968 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 Wednesday, February 23, 2000, 21 commencing at 0904 22 23 24 HEARING 25 26 VOLUME 6 27 28 Les Services StenoTran Services Inc. 613-521-0703 969 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 KATHI LITT 9 10 DONALD ROGERS/ Ontario Hydro Networks 11 BRYAN BOYCE Company Inc. (OHNC) 12 13 DAVID BROWN Independent Power Producers 14 Society of Ontario (IPPSO); 15 Ontario Natural Gas 16 Association (ONGA) 17 18 JAMES FISHER/ Association of Major Power 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 970 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 MIKE HILSON 12 13 PETER BUDD TransAlta Energy 14 15 MURRAY KLIPPENSTEIN Pollution Probe 16 17 RICHARD STEPHENSON Power Workers Union 18 19 MARK RODGER Toronto Hydro Electric 20 System Ltd. 21 22 PAUL DUMARESQ Ontario Association of Physical 23 Plant Administrators 24 25 SHARON WONG Imperial Oil Ltd. 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 971 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 BONNIE ANDRIACHUK 19 20 PAUL VOGEL/ The Chiefs of Ontario 21 CAROL GODBY 22 23 ALAN MARK/ Municipal Electrical 24 KELLY FRIEDMAN/ Association (MEA) 25 MAURICE TUCCI 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 972 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 973 1 Toronto, Ontario 2 --- Upon resuming on Wednesday, February 23, 2000 3 at 0904 4 THE PRESIDING MEMBER: Good morning, 5 everybody. 6 Are there any preliminary matters, Mr. Rogers? 7 PRELIMINARY MATTERS 8 MR. ROGERS: Well, just one thing, sir, having 9 to do with your comments of late yesterday afternoon 10 about the implementation and the complexity of the 11 interrelationship between the various bodies looking at 12 this. 13 I thought I would just tell the Board that 14 this has been a matter of concern to the applicant for 15 some time, obviously. They have given it a good deal of 16 thought as to how they see this unfolding. What I would 17 like to do is when Dr. Poray and Mr. Curtis have a 18 little more time than they have had over the past week, 19 I need to sit down with them. 20 We propose to provide to the Board a list of 21 the decisions which we are asking you to make in this 22 case and outlining the interrelationship of those 23 decisions with other bodies who were also integrally 24 involved. It is complicated and none of us can help 25 that, but we thought that if we could give to you a list 26 to you in writing at some point, in the not too distant 27 future, it would help you and hopefully the other 28 intervenors as well. Les Services StenoTran Services Inc. 613-521-0703 974 Preliminary Matters 1 THE PRESIDING MEMBER: Yes, I think we were 2 mentioning that yesterday. I think that's a very good 3 idea and so we will look forward to that. As you say, 4 you need some time to work on that and with the people. 5 If we do happen to have perhaps a half day this week, 6 which is a possibility and that might be one way. 7 MR. ROGERS: That would help immensely. 8 THE PRESIDING MEMBER: Then we could deal with 9 it next week as a wrap-up item. 10 MR. ROGERS: Yes, that is what I had in mind. 11 Now, the witnesses are quite willing and able 12 to answer questions about it, but there will be a 13 concise summary provided. 14 THE PRESIDING MEMBER: Yes. The 15 implementation issue was set down as being something 16 that was part of every issue, but there is still the end 17 of the implementation issue. So we could do the wrap up 18 under that. 19 MR. ROGERS: Yes. 20 THE PRESIDING MEMBER: Very good. Thanks. 21 Any more preliminary matters? No. 22 I think then, as I understand where we are 23 going this morning, we are going to complete questions 24 from Mr. Janigan first and then move on to Mr. Campbell 25 about F2.1. Then we are going to go on with the next 26 issue. Is my understanding correct? 27 MR. ROGERS: Yes. 28 PREVIOUSLY SWORN: DAVID CURTIS Les Services StenoTran Services Inc. 613-521-0703 975 Preliminary Matters 1 PREVIOUSLY SWORN: ANDY PORAY 2 PREVIOUSLY SWORN: GARY SCHNEIDER 3 THE PRESIDING MEMBER: Okay. 4 Would you like to start then? Good morning, 5 Mr. Janigan. 6 CROSS-EXAMINATION 7 MR. JANIGAN: Good morning, Mr. Chair. 8 Thank you. 9 Good morning, panel. 10 Once again our thanks to MEA for advancing our 11 concerns on the transmission customer issue. 12 It is our understanding from your evidence, 13 and as well from some of the interrogatory responses 14 and, as well, I think you indicated in testimony 15 yesterday that OHNC does not have historical volumes for 16 export and wheeling transactions, nor a forecast of 17 electricity export volumes or revenues. Is that 18 correct? 19 MR. PORAY: That is correct. 20 MR. JANIGAN: There has been no evaluation of 21 possible price elasticity of demand with respect to 22 either the export or the wheel-through service? 23 MR. PORAY: That is correct. 24 MR. JANIGAN: Would it be correct to say that 25 there is a lack of evidence to suggest that pricing at a 26 100 per cent embedded costs would affect the volume of 27 export and wheeling? 28 MR. PORAY: That would be correct. Les Services StenoTran Services Inc. 613-521-0703 976 OHNC PANEL 2, cr-ex (Janigan) 1 MR. JANIGAN: Now, from your evidence then to 2 interrogatory responses and, as well, I believe in 3 testimony yesterday, it is our understanding that the 4 proposed rate of approximately 20 per cent of the 5 embedded costs was a negotiated solution that was 6 crafted with a view to satisfying a variety of 7 stakeholders? 8 MR. PORAY: That is not so much negotiated as 9 a compromise after we heard from all of the stakeholders 10 what their concerns were. 11 MR. JANIGAN: If you have before you OEB Staff 12 Interrogatory Exhibit E-1-100, I would like to refer to 13 a couple of passages from there. 14 --- Pause 15 MR. PORAY: This is E-1-100? 16 MR. JANIGAN: That is correct. 17 MR. PORAY: Okay. We are there. 18 MR. JANIGAN: Okay. It indicates that the 19 proposed charge is such that there is a significant 20 contribution from the users of the transmission system 21 but not large enough to penalize those users. 22 Now, I want to ask you what sort of measure 23 you used to judge what was significant or what might be 24 a penalty? 25 MR. PORAY: I think the measure that we used, 26 really, was what was done in surrounding jurisdictions 27 in terms of the rates that they applied for export and 28 wheel-through transactions. Les Services StenoTran Services Inc. 613-521-0703 977 OHNC PANEL 2, cr-ex (Janigan) 1 MR. JANIGAN: In terms of the studies that 2 were done we understand from an interrogatory of MEA's, 3 Interrogatory E-9-14 -- you might not have to turn that 4 up -- that no studies were done that determined the 5 extent to which 1 mil per kilowatt charge for export and 6 wheeling service would always recover marginal 7 transmission costs of the transaction. Is that correct? 8 MR. PORAY: That's correct. 9 MR. JANIGAN: You have indicated that your 10 proposed rate which, as I understand it, effectively 11 covers -- it represents a revenue-to-cost ratio of .2 -- 12 you have indicated that this is a significant 13 contribution from the users of the transmission system. 14 Your evidence that it is a significant contribution 15 primarily comes from the evidence of neighbouring 16 jurisdictions? 17 MR. PORAY: That's correct. 18 MR. JANIGAN: I believe in yesterday's 19 testimony there was questions concerning that evidence 20 on neighbouring jurisdictions? 21 MR. PORAY: There was, yes. 22 MR. JANIGAN: It is our belief that in 23 creating this new export and wheeling tariff that you 24 have in effect created a new class of transmission 25 customers for whom the special rate will apply. Can you 26 comment on that? 27 MR. PORAY: I think I tried to explain in 28 discussions with Mr. Poch yesterday that we haven't, in Les Services StenoTran Services Inc. 613-521-0703 978 OHNC PANEL 2, cr-ex (Janigan) 1 fact, created a separate class of customers because it 2 is difficult to establish, if you like, an 3 interconnection tariff per se that reflects the cost of 4 interconnection facilities. 5 Also, what I mentioned was that the types of 6 customers that will use this export and wheel-through 7 transactions are different to the provincial load 8 customers. 9 MR. JANIGAN: I wonder, we note in Board Staff 10 Interrogatory E-1-14 -- 11 --- Pause 12 MR. PORAY: Yes, we are there. 13 MR. JANIGAN: The following statement 14 appeared, quoting from the white paper, that 15 transmission would continue to be priced at a uniform 16 rate for all customer classes? 17 MR. PORAY: That's correct. 18 MR. JANIGAN: Do you not believe that the 19 pricing that you have suggested for this new EWT tariff 20 violates this principle? 21 MR. PORAY: I believe it doesn't because -- 22 --- Pause 23 MR. PORAY: -- I think there is the uniform 24 rate of $1.00 per megawatt hour, for anybody that export 25 pays the same rate. It is a uniform rate. 26 MR. JANIGAN: I want to pass on to the way in 27 which the EWT is structured. 28 I think we heard from your testimony yesterday Les Services StenoTran Services Inc. 613-521-0703 979 OHNC PANEL 2, cr-ex (Janigan) 1 that you agree that the EWT transmission charge is only 2 one component of the delivered price of electricity, 3 export markets? 4 MR. PORAY: That's correct. 5 MR. JANIGAN: Would you agree that it is the 6 delivered price of electricity in a marketplace relative 7 to the delivered price of alternative sources of energy 8 which is an important consideration for consumers? 9 MR. PORAY: I believe that is correct. 10 MR. JANIGAN: It is unclear to us, then, why 11 the transmission component should be considered in 12 isolation of the other components of the delivered cost 13 of electricity in the context of ensuring equitable 14 reciprocal treatment. 15 MR. PORAY: The reason why we didn't consider 16 all the other components is that our focus in this 17 submission is on transmission charges and transmission 18 rates. 19 MR. JANIGAN: It has been argued by OPGI that 20 congestion prices charged by the IMO will eventually be 21 the mechanism by which delivered prices will be 22 equalized at border or interconnect points. Is that 23 your understanding as well? 24 MR. PORAY: I'm not sure when you say 25 "equalized" what you mean there. 26 MR. JANIGAN: In effect, it is the mechanism 27 to ensure that the supply and demand at congestion 28 points are appropriately treated so that if there is Les Services StenoTran Services Inc. 613-521-0703 980 OHNC PANEL 2, cr-ex (Janigan) 1 increased demand at a particular delivery point the 2 price reflects that. 3 MR. PORAY: If there is congestion on the 4 inter-ties, then the bidding for the transmission rights 5 for that congestion will reflect, yes, the price. 6 MR. JANIGAN: Now, OEB Board Staff 7 Interrogatory E-1-94 -- 8 MR. PORAY: Yes. 9 MR. JANIGAN: -- indicates that congestion 10 pricing is not expected to be implemented until some 11 18 months after the market is opened. Is that correct. 12 MR. PORAY: That is our understanding. 13 MR. JANIGAN: Wouldn't it be difficult to rely 14 on congestion pricing as a means of ensuring competitive 15 delivered prices at border interconnect points? 16 MR. PORAY: The implementation of congestion 17 pricing for the interconnection points will in fact be 18 implemented at the outset of the open markets, so 19 transactions involving the interconnections will involve 20 congestion pricing. What this refers to is congestion 21 pricing within the province, so this is locational 22 marginal pricing. The intent is to implement that some 23 18 months after the market opens. 24 MR. JANIGAN: I understand from your testimony 25 yesterday in response I believe to questioning from the 26 Green Energy Coalition that you indicated that you had 27 not tried to optimize the revenue from EWT transactions 28 in your proposal since it was not retained by OHNC -- Les Services StenoTran Services Inc. 613-521-0703 981 OHNC PANEL 2, cr-ex (Janigan) 1 MR. PORAY: That is correct. 2 MR. JANIGAN: Now, can we assume from your 3 comment that in your opinion there is no incentive 4 inherent in the current structure in which your revenue 5 requirement is set for you to strive to earn 6 supplemental revenue from sources beyond what has been 7 termed provincial load customers? 8 MR. PORAY: That is correct. 9 MR. JANIGAN: We note that in your response to 10 our interrogatory, VECC, I believe it is E-9-1 -- E-7-1, 11 I'm sorry, I don't think you need to turn it up, you 12 stated that the rate structure should minimize impact on 13 customers beyond sort of open access. 14 MR. PORAY: That's correct. 15 MR. JANIGAN: It seems to us that increasing 16 revenue from EWT transactions and using this revenue to 17 offset costs to provincial load customers would be 18 consistent with this objective. 19 MR. PORAY: I believe it would be. 20 MR. JANIGAN: Now, as you have indicated, it 21 is very hard to operationalize the system in the short 22 term that would be designed on a more market-responsive 23 basis, but does OHNC see any merit in pursuing this 24 option further so as to find a solution that is market 25 driven and strives to optimize revenue from these 26 transactions? 27 MR. PORAY: I think our long-term view is that 28 transactions -- these types of transactions should be Les Services StenoTran Services Inc. 613-521-0703 982 OHNC PANEL 2, cr-ex (Janigan) 1 really done on the marginal pricing basis because that 2 is the most efficient way that these transactions would, 3 in fact, take place. What we are trying to say is that 4 in the longer term you would move away from using 5 embedded type charges for these types of transactions. 6 MR. JANIGAN: What guarantee would there be 7 that that will make it any more price competitive as a 8 delivered price? 9 MR. PORAY: Because I think it will reflect -- 10 it will better reflect the usage of the transmission 11 system which is determined by the dispatch of the 12 transactions within the realm of the operation of the 13 market. 14 MR. JANIGAN: But your competition is external 15 rather than internal, is it not? 16 MR. PORAY: It doesn't matter. The fact is 17 that the entities that want to use this will have to bid 18 into the market and they will have to bid in what they 19 think is the best price for accessing that market. 20 MR. JANIGAN: Is it conceivable, then, that 21 the marginal price may be higher than the embedded costs 22 at times? 23 MR. PORAY: It is possible. It will depend 24 upon the operating conditions on the system and the 25 degree of congestion. 26 MR. JANIGAN: In that circumstance, that 27 difference would flow back to the provincial load 28 customers? Les Services StenoTran Services Inc. 613-521-0703 983 OHNC PANEL 2, cr-ex (Janigan) 1 MR. PORAY: Well, there are mechanisms in the 2 market rules which the IMO will use to refund those 3 customers who have paid for transmission charges, but 4 that will depend on, at the end, after all the 5 settlement process had taken place, how much is retained 6 in that holding account which can then be refunded back 7 to the customers. 8 MR. JANIGAN: What kind of time frame are we 9 talking about? 10 MR. PORAY: I believe that the refund could be 11 done on a monthly basis. 12 MR. JANIGAN: When would something like this 13 be implemented? 14 MR. PORAY: It will be implemented for the 15 market opening because this is part of the settlement 16 process. 17 MR. JANIGAN: To the extent that the revenue 18 from these transactions offsets overall costs and 19 revenue requirements, I believe you suggested that the 20 intent is that the funds be collected in an account and 21 used after the fact to benefit those customers who have 22 paid the full cost of the transmission infrastructure. 23 MR. PORAY: I'm sorry, which -- are you 24 talking about the account held by the IMO? Which 25 transactions are you talking about? Are you talking 26 just about the export and wheel-through or are -- 27 MR. JANIGAN: Yes. 28 MR. PORAY: -- you also talking about Les Services StenoTran Services Inc. 613-521-0703 984 OHNC PANEL 2, cr-ex (Janigan) 1 congestion and transmission rights? 2 MR. JANIGAN: Just the EWT transactions. 3 MR. PORAY: What we are proposing is that that 4 will be returned to OHNC and then OHNC would credit back 5 to customers. 6 MR. JANIGAN: Can you suggest what proportion 7 of these funds might be credited to generators as 8 opposed to provincial load customers? 9 MR. PORAY: What we are proposing is that the 10 credit mechanism would look at the magnitude that is 11 less of the payments made by the generators to the 12 export and wheel transactions and the charges that the 13 generators have paid for acquiring transmission rights. 14 MR. JANIGAN: In Board Staff Interrogatory 15 E-1-101 -- 16 MR. PORAY: Yes. 17 MR. JANIGAN: -- I believe you indicated that 18 the details of the accounting treatment of the export 19 and wheeling transaction revenues have not been 20 discussed with the IMO. 21 MR. PORAY: Not yet, no. 22 MR. JANIGAN: Given that there is a lack of 23 clarity with respect to the treatment of the EWT 24 transaction revenues, would you agree that until the 25 treatment can be clearly articulated, in the interest of 26 simplicity, all revenue should flow back to 27 transmission -- the system users and any future 28 treatment should be the subject of a future rate Les Services StenoTran Services Inc. 613-521-0703 985 OHNC PANEL 2, cr-ex (Janigan) 1 proceeding? 2 MR. PORAY: Well, I think this will be 3 clarified before the market opens so that this process 4 will be set in place. 5 MR. JANIGAN: Thank you, panel. 6 Those are all my questions for this panel. 7 MR. PORAY: Thank you. 8 THE PRESIDING MEMBER: Thank you, Mr. Janigan. 9 I'm not aware of any other questions on this 10 topic. 11 Mr. Campbell, since your other topic is really 12 related to charge determinants for embedded generators, 13 that is the F2.1, we should finish up this issue first, 14 okay, in terms of Board questions. I'm correct that 15 that is what lies behind F2.1? 16 MR. CAMPBELL: Mr. Chair, I may have caused 17 some confusion yesterday. I haven't had a chance yet to 18 look at F2.1 which came out yesterday, but we now have 19 had a chance to look at the example on export and 20 wheel-through and I will be covering that. That's 21 really all I intend to cover today. 22 THE PRESIDING MEMBER: Okay. So then that 23 would be appropriate to go now then on that issue. 24 Thank you. 25 The Board will follow. Thank you. 26 MR. CAMPBELL: Mr. Chairman, it might be 27 helpful if you had in front of you at least at the 28 commencement of my cross-examination Exhibit G5.4 which Les Services StenoTran Services Inc. 613-521-0703 986 OHNC PANEL 2 1 was the excerpt having to do with the transmission 2 approvals that was filed by Mr. Poch. 3 THE PRESIDING MEMBER: I have that. 4 MR. CAMPBELL: And Exhibit G5.2 is the OHNC 5 example for export and wheel-through that was filed 6 yesterday. I guess it might simplest at this time to 7 have marked an exhibit that we prepared last night. In 8 fact, it goes to the Board -- 9 THE PRESIDING MEMBER: You have violated your 10 rules again, have you? 11 MR. CAMPBELL: Absolutely. 12 THE PRESIDING MEMBER: Working overnight and 13 surprising everybody first thing in the morning. Right? 14 MR. CAMPBELL: I tried to give everybody last 15 night warning and I plead mitigating circumstances that 16 what this response is to didn't come into our hands 17 until yesterday. 18 THE PRESIDING MEMBER: Okay. 19 MR. CAMPBELL: I'm going to push back at 20 Mr. Rogers. If he had given us his stuff a day early, 21 we would have been ready. 22 THE PRESIDING MEMBER: All right. 23 MR. ROGERS: I haven't complained to anybody 24 about anything. 25 MR. LYLE: We will mark this as Exhibit G6.1. 26 It's a document entitled "Payments by Generator A and 27 Market Participant B in OHNC's Example". 28 EXHIBIT NO. G6.1: "Payments by Generator Les Services StenoTran Services Inc. 613-521-0703 987 OHNC PANEL 2 1 A and Market Participant B in OHNC's 2 Example" 3 CROSS-EXAMINATION 4 MR. CAMPBELL: Gentlemen, do you have those 5 exhibits in front of you? 6 MR. PORAY: This is G5.4, G5.2 and G6.1. 7 MR. CAMPBELL: Correct. 8 MR. PORAY: Okay. 9 MR. CAMPBELL: All right. Now, the first 10 thing I want to talk about a little bit is the 11 relationship between interconnections and reliability. 12 Yesterday, if I understood your testimony correctly, it 13 was your view that the primary purpose of the 14 interconnections was to increase overall reliability. 15 Correct? 16 MR. PORAY: For the provincial customers, yes. 17 MR. CAMPBELL: And any other purpose would be 18 a secondary or additional benefit. 19 MR. PORAY: That is correct. 20 MR. CAMPBELL: Now, looking at Exhibit G5.4 21 from yesterday, and I am going to take you to page 9 of 22 that decision, at the end of the middle paragraph, there 23 is discussion of the tornado that hit Ontario in May of 24 1985. Would you agree that that is an example of how 25 imports can improve reliability? 26 MR. PORAY: I would categorize that not 27 necessarily as an import as an instantaneous response 28 from the interconnected system. Les Services StenoTran Services Inc. 613-521-0703 988 OHNC PANEL 2, cr-ex (Campbell) 1 MR. CAMPBELL: But it resulted in a flow into 2 Ontario. 3 MR. PORAY: That is correct. 4 MR. CAMPBELL: And the reason is that flow 5 could take place instantaneously is because there was 6 adequate interchange capability at that border of the 7 Ontario system. 8 MR. PORAY: That is correct. 9 MR. CAMPBELL: And would you also agree that 10 having adequate interchange capability with your 11 neighbouring systems reduces the overall amount of 12 domestic transmission that's required to serve domestic 13 customers? I am assuming here an equivalent level, the 14 same reliability standard in both cases. If you have 15 strong interchange capability, you will need less 16 facilities to provide that reliability to your domestic 17 customers. 18 MR. PORAY: I would categorize it not so much 19 as it substituting for provincial transmission. Rather, 20 what I would look at in terms of the reliabilities is 21 the ability of the interconnection to provide, as I say, 22 instantaneous reserve to meet any contingencies in 23 Ontario. Therefore, less reserve has to be held in 24 Ontario. 25 MR. CAMPBELL: And what I'm asking you is: 26 Isn't the effect of that for a given level of 27 reliability standard -- isn't the effect of that to 28 somewhat reduce the amount of transmission facilities Les Services StenoTran Services Inc. 613-521-0703 989 OHNC PANEL 2, cr-ex (Campbell) 1 that you have to install domestically? That has been an 2 advantage pointed out in these applications on the big 3 line, has it not? 4 MR. PORAY: I think probably in general. Yes. 5 MR. CAMPBELL: Now, looking at Exhibit G5.4 6 again, could you turn up the general and specific 7 purposes that Mr. Poch took you to yesterday on pages 12 8 and 13. 9 MR. PORAY: Okay. 10 MR. CAMPBELL: Mr. Poch reviewed those with 11 you yesterday. You recall that? 12 MR. PORAY: That is correct. 13 MR. CAMPBELL: And again, having in mind these 14 general and specific purposes, would it be fair to say 15 that the particular project that we were talking about 16 here was undertaken again to improve the reliability of 17 supply in Ontario? 18 MR. PORAY: That is my understanding. 19 MR. CAMPBELL: And I take it that you would 20 not agree with the proposition that the facilities 21 described in this decision were constructed to support 22 export transactions. 23 MR. PORAY: Not specifically. No. 24 MR. CAMPBELL: That may have been an 25 additional benefit, but that wasn't why they were built. 26 MR. PORAY: That is correct. 27 MR. CAMPBELL: Now, as seems so often over 28 recent years to be the case, the world didn't quite Les Services StenoTran Services Inc. 613-521-0703 990 OHNC PANEL 2, cr-ex (Campbell) 1 unfold as we imagined. The circumstances from 1985 to 2 present have in fact unfolded somewhat differently, have 3 they not? 4 MR. PORAY: I believe they have, yes. 5 MR. CAMPBELL: Half the Bruce units are on 6 extended layup, are they not? 7 MR. PORAY: I understand so. 8 MR. CAMPBELL: And over the last few years, 9 Ontario has been a net importer of energy from Michigan, 10 hasn't it? 11 MR. PORAY: I believe that has been the case. 12 MR. CAMPBELL: Now, yesterday Mr. Brown asked 13 you about the historical level of exports. You replied 14 that you hadn't asked OPG for that information. Do you 15 recall that? 16 MR. PORAY: I recall that. 17 MR. CAMPBELL: However, if -- I'm going to ask 18 you to look at Interrogatory E-31-9. In the pages that 19 are at Tab E-31, I think you will find this on page four 20 of eight. 21 MR. PORAY: We are there. 22 MR. CAMPBELL: You see that? 23 MR. PORAY: Yes. 24 MR. CAMPBELL: And if you look at the table on 25 page 5 of 8, you will see that for Michigan in each of 26 1998 and 1999 imports have exceeded exports. Correct? 27 MR. PORAY: That is correct. 28 MR. CAMPBELL: And I take it that for all the Les Services StenoTran Services Inc. 613-521-0703 991 OHNC PANEL 2, cr-ex (Campbell) 1 reasons that we have just been through, those reasons 2 form the basis of your position that none of the sum 3 costs for interconnection or network facilities were 4 incurred to support exports. 5 MR. PORAY: That is correct. 6 MR. CAMPBELL: All right. Now, I want to look 7 at facilities going forward. In the decision on your 8 December 1998 revenue requirement application for 1999 9 and 2000, the Board approved some expenditures for the 10 Michigan phase shifters. Correct? 11 MR. PORAY: That is correct. 12 MR. CAMPBELL: This project, this investment 13 in the phase shifters on the Michigan interface was 14 recommended by the MDC? 15 MR. PORAY: Not that specific project. 16 What was recommended by the MDCs that within 17 the three years of market opening OHNC should do a best 18 efforts to increase the tie-line capability by 50 per 19 cent. 20 MR. CAMPBELL: You would agree that the MDC 21 made this recommendation in order to increase import 22 capability so that imports could compete with OPG 23 generation? 24 MR. PORAY: I believe that it was imports and 25 exports. 26 MR. CAMPBELL: Well, isn't this recommendation 27 one that appears in the Market Power Mitigation section 28 of the MDC's report. Les Services StenoTran Services Inc. 613-521-0703 992 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: I don't have that. 2 MR. CAMPBELL: We will just dig it up. 3 --- Pause 4 MR. CAMPBELL: Now, the recommendation you 5 referred to in your testimony just a moment ago was 6 Chapter 2, Recommendation 1-5, and I'm just going to 7 read it. 8 I don't know if you have a copy of the MDC 9 report there. 10 MR. PORAY: I don't have that, no. 11 MR. CAMPBELL: I'm going to read the 12 recommendation that I'm referring to and ask you if that 13 was the one that you were referring to in your 14 testimony. 15 The Recommendation 1-5 reads: 16 "OESC will be expected to undertake best 17 efforts to expand intertie capacity with 18 neighbouring jurisdictions by 19 approximately 2000 MW within three years 20 of market opening." 21 Is that the recommendation you were 22 referring to? 23 MR. PORAY: That is correct. 24 MR. ROGERS: Do you want to look at the 25 document, Dr. Poray, to put it in context, or are you 26 comfortable with it? 27 MR. PORAY: Certainly I'm comfortable with 28 that, but if we are making any other reference to any Les Services StenoTran Services Inc. 613-521-0703 993 OHNC PANEL 2, cr-ex (Campbell) 1 other recommendations I think it might be useful to have 2 a look at the document. 3 THE PRESIDING MEMBER: I think that as long as 4 it is a simple quote from there we can leave it. If you 5 want to go on connecting to other recommendations we 6 will have to make copies available to the witness. So 7 it depends where you are going. 8 --- Pause 9 MR. CAMPBELL: Okay. I'm just going to read 10 you the next paragraph under the recommendation where 11 the MDC noted that in its second interim report it 12 noted: 13 "`Ontario Hydro Service Company ... has 14 identified grid investments that could 15 expand by some 1,800 MW the total 16 capacity to import electricity into 17 Ontario from the U.S., Quebec and 18 Manitoba. If these projects can be 19 justified by proponents on the basis of a 20 cost/benefit evaluation and are approved 21 by the OEB, we believe that they should 22 be implemented as soon as practical.'" 23 Do you recall that discussion? 24 MR. PORAY: I recall that discussion and I 25 believe that what is stated in there is what was stated 26 in the report, yes. 27 MR. CAMPBELL: That is what is behind the 28 recommendation that they made in that Chapter 2 that you Les Services StenoTran Services Inc. 613-521-0703 994 OHNC PANEL 2, cr-ex (Campbell) 1 were referring to earlier today? 2 MR. PORAY: That is correct. 3 But I believe that we also indicated that 4 there are benefits in the other direction as well, that 5 it is not just imports but there are export -- 6 capability is increased as well. 7 MR. CAMPBELL: I'm not suggesting for a 8 moment, Mr. Poray, that there aren't benefits and 9 opportunities the other way. 10 What I am suggesting to you is that that 11 recommendation which is in Chapter 2, the Market Power 12 chapter of the MDC report, was aimed at having the 13 opportunity for imports to come in so that there would 14 be competition with OPG. Wasn't that the rationale? 15 MR. PORAY: I would agree with that, yes. 16 MR. CAMPBELL: Now, could I ask you next to go 17 to Interrogatory E-31-16. Again, it's Tab T-31 and in 18 the pages behind there it is found on pages 7 of 8 and 19 8 of 8 and I'm going to ask you to go to page 8 of 8. 20 MR. ROGERS: Mr. Chairman, just let the 21 witness look at the document for a minute. 22 --- Pause 23 MR. PORAY: Okay, we have it. 24 MR. CAMPBELL: Would you look at the examples 25 given here of those who discount. 26 You would agree with me that the discount 27 ranges from a discount of 81 to 62 per cent? 28 MR. PORAY: That's shown on this table, yes. Les Services StenoTran Services Inc. 613-521-0703 995 OHNC PANEL 2, cr-ex (Campbell) 1 MR. CAMPBELL: And the average is calculated 2 at 72 per cent? 3 MR. PORAY: That appears to be so. 4 MR. CAMPBELL: If I understand your proposal 5 correctly, which is shown in the line "OHNC", the 6 discount that is proposed amounts to 74 per cent. Is 7 that correct? 8 MR. PORAY: Can you just hang on for a second. 9 --- Pause 10 MR. PORAY: That would appear to be the case. 11 MR. CAMPBELL: What I would like to suggest to 12 you, Mr. Poray, given the wide range of prices 13 associated with the examples on the table, what I would 14 like to suggest to you and ask you to agree with is that 15 the percentage discount is a more relevant comparison 16 than the actual absolute dollars in this case. Would 17 you agree with that proposition? 18 MR. PORAY: Yes, I would. 19 MR. CAMPBELL: Now, I want to turn, then, to 20 some discussion of this firm/non-firm comparison. 21 Yesterday you were asked some questions about whether 22 Ontario has firm or non-firm transmission service. Do 23 you recall that? 24 MR. PORAY: I do. 25 MR. CAMPBELL: If I took the gist of your 26 answer, it was essentially that what you had was neither 27 and I would like to explore that with you. 28 In Ontario, unlike many of the U.S. Les Services StenoTran Services Inc. 613-521-0703 996 OHNC PANEL 2, cr-ex (Campbell) 1 jurisdictions, would you agree that it will not be 2 possible to buy transmissions separately from energy? 3 That's the structure of the Ontario market? 