422 1 RP-1999-0044 2 3 THE ONTARIO ENERGY BOARD 4 5 IN THE MATTER OF the Ontario Energy Board Act, 1998; 6 7 AND IN THE MATTER OF an Application by Ontario Hydro 8 Networks Company Inc., for an Order or Orders approving 9 year 2000 transmission cost allocation and rate design. 10 11 12 B E F O R E : 13 R.M. HIGGIN Presiding Member 14 P. VLAHOS Member 15 B. SMITH Member 16 17 18 Hearing held at: 19 2300 Yonge Street, 25th Floor, Hearing Room No. 2 20 Toronto, Ontario on Friday, February 18, 2000, 21 commencing at 0905 22 23 HEARING 24 25 VOLUME 3 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 423 1 APPEARANCES 2 JENNIFER LEA/ Counsel to Board Staff 3 MICHAEL LYLE 4 5 HAROLD THIESSEN/ Board Staff 6 NABIH MIKHAIL/ 7 COLIN SCHUCK 8 9 DONALD ROGERS/ Ontario Hydro Networks 10 BRYAN BOYCE Company Inc. (OHNC) 11 12 DAVID BROWN Independent Power Producers 13 Society of Ontario (IPPSO); 14 Ontario Natural Gas 15 Association (ONGA) 16 17 JAMES FISHER/ Association of Major Power 18 19 KEN SNELSON Consumers in Ontario (AMPCO) 20 21 MICHAEL JANIGAN Vulnerable Energy Consumers 22 Coalition (VECC) 23 24 ROBERT WARREN Consumers Association of 25 Canada (CAC) 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 424 1 APPEARANCES (Cont'd) 2 BRUCE CAMPBELL/ Ontario Power Generation 3 JOEL SINGER/ (OPG) 4 JOHN RATTRAY 5 6 LLOYD GREENSPOON NorthWatch 7 8 DAVID POCH Green Energy Coalition (GEC) 9 10 MARK MATTSON Energy Probe 11 12 PETER BUDD TransAlta Energy 13 14 MURRAY KLIPPENSTEIN Pollution Probe 15 16 RICHARD STEPHENSON Power Workers Union 17 18 MARK RODGER Toronto Hydro Electric 19 System Ltd. 20 21 PAUL DUMARESQ Ontario Association of Physical 22 Plant Administrators 23 24 SHARON WONG Imperial Oil Ltd. 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 425 1 APPEARANCES (Cont'd) 2 ERIK GOLDSILVER Electrical Contractors 3 Association of the Ontario; 4 Collingwood Public Utilities 5 Commission 6 7 ROGER WHITE Energy Cost Management Inc. 8 9 RICHARD KING Five Nations Energy Inc.; 10 Detroit Edison Co. 11 12 KENNETH LIDDON Suncor Energy Inc. 13 14 GEORGE VEGH/ Amoco Canada (BP Amoco); 15 JEAN-PAUL DESROCHERS Toromont Energy 16 17 KEITH RAWSON TransCanada Energy 18 19 PAUL VOGEL/ The Chiefs of Ontario 20 CAROL GODBY 21 22 KELLY FRIEDMAN/ Municipal Electrical 23 MAURICE TUCCI Association (MEA) 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 426 1 APPEARANCES (Cont'd) 2 WENDY EARLE/ Brampton Hydro, Cambridge 3 JAMIE SIDLOFSKY and North Dumfries Hydro, 4 Guelph Hydro, Niagara Falls 5 Hydro, Oakville Hydro, 6 Richmond Hill Hydro, 7 Pickering Hydro and Waterloo 8 North Hydro 9 10 RICK COBURN INCO Limited; Ontario Mining 11 Association 12 13 TED COWAN Ontario Federation of 14 Agriculture 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 427 1 Toronto, Ontario 2 --- Upon resuming on Friday, February 18, 2000 3 at 0905 4 THE PRESIDING MEMBER: Thank you. Please be 5 seated. 6 Good morning everybody. This is an initial 7 announcement. We have decided that given the winter 8 storm warning that is coming, we are going to close down 9 the hearing between 12:30 and 1:00, so before lunch. We 10 will only lose an hour and-a-half for this afternoon 11 anyway, as it would be a short afternoon. 12 So we will do that. Rather than just wait to 13 see how it develops, we will just make that decision 14 now. 15 So that's all the announcements. 16 PREVIOUSLY SWORN: DAVID CURTIS 17 PREVIOUSLY SWORN: ANDY PORAY 18 Are there any preliminary matters? Do you 19 have any undertaking responses or anything? 20 MR. COWAN: Yes, sir, I do. 21 THE PRESIDING MEMBER: Mr. Cowan has 22 something. 23 Could you come and use the microphone, please, 24 Mr. Cowan? 25 PRELIMINARY MATTERS 26 MR. COWAN: Thank you, Dr. Higgin. 27 It turns out, sir, that I have to be farming 28 on Monday and we do have, on behalf of the Federation of Les Services StenoTran Services Inc. 613-521-0703 428 Preliminary Matters 1 Agriculture, some questions which we would very much 2 appreciate being able to do today if we could possible 3 be fit in. 4 THE PRESIDING MEMBER: Okay. We can try to 5 make you an order then. 6 MR. COWAN: Thank you kindly. 7 THE PRESIDING MEMBER: Should we not do that, 8 there is an option that has been used in the past, and 9 that is to give the questions to Board Counsel to ask, 10 but we will try to accommodate you. 11 Thank you very much. 12 Mr. Rogers. 13 MR. ROGERS: Thank you, Dr. Higgin. 14 First I would like to correct some information 15 on the record having to do with Exhibit G.2.1, which was 16 a document put by my friend Mr. Campbell to Mr. Poray. 17 He put some calculations to Mr. Poray in this document 18 yesterday. 19 Mr. Poray came up with a slightly different 20 calculation, and on reflection I think we agree that the 21 number in Exhibit G.2.1 prepared by Mr. Campbell's 22 client is correct and is accepted by Mr. Poray as being 23 the correct calculation. 24 The second point was an undertaking, and this 25 was Undertaking F2.2 where I think Mr. Curtis undertook 26 to check Table No. 6 with respect to the generation used 27 in each column. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 429 Preliminary Matters 1 MR. ROGERS: Then maybe you can explain. 2 MR. CURTIS: All right. 3 This is in reference to Exhibit D, Tab 5, 4 Schedule 2, page 7 of 7, Table 6. That's D, Tab 5, 5 Schedule 2, page 7, Table 6. 6 --- Pause 7 MR. ROGERS: Maybe you could just help us. 8 MR. CURTIS: Sure. 9 MR. ROGERS: Just put it back in context, 10 would you? 11 MR. CURTIS: Yes. 12 MR. ROGERS: I think it came out of a question 13 put to you by Mr. Brown. 14 MR. CURTIS: Yes. Mr. Brown asked me about 15 the embedded forecast of generation that was included in 16 each one of the columns of that table. 17 So if we go across column-by-column, the first 18 column: Network 100 Percent Gross Load Billing, 19 Connection 100 Percent Gross Load Billing All Customers. 20 That column has no embedded generation 21 assumed. 22 MR. BROWN: For any year? 23 MR. CURTIS: For any year. 24 The next column: Network 50 Percent Net Load 25 Billing for Cogeneration Network 100 Percent Gross Load 26 Billing for Other Connection 100 Percent Gross Load 27 Billing. And it refers to Option 4C in the previous 28 table, Table 5. Les Services StenoTran Services Inc. 613-521-0703 430 Preliminary Matters 1 If you look at the description of Option 4C in 2 Table 5 it talks about cogeneration, 1,150 megawatts. 3 That is the assumed forecast that is included in that 4 column. 5 Similarly, if we move on to the third column: 6 Network 100 Percent Net Load Billing Connection 7 100 Percent Gross Load Billing All Customers. That 8 refers back to Option 2A in the previous table. If you 9 look at the description for Option 2A in Table 5, it 10 refers to all embedded generation, 2,550 megawatts. 11 Then for the final column, the fourth -- fifth 12 column, I'm sorry: Network 100 Percent Net Load Billing 13 Connection 100 Percent Net Load Billing All Customers. 14 It references Option 1 in the previous table, Table 5. 15 If you look at the description there for Option 1 it 16 refers to all embedded generation, 2,550 megawatts 17 again. 18 So those are the forecasts of embedded 19 generation that are included in each column. 20 MR. BROWN: Thank you for that information. 21 Would it be possible to get an apples and 22 apples comparison. 23 You, for your OHNC Option 4C, the second 24 column, have assumed the 1,150 megawatts -- 25 MR. CURTIS: Yes. 26 MR. BROWN: -- and the net load coalition 27 proposal more or less is the third column, Option 2A 28 where we have the 2,550 megawatts. Les Services StenoTran Services Inc. 613-521-0703 431 Preliminary Matters 1 MR. CURTIS: Yes. 2 MR. BROWN: Is it possible for you to 3 recalculate the values in column three using the 4 1,150 megawatts that you have used to show the rate 5 impacts of your option? 6 MR. CURTIS: I believe we could do that. 7 I would have to check back with the actual 8 analyst who would be doing the calculation, but, yes. 9 MR. BROWN: If you could, just so there could 10 be an apples and apples comparison before the Board. 11 MR. CURTIS: Can I just clarify my 12 understanding, then, of what you are asking? 13 You are asking for the rates in column 3 on 14 this Table 6 to be recalculated using the assumption of 15 the cogeneration amount of 1,150 megawatts as the amount 16 being installed? 17 MR. BROWN: That's right, with that amount -- 18 whatever portion of that amount was used for each 19 particular year in column 2 to be used for each 20 particular year in column 3. 21 MR. CURTIS: Yes, all right. 22 MR. ROGERS: Could we leave it on this basis: 23 Let us make inquiries and if it can be done with a 24 reasonable amount of effort, we will do that. 25 THE PRESIDING MEMBER: Take it on a 26 best-efforts basis and we will take a number for it. 27 Thank you. 28 MS LEA: We are looking at F3.1, please. Les Services StenoTran Services Inc. 613-521-0703 432 Preliminary Matters 1 UNDERTAKING NO. F3.1: Mr. Curtis 2 undertakes to recalculate the rates in 3 column 3 on this Table 6 using the 4 assumption of the cogeneration amount of 5 1,150 megawatts as the amount being 6 installed with whatever portion of that 7 amount was used for each particular year 8 in column 2 to be used for each 9 particular year in column 3 10 THE PRESIDING MEMBER: That is it then? 11 There are no undertaking responses or any 12 other preliminary matters? 13 MR. ROGERS: No, sir, that's it. 14 Thank you very much. 15 THE PRESIDING MEMBER: All right, then. 16 So if we are ready we will resume, then, 17 Mr. Brown, please. 18 MR. BROWN: Thank you, Dr. Higgin. 19 CONTINUED CROSS-EXAMINATION 20 MR. BROWN: Gentlemen, I will only be a few 21 minutes, but I would first like to just sort of step 22 back and look at the overall impact on a customer's bill 23 that OHNC's proposal would have. 24 As I understand it, OHNC is proposing that 25 with respect to any transformation service taken by the 26 customer, that would be calculated on a 100 per cent 27 gross load basis? 28 MR. CURTIS: Taken from any transformation Les Services StenoTran Services Inc. 613-521-0703 433 OHNC PANEL 1, cr-ex (Brown) 1 service? 2 MR. BROWN: That's right. 3 MR. CURTIS: Connection transformation. 4 MR. BROWN: Connection transformation. 5 MR. CURTIS: Yes. That's correct, yes. 6 MR. BROWN: That's right. 7 Similarly, any line connection service taken 8 by the customer will be calculated on a 100 per cent 9 gross load basis? 10 MR. CURTIS: That's correct, yes. 11 MR. BROWN: With respect to network service 12 where the customer is taking some load from an embedded 13 generator, you are proposing that that be calculated on 14 a 50 per cent gross load basis? 15 MR. CURTIS: Yes. I guess with the 16 qualification, what we are talking about here would be 17 the meter reading and adding back 50 per cent of the 18 amount of generation that that generator supplied. 19 MR. BROWN: In terms of the overall impact, 20 then, on the customer's transmission bill, his overall 21 transmission bill -- 22 MR. CURTIS: Yes. 23 MR. BROWN: -- is it fair to say that the 24 overall bill has been calculated on something greater 25 than a 50 per cent gross load basis where the customer 26 is taking some energy from embedded generation? 27 MR. CURTIS: You mean overall, including the 28 network and the connection? Les Services StenoTran Services Inc. 613-521-0703 434 OHNC PANEL 1, cr-ex (Brown) 1 MR. BROWN: All three components. 2 MR. CURTIS: All three components. 3 MR. BROWN: Yes. 4 MR. CURTIS: Yes. 5 MR. BROWN: That overall percentage would be 6 what, somewhere in the range of 70 per cent gross load 7 for the overall bill? 8 MR. CURTIS: It's probably in that range, yes. 9 MR. BROWN: If I could move to the issue of 10 the basis of calculating the bill for transformation and 11 line connection services, I take it that there is a 12 common starting point inasmuch as that it is your 13 position, which has been accepted by many, many 14 stakeholders, that the costs associated with connection 15 and transformation assets used by one or a limited 16 number of customers should not be shifted to other 17 customers who cannot use those assets? 18 MR. CURTIS: That is correct. 19 MR. BROWN: You would agree with me that 20 although for many people, including my client, we have 21 this common starting point with you, that there are 22 different ways to achieve that result. 23 MR. CURTIS: There may be, yes. 24 MR. BROWN: To put it simply, you have 25 proposed a gross load billing for transformation 26 connection services as the method to achieve that 27 result. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 435 OHNC PANEL 1, cr-ex (Brown) 1 MR. BROWN: You have read Mr. Fagan's evidence 2 and he has proposed what he calls a net load billing 3 coupled with a floor mechanism, but you understand that 4 he is basically trying to achieve that result. 5 MR. CURTIS: I guess we weren't quite certain 6 that he was. I'm not sure that we really understood 7 what the historical floor level mechanism was that he 8 was setting. 9 MR. BROWN: So you want to hear more from him 10 on that. 11 MR. CURTIS: Yes, to have a better 12 understanding then in fact what he is talking about is 13 the current existing facilities and the capacity of the 14 current existing facilities based on what the existing 15 load has been taking off those facilities. If that's 16 what he's talking about, then the mechanisms probably 17 are similar. 18 MR. BROWN: Then the third general mechanism 19 that one could use to achieve the results would be to 20 have a direct assignment to customers of their actual 21 connection and transformation asset costs. 22 MR. CURTIS: Yes. That's a more difficult way 23 of implementing it. 24 MR. BROWN: In terms of the proposal that you 25 have put before the Board, which is the gross load 26 billing on the transformation and connection services, 27 could I ask you, gentlemen, please, to turn to one of 28 IPSO's interrogatories to you. It's Interrogatory 16, Les Services StenoTran Services Inc. 613-521-0703 436 OHNC PANEL 1, cr-ex (Brown) 1 which is Exhibit E, Tab 6, Schedule 16. Exhibit E, Tab 2 6, Schedule 16, page 1 of 2. 3 MR. CURTIS: Yes. 4 MR. BROWN: There's an example that's given in 5 subsection (b) which I would just like to go over with 6 you. The example has asked you to consider a single 7 delivery point LDC with a 100 megawatt peak load in all 8 months the market start-up, actually to assume a 9 constant monthly peak load growth rate which totals 10 10 megawatts over five years, so at the end of the five 11 years there would be 110 megawatt gross load. 12 While the peak load growth is taking place, 13 there is a simultaneous installation of distributed 14 generation, plus that the net peak load remains at 100 15 megawatts in all months throughout the five years. 16 The question that was asked of you is will the 17 LDC see a connection charge in every month based on the 18 hundred megawatts or will the connection charge be based 19 on the gross load. The assumption is that no addition 20 or upgrade to connection and transformation is required 21 as a result of the distributed generation. 22 If you flip over the page, gentlemen, to the 23 answer, the answer that you gave is that the connection 24 tariff would be based on the gross load. I take it by 25 that in your response you were saying that the tariff 26 would be based on the total gross load of 110 megawatts. 27 Is that accurate? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 437 OHNC PANEL 1, cr-ex (Brown) 1 MR. BROWN: I know there's a ton of 2 interrogatories that go out. I just wanted to make sure 3 that at the end of the day, at the end of year five, 4 that customer would be billed on the basis of a gross 5 load of 110 megawatts. 6 MR. CURTIS: Yes. 7 MR. BROWN: The question then arises is why 8 that would be so because what the example has asked you 9 to do is to assume that there is no addition or upgrade 10 to the connection and transformation assets. You would 11 agree with me that under this particular example there 12 has been no reduction in use by the customer of the 13 connection assets. 14 MR. CURTIS: No reduction in the use? 15 MR. BROWN: No reduction in the use. 16 MR. CURTIS: That's correct. 17 MR. BROWN: There has been no reduction in the 18 use. Since there has been no reduction in the use, you 19 would agree that this customer has not shifted any of 20 its historic connection costs on to any other customer. 21 MR. CURTIS: That's correct. 22 MR. BROWN: If that's the case, why should 23 that additional 10 megawatts of load growth be tacked on 24 to the customer's bill when you are calculating the 25 connection charge? 26 MR. CURTIS: When connection facilities are 27 installed for a customer, they are installed in a manner 28 that doesn't exactly meet what the customer's current Les Services StenoTran Services Inc. 613-521-0703 438 OHNC PANEL 1, cr-ex (Brown) 1 load is or what the customer says his current load is 2 going to be, so in other words, this particular customer 3 that we are talking about, although there would be 4 knowledge in advance in terms of design and the 5 installation of the connection facility around the 6 hundred megawatt mark, there would be some additional 7 capacity provided on that connection facility for that 8 customer to use, given that customers often fluctuate in 9 terms of what their draw is off a connection facility. 10 In fact, implicitly by the amount that we are 11 talking about here, the customer is making use of the 12 assets that were originally installed for that customer 13 to use. 14 MR. BROWN: So do I take it then that it would 15 be your position that any increase or any growth in peak 16 load up to the point where the customer then has to go 17 out and upgrade or improve the connection asset would be 18 added on to the bill and factored in as part of the 19 gross load? 20 MR. CURTIS: Yes, it would. 21 MR. BROWN: One other aspect in this area of 22 the billing for the connection and transformation. 