14 suggest quite clearly, that the Board rejected that 15 regulatory compact argument. 16 So all of the principles that flow 17 from his erroneous assumption about acceptance of the 18 regulatory compact are without merit. 19 He criticizes the statement in the 20 last bullet point on page 32, where the Board said: 21 "It is remarkable that the 22 company did not alert the Board 23 to the deferred tax problem." 24 (As read) 25 What the Board was saying there, I 26 submit, in the context of all the submissions that had 27 been made, was that the company did not raise the 28 ratepayer responsibility for deferred taxes in any 75 THOMPSON, submissions 1 case, in all of these cases that are relied on, to 2 demonstrate the commitment. 3 It specifically didn't raise it as an 4 issue when we were debating fully allocated costs, and 5 it was remarkable to intervenors, and to the Board 6 obviously, that they had not raised that specific issue 7 when people were arguing whether any costs associated 8 with the ancillary programs should be assigned to 9 ratepayers. 10 In fact, the company had already 11 represented that taxes associated with the programs 12 were for the account of those programs and not the 13 ratepayers. But if it was ever going to be raised, it 14 should have been raised in those cases where we were 15 discussing this methodology. 16 And that was remarkable. It clearly 17 was remarkable. It wasn't whether the topic was 18 discussed in prior cases. Deferred tax is always 19 discussed in prior cases. What was remarkable was that 20 the specific question of ratepayer responsibility was 21 never raised. 22 Therefore, it was unreasonable for 23 the company to conclude that all of the prior decisions 24 evidenced the commitment. That is what the Board's 25 finding indicates. 26 The Board's conclusion with respect 27 to ratepayer responsibility is reflected in paragraph 28 3.3.11, which is that the deferred taxes associated 76 THOMPSON, submissions 1 with rental program should be the responsibility of the 2 shareholder or, stated another way, not the responsibly 3 of the ratepayer. 4 As I mentioned earlier, that wasn't a 5 change, that was an endorsement of the representations 6 that the company had been making repeatedly in its 7 rate-of-return presentations. 8 Just take those rate of return 9 calculations by themselves. There was ample evidence 10 to support the conclusion that the Board made. That is 11 really all you need to be satisfied of for the purposes 12 of asking yourself: Should we review or rehear this 13 case? 14 What you did was clearly in accord 15 with the evidence, and it ought not to be reheard or 16 reviewed. 17 Mr. Hills' testimony, in my 18 respectful submission, adds nothing that was either not 19 available at the time of the hearing or was not argued, 20 and fully argued, during the course of the case. He 21 really is trying to buttress the record with respect to 22 issues that were fully argued. That is not the purpose 23 of a review or rehearing application. His evidence 24 does not meet the threshold of addressing a new fact. 25 It is a misinterpretation, I suggest, 26 to construe the Board's decision as treating the 495 27 proceeding as a watershed with respect to deferred 28 taxes. I think all the Board was saying -- and I am 77 THOMPSON, submissions 1 repeating myself -- is that it was surprising that the 2 topic of ratepayer responsibility for deferred taxes 3 was not raised by the company in that case. That's 4 all. 5 It never said it was a watershed with 6 respect to deferred taxes. What it did say was that 7 none of the decisions, including the 495 decision, 8 supported the company's conclusion that there was this 9 commitment to fix ratepayers with responsibility for 10 taxes associated with ancillary programs. 11 Turning, if I might, then, to the 12 $50 million account issue, again Mr. Hills' affidavit 13 really is another spin on the benefits sharing issue. 14 I simply remind you that the position 15 of IGUA and others with respect to the existence of 16 benefits and the taking account of offsetting burdens 17 was a topic that was fully argued. Mr. Hills is simply 18 re-arguing, in my submission, the benefits issue in an 19 attempt to obtain an allowance greater than 20 $50 million. This is not evidence addressing new 21 facts. This is re-argument. 22 If this issue is going to be reheard 23 or reviewed, then it should be on condition that all 24 arguments are to be reheard, including the arguments of 25 those contending that none of the deferred tax 26 liability should be ascribed to ratepayers through this 27 account. In other words, the account should be zero. 28 I say that there is nothing new in 78 THOMPSON, submissions 1 Mr. Hills' affidavit with respect to this issue which 2 warrants a review or rehearing. 3 I don't intend to deal with the 4 points that Mr. Cass has enumerated under his three 5 categories. I think I covered his points in my 6 submissions. 7 In conclusion, I urge you to find 8 that there is no reason to believe that the order ought 9 to be reviewed or reheard and, in your discretion, 10 dismiss the motion. That, of course, is based on an 11 assumption that we have a proceeding where this issue 12 can be reheard. If that does not exist, then that is 13 yet another reason to dismiss the motion. 14 My last point that I want to make 15 deals with, I guess, the possibility that you might 16 find the threshold has been met. 17 I would like to draw your attention 18 to Rule 64.01, the last part, which reads: 19 "If the Board finds that the 20 matter should be reheard or 21 reviewed, it may, in its 22 discretion, either dispose of 23 the motion or issue procedural 24 orders with respect to the 25 conducting of the rehearing or 26 review on the 27 merits." (As read) 28 If the matter is to be reviewed or 79 THOMPSON, submissions 1 reheard, then, in my submission, you should issue a 2 procedural order to allow the issue to go forward. It 3 is a ratemaking type of proceeding, if something 4 exists, and it ought to be scheduled, in my submission, 5 in some reasonable conjunction with the pending rate 6 case as a separate proceeding so that parties will be 7 allowed to cross-examine and re-argue all these points 8 if that is the Board's wish, including the issue of 9 whether the account that the Board created is to be 10 entirely for the shareholder; i.e., zero instead of $50 11 million. 12 Those are my submissions. I regret 13 that I am unable to be here tomorrow. I will just have 14 to take the record as I find it. 15 If the motion is dismissed, then I 16 request that IGUA be awarded its costs of participating 17 in the process. I can probably make that request even 18 if it isn't dismissed. 19 Those are my submissions. 20 THE PRESIDING MEMBER: Thank you, 21 Mr. Thompson. 22 Mr. Thompson, the Board has some 23 questions since you won't be here tomorrow. 