4 MR. PORAY: There is no reservation of 5 transmission, no. 6 MR. CAMPBELL: So the way one gains 7 transmission access in Ontario is by successfully 8 bidding in the energy market? 9 MR. PORAY: That is correct. 10 MR. CAMPBELL: It can't be bought separately? 11 MR. PORAY: No. 12 MR. CAMPBELL: That energy market is an 13 hourly market? 14 MR. PORAY: That is correct. 15 MR. CAMPBELL: So if I wanted to buy a certain 16 amount of transmission from here to New York for a year, 17 I couldn't do that? 18 MR. PORAY: No. 19 MR. CAMPBELL: I would have to bid into the 20 energy market every hour of the year and if I was 21 unsuccessful in bidding in I wouldn't get that 22 transmission. 23 MR. PORAY: You wouldn't get access to the 24 transmission, no. 25 MR. CAMPBELL: So one of the main distinctions 26 between firm and non-firm service in the U.S. is that 27 firm service can be purchased for longer periods, while 28 non-firm tends to be available for shorter periods. Is Les Services StenoTran Services Inc. 613-521-0703 997 OHNC PANEL 2, cr-ex (Campbell) 1 that correct? 2 MR. PORAY: Generally speaking, yes. 3 MR. CAMPBELL: On that basis, would you agree 4 with me that the distinction -- that based on this 5 distinction between longer and shorter-term product the 6 transmission service that will be available in Ontario 7 is more like non-firm than it is like firm. You can't 8 buy it for long periods. 9 MR. PORAY: Certainly on the basis of that 10 comparison that may be the case. 11 But I think the other considerations that come 12 into the non-firm is the aspect of being, not 13 disconnected but effectively your transaction would have 14 to drop off because of prioritizing of transactions. 15 This also doesn't take place in Ontario. 16 MR. CAMPBELL: Then I want to deal briefly 17 with marginal cost recovery for transmission. Am I 18 right that the marginal cost of transmission will be 19 recovered through the IMO charges for losses? 20 MR. PORAY: I would categorize that as the 21 marginal cost of using the transmission system would be 22 recovered through using the IMO. 23 MR. CAMPBELL: Are there any other marginal 24 costs of transmission? 25 MR. PORAY: I guess one could talk about 26 long-run marginal costs of transmission which relate to 27 long-term investment. 28 MR. CAMPBELL: I want to put aside the Les Services StenoTran Services Inc. 613-521-0703 998 OHNC PANEL 2, cr-ex (Campbell) 1 question of the long-term investment. For what we are 2 dealing with here, the losses are in fact the only 3 marginal cost -- losses in congestion are the only 4 marginal costs. 5 MR. PORAY: There may be some administrative 6 costs of transactions that could be categorized as 7 marginal as well. 8 MR. CAMPBELL: Aren't those also recovered 9 through the IMO administration and uplift fees? 10 MR. PORAY: Through the administration uplift, 11 yes. 12 MR. CAMPBELL: And export transactions pay all 13 of those costs. 14 MR. PORAY: They would indeed. 15 MR. CAMPBELL: So when you propose a dollar 16 for transmission fees for exporters, you are talking 17 about a dollar above and beyond the marginal costs we 18 have been talking about. 19 MR. PORAY: That is correct. 20 MR. CAMPBELL: I would ask you to get in front 21 of you Exhibit G5.2 that you distributed yesterday and 22 Exhibit G6.1 that was marked this morning. 23 MR. PORAY: We have that. 24 MR. CAMPBELL: Mr. Chairman, what we have done 25 here is we have extracted some figures from G5.2 in 26 order to prepare the figures that are shown on 27 Exhibit G6.1. I am going to focus on Scenario 1. We 28 have included the figures for Scenario 2 for Les Services StenoTran Services Inc. 613-521-0703 999 OHNC PANEL 2, cr-ex (Campbell) 1 completeness. But I think once we have gone through 2 Scenario 1, the math will be pretty straightforward. 3 Looking at Scenario 1 in G5.2, Mr. Poray, that 4 is set out at Exhibit A? 5 MR. PORAY: That is correct. 6 MR. CAMPBELL: Can you tell me what P1 is? 7 MR. PORAY: P1 would be the node in Ontario 8 from which the export leaves and P2 would be the node to 9 which the export goes. 10 MR. CAMPBELL: And the difference in price 11 between P1 and P2 represents the congestion on the 12 intertie connecting Ontario with the external 13 jurisdiction. 14 MR. PORAY: That is correct. 15 MR. CAMPBELL: So if there is a difference 16 between P1 and P2, congestion exists; if there is no 17 difference, there is no congestion. 18 MR. PORAY: Essentially that is so. 19 MR. CAMPBELL: Just so we are clear, what we 20 are talking about here is congestion representing the 21 difference in the energy price between the two nodes set 22 out in your example. 23 MR. PORAY: That is correct. 24 MR. CAMPBELL: Again, we can think of those as 25 being the Ontario market and the export market. 26 MR. PORAY: That is so. 27 MR. CAMPBELL: And the congestion, would you 28 agree, relates to transmission because the difference in Les Services StenoTran Services Inc. 613-521-0703 1000 OHNC PANEL 2, cr-ex (Campbell) 1 prices or the congestion represents the maximum payment 2 an exporter would be willing to make in order to use a 3 congested interconnection? 4 MR. PORAY: That is correct. 5 MR. CAMPBELL: And the congestion is charged 6 to exporters by the IMO. 7 MR. PORAY: That is correct. 8 MR. CAMPBELL: In other words, in order to 9 actually accomplish an export transaction, generation A 10 sells into P1 at $20, and it buys out of P2 at $24 -- 11 MR. PORAY: $22, I think. 12 MR. CAMPBELL: $22, I'm sorry. It buys out at 13 $22 in this example. 14 THE PRESIDING MEMBER: Somebody is getting the 15 extra two bucks. We don't know who it was, though. 16 MR. CAMPBELL: Just to back up -- lawyers and 17 math is always a mistake. 18 The generator sells into P1 at $20, buys out 19 of P2 at $22, and the $2 difference is initially 20 retained by the IMO as a congestion charge. 21 MR. PORAY: That is correct. 22 MR. CAMPBELL: As I understand your example, 23 in order to hedge against the possibility of congestion, 24 an individual wishing to undertake an export transaction 25 can buy a hedge, and that hedge is called a transmission 26 right. 27 MR. PORAY: That is correct. 28 MR. CAMPBELL: The holder of the transmission Les Services StenoTran Services Inc. 613-521-0703 1001 OHNC PANEL 2, cr-ex (Campbell) 1 right is entitled to a portion of the congestion charges 2 that are collected by the IMO. 3 MR. PORAY: That is correct. 4 MR. CAMPBELL: So looking at Exhibit G6.1 -- 5 today's exhibit that I distributed earlier -- I would 6 like to associate some numbers with the concepts that we 7 have been discussing. 8 Under Scenario 1, in terms of transmission 9 rights, Generator A has paid $30 for 60 megawatts worth 10 of transmission rights. That is the number that appears 11 in row 1. 12 MR. PORAY: That is correct. 13 MR. CAMPBELL: I have that number right. 14 MR. PORAY: You do indeed. 15 MR. CAMPBELL: In terms of congestion charges, 16 Generator A has paid $240. That is comprised of this $2 17 difference between P1 and P2, times the 120 megawatts 18 that have been exported. 19 MR. PORAY: That is correct. 20 MR. CAMPBELL: And because Generator A 21 purchased 60 megawatts of transmission rights, it is 22 entitled to 60 megawatts worth of congestion payments 23 from the IMO. This is the $120 on the next line, which 24 is $2 times the 60 megawatts. All of that is shown on 25 row 3. 26 Are those numbers correct? 27 MR. PORAY: That is correct. 28 MR. CAMPBELL: So looking at Generator A's net Les Services StenoTran Services Inc. 613-521-0703 1002 OHNC PANEL 2, cr-ex (Campbell) 1 payments for congestion, it has paid $270 -- the $30 2 plus the $240 -- and it has received back $120, for a 3 net payment to the IMO of $150, which is shown in row 4. 4 MR. PORAY: That is correct. 5 MR. CAMPBELL: Okay. And if I go then to 6 Market Participant B it is a slightly different case in 7 your example because, as I understand your scenario, 8 this market participant isn't exporting at all in this 9 example. 10 MR. PORAY: It may export, but it doesn't have 11 a physical facility. It doesn't generate. It may be 12 arranging an export for some other parties. 13 MR. CAMPBELL: But that is not shown on your 14 example? 15 MR. PORAY: No. We didn't show that 16 specifically. 17 MR. CAMPBELL: Okay. So for the purposes of 18 your example, Market Participant B is speculating on the 19 possibility of congestion between P1 and P2? 20 MR. PORAY: They may be, yes. 21 MR. CAMPBELL: In this example the speculation 22 paid off. Market Participant B bought 40 megawatts of 23 transmission rates for 20 bucks and he received 80 bucks 24 in congestion payments from the IMO for a net profit of 25 60 bucks? 26 MR. PORAY: Yes. 27 MR. CAMPBELL: This is shown in row 3 under 28 the Market Participant B example as negative 60 because Les Services StenoTran Services Inc. 613-521-0703 1003 OHNC PANEL 2, cr-ex (Campbell) 1 it is a payment from the IMO to the Market 2 Participant B. Correct? 3 MR. PORAY: That's correct. 4 MR. CAMPBELL: Now, combining the two, 5 Generator A and Market Participant B, we see on the last 6 line that the IMO nets out up $90, that is the $150 from 7 the generators and paying out $60 to Market 8 Participant B. Is that correct? 9 MR. PORAY: That's correct. 10 MR. CAMPBELL: In terms of the $90 it is less 11 than the $150 that the generator paid in that congestion 12 payment, really only because the Market Participant B 13 bought the rights to $2 in congestion payments for 14 50 cents? 15 MR. PORAY: That's correct. 16 MR. CAMPBELL: If your example had assumed 17 that the price of transmission rights was closer to the 18 value of the congestion payments, then the $90 would 19 have been closer to the $150 that the exporter paid. 20 Correct? 21 MR. PORAY: That would be correct. 22 MR. CAMPBELL: All right. Well, now I want to 23 explore what happens to the 90 bucks. I am going to ask 24 you to turn to page 3 of our Exhibit G6.1. 25 Page 3 is an excerpt from the market rules 26 approved by the IMO board? 27 MR. PORAY: That is what it appears, yes. 28 MR. CAMPBELL: I think if you look at pages 4 Les Services StenoTran Services Inc. 613-521-0703 1004 OHNC PANEL 2, cr-ex (Campbell) 1 and 5, we have included those to indicate that on the 2 IMO Web site, this excerpt at page 3 is in fact one that 3 they list as having been approved by the IMO board. You 4 don't take any issue with that, I take it? 5 MR. PORAY: No. 6 MR. CAMPBELL: If we go back then to page 3, 7 looking at section 4.18, it describes the TR clearing 8 account. Correct? 9 MR. PORAY: That is correct. 10 MR. CAMPBELL: Looking at section 4.18.1, this 11 section requires the IMO to establish this TR clearing 12 account. This is not optional, it is required to 13 establish it? 14 MR. PORAY: That is correct. 15 MR. CAMPBELL: Proceeding to the first 16 sub-section 4.18.11, the first thing the account is to 17 hold is the congestion charges collected from those 18 using a congested interface, as we discussed earlier? 19 MR. PORAY: That is correct. 20 MR. CAMPBELL: That is the $240 that we 21 previously discussed in G6.1? 22 MR. PORAY: That is correct. 23 MR. CAMPBELL: Looking at the next sub-section 24 4.18.12, the account also holds the revenues from the 25 transmission rights auction. Is that correct? 26 MR. PORAY: That is correct. 27 MR. CAMPBELL: That is the $30 paid by 28 Generator A in Exhibit G6.1? Les Services StenoTran Services Inc. 613-521-0703 1005 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: That is correct. 2 MR. CAMPBELL: The next sub-section, 4.18.3, 3 shows that the amounts owed to holders of transmission 4 rights are then debited from the account? 5 MR. PORAY: That is correct. 6 MR. CAMPBELL: That is the $120 paid by the 7 IMO to Generator A? 8 MR. PORAY: That's correct. 9 MR. CAMPBELL: The next section 14.4.18.4 10 speaks to TR offerers. We don't have any in this 11 example, do we? 12 MR. PORAY: No, we don't. 13 MR. CAMPBELL: Finally, looking at 4.18.15 14 this is a section that indicates that the remaining 15 amounts in the account can be used to offset 16 transmission service charges. Correct? 17 MR. PORAY: That is correct. 18 MR. CAMPBELL: That is confirmed -- 19 MR. PORAY: Yes. 20 MR. CAMPBELL: -- that is the $90 at the 21 bottom of our example? 22 MR. PORAY: That would be correct. 23 --- Pause 24 MR. CAMPBELL: In fact, when you go through 25 4.18 this offset to transmission customers is the only 26 authorized use for the residual amount in that account. 27 Isn't that correct? 28 MR. PORAY: That is so. Les Services StenoTran Services Inc. 613-521-0703 1006 OHNC PANEL 2, cr-ex (Campbell) 1 MR. CAMPBELL: Now, with this background, I 2 want to take you to Exhibit D6.1 on page 11. 3 MR. PORAY: Okay. We are there. 4 MR. CAMPBELL: I am looking at the line 5 starting at, the paragraph starting at, line 12. 6 MR. PORAY: Yes. 7 MR. CAMPBELL: Here you are talking about the 8 surplus in the auction or sale of transmission rights. 9 Is that correct? 10 MR. PORAY: That is correct. 11 MR. CAMPBELL: This is the surplus that will 12 be used to credit exporters in your proposal? 13 MR. PORAY: No, I think when we came up with 14 our example that we have shown in G5.2 we are not 15 actually dealing with the surplus. 16 MR. CAMPBELL: Well, let me read the 17 paragraph. 18 MR. PORAY: I know in the paragraph it does 19 say "surplus." 20 MR. CAMPBELL: That is exactly what I am 21 asking. Well, let me read the paragraph. 22 MR. PORAY: Okay. 23 MR. CAMPBELL: "It is also proposed 24 that, on an annual basis, a credit will 25 be made to the generators against EWT 26 transmission charges by an amount 27 equivalent to their specific 28 contributions to the surplus in the Les Services StenoTran Services Inc. 613-521-0703 1007 OHNC PANEL 2, cr-ex (Campbell) 1 auction/sale of Transmission Rights by 2 IeMO, pursuant to the Market Rules." 3 That is your proposal, is it not? 4 MR. PORAY: That's what we have stated there, 5 yes. 6 MR. CAMPBELL: That is your proposal? 7 MR. PORAY: I guess our thinking has changed. 8 MR. CAMPBELL: Well, Mr. Poray, I am looking 9 at -- 10 MR. ROGERS: Let him answer the question. You 11 have asked a question and he is trying to answer it. 12 Please -- 13 MR. CAMPBELL: I just want to make sure I am 14 looking at the right page because this page has already 15 been revised once. 16 MR. ROGERS: Well, that's fine. You can 17 editorialize this in the argument, but I would like the 18 witness to at least be given a chance to answer the 19 question. 20 --- Pause 21 MR. PORAY: Yes, I think what our proposal is, 22 if we go to line 13 and line 14, it would be the EWT 23 transmission charges by an amount equivalent to their 24 specific contributions to the auction/sale of 25 transmission rights. So it wouldn't be the surplus. It 26 would be the actual amount. 27 --- Pause 28 MR. CAMPBELL: Okay. I just want to Les Services StenoTran Services Inc. 613-521-0703 1008 OHNC PANEL 2, cr-ex (Campbell) 1 understand, then, exactly how much we have changed in 2 your testimony from what is in the revised submission. 3 You were asked about the contents of this 4 surplus in Interrogatory E-2-27. I would ask you to 5 turn that up. 6 MR. PORAY: Yes. 7 --- Pause 8 MR. PORAY: Yes, we have that. 9 MR. CAMPBELL: Looking at part (b) of this 10 interrogatory from AMPCO, you were asked whether the 11 surplus in your proposal took into account the IMO's 12 payments to transmission right holders when there is 13 congestion. That was the question, wasn't it? 14 MR. PORAY: That is correct. 15 MR. CAMPBELL: Could you read your answer, 16 please? 17 MR. PORAY: We stated or responded that: 18 "OHNC understands that the surplus will 19 take into account payments to 20 Transmission Right holders when there is 21 congestion on the interface(s)." 22 MR. CAMPBELL: So what you are telling me is 23 that, based on your testimony today, that answer is no 24 longer correct? 25 MR. PORAY: No. I think in fact if you look 26 at the reference that you made to the market rules that 27 were approved by the IMO Board, the TR clearing account, 28 4.18, that is exactly what will happen, that is, the Les Services StenoTran Services Inc. 613-521-0703 1009 OHNC PANEL 2, cr-ex (Campbell) 1 payments will be made to the transmission right holders 2 from that account if there is congestion on the 3 interface. 4 MR. CAMPBELL: All right. 5 But with respect to your proposal, your 6 proposal for EWT charges, as I understand it, does not 7 take into account payments to transmission right holders 8 when there is congestion on the interface. 9 MR. PORAY: Yes, it does. We are specifically 10 focusing on the payments that the generators have made 11 for the transmission rights, not for congestion. We are 12 just dealing with transmission rights. 13 MR. CAMPBELL: So what I'm saying is, if I 14 understand your proposal the way you are explaining it 15 today, it is not taking into account payments to 16 transmission right holders when there is congestion. 17 MR. PORAY: That's correct. Yes. 18 MR. CAMPBELL: And that is a change both from 19 what is in Exhibit D and in this interrogatory answer. 20 MR. PORAY: Just hang on for a second, please. 21 --- Pause 22 MR. PORAY: Okay. Perhaps where the confusion 23 is is that what you are referring to, Mr. Campbell, is 24 the surplus that is held in the IMO's TR account whereas 25 what we are proposing is to in fact get a list from the 26 IMO of the purchases that the generators have made of 27 transmission rights. We are not digging into the 28 surplus account. Les Services StenoTran Services Inc. 613-521-0703 1010 OHNC PANEL 2, cr-ex (Campbell) 1 MR. CAMPBELL: Mr. Poray, the clearing account 2 is one matter, and we are going to come back to that. 3 MR. PORAY: Okay. 4 MR. CAMPBELL: But this question asked you, 5 specifically, in relation to your evidence, what was 6 included in the surplus that is mentioned at lines 13 7 and 14, Exhibit D, Tab 6, Schedule 1, page 11 as 8 revised. That is what the question is about, isn't it? 9 You were asked "Does the surplus include the payment to 10 the generator holders" and you said yes. 11 --- Pause 12 MR. CAMPBELL: Mr. Poray, if there is a change 13 in your evidence from what was in the submission and 14 what was in the interrogatory answers by what you have 15 said today, fine, but it looks to me like that is what 16 you are doing. 17 MR. PORAY: I believe that there is a change, 18 yes. 19 MR. CAMPBELL: Okay. So what we are talking 20 about here is, in terms of your example, the payments to 21 the transmission right holders. That is the $120 to 22 Generator A in Exhibit G6.1, is it not? That is what we 23 are talking about here? 24 MR. PORAY: This is the congestion rental 25 payment to the generator as a holder of the transmission 26 right. 27 MR. CAMPBELL: That is what we are talking 28 about in paragraph (b) of this interrogatory answer. Les Services StenoTran Services Inc. 613-521-0703 1011 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: Yes, I believe that is the case. 2 MR. CAMPBELL: And that is what you are now 3 saying is not included in your proposal. 4 MR. PORAY: That's right. Yes. 5 MR. CAMPBELL: Okay. 6 Similarly, then, if we can look at part (c) of 7 the same interrogatory, there you were asked: 8 "Does the surplus take into account the 9 payments by the generators in the energy 10 market when they schedule a transaction 11 through the congested interface?" 12 Could you read your answer to that question, 13 please? 14 MR. PORAY: Certainly. 15 "OHNC understands that the surplus will 16 take into account payments by generators 17 in the energy market when they schedule a 18 transaction through the congested 19 interface. However the details have not 20 yet been finalized as the Market Rules 21 are still being developed." 22 MR. CAMPBELL: All right. 23 Just again, so we know what we are talking 24 about, this is the $240 paid by Generator A for 25 congestion charges in Exhibit G6.1 using your example. 26 Correct? 27 MR. PORAY: That's correct. 28 MR. CAMPBELL: As I understand your example, Les Services StenoTran Services Inc. 613-521-0703 1012 OHNC PANEL 2, cr-ex (Campbell) 1 G5.2, that $240 is now not included in your proposal 2 contrary to your interrogatory answer. 3 MR. PORAY: That's correct. 4 MR. CAMPBELL: Now, let's go on in that 5 interrogatory answer to part (g). What it states is 6 that parties who do not buy a transmission right do not 7 get a credit under your approach. 8 MR. PORAY: That is correct. 9 MR. CAMPBELL: Looking at Exhibit G6.1 -- 10 well, I guess I should ask, are you changing that at 11 all? 12 MR. PORAY: No, we are not. 13 MR. CAMPBELL: So looking at Exhibit G6.1, 14 would you agree that irrespective of whether or not a 15 party buys a transmission right it can make a 16 contribution to the TR clearing account we have been 17 talking about in section 4.18.1 of the market rules 18 through congestion payments? 19 MR. PORAY: That is correct. 20 --- Pause 21 MR. CAMPBELL: All right. Now, if I 22 understand the rules under 418.1 of the market rules 23 that we have been talking about, you agreed with me 24 earlier that all of those moneys into the hopper when 25 they netted out, the net amount went to the credit of 26 transmission customers. Correct? 27 MR. PORAY: That is my understanding. 28 MR. CAMPBELL: So your proposal is not doing Les Services StenoTran Services Inc. 613-521-0703 1013 OHNC PANEL 2, cr-ex (Campbell) 1 that. 2 MR. PORAY: Our proposal has nothing to do 3 with the TR clearing attempt. 4 MR. CAMPBELL: I'm just asking you whether 5 your proposal takes into account all of the things that 6 are listed in 418. 7 MR. PORAY: No, it does not. It only takes 8 into account the transmission rights. 9 MR. CAMPBELL: Just so we are clear here, we 10 are talking about the proposal as you revised it today. 11 MR. PORAY: That's correct. 12 MR. CAMPBELL: So if I understand what you 13 said about this TR clearing account, what you are 14 suggesting is that your proposal is to operate 15 completely independently of the TR clearing account in 16 the market rules. 17 MR. PORAY: That is correct. 18 MR. CAMPBELL: Thank you, Mr. Chairman. Those 19 are my questions. 20 THE PRESIDING MEMBER: Thank you, 21 Mr. Campbell. 22 I will check. If there is no one else who has 23 questions on the EWT transaction -- Okay. 24 MEMBER SMITH: I know that you didn't try to 25 quantify or forecast the revenue from the charge, but 26 could you give me some sort of idea how much you 27 proposed, an order of magnitude, the $50 million would 28 bring in, $100 million, $10 million. How does this fit Les Services StenoTran Services Inc. 613-521-0703 1014 OHNC PANEL 2 1 into the big picture? 2 MR. PORAY: I guess we could perhaps use the 3 information which was in one of the interrogatories 4 based on the volume of traffic that took place in 1998 5 and 1999 and multiply that by the one dollar per 6 megawatt hour to get some sort of an estimate of the 7 charges that might accrue as a result of these 8 transactions. 9 MEMBER SMITH: Could you do that for me now, 10 or later? Just do it on a piece of paper and send it up 11 or something. 12 THE PRESIDING MEMBER: Yes. I was going to 13 ask a question about that. We will hold off an 14 undertaking until we may need to add it. 15 MEMBER SMITH: My second question, in terms of 16 power imported into Ontario, more often than not I 17 understand it bears a similar export charge emanating 18 from the jurisdiction it came from. 19 MR. PORAY: That is correct. 20 MEMBER SMITH: These charges will vary. 21 MR. PORAY: That is correct. 22 MEMBER SMITH: I'm not going to ask you to 23 calculate this. I'm just asking you if the calculation 24 is possible. Would we be able to know -- you be able to 25 know -- on a year to year basis what the average charge 26 was for power imported into Ontario? In other words, we 27 say $2 or $3.50. Would we know that? 28 MR. PORAY: I don't think that's easily Les Services StenoTran Services Inc. 613-521-0703 1015 OHNC PANEL 2 1 quantifiable because of the way discounting is done in 2 the various jurisdictions. We have provided some 3 examples in an interrogatory response that shows -- just 4 using the current rates for export and wheel-through 5 charge other jurisdictions what a transaction would look 6 like in terms of the total cost of importing power from 7 a generator located outside New York and Michigan to a 8 load in Ontario. 9 MEMBER SMITH: Right. 10 MR. PORAY: So that information is available 11 in an interrogatory. We could look that up for you. 12 MEMBER SMITH: It's just I thought, you know, 13 as this thing develops as Ontario consumers would be 14 interested to know how our charges, you know -- are we 15 charging as much as people outside are or are we 16 charging more than they do or charging less? 17 MR. PORAY: We indicated in our comparison of 18 what the charges were in other jurisdictions. 19 MEMBER SMITH: I understand. The last 20 question, you indicated in your testimony that a lot of 21 exported power relates to price -- short term price 22 considerations. 23 MR. PORAY: That's correct. 24 MEMBER SMITH: If the export charge was 25 higher, would that reduce our probability of exporting 26 because the price, therefore, would be higher and, 27 therefore, there would be less chance of getting it, or 28 would that be a minor factor in terms of these things? Les Services StenoTran Services Inc. 613-521-0703 1016 OHNC PANEL 2 1 MR. PORAY: Well, I think it would be a 2 factor. I'm not sure how big a factor that would be. 3 MEMBER SMITH: It wouldn't be the -- 4 MR. PORAY: But it would be a factor. Yes. 5 MEMBER SMITH: Thanks. 6 THE PRESIDING MEMBER: Mr. Vlahos. 7 MEMBER VLAHOS: Gentlemen, just one area of 8 questions. I take it from your proposal that you wish 9 Ontario would take the lead in terms of pricing of 10 export transmission for exports. The one dollar that's 11 proposed is at the bottom of the range, that you have 12 ended up identifying for other jurisdictions. 13 MR. PORAY: That is correct. 14 MEMBER VLAHOS: If that lead is not followed 15 by the others, then what are the impacts from an Ontario 16 perspective? 17 MR. PORAY: I'm not sure whether in fact we 18 are taking the lead when I said I agreed about the one 19 dollar per megawatt hour being at the lower end. I 20 think our stakeholders indicated that they didn't want 21 us to -- the didn't want Ontario to take the lead in the 22 sense that they felt that some charge should be applied 23 rather than no charge. 24 As to what the consequences of -- I'm sorry, 25 could you repeat that second part of the question? 26 MEMBER VLAHOS: Yes. I understand that the no 27 charge -- no charge would definitely take the lead 28 because no other jurisdiction has no charge. Les Services StenoTran Services Inc. 613-521-0703 1017 OHNC PANEL 2 1 MR. PORAY: That is correct. 2 MEMBER VLAHOS: The lowest charge from other 3 jurisdictions is about one dollar Canadian. 4 MR. PORAY: That's correct. 5 MEMBER VLAHOS: So your proposal would put 6 Ontario into the bottom end of the range. 7 MR. PORAY: That is correct. 8 MEMBER VLAHOS: The highest would be -- 9 MR. PORAY: About $11 per megawatt hour. 10 MEMBER VLAHOS: Right. Thank you. Now, to 11 the extent that there would be $1 for Ontario, but the 12 other jurisdictions do not come down to $1, what are we 13 giving up? 14 MR. PORAY: I think perhaps there is a risk 15 that others might not follow the proposal that we are 16 making, but I think directionally, we are certainly 17 going in the same direction as FERC, the Federal Energy 18 Regulatory Commission, is proposing in terms of the 19 structure of the regional transmission organization, 20 which is to remove the pancaking of rates. I think this 21 is supportive of that. 22 MEMBER VLAHOS: That's what I wanted to end 23 up, Dr. Poray, is to perhaps give us an update as to 24 where the matter stands on the original transmission 25 organizations or RTO, that activity. What's the next 26 step? 27 MR. PORAY: I believe the utilities, the 28 transmission utilities, in the United States have to Les Services StenoTran Services Inc. 613-521-0703 1018 OHNC PANEL 2 1 file by October of this year proposals for joining a 2 regional transmission organization. If they don't want 3 to join, then they have to produce evidence why they 4 don't want to do so. 5 MEMBER VLAHOS: Okay. And those would be 6 jurisdictions or regions within the U.S. jurisdiction. 7 MR. PORAY: That is correct. 8 MEMBER VLAHOS: And Canadian jurisdictions are 9 invited? 10 MR. PORAY: They have certainly been invited 11 to participate in the discussion, but there is no 12 timetable for Canadian utilities to join RTOs or to form 13 RTOs. 14 MEMBER VLAHOS: Would it makes sense, then, to 15 wait and see what happens in October? I'm just not sure 16 as to if we do set a rate now that it's, say, below or 17 the bottom of the range, then there would be some 18 repercussions in the short term until this matter is 19 resolved at FERC as to what would be the proposals by 20 the regions in the U.S. 21 MR. PORAY: I think certainly that will take 22 time to -- 23 MEMBER VLAHOS: So the proposals are due in 24 October and there will be some time. Those processes 25 take due time. 26 MR. PORAY: That is correct. 27 MEMBER VLAHOS: So would you venture to guess 28 as to where there may be a resolution? Les Services StenoTran Services Inc. 613-521-0703 1019 OHNC PANEL 2 1 MR. PORAY: I'm not sure of what the timetable 2 is, no. 3 MEMBER VLAHOS: Okay. 4 I'm not sure, again, as to the Canadian 5 connection here. There has to be a resolution in the 6 U.S. and then there has to be a decision by the Canadian 7 original entities as to whether to participate or not. 8 MR. PORAY: Well, certainly they have been 9 invited to participate if they wish, but I think 10 generally each Canadian utility has its own agenda in 11 terms of what it wants to do and the timing. 12 Certainly there is the issue of national 13 treatment in the sense that are there any potential 14 impacts as a result of joining a cross-border ISO in 15 terms of the jurisdictional aspect of the Federal Energy 16 Regulatory Committee having jurisdiction over the U.S. 17 utilities and what is the jurisdictional issue over the 18 Canadian utilities. I think those sort of things are 19 still unresolved. 20 MEMBER VLAHOS: We are talking about subgroups 21 here. We are talking about pockets. There are 22 inter-tie connections, Ontario versus four or five other 23 jurisdictions, but then you move on to Manitoba and the 24 pocket changes, the grouping changes. 25 MR. PORAY: That's correct. 26 MEMBER VLAHOS: So I was just wondering, to 27 your knowledge is it a role here for the regulator to 28 play or has the regulator played any role so far? I'm Les Services StenoTran Services Inc. 613-521-0703 1020 OHNC PANEL 2 1 talking about the Canadian regulator now, whether it is 2 provincial or federal. 3 MR. PORAY: It is my understanding that the 4 government and the regulator have been advised of what 5 has been happening in this discussion on the RTOs, but 6 I'm not sure what the role of the provincial regulator 7 and the federal regulator, the National Energy Board, 8 would be in this matter. 9 But I think just to perhaps close the loop, I 10 see the application of the export and wheeling as not 11 being inconsistent with the evolution of this towards 12 the regional transmission organizations, because in 13 between the regions -- in other words, if you were to 14 look at Ontario as the regional organization, there 15 would still be this matter of trading between the 16 regions where export and wheel transaction could still 17 apply. 