1168 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 Thursday, February 24, 2000, 21 commencing at 0905 22 23 24 25 HEARING 26 27 VOLUME 7 28 Les Services StenoTran Services Inc. 613-521-0703 1169 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 1170 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 1171 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 1172 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 1173 1 Toronto, Ontario 2 --- Upon resuming on Thursday, February 24, 2000 3 at 0905 4 THE PRESIDING MEMBER: Good morning. 5 A couple of preliminaries from the Board. 6 PREVIOUSLY SWORN: DAVID CURTIS 7 PREVIOUSLY SWORN: ANDY PORAY 8 PREVIOUSLY SWORN: GARY SCHNEIDER 9 PRELIMINARY MATTERS 10 THE PRESIDING MEMBER: I have asked Board 11 staff to talk to everybody about the argument schedule 12 for the proceeding. With the assumption that we will be 13 finished the oral, say, next week, we need then to know 14 what the argument schedule is, what is appropriate, 15 whether there are problems for anybody, et cetera, that 16 we can accommodate. I will put that through Board staff 17 to discuss that with you, particularly, of course, 18 Mr. Rogers who has to do both the argument-in-chief and 19 then also reply. 20 So I will leave that and staff will contact 21 you and ask if there are any difficulties and so on. We 22 will then try and nail it down. Either we will have to 23 issue a procedural order, and Board counsel can advise 24 us whether that is necessary, or whether we will just 25 post it on the hotline and in the transcript when we 26 have the schedule set. Okay? That was the first one. 27 The second one. I think we were all getting a 28 bit tired yesterday afternoon but, on reflection, the Les Services StenoTran Services Inc. 613-521-0703 1174 1 Board thinks that we will have a clearer record if 2 Issue 7.0, which is "Treatment of New Load Connection 3 Investment" is -- the questions are done on a standalone 4 basis on that issue. Okay? So we will go through that 5 issue first. 6 Then all of the remaining issues, which in 7 essence, assuming those are not -- only those two for 8 argument, 8.0 and 9.0, then we will have kind of a 9 free-for-all at the end on that. Okay? That is 10 reasonable? 11 --- Laughter 12 MR. ROGERS: That is not okay, but I think you 13 are right, that is the problem that I'm going to have. 14 THE PRESIDING MEMBER: All right. You called 15 it a potpourri, so I don't know which is better. 16 A smorgasbord, as my colleague says. All 17 right. 18 MR. ROGERS: Very good. We will proceed that 19 way, then, sir. 20 THE PRESIDING MEMBER: Okay. So now over to 21 you, Mr. Rogers. 22 MR. ROGERS: Thank you, Dr. Higgin. 23 I have some undertaking answers to provide to 24 the Board. 25 First, at Undertaking F6.1 the applicant 26 undertook to file a copy of Chapter 8, Section 4 of the 27 Market Rules for Ontario Electricity Market, and we have 28 done that. Les Services StenoTran Services Inc. 613-521-0703 1175 1 THE PRESIDING MEMBER: Okay. 2 MR. ROGERS: Second, at Undertaking F6.2, 3 transcript page 1161, Mr. Curtis was asked to calculate 4 for the Board an estimate of the transmission charges 5 that would be incurred by the 1998 contract network load 6 referred to in Exhibit G5.9 concerning what kind of 7 contribution to the revenue requirement and also what 8 the peak would be if the customers were charged the full 9 transmission tariff under Option XVIII, and we have done 10 that. 11 I see the word "Customers" is spelled 12 incorrectly, but I'm assuming the Board would rather 13 have it that way now than corrected later. 14 THE PRESIDING MEMBER: Yes. We thank you for 15 your prompt response on that. 16 MR. ROGERS: Now, there is one more, sir. 17 In Undertaking F3.2 the company was asked I 18 think by Mr. Janigan, but I believe others expressed an 19 interest in this as well, to provide a table which 20 showed the impact of an exemption up to 20 megawatts on 21 a net gross load issue, and we have provided such a 22 table. I know this is important to some of the parties 23 and so I thought I would ask Mr. Curtis in a moment to 24 explain this to you. 25 THE PRESIDING MEMBER: Yes. Thank you, 26 Mr. Rogers. 27 MR. ROGERS: Perhaps we could deal with that 28 now, could we, sir, before we proceed with this panel. Les Services StenoTran Services Inc. 613-521-0703 1176 1 THE PRESIDING MEMBER: Yes. 2 MR. ROGERS: Mr. Curtis, you have before you 3 Undertaking F3.2, the answer, the table that has been 4 provided. 