24 MEMBER VLAHOS: Mr. Thompson, as part 25 of the motion, there was also a discussion about if the 26 benefits were to be extended to 20 years rather than 10 27 then the $50 million would become something 28 different -- would like your views on that -- as well 80 THOMPSON, submissions 1 as the $50 million does not represent the current value 2 of past benefits. I didn't write anything on my pad 3 here. What is your position on that? 4 MR. THOMPSON: Well, as a threshold 5 issue, it is simply evidence with respect to the 6 quantum of benefits. That topic was fully discussed. 7 So on this topic, if Mr. Hills wanted to place some 8 different values on these benefits, he was free to do 9 so at the hearing. This was available. But the topic 10 was discussed and, in my submission, he doesn't meet 11 the threshold by bringing a new spin to that topic. 12 The quantum, if any, of the amount to be recovered from 13 ratepayers -- i.e., the sharing issue -- was fully 14 argued and this evidence goes to the sharing issue. It 15 is not a new fact. 16 MR. VLAHOS: Thank you. 17 MR. THOMPSON: Is that responsive? 18 MR. VLAHOS: Yes, it is. Thank you, 19 Mr. Thompson. 20 THE PRESIDING MEMBER: Thank you, 21 Mr. Thompson. 22 The Board would like to have a break 23 for a few minutes. Perhaps we can reconvene at four. 24 --- Short recess at 1530 25 --- Upon resuming at 1603 26 THE PRESIDING MEMBER: Mr. Brett. 27 SUBMISSIONS 28 MR. BRETT: Thank you, Madam Chair. 81 BRETT, submissions 1 Good afternoon, Panel. My remarks 2 are going to be brief because of the ground very 3 capably covered by Mr. Thompson. I want to start by 4 referring you to the second bullet on page 32 of your 5 decision, because I think in that paragraph you make 6 several points which are important ones in our 7 deliberations here. 8 In that paragraph, in the second 9 paragraph of page 32, you say the following, as I 10 paraphrase it: 11 One, that the Board doesn't set 12 rental rates. 13 Two, that you have always required 14 separate reporting for ancillary programs. 15 Three, that taxes paid on income from 16 the programs are expected to be a part of the expenses 17 directly assigned to the programs, my emphasis. Taxes 18 are always directly assigned to that program and 19 associated with it. 20 Then, four, you say it is not clear 21 to the Board -- it is not entirely clear to the Board 22 that the CICA guideline applied to the programs at all. 23 That to me is a sort of Canadian speak for saying that 24 we are not at all sure that this CICA guideline ever 25 applied to this particular program, regardless of what 26 the method of costing was, whether it was marginal 27 costing or fully allocated costing. 28 I assume that the reason that you 82 BRETT, submissions 1 underlined that point there was because of the fact 2 that it was an ancillary business and in some sense a 3 separate business. 4 Then, finally, and I think this is 5 the most telling point, you say the point was never 6 raised before the Board, the last short sentence in 7 that paragraph. 8 In that respect I agree completely 9 with what Mr. Thompson said, that that issue has never 10 been litigated before the Board. 11 I think, therefore, what we have here 12 is a question of: Who has the obligation to bring 13 forward this issue and to make it a focus for 14 resolution and have it resolved at the Board, and then 15 what are parties entitled to assume? How much is the 16 company entitled to assume about the issue of deferred 17 taxes and the ancillary programs? 18 It seems to me the company has 19 assumed all along that the Board would treat deferred 20 taxes with respect to ancillary programs in exactly the 21 same way as it would treat deferred taxes in respect to 22 the regulated utility operations of the company and 23 that appears to be an erroneous assumption. 24 Now, with respect specifically to the 25 three grounds for review, the question of new facts. I 26 would suggest to you that implicit in the rule 27 statement that an error in fact or a new fact must be 28 brought up is that it must be a material fact. It must 83 BRETT, submissions 1 be a fact that has something to do that is directly 2 linked to the Board's decision in the case. 3 I don't find, in my analysis of the 4 argument and of Mr. Hills' affidavits, any new facts or 5 any error in fact that I can see of any significant 6 nature. 7 The company makes a great deal of the 8 Board's comment at the beginning of the third bullet on 9 page 32, that it is remarkable that the company did not 10 alert the Board to the deferred tax problem when the 11 question of costing of the ancillary programs was under 12 consideration. That sort of triggered a whole series 13 of pieces of evidence from prior cases in the affidavit 14 of Mr. Hills. 15 But I believe you have to put that 16 comment in context. That comment derives, I think, 17 from a comment that is further down in that same 18 bullet, where the Board -- and this is the only 19 statement that the Board quotes from 497 twice in this 20 decision. It quotes this statement that I am about to 21 give you on page 32 and again over on paragraph 3.39 on 22 page 30. So I think it is a pretty fair assumption 23 that it is important to the Board. 24 On 32, in the middle of the 25 paragraph, in the middle of the final bullet, the long 26 paragraph, the Board says: 27 "Consideration of a different 28 costing treatment for the rental 84 BRETT, submissions 1 program commenced as early as 2 1995. Indeed, in E.B.R.O. 497 3 the Board expressed its concern 4 as to what other costs properly 5 belonging to ancillary or 6 non-utility activities are still 7 missing in the company's cost 8 allocation." (As read) 9 Now, you make exactly the same 10 statement over on the bottom of page 3.3.9. You quote 11 the same section from 497. 12 If I go back to 497, that paragraph 13 or that phrase comes from paragraph 2.4.16 in your 14 decision. That was when you were considering the 15 integrity and the completeness of the company's cost 16 allocation scheme and procedure. You were worried 17 about -- you expressed a concern in 2.4.16: 18 "The Board is concerned as to 19 what other costs properly 20 belonging to either ancillary or 21 non-utility activities are still 22 missing." (As read) 23 Because you had observed earlier the 24 problem with diagnostic costs. You went on to say: 25 "Certainly the admission of 26 costs relating to diagnostic 27 services calls into question the 28 reasonableness of the company's 85 BRETT, submissions 1 previous procedures in 2 allocating costs to ancillary 3 programs or non-utility 4 activities." (As read) 5 Then you go on to talk about it sort 6 of decreases the force of the company's argument about 7 benefits to ratepayers. 8 What I took you to be saying there 9 simply was you weren't sure that you had a complete 10 picture of the costs that would properly be allocated 11 to the ancillary programs. 12 So it is in that context, I think, 13 that you were raising a flag of maybe are there other 14 costs here that ought to be included and is deferred 15 taxes one of them as a cost of the ancillary programs 16 just in the interests of a proper cost allocation. 