18 What I think FERC is trying to do is to deal 19 with the matter of the infrastructure in the United 20 States where you have a large number of transmission 21 owners within a trading region and each transmission 22 owner has filed a rate with FERC and consequently you 23 have all of these different rates applying within a 24 trading region. 25 I think what FERC is trying to do is to 26 coalesce this into one transmission entity, be that an 27 independent system operator or a transco, whatever the 28 case may be, whereby you have uniform pricing for that Les Services StenoTran Services Inc. 613-521-0703 1021 OHNC PANEL 2 1 region so you would get away from these pockets of 2 different transmission charges. 3 MEMBER VLAHOS: In your view, how important of 4 an impact or a signal would it be if the price that is 5 set pursuant to this proceeding is, say, $1.00? Would 6 that be something that would go a long way in the minds 7 of the FERC regulator? 8 MR. PORAY: I think it would indicate that we 9 are moving in that direction. In other words, we are 10 setting the rates at a low level as opposed to a high 11 level for these types of transactions. 12 MEMBER VLAHOS: Right. And if it was $2.00, 13 for example, although I recognize there is 100 per cent 14 difference from $1.00, but in the scheme of things do 15 you think that would be viewed as going contrary to the 16 trends or to the end state? 17 MR. PORAY: I don't think so. I think FERC's 18 main perspective in terms of opening up the market is 19 that there is non-discriminative treatment, that up 20 until now they haven't really been concerned with the 21 magnitude of the rates, they have been more concerned 22 with access to the transmission system and reciprocity. 23 So from that perspective I don't see that as a 24 stumbling block, no. 25 MEMBER VLAHOS: All right. Thank you. 26 Thank you for those answers. 27 THE PRESIDING MEMBER: Just to follow up a 28 little bit on that, I understand that Natural Resources Les Services StenoTran Services Inc. 613-521-0703 1022 OHNC PANEL 2 1 Canada and the NEB have been having discussions with 2 U.S. on RTOs. Are you aware of that? 3 MR. PORAY: I understand that they have 4 been, yes. 5 THE PRESIDING MEMBER: And that in a national 6 sense the NEB has jurisdiction over licensing for 7 exports and imports. Correct? 8 MR. PORAY: That is correct. 9 THE PRESIDING MEMBER: So they are the party 10 that could then impose certain conditions -- not prices, 11 but conditions of licence that relate to how those 12 transactions would be sent. 13 MR. PORAY: This would be just for the 14 commodity -- 15 THE PRESIDING MEMBER: Yes. 16 MR. PORAY: -- not for the transmission. 17 THE PRESIDING MEMBER: Yes, okay. Thank you. 18 I would like to just go back and understand a 19 few of the numbers around this proposal of yours. 20 Could you please start by turning up 21 Exhibit D, Tab 6, Schedule 1, page 5 of 11, which then 22 lists the options that you have looked at. 23 In addition, could you keep handy the 24 Interrogatory Response E-31, and I probably will be 25 looking specifically at Schedule 9, page -- I'm just 26 looking for the page -- page 4 of that. 27 MR. PORAY: Okay, we have. 28 THE PRESIDING MEMBER: So if you could keep Les Services StenoTran Services Inc. 613-521-0703 1023 OHNC PANEL 2 1 that handy as well. 2 So I just want to focus on No. 3 and also on 3 the proposal that you have and also compare that to 4 marginal pricing. 5 As far as No. 3 is concerned, you proposed a 6 levelized rate and you have calculated that at $4.85 per 7 megawatt hour -- 8 MR. PORAY: That's correct. 9 THE PRESIDING MEMBER: -- but not based by 10 dividing the annual network pool revenue requirement -- 11 now that is for the network pool -- by the annual energy 12 transacted. 13 MR. PORAY: That is correct. 14 THE PRESIDING MEMBER: Now, first of all, can 15 you explain how that differs from -- if we look at the 16 Interrogatory I mentioned, E-31, and I would like you to 17 go to page 8 and the table there. 18 Now, there you have listed the proposed 19 network charge of $2.70 per kilowatt per month, and then 20 you have converted that into $3.38 per megawatt hour. I 21 would just like to understand the differences between 22 those two numbers in that calculation. 23 MR. PORAY: Okay. Well, first of all, we 24 didn't convert those numbers. I think this was done 25 by OPGI. 26 THE PRESIDING MEMBER: Okay. 27 MR. PORAY: In essence, what we did was we 28 spread the cost of the transmission network over the Les Services StenoTran Services Inc. 613-521-0703 1024 OHNC PANEL 2 1 8,760 hours of the year -- 2 THE PRESIDING MEMBER: I understand -- 3 MR. PORAY: Okay. 4 THE PRESIDING MEMBER: -- that calculation. I 5 got yours, but I could not come up with the other 6 number. 7 MR. PORAY: Okay. I think what the other one 8 does is, it converts that $2.76 per kilowatt per month 9 first of all by assuming that there are 30 days in the 10 month. So that is 720 hours. Then there is 100 per 11 cent load factor. So if we take the 30-day month, so 12 that would figure out to be, what, 360 days per year. 13 So transferring that into hours would be 720 times 24 -- 14 I'm sorry, times 12. 15 THE PRESIDING MEMBER: So for purposes now we 16 will use your number in the evidence -- 17 MR. PORAY: Okay. 18 THE PRESIDING MEMBER: -- for illustrative 19 purposes. I just wanted to understand that. 20 If we could look at E-31, Schedule 9, and look 21 at the table on page 4 of 8, I just want to understand. 22 In 1998 exports are listed there at 3,223,000 megawatt 23 hours. Using that, as you mentioned to Mr. Smith, with 24 an EWT charge, as you have proposed, of $1 per megawatt 25 hour, that would yield approximately $3.2 million in 26 revenue. 27 MR. PORAY: That is correct. 28 THE PRESIDING MEMBER: If you use $4.85 per Les Services StenoTran Services Inc. 613-521-0703 1025 OHNC PANEL 2 1 megawatt hour equivalent -- which I am going to 2 characterize as the fully allocated cost. I don't know 3 whether you would agree. There are various definitions 4 around fully allocated. But we will call it a fully 5 allocated cost. 6 That would yield $15 million roughly. 7 MR. PORAY: That is correct. 8 THE PRESIDING MEMBER: And equally if we did 9 the same calculations for 1999, the numbers would be 10 about $4.6 million for $1, and approximately $22 million 11 for the $4.85. 12 MR. PORAY: That is correct. 13 THE PRESIDING MEMBER: So I have that right. 14 Let's look, then, at the base value of the 15 export. The value of the export in 1998 is listed in 16 Canadian dollars as $98.7 million. That is the value. 17 MR. PORAY: That's right. 18 THE PRESIDING MEMBER: That, by my 19 calculation, averages $30.64 cents per megawatt hour. 20 You can take that subject to check. 21 My point and where I am going is that the 22 charge of $4.85 per megawatt hour is between 11 and 23 16 -- well, I am bringing in the 1999. So for 1998, it 24 is 11 per cent of the total. So that would add value to 25 the total of $11. Is that approximate? 26 MR. PORAY: I think that is correct, yes. 27 THE PRESIDING MEMBER: If we do the same thing 28 for 1998, then the $4.85 per megawatt hour would Les Services StenoTran Services Inc. 613-521-0703 1026 OHNC PANEL 2 1 constitute about 16 per cent, which compares favourably 2 with the 16 per cent of the total power bill in the 3 province. 4 MR. PORAY: Right. 5 THE PRESIDING MEMBER: The point I am making 6 is that only be 2 to 3 per cent of the total value of 7 the export would be from $1. 8 MR. PORAY: To understand, what do you mean by 9 value? 10 THE PRESIDING MEMBER: The value of exports is 11 listed in megawatt hours times dollars Canadian and how 12 much does that work out to, an average price. In 1998, 13 $30.64 per megawatt hour average price to the export. 14 In 1999, that goes up to $43.53 per megawatt hour 15 average price to the export. 16 MR. PORAY: Okay. 17 THE PRESIDING MEMBER: I am comparing the 18 embedded transmission charge which is in there. We 19 don't know exactly how much, but we would assume it is 20 $1. Or if we use the $4.85 fully allocated cost, then 21 it would constitute as follows, subject to your check, 22 between 2 and 3 per cent of the total price for the cost 23 of the export. And if it is using the $4.85, which is 24 not your proposal, about 16 per cent. 25 The point I am coming to is that I am having 26 some difficulty reconciling the fact that this dollar is 27 going to be a significant value to exports and how it is 28 going to affect the transaction cost when it is a dollar Les Services StenoTran Services Inc. 613-521-0703 1027 OHNC PANEL 2 1 out of $30. 2 I am having trouble reconciling your answers 3 about that. 4 In the case of the dollar, it is only 3 per 5 cent of the total cost of the power that is delivered. 6 MR. PORAY: I don't think we have ever 7 actually said that our dollar per megawatt hour was a 8 barrier to exports. 9 THE PRESIDING MEMBER: I have heard several 10 times you say that it was significant in response to 11 questioning from intervenors; that it was a significant 12 part of the transaction cost of export power. 13 I am saying my calculations show that it 14 isn't. 15 MR. PORAY: Just a comment. First of all, we 16 are not sure whether this revenue reflects any 17 transmission charges. 18 THE PRESIDING MEMBER: I don't either. I 19 assumed that that was probably the gross revenue and it 20 would have imbedded the transmission charge, if any. 21 MR. PORAY: We are not sure. The other thing 22 that we are trying to do is to achieve some sort of a 23 balance in coming up with this $1 per megawatt hour, 24 given the -- 25 THE PRESIDING MEMBER: Let's take a 26 hypothetical. If the Board found that until reciprocal 27 agreements are negotiated, the fully allocated cost -- 28 my term -- of $4.85 per megawatt hour would be the Les Services StenoTran Services Inc. 613-521-0703 1028 OHNC PANEL 2 1 charge, what would be the general policy impacts of that 2 in return for returning something like $15 to $20 3 million in revenue to the transmission customers; if we 4 set it at that until and unless reciprocal agreements 5 are negotiated? 6 MR. PORAY: I think my first reaction would be 7 that those who are opposed to $1 per megawatt hour would 8 be even more opposed to the $4.85 per megawatt hour, 9 because they would view that as potentially a barrier to 10 exports. 11 I know that your calculations show that that 12 is a small percentage. However, they may view that that 13 is taking money away from their profits on these 14 profitable transactions. 15 THE PRESIDING MEMBER: The only cost based 16 rate that you have put forward, that is "cost based", is 17 $4.85. 18 MR. PORAY: That is correct. 19 THE PRESIDING MEMBER: That is the basis of 20 the fully allocated cost based rates. 21 Come back to the marginal. Could you explain 22 to me how you would see the marginal pricing work, given 23 congestion and other things. How would that be 24 calculated if you went to marginal pricing? 25 MR. PORAY: I think marginal pricing would 26 involve the calculation of incremental losses and 27 incremental congestion caused by the particular 28 transaction that was scheduled with the IMO for export. Les Services StenoTran Services Inc. 613-521-0703 1029 OHNC PANEL 2 1 THE PRESIDING MEMBER: That would be a very 2 difficult calculation, kind of like a second generation 3 calculation on top of all these other complicated 4 calculations. 5 MR. PORAY: And I think typically this would 6 be an after-the-fact settlement rather than a priority. 7 THE PRESIDING MEMBER: And do you still think 8 that in the long term, as the market develops, that that 9 might an appropriate way to go rather than a flat rate? 10 MR. PORAY: I think that seems to be the 11 general trend; that for these types of transactions, the 12 utilization of the system is perhaps best done if there 13 is marginal pricing. 14 THE PRESIDING MEMBER: Okay. Thank you. 15 Now, the question I would ask you is, you have 16 made a statement -- I think those have asked you that 17 you don't see that there is any incentive for OHNC to 18 maximize EWT revenues, that there is any particular 19 incentive? 20 MR. PORAY: That's correct. 21 THE PRESIDING MEMBER: That is based on the 22 assumption that any revenue would be rebated to the 23 transmission customers? Correct? 24 MR. PORAY: That is our proposal, yes. 25 THE PRESIDING MEMBER: That's your proposal. 26 Now, as everybody who was at the Board's gas 27 hearing knows, that the transactional revenues which are 28 on top of the use of the gas system for using their Les Services StenoTran Services Inc. 613-521-0703 1030 OHNC PANEL 2 1 capacity of the gas system have been approved as being a 2 separate category of transaction, which they shared 3 between the shareholders and the customers -- that has 4 been approved for gas transactions -- you are aware of 5 that? Maybe not. 6 MR. PORAY: I am not offhand. 7 THE PRESIDING MEMBER: Okay. My point is, and 8 my question is, would your answer be different if there 9 was an incentive scheme in place relative to your 10 shareholders? 11 MR. ROGERS: If he could get some help from 12 the economists on the panel. 13 --- Laughter 14 MR. PORAY: I think, basically, yes. The 15 problem I would have is that we don't schedule the 16 transactions. We don't have control over -- 17 THE PRESIDING MEMBER: There is that 18 difference with in gas. 19 MR. PORAY: That's right, yes. 20 THE PRESIDING MEMBER: Thank you. 21 Just one thing I think would be helpful to us. 22 If we could ask you, Mr. Campbell and -- sorry, 23 Mr. Campbell -- and Mr. Rogers, if you could file with 24 us a copy of the market rules, officially chapter 8, 25 section 4, regarding transmission rights and so on. If 26 you could file with us any of the new updates and 27 changes that have happened to that just so that we, the 28 Board, think we have the right set of rules and Les Services StenoTran Services Inc. 613-521-0703 1031 OHNC PANEL 2 1 amendments that should relate to this topic. 2 We did scurry around this morning and we found 3 an old set of rules, but they weren't the new ones that 4 have been approved, and we didn't have time to go on the 5 Web site and get the amendments. So it would be helpful 6 to us and everybody, I think, to have that on the 7 record, if we could. 8 MR. ROGERS: We will. 9 THE PRESIDING MEMBER: Section 4. 10 MR. ROGERS: We will. 11 MR. LYLE: Should we mark that as 12 Undertaking F6.1? 13 UNDERTAKING NO. F6.1: Mr. Rogers 14 undertakes to provide an updated version 15 of the market rules, Chapter 8, Section 4 16 THE PRESIDING MEMBER: Those are all my 17 questions. 18 One question from Mr. Smith. 19 MEMBER SMITH: Again, I am just asking for 20 maybe a wild guess, but in terms of the export revenue 21 that is returned to you under your proposal, it would go 22 to customers or to reduce charges to customers? 23 MR. PORAY: That is correct. 24 MEMBER SMITH: And be paid to generators 25 relative to their transmission rates payments? 26 MR. PORAY: That is correct. 27 MEMBER SMITH: Any idea what the break out 28 would be on an average year? Les Services StenoTran Services Inc. 613-521-0703 1032 OHNC PANEL 2 1 MR. PORAY: No idea, because I don't know how 2 much congestion there will be. I mean, for a relatively 3 uncongested system they may, in fact, get nothing. 4 MEMBER VLAHOS: "They" being? 5 MR. PORAY: The generators. 6 THE PRESIDING MEMBER: Okay. Thank you. 7 We are at the morning break a little late. 8 Could we return at 1115? 9 We will resume then with the next issue which 10 is the treatment of existing Ontario Hydro contracts and 11 then we will be moving on to new load connection 12 investment. All right? 13 Thank you very much. 14 --- Upon recessing at 1049 15 --- Upon resuming at 1405 16 THE PRESIDING MEMBER: First, we should start 17 by asking Mr. Rogers if he has any re-direct on the EWT 18 issue. So we will do that first. 19 MR. ROGERS: Thank you, I do not. 20 THE PRESIDING MEMBER: No. 21 All right. So we are going back now to our 22 list and to issue number six. 23 Do you have any preliminary examination, 24 Mr. Rogers? 25 RE-EXAMINATION 26 MR. ROGERS: Yes, sir, I do, very briefly. 27 Just to outline the issue for the Board. 28 THE PRESIDING MEMBER: Okay. Les Services StenoTran Services Inc. 613-521-0703 1033 OHNC Panel 2, re-ex (Rogers) 1 MR. ROGERS: This, as you pointed out, sir, it 2 deals -- the next issue for this panel is the issue of 3 the treatment of existing Ontario Hydro contracts. I am 4 going to ask Dr. Poray to give us a brief overview, 5 please, of these contracts. 6 MR. PORAY: Certainly. 7 Since the early 1990s, the former Ontario 8 Hydro introduced a number of pricing options for bundled 9 electricity charges. Some customers entered into 10 contracts with Ontario Hydro on the basis of these 11 options. These contracts fall into three main 12 categories: those that can be categorized as being 13 associated with rate design, for example, time-of-use 14 rates and aggregation of metering for charging for 15 bundled energy; those that reflect as different types of 16 services, including surplus power contracts under which 17 customers paid no demand-related charges; and thirdly, 18 those that were designed to encourage additional loads 19 or retain existing loads. 20 MR. ROGERS: Thank you very much. 21 I imagine that these contracts came up for 22 discussion during the consultation process? 23 MR. PORAY: Yes, they did. 24 MR. ROGERS: Could you outline for the Board, 25 please, the context in which they were discussed during 26 that consultation process? 27 MR. PORAY: Certainly. 28 There are three types of contracts that were Les Services StenoTran Services Inc. 613-521-0703 1034 OHNC Panel 2, re-ex (Rogers) 1 brought up during the discussions leading up to this 2 hearing. 3 The first of these categories are contracts 4 signed under the load retention and expansion rates 5 option, which were based on customers negotiating 6 discounts to attract and retain load from new and 7 existing direct industrial customers who had bona fide 8 alternatives to service from Ontario Hydro or its 9 wholesale customers. In many cases, I understand, such 10 alternatives comprised installation of load displacement 11 generation by the customers. Examples of these include 12 contracts held by Imperial Oil and Amoco. 13 The second category were the surplus power 14 contracts which were designed to make efficient use of 15 surplus capacity that existed in Ontario Hydro 16 generation and transmission system. These rates applied 17 only to incremental load in excess of a historical 18 baseline, mutually agreed upon by Ontario Hydro and the 19 contracting customer. 20 Leading up to this hearing, the primary topic 21 of discussion concerning these two types of contracts 22 was the potential need and methods to give some 23 consideration for relief from transmission charges from 24 the contract holders. 25 MR. ROGERS: You mentioned a third class of 26 contracts. What were they? 27 MR. PORAY: These are contracts under the 28 back-up service rate option that were offered by Ontario Les Services StenoTran Services Inc. 613-521-0703 1035 OHNC Panel 2, re-ex (Rogers) 1 Hydro to owners of load displacement generation. In 2 effect, these contracts were structured so that the 3 contract holders did not have to pay monthly charges on 4 the demand associated with outage of embedded 5 generation. Rather, the demand-related charges were 6 calculated on a per day basis for charge rates. Thus, a 7 contract holder would not have to pay charges for the 8 full month if the generator is forced out of service for 9 a few days. 10 The contracts also included rates for the 11 supply of energy during the outage of load displacement 12 generation. These rates were predetermined so that the 13 customers would have reasonable certainty of supply and 14 prices during such outage. 15 The discussions associated with back-up 16 service contracts were centred on the charge determinant 17 option for the network service. The concerned 18 stakeholders noted that there is no need for any 19 consideration for relief for these contract holders if 20 network service chargers used a charge determinant, some 21 method of coincident-demand measure. 22 MR. ROGERS: Thank you. 23 Now, tell me, Dr. Poray, if you can, what is 24 the magnitude of the impact of these types of contracts, 25 either in megawatts involved or the equivalent 26 transmission charges, if you can. 27 MR. PORAY: We don't have that information 28 calculated. We are not privy to these contracts and, Les Services StenoTran Services Inc. 613-521-0703 1036 OHNC Panel 2, re-ex (Rogers) 1 consequently, we don't have all the information. 2 MR. ROGERS: My understanding is that when 3 Ontario Hydro was broken up, these contracts were 4 assigned to OPG? 5 MR. PORAY: That is correct. 6 MR. ROGERS: So that OPG holds the contract 7 with the end user? 8 MR. PORAY: That is my understanding. 9 MR. ROGERS: What is the applicant's proposal 10 with respect to these contracts? 11 MR. PORAY: Perhaps, first of all, let me 12 provide what I understand is the legal position of these 13 contracts which are currently administered by Ontario 14 Power Generation. 15 The Electricity Act, proclaimed in October 16 1998, specifies that the power supply contracts executed 17 by Ontario Hydro will cease to have effect after open 18 access unless exempted by government regulation. Also, 19 the terms and conditions for the rate options under the 20 1999 Ontario Hydro tariff, which is now being 21 administered by Ontario Power Generation, indicate that 22 any new contracts entered into will not extend beyond 23 open access. 24 For the purpose of transmission pricing after 25 open access OHNC proposes that the transmission charges 26 should be calculated in the same manner for all 27 customers irrespective of whether or not these customers 28 had entered into specific contracts with the former Les Services StenoTran Services Inc. 613-521-0703 1037 OHNC Panel 2, re-ex (Rogers) 1 Ontario Hydro. However, the company does have some 2 sympathy with the arguments advanced by Amoco and 3 Imperial Oil in the unique circumstances outlined in 4 their evidence. 5 We are concerned with cost transference and 6 precedent but think their arguments should be heard by 7 other customers and the Board in this proceeding. 8 MR. ROGERS: On that point, do I understand 9 correctly that while you have sympathy with their 10 position and feel that they do have an arguable case, it 11 is the position of the applicant in this case that there 12 should be no special contracts for large customers? 13 MR. PORAY: That is correct. 14 MR. ROGERS: Thank you very much. Those are 15 my questions. 16 THE PRESIDING MEMBER: Thank you. 17 I assume, Mr. Fisher, you wish to lead off on 18 this one? 19 MR. FISHER: Ms Wong is going to start for 20 Imperial Oil. Thank you. 21 MS WONG: Thank you, Mr. Fisher. 22 CROSS-EXAMINATION 23 MS WONG: Good morning, panel. It is still 24 morning. 25 MR. PORAY: Good morning. 26 MS WONG: My name is Sharon Wong. I'm here 27 for Imperial Oil. 28 I have also agreed with my friend, Mr. Vegh, Les Services StenoTran Services Inc. 613-521-0703 1038 OHNC PANEL 2, cr-ex (Wong) 1 that I will be asking questions on the issue -- I will 2 be leading cross-examination on the LRER issue and, in 3 the interest of expediting the process, I will be 4 leading the questions and my friend Mr. Vegh will 5 probably not be asking anything on behalf of Amoco. 6 As you have just outlined, Mr. Poray, Imperial 7 Oil has intervened in this process because it has a 8 specific interest in the treatment that OHNC is 9 proposing for customers who had the load retention and 10 expansion rate contracts with the former Ontario Hydro. 11 Imperial's evidence, as you have seen from the 12 prefiled evidence, is that it entered into that contract 13 with Ontario Hydro in February of 1996. The 14 circumstances of Imperial's contract are set out in 15 Imperial's evidence, which is Exhibit H19.1. So if you 16 could just turn that up, please, H19.1. 17 --- Pause 18 MR. PORAY: Okay, we have it. 19 MS WONG: Thank you. 20 I think Dr. Higgin is still looking for it, so 21 I will give him a moment to find it. 22 THE PRESIDING MEMBER: Yes, we are still 23 finding it in our pile here. 24 --- Pause 25 THE PRESIDING MEMBER: We have left our copy 26 upstairs, so we will have to borrow one from staff, if 27 you can provide us one, please. 28 --- Pause Les Services StenoTran Services Inc. 613-521-0703 1039 OHNC PANEL 2, cr-ex (Wong) 1 THE PRESIDING MEMBER: Okay. We are ready. 2 Sorry for that delay, Ms Wong. 3 MS WONG: Thank you. 4 Dr. Poray, are you generally familiar with the 5 evidence filed by Imperial? 6 MR. PORAY: I have scanned through it, yes. 7 MS WONG: What I would like to do is just take 8 a few minutes and perhaps briefly review the evidence so 9 that we are all working from the same factual context. 10 If you would turn to pages 4 and 5 of the 11 evidence, you will see at that location Imperial gives 12 some information about the steps that it took from 1993 13 to 1995 to develop a cogeneration facility to supply 14 power to its Sarnia site. 15 In paragraph 17 on page 5, there is a 16 reference to the fact that Imperial has spent 17 $2.2 million on the development of its cogen facility by 18 November of 1995, and that was primarily for engineering 19 and design of the facility. 20 Pages 5 to 7 then contain some information 21 about the negotiations that took place between Ontario 22 Hydro and Imperial Oil in 1995. Those negotiations were 23 aimed at coming to an agreement for the deferral of the 24 construction of the Imperial cogen facility so that 25 Ontario Hydro could retain Imperial's load. 26 In paragraph 23, we see there the statement 27 that it was Ontario Hydro that had introduced the 28 concept of treating Imperial as if it had virtual Les Services StenoTran Services Inc. 613-521-0703 1040 OHNC PANEL 2, cr-ex (Wong) 1 generating capacity, and that was reflected in the fact 2 that the rates charged under the LRER were based upon 3 calculating how much Imperial would have incurred as far 4 as expenses to actually produce the power that it was 5 proposing to produce under its cogen facility. 6 You are familiar with that concept? 7 MR. PORAY: Very broadly. 8 MS WONG: Thank you. 9 Now, if you flip over with me to paragraph 25, 10 you will see that by January of 1996 Imperial's costs 11 for the cogen facility had increased to $3.1 million as 12 of that date, and that included not only the engineering 13 and design costs but also some costs for the 14 commencement of the construction of the facility. In 15 particular, they were doing some work on a site to get 16 it ready for the construction of the actual building, 17 and that took it up to another $900,000. 18 The agreement between Ontario Hydro and 19 Imperial was reached in January of 1996, and I think the 20 contract was actually signed in February of 1996. On 21 pages 8 to 10, there is some discussion as to the terms 22 of the contract. The basic idea was that Imperial would 23 be charged a reduced rate over the life of the contract 24 which would make Imperial economically indifferent as to 25 whether or not it built its cogen facility in 1996 or 26 deferred construction of the facility for the life of 27 the contract. You will see that on pages 8 to 10. 28 MR. PORAY: Okay. Les Services StenoTran Services Inc. 613-521-0703 1041 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: Okay? 2 Then on pages 10 to 11 there is a general 3 discussion of some of the events leading up to open 4 access and the fact that Imperial was not able to work 5 out a renewal of that contract because OPG indicated 6 that given market restructuring and all of the events 7 happening around that time it wouldn't be able to 8 renegotiate the contract. 9 Finally -- well, not finally -- then we get to 10 paragraph 40 and finally I have a question for you in my 11 recitation. If you could look at paragraph 40. 12 You will see in paragraph 40 that there is a 13 calculation of how OHNC's rate proposal would impact on 14 Imperial Oil. In particular, Imperial estimates that it 15 would pay about $5.1 million each year for transmission 16 charges at its Sarnia site alone under the current 17 OHNC's proposal, and it sets out there a little 18 calculation as to how it got to that number. 19 Would you agree with me, Dr. Poray, that that 20 calculation seems reasonable and accurate? 21 MR. PORAY: It would appear so, yes. 22 MS WONG: Thank you. 23 Then if you could flip over to paragraph 41 on 24 the next page, there is another calculation which sets 25 out what Imperial would have to pay in the future if it 26 decided to build the cogen facility and, under your 27 current proposal, had to pay 50 per cent gross load. 28 That comes up to a figure of about $3.1 million each Les Services StenoTran Services Inc. 613-521-0703 1042 OHNC PANEL 2, cr-ex (Wong) 1 year. Once again, would you agree with the 2 reasonableness of that calculation? 3 MR. PORAY: I would agree. Yes. 4 MS WONG: Thank you. 5 If you could look at paragraph 42, and let me 6 just read it out for you: 7 "On the other hand, if Imperial had 8 actually built its cogen plant in 1996-97 9 as originally planned it would now be an 10 existing embedded generator, and it would 11 only be required to pay transmission 12 charges on power taken from the grid 13 during an outage at one of its own 14 generators in accordance with whatever 15 formula the Board ultimately approves for 16 existing embedded generators." 17 Would you agree with that statement? 18 MR. PORAY: Generally, I would, yes. 19 MS WONG: In paragraphs 44 and 45, Imperial 20 estimates how much power it would likely have had to 21 draw from the transmission grid if it has actually built 22 its cogen facility in accordance with the design that 23 was in play in 1996. Imperial estimates that it would 24 have had to draw 40 megawatts of power from the grid on 25 eight occasions over the course of a year which would 26 equate to transmission charges for eight months under 27 OHNC's current proposal. 28 Do you have any reason to disagree with that Les Services StenoTran Services Inc. 613-521-0703 1043 OHNC PANEL 2, cr-ex (Wong) 1 estimate of power outages for approximately eight 2 occasions over the course of the year? 3 MR. PORAY: I don't think we have any basis 4 for judging whether that is reasonable or not because we 5 don't know what those outages would look like. 6 MS WONG: That is fair enough. 7 But if you assume with me that those numbers 8 are correct, and Imperial can speak to that when they 9 come up for cross-examination, would you agree with me 10 that the calculations set out in paragraph 46 would be 11 reasonable and accurate, that is, as a result of 12 having -- if it has to pay under OHNC's proposal as 13 opposed to what it would have paid if it had built it is 14 actually prejudiced to the tune of about $3.97 million 15 per year, which is the difference between the 16 $5.1 million and the $1.14 million it would have paid if 17 it had actually built? 18 --- Pause 19 MR. PORAY: No. I think under the assumptions 20 that you have made, what you have shown in 46 is 21 correct. 22 MS WONG: Thank you. So, in other words, 23 assuming that our assumptions are correct, if Imperial 24 had gone ahead and built in 1996, under your current 25 proposal, Imperial would pay $3.97 million less in 26 transmission costs each year. Would that be a fair 27 summary? 28 MR. PORAY: I'm sorry. Would pay less, $3.97 Les Services StenoTran Services Inc. 613-521-0703 1044 OHNC PANEL 2, cr-ex (Wong) 1 less? 2 MS WONG: Yes. If it had actually built in 3 1996. 4 MR. CURTIS: I think that's probably correct 5 on a going forward basis. The problem with trying to 6 apply it backward is again -- what we were talking about 7 is a bundled regime. 