5 MR. CURTIS: Yes, I do. 6 MR. ROGERS: As I understand it now, you have 7 been asked and the company has prepared an analysis 8 which shows the effect of increasing the proposed 9 exemption on the net gross load billing issue from 10 1 megawatt to 20 megawatts. 11 MR. CURTIS: That we have. 12 MR. ROGERS: I wonder if you could just 13 explain to the Board the most significant features of 14 this table? 15 MR. CURTIS: Yes, I would like to do that. 16 The table we have provided has highlighted two 17 options, 4(d) and 4(e), and those are the ones that 18 address this issue of raising the threshold from 19 1 megawatt to 20 megawatts. Those reference back to two 20 other scenarios that were presented in our original 21 table. Again, the issue is in terms of the number of 22 different combinations that we could actually assess in 23 this period of time, so we just picked two. 24 We picked the base, being 4(a), which is net 25 load billed for network only for cogeneration only, and 26 we picked 4(c) which is our proposal for 50 per cent net 27 load billing on network only for cogeneration. 28 MR. ROGERS: If I can just interrupt you Les Services StenoTran Services Inc. 613-521-0703 1177 1 there. 2 Looking at this table I take it the 3 highlighted lines, 4(d) and 4(e), are the revised 4 lines 4(b) and 4(c) with the 20 megawatt assumption? 5 MR. CURTIS: 4(a) and 4(c). 6 MR. ROGERS: I'm sorry, 4(a) and 4(b) with the 7 20 megawatt assumption as opposed to 1 megawatt? 8 MR. CURTIS: That's correct. 9 What one would do is compare 4(a) with 4(d) 10 and compare 4(c) with 4(e). So, for example, if one 11 looks under the column titled "10 LDCs Embedding", if we 12 look at the 4(a) line it has 3.1 per cent there. By 13 raising the threshold from 1 megawatt to 20 megawatts 14 that 3.1 per cent would change to 3.6 per cent as shown 15 across the highlighted row 4(d), and the comparison is 16 similar across the other columns. 17 Similarly, if one were to compare 4(c) with 18 4(e), again, taking the column "10 LDCs Embedding", the 19 percentage would change from 1.5 per cent to 2.3 per 20 cent by raising the 1 megawatt limit to 20 megawatts. 21 MR. ROGERS: As you have pointed out on the 22 table here, 4(c) of course is the applicant's proposal? 23 MR. CURTIS: That is correct. 24 MR. ROGERS: So 4(e) would be the applicant's 25 proposal modified by the 20 megawatt threshold? 26 MR. CURTIS: That's correct. 27 MR. ROGERS: All right. 28 THE PRESIDING MEMBER: Thank you very much, Les Services StenoTran Services Inc. 613-521-0703 1178 1 Mr. Rogers. 2 MR. ROGERS: Thank you. 3 MR. CURTIS: Thank you. 4 THE PRESIDING MEMBER: Any other preliminary 5 matters? 6 MR. ROGERS: That is all I have this morning, 7 sir. 8 THE PRESIDING MEMBER: Okay. Thank you. 9 I'm going to look to you, Mr. Fisher, if you 10 are ready to start off on Issue 7.0, "Treatment of New 11 Load" -- 12 MR. ROGERS: Excuse me. I do have a -- 13 THE PRESIDING MEMBER: Do you have some 14 preliminaries? 15 MR. ROGERS: I thought I would just outline -- 16 THE PRESIDING MEMBER: Okay. 17 MR. ROGERS: Yes. Thank you. I'm sorry. I 18 misunderstood you, Dr. Higgin. 19 I would like to have the witnesses just 20 summarize the position. I hope this will help the Board 21 follow the evidence. 22 I'm going to call on Mr. Schneider to answer 23 these questions. 24 MR. ROGERS: Mr. Schneider, the next topic 25 that we are going to deal with is this treatment of new 26 load connection investment. Could you, please, just 27 summarize for the Board the company's proposal? 28 MR. SCHNEIDER: Certainly. The company's Les Services StenoTran Services Inc. 613-521-0703 1179 1 position is as follows. 2 Currently, load customers have the option of 3 self-providing new connection facilities outside of 4 Ontario Hydro Networks Company's regulated connection 5 pools. If a load customer chooses this option, that 6 customer would not be required to pay transmission rates 7 towards the corresponding regulated connection pools for 8 those specific delivery points. Historically, this 9 option has always been available to customers and we 10 think that it should continue to be available to 11 customers going forward. 12 In the short term, however, a customer should 13 continue to be given the option of having a new 14 connection facility included in the regulated connection 15 pools. If this is the customer's preferred option, the 16 new load connection facilities would be added to the 17 existing regulated pools, supplemented when necessary by 18 a customer financial contribution to keep the pools 19 whole. 