17 Nothing to do with fully allocated cost because these 18 were direct costs and always had been and taxes were a 19 direct cost and had been assigned directly to the 20 program by the company forever and ever, for all 21 practical purposes. 22 So for the company then to seize on 23 this and say, "Well, it's not right for the Board to 24 say that we didn't alert them to the question of 25 deferred costs", as Mr. Thompson says, deferred costs 26 can be referred to in various ways in various decisions 27 and most of these references in Mr. Hills' affidavit 28 relate to, "Well, if we ever get to talking about 86 BRETT, submissions 1 unbundling, there is an issue about deferred costs." 2 But that's a long way from putting the question 3 squarely to the Board of how will deferred costs be 4 treated for the ancillary programs and what is the 5 regime here? 6 There were certain other non-utility 7 businesses in the past that I gather had different 8 treatment of deferred costs; the exploration business, 9 I believe. 10 Well, they didn't come in and raise 11 this issue. I think the obligation was on the company 12 in some fashion to do that. 13 With respect to the question of 14 principles, whether the decision raises an important 15 matter of principle, I don't see that it does. I think 16 when you refer to -- I agree with Mr. Thompson with 17 respect to the regulatory compact or commitment 18 argument. When you talk about regulatory compact at 19 the top of page 32, you put it in quotation marks. 20 I mean, you basically don't accept or 21 didn't accept for a moment in that decision that there 22 was such a thing as a regulatory compact written down 23 on paper somewhere that everyone could look at and say, 24 "Yes, we agree, this is a document that governs our 25 activities in all of these areas." 26 Regulatory compact is in the eye of 27 the beholder it would appear. You have a notion of 28 what is fair from a regulatory point of view, which you 87 BRETT, submissions 1 tried to hold to over the years and it is a notion and 2 set of principles that can gradually evolve, but there 3 is no document written anywhere that says this is the 4 regular compact and it governs your decision and it 5 governed your decision in that particular case. There 6 is just no such thing written down. 7 Finally, I think, frankly, it may 8 have been that had you, for example, tried to make a 9 decision that changed the entire treatment of taxes for 10 the regulated utility, from one to the other as you did 11 in the Union case back in I believe it was 493/494. 12 There one might argue was an issue of principle. You 13 could argue one way or the other about which was the 14 best way to proceed, but you weren't doing that in this 15 case. You weren't changing the tax regime for the 16 regulated utility. 17 Finally, with respect to the question 18 of consequences and the financial consequences that 19 proceed from this, I don't want to trivialize this at 20 all, but I would direct you to the affidavit of 21 Mr. Booth, where he talks about whether or not this had 22 any impact on the financial -- any material impact, 23 which I think is the issue for you, the material impact 24 on the financial viability of the utility. He 25 concludes that it clearly does not. 26 He concludes that it doesn't affect 27 the utility's access to capital markets. It doesn't 28 affect its ability to finance itself properly on an 88 BRETT, submissions 1 ongoing concern. It is not a surprising conclusion, 2 given the amount of dollars in relation to the market 3 capitalization of the Enbridge business. But, 4 nonetheless, it is laid out there for you in his 5 affidavit. I would direct your attention to that. 6 Finally, I would ask that my clients 7 be entitled to an award of costs. Those are my 8 submissions in this case. 9 THE PRESIDING MEMBER: Thank you, 10 Mr. Brett. 11 Mr. Warren. 12 MR. WARREN: Thank you, Madam Chair. 13 SUBMISSIONS 14 MR. WARREN: As a preliminary matter, 15 I intend to refer briefly to a number of cases. I 16 wonder if I could just pass those cases up to you at 17 the beginning of my submissions. 18 MS LEA: Mr. Warren, can we mark all 19 of these cases as a bundle. I think we are up to 20 Exhibit 9, so package of cases from the CAC. 21 THE PRESIDING MEMBER: Exhibit 9. 22 EXHIBIT NO. 9: Package of cases 23 from Consumers Association of 24 Canada 25 MR. WARREN: Madam Chair, let me 26 begin by saying I adopt the submissions of my friend 27 Mr. Thompson. I will try as best I can not to repeat 28 those. 89 WARREN, submissions 1 What I propose to do is to deal first 2 with what I submit is the appropriate framework of law 3 and policy within which this decision on the threshold 4 should be made. 5 Then, secondly, to apply the facts as 6 they appear in the affidavits to that framework. 7 Rule 64.01 of your Rules of Practice 8 and Procedure requires the Board to determine the 9 threshold issue of whether the matter should be reheard 10 or reviewed. I think it is important that we return to 11 first principles and ask why that requirement is there. 12 In my respectful submission, the 13 reason the requirement is there is that the Board 14 cannot and should not rehear or review every decision. 15 There are important considerations of finality to the 16 Board's decision. There are important considerations 17 of predicability, that the parties and indeed the 18 public can know that when the Board reaches a decision, 19 except in very unusual circumstances, that decision 20 will stand. Those are important issues of public 21 policy. 22 Finally, there are important 23 considerations of administrative and policy balance, if 24 you want, or to put it negatively, if we were to accept 25 that decisions could be reviewed easily or trivially 26 then there would be administrative and policy chaos for 27 the Board. 28 Now, in my respectful submission, the 90 WARREN, submissions 1 courts historically have said that the power to review 2 in a regulatory agency should be exercised in 3 circumstances where there is either an obvious error in 4 the decision, or where there are new factors or 5 evidence which could not have been discovered with 6 reasonable diligence at the time of the original 7 consideration. 8 The first decision I have handed up 9 to you is a decision of the British Columbia Supreme 10 Court. I want to refer it to you simply as an 11 illustration of what I say is the traditional view of 12 the courts on a rehearing. That was a consideration by 13 the B.C. Supreme Court of the exercise of the 14 jurisdiction by the Human Rights Commission to 15 reconsider the matter. 16 If you turn to page 559 of the 17 reported decision, you will see the court saying, in 18 the second to last paragraph on that page: 19 "Hence, on the application here 20 of the above quoted words, as I 21 understand them, it seems clear 22 and I accordingly hold that the 23 Commission had jurisdiction to 24 conduct, for that limited 25 purpose, the rehearing or 26 further hearing that it held on 27 the 13th August 1974." 