8 MS WONG: I understand. 9 MR. CURTIS: In order to try and understand 10 how much less the transmission component might have been 11 as per the agreement, I don't believe that we could 12 really untangle it that much. 13 MS WONG: I'm actually only asking on a going 14 forward basis. 15 MR. CURTIS: Yes. If you are asking on a 16 going forward basis based on what we have proposed, we 17 would agree that based on your assumptions the 18 calculations would be as you have shown. 19 MS WONG: Thank you. Now, Imperial and Amoco 20 are proposing that because of their unique 21 circumstances, they should be treated as if they had 22 actually built their cogeneration facilities in 1996. 23 That proposal was set out in Attachment B to the 24 settlement agreement which was filed with the Board. 25 That's at Exhibit I. I don't think we need to turn it 26 up. You are generally familiar with that proposal, are 27 you, Dr. Poray? 28 MR. PORAY: Yes. Les Services StenoTran Services Inc. 613-521-0703 1045 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: And just to summarize for everybody, 2 the proposal essentially would give Imperial and Amoco a 3 period of six years to build their actual cogeneration 4 facilities. If they do build within that six year 5 window, they would be entitled to net load billing after 6 the cogen facility becomes operational and in the 7 interim, while the facility is under construction, they 8 would be entitled to pay for transmission based on the 9 usage they would have paid if they had actually built in 10 1996. That was the proposal. Is that generally 11 correct? 12 MR. PORAY: That's my understanding. 13 MS WONG: Okay. Now, your counsel indicated 14 this morning that OHNC has some sympathy for that 15 proposal, but wanted the Board to have this -- look at 16 this issue. 17 MR. ROGERS: Excuse me. I didn't mean to 18 imply that we have sympathy with that proposal. I think 19 what I meant to say, and I think I did say, is that the 20 company has sympathy for the unique argument being 21 advanced by Amoco and Imperial. Whether we have 22 sympathy for the solution they propose remains to be 23 seen. 24 MS WONG: All right. Let me take it from your 25 words then, Mr. Rogers. The company has indicated they 26 have some sympathy for the argument. Could you explain 27 to me what your thinking is as to why you are 28 sympathetic? Les Services StenoTran Services Inc. 613-521-0703 1046 OHNC PANEL 2, cr-ex (Wong) 1 MR. CURTIS: Imperial entered into these 2 negotiations with Ontario Hydro back in 1996 and did so 3 in good faith. They do have a contract with Ontario 4 Hydro. Under the terms and conditions of that contract, 5 it goes to the end of this year. The sympathy I think 6 we are expressing is to have a contract terminated by 7 government legislation. It's an unusual circumstance. 8 Although it's -- my understanding is it was recognized 9 in the original contract that was signed, that something 10 like that could happen. 11 We do have sympathy for the company in terms 12 of what actions it would now have to take in terms of 13 putting that cogeneration unit in service. 14 MS WONG: Now, when you say that there may 15 have been some recognition in the contract that that 16 could happen, are you talking about from the length of 17 the term of the contract or do you believe that there's 18 actual provision in the contract that talks about 19 government repeal of the contract? 20 MR. CURTIS: I'm on unequal ground here 21 because I am not a lawyer, but it was reflected in part, 22 I think, as far as the term that we are talking about 23 here, the five years. 24 MS WONG: The five year term. 25 MR. CURTIS: Yes. But I think -- 26 MR. ROGERS: We can address this in argument. 27 There are some terms in the contract which arguably 28 contemplate such an event taking place. I'm not sure Les Services StenoTran Services Inc. 613-521-0703 1047 OHNC PANEL 2, cr-ex (Wong) 1 that Mr. Curtis is really qualified to give an answer. 2 I'm not sure I am either, but I probably will 3 eventually. 4 MS WONG: I was just trying to get a sense of 5 what Mr. Curtis had in his mind. That's the extent 6 of -- 7 MR. ROGERS: If you know, Mr. Curtis, please 8 do. Take a moment and look at the contract. 9 MR. CURTIS: All right. 10 --- Pause 11 MR. CURTIS: I'm afraid I'm not familiar with 12 how these tabs are laid out, but I think if we could go 13 to the contract -- 14 MS WONG: The contract is at Tab A in my copy 15 and hopefully it's at Tab A for most people. 16 MR. CURTIS: The title that's on it is 17 "Agreement for power between Ontario Hydro and Imperial 18 Oil". 19 MS WONG: Yes. 20 MR. CURTIS: If we turn to page 25 in that, 21 what I was referring to was section 12. If we look at 22 12.1: 23 "If any court or tribunal determines that 24 Ontario Hydro's providing of the discount 25 pursuant to this Agreement is contrary to 26 the provisions of any statute" -- 27 MS WONG: Yes. 28 MR. CURTIS: -- "or regulation -- Les Services StenoTran Services Inc. 613-521-0703 1048 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: Okay. 2 MR. CURTIS: "Ontario Hydro shall not be 3 liable to the customer for" -- at least my 4 interpretation, not being a lawyer I apologize, that 5 Ontario Hydro wouldn't be obligated to continue on with 6 the contract. That was, I think, in terms of the direct 7 evidence provided what we were referring to as what -- 8 within Bill 35 there is that provision that these 9 contracts would no longer exist past open access. 10 MS WONG: Thank you, Mr. Curtis. In one of 11 your IR responses, OHNC explained its reasons for 12 proposing to build the system embedded on a net load 13 basis. That was at Exhibit E, Tab 5, Schedule 17. If 14 you could turn that up for me. E-5-17. 15 This is a response of IR from the Green Energy 16 Coalition. The question was "Please provide the basis 17 for the proposal to bill load supplied by existing 18 embedded generation on a net load basis". The response 19 is there were two primary reasons. 20 One, the transmission system built by the 21 former Ontario Hydro was based on the subject generation 22 being present on the system and, therefore, it is 23 considered appropriate to grandfather this generation. 24 Two, the deliberations at the Market Design Committee 25 and during the mid-1999 OHNC consultation process 26 indicated an almost unanimous support on this point. 27 Just looking at point one for the moment, it 28 appears that OHNC was recommending that the existing Les Services StenoTran Services Inc. 613-521-0703 1049 OHNC PANEL 2, cr-ex (Wong) 1 generation be grandfathered because the transmission 2 system was built taking into account the present impact 3 of this generation. Is that correct? 4 MR. PORAY: That is correct. 5 MS WONG: If you assume with me, Dr. Poray, 6 that the evidence that Imperial and Amoco have filed is 7 true, and you have no reason to dispute it today, I 8 would imagine on a purely factual basis, so if you 9 assume that the evidence is true, would you agree that 10 Ontario Hydro knew about Imperial's intention to build 11 cogeneration by 1994? 12 MR. PORAY: It did. That's my understanding. 13 MS WONG: Therefore, Ontario Hydro's plans for 14 the transmission systems after 1994 should have taken 15 into account the fact that Imperial and Amoco were 16 intending to build generation. 17 Would that have been a prudent thing for them 18 to do? 19 MR. PORAY: Yes, I believe that is the case. 20 MS WONG: So would you agree with me, 21 Dr. Poray, that with respect to that first criteria that 22 Imperial and Amoco would meet that criteria? 23 MR. PORAY: If that generation had been built 24 at that time, yes. 25 MS WONG: But my previous question was: They 26 knew that the generation was in the works, if you will, 27 that it was planned and intended to be built, so Ontario 28 Hydro's decision post-1994 should have taken that into Les Services StenoTran Services Inc. 613-521-0703 1050 OHNC PANEL 2, cr-ex (Wong) 1 account. 2 MR. CURTIS: I guess our understanding was -- 3 the agreement was signed in 1996, was it not? 4 MS WONG: Yes, it was. 5 MR. CURTIS: And there were ongoing 6 negotiations between Ontario Hydro and Imperial Oil in 7 terms of basically, if you will, deferring the 8 construction of that cogeneration. 9 MS WONG: Right. 10 MR. CURTIS: That would have factored into the 11 overall planning that Ontario Hydro would be doing at 12 that point in time with respect to the transmission 13 system. 14 MS WONG: But even as of 1996 when this 15 contract was signed, the contract was predicated on a 16 deferral of five years. So at the end of the five years 17 Imperial could have gone ahead and built? 18 MR. CURTIS: Yes. Yes. 19 MS WONG: So that is a factor that Ontario 20 Hydro should have had in mind? 21 MR. CURTIS: Yes. It would have been a 22 factor, yes. 23 MS WONG: Now, with respect to the second 24 criteria we see on that interrogatory, that breaks down 25 into two points: the deliberations of the Market Design 26 Committee and the consultation process. 27 If we could just focus for a moment on the 28 deliberations of the MDC. Yesterday we filed with the Les Services StenoTran Services Inc. 613-521-0703 1051 OHNC PANEL 2, cr-ex (Wong) 1 Board, and hopefully everybody has it, Chapter 4 from 2 the Final Report. I think it went in as Exhibit G5.8. 3 There are extra copies on the side if anybody needs it. 4 MR. PORAY: We have it. 5 MS WONG: Thank you. 6 If you could go to page 4-9 and 7 Recommendation 4-8 -- for my purposes I just need you to 8 look at the last sentence in bold type that says: 9 "We also recommend that, except for 10 already committed on-site or embedded 11 generators with existing agreements, 12 distributors and direct customers..." 13 MR. ROGERS: Hold it. I'm sorry. 14 MR. PORAY: Excuse me, we don't have a 15 page 4-9. 16 MS WONG: I'm sorry. I'm looking at 17 Chapter 4, "Transmission and Distribution". 18 MR. PORAY: Yes. 19 MR. ROGERS: Yes. 20 MS WONG: Let me just see if I have extra 21 copies of the 4-9. 22 MR. ROGERS: Is it Recommendation 4.9 or is it 23 page 4-9? 24 MS WONG: No, it's page 4-9, 25 Recommendation 4-8. 26 MR. PORAY: We don't have that. We don't have 27 that page. 28 MS WONG: There are lots of copies. Les Services StenoTran Services Inc. 613-521-0703 1052 OHNC PANEL 2, cr-ex (Wong) 1 --- Pause 2 MS WONG: Dr. Higgin, do you have page 4-9? 3 THE PRESIDING MEMBER: Yes, we have that 4 page 4-9, Recommendation 4-8. 5 MS WONG: There are lots of copies over there. 6 MR. PORAY: Thank you. 7 MS WONG: I was pointing you to the last 8 sentence in Recommendation 4-8 that starts: 9 "We also recommend that, except for 10 already committed on-site or embedded 11 generators with existing agreements, 12 distributors and direct customers be 13 charged on a gross load basis." 14 That recommendation that is in that sentence 15 seems to be developed further on the next page in 16 Recommendation 4-9. 17 MR. ROGERS: Could I just ask for a moment so 18 the witnesses can read this. 19 MS WONG: Certainly. 20 I will just read 4-9 so everybody can hear it 21 while you look at it over there. 22 "We recommend that for the purpose of 23 computing the charge for Basic Use 24 Service, the energy produced by new 25 embedded generators or new on-site 26 generators associated with direct 27 connection customers should be added back 28 for purposes of calculating the usage of Les Services StenoTran Services Inc. 613-521-0703 1053 OHNC PANEL 2, cr-ex (Wong) 1 the customer or LDC through which the 2 customer is served. To determine what 3 connections are `new', we propose that 4 projects committed prior to October 30, 5 1998 and subject to existing agreements 6 be grandfathered. This cut-off date is 7 the effective date of the Electricity 8 Act, 1998." 9 You have had a chance to read that, sir? 10 MR. PORAY: Yes, we have. 11 MS WONG: Would you agree with me that the 12 recommendations in 4-8 and 4-9 were the genesis of the 13 decision to net load bill existing embedded generation? 14 MR. PORAY: That is my understanding. 15 MS WONG: The next document I would like you 16 to look at, sir, was filed yesterday as G5.7, and it is 17 the Wholesale Market Design Technical Panel Report from 18 the MDC Final Report, Appendix 3. 19 Once again, there are copies of the side if 20 anybody needs them. 21 MR. PORAY: Okay, we have it. 22 MS WONG: Hopefully you have a page 4. 23 MR. PORAY: We do indeed. 24 MS WONG: At the very bottom of the page where 25 it says "Embedded Generation", I would like you to focus 26 on sentence 2 and 3 of that paragraph that start: 27 "In many instances, embedded generators 28 are `special cases' that were developed Les Services StenoTran Services Inc. 613-521-0703 1054 OHNC PANEL 2, cr-ex (Wong) 1 under a fundamentally different regime 2 from the one we are recommending. 3 Embedded generators require fair and 4 equitable treatment based on their 5 historical commitments." 6 Would you agree, sir, that those two sentences 7 provide some of the rationale for the MDC 8 recommendations that we just looked at in 4-8 and 4-9? 9 MR. PORAY: I think so, yes. 10 MS WONG: The rationale being -- 11 MR. PORAY: Perhaps I could -- 12 MS WONG: I'm sorry. 13 MR. PORAY: -- couch that, that there is the 14 last sentence, which says: 15 "However, careful consideration in the 16 design of this treatment is imperative to 17 forestall perverse incentives for future 18 investment in generation." 19 MS WONG: I appreciate that, sir, but you 20 would agree with me that those two sentences I pointed 21 to you were sort of the rationale for exempting the 22 existing embedded generation? 23 MR. PORAY: The existing embedded generation 24 that is physically connected to the system, yes. 25 MS WONG: Okay. 26 And the rationale for exempting the physical 27 generation was that past economic decisions made by the 28 parties before the passage of the Electricity Act should Les Services StenoTran Services Inc. 613-521-0703 1055 OHNC PANEL 2, cr-ex (Wong) 1 be respected and honoured? 2 MR. PORAY: I think -- I'm sorry. 3 MR. CURTIS: I think it was done more based on 4 the fact that those investment decisions were made prior 5 to the existence of the new competitive marketplace and 6 so the economic drivers and the economic signals for 7 that investment would be entirely different. So there 8 should be respect, if you will, accorded to the 9 conditions under which those investments were 10 undertaken. 11 MS WONG: Right. Because those decisions were 12 made at a time when people weren't aware of the 13 restructuring that was happening. 14 MR. CURTIS: Yes, that's correct. 15 MS WONG: If you could turn with me, sir, to 16 the OHNC's "Summary of Applications", which is 17 Exhibit A, Tab 2, Schedule 1, page 8. Exhibit A, Tab 2, 18 Schedule 1, page 8. That is a summary of your 19 application. 20 MR. PORAY: We have it. 21 MS WONG: Good. Thank you. 22 I'm looking at the top of the page where it 23 talks about "Existing Embedded Generation" and we have 24 the bullet point: 25 "For load customers who have installed 26 self-generation prior to October 31, 1998 27 to serve their existing load, there would 28 be no additional transmission charges Les Services StenoTran Services Inc. 613-521-0703 1056 OHNC PANEL 2, cr-ex (Wong) 1 levied with respect to the load supplied 2 by the self-generation. 3 This recommendation recognizes that 4 unbundling past decisions would 5 compromise the economic decisions load 6 customers made when installing this 7 generation. Stakeholders tended to 8 support this premise." 9 I take it from that paragraph that OHNC was 10 accepting MDC's view that past economic decisions and 11 historical commitments should be respected? 12 MR. PORAY: Yes, we were. 13 MS WONG: When you say there in line 6: 14 "...that unbundling past decisions would 15 compromise the economic decisions load 16 customers made..." 17 I take it that what you mean is that charging existing 18 generators for transmission based on their own 19 generation would introduce a cost that the generator was 20 not expecting when it decided to build, and that 21 additional cost would compromise or reduce the value of 22 their past decision to build. 23 Is that a fair summary? 24 MR. CURTIS: Is that consistent with the 25 answer that I gave before? 26 MS WONG: I don't know. You are going to have 27 to tell me. 28 MR. CURTIS: I would say that the basis for Les Services StenoTran Services Inc. 613-521-0703 1057 OHNC PANEL 2, cr-ex (Wong) 1 this is that the investment decisions that were made in 2 these generators were done under a different economic 3 regime, if you will. What we are endeavouring to do 4 here is respect the decisions that were made under those 5 circumstances. They can't be undone. The generator 6 can't disappear, if you will, overnight. And financial 7 commitments, economic commitments, were made at the 8 time. 9 MS WONG: But what I would like to focus on 10 just for a minute, sir, is the word "compromise"; that 11 the unbundling would compromise the economic decision in 12 the past. 13 MR. CURTIS: Yes. 14 MS WONG: I would suggest to you that the 15 concept of compromise introduces the idea that the 16 unbundling would reduce the value of the past decision, 17 or prejudice that past decision in some way negatively. 18 MR. CURTIS: Yes, that is fair. 19 MS WONG: Your concern was that nothing should 20 be done under the new regime which would reduce the 21 value of those decisions that people had made prior to 22 the regime coming into effect. 23 MR. CURTIS: Right, as it is stated there; 24 that it doesn't compromise past decisions that were made 25 by the customers. 26 MS WONG: Thank you. And the reason for that 27 would be this compromise or the unexpected reduction in 28 value would be unfair, basically. It would be Les Services StenoTran Services Inc. 613-521-0703 1058 OHNC PANEL 2, cr-ex (Wong) 1 introducing an element they did not know about at the 2 time they made their decision. 3 MR. CURTIS: They would not have been aware of 4 the elements of the new market structure when they made 5 their decision; that's correct. 6 MS WONG: OHNC put together its proposal 7 having in mind trying to avoid this unfairness of 8 compromising the decision. Would that be correct? 9 MR. CURTIS: To avoid compromising those past 10 decisions. 11 MS WONG: When we look at the definition of 12 who is an existing embedded generator, would you agree 13 with me that that definition is a very important, indeed 14 a vital, part of determining which past economic 15 decisions get honoured? 16 MR. CURTIS: Yes. 17 MS WONG: And the narrower your definition, 18 the fewer the people who would fall into this category, 19 and vice versa. 20 MR. CURTIS: Yes. 21 MS WONG: In one of our interrogatories, OHNC 22 provided some information as to how it came up with its 23 proposed definition for existing embedded generators, 24 and I would like to look at that for a moment. 25 That is Exhibit E, Tab 19, Schedule 1. That 26 was the first interrogatory from Imperial Oil: 27 E-19-1-1. 28 MR. PORAY: Okay, we have it. Les Services StenoTran Services Inc. 613-521-0703 1059 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: That is a relatively long 2 interrogatory, and I won't try us all by reading it out 3 loud. Perhaps you could all take a minute and look over 4 the entire IR. 5 --- Pause 6 MR. PORAY: Okay. 7 MS WONG: Thank you. If you could pay 8 particular attention to points (d) and (e) of the 9 response -- and I will just read it out for you. 10 "This definition was chosen to allow any 11 embedded generator who had received 12 approval to build embedded generation in 13 Ontario prior to the passage of Bill 35 14 could continue with their project." 15 (As read) 16 I think there is probably a grammatical 17 mistake in there, but we won't worry about that. 18 "The rationale for choosing required 19 approvals as the test, because this 20 definition is more inclusive, choosing 21 commencement of construction, for 22 example, would exclude embedded 23 generators who had received all required 24 approvals prior to October 1, 1998 but 25 had not yet begun to build the 26 generator." (As read) 27 That response (e) was in response to the 28 question: Les Services StenoTran Services Inc. 613-521-0703 1060 OHNC PANEL 2, cr-ex (Wong) 1 "Why did you choose required approval 2 instead of other factors, for example, 3 commencement of construction?" (As read) 4 So the idea, I take it, was you wanted to be 5 more inclusive rather than just limited to people who 6 had started construction. Is that correct? 7 MR. PORAY: That is correct. 8 MS WONG: Just focusing for a moment on the 9 regulatory approvals that would be required, my 10 understanding is that a party who wanted to build 11 generation -- and this is in the 1996 time frame -- 12 could acquire all of the approvals so long as it meant 13 certain engineering and design specifications. 14 Is that your understanding? 15 MR. PORAY: I think so, yes. 16 MS WONG: If a party really wanted to build, 17 if it was committed to building prior to October 1998, 18 it could have started construction without obtaining the 19 approvals and worked simultaneously on getting the 20 approvals at the same time as constructing. 21 Isn't that correct? 22 MR. ROGERS: The witnesses can certainly 23 answer, but they are not lawyers and they are not 24 environmental analysts and they are not town planners. 25 MS WONG: That's fine. 26 MR. CURTIS: The other problem is that you are 27 talking about approvals for the construction of 28 generation, and we come from a transmission company. Les Services StenoTran Services Inc. 613-521-0703 1061 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: Right. But as far as your 2 understanding today, you would not disagree with me that 3 if parties really wanted to build, they would have to 4 meet design specifications, and that was something they 5 could work towards and presumably satisfy. There wasn't 6 anybody that had the power to stop them for no good 7 reason, as far as you know. 8 MR. CURTIS: Well, I believe there were 9 provisions under the Power Corporation Act that they 10 would have to have met. Again, we are getting into an 11 area that we are generally not -- 12 THE PRESIDING MEMBER: There are also other 13 approvals under the Environmental Protection Act that 14 are required before you put a plant into service, for 15 sure. 16 MS WONG: And my understanding, sir, would be 17 that certainly you would have to meet the EPA 18 requirements, but that would fall under what I would 19 call design specification requirements; that if your 20 design was up to snuff -- 21 THE PRESIDING MEMBER: You would need an 22 operating permit to put it into service. 23 MS WONG: But you would be able to commence 24 the construction while you were working on getting that 25 design permit. That is all I was trying to get at. 26 Thank you. 27 Would you agree with me, sir, that if a party 28 had chosen to go that route, to build simultaneously at Les Services StenoTran Services Inc. 613-521-0703 1062 OHNC PANEL 2, cr-ex (Wong) 1 the same time as it was acquiring the regulatory 2 approvals, the commencement of construction would have 3 demonstrated at least an equal amount of commitment to 4 the project as simply getting the required approvals 5 without constructing? 6 MR. CURTIS: You are talking about the 7 environment back in 1996, are you? 8 MS WONG: Yes, I am. 9 MR. CURTIS: Not the one we are talking about 10 now in terms of -- 11 MS WONG: I am talking about the environment 12 in 1996. So the question is: If they had actually made 13 the decision to start constructing and work at the same 14 time on getting the approvals, would that not have been 15 a demonstration of an equal level of commitment? 16 MR. CURTIS: Again, we are getting into this 17 area that we are not familiar with, going back then in 18 terms of constructing generation projects, whether that 19 would have been an equivalent level that you are talking 20 about. 21 MS WONG: Would you agree with me that the 22 decision to start building could be viewed as a 23 significant economic decision? 24 MR. CURTIS: On behalf of the company? 25 MS WONG: Yes. 26 MR. CURTIS: Yes. 27 MS WONG: If we could go back, then, sir, to 28 that first interrogatory that we looked at, which is the Les Services StenoTran Services Inc. 613-521-0703 1063 OHNC PANEL 2, cr-ex (Wong) 1 one that set out the two reasons for your proposal, it 2 was E-5.17.1. That is the one that said the two primary 3 reasons were that the transmission system built by the 4 former Ontario Hydro was based on the subject generation 5 being present. 6 And then point 2 was the deliberations of 7 the MDC. 8 MR. PORAY: Okay. We have that. 9 MS WONG: Thank you. 10 When we last looked at that interrogatory, we 11 were looking at the first part of point 2, that is the 12 deliberations of the MDC. I think that you have agreed 13 with me that OHNC shared the MDC's concern that past 14 economic decisions to build generation should be 15 respected in order to treat people who had made such 16 historical commitments fairly? 17 MR. PORAY: We did. 18 MS WONG: I would just like to look very 19 briefly at the second point in point 2, which is the 20 consultation process that OHNC engaged in. 21 I understand, sir, that during the stakeholder 22 consultation the LRER contracts were discussed generally 23 in a context of the treatment of Ontario Hydro's 24 existing customers. Is that correct? 25 MR. CURTIS: Yes, it was. 26 MS WONG: Was there any specific discussion 27 that focused on LRER? 28 MR. CURTIS: Not that I recall, no. Les Services StenoTran Services Inc. 613-521-0703 1064 OHNC PANEL 2, cr-ex (Wong) 1 MS WONG: There is no record of any specific 2 discussion on LRER, is there? 3 MR. CURTIS: Not that I am aware. We filed 4 most of the written documentation that was developed 5 throughout the consultation process. I guess, subject to 6 some check, I am not aware of anything that is in that. 7 MS WONG: Okay. So it is possible that 8 stakeholders may not have made any comments at all on 9 the LRER contracts in specific detail? 10 MR. CURTIS: Not in specific detail, no. 11 MS WONG: Would it be fair to say that there 12 was nothing in the stakeholder consultation process 13 which led you to narrow the MDC proposal that committed 14 generations should be net billed? 15 MR. CURTIS: I am not sure I understand. Can 16 you rephrase that again? I am sorry. 17 MS WONG: Sure. 18 Well, we saw earlier that the MDC proposal had 19 suggested that -- the wording they used was "committed 20 generation" should be net billed? 21 MR. CURTIS: Yes. 22 MS WONG: I was putting to you that there was 23 nothing in the stakeholder process which would suggest 24 that anybody who wanted the definition of committed 25 generation to be narrowed, or for the definition of 26 "existing embedded" to be narrowed to something less 27 than committed generation? 28 MR. CURTIS: That would be correct in terms of Les Services StenoTran Services Inc. 613-521-0703 1065 OHNC PANEL 2, cr-ex (Wong) 1 the stakeholder process. 2 MS WONG: We looked earlier at your IR 3 response which talked about the fact that you chose 4 regulatory approval as the threshold because you wanted 5 it to be a more inclusive definition, rather than 6 commencement of construction? 7 MR. CURTIS: Yes, that's correct. 8 MS WONG: So would you agree with me that when 9 you put together your proposal OHNC never really 10 intended, and didn't want to narrow, the definition of 11 existing embedded to something less than committed 12 generation? 13 MR. CURTIS: I don't think there was any 14 purpose in directly narrowing it to that. There was, 15 though, the consideration that the term committed 16 generation had to be defined in some sense. 17 MS WONG: Right. 18 MR. CURTIS: So that we or the Board could 19 determine on some objective basis whether or not a 20 specific generator or a generator project qualifies. 21 That was really what we were endeavouring to do in terms 22 of what we laid out in that interrogatory. 23 MS WONG: I could probably rephrase it by 24 saying that when you came up with regulatory approval at 25 the threshold you were defining in your own way what 26 committed generation meant -- 27 MR. CURTIS: Yes. 28 MS WONG: -- because you needed to put Les Services StenoTran Services Inc. 613-521-0703 1066 OHNC PANEL 2, cr-ex (Wong) 1 something structured on it? 2 MR. CURTIS: Yes. 3 MS WONG: Thank you. 4 Just give me a moment, please. 5 --- Pause 6 MS WONG: Thank you. Those are all my 7 questions. 8 MR. CURTIS: Thank you. 9 MR. PORAY: Thank you. 10 THE PRESIDING MEMBER: Thank you, Ms Wong. 11 Just to clarify if Mr. Vegh has any follow-up 12 questions? 13 It would be as well to keep them in sequence. 14 MR. VEGH: I have no follow-up questions. 15 THE PRESIDING MEMBER: Thank you. 16 MR. VEGH: Thank you. 17 THE PRESIDING MEMBER: I will go to 18 Mr. Fisher, please. 19 MR. FISHER: Good afternoon. Thank you. 20 MR. CURTIS: Good afternoon. 21 THE PRESIDING MEMBER: Good afternoon. 22 FURTHER CROSS-EXAMINATION 23 MR. FISHER: Surplus power is one of the 24 special rates that Ontario Hydro has had since about 25 1993. No transmission has been built for these 26 customers and they pay little, if anything, towards the 27 fixed costs of the transmission system. AMPCO has a 28 proposal to phase these customers into paying the full Les Services StenoTran Services Inc. 613-521-0703 1067 OHNC Panel 2, cr-ex (Fisher) 1 transmission rate over a 10-year period. This proposal 2 is described in AMPCO's evidence and we will deal with 3 it at that time. AMPCO will bring a panel of witnesses, 4 as well, to deal with surplus power from the perspective 5 of surplus users. 6 I would like to ask a few questions to get 7 some basic information on the record regarding surplus 8 power, so would you please turn to Exhibit D, tab 11, 9 Schedule 1, page 6? 10 MR. PORAY: Okay. We have that. 11 MR. FISHER: I am looking at the paragraph 12 starting at line 18 which starts: 13 "As indicated above, Surplus Power was 14 introduced in 1992." 15 The next sentence says that its purpose was to 16 encourage incremental load. Can you confirm that the 17 phrase "incremental load" is intended to mean that it is 18 load that would not exist at the normal level of rates? 19 MR. PORAY: I think that is our understanding 20 too, yes. 21 MR. FISHER: Is it true that one type of 22 incremental load could be a new manufacturing plant that 23 is built in Ontario because the surplus power rate was 24 low enough to make it feasible to the extent that if 25 normal rates were applied this plant may have been built 26 somewhere else? 27 MR. CURTIS: I think these are very 28 complicated decisions that you are talking about. That Les Services StenoTran Services Inc. 613-521-0703 1068 OHNC Panel 2, cr-ex (Fisher) 1 may have been one factor, but obviously a manufacturer 2 deciding to put a plant in Ontario would be taking into 3 account many, many other factors before making that 4 commitment to invest here. 5 MR. FISHER: Yes, understood. 6 Another form of incremental load could be a 7 plant that would close if normal rates were applied but 8 could stay open with lower electricity costs as a 9 surplus power rate. Would that also be a situation that 10 could occur? 11 MR. CURTIS: I think, again, this is a similar 12 sort of description that there would be many, many 13 factors that would be taken into account in terms of 14 closing a plant, one of which might be what they are 15 paying for electricity services. 16 MR. FISHER: Exactly. 