23 Would you agree with me that if one customer reduces its 24 use to a certain extent the connection asset, and that 25 obviously frees up some local capacity for that asset, 26 and another customer which is connected to the same 27 asset comes along and makes up for that reduced use, the 28 benefits of reducing the load should accrue to the Les Services StenoTran Services Inc. 613-521-0703 439 OHNC PANEL 1, cr-ex (Brown) 1 customer who reduces the load and not to OHNC through a 2 gross load billing mechanism? 3 MR. CURTIS: The benefits wouldn't accrue to 4 OHNC. It would accrue to all of the transmission 5 customers within OHNC. 6 MR. BROWN: Well, where another customer is 7 able to step up and make use of the capacity that has 8 been freed up as a result of the reduced load, why 9 should not the initial load that reduced its use of that 10 particular asset get the benefit of the reduced use? 11 MR. CURTIS: Well, I think we are talking 12 about a circumstance that would be very unusual first of 13 all because it's not often that you see one customer at 14 a particular connection point that would be lowering its 15 take off its connection facilities and then another 16 customer appears that, you know, would take up that 17 additional. I think we are talking about maybe a second 18 order correction, if you will. 19 MR. BROWN: But would you agree as a matter of 20 a well designed rate mechanism, you should be able to 21 give the benefit of the load reduction in that case to 22 the customer that reduces the load where other customers 23 have been able to step up and use the freed up capacity? 24 MR. CURTIS: Rather than all of the other 25 customers on the system is what you are getting at. I 26 don't know. That might be a possibility, yes. 27 MR. BROWN: It would be a good target to shoot 28 for if one could do it. Les Services StenoTran Services Inc. 613-521-0703 440 OHNC PANEL 1, cr-ex (Brown) 1 MR. CURTIS: Yes. 2 MR. BROWN: I would like to move to the final 3 area of questioning for you, gentlemen. This I had 4 indicated was in the area of the minimum threshold that 5 you were proposing for invented generation. 6 As I understand your proposal, you are 7 suggesting that there should be net net billing for 8 network to connection services for any embedded 9 generation under one megawatt or any load served by 10 embedded generation under one megawatt. 11 MR. CURTIS: Yes, that's correct. 12 MR. BROWN: The rationale, as I understand it, 13 from your part for this proposal is one of 14 administrative efficiency. 15 MR. CURTIS: Yes, it is. 16 MR. BROWN: Could I ask you in that regard to 17 turn to Exhibit D, Tab 5, Schedule 1, page 39. 18 MR. CURTIS: Yes. 19 MR. BROWN: These are really more 20 informational questions. If you look at that page, 21 starting at line 18 on page 39, I think you begin to 22 review the rationale for your proposal. 23 MR. CURTIS: Yes. 24 MR. BROWN: The first thing that you mention 25 is that OHNC recognizes the potential administrative 26 difficulties with respect to billing the load supplied 27 by such generation on anything other than a net load 28 basis. Les Services StenoTran Services Inc. 613-521-0703 441 OHNC PANEL 1, cr-ex (Brown) 1 Could you please explain what potential 2 administrative difficulties you are referring to there. 3 MR. CURTIS: All right. We are talking about 4 having a billing system, for example, track loads of 5 that order of that magnitude. We are talking about the 6 connection requirements for that generator, if we are 7 going to bill that generator. 8 We are talking too in terms of being able to 9 track and administer that generator in terms of its 10 connection facilities, you know, that sort of aspect of 11 it. That's on our side. 12 On the other side, we are talking about the 13 customer in terms of the administrative burden that that 14 customer would carry in terms of being billed on other 15 than a net net basis. 16 MR. BROWN: The next rationale that I 17 understand that you put forward is also contained on 18 line 18. You refer to a recognition of the 19 proportionately high societal cost associated with 20 billing on anything other than a net load basis for that 21 size. 22 MR. CURTIS: Yes. 23 MR. BROWN: What are you referring to there 24 when you say proportionately high societal cost? 25 MR. CURTIS: It would cost the investment that 26 society as a whole on an economic basis is making in 27 terms of having to track and build these loads is what 28 we are referring to here. Les Services StenoTran Services Inc. 613-521-0703 442 OHNC PANEL 1, cr-ex (Brown) 1 MR. BROWN: The cost of billing is greater 2 than the revenue you get back? 3 MR. CURTIS: No, it actually isn't, but there 4 are non-quantifiable variables, at least from our 5 perspective, that sort of enter into the picture in 6 terms of, for example, the administrative burden placed 7 on applicants -- placed on customers rather, in terms of 8 dealing with OHNC or its transmission provider. 9 MR. BROWN: Instead of calling them 10 proportionately high societal costs can we simply label 11 it as the hassle factor? 12 MR. CURTIS: Yes, that would be fine. 13 MR. BROWN: Going on in your evidence, 14 particularly at line 20 to 22, am I correct that you 15 have identified a third rationale for your threshold 16 proposal, inasmuch as that generation at the less than 17 one megawatt level is not likely to have significant 18 impact on the reassignment of responsibility of 19 transmission charges? 20 MR. CURTIS: Yes. 21 MR. BROWN: When you refer there to 22 significant impact is there any quantitative measure of 23 that that you were using when making that statement? 24 MR. CURTIS: Yes. If we take one megawatt as 25 the size that we are dealing with here and you multiply 26 that out by the various transmission charges that we put 27 forward in this application, I think we come up with a 28 figure of the order of $60,000 a year in terms of the Les Services StenoTran Services Inc. 613-521-0703 443 OHNC PANEL 1, cr-ex (Brown) 1 transmission revenue. 2 MR. BROWN: What I was perhaps trying to get 3 at is you had mentioned earlier in your evidence, either 4 yesterday or the day before, that when you were looking 5 at cost reassignment amongst customer classes I think 6 you used the figure of 5 per cent as your threshold for 7 significant impact? 8 MR. CURTIS: Right. 9 MR. BROWN: Are you also using the 5 per cent 10 level for this rationale? 11 MR. CURTIS: I think implicitly we are because 12 if you talk about one customer of the order of $60,000 a 13 year spread over $1.163 billion, that clearly is less 14 than 5 per cent in terms of the impact on other 15 customers. 16 MR. BROWN: Now, when I showed you the AGRA 17 Monenco chart yesterday, which perhaps we can go to. 18 It's right at the end of this tab. There was that 19 chart, I think it was Table 4-2, where they looked at 20 all of the potential newco generation project. The last 21 line dealt with Ontario small plant which appeared to be 22 less than five megawatts, just by the looks of the other 23 numbers they were using on the chart. They had a 24 mid-point of 300 megawatts there in terms of a forecast 25 for the next eight years. 26 MR. CURTIS: Yes. 27 MR. BROWN: Did OHNC perform any study of the 28 impact of charge reassignment if an exemption was given Les Services StenoTran Services Inc. 613-521-0703 444 OHNC PANEL 1, cr-ex (Brown) 1 to all of that 300 megawatts worth of projects that AGRA 2 Monenco is referring to there. 3 MR. CURTIS: No. 4 MR. BROWN: If I could ask you to go back to 5 page 39, gentlemen, line 28, am I correct that a fourth 6 rationale underlying your proposal is that it would 7 facilitate the development of small scale 8 environmentally friendly generation options? 9 MR. CURTIS: I think to complete that record, 10 it was provided to us by some stakeholders that that's 11 what it would do, yes. 12 MR. BROWN: The point I am trying to elicit 13 from you is the rationale of OHNC. Does the promotion 14 or the incentive of small scale environmentally 15 generated projects comprise one of your rationale for 16 this threshold proposal? 17 MR. CURTIS: I think to be correct about it 18 this is what we have heard from other stakeholders, and 19 in terms of trying to put together the package that we 20 are talking about here, we were trying to address as 21 many of the stakeholder concerns as we could. So, it 22 was from that perspective, as opposed to adopting the 23 principle ourselves of promoting, I think to use your 24 words, the use of this generation. 25 MR. BROWN: One final document I would like 26 you to take a look at and then I will be done. This is 27 an interrogatory that the OEB made of IPPSO. It's 28 Exhibit E, tab 57, Schedule 4. It's OEB/IPPSO-4. Les Services StenoTran Services Inc. 613-521-0703 445 OHNC PANEL 1, cr-ex (Brown) 1 MR. CURTIS: We are there. 2 MR. BROWN: What I would simply like you to do 3 is what Board staff did in this interrogatory is to ask 4 Mr. Fagan whether there was any specific rationale for 5 his proposal, which was to expand the threshold 6 exemption from one megawatt to 20 megawatts. Mr. Fagan 7 gave this response and he identifies what he says are 8 four benefits of an increased threshold exemption. I 9 would like to get your comments on each. 10 First, he says that smaller scale -- 11 MR. CURTIS: Do you mind if we take a few 12 minutes to read this? 13 MR. BROWN: No. Why don't you read the whole 14 thing and once you have done that I will ask my 15 questions. 16 --- Pause 17 MR. CURTIS: We have read it. 18 Thank you. 19 MR. BROWN: I had sort of assumed that you had 20 memorized all of the evidence. 21 MR. CURTIS: Not quite. 22 MR. BROWN: We can't even carry all of the 23 evidence, let alone memorize it. 24 Mr. Fagan here is responding to certain 25 benefits which you say would be uncaptured without full 26 net net billing up to a 20 megawatt level. The first 27 benefit that he describes is that smaller scale 28 generation reduces transmission losses. Do you agree Les Services StenoTran Services Inc. 613-521-0703 446 OHNC PANEL 1, cr-ex (Brown) 1 that that is one such benefit? 2 MR. CURTIS: It may be a benefit. I don't 3 know in all circumstances that it necessarily would 4 reduce system losses. It depends on where the 5 generation is installed. 6 MR. BROWN: So in some cases it may and in 7 some cases it might not? 8 MR. CURTIS: Yes. 9 MR. BROWN: The second benefit that he 10 enumerates is that the cumulative presence of many small 11 scale generation units provides system reliability 12 benefits with value that may not be directly captured by 13 the investors through any currently proposed market 14 mechanism. Do you regard that as a potential benefit? 15 MR. CURTIS: He goes on and he lists some of 16 these reliability benefits. I think we would agree that 17 those potentially could be there. 18 What he doesn't go on and talk about are some 19 potential system reliability disbenefits, if you will. 20 Some of these smaller units may be subject to 21 operational problems or difficulties that are corrected 22 by the fact that the loads are still connected on within 23 the system and so, in fact, they correct problems that 24 some of these smaller generators may create. Problems, 25 for example, like the small generators tripping off 26 inadvertently and problems in terms of if during the 27 start-up or shut down of some of these generators there 28 may be over or underfrequency problems that are created Les Services StenoTran Services Inc. 613-521-0703 447 OHNC PANEL 1, cr-ex (Brown) 1 that are compensated for by the fact that their loads 2 are still connected to the system. So there is a 3 balance that would have to be struck here. 4 MR. BROWN: The third potential benefit that 5 he lists is that these smaller units would help reduce 6 loading on existing equipment and could prolong physical 7 or operating lifetimes. Is that a potential benefit 8 which you would foresee as well? 9 MR. CURTIS: Maybe in terms of the local 10 connection area facilities. 11 MR. BROWN: The fourth and final one is that 12 the smaller units could impart increased flexibility in 13 the scheduling of maintenance on transmission and 14 distribution facilities. Would you agree that that also 15 ranks as a potential benefit? 16 MR. CURTIS: I think in order for that to be 17 the case, these units would have to be a participant 18 within sort of the overall IMO-administered market 19 system because what we are talking about here is being 20 able to co-ordinate with the transmission owner and 21 other generation owners in terms of the overall 22 scheduling of these. 23 Now, if that is going to be the case, then the 24 arguments that were put forward earlier on about these 25 benefits not being captured under the market system 26 would probably be invalid then. In other words, the 27 generator here has a choice, either he is part of the 28 overall system and participates in it or he is not. Les Services StenoTran Services Inc. 613-521-0703 448 OHNC PANEL 1, cr-ex (Brown) 1 MR. BROWN: Thank you very much, gentlemen. 2 Those are my questions. 3 THE PRESIDING MEMBER: Thank you, Mr. Brown. 4 We will move to Mr. Janigan and Mr. Cowan 5 after Mr. Janigan. 6 Thank you. 7 MR. JANIGAN: Thank you, Mr. Chair. 8 First, I would like to express my thanks to 9 MEA for agreeing yesterday to advance some of our 10 questions in the course of their cross-examination. It 11 has saved me the attendance, for which I am grateful and 12 I'm sure the Board is grateful as well. 13 FURTHER CROSS-EXAMINATION 14 MR. JANIGAN: I would like to start first with 15 the principles behind the argument associated with the 16 net load billing situation, the argument being that 17 connection assets should be billed on a net load basis. 18 MR. PORAY: I'm sorry, connection assets...? 19 MR. CURTIS: Connection on a net? You mean on 20 a gross. 21 MR. PORAY: On gross. 22 MR. JANIGAN: I'm sorry. This is the contour 23 argument I'm referring to. 24 MR. CURTIS: Oh, I'm sorry. All right. 25 MR. JANIGAN: The argument by some industrial 26 customers. 27 MR. CURTIS: I'm sorry. 28 MR. JANIGAN: In the event that a transmission Les Services StenoTran Services Inc. 613-521-0703 449 OHNC PANEL 1, cr-ex (Janigan) 1 customer decides to move to a new generation that 2 doesn't require the connection assets, what is the 3 likelihood that other users of the transmission system 4 could use these assets? 5 MR. CURTIS: We feel that it would be very 6 low. These connection facilities that you talk about 7 are designed for specific customers and they are 8 designed for those customers to use. They are fixed 9 facilities, in other words, they are not easily moved to 10 any other location in the province. Because they are 11 linked to specific physical sites, if that customer 12 chooses not to be taking off those connection 13 facilities, it is I think a little difficult to imagine 14 that they are abandoning their physical site at the end 15 of the line and some other customer could rebuild in 16 that location. 17 MR. JANIGAN: If net load billing was adopted, 18 it would appear, in our view, to inconsistently apply 19 the principle of user pays so far as it would result in 20 a transference of costs to customers that don't use 21 these assets. Would you agree with that? 22 MR. CURTIS: Yes, I think we would agree with 23 that. 24 MR. JANIGAN: Would you agree that this may 25 result in an incorrect price signal for the remaining 26 transmission customers if they picked up the cost of 27 assets which are neither used nor useful to them? 28 MR. CURTIS: Yes, it would. Les Services StenoTran Services Inc. 613-521-0703 450 OHNC PANEL 1, cr-ex (Janigan) 1 MR. JANIGAN: In respect of sending the 2 correct price signals to ensure efficient use of the 3 existing infrastructure, in removing the cost of exit 4 from those customers that choose to bill the embedded 5 generation, would you be in fact sending the wrong price 6 signals to market players in general? 7 MR. CURTIS: Well, we believe we would, yes. 8 MR. JANIGAN: I wonder if you could turn up -- 9 in summary, I would assume that you believe that the 10 adoption of net load billing at this time would be a 11 significant departure from the user-pay principle and 12 the principle of fairness in the allocation of costs. 13 MR. CURTIS: Certainly on the connection side, 14 yes. 15 MR. JANIGAN: I wonder if you could turn up 16 that Interrogatory No., 1 which is found at E1, Tab 7, 17 Schedule 1. 18 MR. PORAY: E1, Tab 7? 19 MR. JANIGAN: Schedule 1. 20 MR. PORAY: Oh, E-7, sorry. 21 --- Pause 22 MR. PORAY: Okay. 23 MR. CURTIS: E-7-1? 24 MR. JANIGAN: That's right. 25 MR. CURTIS: Thank you. 26 MR. JANIGAN: You will see that in this 27 interrogatory the question was asked what new principles 28 have been added in terms of the cost allocation Les Services StenoTran Services Inc. 613-521-0703 451 OHNC PANEL 1, cr-ex (Janigan) 1 methodology as part of this proposal and please list the 2 principles. 3 And the principles are set out in the 4 response: 5 "The cost allocation should consider how 6 other jurisdictions have accomplished 7 this task" 8 Secondly: 9 "The rate structure should minimize 10 (negative cost) impact on customers at 11 the onset of Open access, and" 12 Thirdly: 13 "The rate structure should minimize 14 impacts on the operation of the 15 electricity marketplace." 16 MR. CURTIS: Yes. 17 MR. PORAY: That's correct. 18 MR. JANIGAN: If you would turn over to the 19 next page on Interrogatory No. 2, you identify a major 20 impact as part of your answer to (b) in that 21 interrogatory. 22 MR. CURTIS: Yes. 23 MR. JANIGAN: You indicate: 24 "A major impact is relative but may be 25 considered to be one in which the rate 26 change is in the range of 5-10% of the 27 norm" 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 452 OHNC PANEL 1, cr-ex (Janigan) 1 MR. JANIGAN: Okay. 2 I wonder if you could then turn up Exhibit D, 3 Tab 5, Schedule 1, Table 5. 4 --- Pause 5 MR. CURTIS: Yes. 6 MR. JANIGAN: Did I say Schedule 1? It should 7 be Schedule 2. 8 MR. PORAY: That's correct. 9 --- Pause 10 MR. PORAY: Okay, we are there. 11 MR. JANIGAN: I'm looking at Scenario No. 1 12 involving net load billing for network and connection 13 for all embedded generation. 