28 THE PRESIDING MEMBER: Mr. Warren, 91 WARREN, submissions 1 can you try and go slowly when you read? You always 2 race off on your quotes and the poor court reporters 3 are left -- 4 MR. WARREN: Does the court reporter 5 want me to repeat that quote? 6 It is in the second to last paragraph 7 where the court finds that the Commission had the 8 jurisdiction to rehear, and it holds: 9 "Hence, on the application here 10 of the above quoted words, as I 11 understand them, it seems clear 12 and I accordingly hold that the 13 Commission had jurisdiction to 14 conduct, for that limited 15 purpose, the rehearing or 16 further hearing that it held on 17 the 13th August 1974." 18 Then it goes on to say the following: 19 "That is not to say, however, 20 that there was power in the 21 Commission to alter its prior 22 decision unless new evidence was 23 forthcoming." 24 I cite the case again for what I say 25 is the traditional view of the courts that there must 26 be new evidence to warrant a reconsideration. 27 The broadest statement, in my 28 submission, of the jurisdiction of a regulatory agency 92 WARREN, submissions 1 to reconsider is that of the divisional court in re 2 Merrens and the Municipality of Metropolitan Toronto 3 case, the case decided some 25 or 26 years ago. The 4 issue there was the jurisdiction of the Municipal Board 5 under a power to rehear, which is reasonably similar to 6 this Board's power to review, whether it can consider 7 some two and a half years after the original decision 8 new evidence. 9 If you look, Madam Chair and Members 10 of the Panel, at page 277 of the report, the court is 11 wrestling with the issue of whether or not the wording 12 in the Board's power to rehear allowed the Board to 13 consider so long after the decision new evidence. What 14 the court found in that case was that the Board could 15 and it said, in the second to last paragraph: 16 "...the Board was not restricted 17 to facts as they existed at the 18 time of the original order." 19 The reason that I cite the case is 20 that there is no broader statement in the case of this 21 province of the power of a board to rehear. However, 22 it must be new facts. There is no authority for the 23 proposition implicit in my friend Mr. Cass' argument 24 that the Board can simply rehear arguments that have 25 already been made. 26 The statement of law and policy is 27 succinctly summarized by the Labour Relations Board in 28 the third decision I have placed before you. That is 93 WARREN, submissions 1 the Lorain Products (Canada) Ltd. case. I ask you to 2 turn to page 263 of that decision at numbered 3 paragraph 4. The Board rules as follows: 4 "The Board is given a broad 5 authority under Section 95(1) of 6 the Act to reconsider any 7 decision `if it considers it 8 advisable to do so.'" 9 I pause there to note that that is a 10 very broad power of reconsideration. 11 The Board then goes on to say: 12 "The Board having regard to the 13 Labour Relations chaos which 14 would result if there were not 15 some finality to its decisions 16 has been loathe to reconsider 17 where the parties have been 18 afforded a full and fair hearing 19 unless the party seeking 20 reconsideration can show that it 21 has uncovered new evidence which 22 could not have been obtained 23 with reasonable diligence and 24 adduced at the initial hearing 25 and which, if adduced, would 26 have a material and determining 27 effect on the decision of the 28 Board. The parties to Board 94 WARREN, submissions 1 proceedings are entitled to rely 2 upon the decisions of the Board 3 in the knowledge that they are 4 final and conclusive unless 5 evidence of the type referred to 6 above is uncovered... The Board 7 does not permit reconsideration 8 for the purpose of allowing a 9 party to repair the deficiencies 10 in its case or to reargue the 11 merits of its case." 12 Clearly, a decision of that Board is 13 not binding on this Board. I advance the case simply 14 as authority for the proposition, Madam Chair, a 15 succinct summary of the policy considerations which the 16 Board should bring to bear when it interprets section 17 64 of its Rules. 18 Set against that context is my friend 19 Mr. Cass' argument that, with respect to the criteria 20 which are listed in section 63 of your Rules, that is 21 not an exhaustive list. In my respectful submission, 22 that list, which is a helpful guideline to the parties 23 coming before the Board, doesn't and shouldn't change 24 the longstanding view that the review power should be 25 considered restrictively in requiring something new. 26 I use the illustration of the 27 criteria that my friend Mr. Cass relies on heavily, 28 which is the important matter principle that has been 95 WARREN, submissions 1 raised by the order or decision. That criterion should 2 be read subject to this gloss, in my respectful 3 submission, that it is an issue of principle that was 4 not argued or could not have been argued in the 5 original decision. 6 If a party argued it and lost, then 7 they should not be entitled to a rehearing on the very 8 point. If the party could have argued it and elected 9 for whatever reason not to, then in like fashion it 10 should not, in my respectful submission, be entitled to 11 raise it under the guise of an important matter of 12 principle. 13 Within that policy framework, as most 14 succinctly articulated in the Labour Relations case I 15 put before you, I turn to the facts as they are 16 expressed in the various affidavits in this case. I 17 adopt, to begin with, my friend Mr. Thompson's 18 submissions with respect to the affidavits of Messrs. 19 Truswell and Warner and won't repeat those submissions, 20 but I want to turn, in particular, to the issue of 21 Mr. Hills' affidavit. 22 I begin with the observation, Madam 23 Chair, which I think bears repeating, that the issue of 24 the appropriate allocation of deferred taxes was the 25 subject of evidence from a panel of witnesses, which 26 included the redoubtable Mr. Hills and a separate panel 27 of an expert. It was the subject of extensive 28 argument, including a 20-page argument in-chief and a 96 WARREN, submissions 1 33-page reply argument; 53 pages of argument on one 2 issue. 3 In my respectful submission, as a 4 general observation, there is no issue raised by this 5 motion or referred to in the affidavit which was not 6 argued extensively, and I am sure perhaps to the Panel 7 Members ad nauseam, in the original case. 8 Mr. Hills' affidavit is, I say with 9 respect, a deeply argumentative affidavit. In effect, 10 I submit what Mr. Hills is arguing is that the Board 11 was wrong in its decision in this case, but there is 12 nothing in the affidavit which could not have been 13 argued and, more importantly, was not argued 14 extensively before. 