17 Is it true that Ontario Hydro did not offer 18 the surplus power rate to customers unless Ontario Hydro 19 was satisfied that the load was incremental load? 20 MR. CURTIS: Yes, that's correct. 21 MR. FISHER: Can you confirm that in some 22 cases Ontario Hydro used outside independent reviewers 23 to help to determine whether the load was incremental? 24 MR. CURTIS: Yes, that's correct. 25 MR. FISHER: Will you accept that for the 26 purposes of this proceeding it is not productive to go 27 back over these past decisions and try to second guess 28 the decisions on what was or was not incremental load? Les Services StenoTran Services Inc. 613-521-0703 1069 OHNC Panel 2, cr-ex (Fisher) 1 MR. CURTIS: I know we certainly wouldn't be 2 equipped to be able to go back and do that. 3 MR. FISHER: Pardon me? 4 MR. CURTIS: I say I would agree that we are 5 certainly not equipped to be able to go back and 6 re-examine whether those still remain as incremental 7 load or not. 8 MR. FISHER: Okay. Further down on page 6 at 9 line 23, it says: 10 "...and where no additional commitment to 11 transmission facilities was required." 12 Before I ask my next question on this could 13 you turn to Interrogatory E, tab 2, Schedule 38? This 14 is an interrogatory from AMPCO. 15 --- Pause 16 MR. PORAY: We are there. 17 MR. FISHER: Here it says: 18 "Please confirm that it is a condition of 19 supply for Surplus Power that no 20 transmission or generation facilities 21 will be constructed for a Surplus Power 22 supply and no existing facilities will be 23 committed for a Surplus Power supply." 24 The answer, the response there was that that 25 was correct. 26 MR. PORAY: Yes. 27 MR. FISHER: Can you confirm that based on 28 this condition Ontario Hydro did not build any Les Services StenoTran Services Inc. 613-521-0703 1070 OHNC Panel 2, cr-ex (Fisher) 1 facilities and, in particular, did not build any 2 transmission facilities to supply surplus power 3 customers? 4 MR. PORAY: That is our understanding, yes. 5 MR. FISHER: Is it also true that if new 6 facilities were required to supply surplus customers 7 that the customers were required to fully pay for any 8 incremental transmission facilities that were required 9 to serve them? 10 MR. CURTIS: I don't think we are aware of any 11 such examples, but that would be factually correct if 12 they were required. 13 MR. FISHER: The interrogatory we are looking 14 at also said that no existing facilities would be 15 committed to surplus power supply. Could this be 16 interpreted to mean that if a surplus power customer is 17 currently using a part of the system and for some reason 18 this part of the system is needed by a firm power 19 customer the surplus power customer must get off the 20 system to make room for the firm power customer? 21 MR. CURTIS: Yes. That's correct. 22 MR. FISHER: I don't want to get into a debate 23 over the meaning of the phrase "cost causality", but 24 would you agree with the simple point that the fixed 25 costs that OHNC is recovering through this application 26 would be no higher than if the surplus power customers 27 never existed? 28 --- Pause Les Services StenoTran Services Inc. 613-521-0703 1071 OHNC Panel 2, cr-ex (Fisher) 1 MR. CURTIS: As far as we know, that's 2 correct. Yes. 3 MR. FISHER: If we could go back to Exhibit D, 4 Tab 11, Schedule 1, page 6. At line 21 it begins to say 5 that surplus power was: 6 "...intended for large users ... who have 7 flexible operations that can operate 8 under power supply conditions that are 9 significantly less reliable than normal 10 or even those for interruptible power..." 11 And it goes on to say that: 12 "Surplus Power is interruptible for both 13 capacity and economy reasons -- unless 14 the customer has contracted for a higher 15 priced `buy-through' option to address 16 economy cuts." 17 We will talk about buy-through options in a 18 couple of minutes. 19 Is it true that there are no contractual 20 limits on the cuts to surplus power customers? 21 MR. CURTIS: That's correct. Yes. 22 MR. FISHER: It follows, then, if for some 23 reason there was no room on the transmission system for 24 the surplus power customers they could be cut at any 25 time for every hour of every day of the month? 26 MR. CURTIS: Yes, they could be. 27 MR. FISHER: At Exhibit G5.9 is information 28 provided by OPGI. It was distributed yesterday. This Les Services StenoTran Services Inc. 613-521-0703 1072 OHNC Panel 2, cr-ex (Fisher) 1 has four pages describing Ontario Hydro rate options. 2 --- Pause 3 MR. FISHER: Are you there? 4 MR. PORAY: Sorry, yes. 5 MR. CURTIS: Yes, we are there. Sorry. 6 MR. FISHER: Pages 2, 3 and 4 of Exhibit G5.9 7 are a lists of cuts to surplus power. If you look at 8 page 3, at the data for July 1997, you will see that 9 there were cuts to surplus power on 15 of the 31 days of 10 that month. The cuts were not just for a few minutes, 11 but they range from a couple of hours to many days with 12 more than 12-hour cuts. 13 MR. CURTIS: Are you referring to the July 14 period? 15 MR. FISHER: Yes, July 1997. 16 MR. CURTIS: 1997, yes. 17 MR. FISHER: Is this what you mean in your 18 evidence by the reference to surplus power being 19 significantly less reliable than even interruptible 20 power? 21 MR. CURTIS: You mean in terms of it being 22 subjected to these number of cuts over the period of 23 time that you are pointing to here? 24 MR. FISHER: Yes. 25 MR. CURTIS: Yes. 26 MR. FISHER: I want to look now at how surplus 27 power is priced and come back later to the buy-through 28 option. Les Services StenoTran Services Inc. 613-521-0703 1073 OHNC Panel 2, cr-ex (Fisher) 1 AMPCO has set out how the price is calculated 2 in section 7.2 of its evidence, which is Exhibit H, 3 Tab 2, Schedule 1, and section 7.2 is at page 39. 4 MR. CURTIS: Could you supply those references 5 again, please? 6 MR. FISHER: Yes. It is AMPCO's evidence, 7 section 7.2 at page 39. 8 MR. PORAY: Okay. We have it. 9 MR. FISHER: Okay. Could you have a look at 10 the second paragraph under that section 7.2. It gives 11 the details of energy pricing. 12 --- Pause 13 MR. CURTIS: Yes. 14 MR. FISHER: Is it correct that the basic 15 price starts from the marginal cost of production from 16 the most expensive generating unit that is running on 17 the system? 18 MR. CURTIS: I think you are straying into an 19 area where we are not familiar with how these contracts 20 are structured. These are not our contracts. You are 21 talking about marginal cost of production I think in 22 terms of generation costs here. 23 MR. PORAY: I think, as you have stated -- I 24 mean, you have stated that that is what happens in your 25 first sentence. 26 MR. FISHER: Yes. 27 MR. CURTIS: I think what we are saying is 28 that we would defer to your knowledge of the contract Les Services StenoTran Services Inc. 613-521-0703 1074 OHNC Panel 2, cr-ex (Fisher) 1 completely. We don't -- 2 MR. FISHER: Okay. So you would accept it 3 subject to some other information that came forward that 4 disputed this, then. 5 MR. CURTIS: We wouldn't know. 6 MR. ROGERS: Let's put it this way. They 7 don't have the contracts, you do. Let's assume that you 8 are correct subject to future proof. So for 9 hypothetical questions let's assume that this is 10 correct. 11 MR. FISHER: Okay. 12 So then, surplus power customers will have to 13 buy their energy at the market price -- and this is for 14 the new market -- and that this price will be at least 15 the marginal cost of production of the most expensive 16 unit that is running on the system. Okay? 17 MR. PORAY: I think that was our 18 understanding, yes. 19 MR. CURTIS: Yes. 20 MR. ROGERS: Mr. Chairman, may I ask the 21 witness, do you understand the -- is this the hypothesis 22 you are putting to the witness? 23 THE PRESIDING MEMBER: The questions are 24 related to the commodity and the witnesses have no 25 knowledge of the commodity aspect of the market. We are 26 here to talk about transmission and delivery of that 27 commodity to customers so, you know, we have to keep it 28 within the scope of what the witnesses know. I mean, Les Services StenoTran Services Inc. 613-521-0703 1075 OHNC Panel 2, cr-ex (Fisher) 1 general questions about the working of the market may be 2 okay, but I think we have to confine it to things that 3 are directly relevant to transmission and the delivery 4 of power to customers. Okay? 5 MR. FISHER: Thank you, Mr. Chair. 6 Another component of price that surplus power 7 customers pay is a 5 per cent gross-up for transmission 8 losses. This is mentioned in the third paragraph of 9 section 2 of AMPCO's evidence that we have been looking 10 at. Is this 5 per cent a reasonable approximation of 11 the average losses of the transmission system? 12 MR. PORAY: I think our understanding is that 13 the average transmission losses can vary between 3 per 14 cent and 5 per cent, 6 per cent. It's probably in the 15 ball park. 16 MR. FISHER: Right. Thank you. Am I right 17 that in the new market the cost of losses will be 18 recovered by the IMO through an uplift mechanism and 19 that assuming that the surplus power customers must pay 20 us list, they will pay for the losses through the IMO 21 uplift. 22 MR. PORAY: That is our understanding 23 MR. FISHER: Section 7.2 of AMPCO's evidence 24 submitted one of the charges that surplus power 25 customers must pay. They are required to pay a $2,000 26 per month fee to cover the cost of administration of the 27 rates. Can you confirm that they must pay this $2,000 a 28 month charge, please? Les Services StenoTran Services Inc. 613-521-0703 1076 OHNC Panel 2, cr-ex (Fisher) 1 MR. PORAY: I don't think we are in a position 2 to confirm that. 3 MR. FISHER: Would you agree that the marginal 4 cost of generation, plus the cost of transmission 5 losses, plus the cost of administration, is a reasonable 6 estimate of the total incremental cost of supplying the 7 surplus power to customers? 8 MR. CURTIS: Again, we are having problems 9 with the commodity side of your equation. 10 MR. PORAY: I think we need to focus on what 11 the treatment will be for transmission purposes of this 12 commodity power, this surplus power. That's what we 13 really need to focus on. You have talked about how 14 losses will be charged by the IMO. There may be other 15 aspects of the treatment, but it's transmission that we 16 are focusing here on 17 MR. FISHER: Okay. Thank you. Could I have a 18 moment, please? 19 --- Pause 20 MR. FISHER: Mr. Chair, would this be a good 21 time to break for lunch? 22 THE PRESIDING MEMBER: Sure. Yes. We are 23 happy to do that. Maybe you could have a look at your 24 line of questioning and see whether we can focus toward 25 the transmission aspect. That would be very good. 26 MR. FISHER: Thank you. 27 THE PRESIDING MEMBER: We have a couple of 28 little things to do over the lunch break, so we will Les Services StenoTran Services Inc. 613-521-0703 1077 OHNC Panel 2, cr-ex (Fisher) 1 come back at two o'clock 2 MR. FISHER: Thank you very much. 3 --- Upon recessing at 1230 4 --- Upon resuming at 1404 5 THE PRESIDING MEMBER: Thank you. Please be 6 seated. 7 Any preliminary matters. Mr. Rogers? 8 MR. ROGERS: No, thank you. 9 THE PRESIDING MEMBER: So, Mr. Fisher, we are 10 back to then. I hope we didn't screw you up in your 11 flight of fancy this morning. I hope you can resume. 12 MR. FISHER: Thank you, Mr. Chair. The axe 13 has fallen on a few questions as necessary. 14 Good afternoon. As we have discussed, the 15 essential characteristics for surplus power are that 16 it's for incremental load that is supplied without any 17 incremental facilities on an "as available" basis and 18 that the price is a small mark-up over the incremental 19 costs of supply. 20 As I understand it, the current draft market 21 rules do not provide for a non-firm transmission 22 service, and we will get back to that point in a minute. 23 Is it true that because of the variability of loads in 24 the province there will continue to be times when there 25 is room on the transmission system for incremental loads 26 without the need to construct new facilities? 27 MR. PORAY: I think that's probably the case. 28 Yes. Les Services StenoTran Services Inc. 613-521-0703 1078 OHNC Panel 2, cr-ex (Fisher) 1 MR. FISHER: Would this also be true even if 2 the system is fully loaded at peak times? 3 MR. CURTIS: It may be in certain spots on the 4 system. I wouldn't want to state that categorically 5 across the system though. 6 MR. FISHER: During off-peak times? 7 MR. CURTIS: During off-peak times, yes 8 MR. FISHER: Can you confirm that incremental 9 load that would not otherwise be there at standard 10 rates, but pays in excess of the incremental costs of 11 supplying it can add to either the net income of OHNC or 12 to lowering rates to other customers? 13 MR. CURTIS: Kind of a complicated question. 14 MR. FISHER: I will try that one again. 15 MR. CURTIS: Can you try that one again? I'm 16 not sure I followed all of it. 17 MR. FISHER: Okay. Could you confirm that 18 incremental load that would not otherwise be there at 19 standard rates, but pays in excess of the incremental 20 costs of supplying it can either add to the net income 21 of OHNC or to lowering the rates of other customers? 22 MR. CURTIS: I think that's correct. Yes. 23 MR. FISHER: Can you confirm that the Alberta 24 market has a transmission rate for such a service called 25 grid opportunity service? 26 MR. CURTIS: I think we are broadly aware that 27 that's there. I don't know about the terms and 28 conditions of that particular component of their service Les Services StenoTran Services Inc. 613-521-0703 1079 OHNC Panel 2, cr-ex (Fisher) 1 though. 2 MR. FISHER: Thank you. Can you confirm that 3 the New York market, which is a locational marginal 4 pricing market, is able to distinguish between firm and 5 non-firm transmission service? 6 MR. PORAY: My understanding is that the 7 distinction is not so much the locational marginal 8 pricing, but on the export and wheel-through service 9 which is called point to point service. 10 MR. FISHER: As I mentioned earlier, AMPCO is 11 aware that the current draft market rules for Ontario do 12 not provide for a separate non-firm transmission 13 service. Do you believe that it would require 14 significant changes to the Ontario market rules to allow 15 for separate non-firm transmission service? 16 MR. PORAY: I think it might change the 17 philosophy of the intent of the market rules in terms of 18 how access is gained to the transmission system, but 19 it's not based through firm and non-firm service, but 20 rather through the bidding into the marketplace 21 MR. FISHER: And that would be a significant 22 change then. 23 MR. PORAY: I believe so. 24 MR. FISHER: Yes. I now want to turn to the 25 impact of terminating the surplus power contracts as it 26 affects transmission rates and the resulting 27 transmission charges that surplus power customers will 28 pay under this OHNC proposal. Les Services StenoTran Services Inc. 613-521-0703 1080 OHNC Panel 2, cr-ex (Fisher) 1 Could you turn back to Exhibit D, Tab 11, 2 Schedule 1, page 9. 3 MR. CURTIS: Yes. We have that. 4 MR. FISHER: Lines 7 to 17. At this point you 5 talk about the two options. In Option A, the surplus 6 power customers pay full transmission charges and in 7 Option B, the surplus power customers pay no 8 transmission charges until the end of the contracts. 9 At lines 19 to 24, you estimate that the 10 difference between these two options for the surplus 11 power customers is $25 million annually. You also 12 indicate that this is a "significantly large increase in 13 their overall delivered energy costs". 14 Given that surplus power customers pay very 15 little, if anything, toward the fixed costs of 16 transmission today, isn't this an increase in the 17 transmission rates that they will pay of many hundreds 18 of per cent which is in orders of magnitude higher than 19 the 5 per cent threshold, indicating a significant 20 impact? 21 MR. CURTIS: Again, the issue here is that we 22 are talking about a surplus contract that is a bundled 23 contract, bundling the energy commodity with the 24 transmission commodity. I think, as we talked about 25 before, it is extremely difficult, if not almost 26 impossible, to unravel those contracts to segregate out 27 what would be the transmission component from the 28 commodity portion. I don't think we would be in a Les Services StenoTran Services Inc. 613-521-0703 1081 OHNC Panel 2, cr-ex (Fisher) 1 position to confirm any figure in terms of portraying it 2 as an increase in the payment for transmission services. 3 MR. FISHER: Would you agree that the average 4 transmission rate is in the range of .4 to .8 cents per 5 kilowatt hour, depending on load factor, and whether 6 connection services are required as well as network? If 7 you do not want to agree to this range, would you at 8 least confirm that this range is an acceptable estimate? 9 MR. CURTIS: Could you tell us how you did the 10 calculations? This doesn't obviously match the rates 11 that we filed because they are done on a peak basis -- 12 sorry, done on a per kilowatt basis. Right? How did 13 you do your calculations? 14 MR. FISHER: I will have to refer to 15 Mr. Snelson for this one. 16 MR. SNELSON: If you would look at AMPCO's 17 evidence, which is Exhibit H, Tab 2, Schedule 1. 18 MR. PORAY: Which section, Mr. Snelson? 19 MR. SNELSON: If you can look under Tab A. 20 There are -- 21 MR. PORAY: Does it have an appendix letter? 22 MR. SNELSON: It's Appendix A. 23 MR. PORAY: Appendix A. Okay. 24 MR. CURTIS: Okay. Thank you. 25 MR. SNELSON: My copy has tabs and maybe yours 26 don't. 27 MR. PORAY: We don't have tabs. Sorry. 28 MR. SNELSON: There is a series of charts Les Services StenoTran Services Inc. 613-521-0703 1082 OHNC Panel 2, cr-ex (Fisher) 1 starting with chart 1, 1A, 2 and 2A. 2 These are calculations of your transmission 3 rates with a variety of different load patterns and the 4 different types of customers and they have been 5 calculated from the average kilowatts. 6 For instance, if you look at Type A, Average, 7 which is Chart 1, Type A, Average, then that is the 8 calculation using the variety of charge determinants 9 that have been used for the standard load factor 10 assumptions or charge utilities assumptions that OHNC 11 has used to recalculate the rates from dollars to 12 kilowatt into an effect on energy. 13 For this particular case, which is your 14 current proposal, network and line connections, it shows 15 typically the average energy impact is in the order of 16 .5 cents a kilowatt hour. This one is calculated from 17 network and line connections. 18 If we look at Chart 2, which is actually the 19 third chart going past Chart 1A, then again with 20 network, line and transmission connections included, 21 then you get some rates that are going up towards 22 .8 cents a kilowatt hour. 23 We are not trying to get precision of these 24 numbers, we are just trying to establish a rough level 25 to be able to use as a base for calculating impact. 26 MR. PORAY: Okay. I guess that's as indicated 27 here, those reflect the numbers that you spoke of. 28 MR. FISHER: Assuming that the surplus power Les Services StenoTran Services Inc. 613-521-0703 1083 OHNC Panel 2, cr-ex (Fisher) 1 customer pays on average 5 cents a kilowatt hour for a 2 total bundled electricity rate, then the imposition of 3 transmission charges is an increase on the total bundled 4 electricity bill of 8 to 16 per cent. Is that correct? 5 MR. CURTIS: I think we would have to trust 6 your calculation, because we don't have any knowledge 7 about what they pay as far as an energy bundled rate. 8 We don't have those contracts. 9 MR. FISHER: Thank you. 10 MR. ROGERS: We will take your word for it for 11 the purpose of the questioning. 12 MR. FISHER: Thank you. 13 Given that the impact on the transmission 14 component is hundreds of percentage points and the 15 impact on the total bundled bill is in the 8 per cent to 16 16 per cent range, would this impact not qualify as what 17 you meant in your evidence by a significantly large 18 impact on the overall delivered cost of energy? 19 MR. CURTIS: Again what you are stating is 20 based on the calculations that you have done which we 21 haven't had an opportunity to check or verify. I would 22 feel uncomfortable agreeing with your assertion without 23 us having that ability to confirm it. 24 The major portion of, I think, what you are 25 bringing forward is based on the energy component of the 26 surplus contracts which we don't have, so we are not in 27 a position to be able to know how much that actually is. 28 MR. FISHER: The simple point is that it is a Les Services StenoTran Services Inc. 613-521-0703 1084 OHNC Panel 2, cr-ex (Fisher) 1 significant part of the bundled costs though, the energy 2 component? 3 MR. CURTIS: Yes -- I'm sorry. 4 MR. FISHER: The new transmission rates I 5 should say. 6 MR. PORAY: I think we have always said or 7 stated that the transmission component represents about 8 15 per cent on average of the bill. 9 --- Pause 10 MR. FISHER: The view of the surplus customers 11 is that they do see it as a significant impact, would 12 you not agree that one way to mitigate this impact and 13 to respect the principle mentioned above would be to 14 have a transition period to allow these customers to 15 adjust? The principle being that the rate structure 16 should minimize negative cost impact on customers at the 17 onset of open access. 18 MR. CURTIS: I'm sorry. Could you rephrase 19 your question again? 20 MR. FISHER: Sure. 21 MR. CURTIS: You added the principle in there 22 and confused me. 23 MR. FISHER: Okay. I apologize for that. 24 MR. CURTIS: I'm sorry. 25 MR. FISHER: The principle stated, in 26 Exhibit C I believe it is, is that the rate structure 27 should minimize negative cost impact on customers at the 28 onset of open access. Les Services StenoTran Services Inc. 613-521-0703 1085 OHNC Panel 2, cr-ex (Fisher) 1 The question was: Would you not agree that 2 one way to mitigate the impact and to respect the 3 principle I just mentioned would be have a transition 4 period to allow the customers to adjust? 5 MR. CURTIS: I think, as we put forward in our 6 evidence, the basis that we are putting forward this 7 proposal is the legislation, Bill 35, that these were 8 bundled contracts under Ontario Hydro and as per the 9 legislation requirements they would cease to exist as of 10 open access. 11 MR. FISHER: AMPCO's proposal for a phase-in 12 for surplus power customers is described in section 7.7 13 of Exhibit H, Tab 2, Schedule 1, which is the AMPCO's 14 evidence. Section 7.7 goes from page 43 to 45. 15 In essence, the proposal is that there should 16 be a 10-year transition period from no transmission 17 charge to full transmission rates and each year the 18 transmission charges would be calculated the same way as 19 for any other customer but before the bill is issued the 20 charge would be multiplied by a factor. 21 In the first year the factor would be 0, in 22 the second year it would be 0.1, and that would be 23 10 per cent, in the third year 0.2 and so on, until the 24 11th and subsequent years when the factor would be 1.0 25 and no special treatment would be required. 26 Would you agree that this proposal is feasible 27 and can be implemented? 28 MR. CURTIS: Yes, it is. Les Services StenoTran Services Inc. 613-521-0703 1086 OHNC Panel 2, cr-ex (Fisher) 1 MR. FISHER: There is another aspect to this 2 issue I want to deal with and that gets to the 3 interrelationship between surplus power rates and charge 4 determinants. 5 Could you turn to Exhibit D, Tab 11, 6 Schedule 1, page 10. Lines 12 to 15 has a sentence: 7 "Customers with surplus power loads will 8 have opportunities to utilize the 9 flexibility inherent in such loads to 10 manage their overall transmission charges 11 and to reduce their purchase power 12 costs." (As read) 13 Do you agree that the charge determinant 14 Option XVIII gives the surplus power customer 15 flexibility to use the system at low cost after 16 7:00 p.m. and the weekend? 17 MR. PORAY: Yes, we would agree. 18 MR. FISHER: However, would you also not agree 19 that Option XVIII gives the surplus power customer very 20 little flexibility to use the system during the week 21 days from 7:00 a.m. to 7:00 p.m. periods, even when the 22 system load is low, simply because if the surplus power 23 customer uses power at these times it will get caught by 24 the 85 per cent of non-coincident peak part of the 25 charge? 26 MR. CURTIS: Well, the customer could manage 27 its take off the system through that period so that it 28 has been levelized. It's not that it doesn't have any Les Services StenoTran Services Inc. 613-521-0703 1087 OHNC Panel 2, cr-ex (Fisher) 1 flexibility in terms of managing its load during that 2 period. 3 MR. FISHER: Do you agree that Option XVI 4 gives the surplus power customer flexibility to use the 5 system during these lower load times in the weekday from 6 7:00 a.m. to 7:00 p.m.? It gives more flexibility than 7 Option XVIII? 8 MR. PORAY: I think we would agree, yes, it 9 does. 10 MR. FISHER: Do you agree that, at present, 11 surplus power customers are allowed to, and do, use the 12 system at low cost during lower load weekday periods as 13 well as night times and weekends? 14 MR. PORAY: I think when you refer to low cost 15 you are referring to the cost of the energy produced, 16 not in fact to there being any reduction in cost as a 17 result of our referring to the transmission system. 18 MR. FISHER: Returning to your statement on 19 page 10, that surplus power customers will have 20 opportunity to utilize the flexibility inherent to 21 manage their overall transmission charges, will you 22 agree with me that the charge determinant Option XVI 23 gives significantly more flexibility than Option XVIII? 24 MR. CURTIS: I don't know that we would agree 25 with "significantly"; but it would give more 26 flexibility. 27 MR. FISHER: We have some questions dealing 28 with back-up power. And in light of the revised Les Services StenoTran Services Inc. 613-521-0703 1088 OHNC Panel 2, cr-ex (Fisher) 1 interrogatory yesterday from OHNC, I would like to turn 2 over the next questions to Mr. Snelson. 3 CROSS-EXAMINATION 4 MR. SNELSON: These questions have been 5 adjusted to take into account some of the new 6 information made available yesterday. I believe what we 7 are asking can be somewhat shorter and quite a lot less 8 technical than they would have been otherwise. 9 These contracts for back-up power, we are 10 aware that they are like the other contracts on a 11 bundled basis and that there are both energy and 12 transmission components to them. You will be pleased to 13 know that we are asking very few, if any, questions 14 about the energy component. 15 I do have just one question in that area, and 16 that is: Do you agree that we don't need to be 17 concerned about the energy component of these contracts 18 because the customers who currently take back-up power 19 will buy their energy in the spot market, either at the 20 spot price or through some form of bilateral contract, 21 and the energy is something that we don't have to be 22 concerned about today? 23 MR. PORAY: Yes. 24 MR. SNELSON: Will you also agree that to get 25 the back-up energy to his premises or plant, the 26 customer needs to use the transmission system? 27 MR. PORAY: That is correct. 28 MR. SNELSON: This service of getting back-up Les Services StenoTran Services Inc. 613-521-0703 1089 OHNC PANEL 2, cr-ex (Snelson) 1 energy from wherever it is bought in the market to the 2 customer's plant, I am going to refer to as back-up 3 transmission service. 4 MR. PORAY: Yes. 5 MR. SNELSON: Will you agree that the basic 6 question to be addressed is whether the normal charges 7 for transmission under the charge determinant provide an 8 appropriate level of charges for back-up transmission 9 service? 10 MR. PORAY: Yes, I would agree. 11 MR. SNELSON: I want you to address the next 12 question without considering the practical difficulties, 13 if any, of setting up a rate for back-up transmission 14 service. We will come back to the practical issues. 15 Will you agree that if the charge determinant 16 does not provide an appropriate level of charges, it may 17 be worth considering if a separate rate for back-up 18 transmission service is required? 19 MR. PORAY: Could you repeat that question, 20 please. 21 MR. SNELSON: Will you agree that if the 22 charge determinant does not provide an appropriate level 23 of charges, then it may be worth considering if a 24 separate rate for back-up transmission service is 25 required? 26 MR. CURTIS: Are you talking about the 27 standard rate providing sufficient -- 28 MR. SNELSON: I am talking about the standard Les Services StenoTran Services Inc. 613-521-0703 1090 OHNC PANEL 2, cr-ex (Snelson) 1 charges for transmission service, with whatever charge 2 determinant we might settle upon at the end of this 3 process. 4 MR. CURTIS: Right. 5 MR. SNELSON: And if that doesn't provide the 6 right level of charges, the appropriate level -- it may 7 be too high; it may be too low. But if it doesn't 8 provide the appropriate level, then we might have to 9 think about whether we have to have a separate back-up 10 transmission rate. 11 MR. PORAY: I think that is probably true, 12 yes. 13 MR. CURTIS: Right. 14 MR. SNELSON: I asked you to deal with that 15 question without considering the practical difficulties, 16 and I would now like to address some of the practical 17 difficulties. 18 Would I be right that the IMO would have some 19 difficulty separating the demands for back-up 20 transmission service from other demands on the system? 21 MR. PORAY: I would say that is a fair 22 comment. 23 MR. SNELSON: Would you agree that, as far as 24 the transmission system is concerned, the flows on the 25 system from back-up transmission service are a rather 26 extreme example of a low load factor customer? 27 MR. CURTIS: I don't think I have ever thought 28 of it as that concept. Les Services StenoTran Services Inc. 613-521-0703 1091 OHNC PANEL 2, cr-ex (Snelson) 1 --- Pause 2 MR. PORAY: I think possibly the problem we 3 are having here is that the back-up customer is an 4 intermittent user, whereas a low load factor customer 5 would be using it on a continuous basis. 6 MR. SNELSON: You could conceive of a customer 7 that didn't, for instance, in the distribution system -- 8 and I am not quite sure if there is anything comparable 9 in the transmission system. You have ski operators who 10 close down in the summer or golf courses that shut up in 11 the winter, or you could have a plant that shuts down 12 for three months because of an economic shutdown. 13 So there can be low load factor customers. 14 I think there has been some data provided that 15 show that there is, I think, one transmission customer 16 on Ontario Hydro, a direct customer, that has a load 17 factor of around 5 per cent. 18 MR. PORAY: I would have to take your word for 19 that. 20 MR. SNELSON: I think it is in the answer to 21 one of your interrogatories. I can't find it 22 immediately. 23 MR. PORAY: Okay. 24 MR. SNELSON: Going on to my next question, 25 would you agree that the preferable solution to the 26 provision of back-up transmission service is to have a 27 transmission rate structure with charge determinants 28 that give appropriate charges for this service and for Les Services StenoTran Services Inc. 613-521-0703 1092 OHNC PANEL 2, cr-ex (Snelson) 1 other low load factor uses of the system, such that we 2 don't have to have a special back-up transmission rate? 3 The reasons for this are the difficulties in 4 separating out the back-up flows from other flows and to 5 have some degree of consistency between back-up charges 6 and charges for other transmission low load factor 7 customers. 