14 MR. CURTIS: Yes. 15 MR. JANIGAN: By the looks of it, in the 16 category of "Other LDCs" this first proposal would 17 result in a 12.7 per cent negative rate impact to that 18 class of customers. 19 MR. CURTIS: Yes. 20 MR. JANIGAN: It would in fact run afoul of 21 the principles that you have established in this 22 proceeding. 23 MR. CURTIS: Yes. 24 MR. JANIGAN: Similarly, with net load billing 25 for network only for all embedded generation, it would 26 also have a negative impact of 7 per cent on other LDCs 27 as well. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 453 OHNC PANEL 1, cr-ex (Janigan) 1 MR. JANIGAN: Okay. And would, once again, 2 run afoul of your principles? 3 MR. CURTIS: Yes. 4 MR. JANIGAN: Okay. 5 One of the principles you indicate that guided 6 this application was to look at what is occurring in 7 other jurisdictions. Is that correct? 8 MR. CURTIS: Yes. Yes, it is. 9 MR. JANIGAN: I believe that it was indicated 10 in evidence, if you can confirm, that it is your 11 understanding that Alberta is the only jurisdiction in 12 Canada and the United States that allows net load 13 billing in connection with network charges. 14 MR. CURTIS: I don't think so, not in terms of 15 network. It is interpreted I think with some of the 16 states in the Unites States that they are employing a 17 net load billing basis for network charges as well as 18 Alberta. 19 MR. JANIGAN: Do you have any idea how many of 20 the states this would involve? Would it involve -- 21 MR. CURTIS: No, I'm not -- 22 MR. ROGERS: Are you talking about network 23 charges or connection charges? 24 MR. JANIGAN: Network. 25 MR. CURTIS: Network. I don't think we did an 26 actual count on that, no. 27 MR. JANIGAN: Perhaps we will confine it to 28 Canada, then. Les Services StenoTran Services Inc. 613-521-0703 454 OHNC PANEL 1, cr-ex (Janigan) 1 MR. CURTIS: Yes, within Canada that's 2 correct, to the best of our knowledge, anyway. 3 MR. JANIGAN: Did you obtain any evidence with 4 respect to the practices in the other jurisdictions as 5 to the rationale as to why gross load billing was 6 adopted in these jurisdictions? 7 MR. PORAY: I think in one of our 8 interrogatories which provides a copy of a report 9 prepared by our consultant, in most to the other 10 jurisdictions the issue of transmission bypass has not 11 really been dealt with. 12 MR. JANIGAN: Well, yesterday I believe you 13 indicated that one of the reasons Alberta adopted net 14 load billing was because the load growth there was 15 significantly higher from that forecast in Ontario. 16 MR. CURTIS: Yes. 17 MR. JANIGAN: Can you expand on the importance 18 of that fact? 19 MR. CURTIS: What we have talked about in 20 terms of our application on this net versus gross load 21 issue is related to existing facilities and how costs 22 would be shifted to other customers. 23 If you have a situation where there is 24 significant load growth, the net load issue can be 25 mitigated, to at least some extent, by the fact that 26 this new load growth can be accommodated through the net 27 load billing structure that was put in place and would 28 therefore mitigate the cost-shifting to other customers Les Services StenoTran Services Inc. 613-521-0703 455 OHNC PANEL 1, cr-ex (Janigan) 1 that would occur because new transmission facilities 2 wouldn't have to be installed to meet that load growth. 3 MR. JANIGAN: I wonder if I could take you 4 back to Exhibit D, Tab 5, Schedule 2 at page 2. 5 MR. CURTIS: Yes. 6 MR. JANIGAN: This is the forecast of Ontario 7 weighted load growth that underpins the analysis? 8 MR. CURTIS: Yes. 9 MR. PORAY: That's right. 10 MR. JANIGAN: Can you indicate what percentage 11 of the new generation that is built over this forecast 12 period is replaced by these new customers? 13 MR. CURTIS: I'm sorry, could you rephrase -- 14 could you repeat the question? 15 MR. JANIGAN: Sure. 16 Can you indicate what percentage of new 17 generation that will be built over the forecast period 18 is replaced by these new customers or this new load? 19 MR. CURTIS: All right. If you look at 20 Table 1, we are talking in order of over 1,000 megawatts 21 in terms of the increase running from 2000 to 2008. 22 If you look at the Table 2 forecast, depending 23 on which scenario that we are looking at, it could be -- 24 if we take the medium scenario, it could be 25 2,550 megawatts. I think if you net those two together, 26 the result would be in the order of 1,000 megawatts of 27 that 2,500 megawatts would be -- could be attributed to 28 new customers coming onto the system. Les Services StenoTran Services Inc. 613-521-0703 456 OHNC PANEL 1, cr-ex (Janigan) 1 This is a very imprecise way of doing it 2 because you have to really consider where the new load 3 is going to appear on the system, as well as where the 4 new generation is going to appear. So that it may not 5 necessarily mean that all of the load that you are 6 seeing appearing here could be met by the generation 7 that's in Table 2. 8 MR. JANIGAN: I wonder if you could turn up 9 Board Staff Interrogatory E-1-43, please? 10 --- Pause 11 MR. CURTIS: Yes. 12 MR. JANIGAN: I understand from your answer to 13 this interrogatory that the average remaining life of 14 OHNC's transmission assets is estimated to be between 15 25 and 40 years. 16 MR. CURTIS: That is correct. 17 MR. JANIGAN: Now, I take it that each 18 situation will be different since each asset is being 19 replaced as a different remaining life. Nonetheless, on 20 average, what is the impact of the average remaining 21 life in terms of the length of time that remaining 22 customers would likely have to pay for the cost of 23 departing customers in a net load billing circumstance? 24 MR. CURTIS: There are a lot of things that 25 are going to happen over that period. It would be less 26 than the remaining service life that we are talking 27 about here, 25 to 40 years, because new load growth 28 could appear and mitigate, to some extent, this. Les Services StenoTran Services Inc. 613-521-0703 457 OHNC PANEL 1, cr-ex (Janigan) 1 I think we are talking about just a real 2 ballpark estimate here, and it would probably be maybe 3 about half of what is stated here. It may be something 4 in the order of 10 to 20 years. 5 MR. JANIGAN: Thank you. 6 Now, from a cursory review of Exhibit G.2.2 7 yesterday, which was, I believe, presented by IPPSO from 8 ESBI Alberta Limited entitled "1999-2000 General Rate 9 Application Phase I and Phase II". 10 MR. CURTIS: Yes. 11 MR. PORAY: We have that, yes. 12 MR. JANIGAN: It appears that Alberta has 13 adopted other exit provisions in addition to net load 14 billing. 15 MR. CURTIS: Yes, that is our observation 16 as well. 17 MR. JANIGAN: It seems that Alberta has 18 considered waiving these exit provisions to the extent 19 that there are special circumstances such as absence of 20 stranded cost or some other benefit to the system of 21 remaining customers or their sort of remaining 22 customers. 23 MR. CURTIS: Yes, that is our reading as well. 24 MR. JANIGAN: Can you expand on that? 25 MR. CURTIS: In not all circumstances, if 26 transmission -- an existing transmission customer 27 choosing to leave the system, would there necessarily be 28 stranded costs involved. That is one of the Les Services StenoTran Services Inc. 613-521-0703 458 OHNC PANEL 1, cr-ex (Janigan) 1 peculiarities of a transmission system because of the 2 way electricity flows through a transmission system. 3 So, for example, at the network level, 4 although a customer would choose to leave, there would 5 be a reallocation, if you will, that flows over the 6 transmission system, that may not in fact strand as much 7 of the network facility as one might imagine at first 8 glance with their customer leaving. 9 I think that is probably what they are talking 10 about. But again, unfortunately we weren't part of the 11 Alberta hearing so we are not fully aware of what they 12 were discussing at that point. 13 MR. JANIGAN: That scenario is presented, as I 14 understand it, as a special circumstance? 15 MR. CURTIS: From our reading of this, that's 16 what it appears, yes. 17 MR. JANIGAN: Now, in general terms what can 18 you tell us in terms of the expected impact of a 19 combination of low load growths and an infrastructure 20 with a long remaining asset life? 21 MR. CURTIS: In terms of the net versus gross 22 load billing issue? 23 Our analysis would indicate that if there are 24 customers that get the net load billing option that that 25 means that there would be costs that would have to be 26 shifted to other customers, other transmission 27 customers. We have tried to show in our analyses and 28 assessments that we have provided as our evidence what Les Services StenoTran Services Inc. 613-521-0703 459 OHNC PANEL 1, cr-ex (Janigan) 1 the magnitudes of those shifts would be to other 2 customer groups. 3 MR. JANIGAN: With relatively long asset life 4 and low load growth this effect would continue for some 5 period of time? 6 MR. CURTIS: Yes. That is our belief, yes. 7 MR. JANIGAN: I believe you suggested 8 yesterday that in Alberta one of the reasons that net 9 load billing was approved was perhaps due to the lack of 10 stakeholders views being included. 11 MR. CURTIS: Well, it certainly appeared that 12 way when we read the evidence that was provided to us, 13 because as you read through each position that is stated 14 there supports the net load billing concept. 15 MR. JANIGAN: I take it in terms of the OHNC 16 proposal in this proceeding stakeholders views were 17 important in developing a comprehensive and balanced 18 outcome? 19 MR. CURTIS: Yes, they were. 20 MR. JANIGAN: Now, in the context of moving 21 forward to generate a longer term solution I believe you 22 have suggested that you will eventually be moving to a 23 contract-based system in which OHNC might enter into 24 separate contracts? 25 MR. CURTIS: That is our proposal, yes. 26 MR. JANIGAN: In this system how important do 27 you think the stakeholdering process should be? 28 MR. CURTIS: I think the stakeholders should Les Services StenoTran Services Inc. 613-521-0703 460 OHNC PANEL 1, cr-ex (Janigan) 1 still be involved in terms of determining what the 2 overall framework for this contractual set up should be. 3 So, in other words, I think as I was stating 4 yesterday, we would plan to come forward with a proposal 5 to the Board of how this contracting mechanism would 6 work. So the full extent of the framework and the 7 implications of the contracts could be assessed with 8 stakeholder input and then presumably whatever the Board 9 approves as the framework would be what we would be 10 using on a going-forward basis. 11 MR. JANIGAN: I believe yesterday there was a 12 discussion of investor risk in a general sense and 13 regulatory risk in particular associated with issues 14 such as uncertainty. 15 MR. CURTIS: Yes. 16 MR. JANIGAN: I would take it that this 17 current regime that you are proposing will provide some 18 certainty of, let's say, 12 to 24 months. 19 MR. CURTIS: Yes. 20 MR. JANIGAN: And thereafter I took it from 21 the evidence that the intent is to move closer to a 22 customer pays formula in the contractual negotiations. 23 MR. CURTIS: Yes. 24 MR. JANIGAN: So from an investor standpoint, 25 things could only get better. 26 MR. CURTIS: That's our belief. 27 MR. JANIGAN: And in terms of the regulatory 28 risk, on a going forward basis as we move towards the Les Services StenoTran Services Inc. 613-521-0703 461 OHNC PANEL 1, cr-ex (Janigan) 1 end state of this, would you agree there are ways to 2 minimize this risk? 3 MR. CURTIS: Yes, I think there are. 4 MR. JANIGAN: For example, more stakeholdering 5 could define efficient generation. 6 MR. CURTIS: Yes. A clear definition of what 7 efficient generation is, one that's done with specific 8 technical terms so there's no ambiguity about what 9 qualifies and what doesn't qualify. Yes. 10 MR. JANIGAN: In terms of developing criteria 11 for individual contract stakeholdering once again could 12 assist in that process. 13 MR. CURTIS: Yes. 14 MR. JANIGAN: Would you agree it also might be 15 helpful to await the outcome of the transmission system 16 code with respect to connection agreements? 17 MR. CURTIS: Yes, that is part of our 18 evidence. 19 MR. JANIGAN: I wonder if you could just turn 20 up briefly Tab 1, Schedule 51. 21 MR. CURTIS: Is this in E? 22 MR. JANIGAN: That's right. Sorry. 23 MR. CURTIS: Yes. 24 MR. JANIGAN: I take it from this response 25 because transmission charges account for only about 15 26 per cent of the total energy bill that there are other 27 factors such that you have named here, the projected 28 market price for energy, contracts to ensure stability Les Services StenoTran Services Inc. 613-521-0703 462 OHNC PANEL 1, cr-ex (Janigan) 1 of revenue, citing environmental requirements and 2 approval that will play a much bigger role in investor 3 decision making. 4 MR. CURTIS: Yes. In our opinion, that's 5 correct. 6 MR. JANIGAN: Now, in terms of yesterday's 7 testimony, I believe there was evidence or questions 8 concerning the location for the siting of new generation 9 and the possibility of new distributed generation 10 becoming smaller, more efficient and more often sited 11 than other smaller LDCs. 12 MR. CURTIS: Yes. 13 MR. JANIGAN: Would you agree that many of the 14 knowledgeable people in this room would likely have 15 their own estimate of the timing, size, customer group, 16 location and probability of new embedded generation in 17 this province over the next eight years? 18 MR. CURTIS: Yes. We have seen that through 19 the stakeholdering process as well. 20 MR. JANIGAN: Would you agree that 21 irrespective of the volume or specifics of the new 22 generation, to the extent there is net load billing, 23 there would be a shift of transmission costs to those 24 customers who do not have the opportunity to engage in 25 these? 26 MR. CURTIS: Yes. Definitely so. 27 MR. JANIGAN: Finally, just some wrap-up 28 questions dealing with some of the other evidence that Les Services StenoTran Services Inc. 613-521-0703 463 OHNC PANEL 1, cr-ex (Janigan) 1 has been offered by other parties in this proceeding. 2 In particular, I wonder if I could refer you to IPSO's 3 proposal associated with the increase of the embedded 4 generation threshold to 20 megawatts. I don't think you 5 need to turn it up. I'm not going to have any specific 6 questions. 7 In OHNC's viewpoint, if the threshold is 8 increased above one megawatt, does this represent a new 9 customer class? 10 MR. CURTIS: I'm not sure I really understand 11 the question. 12 MR. JANIGAN: If you increase the threshold -- 13 MR. CURTIS: Right. 14 MR. JANIGAN: -- from minus one megawatt to 20 15 megawatts, aren't you really creating a new customer 16 class? 17 MR. CURTIS: I would suggest we are probably 18 expanding the customer class that we are talking about 19 as currently being limited to one megawatt or less. 20 MR. JANIGAN: Have you made any estimate of 21 the impact of the IPSO proposal? 22 MR. CURTIS: No. I don't know. No, we 23 haven't. 24 MR. PORAY: This the -- my going to 20 25 megawatts you mean. 26 MR. JANIGAN: Yes. 27 MR. PORAY: No, we haven't. 28 MR. JANIGAN: Would it be a difficult prospect Les Services StenoTran Services Inc. 613-521-0703 464 OHNC PANEL 1, cr-ex (Janigan) 1 to produce some figures for an impact? 2 MR. PORAY: When you talk about the impact, 3 are you looking at the impacts that we prepared in table 4 5? 5 MR. JANIGAN: That's correct. 6 MR. CURTIS: I think we would have to check 7 back with some of our analysts to find out how difficult 8 this would be. 9 MR. ROGERS: Can we take that under 10 advisement, Mr. Chairman, and report back to the Board 11 on Monday morning? 12 THE PRESIDING MEMBER: Can we just clarify 13 which scenario is the base scenario on which you would 14 like them to work on. 15 MR. JANIGAN: The increase of the threshold 16 from one megawatt to 20 megawatts. 17 THE PRESIDING MEMBER: But under which -- 18 MR. JANIGAN: The net load billing. 19 THE PRESIDING MEMBER: Under 4(c) or do you 20 want every case? Is that a lot of work? 21 MR. CURTIS: Yes. 22 MR. JANIGAN: 4(c) I think would be fine. 23 THE PRESIDING MEMBER: 4(c). 24 MR. JANIGAN: Yes. 25 THE PRESIDING MEMBER: That's a bit more 26 doable, I would think. 27 MR. CURTIS: Can we check back then and we 28 will report back on Monday. Les Services StenoTran Services Inc. 613-521-0703 465 OHNC PANEL 1, cr-ex (Janigan) 1 THE PRESIDING MEMBER: Can we have an 2 undertaking. Thank you. 3 MS LEA: Yes. I would like to give it an 4 undertaking number so we don't forget. So the 5 undertaking is to indicate whether you can undertake to 6 do the calculation proposed by Mr. Janigan. 7 MR. ROGERS: That is called a Rogers 8 undertaking. What is the number? 9 MS LEA: I'm sorry, F3.2. 10 UNDERTAKING NO. F3.2: Mr. Curtis 11 undertakes to indicate whether he can 12 undertake to do the calculation proposed 13 by Mr. Janigan 14 MR. JANIGAN: Finally, dealing with the OPGI 15 proposal which advocates gross load billing for network 16 services on a declining scale of a ten year period. 17 MR. CURTIS: Yes. 18 MR. JANIGAN: Have you done an evaluation of 19 the impact of the OPGI proposal? 20 MR. CURTIS: Not a specific one. No. 21 MR. JANIGAN: I take it you are not 22 recommending this to the Board. Can you indicate 23 briefly you believe the ten years is not appropriate. 24 MR. CURTIS: I think it was more from the 25 perspective of what we were hearing within our 26 stakeholdering process. We heard from large industrial 27 customers, developers and that, that some form of net 28 load billing would have to be put in place if there was Les Services StenoTran Services Inc. 613-521-0703 466 OHNC PANEL 1, cr-ex (Janigan) 1 going to be any embedded generation appearing within 2 Ontario. 3 What the OPGI proposal does is it starts off 4 at your gross load. It declines on a 10 per cent basis 5 on a year by year basis, so it would take five years 6 before the proposal that we have put before the Board 7 would be available to customers. 