15 Let me turn first to that portion of 16 his affidavit in which he deals with alleged error of 17 fact. What Mr. Hills argues -- I congratulate Mr. 18 Cass -- is a deft inflating of E.B.R.O. 495 into the 19 main issue, which is it is not. Mr. Cass' argument on 20 E.B.R.O. 495 proceeds, as Mr. Thompson has said, on a 21 misreading of the Board's decision. What the Board was 22 saying, simply put, was that the company should have 23 brought their position that this was a ratepayer 24 responsibility before the Board and that apt 25 circumstance, the most recent apt circumstance, was the 26 fully-allocated cost issues in 495. 27 In response to that, what we get is 28 Mr. Hills' affidavit sort of drizzling out on us the 97 WARREN, submissions 1 various little side bar references to this outstanding 2 tax issue. That misses the point and it misses the 3 point of the Board's decision. 4 The CAC, I should note, in its 5 argument argued squarely that Enbridge Consumers Gas 6 should have brought the issue back before the Board for 7 review. There was no mystery about that issue, about 8 its centrality. There was a response, which appears at 9 pages 86 and 87 of the reply argument, in which the 10 company argued that it had brought the issue before the 11 Board. There is nothing new in this. What Mr. Hills 12 doesn't like is the Board's conclusion, but that's not 13 a basis for a review. 14 What Mr. Hills then does is he begins 15 to argue, I say with respect, in his affidavit with 16 various elements of the Board's decision. I illustrate 17 that point, if you would turn up paragraph 26 of 18 Mr. Hills' affidavit, which appears at page 15 of the 19 main motion record. 20 Now, in that paragraph what Mr. Hills 21 does is he selects various portions of the Board's 22 decision and takes issue with them. 23 If you turn to page 16 of the main 24 motion record in -- 25 MS LEA: Mr. Warren, I am having 26 trouble hearing you, I'm sorry. 27 MR. WARREN: I am either too fast or 28 don't speak loudly enough, so I will slow down and 98 WARREN, submissions 1 yell. 2 If I could refer you to 3 Romanette (ii) on page 16 in which he takes a Board 4 statement: 5 "These decisions were based on 6 circumstances at the time in 7 question." (As read) 8 If you look at the last complete 9 sentence in his affidavit which follows that: 10 "Surely when the company has 11 asked the Board for a decision 12 on deferred taxes which is not 13 tied to the particular 14 circumstances of a case and the 15 Board has denied the company's 16 request, the suggestion that 17 past decisions were based on the 18 circumstances at the time does 19 not become a reason for 20 shareholder responsibility." 21 (As read) 22 I pause to note that that is pure, 23 undiluted, distilled argument. 24 But the point is that simply 25 disagreeing with the Board's decision is not a basis 26 for a review. That, in my respectful submission, is 27 what he does throughout paragraph 26 in each of the 28 individual issues which he raises. 99 WARREN, submissions 1 He then turns to paragraphs 34 and 35 2 of his affidavit in which he raises this business about 3 a government policy. If government policy was an issue 4 on which Enbridge Consumers Gas wanted to rely, it was 5 an issue which they could have argued and chose not to. 6 Now, in paragraphs 36 through 38 in, 7 in effect, a kind of slipstream relying on 8 Mr. Truswell's argument about the effects of the 9 decision, I say with respect that the effects of a 10 decision are not -- unequivocally not a basis for a 11 review, because if it were accepted as the basis for 12 review there is simply no decision which this Board 13 makes which would not be subject to challenge by some 14 disappointed party. 15 The other point on this issue is that 16 it was argued extensively what the effect would be on 17 the shareholders, on the company, on its credit 18 position, on its ability to raise -- et cetera, 19 et cetera. All of that was argued extensively in the 20 case. 21 In other words, to put it another 22 way, the possible implications of the position were 23 clearly in the mind of Enbridge Consumers Gas and were 24 argued. To say now that the Board should reconsider it 25 because Mr. Truswell has come on the scene and said it 26 is an issue is insupportable. 27 With respect to the issue which is 28 set out in paragraphs 39 through 44, which is the 100 WARREN, submissions 1 $50 million issue, I agree with Mr. Thompson's 2 submissions and I won't repeat them beyond saying that 3 this is really just a re-argument about the benefits 4 issue. 5 The intervenors took a position on 6 benefits, their relevance and the calculation of them. 7 Enbridge Consumers Gas took a different position. 8 For purposes of the threshold issue 9 there is nothing new in this question. Absolutely 10 nothing new. 11 Finally, I turn to paragraphs 45 12 through 47 of the affidavit which I say, with respect, 13 really are the guts of the affidavit and the guts of 14 the complaint which is before you today. 15 This is an argument about the 16 adequacy of the Board's Reasons for Decision. I doubt, 17 although Mr. Cass has raised it as a prayer for relief 18 today that the Board issue Reasons for Decision, that 19 it was not requested in the Notice of Motion, but 20 nothing turns on that. 21 It's interesting that what Mr. Hills 22 says is he concedes that the company raised the five 23 issues in its argument. He then argues that the Board 24 is obligated to deal with each of those five issues, 25 and I say, with respect, that it is not. 26 The Board is not bound by the 27 arguments which any particular party advances. It can 28 select those which it considers to be relevant. It can 101 WARREN, submissions 1 dispense with those which it considers to be 2 irrelevant. 3 More importantly, you have a 4 statutory obligation to make your decisions on the 5 considerations of what is just and reasonable, and if 6 any of the parties doesn't, in your view, adequately 7 address those considerations, you are free to choose 8 your own reasons for reaching a decision. You are not 9 bound to resolve the particular issues which are 10 presented to you. 11 In my respectful submission, the 12 Board got it right on this issue, even though it 13 disagreed with the CAC submission that the deferred tax 14 liability should be wholly allocated to the 15 shareholder. The Board, in thorough comprehensive 16 Reasons, disposed of the issue: Has it failed in its 17 obligations? 18 On that issue I put before you the 19 decision of the Supreme Court of Canada in the 20 Northwestern Utilities and City of Edmonton case which, 21 ironically enough, deals with the adequacy of a 22 decision of a regulatory agency dealing with an energy 23 case. 24 But the issue in that case was 25 whether that Board's Reasons for Decision were 26 adequate. 27 If you look at page 175 of the 28 reported decision you will see the Interim Order that 102 WARREN, submissions 1 was being challenged, or the adequacy of which was 2 being challenged. It consists of a set of recitals of 3 what was before the Board followed by an order. 