8 MR. CURTIS: We wouldn't agree that the 9 requirements for setting a back-up rate, if they do 10 actually exist, should drive the decision on charge 11 determinant. 12 Is that what your question is? 13 MR. SNELSON: No. I think I am really saying 14 that the desirable end state to get to, to avoid the 15 practical difficulties of having a separate back-up 16 rate, is to have a charge determinant that would give an 17 appropriate signal. 18 I am not saying it necessarily would drive 19 that. But that would be a desirable end state. 20 MR. CURTIS: The concern that I would have is 21 that we are putting the cart before the horse in this, I 22 think. What you are getting at is using a rate that we 23 may or may not have and using that as a drive in terms 24 of how we should make the choice around charge 25 determinant. We wouldn't consider that to be 26 appropriate. 27 MR. SNELSON: Would you consider this to be 28 one factor in the choice of the charge determinant -- Les Services StenoTran Services Inc. 613-521-0703 1093 OHNC PANEL 2, cr-ex (Snelson) 1 maybe not the determining factor but just one of a 2 number of factors to take into account? 3 MR. CURTIS: We would consider that to be a 4 nice factor to have at the end of the choice of the 5 charge determinant, but not being a predominant driver 6 in terms of the choice of charge determinant. 7 MR. SNELSON: Thank you. 8 Yesterday, you submitted a revised answer to 9 Interrogatory E-1-47, and that has a number on it as 10 E-1-47(a). Can you perhaps find that, please? 11 MR. PORAY: Okay. 12 MR. SNELSON: If you go over to the second 13 page there is a table of numbers. 14 The number on the bottom left-hand corner of 15 the chart is 15.5. I believe that it is 15.5 million. 16 MR. PORAY: That's correct. 17 MR. SNELSON: Am I correct that, this figure, 18 the earlier version has that figure at 12.8 million? 19 MR. PORAY: That is correct. 20 MR. SNELSON: Can you, please, now turn to 21 Exhibit D, Tab 11, Schedule 1, page 6? I am sorry, page 22 16. I am sorry, I had the wrong page. So that is 23 Exhibit D, Tab 11, Schedule 1, page 16. 24 MR. PORAY: We have that. 25 MR. SNELSON: You will see also a rather 26 similar table of numbers. Would I be correct that the 27 $12.8 million figure, again to the bottom left of that 28 table, the middle column at the bottom, should be Les Services StenoTran Services Inc. 613-521-0703 1094 OHNC PANEL 2, cr-ex (Snelson) 1 corrected to 15.5? 2 MR. PORAY: It would be correct. That is that 3 also the wording in the bottom left-hand -- in the 4 bottom part of that first column is also corrected. 5 MR. SNELSON: That should be corrected to say 6 "with altitude as per the CEA data" and so on, as you 7 have in the box in the revision to E-1-47(a)? 8 MR. PORAY: That is correct. 9 MR. SNELSON: I want now to look at the 10 difference on this table between the $12.4 million which 11 is shown in the bottom right of this table, and that is 12 the transmission charges with no transmission charges 13 for back-up service, as I understand it, and the $15.5 14 million at the bottom of the middle column, which is the 15 rates that these people would pay, that these back-up 16 customers would pay with full transmission charges? 17 MR. PORAY: That's correct. 18 MR. SNELSON: As the table was the difference 19 was 12.8 million to 12.4 million? 20 MR. PORAY: That is correct. 21 MR. SNELSON: A difference of .4, $400,000 or 22 .4 million? 23 MR. PORAY: That's correct. 24 MR. SNELSON: Am I right that is an estimate 25 of -- that difference is an estimate of the cost of 26 providing back-up service to those customers, because it 27 is a difference between the transmission costs with no 28 back-up charges and the transmission costs with full Les Services StenoTran Services Inc. 613-521-0703 1095 OHNC PANEL 2, cr-ex (Snelson) 1 transmission rates for back-up service? 2 MR. PORAY: I think that difference is based 3 on the fact that in the middle column we allowed for the 4 generators to have a 10 per cent outage rate and that is 5 how that 12.8 million came about. 6 In column B the customers that had back-up 7 contracts would not pay any transmission charges. 8 MR. SNELSON: For the back-up demand? 9 MR. PORAY: For the back-up demand, yes. 10 MR. SNELSON: And that is correct. So I am 11 looking at a difference between $12.4 million with no 12 charges for back-up demand -- 13 MR. PORAY: That's correct. 14 MR. SNELSON: -- and $12.8 million in the 15 original table, those regular transmission charges for 16 back-up demand? 17 MR. PORAY: That's right. The difference 18 is .4. 19 MR. SNELSON: Point four (.4). That is 20 attributable to the costs -- to the transmission charges 21 on the back-up demand? 22 MR. PORAY: On the back-up demand, yes. 23 MR. SNELSON: If we do that difference again 24 with new figures, 15.5 to 12.4, the difference is now 25 $3.1 million? 26 MR. PORAY: That is correct. 27 MR. SNELSON: Can you confirm that the reason 28 for the change is that OHNC had a closer look at the Les Services StenoTran Services Inc. 613-521-0703 1096 OHNC PANEL 2, cr-ex (Snelson) 1 effect of the non-coincident peak aspect of the charge 2 determinants in the rates that you are proposing? 3 MR. PORAY: I think it is a combination of 4 that and the outage rates for generators, the statistics 5 that were in the Canadian Electrical Association report. 6 MR. SNELSON: Okay. Well, let's just look at 7 that. 8 I believe that the statistics in the Canadian 9 Electrical Association report were included in OHNC 10 Undertaking F2.1? 11 MR. PORAY: That is correct. 12 MR. SNELSON: They show forced outage rates of 13 4 per cent, 4.32 per cent and 2.96 per cent? 14 MR. PORAY: That is correct. 15 MR. SNELSON: If one just looked at the change 16 in forced outage rate, of going from 10 per cent forced 17 outages to somewhere in the order of 3 or 4 per cent 18 forced outage, you would expect that the cost of 19 transmission -- of back-up service -- would go down, I 20 presume, because the outage rate is lower, the back-up 21 supply is required less frequently? 22 MR. PORAY: I think you also have to take into 23 consideration the column beside the forced outage rate 24 column, which is the average repair time. 25 MR. SNELSON: Yes. 26 MR. PORAY: We took that into consideration as 27 well. 28 MR. SNELSON: Okay. But the further Les Services StenoTran Services Inc. 613-521-0703 1097 OHNC PANEL 2, cr-ex (Snelson) 1 consideration of the non-coincident nature of the peak 2 charges was a significant factor in that difference. It 3 may not be the whole of the factor? 4 MR. PORAY: That's correct. 5 MR. SNELSON: As a matter, sort of principle, 6 would you agree that non-coincident peak charge 7 determinants can have a relatively large impact on 8 back-up charges compared to these coincident peak 9 measures? 10 --- Pause 11 MR. PORAY: I think that is probably the 12 case, yes. 13 MR. SNELSON: Now, these impacts, do you agree 14 that they are calculated using only the network rate? 15 MR. PORAY: That is correct. 16 MR. SNELSON: You will agree that the 17 connection rates that you are proposing for both line 18 connection and transmission connection are 19 non-coincident peak rates? 20 MR. PORAY: Yes, they are. 21 MR. SNELSON: Would you agree that if back-up 22 customers use the connection services then the impact on 23 them would be considerably larger than the impact 24 indicated? 25 --- Pause 26 MR. PORAY: I am not sure that I would agree 27 with that because the connection charge reflects the 28 need for the capacity of that customer that is connected Les Services StenoTran Services Inc. 613-521-0703 1098 OHNC PANEL 2, cr-ex (Snelson) 1 to the system. 2 MR. SNELSON: If we have a generator who has 3 50 megawatts of load and 40 megawatts of generation in a 4 month when his generation is fully in service he will 5 have a peak demand of 10 megawatts? 6 The connection charge rate will be based on a peak 7 demand of 10 megawatts if his generator goes out of 8 service then he is going to have a peak demand of 50 9 megawatts? 10 MR. PORAY: I believe that we, in our 11 proposal, we have submitted that the connection will be 12 based on gross loads. So it will be 90 megawatts. 13 MR. SNELSON: Okay. Gross load for new 14 embedded generators but net load for existing embedded 15 generators? 16 MR. PORAY: That is correct. Yes. 17 MR. CURTIS: Right. 18 MR. SNELSON: So this effect will take place 19 for existing embedded generators? 20 MR. PORAY: I think that is true, yes. 21 MR. SNELSON: I would like to turn now to an 22 exhibit that OPGI put in front of you. That is 23 Exhibit G2.1. 24 --- Pause 25 MR. PORAY: Okay. We have it. 26 MR. SNELSON: I notice that this exhibit 27 calculates the level of back up charges for a generator 28 with a 3 per cent forced outage rate, and that it also Les Services StenoTran Services Inc. 613-521-0703 1099 OHNC PANEL 2, cr-ex (Snelson) 1 assumes that the charge determined is Option XVI, the 2 preferred option of AMPCO. 3 MR. PORAY: That is my understanding, yes. 4 MR. SNELSON: I know this is a 3 per cent 5 forced outage rate. That is a pretty good generator, a 6 generator that you would like to have on your system. 7 MR. PORAY: I'm not a generator, I'm not -- 8 MR. SNELSON: Okay. I think OPGI would be 9 very pleased if their nuclear units could achieve 8 per 10 cent availability never mind 97 per cent. 11 You would agree, I believe, that this 12 particular calculation includes only the network 13 charges? 14 MR. PORAY: That is correct. 15 MR. SNELSON: And as we have just discussed, 16 at least for existing embedded generators, there has to 17 be the -- there is the effect of connection services if 18 they need connection services that have to be added to 19 this. 20 MR. PORAY: Yes, I think so. 21 MR. SNELSON: Now, in this exhibit, the 22 resulting charge is compared to the existing replacement 23 back-up rate and, in particular, it is charged, it is 24 compared, to the facilities charge in the existing 25 replacement back-up rate, and that charge is quoted as 26 $1.33 per kilowatt per month if the customer is 27 connected to the 115 kV. I want to explore a little bit 28 as to whether this is a reasonable indication of the Les Services StenoTran Services Inc. 613-521-0703 1100 OHNC PANEL 2, cr-ex (Snelson) 1 existing level of transmission charges for back-up 2 service. 3 Will you accept, subject to checking, that for 4 customers connected to the 115 kV the facilities back-up 5 charge for replacement back-up power in the existing 6 rate structure includes the following items: automatic 7 generation control and black start, the active power 8 support, communications, rural rate assistance and 9 administration? 10 MR. PORAY: We are not in a position to verify 11 that information. 12 MR. SNELSON: Can you confirm that if that was 13 the case several of these components are not a relevant 14 comparison to the recovery of the fixed cost of the 15 transmission system, in particular: automatic 16 generation control and black start will be part of the 17 uplift by the IMO; reactive power support may be divided 18 between IMO charges and the cost of reactive power 19 supply in the transmission rate; and, rural rate 20 assistance, clearly, is not a part of the transmission 21 rate? 22 MR. PORAY: Certainly, from a going-forward 23 position, I would confirm that, yes. 24 MR. CURTIS: I would question, though, maybe 25 about the rural rate assistance in terms of where it is 26 collected. It may reside with the transmission rate on 27 a going-forward basis. 28 MR. SNELSON: Okay. But it is not part of the Les Services StenoTran Services Inc. 613-521-0703 1101 OHNC PANEL 2, cr-ex (Snelson) 1 charges that is being collected through this proceeding? 2 MR. CURTIS: It's not part of the charges that 3 we are talking about in this proceeding. You are right. 4 MR. SNELSON: Thank you. 5 When we were talking about -- when Mr. Fisher 6 was talking about the surplus power, then he took you to 7 an exhibit which included some information from OPGI, 8 and that is Exhibit G5.9 -- perhaps you could go to 9 that. 10 --- Pause 11 MR. PORAY: Yes, we have that. 12 MR. SNELSON: That has some data about the 13 customers who take back-up power. It is about a third 14 of the way down the page and it is in three categories, 15 "Back-Up Power": "Supplementary", "Replacement" and 16 "Long-Term". 17 MR. PORAY: Yes, we see that. 18 MR. SNELSON: You will notice that more than 19 70 per cent of the back-up power is supplied under 20 supplementary back-up and that a very small proportion 21 is supplied under replacement. 22 MR. PORAY: That is how it appears, yes. 23 MR. SNELSON: Can you confirm that the 24 existing supplementary back-up rate has no facilities 25 charge that is charged every month whether or not 26 back-up is taken? 27 MR. PORAY: I don't think I'm in a position to 28 confirm that. I don't know. Les Services StenoTran Services Inc. 613-521-0703 1102 OHNC PANEL 2, cr-ex (Snelson) 1 MR. SNELSON: Okay. We will confirm it some 2 other way. 3 I now want to turn to the degree of influence 4 that back-up power demands have on the need for 5 transmission. First of all, I would like to go to an 6 interrogatory which is Interrogatory E, Tab 2, 7 Schedule 35. So it is 35 of the interrogatories asked 8 by AMPCO. 9 --- Pause 10 THE PRESIDING MEMBER: Is that No. 35, 11 Schedule 35? 12 MR. SNELSON: Yes, E, Tab 2, Schedule 35. 13 MR. PORAY: Yes. 14 MR. SNELSON: And part (d) of that question 15 has quotes from an interrogatory answer that was given 16 by Ontario Hydro back in the ancient history of the old 17 Ontario Hydro days in HR-22 where the answer to that 18 interrogatory states: 19 "`In general, Hydro has not considered 20 back-up power supply arrangements in its 21 bulk transmission planning studies. 22 Typically the forecast of customer 23 demands contains the net demand which has 24 to be supplied from the power system, and 25 this forms the basis of the planning 26 assumptions regarding customer demands. 27 To date there has been, in general, 28 sufficient transmission capacity Les Services StenoTran Services Inc. 613-521-0703 1103 OHNC PANEL 2, cr-ex (Snelson) 1 available to carry the additional supply 2 requirements in the event that customers 3 needed back-up supply.'" 4 And we asked: 5 "Has this situation changed since 1994?" 6 Your answer over the page, part (d), is: 7 "Not since April 1/99 when OHNC was 8 operationalized." 9 I notice that this quote refers to "bulk 10 transmission planning studies". Would I be correct to 11 assume that the bulk transmission system referred to is 12 approximately the same as what is now classified as 13 network? 14 MR. PORAY: I think probably for the most 15 part, yes. 16 MR. SNELSON: Now I would like to move on and 17 look at Interrogatory Exhibit E, Tab 5, Schedule 12. 18 This is an interrogatory from the Green Energy 19 Coalition. 20 --- Pause 21 MR. PORAY: E-5-12? 22 MR. SNELSON: Yes. 23 MR. PORAY: Okay. 24 MR. SNELSON: This interrogatory asks about 25 transmission planning criteria. In particular, in the 26 answer, there is an indication that the generation 27 outage assumption used to test whether the transmission 28 system is adequate is the two largest or most impactive Les Services StenoTran Services Inc. 613-521-0703 1104 OHNC PANEL 2, cr-ex (Snelson) 1 generation units in the constrained area and the 2 assumption is that those units are out of service at the 3 time of critical demand. 4 Would I be correct that on the network part of 5 the system, and I'm talking about network not 6 connection, but on the network part of the system, the 7 two largest and most impacted generation units are not 8 likely to be embedded generation units. 9 MR. PORAY: Yes. That would be correct. 10 MR. SNELSON: Let's also think a little about 11 the probabilities. Let us assume that the two most 12 impacted units on nuclear units and that each one has an 13 availability of 80 per cent, that means there's a 14 probability of it being unavailable of 20 per cent, 15 would I be correct that in very simple probability 16 mathematics, the probability of two units being out of 17 service at the same time is 0.2 times 0.2, which by my 18 arithmetic is 0.04 or four parts per hundred? 19 MR. PORAY: That's correct. Yes. 20 MR. SNELSON: Let us assume now that this were 21 to be two embedded generation units even though we know 22 that from the network part of the system it's not likely 23 to be two embedded generation units, and if embedded 24 generation units are as good as OPGI seems to think they 25 are and even as good as the CEA statistics seem to 26 indicate they are, and let's assume that they have 97 27 per cent availability, in this case the probability of 28 any one of those units being out of service is 0.03 or Les Services StenoTran Services Inc. 613-521-0703 1105 OHNC PANEL 2, cr-ex (Snelson) 1 three parts per hundred. Correct? 2 MR. PORAY: Correct. 3 MR. SNELSON: And would I be correct that the 4 probability of two units being out of service at the 5 same time is 0.03 times 0.03 which comes 0.309 or nine 6 chances in 10,000. 7 MR. PORAY: That is correct. 8 MR. SNELSON: I think we have established that 9 historically back-up demands have not been taken into 10 account in transmission planning, at least as far as 11 network facilities are concerned, so the network 12 embedded generators are not likely to be the two most 13 impacted generators. Even if they are the most impacted 14 generators, then with relatively low forced outage 15 rates, the probability of having two such generators out 16 at the same time is quite low. 17 Would you agree on this basis that back-up 18 demand had little or no influence on the need for 19 network transmission facilities? 20 MR. CURTIS: And taking into consideration the 21 actual magnitude of back-up demand that has been placed 22 on the system. Yes. 23 MR. SNELSON: Thank you. And given that 24 back-supply has had little impact on the need for 25 network facilities and taking into account your 26 qualification, isn't it appropriate that the charge for 27 back-up transmission service for the use of network 28 facilities would be very low? Les Services StenoTran Services Inc. 613-521-0703 1106 OHNC PANEL 2, cr-ex (Snelson) 1 MR. CURTIS: OEM put forward in this 2 application a back-up service charge or a charge 3 determinant. Until we have actually had the opportunity 4 to go through such an exercise if it's required, I don't 5 think we would like to agree -- sorry -- we wouldn't 6 agree with what you are stating right now. 7 MR. SNELSON: Okay. We can move on from that 8 in our evidence and so on. 9 MR. CURTIS: Yes. 10 MR. SNELSON: Okay. Thank you. Those are all 11 my questions. 12 THE PRESIDING MEMBER: Thank you, Mr. Snelson. 13 Does that include yours as well, Mr. Fisher? 14 You have finished, both of you. 15 MR. FISHER: Yes, Mr. Chair. Thank you. 16 THE PRESIDING MEMBER: Thank you. 17 Can we move on to Mr. Janigan then, please, 18 next. Thank you. 19 MR. JANIGAN: Thank you, Mr. Chair. 20 FURTHER CROSS-EXAMINATION 21 MR. JANIGAN: I want to start first with the 22 Electricity Act and the reference that you have made to 23 section 26(3) in your evidence earlier in the testimony 24 concerning the viability of contracts that were entered 25 into by Ontario Hydro. 26 As you indicated, section 26(3) makes any 27 contract cease to have any effect after the date that 28 subsection (1) of 26 goes into effect. Les Services StenoTran Services Inc. 613-521-0703 1107 OHNC PANEL 2, cr-ex (Janigan) 1 Are you aware of any statutory instrument or 2 provision in this Act or any other Act that would urge 3 any other conclusion that these contracts are null and 4 of no effect as of that date? 5 MR. CURTIS: Not in this Act. No, I'm not 6 aware. 7 MR. JANIGAN: Or any statutory provision in 8 this Act or any other Act that would urge that the 9 contracts be continued. 10 MR. CURTIS: I guess we are at a bit of a 11 disadvantage given that we are not lawyers and what we 12 are referring to here is this particular Act. We are 13 not in a position to be aware. 14 MR. ROGERS: He means they are not aware of 15 any, but they can't be blamed for that. They are good 16 lawyers. 17 MR. JANIGAN: Are you aware of any statement 18 of government policy that would urge the continuation of 19 these contracts? 20 MR. CURTIS: No. 21 MR. JANIGAN: Now, when we are dealing with 22 these agreements, I believe you have stated in your 23 testimony that these were Ontario Hydro agreements for a 24 bundled service to end use industrials. Is that 25 correct? 26 MR. PORAY: That's our understanding. 27 MR. JANIGAN: And these agreements included 28 both transmission and generation services. Les Services StenoTran Services Inc. 613-521-0703 1108 OHNC PANEL 2, cr-ex (Janigan) 1 MR. PORAY: And I believe distribution as 2 well. The entire bundled product really. 3 MR. JANIGAN: And as a result of the Energy 4 Competition Act of 1998, Ontario Hydro was legally 5 separated into distribution, transmission and generation 6 entities. Is that correct? 7 MR. PORAY: And the IMO. 8 MR. JANIGAN: The IMO. There no longer exists 9 an entity that provides the bundled service that was the 10 subject matter of the contract. Is that correct? 11 MR. PORAY: I think up until the market 12 actually opens, these services haven't been unbundled. 13 They are still being provided to the customers of a 14 bundled service. 15 MR. JANIGAN: With the onset of open access, 16 there won't be any entity that provides this bundled 17 service. 18 MR. PORAY: That's correct. 19 MR. CURTIS: Apart from remote communities. 20 MR. JANIGAN: Yes. Now, in looking at the 21 components of the bundled service that was provided 22 under different rates in this agreement, is there any 23 way at this point in time to unbundle those components 24 to, for example, price what element of the rate was 25 transmission, for example? 26 MR. CURTIS: No. 27 MR. JANIGAN: So you don't have any evidence 28 that would say that this particular amount or rate was Les Services StenoTran Services Inc. 613-521-0703 1109 OHNC PANEL 2, cr-ex (Janigan) 1 attributable to transmission, this was attributable to 2 generation. 3 MR. CURTIS: No. 4 MR. JANIGAN: For all you know, it could have 5 picked up a hundred per cent of the embedded 6 transmission costs. 7 MR. CURTIS: Or a hundred per cent of the 8 generation costs. 9 MR. JANIGAN: True. 10 MR. CURTIS: Yes. 11 MR. JANIGAN: And I think you have indicated 12 earlier that you are not in possession of these 13 agreements. 14 MR. CURTIS: That is correct. 15 MR. JANIGAN: Okay. Now, have you conducted 16 any analysis of the impact of granting a continuation of 17 the special rate provisions to these customers that were 18 contained in the agreement? 19 MR. CURTIS: There hasn't been any detailed 20 analysis. We did have some information in terms of what 21 the costs would be and some elements of them if they 22 were to carry on. I think there was some earlier 23 reference in terms of the surplus contracts, for 24 example, of the order of $25 million per year. 25 As we are not in possession of the contracts 26 and we don't know what the detailed contract provisions 27 are, we don't know an aggregate what the amounts would 28 be involved. Les Services StenoTran Services Inc. 613-521-0703 1110 OHNC PANEL 2, cr-ex (Janigan) 1 MR. JANIGAN: Now, in your evidence at Exhibit 2 D, Tab 11, Schedule 1, page 6, you speak of the 3 motivating factors behind the entering into of these 4 agreements, in particular at the top of the page: 5 "The rates were very much tied to 6 concerns about the competitiveness of 7 Ontario Hydro's then existing rates, in 8 light of other alternatives available to 9 customers. These concerns are part of 10 what lead to the current electricity 11 industry restructuring taking place in 12 Ontario." 13 I wonder if you could expand on that 14 statement, particularly whether or not the conditions 15 that were in place at the time of the agreements are, in 16 your view, in place currently? 17 --- Pause 18 MR. CURTIS: I think the situation that we are 19 talking about back when these were struck largely 20 reflected what was happening on the generation side of 21 Ontario Hydro's business and again it is a little 22 difficult for us to be able to state today whether or 23 not those same conditions exist as far as generation is 24 concerned as they did back then. 25 Back again when these contracts were being 26 struck the sort of state of the transmission system 27 business, if you will, or that component of Ontario 28 Hydro's business would be much the same as it is today. Les Services StenoTran Services Inc. 613-521-0703 1111 OHNC PANEL 2, cr-ex (Janigan) 1 So in terms of a going-forward basis we could comment 2 that there hasn't been very much change as far as a 3 transmission side is concerned. 4 MR. JANIGAN: Now, in terms of a view that 5 would urge the continuation of special arrangements that 6 have been given through agreements in the past, is it 7 your opinion that the continuation of such arrangements 8 may set a precedent were the same treatment to be 9 conferred upon other direct customers than municipal 10 utilities? 11 MR. CURTIS: That's one consideration, yes. 12 MR. JANIGAN: As I understand in your 13 evidence, because you are not in the generation business 14 any more and not in possession in the customer's -- or 15 you are not in possession of the customer agreements 16 that we are talking about, that with respect to other 17 load retention contracts you cannot tell us who the 18 customers are or what is the load of these customers 19 separately or in total or what is the dollar impact if 20 these agreements were grandfathered? 21 MR. CURTIS: That is correct. 22 MR. JANIGAN: What is your opinion of the 23 prudency of approving the continuation of special deals 24 without knowing the economic or quantitative impact of 25 shifting costs to other transmission customers? 26 MR. CURTIS: I think our position -- I'm 27 sorry. Our position is quite clearly stated in our 28 application. We do not favour the continuation of these Les Services StenoTran Services Inc. 613-521-0703 1112 OHNC PANEL 2, cr-ex (Janigan) 1 existing contracts. 2 Certainly one element of that is in terms of 3 our lack of knowledge of what that would entail, but our 4 position is based on what the Act and the legislation 5 says, as well as a general problem with continuing 6 existing arrangements or existing deals from the old 7 structure of the marketplace. 8 MR. PORAY: I think if I may also add to that 9 that our review is that all customers who use the 10 transmission system should pay the charges for that 11 system. 12 MR. JANIGAN: Is it possible that granting a 13 special arrangement to some or all of the customers with 14 special arrangements in the past may set a precedent 15 that the same treatment may have to be conferred at 16 other regulatory proceedings, such as in the IeMO 17 proceedings? 18 MR. CURTIS: That is a possibility, yes. 19 MR. JANIGAN: In your opinion, is there a 20 possibility that these same customers urging special 21 treatment currently would argue that they should also be 22 exempt from CTC charges? 23 MR. CURTIS: I don't know that we are in a 24 position to know whether they would argue that, but it 25 might be an extension, yes. 26 MR. JANIGAN: Now, I note that one of the 27 intervenors in the proceeding, the Collingwood Public 28 Utilities Commission, has urged that because of the Les Services StenoTran Services Inc. 613-521-0703 1113 OHNC PANEL 2, cr-ex (Janigan) 1 arrangements they made under a Local Integrated Resource 2 Planning Agreement that there should be special 3 arrangements associated with the costs of building a new 4 transformer in that district. 5 Are you familiar with the circumstances? 6 MR. CURTIS: Yes, we are. 7 MR. JANIGAN: Now, was there ever a contract 8 between OHNC and Collingwood, for example? 9 MR. CURTIS: Not for the transformer that 10 Collingwood is talking about, no. 11 MR. JANIGAN: Are there other customers in the 12 Collingwood circumstance that may be coming forward 13 urging special treatment based on a LIRP Agreement? 14 MR. CURTIS: We did quite a number of LIRP 15 agreements and if Collingwood was coming forward based 16 on that agreement others could as well, yes. 17 MR. JANIGAN: Do you know the magnitude of the 18 others? 19 --- Pause 20 MR. JANIGAN: I believe Collingwood is 21 $80 million. 22 MR. SCHNEIDER: My recollection is there are 23 probably about a dozen or so of these LIRP's that were 24 done in the mid-1990s. 25 MR. JANIGAN: Similar size to Collingwood? 26 MR. SCHNEIDER: I say they vary in size from 27 much smaller to somewhat larger. 28 MR. JANIGAN: Now, can you provide an estimate Les Services StenoTran Services Inc. 613-521-0703 1114 OHNC PANEL 2, cr-ex (Janigan) 1 of the value of the special pricing arrangements that 2 were made with the load retention customers over the 3 past life of their contracts in terms of the electricity 4 cost savings relative to the Ontario Hydro contract 5 price? 6 MR. CURTIS: No, we wouldn't be able to do 7 that. We are not in possession of that information. 8 MR. JANIGAN: In terms of qualitative 9 benefits, would you agree that they have received 10 whatever benefits were associated with those cost 11 savings which we can't quantify and at the same time 12 have not had to experience any of the operational 13 problems associated with operating the generator? 14 MR. CURTIS: Since the generator doesn't 15 exist, that's correct, yes. 16 MR. JANIGAN: Now, similarly it appears in 17 your evidence at Exhibit D, Tab 11, Schedule 1, 18 page 12 -- you might not have to turn that up -- that 19 you believe that they receive benefits from not having 20 the risks of owning a generator or generation as the 21 market restructures. 22 MR. CURTIS: That is correct. They haven't 23 had to make the investment in the generator. 24 MR. JANIGAN: Finally -- no, there's one more. 25 --- Pause 26 MR. JANIGAN: Earlier today I referenced the 27 white paper and the quote from the white paper that 28 stated: Les Services StenoTran Services Inc. 613-521-0703 1115 OHNC PANEL 2, cr-ex (Janigan) 1 "Transmission would continue to be priced 2 at a uniform rate for all customer 3 classes." (As read) 4 Do you recall we discussed that this morning? 5 MR. PORAY: Yes, we do. 6 MR. JANIGAN: Now, would you comment on the 7 applicability of that objective with respect to the view 8 that urges the grandfathering of special pricing 9 arrangements? 10 MR. CURTIS: If those rates were continued on 11 for existing customers, then it would represent a 12 departure from the uniform pricing. 13 MR. JANIGAN: And the premise of that 14 objective in the white paper, I would assume? 15 MR. CURTIS: That would be our understanding, 16 yes. 17 MR. JANIGAN: Would you also agree that the 18 continuation of special pricing arrangements would not 19 provide proper market signals to those receiving those 20 special pricing arrangements as to the benefits and/or 21 costs of increasing or decreasing their usage of the 22 transmission service? 23 MR. CURTIS: Yes. 24 MR. JANIGAN: It would be contrary to the 25 user-pay principle. Would you agree? 26 MR. CURTIS: That's one of the principles that 27 we brought forward for our recommendation that these 28 contracts would cease to exist upon open access. That Les Services StenoTran Services Inc. 613-521-0703 1116 OHNC PANEL 2, cr-ex (Janigan) 1 is correct. 