8 In our efforts to try and balance the issues 9 that were expressed to us by the developers versus those 10 other customer interests, we felt that our proposal 11 would be the best option overall and going to OPGI's 12 proposal would disadvantage those large investors. 13 MR. JANIGAN: I take it also with low load 14 growth and a fairly long life of assets that at the end 15 of the ten year period there still would be some form of 16 stranded costs that would be passed on to those 17 customers that couldn't take advantage of new 18 generation. 19 MR. CURTIS: Yes. We would expect that, but I 20 think as I indicated a little earlier in what we have 21 been discussing, somewhere between 10 and 20 years. We 22 would expect that to be mitigated to a considerable 23 extent. 24 MR. JANIGAN: Thank you, panel. Those are all 25 my questions. 26 Thank you both. 27 THE PRESIDING MEMBER: Thank you, Mr. Janigan. 28 I haven't forgotten you, Mr. Budd, but can Mr. Les Services StenoTran Services Inc. 613-521-0703 467 OHNC PANEL 1, cr-ex (Janigan) 1 Cowan come up, please, to the microphone. 2 THE PRESIDING MEMBER: Are you ready, sir? 3 MR. COWAN: Yes. Thank you kindly. 4 CROSS-EXAMINATION 5 MR. COWAN: Members of the Board, Mr. Poray 6 and Mr. Curtis, I thank you for the opportunity to 7 intervene in this flow of questions and it is very 8 helpful for me. 9 I would like to point out that initially the 10 Federation of Agriculture is not aligned with the net 11 load alliance or with any other group on this question. 12 OFA sees merit in both points of view and we are seeking 13 not so much for a middle ground or the high ground as 14 fertile ground. 15 THE PRESIDING MEMBER: The trouble is it has 16 probably been ploughed over too many times. 17 MR. COWAN: In that case we are looking for 18 till. 19 First, some questions out of yesterday with 20 respect to hum along. 21 MR. CURTIS: Yes. 22 MR. COWAN: Is hum along essential to an 23 embedded generator? 24 MR. CURTIS: Not to the generator, but to the 25 load to which the generator is attached, except perhaps 26 during the start up of the generator hum along would 27 help. 28 MR. COWAN: Then, as it is either essential or Les Services StenoTran Services Inc. 613-521-0703 468 OHNC PANEL 1, cr-ex (Cowan) 1 very useful, can they get it by radio or some other 2 means? 3 MR. CURTIS: No. 4 MR. COWAN: It has to be off the grid. Okay. 5 MR. CURTIS: It's intrinsic as part of the 6 physical interconnection. 7 MR. COWAN: I was interested in knowing 8 whether or not there is such a thing as a stand alone 9 embedded generator or whether they need to have a 10 conductor out there to give them the pitch. 11 MR. CURTIS: You could do it that way. 12 MR. COWAN: But it wouldn't work? 13 MR. CURTIS: Well, it would work, but it 14 wouldn't work nearly as well and it would depend in 15 terms of what sort of load that you hooked up to that 16 generator. I am sure you are aware of lots of examples 17 where small generators are hooked to individual loads 18 and you can start that generator up and service that 19 load without having to be hooked onto a grid. 20 MR. COWAN: Okay. Right. 21 Then, moving more into the net versus the 22 gross question and referring to the diagram from AMPCO, 23 G1, if I recall, the line connection diagram. 24 MS LEA: G1.3. 25 MR. COWAN: Yes, 1.3. Yes, that's the one. 26 Thank you. 27 MR. CURTIS: Yes. 28 MR. COWAN: Would an embedded generator in Les Services StenoTran Services Inc. 613-521-0703 469 OHNC PANEL 1, cr-ex (Cowan) 1 MEU-1, the one on the left, with net load billing rights 2 or privileges, displace some capacity of an existing 3 station and render the lines near it or some of the 4 lines near it redundant? 5 MR. CURTIS: It wouldn't render it completely 6 redundant because again there is a difference in terms 7 of a transmission system here because of how electricity 8 flows on the system, but it would reduce the requirement 9 that -- 10 MR. COWAN: That used the utilization rate and 11 potentially the return? 12 MR. CURTIS: Yes, that's right. 13 MR. COWAN: Then, is it correct that if growth 14 in load is the correct disredundancy that growth in load 15 should follow soon after and be tied to the redundant 16 line or the partially lines and not anywhere else? 17 MR. CURTIS: Yes, that's correct. 18 MR. COWAN: So, these things being true, can 19 it then follow that there are local considerations to 20 net versus gross and that embedded generation in some 21 places might see the displaced load quickly taken up? 22 MR. CURTIS: Yes. 23 MR. COWAN: While in others the redundant 24 lines might be, or the partially redundant lines could 25 be partially idle for some time? 26 MR. CURTIS: Yes, we would agree with that. 27 MR. COWAN: Thank you. 28 Then, in the generality of things, as Les Services StenoTran Services Inc. 613-521-0703 470 OHNC PANEL 1, cr-ex (Cowan) 1 circumstances vary locally, would we have if not the 2 best of all possible worlds, at least a somewhat more 3 acceptable one, if we could have investment, and I say 4 investment rather than a new generator or a net load 5 billing, where it would do no great harm and perhaps 6 provide substantial benefits, but avoid investment where 7 on balance it might do more harm than good? 8 MR. CURTIS: I think I would agree with that. 9 MR. COWAN: I am sure you would. When I go 10 over it again I know you will. 11 MR. CURTIS: Thank you. Please. 12 MR. COWAN: In the generality of things then, 13 where things vary locally, would we not have a somewhat 14 happier world if we could have investment where it does 15 no great harm and perhaps provides substantial benefits, 16 but avoid investment where on balance it might do more 17 harm than good? 18 MR. CURTIS: Yes, I would agree with that. 19 MR. COWAN: That wasn't so tough. 20 Then I want now to offer an apology to 21 everyone who has gone before because if you are stepping 22 across the stream on the rocks you always step on the 23 rock nearest the bank first and there may be other ones, 24 so that rock is always a good starting place and I am 25 going to have to start again, so apologies to Mr. Brown 26 and Mr. Fisher and Mr. Janigan and to everyone else 27 while I retread a bit here. 28 In your opinion then, and I suppose we could, Les Services StenoTran Services Inc. 613-521-0703 471 OHNC PANEL 1, cr-ex (Cowan) 1 if need be, refer to tab 5, Schedule 1, page 24, though 2 I doubt that that will be necessary for you because you 3 did write it and you know it by heart. 4 MR. CURTIS: I think I do. 5 MR. COWAN: That's the way "The Little Engine 6 That Could" starts, "I think I do". 7 In your opinion, is a purpose of possible 8 result, a probable result of net billing, assuming no 9 severe barriers to entry of new generators, to increase 10 the potential for new competitive generation a purpose 11 or a possible result to increase? 12 MR. CURTIS: We think it's a possible result, 13 but I think we have tried to bring out that there are 14 many more aspects to the decision to install an embedded 15 generator rather than whether it is net or gross billed 16 on the transmission. 17 MR. COWAN: And the next question will 18 certainly help bring out those other ones too. 19 MR. CURTIS: Okay. 20 MR. COWAN: Then, with respect to gross 21 billing, are some of the purposes or probable results 22 that preserve the revenue shifted -- sorry, to preserve 23 the revenue needed to maintain the network and to 24 protect customers from adverse rate shifts? 25 MR. CURTIS: In terms of this particular 26 application we are feeling that it is protecting the 27 customers from the adverse rate shifts is the -- 28 MR. COWAN: Is the primary one rather than Les Services StenoTran Services Inc. 613-521-0703 472 OHNC PANEL 1, cr-ex (Cowan) 1 preserving the network. You think the network will be 2 healthy whatever happens? 3 MR. CURTIS: Depending on many different 4 factors I guess, yes. 5 MR. COWAN: Okay. It's nice to have such a 6 large firm looking out for consumers. I must admit I 7 feel better already. 8 MR. ROGERS: It's quite a change, isn't it, 9 Mr. Cowan? 10 MR. COWAN: It is. I will remember that the 11 next time I sell beef. I shouldn't advertise, so I 12 won't tell you where you can buy it. 13 Would you agree then that access to new 14 competitive generation and protection from rate shifting 15 then are both desirable and in the public interest, 16 these two aims, the one aim of net and the other aim of 17 gross, both are in the public interest? 18 MR. CURTIS: Broadly speaking, yes. 19 MR. COWAN: And these pair of public interests 20 are they then in the keeping of the Board in its 21 Director of Licensing who under I believe section 59 or 22 60 of the OEB Act may order a hearing into the licensing 23 of any new generator at their sole discretion? 24 MR. CURTIS: Yes. You are getting into a 25 realm that I am really not that familiar with. 26 Unfortunately, I am not a lawyer and I don't want to try 27 and interpret the legislation. 28 MR. COWAN: Whenever I am asked if I am a Les Services StenoTran Services Inc. 613-521-0703 473 OHNC PANEL 1, cr-ex (Cowan) 1 member of a particular ethnic group I always say, 2 unhappily, no. I think I would have to say that with 3 respect to lawyers as well. 4 However, you would allow then that there is 5 some provision for licensing of any generator? 6 MR. CURTIS: Yes. 7 MR. COWAN: All right. 8 Under net load billing then, if the Board were 9 convinced that the proposed generator owing to its size 10 or location would displace load in a manner that would 11 cause a sustained adverse shift of rates to users or a 12 loss of revenue to your firm that threatened the 13 integrity of the network, do you feel there is a 14 reasonable prospect that the Board might refuse or defer 15 a licence until such time as the risks were acceptable? 16 MR. CURTIS: I believe that the Board would 17 entertain arguments like that in terms of its decision, 18 yes. 19 MR. COWAN: I think that is moving in the 20 direction of the affirmative, but it is a broad fence 21 you are sitting on. 22 MR. CURTIS: I just wouldn't want to presume 23 how the Board would come to its decision, that's all, 24 Mr. Cowan. 25 MR. COWAN: In addition to that protection 26 that one might enjoy from the Board and the director, 27 would back-up charges and exit fees also provide some 28 protection against the potential harms of net billing? Les Services StenoTran Services Inc. 613-521-0703 474 OHNC PANEL 1, cr-ex (Cowan) 1 MR. CURTIS: We have offered some evidence to 2 show that back-up charges would be insufficient to 3 recover the costs that you are talking about and that 4 there would still be substantial shifting. 5 MR. COWAN: Insufficient to cover the entire 6 harm but to provide some protection? 7 MR. CURTIS: That's right. Yes, but -- 8 MR. COWAN: So in a marginal case it might 9 take care of the marginal harm and still allow the 10 marginal benefit to proceed? 11 MR. CURTIS: No, I don't think it would work 12 that way. 13 MR. COWAN: In a marginal case, it would 14 absolutely have to by definition. 15 MR. CURTIS: No. No, it wouldn't have too 16 much -- I think what we are talking about in terms of 17 our assessment of providing for back-up charges, there 18 would be a relatively small amount of the potentially 19 repositioned or redistributed costs that would be 20 accommodated through those charges. 21 MR. PORAY: But I think your second point was 22 exit fees, and exit fees would go some way towards 23 mitigating this. 24 MR. COWAN: So between the two of them, 25 back-up fees and exit fees, there might be some 26 additional protection in addition to that provided by 27 the existence of the Board and the director? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 475 OHNC PANEL 1, cr-ex (Cowan) 1 MR. COWAN: Then we would likely agree that, 2 in a market system, government cannot order investors to 3 build new generators, yet there is a public interest in 4 having new generators albeit a reduced interest in times 5 when we have a surfeit of them. 6 Can we agree that the public interest in 7 getting new generators is served by rules which allow 8 desirable investment, also bearing in mind that there is 9 another side to this public interest, so rules which 10 retain discretion to prohibit it when that investment 11 becomes a threat to some other important public 12 interest? I would give you the for instance that any 13 generator that harms fish habitat can be prohibited 14 under the Fisheries Act of Canada by discretion. 15 MR. PORAY: I would assume that if a generator 16 was coming forward it would have to obtain certain 17 approvals, and environmental approvals would probably 18 examine those sort of issues. 19 MR. COWAN: Okay. 20 And if the public damage was as a consequence 21 of a net load billing, it could also be prohibited in a 22 regulatory framework? 23 MR. CURTIS: Well, it could, but the caution I 24 think that I would like to express is that this is 25 creating more regulatory requirements and more 26 regulatory burdens. I think I would express the 27 opinion -- 28 MR. COWAN: But is there -- Les Services StenoTran Services Inc. 613-521-0703 476 OHNC PANEL 1, cr-ex (Cowan) 1 MR. CURTIS: -- that we would like to reduce 2 that if it is possible. 3 THE PRESIDING MEMBER: I was just going to ask 4 Mr. Cowan, could you let Mr. Curtis answer the questions 5 before you jump in. 6 MR. COWAN: My apologies. My apologies. 7 THE PRESIDING MEMBER: Thank you. 8 MR. COWAN: Thank you. We will carry on from 9 there, then. 10 With this in mind, then, if the public 11 interest is best served, if we have enough net billing 12 to attract new generation but a vigilant Board and 13 director and possibly exit fees and back-up charges to 14 ensure protection of network integrity and to constrain 15 rate burden shifting, does the public interest require a 16 third or a fourth line of defence, such as gross load 17 billing, against whatever harm new generators might 18 bring? 19 MR. CURTIS: I think what you have proposed 20 would probably cover the risks. It is just the point 21 that I was trying to make earlier that you are bringing 22 in more and more regulatory oversight and regulatory 23 control as part of this and it is our proposal not to do 24 that that we have brought forward to the Board. 25 MR. COWAN: Well, as a former regulator, I am 26 always in favour of more of it. 27 --- Laughter 28 MR. COWAN: Thank you very kindly. Les Services StenoTran Services Inc. 613-521-0703 477 OHNC PANEL 1, cr-ex (Cowan) 1 Thank you. 2 MR. CURTIS: Thank you. 3 THE PRESIDING MEMBER: Thank you, Mr. Cowan. 4 Now we will move on. I think Mr. Budd 5 didn't -- I didn't ask him in order because we had 6 Mr. Janigan who wished to get away and now Mr. Cowan. 7 Should we take the break now or perhaps in ten 8 or 15 minutes? I don't want to interrupt you in the 9 middle. What would you prefer? 10 MR. BUDD: We can take the break now, if you 11 like. 12 THE PRESIDING MEMBER: All right. So we will 13 do that and we will come back at a quarter to and 14 Mr. Budd will start. 15 Thank you. 16 --- Upon recessing at 1025 17 --- Upon resuming at 1047 18 THE PRESIDING MEMBER: Okay, Mr. Budd, are you 19 ready? 20 MR. BUDD: Yes, sir, thank you very much, I 21 am. 22 THE PRESIDING MEMBER: Charge ahead. 23 --- Laughter 24 MR. BUDD: There will be no farming jokes from 25 here. 26 FURTHER CROSS-EXAMINATION 27 MR. BUDD: Gentlemen, I have a couple of 28 practical sort of implementation questions that I would Les Services StenoTran Services Inc. 613-521-0703 478 OHNC PANEL 1, cr-ex (Budd) 1 like to begin with. Then I would like to, with your 2 assistance, Mr. Chairman, mark an exhibit and move 3 forward in another part of my cross. 4 First, let's just follow up, if we may, with 5 respect to some of the practical examples that we have 6 heard this morning and yesterday. 7 Hypothetically, if I had a customer with an 8 industrial site in, say, Mississauga with a 100 megawatt 9 load -- are you with me? 10 MR. PORAY: Yes. 11 MR. BUDD: -- and that company proposes to 12 build a 100 megawatt cogen to serve its load, that 13 company would pay under your proposals network charges 14 on the 50 megawatts. Right? 15 MR. CURTIS: That's correct. 16 MR. BUDD: Okay. 17 If that same company instead made a decision, 18 which companies do, to close or sell its facility in 19 Mississauga and build another one, say, in Brampton, 20 that would be considered new load. Am I right? 21 MR. CURTIS: That's correct. 22 MR. BUDD: And it would be charged on a net 23 load basis? 24 MR. CURTIS: On a net load basis, right. 25 MR. BUDD: So it is using its own cogen, its 26 own facilities, it has bought a new site, builds its own 27 power plant -- 28 MR. CURTIS: It is considered new load, yes. Les Services StenoTran Services Inc. 613-521-0703 479 OHNC PANEL 1, cr-ex (Budd) 1 Yes. 2 MR. BUDD: Okay. Thank you. 3 Now, let's look at a separate example again in 4 trying to figure out how this is going to work because 5 the Board has to wrestle with whether what you are 6 proposing actually works in the real world. 7 I come from Windsor where there is automobile 8 plants. Let's just say there is a load there that has 9 currently three shifts, okay, and it goes to two. So 10 its load drops from, say, 150 down to 100. Are you with 11 me so far? 12 MR. CURTIS: You are talking about -- these 13 are continuous shifts, though, are they? Like, if you 14 are talking about it changing over time, that you were 15 running three shifts all the time and now you are 16 running just two shifts -- all right. 17 MR. BUDD: So our electricity usage decreases 18 by 50 megawatts. 19 MR. CURTIS: Yes. Okay. I understand. Thank 20 you. 21 MR. BUDD: You would then bill us, if we were 22 that auto plant, on the 100 that we were actually using? 23 MR. CURTIS: That's correct. 24 MR. BUDD: Let's say that a second load auto 25 plant decides that it is going to -- it has 150 megawatt 26 usage and it decides its going to install 50 megawatts 27 of embedded generation, that too will mean that it is 28 going to be using less. Correct? Les Services StenoTran Services Inc. 613-521-0703 480 OHNC PANEL 1, cr-ex (Budd) 1 MR. CURTIS: Yes. 2 MR. BUDD: And it will be down to the 100. 