4 The court said, I'm sure to 5 absolutely no one's surprise, that just isn't 6 sufficient. 7 It then went on to say, on page 176, 8 what the courts would look for. It says in the first 9 full paragraph: 10 "It is not enough to assert, or 11 more accurately, to recite, the 12 fact that evidence and arguments 13 led by the parties have been 14 considered. That much is 15 expected in any event. If those 16 recitals are eliminated from the 17 `reasons' of the Board all that 18 is left is the conclusion of the 19 Board `that the forecast revenue 20 deficiency in the 1975 future 21 test year requested by the 22 Company cannot be properly 23 characterized as `past losses'.' 24 The failure of the Board to 25 perform its function under s. 8 26 included most seriously a 27 failure to set out `the findings 28 of fact upon which it based its 103 WARREN, submissions 1 decision' so that the parties 2 and a reviewing tribunal are 3 unable to determine whether or 4 not, in discharging its 5 functions, the Board has 6 remained within or has 7 transgressed the boundaries of 8 its jurisdiction established by 9 its parent statute." 10 Now, those are the key words, and I 11 repeat them: 12 "The failure of the Board to 13 perform its function under s. 8 14 included most seriously a 15 failure to set out `the findings 16 of fact upon which it based its 17 decision' so that the parties 18 and a reviewing tribunal are 19 unable to determine whether or 20 not, in discharging its 21 functions, the Board has 22 remained within or has 23 transgressed the boundaries of 24 its jurisdiction established by 25 its parent statute." 26 That clearly does not apply in this 27 case. 28 My friend Mr. Cass and his client 104 WARREN, submissions 1 don't like the Board's Reasons, but that doesn't make 2 them inadequate and that doesn't make them wrong and it 3 doesn't make them subject to a review because they 4 don't like them. 5 Now, even if the Board were to accede 6 to the argument, which I urge it not to, that other 7 Reasons for Decision should be issued, fuller reasons, 8 then there shouldn't be a re-argument on the merits 9 before you do that because you are back hearing the 10 entire case again. 11 The point is that Mr. Hills' and now 12 Mr. Cass' suggestion about a new set of Reasons is an 13 entirely separate issue from the main issue about 14 whether there should be a rehearing. 15 But, as I say, the Board's Reasons 16 for Decision are good Reasons and they meet the test 17 set out in the Northwestern Utilities case. 18 In my respectful submission, in 19 conclusion, Enbridge Consumers Gas has not met the 20 threshold test. It just disagrees with the Board's 21 decision. Like any skilled counsel, Mr. Cass has found 22 reasons why he doesn't agree and he wants to elevate 23 those reasons into important matters of principle. 24 But all of the issues which my friend 25 Mr. Cass has articulated today, all of the matters 26 which are found in Mr. Hills affidavit, are matters 27 which either were argued extensively before the Board 28 or could have been. Given that, they don't meet what I 105 WARREN, submissions 1 say is the critical threshold consideration: Is there 2 anything new that the Board hasn't considered before or 3 couldn't if the parties wished to put it before it? 4 Finally, the argument, as I have 5 said, that the decision has certain effects is not a 6 valid ground for a reconsideration. In my respectful 7 submission, Enbridge, not having met the threshold 8 test -- 9 Let me put this question rhetorically 10 finally before it: If the Board were to accede to the 11 arguments in this case and were to try to discern in 12 Mr. Hills' affidavit a valid basis for a 13 reconsideration, I suggest, with respect, that it would 14 be hard put to distinguish this case from all of the 15 other cases that have come before it. 16 There is nothing in here upon which 17 the Board can say that as a matter of distinction, as a 18 matter of principle, this makes this case different 19 from all of the other cases where people are simply 20 disappointed in what you have done and want an 21 opportunity to reargue it. 22 They have not met the threshold test. 23 The motion should be dismissed. 24 Like my friends, the CAC asks for an 25 award of 100 per cent of its reasonably incurred costs. 26 Those are my submissions. 27 Thank you. 28 THE PRESIDING MEMBER: Thank you, 106 WARREN, submissions 1 Mr. Warren. 2 Mr. Janigan. How long do you think 3 you will be, Mr. Janigan? Any idea? 4 SUBMISSIONS 5 MR. JANIGAN: Very brief, Madam 6 Chair, at least I will try to be. 7 My friends I think have adequately 8 very competently covered some of the ground that I 9 might like to visit. I would like to try to 10 concentrate on some new points arising from their 11 submissions. 12 In particular, I would like to look 13 first at the question of whether or not the errors of 14 fact as alleged by counsel for the company do such 15 damage to the foundation of the decision on deferred 16 tax that it necessitates a new look or a review of that 17 decision. 18 The foundation of the company's 19 argument seems to be that the Board's decision on the 20 issue of deferred tax is based on the company's 21 perceived failure to address this issue in 22 E.B.R.O. 495. I believe that was referred to as a 23 watershed decision. 24 With respect, I concur with the 25 submissions of my friend Mr. Thompson insofar as what 26 the Board was referring to was the failure to address 27 the ratepayer liability for the deferred tax liability. 28 In any event, I don't believe that 107 JANIGAN, submissions 1 the record of the decision bears out the interpretation 2 that has been put upon it. In particular, the bullet 3 point at the top of page 32 regarding the regulatory 4 compact I believe has been interpreted in a way which 5 is contrary to the intent of the Board in the making of 6 the decision. 7 The bullet point at the top of 8 page 32 indicates: 9 "The regulatory compact..." 10 First of all, that is in italics, for 11 one thing. 12 "...does not operate in such a 13 way as to prevent the Board from 14 considering new circumstances 15 and changing its approach in 16 response to them." (As read) 17 I do not believe, necessarily, that 18 the Board accepted the notion of the regulatory compact 19 to begin with. In any event, it indicated that in this 20 circumstance it could consider new circumstances and 21 change its approach in response to them. There were 22 many new circumstances before the Board in relation to 23 the proposals of the company. 24 The whole unbundling process and the 25 method by which the company chose to deal with that 26 process were matters which intervenor argument focused 27 considerable attention upon, and in fact, as is noted 28 in the decision, urged that the Board simply say no 108 JANIGAN, submissions 1 because the plan of unbundling was insufficient to 2 sufficiently protect ratepayers. 3 The Board elected to proceed, and the 4 Board considered the new circumstances, which included 5 the proposals of the company in relation to unbundling 6 in making its decision associated with the deferred tax 7 issue. 