2 MR. JANIGAN: In Exhibit D, Tab 11, Schedule 1 3 at page 3, you give a definition there. You give some 4 information concerning surplus power and you indicate 5 there that: 6 "Surplus power is designed to make 7 efficient use of surplus capacity which 8 exists due to variability in system load 9 and existing transmission system 10 solutions. Surplus power rates apply 11 only to incremental load and excess of an 12 historical baseline and is interruptible 13 for both generation and transmission 14 capacity constraints." (As read) 15 Can you tell me how much interruption was 16 historically required for transmission? 17 MR. CURTIS: We are not really in a position 18 to know versus generation. As a matter of fact, we are 19 not, to the best of my knowledge, in possession of all 20 of the information in terms of when they were 21 interrupted. 22 I think there was some reference earlier on, 23 and that information was supplied by OPG. They are the 24 ones that are in possession of the contracts. They 25 would know. 26 MR. JANIGAN: Is it possible to state that the 27 majority of the interruption was associated with 28 generation complaints? Les Services StenoTran Services Inc. 613-521-0703 1117 OHNC PANEL 2, cr-ex (Janigan) 1 MR. CURTIS: We wouldn't be in a position to 2 be able to provide that information. 3 MR. JANIGAN: In terms of the commitment, you 4 indicate further in that exhibit, at page 6, that there 5 is only a five-year commitment to the continued 6 availability of surplus power. 7 MR. CURTIS: That is correct. 8 MR. JANIGAN: To your knowledge, was any 9 commitment ever made that surplus power would be 10 available beyond that five-year period? 11 MR. CURTIS: To the best of our knowledge, no. 12 MR. JANIGAN: Finally, will a surplus power 13 customer receive the exact same transmission service 14 compared with all other transmission customers? 15 MR. CURTIS: Do you mean on a going forward 16 basis? 17 MR. JANIGAN: Yes. 18 MR. CURTIS: Yes. 19 MR. JANIGAN: Thank you, panel, those are all 20 of my questions. Thank you, Mr. Chairman. 21 THE PRESIDING MEMBER: Thank you, gentlemen. 22 Mr. Warren, please. 23 MR. WARREN: Thank you, Mr. Chairman. 24 CROSS-EXAMINATION 25 MR. WARREN: Panel, since I have not been here 26 for the last few days, I will introduce myself to you. 27 My name is Robert Warren. I appear for the Consumers 28 Association of Canada. Les Services StenoTran Services Inc. 613-521-0703 1118 OHNC PANEL 2, cr-ex (Warren) 1 My questions deal only with one area, and that 2 is with the load retention contracts. Happily for you, 3 I have very few questions. 4 I want to start with an issue of baseline 5 clarification. When we are talking about the lube 6 retention and expansion rates, are we talking about just 7 the two contracts that were referenced in 8 cross-examination; that is, Amoco and Imperial Oil? Or 9 are there others? 10 MR. CURTIS: We understand that there are 11 others. 12 MR. WARREN: As I understand the answer that 13 you gave to Mr. Janigan, you don't know how many others 14 there are. Is that correct? 15 MR. CURTIS: That is correct. 16 MR. WARREN: And you don't know the terms of 17 those contracts. Is that correct? 18 MR. CURTIS: That is correct. 19 MR. WARREN: Can I conclude from that that 20 if -- sorry, let's do it one step at a time. 21 If the Board were to disagree with your 22 recommendation and to say, hypothetically, we are going 23 to continue those existing contracts in some fashion, I 24 take it the Board would be doing that without knowledge 25 of either the number of contracts or what their terms 26 are. Fair? 27 MR. CURTIS: Certainly from any evidence that 28 we have been able to offer, that is fair, yes. Les Services StenoTran Services Inc. 613-521-0703 1119 OHNC PANEL 2, cr-ex (Warren) 1 MR. WARREN: Mr. Janigan asked you the 2 question with respect generally to the customer 3 contracts, but let me ask you it with respect to the 4 load retention contract. You have been unable to do any 5 calculation of the impact of the continuation of these 6 contracts on other customers, for the reason that you 7 don't know how many there are and what their terms are. 8 Is that fair? 9 MR. CURTIS: Yes, leading to how much money -- 10 yes, exactly. 11 MR. WARREN: One of the concerns that you 12 articulated -- I am not sure where it was in the 13 evidence. But one of the concerns that you articulated 14 with an alternative to your recommendation was cost 15 transference. Correct? 16 MR. CURTIS: Yes. 17 MR. WARREN: And you have not been able to 18 calculate what the cost transference is. 19 MR. CURTIS: Not in its complete totality; 20 only based on the information that has been made 21 available to us, yes. 22 MR. WARREN: But with respect to the load 23 retention rates, you are not able to calculate what the 24 cost transference impact is. Is that correct? 25 MR. CURTIS: Not in total. 26 MR. WARREN: Does it follow from that -- you 27 will excuse me if I engage in a sort of "see Spot run" 28 cross-examination. But does it follow from that that if Les Services StenoTran Services Inc. 613-521-0703 1120 OHNC PANEL 2, cr-ex (Warren) 1 the Board were to disagree with your recommendations, 2 they would not know the impact in terms of cost 3 transference on other customers. 4 Is that fair? 5 MR. CURTIS: Not in terms of any evidence that 6 we could bring forward; that is fair. 7 MR. WARREN: Thank you. In terms of its -- 8 let me deal briefly with the historical background to 9 these contracts. 10 Are you familiar, panel, with this Board's 11 consideration of load retention contracts in its 12 decisions in HR-23 and HR-24? 13 MR. CURTIS: Not in great detail, no. 14 MR. WARREN: You don't need to turn up the 15 decisions. But subject to check, would you agree with 16 me that in its decision in HR-23, one of the 17 recommendations that the Board made was that load 18 retention and expansion rate contracts should be for no 19 longer than three years? 20 Any reason to quarrel with that? 21 MR. CURTIS: We are not in possession of the 22 decision. But if you are quoting from the 23 decision, yes. 24 MR. WARREN: Let me turn from that, then, 25 finally to this. I want to see if you understand what 26 is before you in terms of the Amoco and Imperial Oil 27 agreements. 28 Is it your understanding that what those two Les Services StenoTran Services Inc. 613-521-0703 1121 OHNC PANEL 2, cr-ex (Warren) 1 entities are proposing is what is set out in Attachment 2 B to the Settlement Agreement? Is that your 3 understanding? 4 MR. CURTIS: Yes, it is. 5 MR. WARREN: Those are my questions. Thank 6 you very much, sir. 7 THE PRESIDING MEMBER: Thank you, Mr. Warren. 8 We could take another set of questions. 9 Mr. King, do you wish to go ahead? 10 I'm sorry, I have your name wrong. 11 MR. GOLDSILVER: It is Mr. Goldsilver. 12 No, I am not asking any questions on existing 13 Ontario Hydro contracts. I am here waiting for the 14 treatment of new load connection facilities. 15 THE PRESIDING MEMBER: Okay. Are you ready, 16 Mr. Mattson? 17 MR. MATTSON: Thank you, Mr. Chairman. I just 18 have a couple of questions. 19 CROSS-EXAMINATION 20 MR. MATTSON: Mr. Poray, Mr. Curtis, it seems 21 that prior to the application that you are bringing 22 forward, when we are talking about the history of 23 Ontario Hydro, those contracts that were made between 24 these customers and Ontario Hydro did not require the 25 Ontario Energy Board's approval, to your knowledge. 26 Is that fair? 27 MR. CURTIS: Not final approval. My 28 understanding is that they were reviewed before the Les Services StenoTran Services Inc. 613-521-0703 1122 OHNC PANEL 2, cr-ex (Mattson) 1 Board, but it was Ontario Hydro's board and the 2 government in the end that made the decisions on those 3 contracts. 4 MR. MATTSON: Right. But they were also 5 reviewed by the Ontario Energy Board in an advisory 6 capacity. Is that fair? 7 MR. CURTIS: That is fair, yes. 8 MR. MATTSON: Throughout the course of this 9 hearing your evidence I believe has been that you have 10 not really reviewed those decisions of the Board back in 11 HR-24 or HR-23. 12 MR. CURTIS: Not in any detail, no. 13 MR. MATTSON: If we look at the situation as 14 it exists today, these customers have come to you, at 15 least through the stakeholder and consultation process, 16 to see if your company would abide by contracts that 17 were entered into with Ontario Hydro prior to this 18 Energy Act. 19 MR. CURTIS: That is correct. 20 MR. MATTSON: That is regardless of the fact 21 that the Energy Act itself seems to indicate that all 22 those contacts should be null and void now. Fair? 23 MR. CURTIS: That's right. That is our 24 position. 25 MR. MATTSON: But the Act also said that 26 unless this Board accepts otherwise. Is that fair? I 27 believe it was read this morning on the record. 28 MR. CURTIS: Yes, that is fair. Les Services StenoTran Services Inc. 613-521-0703 1123 OHNC PANEL 2, cr-ex (Mattson) 1 MR. MATTSON: You haven't read the decision, 2 but on a general basis would you agree with me that the 3 Board, when they were reviewing these contracts -- 4 MR. CURTIS: Actually, just in terms of 5 recalling my understanding of that, it might require 6 even more than this Board's decision in order to extend 7 those contracts. I think there is a government 8 requirement to do that. 9 MR. LYLE: Perhaps I could clarify. There is 10 in fact a requirement for the government to make a 11 regulation in order to save the contract. 12 MR. MATTSON: Thank you. 13 MR. CURTIS: Thank you. 14 MR. MATTSON: So what is your understanding, 15 then, of what the Board can do through this rate 16 proceeding with respect to these requests by these 17 customers? 18 MR. CURTIS: I don't know what the Board 19 actually could do in this respect. Again, I don't 20 understand how it would work as far as the legislation 21 is concerned. 22 It would appear that the Board perhaps could 23 make some recommendation back to the government. But it 24 would be the government in the end that would have to 25 make the decision through a regulation in terms of 26 whether these contracts would be extended. 27 MR. MATTSON: Now, although you have not 28 reviewed in any detail the past Board decision, I take Les Services StenoTran Services Inc. 613-521-0703 1124 OHNC PANEL 2, cr-ex (Mattson) 1 it you are generally aware that the Board had some 2 concerns with respect to these rate -- bundled rate 3 options? 4 MR. CURTIS: Yes, we are. 5 MR. MATTSON: Two major components of our 6 concern, one was that they were concerned with the 7 length of the contracts. I don't think the Board at 8 HR-24, the last hearing -- I think they acknowledged 9 that no deal should go beyond 1999. Are you familiar 10 with that, whether it was surplus or guaranteed? 11 MR. CURTIS: Yes. 12 MR. MATTSON: We are certainly past that date 13 today? 14 MR. CURTIS: Yes. 15 MR. MATTSON: They were also very concerned 16 with respect to the transparency of these contracts, 17 were they not? 18 MR. CURTIS: Yes, they were. 19 MR. MATTSON: Just reading page 132 of the 20 decision, one of the recommendations -- I would just 21 like to read to you this recommendation. It said: 22 "The Board recommends that hydro" -- 23 now, Hydro isn't around but -- 24 "... Hydro in bringing rate options 25 before the Board provide evidence other 26 than anecdotal and hearsay of the public 27 acceptability of the proposed rates to 28 customers or customer classes for which Les Services StenoTran Services Inc. 613-521-0703 1125 OHNC PANEL 2, cr-ex (Mattson) 1 the option has been designed, and to 2 non-participating customers that will be 3 funding the option." (As read) 4 My question to you is since Hydro isn't here, 5 have the stakeholders, have the customers, brought to 6 you at this point anything more than just an anecdotal 7 or hearsay evidence about the acceptability of these 8 rates to customers and customer classes and what the 9 cost will be on non-participating customers? 10 MR. CURTIS: Other than the evidence that they 11 filed we haven't seen anything else. I guess, further 12 to that, throughout the stakeholdering process that we 13 conducted, there was general agreement on behalf of all 14 of the stakeholders that these contracts should cease to 15 exist. 16 MR. MATTSON: But I mean, even my friend 17 Mr. Warren's questions, and I think that they were 18 questions before, you were quite candid in acknowledging 19 that you are not even sure how many contracts exist? 20 MR. CURTIS: That's correct. 21 MR. MATTSON: Or what the costs will be on the 22 customers or the non-participating customers? 23 MR. CURTIS: That's correct. 24 MR. MATTSON: Thank you. 25 Those are all my questions, Mr. Chairman. 26 THE PRESIDING MEMBER: Mr. Mark, how long will 27 you be on this subject? 28 MR. MARK: Just a very few minutes, sir. Les Services StenoTran Services Inc. 613-521-0703 1126 OHNC PANEL 2 1 THE PRESIDING MEMBER: Okay. We will go up to 2 the break then with you. Thank you. Please start. 3 FURTHER CROSS-EXAMINATION 4 MR. MARK: Gentlemen, I think you make the 5 observation somewhere in your evidence, and I don't have 6 an exact reference though, it is your understanding that 7 many of the special rates that old Ontario Hydro was 8 offering were driven by competitive pressures with 9 respect to the generation of electricity. Correct? 10 MR. CURTIS: Yes, it is. 11 MR. MARK: In particular, the pressure that 12 Ontario Hydro was facing was that there were certain 13 customers that could obtain electricity which was 14 generated for a lower price elsewhere. Correct? 15 MR. CURTIS: Yes, that's correct. 16 MR. MARK: Would it be fair to say that the 17 response to those opportunities for those customers 18 represented an exception to the general basis upon which 19 a monopoly utility should be providing its rates to its 20 customers? 21 MR. CURTIS: I am not quite sure what you are 22 getting at in terms of the way a monopoly organization 23 should offer its rates. It certainly was an exception 24 to how Ontario Hydro normally set its rates for 25 customers. 26 MR. MARK: That's right, because when you are 27 a sole supplier the general rule is non-discrimination. 28 Correct? Les Services StenoTran Services Inc. 613-521-0703 1127 OHNC Panel 2, cr-ex (Mark) 1 MR. CURTIS: Yes. 2 MR. MARK: It is an exception to that rule, 3 and it may be a rare exception to that rule, when you 4 give some customers different or lower rates than other 5 customers. Correct? 6 MR. CURTIS: Yes. 7 MR. MARK: The system should be blind to the 8 elasticity of the demands of the various customers. 9 Correct? 10 MR. CURTIS: Yes. 11 MR. MARK: Transmission services in Ontario 12 remain a monopoly, am I correct? 13 MR. CURTIS: That is correct. 14 MR. MARK: Is one of the fundamental 15 ratemaking principles, therefore -- 16 MR. CURTIS: I guess with the provision that 17 going forward there may be other transmission providers, 18 but at the moment, yes. 19 MR. MARK: But let's talk about the 20 foreseeable universe. It is still and likely for some 21 time to be essentially a monopoly. Correct? 22 MR. CURTIS: Yes. 23 MR. MARK: Is it your view, then, that a 24 fundamental principle for the rates you establish should 25 be that the rates should be non-discriminatory and 26 should be non-discriminatory regardless of the 27 elasticities of the customer's demands? 28 MR. CURTIS: In general, yes, it would be. Les Services StenoTran Services Inc. 613-521-0703 1128 OHNC Panel 2, cr-ex (Mark) 1 There has to be, though, a recognition of the fact that 2 there is an electricity marketplace being established. 3 MR. MARK: I understand that. 4 MR. CURTIS: We are also directed not to 5 inhibit the performance of that electricity marketplace. 6 MR. MARK: But in terms of the provision of 7 transmission services is that principle one you 8 subscribe to? 9 MR. CURTIS: Yes. It is reflected, for 10 example, in the white papers setting out that we should 11 be charging the transmission rates on a postage-stamp 12 basis across customers, yes. 13 MR. MARK: Now, with respect to those 14 customers who are presently surplus power customers, you 15 understand, do you not, that one of -- the position that 16 you are putting forward is that because of the 17 elasticity of their demand you should be able to offer 18 them some different form of pricing. Correct? 19 MR. CURTIS: That's correct, yes. 20 MR. MARK: Are there other customers, 21 customers other than the ones who felicitously happen to 22 presently be surplus power customers, who would also 23 have elastic demands? 24 MR. CURTIS: There are customers that do have 25 elastic demands apart from the surplus customers. 26 MR. MARK: Am I correct that other than the 27 request by those customers who fortuitously happen to 28 presently be surplus power customers, no other customers Les Services StenoTran Services Inc. 613-521-0703 1129 OHNC Panel 2, cr-ex (Mark) 1 are asking, and you did not propose to give to any other 2 customers a rate similar to the one being asked for by 3 this surplus power customer? 4 MR. CURTIS: That is correct. 5 MR. MARK: Now, with respect to the LRER 6 customers, I want to make sure I understand the present 7 state of play. Have either Imperial or Amoco made a 8 commitment to proceed with the generation projects? 9 MR. CURTIS: Not that we are aware of, no. 10 MR. MARK: To your knowledge, will Imperial 11 and Amoco, when considering whether to proceed with 12 those projects, take into account the economics of the 13 restructured electricity market? 14 MR. CURTIS: I would believe they would, yes, 15 as any business entity. 16 MR. MARK: In the restructured market of 17 today, are there opportunities that did not exist in the 18 marketplace of say 1996 when they say the original 19 decisions on investment were made? 20 MR. CURTIS: Absolutely, yes. 21 MR. MARK: For example, would it be open to 22 them to oversize the facilities in a way which was not 23 open to them in 1996? 24 MR. CURTIS: That is correct. 25 MR. MARK: Thank you, gentlemen. 26 Those are my questions. Thank you, Mr. Chair. 27 THE PRESIDING MEMBER: Thank you, Mr. Mark. 28 It sounds like we need a break. So we will Les Services StenoTran Services Inc. 613-521-0703 1130 OHNC Panel 2, cr-ex (Mark) 1 take one and come back at four o'clock, please. Just to 2 see who is next with respect to this particular topic of 3 hydro contracts, Mr. Campbell, you have questions, I 4 assume, as a defender of the faith? Yes? 5 --- Laughter 6 MR. CAMPBELL: As a defender of the truth, 7 yes. 8 THE PRESIDING MEMBER: Thank you. 9 Who else will have questions about the 10 existing contracts? Yes? 11 MS ANDRIACHUK: I do, on behalf of TransCanada 12 Energy. 13 THE PRESIDING MEMBER: TransCanada Energy. 14 Anyone else? 15 So that gives you a heads up. We probably 16 will not get very far on the next topic today, but we 17 may start it at least. 18 Thank you. We will see you at four. 19 --- Upon recessing at 1535 20 --- Upon resuming at 1602 21 THE PRESIDING MEMBER: Mr. Rogers. 22 MR. ROGERS: Yes, Dr. Higgin. Thank you. 23 I have one other undertaking I can answer now. 24 This is transcript Undertaking F5.1 in which Mr. Fisher 25 was probing with the panel a so-called promise made by 26 another member of the organization a year or more ago. 27 I deny there was any promise made. You can 28 judge for yourself, sir, because what we have done is we Les Services StenoTran Services Inc. 613-521-0703 1131 OHNC PANEL 2 1 have copied pages of the transcript from that technical 2 conference which was a year ago, before the 3 stakeholdering took place, and there was some talk about 4 this. I think it is unfair to qualify it as a -- or to 5 state that there was a promise made by the company, but 6 if you are interested we have provided it for you. You 7 can read it for yourself. 8 I don't think it is a big issue. 9 --- Pause 10 THE PRESIDING MEMBER: We will look at it 11 later, I think, unless there is anything you want to 12 point out specifically at the moment. 13 Mr. Lyle. 14 MR. LYLE: Thank you, Dr. Higgin. 15 Board staff have one exhibit to introduce 16 which is related to the line connection issue. That is 17 an exhibit coming from Board staff and we are giving it 18 No. G6.2. 19 I believe there are copies available on the 20 ledge. 21 EXHIBIT NO. G6.2: Diagram entitled 22 "Board Staff Example, Comparison Between: 23 (1) OHNC-Owned DESN Station C Located 24 Inside Network Station X, (2) 25 Customer-Owned DESN Station, Station B 26 Tapped-Of OHNC Network Lines (the two 27 taps are also customer-owned), dated 28 February 23, 2000" Les Services StenoTran Services Inc. 613-521-0703 1132 OHNC PANEL 2 1 THE PRESIDING MEMBER: We are not quite there 2 yet, but is this G6.2 related to the next issue? 3 MR. LYLE: That's correct. 4 Mr. Fisher is just pointing out to me that he 5 also has an exhibit to be introduced with respect to the 6 line connection issue. We will give that Exhibit 7 No. G6.3. 8 You will also be leaving copies on the ledge, 9 Mr. Fisher? 10 MR. FISHER: I am going to do that. 11 MR. LYLE: And it is titled "AMPCO Investment 12 Examples". 13 EXHIBIT NO. G6.3: Document entitled 14 "AMPCO Investment Examples" 15 --- Pause 16 MR. GOLDSILVER: Mr. Chair, if I might also 17 interrupt. 18 The Town of Collingwood would like to file 19 evidence as well for the treatment of new line 20 connection investments. 21 THE PRESIDING MEMBER: Okay. If you have it 22 here we might as well have these now. We will receive 23 another exhibit. 24 --- Pause 25 MR. LYLE: We are marking the document from 26 the Town of Collingwood, G6.4, and it is fronted by a 27 letter from Power Budd dated February 22, 2000. 28 EXHIBIT NO. G6.4: Package of documents Les Services StenoTran Services Inc. 613-521-0703 1133 OHNC PANEL 2 1 from the Town of Collingwood regarding 2 new line connection investments with 3 cover letter from Power Budd dated 4 February 2, 2000 5 THE PRESIDING MEMBER: I think we got this 6 package earlier. Just tell me, is there 21 pages in 7 there behind the cover sheet? There is a fax cover 8 sheet and then -- 9 MR. GOLDSILVER: That is correct. It was 10 faxed to the Board yesterday afternoon. 11 THE PRESIDING MEMBER: Yes. The Board has it 12 so we don't need another copy of that. 13 MR. LYLE: I have 19 pages. Is that -- 14 THE PRESIDING MEMBER: So we just need the 15 number. It was G6.3? 16 MR. LYLE: That was just marked as G6.4. 17 THE PRESIDING MEMBER: And the AMPCO one was 18 G6.3? 19 MR. LYLE: Yes. 20 THE PRESIDING MEMBER: All right. 21 Any more filings? Okay. We will resume, 22 then. 23 Mr. Campbell, you are next, please. 24 FURTHER CROSS-EXAMINATION 25 MR. CAMPBELL: Mr. Snelson took you to E-2-35, 26 which referred you to an HR-22 quote. Could you turn 27 that up, please. 28 MR. PORAY: Okay. We are there. Les Services StenoTran Services Inc. 613-521-0703 1134 OHNC PANEL 2, cr-ex (Campbell) 1 MR. CAMPBELL: He referred you to the question 2 and your answer to part (d) of the interrogatory and in 3 your answer you stated, on page 2 of that interrogatory, 4 that back-up demand on the bulk transmission system has 5 not been taken into account in planning since 1999. Is 6 that correct? 7 MR. PORAY: I think what we responded is to 8 the last sentence in that question (d) which is, "Has 9 this situation changed since 1994", I guess, yes. 10 MR. CAMPBELL: Yes. And your answer speaks to 11 the situation since 1999, your company's situation. 12 MR. PORAY: That's right. 13 MR. CAMPBELL: The quote that is referred to 14 in the question in part (d) is HR-22. Do you notice 15 that? 16 MR. PORAY: Yes. 17 MR. CAMPBELL: HR-22 took place in 1994, so 18 there is a -- it appears that we have a five-year gap in 19 there. You will remember that Mr. Snelson got you to 20 generally agree, I think was the phrase, that back-up 21 power was not considered in bulk transmission system 22 planning. Do you remember that exchange? 23 MR. PORAY: Yes, we do. 24 MR. CAMPBELL: But if we have this five-year 25 gap between HR-22 and when OHSC was formed -- and I 26 would like to take you to Exhibit H-2-1 at page 35 to 27 see if we can find out what happened after HR-22. 28 --- Pause Les Services StenoTran Services Inc. 613-521-0703 1135 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: H-2-1. I'm sorry, which page? 2 MR. CAMPBELL: H-2-1, which is Mr. Snelson's 3 testimony on behalf of AMPCO, as I understand it. 4 MR. PORAY: Right. 5 MR. CAMPBELL: And if we can go to page 35. 6 MR. PORAY: Okay. We are there. 7 MR. CAMPBELL: And if you could look at the 8 fourth full paragraph, please. In that paragraph, 9 Mr. Snelson describes his understanding of Ontario 10 Hydro's planning for back-up using the bulk transmission 11 system. I guess the simplest thing for someone who is 12 trying to follow this in the transcript is just to ask 13 you to read that paragraph into the transcript starting 14 at "This is not consistent". 15 MR. PORAY: Okay. 16 "This is not consistent with Ontario 17 Hydro's previous practice. In the past, 18 Ontario Hydro assumed that up to 22 per 19 cent of the contract demand for back up 20 power would contribute to bulk 21 transmission needs. The 22 per cent 22 figure was for a fully firm back up 23 service. Non-firm back up services were 24 costed assuming a lower impact on 25 transmission needs." 26 MR. CAMPBELL: And in order to support the 27 time in the past when that practice was followed, the 28 footnote, as I understand it, refers to OEB Hearing Les Services StenoTran Services Inc. 613-521-0703 1136 OHNC PANEL 2, cr-ex (Campbell) 1 HR-23. 2 MR. PORAY: That is what it does, yes. 3 MR. CAMPBELL: And that falls within this 4 five-year gap that we have been talking about. 5 MR. PORAY: I think that is correct, yes. 6 MR. CAMPBELL: So, in fact, as I understand 7 the situation, and I would ask you to agree, contrary to 8 Mr. Snelson's earlier suggestion, isn't it correct that 9 by the time we got to HR-23 Hydro was considering 10 back-up loads in its bulk transmission system planning? 11 MR. PORAY: Only for the fully firm service. 12 MR. CAMPBELL: Well, non-firm back-up services 13 were costed assuming a lower impact on transmission 14 needs. It wasn't the full impact for firm service. 15 Correct? 16 MR. PORAY: Well, the 22 per cent figure 17 refers to fully firm back-up service. 18 MR. CAMPBELL: Yes. And non-firm, according 19 to Mr. Snelson's evidence, and he cites the OEB exhibit 20 in HR-23, was costed assuming a lower impact, that from 21 which I would understand to be less than the 22 per cent 22 figure. Correct? 23 MR. PORAY: Okay. Yes. 24 --- Pause 25 MR. CAMPBELL: The other thing that we did 26 just before in the cross-examination was a probability 27 calculation. We had .02 times .02 unavailability. Do 28 you recall that? Les Services StenoTran Services Inc. 613-521-0703 1137 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: Yes, I do. 2 MR. CAMPBELL: And then for an embedded 3 generator, it was .03 times .03. That calculation was 4 done? 5 MR. PORAY: That's correct. 6 MR. CAMPBELL: But the .03 was for a forced 7 outage rate, was it not? 8 MR. PORAY: I believe it was. I don't -- 9 MR. CAMPBELL: And if you look at Exhibit 10 G2.1, I think that's where that figure was taken from, 11 was it not? 12 MR. PORAY: Yes. I think we are okay with 13 that. 14 MR. CAMPBELL: Now, is a forced outage rate 15 the same as an overall generation unavailability rate? 16 MR. CURTIS: No, it is not. 17 MR. CAMPBELL: So an unavailability, as I 18 understand it, Mr. Curtis, is both planned and forced 19 outages. 20 MR. CURTIS: For a total unavailability rate 21 for the generator, that's correct. Yes. 22 MR. CAMPBELL: So would you agree with me that 23 it would not be appropriate to mix the two? 24 MR. CURTIS: Yes. 25 MR. CAMPBELL: And in fact the results could 26 be quite misleading if you did so. 27 MR. CURTIS: Yes. 28 MR. CAMPBELL: Now, then I would ask you to Les Services StenoTran Services Inc. 613-521-0703 1138 OHNC PANEL 2, cr-ex (Campbell) 1 go, please, to Exhibit G5.10. 2 MR. PORAY: Okay. We have it. 3 MR. CAMPBELL: You have it. It was filed 4 yesterday. What it does, as I understand it, is it adds 5 connection charges for line connection and 6 transformation to an earlier exhibit, that is Exhibit I 7 think G2.1. 8 MR. PORAY: Yes. I believe that is the case. 9 MR. CAMPBELL: And, as you pointed out in your 10 discussion with Mr. Snelson earlier this afternoon, a 11 new embedded generator would be billed on a gross load 12 basis, would it not? 13 MR. PORAY: Yes. That is so. 14 MR. CAMPBELL: And what we are talking about 15 here is it would be billed on a gross load basis for 16 connection and transformation. 17 MR. PORAY: That is correct. 18 MR. CAMPBELL: So would you agree with me that 19 Exhibit G5.10, which adds on these connection charges, 20 would only be appropriate for an existing embedded 21 generator? I think you were taken through a similar 22 calculation earlier. My question is this would only be 23 appropriate for an existing embedded generator. 24 MR. PORAY: That is correct. 25 MR. CAMPBELL: Now, if we can look just 26 generally at the transformation side of what's added in 27 that exhibit, isn't it the case that there are 28 relatively few directs in the transformation pool? Les Services StenoTran Services Inc. 613-521-0703 1139 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: That is our understanding. Yes. 2 MR. CAMPBELL: And as I understand it, that's 3 because the larger and more sophisticated directs tend 4 to own their own transformation. 5 MR. PORAY: That is correct. 6 MR. CAMPBELL: And they are the ones that are 7 likely to put in embedded generators. 8 MR. PORAY: That is our understanding. 9 MR. CAMPBELL: Now, would I also be correct to 10 say that under the narrow definition proposed by AMPCO 11 dealing with the other side of the addition in G5.10 for 12 connection, the line connection, under the narrow 13 definition proposed by AMPCO, there would only be four 14 direct customers who would pay line connection charges. 15 I think that can be found at Exhibit E2.26, page 2. 16 MR. PORAY: Yes. There will be four delivery 17 points in the line connection pool. 18 MR. CAMPBELL: So if I understand what you 19 have told me correctly about the number of 20 transformation -- number of directs or transformation 21 customers and the number of directs under the narrow 22 line definition who will be line connection customers, 23 there would be relatively few customers to whom the 24 connection charges shown on Exhibit G5.10 would apply. 25 MR. PORAY: I think I would agree with that. 26 Yes. 27 MR. CAMPBELL: And again, it's only the 28 existing embedded generators. Les Services StenoTran Services Inc. 613-521-0703 1140 OHNC PANEL 2, cr-ex (Campbell) 1 MR. PORAY: That is correct. 2 MR. CAMPBELL: Now, the example that we have 3 talked about so far is Option XVI. Do you think that 4 Option XVIII will collect an appropriate level of 5 transmission charges for customers taking back-up under 6 that option? 7 MR. PORAY: I think based on the calculation 8 that we indicated in the Undertaking F2.1, we would 9 agree. Yes. 10 MR. CAMPBELL: Now, I have been asked to put 11 at the end here one question on behalf of my friend, Mr. 12 Mark. It has to do with Exhibit G5.9, which was 13 information provided to AMPCO by my client. 14 I am acting as nothing more than a conduit in 15 this case. The question is on the first page of that 16 exhibit -- 17 MR. PORAY: Okay. We are there. 18 MR. CAMPBELL: The contribution to -- surplus 19 power contribution to net income is shown as falling 20 between 1997 and 1998. Mr. Mark's question is why is 21 that? 22 MR. PORAY: I don't think we are in a position 23 to answer that. 24 MR. CAMPBELL: Thank you, Mr. Chairman. 25 Those are my questions and Mr. Mark's 26 questions. 