3 Correct? 4 MR. CURTIS: Yes. 5 MR. BUDD: But in that case, you would indeed 6 add 50 per cent of the embedded generation back in. 7 MR. CURTIS: Yes. 8 MR. BUDD: So it will pay 125 whereas the 9 other one 100. 10 MR. CURTIS: Yes. But in that case it was 11 using 150. Right? 12 MR. BUDD: In some respects, if those examples 13 I just gave you were real, have you considered the 14 implementation of this proposal province-wide? 15 MR. CURTIS: Yes, we have. 16 MR. BUDD: Do you think you will be able to 17 track all that, keep track of all that? 18 MR. CURTIS: Well, because the customers that 19 you are talking about would all have connection 20 agreements with our company if they are hooked onto our 21 transmission system, and it would be monitored and 22 managed through that. 23 MR. BUDD: Okay. 24 Do you have all that set up? That is all 25 ready to roll? 26 MR. CURTIS: It won't be ready to roll until 27 the transmission system code, you know, has been put in 28 place and the definition around connection agreements Les Services StenoTran Services Inc. 613-521-0703 481 OHNC PANEL 1, cr-ex (Budd) 1 with customers has been set up, but the expectation is 2 all that has to be in place before market opening. 3 MR. BUDD: I would like to ask you, if I 4 could, gentlemen, to turn to the piece of paper entitled 5 "Net vs Gross Load Billing" with the words "TransAlta 6 Exhibit" and then a line in the corner up on the left 7 side. 8 I would ask, Mr. Chairman, if we could have an 9 exhibit number from Ms Lea. 10 MS LEA: G3.1. 11 We have several pages, Mr. Budd, or are they 12 all going to be -- 13 MR. BUDD: It is a one-page exhibit which was 14 put at the side of the room yesterday and distributed to 15 one of your colleagues. 16 MS LEA: Thank you. 17 EXHIBIT NO. G3.1: Document entitled "Net 18 vs Gross Load Billing" 19 MR. BUDD: Maybe I also could then ask if the 20 witnesses, Mr. Chairman -- everybody would take this 21 brief list of exhibits down. I'm going to be going 22 through these and rather than continually interrupting 23 ourselves with what we are going to do for the next hour 24 or so maybe we could get them all out now, if that's 25 possible. 26 THE PRESIDING MEMBER: All right. 27 MR. BUDD: So if you have a pen handy, it is 28 E-1-66, E-1-68, D-5-2, and E-20-5, the Attachment 6L. Les Services StenoTran Services Inc. 613-521-0703 482 OHNC PANEL 1, cr-ex (Budd) 1 MR. ROGERS: Just give us a moment, Mr. Budd, 2 while we collect those. 3 MR. BUDD: Sure. 4 MR. ROGERS: Thank you. 5 ---- Pause 6 THE PRESIDING MEMBER: We are ready. 7 MR. BUDD: Thank you. 8 I would like to start, if I could, panel, 9 with G3.1. 10 First, just to assist you with this, to 11 explain that the purpose of this exhibit is really to 12 clarify the effect of the different combinations of net 13 and gross billing at the customer and LDC meters. 14 I understand, Dr. Poray, you have had a chance 15 to speak with one of my clients some time ago about 16 these matters. I'm acting for Transalta. 17 First, let's just start with the diagrams on 18 the left-hand side. 19 In the first LDC example we have here an LDC 20 with two customers, each 100 megawatts. There is no 21 embedded generation so the total load at the LDC meter 22 is 200 megawatts. 23 Would you agree? 24 MR. PORAY: Yes. 25 MR. CURTIS: Yes. 26 MR. BUDD: Thank you. 27 In the second LDC, below that, a neighbouring 28 LDC with two identical customers, these each have Les Services StenoTran Services Inc. 613-521-0703 483 OHNC PANEL 1, cr-ex (Budd) 1 100 megawatts, but there is 50 megawatts of merchant 2 generation, which we shall assume to be efficient 3 generation, so a total load at the LDC meter would be 4 150 megawatts. 5 Do we agree? 6 MR. PORAY: Yes. 7 MR. BUDD: Thank you. 8 The third LDC example, this would be another 9 neighbouring LDC, the same situation as example number 10 two, except that customer number two, as you can see, 11 has 80 megawatts of generation behind the customer 12 meter. Again we shall assume that the generation is 13 efficient generation. So the total load at the LDC 14 meter would be 70 megawatts. 15 MR. CURTIS: Is the assumption G1 is a 16 merchant plant? 17 MR. BUDD: Yes. Thank you. 18 Now, are you okay with the diagrams? 19 MR. CURTIS: Yes. 20 MR. BUDD: Let's move on to the table on the 21 right-hand side here. 22 This is a table of charge determinants. There 23 are three columns, as you probably can see there at the 24 top. The first column is based on OHNC's proposal for 25 gross billing at both the customer and the LDC meter. 26 MR. CURTIS: By our proposal you are talking 27 about there is 50 per cent on the network side and then 28 full gross on the network -- Les Services StenoTran Services Inc. 613-521-0703 484 OHNC PANEL 1, cr-ex (Budd) 1 MR. BUDD: Yes. 2 MR. CURTIS: -- on the connection rather. 3 Yes, okay. 4 MR. BUDD: The second column is based on net 5 billing of both the customer and the LDC meter, and the 6 third column is Transalta's proposal for a net billing 7 at the customer meter and gross billing at the LDC 8 meter. 9 Are we on the same wavelength? I know we are 10 on the same planet. 11 Now, let's just look at the first LDC example, 12 if we can. Remember this one has just the two customers 13 but no generation. 14 There is no difference, would you agree, 15 between the three columns. Each customer is charged 16 100 megawatts. So the total customer load is 17 200 megawatts and the LDC is charged for that 18 200 megawatts? 19 MR. CURTIS: That's correct. 20 MR. BUDD: So the LDC, gentlemen, is charged 21 for an amount of transmission service that matches the 22 LDC's customer charge determinants? Do we agree? 23 MR. CURTIS: Yes. 24 MR. BUDD: Thank you. 25 Now, if we just go down to the second example, 26 each customer is still charged 100 megawatts and the 27 total customer load is still 200 megawatts. Right? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 485 OHNC PANEL 1, cr-ex (Budd) 1 MR. BUDD: But under the OHNC proposal the LDC 2 would only be charged for 175 megawatts of the 3 transmission service. Correct? That's 150 megawatts on 4 the LDC meter plus 50 per cent of the merchant 5 generation of 50 megawatts. 6 MR. CURTIS: I think one of the problems we 7 were having is that you have added the condition here 8 that this is a merchant generator. But it's efficient, 9 is it? 10 MR. BUDD: I'm sorry, yes. 11 MR. CURTIS: Is that the assumption? 12 MR. BUDD: Yes, that's right, it's efficient. 13 MR. CURTIS: Okay. 14 Then yes, it's 175. 15 MR. BUDD: Thank you. 16 Similarly, under the net net the LDC would 17 only be charged for 150 megawatts of transmission 18 service. Correct? 19 MR. PORAY: That's correct. 20 MR. CURTIS: That's right. 21 MR. BUDD: Under Transalta's proposal, the 22 entire net flow into the LDC system from the merchant 23 generator would be added back to the LDC meter so that 24 the LDC would be charged for 200 megawatts. Isn't that 25 right? 26 MR. CURTIS: Yes. 27 MR. BUDD: Thank you. 28 Now, the third example is slightly more Les Services StenoTran Services Inc. 613-521-0703 486 OHNC PANEL 1, cr-ex (Budd) 1 complicated. Let's just go slowly. 2 Customer one remains at 100 megawatts in all 3 three columns. So let's just look over C1, and you see 4 customer one is 100 megawatts in all three columns. 5 MR. CURTIS: Yes. 6 MR. PORAY: That's correct. 7 MR. BUDD: Under the OHNC proposal customer 8 number two, at C2, would be charged for 60 megawatts. 9 That is derived from 20 megawatts on the customer meter 10 plus 50 per cent of the on-site generation of 80. 11 MR. CURTIS: That's correct. 12 MR. BUDD: So that gives us that number. 13 The total customer charge determinate would 14 then be 160 megawatts. That is that third number there 15 beside C1, Question 2. 16 MR. CURTIS: Yes. 17 MR. BUDD: The LDC charge determinant would be 18 135 megawatts because of the 70 megawatts on the LDC 19 meter, plus 50 per cent of each generator. Correct? 20 MR. PORAY: That's correct. 21 MR. CURTIS: Yes. 22 MR. BUDD: Thank you, gentlemen, for your 23 patience. 24 Under the net net scenario, the next column 25 over, OHNC would just take readings on each meter so 26 that customer number two would be charged for the 20 and 27 the LDC would be charged for 70. Correct? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 487 OHNC PANEL 1, cr-ex (Budd) 1 MR. BUDD: Under the gross -- pardon me, the 2 net gross column, customer number two would be charged 3 for 20 megawatts and the LDC would be charged for 4 120 megawatts, that coming from 70 megs on the LDC meter 5 plus all net inflows. The only net inflow is 50 megs 6 from generator number one. All right? 7 MR. CURTIS: Yes. 8 MR. PORAY: Yes. 9 MR. BUDD: Thank you. 10 So do we have a reasonable understanding of 11 how this table works then, panel? 12 MR. CURTIS: A reasonable understanding, yes. 13 MR. BUDD: Okay. Thank you for your patience 14 so far. 15 Could I ask you, then, please to turn up one 16 more piece of paper, which is the first one that I 17 listed, E-1-66, please. Thank you. 18 MR. CURTIS: Yes. 19 --- Pause 20 MR. PORAY: We are there. 21 MR. CURTIS: Yes. I'm sorry. 22 MR. BUDD: That's okay. No, I was just 23 waiting for you to make sure you have read it and you 24 are comfortable. 25 MR. CURTIS: Yes. 26 MR. BUDD: Focusing just on line 17, here you 27 have indicated in this Board staff interrogatory 28 regarding an explanation on why LDCs should be gross Les Services StenoTran Services Inc. 613-521-0703 488 OHNC PANEL 1, cr-ex (Budd) 1 load billed, in your response you have indicated: 2 "This proposal would result in the end 3 use customers within different LDCs 4 paying transmission related charges at 5 rates that are not uniform." 6 Do you see that? 7 MR. CURTIS: Yes. 8 MR. BUDD: If we look back to the exhibit 9 submitted by Transalta today called G3.1 for a moment, 10 and we compare examples one and two -- I would note that 11 example three would give the same result -- under OHNC's 12 proposal the second LDC would only occur 175 megawatts 13 of transmission charges even though it has 200 megawatts 14 of customer load. Right? 15 MR. CURTIS: Yes, that's correct. 16 MR. BUDD: And, therefore, end use customers 17 in LDC 2 would pay less for transmission, would they 18 not, than identical customers in LDC 1? 19 MR. CURTIS: I guess making the assumption 20 that the transmission charges are passed through in the 21 same manner to the end customers. Subject to that, yes. 22 MR. BUDD: Gentlemen, would you agree with me 23 that this is an example of your statement on line 17 24 that end use customers within different LDCs would pay 25 different transmission related charges? 26 MR. CURTIS: Yes. 27 MR. BUDD: And just looking over, would you 28 also agree that the same concern exists with net net Les Services StenoTran Services Inc. 613-521-0703 489 OHNC PANEL 1, cr-ex (Budd) 1 billing shown in the second column, that's the 200 2 versus the 150. 3 MR. CURTIS: Yes. 4 MR. BUDD: Now, continuing on in E166, you go 5 on in line 20 of that response to propose to the OEB 6 that it give consideration to achieving a higher degree 7 of parity between end use customers within the LDCs. Do 8 you see that? 9 MR. CURTIS: Yes. 10 MR. BUDD: And you go on to note that one way 11 this could be achieved is to bill the LDCs on a gross 12 load basis. 13 MR. CURTIS: Yes. Correct. 14 MR. BUDD: So referring back to the exhibit, 15 would you agree with me, gentlemen, that in all cases 16 Transalta's net gross proposal does achieve postage 17 stamp transmission pricing at the end use customer? 18 MR. CURTIS: In terms of the examples that you 19 have brought forward, yes, it does. 20 MR. BUDD: And in fact, to your knowledge, 21 it's the only proposal in this proceeding which 22 accomplishes postage stamp transmission pricing at the 23 end use meter. 24 MR. CURTIS: To our knowledge, yes, it is. 25 You realize though that again in terms of developing our 26 proposal that was based on input from a number of 27 different stakeholders -- 28 MR. BUDD: I had the pleasure of being there. Les Services StenoTran Services Inc. 613-521-0703 490 OHNC PANEL 1, cr-ex (Budd) 1 MR. CURTIS: -- and that some of those 2 stakeholders felt that a grossed -- not allowing the 3 LDCs to enjoy the benefits of the full proposal that we 4 put forward would be in their minds discriminatory 5 against them. 6 MR. BUDD: Let's just keep going with the 7 questions. Thanks. If we could then turn to E1, 68, 8 next, please. I will give you another minute here. 9 -- Pause 10 MR. CURTIS: Yes. 11 MR. BUDD: Thanks. This is an interrogatory 12 from the Board staff again in respect of MNA activity 13 and the impact it may have on charge determinants. 14 MR. CURTIS: Yes. 15 MR. BUDD: Okay. Now, let's look back at 16 Exhibit G3.1. Let's assume, gentlemen, for a moment 17 that LDC 1 and LDC 2 were going to merge and that the 18 new merged LDC had uniform tariffs. Can you make that 19 assumption with me? 20 MR. CURTIS: All right. 21 MR. BUDD: Would you agree that under OHNC's 22 proposal, customers in LDC 1 would see a rate decrease, 23 customers in LDC 2 would see a rate increase in the 24 circumstance? In other words, this is down from 200 and 25 you would go up from 175. 26 MR. CURTIS: Yes. I guess I'm a little 27 concerned about whether this might be an 28 oversimplification. Our proposal is that these charges, Les Services StenoTran Services Inc. 613-521-0703 491 OHNC PANEL 1, cr-ex (Budd) 1 the charges that we are putting forward would be based 2 on the delivery point, so even though there was a merger 3 between these two utilities, if your example one was at 4 one delivery point and your example two was at another 5 delivery point, the merger would still mean that the new 6 merged utility then would be billed on two separate 7 delivery points. I'm not sure that they would see any 8 difference as a result of that. 9 Your assumption has to be -- I think that it 10 has to be as part of the merger that the delivery point 11 also somehow gets merged. 12 MR. BUDD: Right. 13 MR. CURTIS: That's an unlikely event, I 14 think, in terms of a utility merger. 15 MR. BUDD: Let's just go with the hypothetical 16 example that's here. We are going to see utilities in a 17 province merge. That's one of the fundamental thrusts 18 that's being undertaken. Some will have higher rates, 19 some will have lower rates. When they merge, there will 20 be another rate. 21 MR. BUDD: There will be another rate. Yes. 22 MR. CURTIS: Right. 23 MR. BROWN: Let's just keep it basic for a guy 24 like me. Now, let's just say similarly, if OHNC 25 distribution were to purchase LDC 2, the customers in 26 LDC 2 would see a rate increase since they would no 27 longer receive the benefit of their LDC paying for only 28 175 megawatts of transmission, despite having the 200 Les Services StenoTran Services Inc. 613-521-0703 492 OHNC PANEL 1, cr-ex (Budd) 1 megawatts of customer load. 2 Would you agree with me, gentlemen, that the 3 MNA activity would also impact customer rates under the 4 net net regime? That's the 200 again and the 150, 5 hypothetically. 6 MR. CURTIS: Hypothetically, but again what 7 I'm struggling with is this issue around individual 8 delivery points. That's where the bills are 9 established. 10 MR. BUDD: Hypothetically. That's all I'm 11 doing here is hypothetical exploration. 12 MR. CURTIS: All right. 13 MR. BUDD: And would you agree that under 14 Transalta's net gross proposal, customers would be 15 indifferent from at least a transmission pricing 16 perspective to changes in ownership? 17 MR. CURTIS: Hypothetically, yes. 18 MR. BUDD: That's what we are doing, 19 gentlemen. We are going through a hypothetical 20 numerical exercise of how this might work. That's 21 because if we look over at the right hand columns, we 22 have 200 and 200 and they are the same. 23 MR. CURTIS: That's right. 24 MR. BUDD: Right. Let's turn up, please, 25 D.5-2, please. 26 MR. CURTIS: Page? 27 MR. BUDD: Page 4 of 7. Hopefully on most 28 people's you will have page 3 of 7 on either side of the Les Services StenoTran Services Inc. 613-521-0703 493 OHNC PANEL 1, cr-ex (Budd) 1 same page. It has been copied similarly. 2 MR. CURTIS: All right. 3 MR. BUDD: Now, this is, for the record, table 4 3, medium scenario assumptions for siting of new 5 embedded generation. 6 MR. CURTIS: Yes. 7 MR. BUDD: You are familiar with that chart. 8 MR. CURTIS: Yes. 9 MR. BUDD: Would you agree, gentlemen, that 10 under Transalta's net gross proposal, the column 10 LDCs 11 embedding in table 3, which totals 1,160 megawatts, 12 would not have any effect on the so-called cost shifting 13 concern since all such generation would be added back to 14 the reading of the LDC meter. 15 MR. CURTIS: Under Transalta's proposal, yes. 16 MR. BUDD: Thank you. Then in fact the 17 embedded generation would be reduced under OHNC's medium 18 scenario to -- 19 MR. PORAY: Could you just hang on for a 20 second, please. Okay, I'm sorry. Yes. 21 MR. BUDD: Thank you, Dr. Poray. So then the 22 embedded generation effectively would be reduced under 23 OHNC's medium scenario. Here's the math. Two thousand, 24 five hundred and fifty megawatts, the right hand column, 25 minus the 1,160 in the ten LDCs embedding column, to 26 give us a number of 1,390 under Transalta's proposal. 27 MR. CURTIS: I guess the problem we are having 28 is I don't know whether math is going to be quite that Les Services StenoTran Services Inc. 613-521-0703 494 OHNC PANEL 1, cr-ex (Budd) 1 simple, Mr. Budd. You are painting a different scenario 2 in terms of how the net versus gross load issue is 3 resolved and potentially some of those megawatts that we 4 are talking about being in the ten LDCs embedding would 5 move to, say, other directs or to serve other customers. 6 It wouldn't necessarily mean that all of that 1,160 7 disappears in terms of the -- I think what you are 8 leading to is in terms of the cost, mitigating the cost 9 shifting. 10 MR. BUDD: Mr. Curtis, I don't want to be 11 impolite, but I will get where I am going on that. I 12 just really need your help in understanding that the 13 math is right now and then I was going to ask you to 14 help if there were any other factors. Is the math 15 generally right, directionally correct? 