8 We do not see how the fact as alleged 9 in Mr. Hills' affidavit can dislodge the view that the 10 Board was taking of the circumstances of the wind-down 11 of the program and the attendant difficulties 12 associated with deferred tax. 13 Secondly, the company has alleged 14 that there are such errors of principle that 15 necessitate a review. 16 In our view, there is nothing to 17 suggest that the Board has departed from ordinary 18 regulatory principles in making its decision. In 19 particular with respect to the evidence associated with 20 problems associated with shareholder confidence and 21 confidence in investing in the Ontario economy, there 22 is no evidence, apart from Mr. Hills' and 23 Mr. Truswell's unsupported allegations in their 24 affidavits, that any lack of confidence in investor 25 confidence has resulted from the decision of the Board. 26 In fact, as Dr. Booth's affidavit 27 indicates, the decision itself does not have the 28 dramatic consequences as alleged by the affidavits that 109 JANIGAN, submissions 1 have been filed by the company. 2 In fact, the most unusual aspect of 3 the decision was in fact the crediting of the 4 shareholders with previous revenues associated with the 5 program, the $15 million credit they were allowed. It 6 is unusual, insofar as it appears to transgress some of 7 the intergenerational aspects of regulatory treatment 8 of utilities. 9 The Board did so on the basis of 10 fairness, and it was a notional accounting that was 11 done. It is very clear from the wording in the 12 decision that this is a notional accounting that takes 13 place. This is not some kind of formulaic shareholder 14 benefit that can be calculated according to a 15 particular accounting principle. 16 The Board elected to do that on the 17 basis of fairness, and now the company comes forward 18 and questions the way in which this was calculated. 19 In fairness, this was not meant to be 20 some kind of a numerical or formulaic calculation. It 21 was a notional accounting. The Board did it on the 22 basis of the evidence that was before it, and there is 23 no new evidence before the Board today to change the 24 nature of that accounting. 25 We agree with the submissions of my 26 friend Mr. Warren that the consequences of the 27 decision, particularly upon the parent company, are 28 something that the Board should not consider in dealing 110 JANIGAN, submissions 1 with a request to review. 2 In conclusion, the errors of fact as 3 alleged, even if proved, do not disturb the foundation 4 of this decision. 5 It is difficult to glean what 6 principles could be called into play that the Board 7 must be concerned about that would necessitate a review 8 of the decision in this matter. 9 We would accordingly request that the 10 Board dismiss this motion on its failure to meet the 11 threshold as set out in the rules. On behalf of OCAP, 12 I would also request our costs associated with our 13 participation in this proceeding. 14 THE PRESIDING MEMBER: Thank you, 15 Mr. Janigan. 16 Mr. Mattson? 17 SUBMISSIONS 18 MR. MATTSON: Thank you, Madam Chair. 19 When I read the company's argument, I 20 received -- and I am not sure if the Board did, but you 21 get the distinct impression that somehow the company 22 believes the Board was wrong in fact, or somehow there 23 was an incorrect assumption in its decision, because it 24 found the company had not alerted the Board to the 25 question of the quantum of the rental program deferred 26 tax liability, and that somehow this, and this alone, 27 is the grounds for meeting the threshold of the motion. 28 I agree with Mr. Thompson, and I am 111 MATTSON, submissions 1 not going to go over it again. I agree with 2 Mr. Thompson's points that the company's argument, in 3 order for you to understand what they are saying with 4 respect to this assumption, you need to really 5 interpret your phrase "the problem" very narrowly. 6 You can't interpret it as meaning the 7 problem was that the ratepayers would be responsible 8 for the deferred costs, because certainly the Hills' 9 affidavit never illustrates whether the company made 10 the Board aware of that; that in fact they felt that 11 these costs, deferred tax costs, would be the 12 responsibility of ratepayers. 13 Third, you can't interpret the 14 problem, as the Board used it in its decision, meaning 15 that the rental program would be somehow costed 16 differently soon, as 495 indicated. And even back as 17 far as 490, I believe there were discussions of it. 18 You can't interpret it that somehow 19 the company knew that the writing was on the wall, and 20 yet they still grew the business faster than ever. The 21 deferred tax liabilities were allowed to grow, and the 22 magnitude of the problem was getting worse, because 23 nowhere does the company bring that to the attention of 24 the Board, that there is this problem; it's festering, 25 it's growing. They feel that the ratepayers are going 26 to have to pick it up at some point and something 27 should be done about it. That is never addressed in 28 the Hill's affidavit. 112 MATTSON, submissions 1 The company wants you to interpret 2 the problem that because the company never told the 3 Board that the quantum of the deferred tax liability 4 associated with the rental program, as opposed to the 5 total deferred tax liability, that this was the 6 problem; that you were mistaken. You believed that the 7 problem was that they had never told you that there is 8 this deferred tax liability and that this is what you 9 thought the problem was. 10 Because of that, if we look to the 11 Hills' affidavit, we would see that they did tell you. 12 Mr. Cass, in 495, said it was a tricky issue that was 13 complicated. 14 When Chairman Vlahos was asking, on 15 behalf of IGUA and IPSO, to break down all these costs, 16 Mr. Cass said this is a problem; it is coming late in 17 the hearing. There is a concern. Go back to 490. 18 They provide you with that at page 19 13, where they say: There is this problem with 20 deferred taxes. There are considerable tax write-offs 21 associated with some of the programs. If you move 22 those programs out, the tax benefits should flow with 23 the programs, and that would have a large impact on the 24 revenue requirement. 25 What they are trying to show here is 26 that you are wrong if you assume that we had never told 27 you about this deferred tax liability before this 28 hearing, because we had. We had raised it before. 113 MATTSON, submissions 1 The problem is, Madam Chair, that the 2 Board wasn't wrong. It was the company and the 3 company's witness that was wrong. 4 If you go to the transcript at page 5 1211, Mr. Hills' evidence -- and I will read it: 6 "I don't know that we ever set 7 out the accumulated unrecorded 8 deferred taxes in respect of the 9 rental program. 10 However, if you looked at the 11 calculations of the rate of 12 return earned by the rental 13 program you could see that they 14 were calculated on a 15 flow-through basis." 