27 THE PRESIDING MEMBER: Thank you 28 Ms Andriachuk, please. Les Services StenoTran Services Inc. 613-521-0703 1141 OHNC PANEL 2, cr-ex (Campbell) 1 MS ANDRIACHUK: Thank you, Mr. Chairman, 2 Members of the Board, gentlemen. 3 CROSS-EXAMINATION 4 MS ANDRIACHUK: My name is Bonnie Andriachuk 5 and I counsel at TransCanada Energy. I will try not to 6 duplicate anything that Mr. Fisher has already covered. 7 I intend to be quite brief. 8 Prior to filing your application, did OHNC 9 meet specifically with surplus power customers to 10 discuss the impact that your proposal would have on 11 surplus power customers? 12 MR. PORAY: I think there was one meeting. 13 This is before the filing or before the hearing? I'm 14 sorry. 15 MS ANDRIACHUK: Before the filing. 16 MR. CURTIS: I think it was after the filing. 17 The account executives within OHNC met with the affected 18 customers. 19 MS ANDRIACHUK: And if I understood what you 20 had indicated earlier, OHNC does not have copies of the 21 surplus power contracts. 22 MR. CURTIS: That's correct. 23 MS ANDRIACHUK: I believe you earlier 24 indicated that while you have some familiarity with the 25 proceedings in the Decision in HR-23 and HR-24 that you 26 haven't sort of gone into a great level of detail on 27 those proceedings? 28 MR. PORAY: That's correct. Les Services StenoTran Services Inc. 613-521-0703 1142 OHNC PANEL 2, cr-ex (Andriachuk) 1 MS ANDRIACHUK: Is that true also with the 2 surplus power issues in those proceedings? 3 MR. PORAY: That's correct. 4 MS ANDRIACHUK: Prior to filing your 5 application and preparing your proposal as it pertains 6 to surplus power issues, did you undertake or endeavour 7 to familiarize yourself in some way with the surplus 8 power issues, either in speaking with OPG or anyone 9 else? 10 MR. CURTIS: I think we largely did that 11 through the stakeholdering process in terms of the 12 information that was brought forward to us by customers 13 and by various stakeholders. There has been some 14 information obviously that has been filed as evidence on 15 these contracts and we have read that as well. 16 MS ANDRIACHUK: But that all occurred after 17 the filing. 18 MR. CURTIS: That occurred after the filing, 19 yes. 20 MS ANDRIACHUK: So is it fair to say that 21 surplus power customers are currently treated as a 22 distinct rate class or customer? 23 MR. CURTIS: Not from a transmission 24 perspective, no. 25 MS ANDRIACHUK: But presently they have 26 separate contracts that deal just with surplus power 27 issues? 28 MR. CURTIS: Yes. You are talking about under Les Services StenoTran Services Inc. 613-521-0703 1143 OHNC PANEL 2, cr-ex (Andriachuk) 1 the former structure of the electricity industry, yes. 2 MS ANDRIACHUK: That's what I'm speaking 3 about, the current situation, not the proposed 4 situation. 5 MR. CURTIS: Well, it continues on until open 6 access, the past situation in terms of the treatment of 7 customers. 8 MS ANDRIACHUK: I would just like to refer to 9 Bonbright's Principles of Public Utility Rates, which I 10 believe is Exhibit G1.2. I'm just going to refer you to 11 No. 6. 12 MR. PORAY: Which page? 13 MS ANDRIACHUK: I believe it's page 383 and 14 just over onto page 384. 15 MR. PORAY: Okay. We are there. 16 MS ANDRIACHUK: Simply put, this principle of 17 fairness more or less says: Let's treat equals equally 18 and unequals unequally. Would you agree with that? 19 --- Pause 20 MR. PORAY: I think we would agree with that 21 principle, yes. 22 MS ANDRIACHUK: In OHNC's opinion is there any 23 other customer grouping that you would consider equal to 24 surplus power customers? 25 MR. PORAY: I think from a transmission 26 perspective they are a transmission customer just like 27 any other transmission customer. 28 MS ANDRIACHUK: Except for the historical Les Services StenoTran Services Inc. 613-521-0703 1144 OHNC PANEL 2, cr-ex (Andriachuk) 1 considerations on contributions to transmission costs. 2 Is that true? 3 MR. PORAY: I'm not sure what you mean, 4 "contribution to transmission costs". 5 MS ANDRIACHUK: That the transmission system 6 wasn't committed, say, to surplus power customers. 7 MR. PORAY: No, but they did use the 8 transmission system. 9 MS ANDRIACHUK: If I could get you to turn to 10 Exhibit C, Tab 3, Schedule 1. I'm just looking at 11 page 2 of 3. 12 MR. PORAY: Okay, we are there. 13 MS ANDRIACHUK: I am just looking at lines 21 14 to 24 and I will just read them. 15 "To the greatest extent practicable the 16 customer should not see a major impact on 17 their rates as a result of unbundling the 18 transmission component. Cost shifting 19 should be discouraged." (As read) 20 Now I would like you to also look at 21 Exhibit D, Tab 11, Schedule 1, page 9 of 17. This is 22 where you assess Option A and Option B in relation to 23 surplus power. 24 MR. PORAY: I'm sorry, which page? 25 MS ANDRIACHUK: Page 9. 26 --- Pause 27 MS ANDRIACHUK: I particularly want to focus 28 on paragraphs 19 to 24, so I will give you a moment to Les Services StenoTran Services Inc. 613-521-0703 1145 OHNC PANEL 2, cr-ex (Andriachuk) 1 review it. 2 --- Pause 3 MR. PORAY: Okay. 4 MS ANDRIACHUK: Just for clarity sake, under 5 Option A the $25 million referred to in line 20 would be 6 shifted to a cost that surplus power customers would 7 incur under Option A -- 8 MR. PORAY: That's correct. 9 MS ANDRIACHUK: -- if it's approved? 10 Then in line 22, affected customers that would 11 have a significantly large increase in their overall 12 delivered energy cost is referring to surplus power 13 customers there as well? 14 MR. PORAY: That is correct. 15 MS ANDRIACHUK: Would it be fair to say that 16 of all of OHNC's customers surplus power customers are 17 likely to see the most significant rate increases if 18 your proposal, as presented today, is approved? 19 MR. PORAY: I don't think we can say that 20 because, in essence, we are going from a bundled rate to 21 an unbundled rate so we can't make that comparison. 22 MS ANDRIACHUK: But, in any event, I mean you 23 have already indicated that there will be a 24 significantly large increase in their overall delivered 25 energy costs? 26 MR. PORAY: As we have evaluated here, the 27 $25 million. 28 MS ANDRIACHUK: So taking into consideration Les Services StenoTran Services Inc. 613-521-0703 1146 OHNC PANEL 2, cr-ex (Andriachuk) 1 the ratemaking principle that customers would not see a 2 major impact on their rates as a result of unbundling 3 and that cost shifting would be discouraged, would you 4 not agree with me that Option B actually achieves that 5 goal better than Option A? 6 MR. PORAY: No, I don't believe so because in 7 Option B those customers would not be paying 8 transmission charges while they would in fact be using 9 the transmission system. 10 MS ANDRIACHUK: In light of the surplus power 11 customers? 12 MR. PORAY: They are still using the 13 transmission system when they need to. 14 MS ANDRIACHUK: But under Option B surplus 15 power customers will incur additional costs as a result 16 of the shifting of the $25 million, and they will also 17 have a significant increase in their energy costs? 18 --- Pause 19 MR. PORAY: I'm sorry, under Option B it says 20 that surplus power customers do not have to pay 21 transmission charges. 22 MS ANDRIACHUK: Do I have this backwards? 23 MR. PORAY: I'm not clearly following you, I'm 24 sorry. If you could maybe -- 25 MS ANDRIACHUK: Try it again. 26 MR. PORAY: Try again, yes. Thank you. 27 MR. ROGERS: I think the point is -- if I 28 could just help -- the difference between Option A and Les Services StenoTran Services Inc. 613-521-0703 1147 OHNC PANEL 2, cr-ex (Andriachuk) 1 Option B is about a $25 million increase for this group 2 of customers. 3 MR. PORAY: That's correct. 4 THE PRESIDING MEMBER: And you are 5 recommending Option A so they will then have to 6 experience $25 million more. 7 MR. PORAY: That's correct. 8 MR. ROGERS: Transmission. 9 THE PRESIDING MEMBER: Transmission. 10 MS ANDRIACHUK: Yes. 11 The point was, between the two options the one 12 that fits within the ratemaking principles that you 13 presented earlier on discouraging cost shifting and 14 increasing costs significantly, Option B fits within 15 those ratemaking principles better -- 16 MR. PORAY: No. 17 MS ANDRIACHUK: -- than Option A for surplus 18 power customers. 19 MR. CURTIS: The problem we are having with 20 this is that we are going from a state where this is a 21 bundled contract. You don't know within that bundled 22 contract what component is transmission and what 23 component is energy. 24 It's true when you look at this comparison of 25 Option A and Option B, that there is a difference of the 26 order of $25 million in transmission charges, but to 27 then draw the conclusion that surplus customers are 28 paying more under Option A than Option B, we are not in Les Services StenoTran Services Inc. 613-521-0703 1148 OHNC PANEL 2, cr-ex (Andriachuk) 1 a position to know that because we don't know what the 2 energy component -- if you were to try to unbundle it, 3 you would have to go back and unbundle from the original 4 situation, from the original contract and we are not 5 able to do that. 6 So what you would have to do is determine what 7 the energy component is to know whether or not these 8 customers are in fact paying more or less than under 9 those two components. 10 MS ANDRIACHUK: My understanding is that at 11 this point we are unable to determine the energy 12 component. 13 MR. CURTIS: That's correct. 14 MS ANDRIACHUK: And from a transmission cost 15 alone, then we can agree that Option B falls within the 16 ratemaking principles better than Option A. 17 MR. CURTIS: We are talking about, I think, 18 the total rate impact for customers going into open 19 access, though. And without being able to do that 20 calculation, I don't know that we are in a position to 21 know. 22 MS ANDRIACHUK: Okay. I will go back to this 23 once more. 24 The transmission cost alone, Option B better 25 fits in those ratemaking principles than Option A. That 26 we do know, the transmission cost. 27 MR. SCHNEIDER: Maybe I can try. 28 Where I am having trouble understanding what Les Services StenoTran Services Inc. 613-521-0703 1149 OHNC PANEL 2, cr-ex (Andriachuk) 1 you are saying is when you are referencing the $25 2 million as a cost shift from one group of customers to 3 another, from the unbundling that Mr. Curtis has 4 described, the bill is being broken down into the 5 components. And now you are trying to focus on the 6 transmission component of it. 7 One of the other principles that we are 8 looking at is cost causality, and we are simply trying 9 to apply that principle as well, in terms of having the 10 customers who use the system pay for that use. 11 I am having trouble -- and that is what I am 12 thinking of when I look at this paragraph. Rather than 13 cost shifting, I see going with Option B where they are 14 not going to be paying transmission charges as more of a 15 cost shift to all other customers who would be picking 16 up the charges that they wouldn't be picking up. 17 MS ANDRIACHUK: And I am looking at this from 18 the surplus power customer perspective. I think you 19 will agree with me that from that perspective Option B 20 better fits into the ratemaking principles that you have 21 put forward better than Option A. 22 Or do you want to think on that? 23 MR. SCHNEIDER: Well, the principle you 24 referenced was talking about treating customers equally. 25 I think Mr. Poray said earlier that that is what we are 26 trying to do in the application: that from a 27 transmission perspective, treat all customers the same. 28 I am still having trouble with what you are Les Services StenoTran Services Inc. 613-521-0703 1150 OHNC PANEL 2, cr-ex (Andriachuk) 1 proposing. 2 MS ANDRIACHUK: I think I will leave it at 3 that. 4 Those are all of my questions; thank you, 5 Mr. Chairman. 6 THE PRESIDING MEMBER: Thank you, 7 Ms Andriachuk. 8 Are there any other questions on this topic, 9 or have we beaten it to death? 10 Then we will move on and we will at least get 11 started -- 12 MR. LYLE: Mr. Chair, Board Staff does have 13 some questions. 14 THE PRESIDING MEMBER: You do? 15 MR. LYLE: Yes. 16 EXAMINATION 17 MR. LYLE: Gentlemen, could I refer you back 18 to Exhibit G5.9. 19 MR. PORAY: Okay, we are there. 20 MR. LYLE: There was some discussion earlier 21 that, given that OPGI is now the contract holder, you 22 don't have any information with respect to these 23 contracts, either the number or the load. 24 This document apparently was provided by OPGI 25 and is for 1998. If we look down at the left-hand 26 column under Pricing Options, the third line down, 27 SPP -- I am assuming that is surplus power purchase -- 28 appears to be 22 customers. Les Services StenoTran Services Inc. 613-521-0703 1151 OHNC PANEL 2, ex (Lyle) 1 Two lines further down there is LREP 2 generation deferral, and there appears to be five 3 customers. 4 And then the line down after that, Backup 5 Power, there appear to be three different classes of 6 backup power, adding up to 21 customers. 7 You don't have any reason to doubt the 8 information that is in this exhibit, do you? 9 MR. CURTIS: We don't have any basis for that, 10 yes. 11 MR. LYLE: Can you explain to me -- with 12 respect to backup power, there are three different 13 classes. Is there any distinction between these classes 14 for the purpose of deciding whether special treatment 15 should be provided to those customers, that you are 16 aware of? 17 MR. CURTIS: Well, we are not really aware of 18 the details in terms of describing them, so we are not 19 in a position to be able to tell you whether there would 20 be any difference in the treatment. 21 MR. LYLE: Fair enough. I would ask you to 22 turn to Exhibit D, Tab 11, Schedule 1 of your prefiled 23 evidence, and I will take you to the first paragraph of 24 page 7. 25 There it seems to indicate that, setting aside 26 the considerations of the Electricity Act, the surplus 27 power contracts will all expire in the year 2002. 28 Have I read that correctly? Les Services StenoTran Services Inc. 613-521-0703 1152 OHNC PANEL 2, ex (Lyle) 1 MR. PORAY: That is our understanding. 2 MR. LYLE: I believe you said earlier that you 3 don't have any information as to when the other LRER 4 contracts, those with Amoco and Imperial, are going to 5 expire. Is that correct? 6 MR. PORAY: That is correct. 7 MR. LYLE: Do you have any knowledge as to 8 whether any of those contracts are going to expire after 9 Amoco and Imperial which, as we know, expire at the end 10 of this year? 11 MR. CURTIS: The LRER contracts, when they 12 were formulated or set up, would have been done about 13 the same time and would probably have about the same 14 duration in them. But I don't know that we know 15 specifically. 16 MR. LYLE: So your sense is that they are all 17 going to expire roughly in the same neighbourhood, 18 though. 19 MR. CURTIS: Yes. 20 MR. LYLE: That is helpful. 21 I would ask you to turn to page 9 of the same 22 document. You have set out two options for dealing with 23 customers who currently have surplus power contracts. 24 Option A is essentially not to give them any special 25 treatment, and Option B is to have them not pay 26 transmission charges for the associated load for the 27 balance of their current contract term running through 28 2002. Les Services StenoTran Services Inc. 613-521-0703 1153 OHNC PANEL 2, ex (Lyle) 1 We had some discussions earlier about the 2 legal ramifications of the Electricity Act and the 3 provisions that mean that those contracts cease to have 4 effect on market opening unless they are saved by 5 regulation. 6 I was a little bit confused as to what Option 7 B was trying to suggest. Is it suggesting that the 8 Board -- and I know, gentlemen, that you are not lawyers 9 and I don't want to take you too deeply into that mire. 10 Is it trying to suggest that the Board should 11 consider whether or not to establish a special rate 12 under its power to set just and reasonable rates without 13 regard to whether or not these contracts get saved by 14 regulation? Or is it, in your view, of some relevance 15 to the Board's considerations as to whether or not the 16 contract is saved by regulation and continues in place 17 after market opening? 18 MR. CURTIS: I don't think it is done with 19 either respect in mind. The option was put forward in 20 response to some of the things that we heard from 21 stakeholders when they came forward; the idea that a 22 contract should be honoured and it should be honoured 23 for its full term. 24 It is an option that we were looking at 25 strictly from that perspective. We didn't push it 26 beyond, to be suggesting that the Board necessarily take 27 any specific action around the option. 28 MR. LYLE: Moving you to page 11, under LRER Les Services StenoTran Services Inc. 613-521-0703 1154 OHNC PANEL 2, ex (Lyle) 1 contracts, there are three options set out here. One 2 option, under Option B, is to continue, for the life of 3 the contracts, special billing treatment; and then 4 Option C is to continue special billing treatment on 5 past the life of the contracts. 6 I take it, for Imperial and Amoco, Option B 7 isn't going to be terribly helpful to them in terms of 8 addressing their concerns since there is such a short 9 life left on their contracts after open market. 10 Is that fair? 11 MR. SCHNEIDER: I guess, based on the 12 attachment to the settlement conference proposal, that 13 would be fair; what Imperial attached, their attachment 14 to that proposal. 15 MR. LYLE: Finally, gentlemen, in your view, 16 with respect once again to the LRER customers, is there 17 a stronger case for special treatment for the LRER 18 customers than there is for a customer who also had the 19 intention and the ability to build cogen capacity but 20 deferred construction when the wholesale rate freeze 21 came into place, for instance? 22 Do you see Imperial and Amoco as having a 23 stronger case than someone else who deferred 24 construction for other reasons? 25 MR. CURTIS: Only from the perspective that 26 they have an LRER contract. 27 MR. LYLE: Thank you, gentlemen, those are all 28 my questions. Les Services StenoTran Services Inc. 613-521-0703 1155 OHNC PANEL 2, ex (Lyle) 1 THE PRESIDING MEMBER: Thank you, Mr. Lyle. 2 Mr. Smith. 3 MEMBER SMITH: You mentioned early on in this 4 part that there was a clause in the Imperial Oil 5 contract to the effect that it could be changed or 6 negated by future government legislation or something to 7 that effect. Right? 8 MR. ROGERS: Indirectly it says something 9 along those lines, yes. 10 MEMBER SMITH: Okay. My only question was: 11 Was that a standard piece of boilerplate put in all such 12 contracts or was it put in because at the time people 13 knew there was something in the wind and that things 14 could change within a few years? 15 MR. ROGERS: I don't know that we could answer 16 that, Mr. Smith. We will get a chance to ask Imperial 17 when they come, but the witnesses can help. I think it 18 was generally understood at the time the changes were 19 coming on the horizon, but perhaps the witnesses could 20 help you with the historical context. 21 MR. CURTIS: I think it is just within that 22 context there was discussion going on at that particular 23 time that there needed to be a restructuring of the 24 electricity marketplace within Ontario. It is within 25 that context that I think we are talking about. 26 MEMBER SMITH: Thank you. 27 THE PRESIDING MEMBER: Thank you. 28 Mr. Vlahos. Les Services StenoTran Services Inc. 613-521-0703 1156 OHNC PANEL 2 1 MEMBER VLAHOS: Gentlemen, just a couple of 2 questions from the one area. 3 In the beginning of your evidence, Tab D -- 4 Exhibit D, Tab 11, Schedule 1 -- if you can turn that 5 up, please? 6 MR. PORAY: Yes, we have it. 7 MEMBER VLAHOS: You set out a list of pricing 8 options for both the direct industrial customers and 9 municipal utilities and you list what -- you set certain 10 things in that list. 11 So today, we talked about surplus power and we 12 talked about load retention expansion rates. I guess 13 back-up rate, as well. What about the balance of those 14 items? Is anyone proposing that the special rates would 15 continue for those other items? 16 MR. CURTIS: No one came forward to us to 17 propose that there be any extension or any special 18 treatment in these others. 19 MEMBER VLAHOS: If you just look at those, 20 some of them or just one, where the proponent may be or 21 may have been a real-time pricing one? 22 MR. SCHNEIDER: Just from my recollection with 23 the real-time pricing options, they would have been 24 primarily directs with a few utilities on the RTP-2 25 rates, to the best of my recollection. 26 Would you like me to go through some of the 27 others? 28 MEMBER VLAHOS: Yes. We have heard about Les Services StenoTran Services Inc. 613-521-0703 1157 OHNC PANEL 2 1 surplus power, real-time pricing two? 2 MR. SCHNEIDER: That was a refinement, I 3 believe, of the real-time pricing one experiment. I 4 believe towards the end of the real-time pricing one 5 experiment that one was close. So any new customers 6 would go on to the RTP-2 rates and it would be the same 7 mix, relatively speaking. 8 MEMBER VLAHOS: The item six, aggregation, 9 what does that refer to? 10 MR. SCHNEIDER: I believe that refers to a 11 rate that would have allowed end use customers, 12 primarily industrial, I would imagine, to aggregate 13 their loads at different sites for billing purposes. 14 MEMBER VLAHOS: That has been an issue of 15 discussion. 16 You weren't here, Mr. Schneider, but -- 17 MR. SCHNEIDER: Yes, it has. 18 MEMBER VLAHOS: Then moving to point seven, 19 residential retention expansion price, what is that? 20 MR. SCHNEIDER: I believe both number seven 21 and number eight were rate structures that were offered 22 to municipal utilities to encourage growth in their 23 service territories in their respective customer classes 24 listed there. 25 MEMBER VLAHOS: And there has not been a 26 proponent for those special rates? 27 MR. SCHNEIDER: We haven't heard from anyone 28 on those. Les Services StenoTran Services Inc. 613-521-0703 1158 OHNC PANEL 2 1 MEMBER VLAHOS: So that when I go to the same 2 exhibit, Table A, which appears on page 8 of 17 -- just 3 a bit of explanation, we have checkmarks in the two 4 columns continuing with historical arrangements. 5 You see that in column 2 -- and charges on the 6 same basis as these customers. You have under the 7 industrial role -- we have checkmarks under both. The 8 same would apply to residential and commercial. Those 9 are the stakeholder groups. 10 Can someone help me as to why there are check 11 marks on both? 12 MR. SCHNEIDER: In cases where you have check 13 marks under more than one column it was an indication 14 from stakeholders to us that we heard both sides of the 15 points for that issue. 16 For example, with an industrial group we heard 17 from some industrial customers that they preferred to 18 continue with the historical arrangement, while others 19 preferred to move forward, charging on the same basis. 20 So there was a split. It wasn't clear enough to us to 21 put a check mark under one of the columns for that 22 category. 23 MEMBER VLAHOS: Those industrial customers 24 would -- they would present themselves from those or 25 they would be members of an association like AMPCO? 26 MR. SCHNEIDER: Yes. I think it could have 27 been a bit of both. It was what we picked up through 28 the consultation process. Les Services StenoTran Services Inc. 613-521-0703 1159 OHNC PANEL 2 1 MEMBER VLAHOS: Then on the residential and 2 commercial stakeholder groups can you shed some light 3 there? 4 MR. SCHNEIDER: I guess I could offer the 5 point that we had a split on this issue within that 6 stakeholder group. If you look in the footnote 7 beginning on line, page 15, for residential and 8 commercial, you can see the types of groups that were 9 included there coming in from our consultation. Some 10 representatives of those groups who participated who 11 preferred continuing with the historical arrangement, 12 while others preferred the other option. 13 MEMBER VLAHOS: So specifically, it would 14 pertain to one or more of the groups that are listed 15 there? 16 MR. SCHNEIDER: Yes. 17 MEMBER VLAHOS: Okay. Thank you for those 18 answers. 19 THE PRESIDING MEMBER: I would just like to 20 ask you a question regarding G5.9, which is the 21 information provided by OPGI. Can you give me some 22 estimate of the amount of transmission charges that 23 would be incurred by the 1998 contract load under the 24 various categories here? Can you give me any idea 25 either now or -- could you do a quick calculation as to 26 what kind of contribution to the revenue requirement 27 and, also, you have to make some assumptions about peak 28 and so on, we don't know what it is now but what it Les Services StenoTran Services Inc. 613-521-0703 1160 OHNC PANEL 2 1 would be if these customers were charged the full 2 transmission tariff under Option XVIII? 3 MR. CURTIS: We would just take these numbers 4 as they are presented and use that as the basis for the 5 calculation. Is that correct? 6 THE PRESIDING MEMBER: Unless you have a 7 better assumption. I don't think you would. 8 MR. PORAY: No. 9 MR. CURTIS: No. 10 THE PRESIDING MEMBER: I wonder if you could 11 just give me an idea ballpark-wise what that would come 12 to? 13 MR. SCHNEIDER: Maybe I can just add a little 14 bit to that. It would be difficult, in my view, without 15 knowing the connection information for the customers who 16 are -- 17 THE PRESIDING MEMBER: So you could do 18 network, but you wouldn't be able to -- 19 MR. SCHNEIDER: Right. 20 THE PRESIDING MEMBER: So we will just do the 21 network part, then, if that would be -- that is the 22 $2.76 contribution. So if you could do that and give me 23 an idea, just ballpark, how many million dollars we are 24 talking about here with these customers. 25 MR. CURTIS: Yes. 26 THE PRESIDING MEMBER: That would be helpful. 27 Thank you. 28 MR. LYLE: We will make that an Les Services StenoTran Services Inc. 613-521-0703 1161 OHNC PANEL 2 1 undertaking, F6.2. 2 UNDERTAKING NO. F6.2: Mr. Curtis to 3 calculate for the Board an estimate of 4 the amount of transmission charges that 5 would be incurred by the 1998 contract 6 network load referred to in Exhibit G5.9 7 re: what kind of contribution to the 8 revenue requirement and also what the 9 peak would be if the customers were 10 charged the full transmission tariff 11 under Option XVIII 12 THE PRESIDING MEMBER: That is my only 13 question. 14 Mr. Rogers, you have five minutes for direct. 15 --- Laughter 16 MR. ROGERS: That is about all it will take, 17 but I would suggest, sir, that we start tomorrow morning 18 fresh. 19 THE PRESIDING MEMBER: No. You don't have any 20 redirect? 21 MR. ROGERS: No, I don't. No. 22 THE PRESIDING MEMBER: I think that is a wise 23 move. I think we are all a bit tired. We will start 24 fresh in the morning at nine o'clock, so we will see you 25 then. 26 MR. ROGERS: I will just say, if I could for 27 the record, that it is my plan to have a kind of a 28 potpourri in this last panel or this last issue and we Les Services StenoTran Services Inc. 613-521-0703 1162 1 will correct everything that is remaining. We have the 2 First Nations issues, we have the line connection issue, 3 the new load connection issue, and the terms and 4 conditions too. 5 There are some people that have some questions 6 about the terms and conditions which are found at I 7 think it is Tab 12 of Exhibit D. I would hope that we 8 could ask those questions of this panel on this next 9 iteration as well. 10 THE PRESIDING MEMBER: All right. That would 11 be good. 12 Just to come back to what we asked you last 13 night, I think that you may not have had a chance to 14 prepare anything with respect to the request that you 15 are making of the Board and the interconnectiveness. We 16 may still have to come back to that next week some time 17 and we may need a witness or two to speak to that when 18 that happens. 19 MR. ROGERS: Yes. I'm anticipating that, 20 actually, Dr. Higgin. We have prepared a preliminary 21 list, as a matter of fact, but what I really need to do 22 is to sit down with the witnesses next week. 23 THE PRESIDING MEMBER: Yes. I know you 24 haven't had time because -- 25 MR. ROGERS: That's right. 26 THE PRESIDING MEMBER: -- they have been on 27 the stand. 28 MR. ROGERS: That's right. I'm quite willing Les Services StenoTran Services Inc. 613-521-0703 1163 1 to bring them back, some of them back at least, and have 2 a discrete panel on that issue. 3 THE PRESIDING MEMBER: So we may still have a 4 bit of a wrap-up on some of those implementation type 5 issues next week. But, basically, we will try and deal 6 with what we can tomorrow and hopefully finish up the 7 applicant's main case in-chief tomorrow and then we will 8 start with the intervenors on Friday with Imperial Oil 9 and -- 10 MR. ROGERS: And Amoco. 11 THE PRESIDING MEMBER: -- Amoco. 12 All right. We will see you tomorrow morning 13 at nine o'clock. 14 --- Whereupon the hearing adjourned at 1655, to resume 15 on Thursday, February 24, 2000 at 0900 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 1164 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0904 973 4 Preliminary Matters 973 5 OHNC PANEL 2 6 PREVIOUSLY SWORN: DAVID CURTIS 974 7 PREVIOUSLY SWORN: ANDY PORAY 975 8 PREVIOUSLY SWORN: GARY SCHNEIDER 975 9 Cross-examination by Mr. Janigan 975 10 Cross-examination by Mr. Campbell 987 11 Questions by the Board 1013 12 Upon recessing at 1049 1032 13 Upon resuming at 1405 1032 14 Re-examination by Mr. Rogers 1032 15 Cross-examination by Ms Wong 1037 16 Further Cross-examination by Mr. Fisher 1066 17 Upon recessing at 1230 1077 18 Upon resuming at 1404 1077 19 Cross-examination by Mr. Snelson 1088 20 Further Cross-examination by Mr. Janigan 1106 21 Cross-examination by Mr. Warren 1117 22 Cross-examination by Mr. Mattson 1121 23 Further Cross-examination by Mr. Mark 1126 24 Upon recessing at 1535 1130 25 Upon resuming at 1602 1130 26 Further Cross-examination by Mr. Campbell 1133 27 Cross-examination by Ms Andriachuk 1141 28 Les Services StenoTran Services Inc. 613-521-0703 1165 1 INDEX OF PROCEEDING (Cont'd) 2 PAGE 3 Examination by Board Counsel 1150 4 Questions by the Board 1155 5 Upon adjourning at 1655 1163 6 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 1166 1 EXHIBITS 2 NO. PAGE 3 G6.1 Document entitled "Payments 986 4 by Generator A and Market 5 Participant B in OHNC's Example" 6 7 G6.2 Diagram entitled "Board Staff 1131 8 Example, Comparison Between: 9 (1) OHNC-Owned DESN Station C 10 Located Inside Network Station X, 11 (2) Customer-Owned DESN Station, 12 Station B Tapped-Of OHNC Network 13 Lines (the two taps are also 14 customer-owned), dated 15 February 23, 2000" 16 17 G6.3 Document entitled "AMPCO 1132 18 Investment Examples" 19 20 G6.4 Package of documents from the 1132 21 Town of Collingwood regarding 22 new line connection investments 23 with cover letter from Power Budd 24 dated February 2, 2000 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 1167 1 UNDERTAKINGS 2 NO. PAGE 3 F6.1 Mr. Rogers undertakes to provide 1031 4 an updated version of the market 5 rules, Chapter 8, Section 4 6 7 F6.2 Mr. Curtis to calculate for the 1161 8 Board an estimate of the amount 9 of transmission charges that would 10 be incurred by the 1998 contract 11 network load referred to in 12 Exhibit G5.9 re: what kind of 13 contribution to the revenue 14 requirement and also what the peak 15 would be if the customers were 16 charged the full transmission tariff 17 under Option XVIII