16 MR. CURTIS: Can we say directionally correct. 17 MR. BUDD: Thank you. 18 And if we were to look at D, tab 5, Schedule 19 2, page 3 of 7, this Table 2 forecast of new embedded 20 generation by 2008, would you agree and we recognize 21 this may be just coincidence that under Transalta's net 22 gross proposal the total embedded generation which we 23 agreed was at least directionally $13.90 is close in 24 total to the low case shown on Table 2? We are not 25 dealing in absolute numbers, but they are sure close. 26 MR. CURTIS: They are close. 27 MR. BUDD: Now, could I ask you gentlemen to 28 turn with me please to the final exhibit that I wanted Les Services StenoTran Services Inc. 613-521-0703 495 OHNC PANEL 1, cr-ex (Budd) 1 to refer to, E-20, Schedule 5, and if you could find in 2 there please the Attachment 6(l). 3 Mr. Chairman, pardon me, Table 6(l) is 4 entitled "Forecast of Change in Aggregate Transmission 5 Rates from 2000 to 2008 [Aggregate Network Plus 6 Connection Rate in Dollars/Kilowatt Month] [Based on Low 7 Scenario of New Embedded Generation]". 8 Now, we just agreed -- pardon me, this is the 9 low scenario of embedded generation. Is that right? 10 MR. CURTIS: That is correct. 11 MR. BUDD: Which we just agreed was close to 12 OHNC's medium forecast. Correct? But assuming 13 Transalta's net gross proposal. 14 MR. CURTIS: Okay. If you add that in, yes. 15 MR. BUDD: Is it correct, gentlemen, that 16 under all the options in this table the aggregate 17 transmission rates fall in nominal dollars between 2000 18 and 2008? 19 MR. CURTIS: That's correct. 20 MR. BUDD: And would you agree that under 21 Transalta's net gross proposal, since first rates are 22 postage stamp at the end use customer and, secondly, 23 that in all options aggregate transmission rates are 24 falling in nominal terms that there should be, would be 25 in fact, no rate shock on customers. Correct? 26 MR. CURTIS: I think in terms of rate shock 27 remember this is an aggregate average across all 28 customers. Les Services StenoTran Services Inc. 613-521-0703 496 OHNC PANEL 1, cr-ex (Budd) 1 MR. BUDD: Gentlemen, you have defined I think 2 or mentioned, don't ask me for the reference please, but 3 rate shock is something like, in your view, 5 per cent 4 or more in OHNC's view? 5 MR. CURTIS: Yes. 6 MR. BUDD: I thank you for your answers. 7 Thank you, Mr. Chairman. Those are all my 8 questions. 9 THE PRESIDING MEMBER: Thank you, Mr. Budd. 10 Mr. Vogel, would you like to go next? 11 MR. VOGEL: Thank you, Mr. Chair. 12 Good morning, panel. 13 MR. CURTIS: Good morning. 14 MR. PORAY: Good morning. 15 FURTHER CROSS-EXAMINATION 16 MR. VOGEL: Mr. Curtis, I would also like to 17 deal with some of the application of the principles as 18 they apply to this net versus gross load billing issue. 19 Earlier in the week we referred to the 1997 White Paper 20 as establishing many of the principles underlying the 21 restructuring of the electricity industry in Ontario. I 22 would like to take you back to that White Paper again. 23 It's Exhibit E, tab 1, Schedule 9. 24 MR. CURTIS: Yes. We have it. 25 MR. VOGEL: If you refer to, firstly, page 10 26 of the White Paper -- 27 MR. CURTIS: Yes. 28 MR. VOGEL: -- it deals with the significant Les Services StenoTran Services Inc. 613-521-0703 497 OHNC PANEL 1, cr-ex (Vogel) 1 impetus for restructuring and on page 10 in the last 2 full paragraph on that page, the first sentence 3 indicates that the electricity cost advantages which 4 have made Ontario an attractive place to live and invest 5 were being and have been significantly eroded. Do you 6 agree with that? 7 MR. CURTIS: Yes. 8 MR. VOGEL: And at page 11 of the White Paper 9 in an effort to address this situation the indication is 10 that the objective was that the price for transmission 11 was to be regulated so that the total price for all 12 electricity would remain as low as possible. That's in 13 the third paragraph on that page. Do you see that? 14 MR. PORAY: Yes, we do. 15 MR. VOGEL: And you agree with that as an 16 objective? 17 MR. CURTIS: Yes. 18 MR. VOGEL: The White Paper states that one of 19 the key reform objectives is to ensure that all 20 Ontarians enjoy the benefits of competition as soon as 21 possible. That's in the second paragraph there. Do you 22 agree with that objective? 23 MR. CURTIS: Yes. 24 MR. VOGEL: And to that end then, if you turn 25 over to page 19, with respect to generation in the fifth 26 paragraph on that page: 27 "The Board was given the responsibility 28 for promoting the development of Les Services StenoTran Services Inc. 613-521-0703 498 OHNC PANEL 1, cr-ex (Vogel) 1 competition in generation." (As read) 2 Is that your understanding? 3 MR. PORAY: Which paragraph are you referring 4 to? 5 MR. VOGEL: This is right in the middle of the 6 page. 7 MR. PORAY: The one that starts with: 8 "The Board would oversee the activities 9 of the independent...." 10 MR. VOGEL: Yes, and is responsible for: 11 "...promoting the development of 12 competition in generation." (As read) 13 MR. PORAY: Okay. Yes. 14 MR. VOGEL: And the concern that is being 15 addressed there and the reason for that responsibility 16 given in the Board is dealt with in the second-last 17 paragraph. It relates at least in part to Ontario 18 Hydro's domination of generation in the province and the 19 concern that that would preclude development of a 20 genuinely competitive market. Does that reflect your 21 understanding? 22 MR. CURTIS: Yes, it does. 23 MR. VOGEL: And it was in light of that 24 concern and on page 20 that direction was provided 25 through the White Paper that it was the government's 26 view that access for generators should be facilitated. 27 That's in the first paragraph on page 20? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 499 OHNC PANEL 1, cr-ex (Vogel) 1 MR. VOGEL: All of that and those objectives 2 as stated in the White Paper then provide the context in 3 which OHNC has brought this application. Is that 4 correct? 5 MR. CURTIS: It's part of the contextual 6 fabric, yes. 7 MR. VOGEL: Dealing specifically with this net 8 versus gross load billing issue, as I understand it that 9 original suggestion in that regard originated with the 10 Market Design Committee Report. Is that correct? 11 MR. CURTIS: In our December application, yes, 12 it did. 13 MR. VOGEL: And I have provided through your 14 counsel to you excerpts from the Market Design Committee 15 Report and provided those to the Board. Perhaps that 16 could be marked as an exhibit. 17 MR. THIESSEN: That will be Exhibit G3.2. 18 EXHIBIT NO. G3.2: Excerpts from the 19 Market Design Committee Report 20 MR. ROGERS: Are there more copies available, 21 Mr. Vogel? I gave my only copy to the panel. 22 MR. VOGEL: I think there were copies on the 23 side. 24 THE PRESIDING MEMBER: This is G3.2. Thank 25 you. 26 MR. CAMPBELL: Mr. Chairman, again, if parties 27 could please let more than just Mr. Rogers know, we do 28 try and do a little homework for this and if things come Les Services StenoTran Services Inc. 613-521-0703 500 OHNC PANEL 1, cr-ex (Vogel) 1 in during the day one of these times it is going to 2 cause problems. 3 THE PRESIDING MEMBER: We reiterate that the 4 obligation is not only to make the applicant aware of 5 what you are bringing forward, but also the Board and 6 the other intervenors as well, that's the obligation. 7 So we will remind everybody here and we will carry on 8 for now. 9 MR. VOGEL: Mr. Chair, I had distributed a 10 number of copies, but I guess I didn't get everybody. I 11 did think that most people would be familiar with and 12 have access to this particular document. 13 If I could just refer you to page 4.5 of 14 Chapter 4 of that report. 15 MR. CURTIS: Are you talking section 4.5, did 16 you say? 17 MR. VOGEL: Correct, section 4.5. 18 MR. CURTIS: Yes. 19 MR. VOGEL: Well, no. Actually, it is 20 page 4.5. 21 MR. PORAY: Our pages are numbered page -- it 22 is not 4.5, it is page 23 or page 9 or page 5. It's 23 not -- no, there isn't a 4.5 in our -- 24 MR. VOGEL: Let me see if I can get this. If 25 you could turn to section 4.3.1. 26 --- Pause 27 MR. PORAY: This is on page 24. 28 MR. VOGEL: This is under section 4.3, Les Services StenoTran Services Inc. 613-521-0703 501 OHNC PANEL 1, cr-ex (Vogel) 1 "Requirements for Connection to the IMO-Controlled 2 Grid". 3 Sorry? 4 THE PRESIDING MEMBER: No, we don't have that 5 copy I'm afraid. 6 MR. PORAY: The title of that section is 7 "Treatment of Lines Built to Incorporate Generation". 8 MR. ROGERS: Mr. Chairman, people are asking 9 me which report this and it might be useful for 10 everybody if we could just clarify which report of the 11 committee is this one. 12 MR. PORAY: I think this is supposed to be 13 Chapter 4.0, "Transmission and Distribution" of the 14 final report of the Market Design Committee, some 15 specific pages that have been copied from that report. 16 MR. ROGERS: It is the final report, though. 17 MR. PORAY: It is the final report. 18 MR. VOGEL: And what I had copied was 19 Chapter 4.0, "Transmission and Distribution". My 20 intention was to refer you to what I have as section 4.3 21 of that report, "Requirements for Connection to the 22 IMO-Controlled Grid". 23 MR. PORAY: I think what actually happened, if 24 I may interject here -- 25 MR. VOGEL: Yes. 26 MR. PORAY: -- is that what we have are the 27 appendices to that chapter. 28 THE PRESIDING MEMBER: I think you are right. Les Services StenoTran Services Inc. 613-521-0703 502 OHNC PANEL 1, cr-ex (Vogel) 1 MR. VOGEL: Oh, I see. 2 MR. PORAY: We don't have Chapters 4.0 and 3 5.0. We have the appendices to Chapter 4.0. 4 MR. VOGEL: All right. I will deal with the 5 appendices in a moment. 6 Am I correct, then, from your knowledge of 7 this report, gentlemen, am I correct in stating that the 8 suggestion with respect to gross load billing was 9 developed in the context of a recommendation that there 10 be an internally consistent set of connection rules that 11 would apply to all market participants including 12 generators? 13 MR. PORAY: I would have to have a look at 14 that report. I can't recall the linkage that you are 15 trying to establish. 16 MR. VOGEL: All right. 17 That wording that I just gave you -- and I 18 apologize for the confusion here -- the wording that I 19 just gave you is in fact contained at section 4.3.1. So 20 you might want to review that at your convenience. 21 Am I correct in saying that at least at this 22 time there had been no analysis done of the impacts of 23 gross load billing on new generation, at the time that 24 this proposal first came forward in the MDC report? 25 Maybe I can just read into the record from 26 that section. It says: 27 "For new connections we expect that the 28 IMO will perform system impact studies of Les Services StenoTran Services Inc. 613-521-0703 503 OHNC PANEL 1, cr-ex (Vogel) 1 proposed new connections for purposes of 2 determining network impacts." (As read) 3 I take it from that that there had been no 4 such study done up to that point in time. Is that 5 correct? 6 MR. PORAY: As far as I'm aware. 7 MR. VOGEL: If you can turn, then, to the 8 appendix -- 9 MR. PORAY: Perhaps I should clarify this. 10 What we are talking about are the future 11 market rules that were being developed at the time for 12 the IMO and the IMO will, in fact, perform the impact 13 assessment studies for any new customers connecting to 14 the IMO-controlled grid. 15 MR. VOGEL: Fair enough. 16 But at the time that this gross load billing 17 suggestion first came forward then, no such impact study 18 had been done? 19 MR. PORAY: I answered that as far as I was 20 aware there wasn't. 21 MR. VOGEL: Okay. 22 Looking at the appendix, then, which is the 23 attachment that I have distributed to you, at page 19 -- 24 --- Pause 25 MR. PORAY: Yes, we are there. 26 MR. VOGEL: -- that even in the advancing of 27 the suggestion that gross load billing be considered, 28 what I read at page 19 in paragraph 3 on that page was Les Services StenoTran Services Inc. 613-521-0703 504 OHNC PANEL 1, cr-ex (Vogel) 1 that there was a recognition by the MDC that there was 2 at least a potential for inefficient decision-making 3 with respect to embedded generation resulting from the 4 decision to apply gross load billing. 5 That was something that even the MDC 6 recognized at that time in making that recommendation. 7 Is that correct? 8 MR. PORAY: My recollection is that is 9 correct. 10 MR. VOGEL: For at least that reason, it was 11 part of the MDC's recommendation at that time that the 12 OEB be given some latitude in how it applied gross load 13 billing if gross load billing went forward. Is that 14 correct? 15 MR. PORAY: That is what is stated in 16 paragraph 3 on page 19. 17 MR. VOGEL: All right. Turn over to page 36 18 of that attachment. 19 At least in the case of power generated 20 outside Ontario, as I understand it, for export -- 21 MR. ROGERS: Excuse me, Mr. Vogel, I'm sorry 22 to interrupt you. I don't have 36 in my copy. Do the 23 witnesses? 24 MR. PORAY: I think what happened, if you look 25 at your copy, the pages have been mixed up. 26 THE PRESIDING MEMBER: We are just turning it 27 up. Yes. 28 MR. ROGERS: That makes it interesting. Les Services StenoTran Services Inc. 613-521-0703 505 OHNC PANEL 1, cr-ex (Vogel) 1 THE PRESIDING MEMBER: Pages 21 and so on have 2 been interspersed, so we need to go back past those to 3 get to 36. 4 MR. ROGERS: I'm used to going forward, but I 5 will try and find it. 6 I apologize. 7 THE PRESIDING MEMBER: That is all right. 8 MR. VOGEL: I apologize for that confusion, 9 Mr. Chair. 10 THE PRESIDING MEMBER: We were just looking 11 for it ourselves. 12 MR. THIESSEN: Page 36 follows page 25. 13 MR. ROGERS: Oh, of course. Thanks. 14 --- Laughter 15 MR. VOGEL: At least with respect to power 16 generated outside Ontario now for export, there appears 17 to be a recognition in 5.3.5, the first paragraph there 18 that economic theory on efficient transmission pricing 19 requires that externally generated electricity should 20 only be subject to charges for congestion and losses but 21 not for the sunk costs of the existing generation. Is 22 that correct? 23 MR. PORAY: This is in the context of the 24 debate of the charges for the export and wheeling 25 through transactions. 26 MR. VOGEL: Yes, that's correct. It's in that 27 context, but I'm simply asking you if in the context of 28 the MDC report and the suggestion made there with Les Services StenoTran Services Inc. 613-521-0703 506 OHNC PANEL 1, cr-ex (Vogel) 1 respect to gross load billing there was also recognition 2 under 5.3.5 that in terms of efficient transmission 3 pricing, at least for generators outside the province, 4 they shouldn't be saddled with the sunk costs of the 5 transmission system. Is that correct? 6 MR. PORAY: I think I have to put this in the 7 context that there was no linkage to the debate about 8 gross and net billing. 9 What we are debating in here are what should 10 be the charges for the use of the transmission for an 11 exporter or a wheeler through. 12 MR. VOGEL: I understand that. In that 13 context, at least, the view of the MDC committee was 14 that economic theory on efficient pricing required that 15 externally-generated electricity not be subject to those 16 sunk costs. Is that correct? 17 MR. PORAY: Not only external but also 18 exporters from the province. 19 MR. VOGEL: All right. 20 And the reason for that, it appears from that 21 same reference, is that that was necessary in order that 22 there be competitive alternatives developed to OPGI and 23 to encourage a reduction in OPGI's market power. That 24 is the reason for the application of that theory. Is 25 that correct? 26 MR. PORAY: I'm not sure whether that is the 27 only reason. I think the main reason for using what is 28 termed marginal pricing of the use of the transmission Les Services StenoTran Services Inc. 613-521-0703 507 OHNC PANEL 1, cr-ex (Vogel) 1 system is that is the most efficient way of conducting 2 transactions on the transmission system and the MDC felt 3 that in terms of moving forward in trying to avoid 4 pancaking of rates, which is what is being done in other 5 jurisdictions today, that the more appropriate manner in 6 terms of the way transactions should take place on the 7 transmission system is to use marginal pricing. 8 MR. VOGEL: All right. But at least in that 9 context in the application of appropriate economic 10 theory, the last sentence of that paragraph that I have 11 just referred you to appears to express the view of the 12 MDC that avoidance of these sunk costs on that 13 transmission would encourage the development of 14 competitive alternatives to OPGI and reduce OPGI's 15 market power? 16 MR. PORAY: That is what it says, yes. 17 MR. VOGEL: I refer you in the prefiled 18 evidence, then, to Exhibit D, Tab 5, Schedule 1. 19 MR. PORAY: That is D-5-1? 20 MR. VOGEL: Yes. 21 MR. CURTIS: Do you have a page? 22 MR. PORAY: Do you have a page number? 23 MR. VOGEL: Yes, page 34. 24 --- Pause 25 MR. PORAY: All right. 26 MR. VOGEL: Is it fair to say that the same 27 concern about the shifting of costs to new generation 28 which has been produced without reports to the system, Les Services StenoTran Services Inc. 613-521-0703 508 OHNC PANEL 1, cr-ex (Vogel) 1 the same concern about discouraging competition and 2 impeding the realization of energy prices. That was 3 also a concern expressed to you by stakeholders during 4 the consultation process. Is that correct? 5 MR. CURTIS: Yes, it was. 6 MR. VOGEL: Can we agree that gross load 7 billing does really nothing to address concerns 8 expressed in the white paper and expressed by these 9 stakeholders with respect to promoting competition from 10 new generation or facilitating access by generators to 11 the system? It doesn't certainly do anything to incent 12 that type of behaviour? 