16 My question: 17 "Okay. So other than that 18 number that you provided us in 19 the blue sheets yesterday which 20 gave us the total amount of 21 deferred taxes of the company, 22 there was -- this was the first 23 time that the issue of the 24 deferred taxes with respect to 25 the rental water heater program 26 were raised, correct, exactly 27 what those deferred taxes were 28 owing?" 114 MATTSON, submissions 1 Answer: 2 "I think that's correct. I 3 can't think of any other time we 4 would have disaggregated the 5 amount." 6 "Q. And is it also fair to say 7 that your rental program over 8 the past five years was the 9 single largest growth business 10 in the utility?" 11 He goes: 12 "A. On a percentage basis that 13 might be true. I think of our 14 total capital budget, our 15 investment [in] rental equipment 16 might have been 25 per cent of 17 the total." 18 So if the problem was that the Board 19 assumed that the company had never broken these taxes 20 out before and given them to the Board, even though 21 from the affidavit it seems Mr. Hills was wrong, it was 22 because Mr. Hills was wrong. He committed the error in 23 fact. It was his incorrect assumption, not the 24 Board's. That is his evidence. 25 So if you take the very narrow 26 interpretation that Mr. Cass wants you to take from 27 your decision, that interpretation meaning not that it 28 was the ratepayers' responsibility, not that there was 115 MATTSON, submissions 1 this problem and it was being allowed to grow, it was 2 growing quicker than ever, it was festering, that is 3 not the problem, but the problem was that we had never 4 told you what these taxes were, well, that was their 5 fault. That was their evidence. That was their 6 testimony. That is at page, again, 1211 of the 7 transcript. 8 So, certainly, I would suggest that 9 that is not an error of fact or an incorrect assumption 10 that meets the threshold test. It wasn't the Board 11 there. It was the company and the company's witness. 12 Now, the same witness who said that comes forward with 13 all these other quotes where, in the past, they said it 14 was tricky, they said there would be problems. 15 So my client agrees with all the 16 submissions of my friends that went before mine: there 17 is no reason to reopen, rehear or review the case. The 18 fact is the company never had a reasonable basis to 19 expect that deferred taxes would be recoverable in 20 rates. There is nothing in the affidavits that show 21 that that is the case. 22 If anything, the evidence showed that 23 the company avoided the issue by not bringing it 24 forward squarely, for all the time grew the business, 25 and the problem got worse. That was what was indeed 26 remarkable. That is what the Board called remarkable 27 in its decision. The company should not have been able 28 to thrust these costs onto the ratepayers after the 116 MATTSON, submissions 1 issue was forced into the spotlight by the wind-down 2 proposal that the company brought forward. 3 For those reasons, we suggest that 4 the motion be denied. 5 Thank you. 6 THE PRESIDING MEMBER: Thank you, 7 Mr. Mattson. 8 One moment, please. 9 --- Pause 10 THE PRESIDING MEMBER: The Board has 11 one question of clarification from one of the counsel. 12 Mr. Vlahos. 13 MEMBER VLAHOS: Mr. Janigan, if you 14 can help me, sir, I put down on my paper that the 15 $50 million that you made reference to, it was not a 16 result of a formula-like approach, but rather it was a 17 notional amount. 18 Can you just expand on that? Can you 19 help me understand as to exactly what you mean by -- 20 MR. JANIGAN: The decision of the 21 Board seems to deal with a number of different factors 22 that would go into the accounting, including whether or 23 not the ratepayers or the renters benefited from the 24 operation of the program over a period of time and 25 whether or not any accounting should be done for that. 26 At the end of the day, they looked at, simply, the 27 accumulation of revenues over expenses during that 28 period of time and used that figure, with the 117 MATTSON, submissions 1 assumption that it would likely accrue to the company 2 in the same way as the benefits had accrued to the 3 ratepayers over the years. 4 So, when I say it was a notional 5 accounting, it was, to some extent, a rough and ready 6 kind of assessment of fairness that was done in that 7 circumstances. It was not meant to be something done 8 with precision or pursuant to a formula. 9 MEMBER VLAHOS: That is what I want 10 to follow up with you. 11 If you just turn to page 34 of the 12 Board's decision, paragraph 3.3.17, and if you read 13 that one and a half lines plus the first bullet point. 14 --- Pause 15 MEMBER VLAHOS: Does that agree with 16 what you have just told me? 17 MR. JANIGAN: I still think that -- 18 yes, I think it does. 19 In looking at the sufficiency, the 20 Board did not take, you know, a present value approach 21 or looking at it as if it was a lost benefit to the 22 company and using accounting principles to come up with 23 that. It simply looked at revenues over expenses, over 24 that period of time, and then decided to have it flow 25 back to the company in the same way as it flowed to the 26 ratepayers to begin with. 27 I don't mean to say "notional" in the 28 sense that it was completely without foundation. I 118 MATTSON, submissions 1 guess that what -- if you are suggesting that that was 2 what I meant by that, I did not. I, rather, meant that 3 it was something that certainly had some basis in the 4 way in which the program had been operated but was not 5 meant to be a strict formula on the basis of accounting 6 for those benefits. 7 MEMBER VLAHOS: All right. Thank 8 you, sir. 9 THE PRESIDING MEMBER: Mr. Cass, 10 might I assume that you would like to reserve your 11 response for tomorrow? 12 MR. CASS: I think that is 13 appropriate, Madam Chair, subject of course to the 14 Board's convenience. 15 THE PRESIDING MEMBER: It is late 16 enough in the day that that would be appropriate. 17 One moment, please. 18 --- Pause 19 THE PRESIDING MEMBER: The Board will 20 reconvene tomorrow at 0930. 21 MR. THOMPSON: Madam Chair, just 22 before we break, if I might -- 23 THE PRESIDING MEMBER: Mr. Thompson. 24 MR. THOMPSON: -- I omitted to give 25 two references when I was giving you the references in 26 the IGUA argument to the CICA guidelines point and the 27 references to the rate-of-return documents that the 28 company used. 119 MATTSON, submissions 1 If you could just add to those 2 references the following: page 23, paragraphs 75 to 3 80; and page 53, paragraphs 163 and 164. 4 I apologize for not having given you 5 those earlier. 6 THE PRESIDING MEMBER: Thank you, Mr. 7 Thompson. 8 Are there any other matters before we 9 adjourn for the evening? 10 We will reconvene tomorrow morning at 11 0930. 12 Thank you. 13 --- Whereupon the hearing adjourned at 1700, 14 to resume on Wednesday, August 11, 1999 15 at 0930