13 MR. PORAY: Well, I think as we mentioned 14 earlier on, transmission considerations are just one 15 part of the equation, that there will be other signals 16 and incentives which will be provided through the 17 marketplace to generate us to enter into the 18 marketplace. 19 MR. VOGEL: Okay. That's fair enough. 20 But dealing simply with the net versus gross 21 load, you would agree with me that there is nothing in 22 this gross load proposal which would provide the 23 incentive for the development of that kind of 24 competition or facilitating access by generators. 25 MR. CURTIS: You are talking about a pure 26 gross load, pure -- 27 MR. VOGEL: I'm talking about OHNC's 28 proposal, yes. Les Services StenoTran Services Inc. 613-521-0703 509 OHNC PANEL 1, cr-ex (Vogel) 1 MR. PORAY: I think our understanding was that 2 transmission rates for the recovery of embedded costs do 3 not send signals for new investments for generators. 4 MR. VOGEL: So you are agreement that it 5 wouldn't provide any incentive? 6 MR. PORAY: But transmission rates for the 7 recovery of embedded costs, whether it's net or gross, 8 doesn't -- don't send signals for new investment. 9 The transmission costs are dealing with the 10 recovery of the embed -- or the transmission rates are 11 dealing with the recovery of embedded costs. They don't 12 deal with the usage or the traffic on the transmission 13 system. 14 MR. VOGEL: Can we agree that to the extent 15 that the costs imposed on new generation are reduced 16 through net billing or otherwise, that that would 17 provide some incentive to the development of new 18 generation and the development of competition for OPGI. 19 MR. PORAY: Well, the first issue that we have 20 to address here is that net versus gross load billing is 21 really dealing with the bypass of transmission charges 22 on the network and generators are not going to be paying 23 network charges. 24 MR. VOGEL: Yes. But to the extent that these 25 costs are imposed, the sunk costs are imposed on new 26 generation, if that were not the case and therefore the 27 costs imposed on new generation were less, can we agree 28 that that reduction in costs would provide incentive for Les Services StenoTran Services Inc. 613-521-0703 510 OHNC PANEL 1, cr-ex (Vogel) 1 the development of new generation. 2 MR. PORAY: There is no imposition of cost on 3 the generator other than the direct cost of connecting 4 to the transmission system. 5 MR. VOGEL: No, it's the cost on the 6 generation. I'm saying if the power which was produced, 7 the electricity that was produced and the new generation 8 was subject to the reduced, was not subject to the sunk 9 costs and therefore the cost was reduced, can we agree 10 that that is incentive to the development of competition 11 for OPGI? 12 MR. PORAY: The output of the generators, the 13 actual megawatts and the energy is not subject to 14 transmission charges. 15 The load customers in Ontario pay for 16 transmission network charges -- 17 MR. VOGEL: Yes. 18 MR. PORAY: -- the generators don't. 19 MR. VOGEL: Right. To the extent that we 20 could reduce the cost to those load customers by 21 eliminating the sunk costs from the new generation which 22 is produced, would you agree with me that that would 23 amount -- that that relative to gross billing may 24 provide an incentive for the development of new 25 generation and competition to OPGI and facilitate access 26 for new generators to assist it. 27 MR. PORAY: I fail to understand when you make 28 reference to the sunk costs that are attributed to Les Services StenoTran Services Inc. 613-521-0703 511 OHNC PANEL 1, cr-ex (Vogel) 1 generators. 2 MR. VOGEL: I think the question that I put to 3 you, Mr. Poray, was that if the power produced through 4 the new generation was not subject -- was not subject to 5 the sunk costs by the load customer, so, in other words, 6 the load customer did not have to pay the sunk costs of 7 this generation, this new generation, can we simply 8 agree -- can we simply agree that by reducing the cost, 9 therefore, of that new generation to the load customer, 10 that would provide incentive to the development of new 11 generation? 12 MR. PORAY: I think what you are saying, if I 13 may paraphrase that, is you are saying that the load 14 customer should be given a break on the network charges, 15 or paying his full portion of the network charges by 16 putting in generation. 17 Now -- let me just finish -- the issue that 18 the MDC was trying to deal with in terms of the gross 19 load billing was precisely for the reasons that that may 20 send, in fact the wrong signals to the marketplace, that 21 you may get less efficient generation coming on based on 22 the fact that they are getting a break on the 23 transmission charges. 24 In other words, new generation should really 25 be an incentive not by transmission but by other 26 factors. 27 MR. VOGEL: But the concern, then, that the 28 MDC had was that -- if I understand what you just told Les Services StenoTran Services Inc. 613-521-0703 512 OHNC PANEL 1, cr-ex (Vogel) 1 me, was that by permitting net load billing on new 2 generation, that that in fact would encourage the 3 development of new generation? 4 MR. PORAY: No, I don't think that's what the 5 MDC said at all. I think -- 6 MR. VOGEL: No, that is the concern you have 7 just indicated the MDC was trying to address. Isn't 8 that what you just told me? 9 MR. PORAY: What the MDC was trying to address 10 was the uneconomic bypass of the transmission through 11 the installation. 12 MR. VOGEL: Yes. All right. And is that in 13 part through the imposition of gross load billing. 14 MR. PORAY: And that should be done through 15 the use of gross load billing. 16 MR. VOGEL: All right. My suggestion to you 17 is that if we went to net load billing and that the cost 18 to the load customer was reduced to reflect that, I put 19 it to you that that would be an incentive to encourage 20 the development of new generation in the province. Is 21 that not correct? 22 MR. PORAY: It may be one of the factors, but 23 not the only factor. 24 MR. VOGEL: All right. 25 --- Pause 26 MR. VOGEL: If I can take you to one of your 27 interrogatory responses to a Board Interrogatory, this 28 is a Response to OEB Interrogatory No. 59 at Exhibit E, Les Services StenoTran Services Inc. 613-521-0703 513 OHNC PANEL 1, cr-ex (Vogel) 1 Tab 1, Schedule 59. 2 MR. PORAY: Okay. 3 MR. CURTIS: Yes. 4 MR. VOGEL: When I read that response, it 5 appeared that the OHNC's proposal with respect to gross 6 load billing would extend indefinitely. I'm just trying 7 to clarify in my own mind the relationship between this 8 interrogatory response and some of the evidence which 9 you gave yesterday in response to Mr. Brown's questions 10 and some of what I heard this morning. 11 Mr. Curtis, you made reference yesterday to 12 the coming of a new contract regime or contract basis as 13 being where you expect all this to evolve. Is that 14 correct? 15 MR. CURTIS: Yes, that is correct. 16 MR. VOGEL: In that sense and from the answers 17 that you gave yesterday, do I understand that this 18 proposal about gross load billing is in OHNC's 19 intentions a relatively short term prospect? 20 MR. CURTIS: I don't know whether we would 21 want to actually -- I think we have characterized it as 22 short term without being specific about how short the 23 term is. 24 MR. VOGEL: So it's indefinite but short, 25 whatever short means. 26 MR. CURTIS: Whatever short means. 27 MR. VOGEL: Is that right? 28 MR. CURTIS: I'm not trying to be glib about Les Services StenoTran Services Inc. 613-521-0703 514 OHNC PANEL 1, cr-ex (Vogel) 1 this, but we realize it's going to be a decision made by 2 the Ontario Energy Board in terms of this transition to 3 the contracting phase. 4 MR. VOGEL: All right. Well, maybe I will 5 come back to that. In the meantime, for the indefinite 6 future, and until the dawning of this contract regime, 7 OHNC's proposal -- dealing with the threshold issue -- 8 OHNC's proposal is that the threshold for embedded 9 generation for the purpose of gross load billing would 10 be one megawatt. 11 MR. CURTIS: One megawatt, yes. 12 MR. VOGEL: Is that correct? 13 MR. CURTIS: Yes. 14 MR. VOGEL: Therefore, generation in excess, 15 new generation in excess of one megawatt is going to be 16 subject to gross load billing. 17 MR. CURTIS: Well, subject to our proposal. 18 It's gross load on the network charge. 19 MR. VOGEL: Yes. 20 MR. CURTIS: And a 50 per cent access fee 21 tacked on to net billing on the network charge. 22 MR. VOGEL: All right. 23 MR. PORAY: I would characterize perhaps our 24 proposal as partial net load billing. 25 MR. BUDD: In the short term, until we get a 26 contract. 27 MR. PORAY: In the short term. 28 MR. VOGEL: First, at least you got net load Les Services StenoTran Services Inc. 613-521-0703 515 OHNC PANEL 1, cr-ex (Vogel) 1 billing in there. Now the question is how far it goes, 2 I guess. If I can take you to the evidence of the 3 Chiefs of Ontario, and this is at Exhibit H, Tab 30. 4 It's in the evidence of Chief Bressette. I have it at 5 Tab E, but it would be the last attachment to that 6 evidence. 7 THE PRESIDING MEMBER: The last attachment 8 appears to be the evidence of Franco Crupi. 9 MR. VOGEL: No. I'm sorry, the last 10 attachment to the evidence of Chief Bressette. 11 THE PRESIDING MEMBER: We haven't found the 12 evidence of the Chief. 13 MR. VOGEL: He called it remote small hydro 14 reconnaissance methodology, results for Northern 15 Ontario. 16 MR. ROGERS: I think we have got it here. 17 Just give them a moment. 18 THE PRESIDING MEMBER: We will try and get 19 everybody oriented to the tab. Appendix number -- 20 MR. VOGEL: I think it's in the Chief's 21 evidence under Tab 3. 22 THE PRESIDING MEMBER: Tab 3. All right. 23 MR. VOGEL: And then under Tab 3, Tab E. 24 THE PRESIDING MEMBER: Tab E. Thank you. We 25 have it. Ottawa Engineering Report. 26 MR. VOGEL: That's correct. If I can just 27 take you to the last page of that document, the schedule 28 entitled "Second screening criteria". Les Services StenoTran Services Inc. 613-521-0703 516 OHNC PANEL 1, cr-ex (Vogel) 1 THE PRESIDING MEMBER: Okay. We are there. 2 MR. VOGEL: Gentlemen, this is an analysis of 3 potential First Nation generating sites. If you will 4 look in the column right in the middle of the page, 5 under the site section kilowatts column, you will see 6 that most of these potential sites -- 7 THE PRESIDING MEMBER: Oh, it's under sites, 8 is it? 9 MR. VOGEL: Under sites, yes, and it's the 10 column on the page PW. 11 MR. PORAY: Yes. 12 MR. VOGEL: What that study seems to indicate 13 is that most of these potential First Nation sites would 14 generate more than the one megawatt threshold. To the 15 extent that they were serving existing load debt, that 16 would as I understand it make them subject to the gross 17 load billing proposal of OHNC. Is that right? 18 MR. CURTIS: Yes, it would. Yes. 19 MR. VOGEL: At your interrogatory response, 20 this is your interrogatory response to the Chiefs of 21 Ontario, Interrogatory No. 28, at Exhibit E, Tab 30, 22 Schedule 28, page 1. 23 MR. PORAY: Can you just repeat that, please. 24 MR. VOGEL: Yes. Exhibit E, Tab 30, Schedule 25 28, page 1. 26 MR. PORAY: Okay. We're there. 27 MR. CURTIS: Yes. 28 MR. VOGEL: You are asked certain questions Les Services StenoTran Services Inc. 613-521-0703 517 OHNC PANEL 1, cr-ex (Vogel) 1 about the threshold limit and you have indicated that 2 you haven't carried out assessments of either the 3 proposed threshold limit or the other ones that you were 4 asked to consider. 5 In that sense, is it fair to conclude that the 6 threshold limit that you set at one megawatt for 7 administrative reasons, or whatever reasons, is somewhat 8 arbitrary in the sense that you haven't done an 9 assessment of the impacts of it? 10 MR. CURTIS: Well, I wouldn't agree to the 11 word "arbitrary", but yes, we have not done the 12 assessments that you are talking about. 13 MR. VOGEL: Okay. And you haven't done any 14 assessments on any other threshold level. 15 MR. CURTIS: No. 16 MR. VOGEL: If, for example, looking at this 17 second screening criteria chart, if, for example, you 18 were to set the threshold at ten megawatts, it appears 19 that that would then allow most of these proposed 20 projects to proceed on a net billing basis. Am I 21 correct in that? 22 MR. CURTIS: I think you might be correct in 23 terms of the number, but maybe in terms of the total 24 megawatts that would be installed, it's maybe less than 25 most. Certainly more projects would, yes. 26 MR. VOGEL: All right. So in terms of making 27 that new generation available and making that 28 opportunity available to the First Nations to develop Les Services StenoTran Services Inc. 613-521-0703 518 OHNC PANEL 1, cr-ex (Vogel) 1 more of these sites, and in terms of the policy that we 2 looked at the other day which recognizes the distinct 3 status of First Nations and that they are more than just 4 an interest group, might it be appropriate then to treat 5 First Nation generation on a net billing basis to permit 6 those goals to be accomplished? 7 MR. CURTIS: I think to reiterate the 8 statement that I made the other day, we are very 9 respectful of First Nations in terms of their desire to 10 be treated as First Nations and we are certainly willing 11 to negotiate with them on that basis, but that doesn't 12 necessarily translate into a special economic 13 transmission rate for First Nations. 14 We again stated that this would all have to be 15 reviewed by the Board and require OEB approval in order 16 to be put in place. 17 MR. VOGEL: Yes, and that's fair enough. It 18 would all be subject to Board approval and I think we 19 agreed on that the other day. 20 I guess, particularly in the context of this 21 new era, this new contract regime era that OHNC has 22 proposed, might it be appropriate then for the Board in 23 the context of First Nations to direct OHNC to develop 24 the former protocol agreements proposed by the First 25 Nations to provide that framework for contractual 26 negotiations, which would include possibly a higher 27 threshold limit to allow these things to proceed? 28 MR. CURTIS: That's certainly the argument Les Services StenoTran Services Inc. 613-521-0703 519 OHNC PANEL 1, cr-ex (Vogel) 1 that is being put forward, yes. 2 MR. VOGEL: And OHNC would agree then that it 3 might be appropriate for the Board to provide that 4 direction with respect to the development of that form 5 of contractual framework, so that those contractual 6 negotiations could proceed? 7 MR. CURTIS: I think OHNC is advancing the 8 idea that that contractual framework should be put in 9 place. I don't know whether OHNC is necessarily 10 supportive of that translating into a special rate or a 11 special arrangement as far as First Nations are 12 concerned. 13 MR. VOGEL: But at least with respect to the 14 Board direction concerning the parameters within which 15 those negotiations could take place OHNC would be 16 supportive of that? 17 MR. CURTIS: If the Board approved a set of 18 parameters that way, yes. 19 MR. VOGEL: Thank you. 20 Those are my questions, Mr. Chairman. 21 THE PRESIDING MEMBER: Thank you, Mr. Vogel. 22 We will move to Mr. Stephenson, please. 23 FURTHER CROSS-EXAMINATION 24 MR. STEPHENSON: Mr. Curtis, I am going to 25 take you back to the document that everybody has looked 26 at so far which is Exhibit D, tab 5, Schedule 2, which 27 is the average change in transmission charges for 28 aggregate groups showing the various scenarios.d Les Services StenoTran Services Inc. 613-521-0703 520 OHNC Panel 1, cr-ex (Stephenson) 1 MR. CURTIS: Table 5? 2 MR. STEPHENSON: That's right. 3 MS LEA: Can we have that exhibit number 4 repeated, please? 5 MR. STEPHENSON: Exhibit D, tab 5, Schedule 2, 6 Table 5 which is at page 6 of 7. 7 As indicated on the document, you have 8 indicated here within each of the various categories of 9 customers that these are the average percentage changes 10 that would result in the event of the particular 11 scenarios that are set out. Is that correct? 12 MR. CURTIS: That's correct, aggregated over 13 each group individually. 14 MR. STEPHENSON: And almost by definition 15 then, within any of the particular categories of 16 customers then you would anticipate that specific 17 customers would have impacts which are either higher or 18 lower than set out -- than as expressed by the average? 19 Is that fair enough? 20 MR. CURTIS: That is correct. 21 MR. STEPHENSON: So to use the example in 22 terms of scenario 2(a), where you have one of your 23 categories, the average impact for the 20 direct high 24 embedding of a decrease of 24.6 per cent, presumably at 25 least some of those customers would experience decreases 26 greater than 24.6 per cent? 27 MR. CURTIS: That is correct. 28 MR. STEPHENSON: Similarly, in terms of LDCs Les Services StenoTran Services Inc. 613-521-0703 521 OHNC Panel 1, cr-ex (Stephenson) 1 in the category immediately to the left, that was other 2 LDCs experienced an increase of 7 per cent, some of the 3 other LDCs you would anticipate would experience 4 increases greater than 7 per cent. Is that fair? 5 MR. CURTIS: That is correct. 6 MR. STEPHENSON: Can you assist me that at 7 least in general terms, focusing on the category of 8 other LDCs for a moment, what would the characteristics 9 of an LDC which experienced a higher than average rate 10 impact be? What kind of LDC would we be looking at? 11 Can you assist us at all there in terms of large, small 12 or otherwise? 13 MR. CURTIS: I think for the first aspect of 14 it the smaller ones would tend to be more adversely 15 affected than the larger ones. 16 I think in terms of some of the impacts that 17 we looked at there are also some locational 18 considerations that come into play, so it depends again 19 on the specific transmission connection facilities that 20 are attributed to the LDCs that we are looking at here. 21 In some instances there is a larger investment in 22 connection facilities that's attributed back to these 23 individual LDCs than others, so they would be more 24 adversely affected. 25 MR. STEPHENSON: Can you assist me here, in 26 terms of again an average impact, again just using the 27 other LDCs category as an example, do you know -- are we 28 talking about a diverse range of impacts, a broad Les Services StenoTran Services Inc. 613-521-0703 522 OHNC Panel 1, cr-ex (Stephenson) 1 variance around that mean or are these likely to be 2 closely clumped around 7 per cent? 3 MR. CURTIS: No. There was a fair bit of 4 divergence around this aggregated mean. 5 MR. STEPHENSON: Do you have any information, 6 either than you can provide me now or by way of an 7 undertaking about the range of impact that results in 8 that 7 per cent? 9 MR. CURTIS: Could we get back to you later? 10 We have to talk with our analyst again to find out 11 whether that's possible. 12 MS LEA: S3.3. 13 UNDERTAKING NO. S3.3: Undertake to 14 provide information about the rage of 15 impact that results in 7 per cent 16 MR. STEPHENSON: I am content with that. 17 Just so I understand it, you are going to let 18 us know whether or not you are going to be able to 19 provide that answer. Is that right? 20 MR. CURTIS: That's correct. 21 MR. STEPHENSON: Fair enough. 22 I want to just take you to some specific items 23 that we have heard from the evidence. In the evidence 24 filed by one of the intervenors in this proceeding, an 25 intervenor by the name of Energy Link, and maybe you 26 could refer to that evidence. It's at Exhibit H, tab 27 15, Schedule 1. 28 MR. ROGERS: I'm sorry, I missed that. I Les Services StenoTran Services Inc. 613-521-0703 523 OHNC Panel 1, cr-ex (Stephenson) 1 apologize. What was the reference, please? 2 MR. STEPHENSON: It's the Energy Link direct 3 evidence, Exhibit H, tab 15, Schedule 1. 4 MR. CURTIS: Yes, we have that. 5 MR. STEPHENSON: At least on my copy the pages 6 aren't numbered in the direct evidence, but it's the 7 sixth page. 8 MR. PORAY: This is the page that has section 9 9 in it? 10 MR. STEPHENSON: That's right. 11 Immediately above that heading, it's the 12 paragraph immediately there, I take it you will 13 recollect the gist of this evidence is in favour of at 14 least some form of net load billing because it would act 15 as an incentive for small embedded generation. That's 16 essentially the gist of the evidence. Is that fair? 17 MR. CURTIS: I think that's the position this 18 evidence puts forward. 19 MR. STEPHENSON: One of the factors that is 20 referenced in the evidence is the amount that OHNC is 21 going to spend in terms of its capital program for 22 expansion. You will see a reference in the paragraph 23 immediately above the heading which says: 24 "OHNC budgeted $29.5 million for the year 25 2000 capital program for work related to 26 capacity expansion. This amount could be 27 eliminated with an historical cap on load 28 for gross load billing." (As read) Les Services StenoTran Services Inc. 613-521-0703 524 OHNC Panel 1, cr-ex (Stephenson) 1 There is a reference to an exhibit there and I 2 just want to get you to turn up that exhibit, if you 3 might. It's Exhibit E, tab 15, Schedule 3. 4 --- Pause 5 MR. PORAY: We have that. 6 MR. CURTIS: Yes. 7 MR. STEPHENSON: This is one of your 8 documents, as I understand it. It is your forecast or 9 estimate for transmission capital expenditures for the 10 year 2000. 11 MR. CURTIS: Yes. 12 MR. STEPHENSON: As I see it, the figure of 13 $29.5 million appears in the extreme lower right-hand 14 corner of that document. Do you see that? 15 MR. CURTIS: Yes, we do. 16 MR. STEPHENSON: I understood that to be the 17 figure that was being referred to you. Do you read that 18 the same way? 19 MR. CURTIS: That is the only place on this 20 table where the 29.5 figure appears, yes. 21 MR. STEPHENSON: Okay. 22 Just to be fair, in terms of that number, as I 23 read this document, that is an aggregate of the total 24 capacity expansion capital expenditures for connection, 25 network and interconnect? 26 MR. CURTIS: Yes, it would. It would include 27 all of the capital projects that were planned. 28 MR. STEPHENSON: If we look up that extreme Les Services StenoTran Services Inc. 613-521-0703 525 OHNC Panel 1, cr-ex (Stephenson) 1 right-hand column, the largest figure by far appears to 2 be the interconnection figure. Do you see that? 3 MR. CURTIS: Yes. 4 MR. STEPHENSON: Am I correct that the amount 5 of expenditures, both in 2000 and beyond on interconnect 6 will be totally unaffected by any gross load/net 7 load determination. Is that fair? 8 MR. CURTIS: Yes, that's correct. 9 MR. STEPHENSON: Similarly, the second largest 10 number there is the $10.5 million forecast for 11 connection expansions. Do you see that? 12 MR. CURTIS: Yes. 13 MR. STEPHENSON: I take it, almost by 14 definition, that that number would be unaffected by the 15 determination of the gross load/net load question with 16 respect to network billing. 17 MR. CURTIS: That's correct. 18 MR. STEPHENSON: Is that fair? 19 MR. CURTIS: That's correct. 20 MR. STEPHENSON: So what we are left in 2000, 21 at least for network capacity expansion, is the figure 22 of $1.3 million. Do you see that? 23 MR. CURTIS: Yes, we do. 24 MR. STEPHENSON: Can you assist us at all -- 25 and I appreciate that this is the year 2000 that we are 26 already in and we are not going to get your -- whatever 27 rate design comes out of this isn't going to occur until 28 November or thereabouts of this year, but assuming that Les Services StenoTran Services Inc. 613-521-0703 526 OHNC Panel 1, cr-ex (Stephenson) 1 even we went to a full net load billing, is there any 2 foreseeability that you will be able to avoid or defer 3 that $1.3 million expenditure? 4 MR. CURTIS: I think it is very unlikely that 5 we would be able to do that. 6 MR. STEPHENSON: Okay. 7 Can you assist us at all? Presumably you have 8 some forecasts, and indeed I'm sure it is in your 9 materials somewhere, probably on the CD-ROM, about your 10 forecast expenditures to 2001 and beyond for network 11 expansion expenditures. 12 MR. PORAY: No. 13 MR. CURTIS: No, not beyond 2000. 14 MR. STEPHENSON: I take it that nevertheless 15 it is your general expectation that even under a full 16 net load billing scenario for network it is highly 17 unlikely that you are going to avoid any network 18 expenditures. That is the fundamental rationale behind 19 your proposal. Is that fair? 20 MR. CURTIS: I think it is unlikely. I don't 21 think I would go as far as saying highly unlikely. 22 MR. STEPHENSON: Let me just refer you to a -- 23 it is actually an interrogatory response. It was a 24 question asked of the Green Energy Coalition witness. 25 It was a question by OPG. It is Exhibit E-46-4. 26 MR. CURTIS: Yes, we have it. 27 MR. STEPHENSON: Okay. 28 This is Mr. Chernick's analysis of certain Les Services StenoTran Services Inc. 613-521-0703 527 OHNC Panel 1, cr-ex (Stephenson) 1 flaws from his perspective in your impact evaluation. I 2 want to address you to, at the moment, what he refers to 3 as flaw No. 1, in which he says: 4 "Assuming revenue requirements are not 5 affected by load reduction, in reality, 6 load reductions lead to less load 7 growth-related investment, longer lives 8 for heavier loaded equipment and reduced 9 losses." (As read) 10 I am going to leave aside whether there is any 11 truth of that, in a general level, but I would like you 12 to focus rather on the specifics that follow immediately 13 below that which makes reference to development 14 additions for network of $29 million in 1999 and 15 $19 million in 2000. 16 The suggestion is that some of these kinds of 17 investments might be avoided if there is net load 18 billing or some form of net load billing. Do you have 19 any comment on that in terms of either those specific 20 forecast expenditures or expenditures in general terms 21 of a like nature? 22 --- Pause 23 MR. CURTIS: I think our overall impression 24 would be that these expenditures for 1999 obviously and 25 for 2000 wouldn't be avoided by putting in place any 26 option around net versus gross load billing. 27 MR. STEPHENSON: Okay. 28 MR. CURTIS: I think it would be difficult for Les Services StenoTran Services Inc. 613-521-0703 528 OHNC Panel 1, cr-ex (Stephenson) 1 us to project forward beyond that, though. 2 MR. STEPHENSON: Let me just focus on this 3 issue about avoided investment for a moment. 4 I take it that, in general terms, if the 5 installation of embedded generation will result in 6 avoided network system costs which exceed the lost 7 revenue associated from that, then, in general terms, 8 any cost issues don't arise and, at a principled level, 9 you would not have any difficulty with that kind of 10 investment. Is that fair? 11 MR. CURTIS: Yes. At a principled level, 12 that's correct. 13 MR. STEPHENSON: In order to establish that, 14 am I right that the appropriate exercise would be that 15 you would engage in a system planning analysis in terms 16 of what your forecast expenditures on network would be 17 without the addition, and then you would do the same 18 exercise again substituting in an assumption that the 19 addition was made and determine whether or not what, if 20 any, avoided costs arose. Is that fair? 21 MR. CURTIS: Broadly speaking, I think you are 22 describing the analysis that would be undertaken. I 23 think the issue would be whether or not it would 24 necessarily be us that would be doing it and, going 25 forward, it would seem these accountabilities are 26 assigned to the IMO. 27 MR. STEPHENSON: Fair enough. But leaving 28 aside the question of who is doing it -- Les Services StenoTran Services Inc. 613-521-0703 529 OHNC Panel 1, cr-ex (Stephenson) 1 MR. CURTIS: That's correct. 2 MR. STEPHENSON: -- let's assume for a moment 3 that a proponent of a project, either directly or 4 indirectly, undertook that exercise and was able to 5 satisfy that the net present value of the avoided costs 6 exceeded the net present value of the lost revenues, I 7 take it that your objection to a particular project -- 8 you would likely not oppose that project. Is that fair? 9 MR. CURTIS: Yes. I don't see it as our role 10 in terms of opposing or supporting a particular 11 proposal, but I think you are talking in terms of the 12 transmission rate impact to customers. Yes, we 13 wouldn't -- 14 MR. STEPHENSON: It wouldn't necessarily -- if 15 that particular customer was then billed on a net basis 16 for networks you would not have any cost-shifting 17 concerns. 18 MR. PORAY: I wonder if we are straying into 19 the issue of new investment and generation linked to 20 that. What we are trying to do here is address the 21 bypass of transmission charges for existing facilities 22 and by putting in new generation, not really looking at 23 expanding the transmission system but just dealing with 24 the existing transmission system, installing new 25 generation and bypassing the charges. 26 MR. STEPHENSON: I take it under that 27 analysis, almost by definition, there is essentially no 28 avoided costs through the installation of embedded Les Services StenoTran Services Inc. 613-521-0703 530 OHNC Panel 1, cr-ex (Stephenson) 1 generation because the costs for avoiding are, by 2 definition, new investments in transmission. 3 MR. CURTIS: I think generically you are 4 correct. 5 MR. STEPHENSON: One of the issues raised by 6 one of my friends earlier was the fact that over time 7 load growth may mitigate rate impacts arising from 8 cost-shifting. 9 Do you recollect any of that? 10 MR. CURTIS: Yes, I do. 11 MR. STEPHENSON: I think you agreed that in 12 general terms that was true. 13 MR. CURTIS: Yes. 14 MR. STEPHENSON: Would you agree with me that 15 load growth may mitigate any rate impact in absolute 16 terms in the sense that rates over time may be reduced 17 back to the point that they were prior to the shift 18 occurring. It does nothing to address the rate impact 19 in relative terms, that is, the customers to whom the 20 costs have shifted, even after load growth has occurred, 21 will be paying relatively more than they would have paid 22 but for the shifting of the costs? 23 MR. CURTIS: Yes. Potentially, yes. 24 MR. STEPHENSON: Why do you qualify that by 25 saying "potentially", sir? 26 MR. CURTIS: I think one of the problems that 27 we have in terms of dealing with these broad general 28 examples is that I would think that you could come up Les Services StenoTran Services Inc. 613-521-0703 531 OHNC Panel 1, cr-ex (Stephenson) 1 with specific cases where that necessarily isn't true. 2 But broadly what you have stated is correct. 3 MR. STEPHENSON: Does that go back to the 4 point where we say that these average impacts for 5 customer groups is a certain number, but around that 6 average there is variance? 7 MR. CURTIS: Exactly. Exactly. 8 MR. STEPHENSON: Okay. 9 Another issue that was raised with you was the 10 issue of how under the old Ontario Hydro if a customer 11 embedded self-generation they were not gross load billed 12 thereafter with respect to any decrease of load off the 13 system and that how in the new system your proposal 14 would amount to a change as compared to that treatment. 15 Do you recall that? 16 MR. CURTIS: I think we had a very extensive 17 exchange on that and the difficulty that we always had 18 in terms of that discussion was under the old regime, 19 under the old paradigm we are talking in terms of 20 bundled contracts and -- 21 MR. STEPHENSON: That's in fact -- 22 MR. CURTIS: -- it's difficult to -- okay. 23 MR. STEPHENSON: Yes. But my first question 24 was simply do you recall that? 25 MR. CURTIS: I recall the conversation, yes. 26 I'm sorry. 27 MR. STEPHENSON: Okay. And indeed your 28 concern was that this was again another example of an Les Services StenoTran Services Inc. 613-521-0703 532 OHNC Panel 1, cr-ex (Stephenson) 1 apples and oranges comparison that -- 2 MR. CURTIS: Exactly. 3 MR. STEPHENSON: -- the comparison may simply 4 be entirely inapplicable. 5 MR. CURTIS: Yes. 6 MR. STEPHENSON: Insofar as it is applicable 7 at all -- and I share your concern that it may be 8 totally inapplicable -- but it's fair to say, isn't it, 9 that insofar as that treatment was appropriate at that 10 time, it may -- one of the reasons it may have been 11 appropriate is that because it was a bundled rate for a 12 bundled service, you would have to look at, for example, 13 whether or not there were avoided generation costs that 14 arose by virtue of the installation of the embedded 15 generation and whether that may justify it in terms of 16 any transference of costs? 17 MR. CURTIS: That's right. That was often one 18 of the components of the assessment. 19 MR. STEPHENSON: In addition, in circumstances 20 where perhaps the former treatment wound up in 21 situations where the avoided costs were in fact -- the 22 bundled avoided costs were less than the lost revenue, 23 indeed that treatment may have contributed in some way 24 to a negative financial impact on Ontario Hydro and the 25 whole issue of the old Ontario Hydro's stranded debt and 26 stranded cost problems? 27 MR. CURTIS: It may have. I wouldn't know 28 enough of the details of these specific projects to be Les Services StenoTran Services Inc. 613-521-0703 533 OHNC Panel 1, cr-ex (Stephenson) 1 able to make that conclusion though, but it may have. 2 --- Pause 3 MR. STEPHENSON: Those are my questions. 4 Thank you. 5 MR. CURTIS: Thank you. 6 THE PRESIDING MEMBER: Just looking at the 7 time, do we start with the next or not is my question, 8 and the question is based on how long do you think you 9 will run? 10 It will be you, Mr. Mattson, but I notice 11 Mr. Poch, more than anybody, wants to get home today. 12 No? 13 MR. POCH: Well, my cross would be quite 14 lengthy and I have to be here in any event so it would 15 make sense for me to hold over. 16 THE PRESIDING MEMBER: So that is the 17 question: Do we start and then interrupt you or not, 18 Mr. Mattson? 19 MR. MATTSON: I don't mind. Whenever you want 20 to leave this afternoon or start Monday, it doesn't 21 matter to me. 22 THE PRESIDING MEMBER: Do you have more than 23 five minutes? 24 MR. MATTSON: Yes, but I could do five 25 minutes worth. 26 THE PRESIDING MEMBER: No, I didn't say could 27 you do five minutes worth, I said -- 28 --- Laughter Les Services StenoTran Services Inc. 613-521-0703 534 1 MR. MATTSON: I will have to go longer than 2 that, but -- 3 THE PRESIDING MEMBER: Yes, okay. 4 Well, then we will wrap it up here at this 5 point, then, today. 6 Are there any other matters that we need to 7 address in terms of schedule or anything else? 8 Everything is fine? 9 Okay. A reminder that Monday we said we would 10 start at 9:30 Monday. Just a reminder. This is in 11 deference to people who have a little ways to travel to 12 get here, so we will do that. 13 I hope everybody can get home before the 14 storm. It is starting now. 15 --- Whereupon the hearing adjourned at 1223, to 16 resume on Monday, February 21, 2000 at 0930 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 535 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0905 427 4 OHNC PANEL 1 5 PREVIOUSLY SWORN: DAVID CURTIS 427 6 PREVIOUSLY SWORN: ANDY PORAY 427 7 Preliminary Matters 427 8 Continued Cross-examination by Mr. Brown 432 9 Further Cross-examination by Mr. Janigan 448 10 Cross-examination by Mr. Cowan 467 11 Upon recessing at 1025 477 12 Upon resuming at 1047 477 13 Further Cross-examination by Mr. Budd 477 14 Further Cross-examination by Mr. Vogel 496 15 Further Cross-examination by Mr. Mr. Stephenson 519 16 Hearing adjourned at 1223 534 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 536 1 EXHIBITS 2 NO. PAGE 3 G3.1 Document entitled "Net vs Gross 481 4 Load Billing" 5 G3.2 Excerpts from the Market Design 499 6 Committee Report 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 537 1 UNDERTAKINGS 2 NO. PAGE 3 F3.1 Mr. Curtis undertakes to recalculate 431 4 the rates in column 3 on this 5 Table 6 using the assumption of the 6 cogeneration amount of 1,150 megawatts 7 as the amount being installed with 8 whatever portion of that amount was 9 used for each particular year in 10 column 2 to be used for each 11 particular year in column 3 12 F3.2 Mr. Curtis undertakes to indicate 468 13 whether he can undertake to do the 14 calculation proposed by Mr. Janigan