20 Now, keeping the pools whole means that the 21 average connection pool cost does not increase after the 22 new connection facility has been added. This is based 23 on consideration of the cost of the new connection 24 facility and the expected revenue stream associated with 25 the new facility. It is the company's position that in 26 the longer term new connection investments should be 27 made on a competitive and commercial basis to be 28 determined by the needs of the beneficiaries. Les Services StenoTran Services Inc. 613-521-0703 1180 1 The transition to this state would require 2 demonstration to the Board that a competitive market 3 does indeed exist for providing new connection 4 facilities. In this sense, the beneficiary of a new 5 connection facility would pay for the investment and for 6 the associated ongoing operations and maintenance costs, 7 none of which would be included in the regulated pools. 8 This would be consistent with the user pay 9 principle as recommended by the Market Design Committee. 10 MR. ROGERS: Thank you. Suppose the company 11 didn't have to present any evidence on this issue -- I 12 don't think we are asking the Board for any affirmative 13 decision on this -- why did the company submit evidence 14 on the treatment of new load connection investment in 15 this case, Mr. Schneider? 16 MR. SCHNEIDER: Well, one of the drivers for 17 our decision to include it in the evidence was that 18 stakeholders raised this issue during the consultation 19 program. They were looking for some degree of clarity 20 around the issue. 21 It is also important to note that we included 22 this issue in the evidence to provide a more complete 23 picture for the Board and for stakeholders to help in 24 understanding the company's proposal on transmission 25 cost allocation and rate design. 26 I also might add that the treatment of new 27 load connection investment, as I am sure the Board and 28 others are aware, is also being addressed through other Les Services StenoTran Services Inc. 613-521-0703 1181 1 initiatives as we approach open access, those being the 2 development of the transmission system code and the 3 approval and implementation of related market rules. 4 Decisions resulting from those initiatives are 5 also expected to impact on the treatment of new load 6 connection investment. 7 MR. ROGERS: Tell me, how would a Board 8 pronouncement or decision on the treatment of new load 9 connection investment affect Ontario Hydro Network 10 Companies proposed cost allocation and rate design, if 11 at all? 12 MR. SCHNEIDER: It's our position that the 13 structure of the proposed transmission cost allocation 14 and rate design would not be affected by a Board 15 decision on this issue. However, a Board decision on 16 the treatment of new load connection investment would 17 indeed affect the choices available to customers, at 18 least in the short term. 19 Moving more quickly, for example, to our 20 longer term proposal would remove the option of pooling 21 new load connection investment from the choices 22 available to customers. 23 MR. ROGERS: Thank you. Can you tell me how 24 the applicant arrived at its proposal on the treatment 25 of new load connection investment? 26 MR. SCHNEIDER: Certainly. As has been 27 mentioned several times during the proceeding, the 28 company conducted an extensive stakeholder consultation Les Services StenoTran Services Inc. 613-521-0703 1182 1 program to elicit the views of stakeholders on issues 2 important to them. 3 Based on the input received from stakeholders, 4 along with our own considerations, a number of options 5 were developed for the treatment of new load connection 6 investment and these options range from including all of 7 the investments in the regulated connection pools all 8 the way to the other extreme of having them all take 9 place in a competitive marketplace. 10 The company's proposal on this issue 11 represents the due consideration and balancing of 12 stakeholder views. In general, most stakeholders prefer 13 the user pay principle when addressing the treatment of 14 new load connection investment. This principle is most 15 often discussed in the context of the longer term once 16 the open market for electricity has evolved somewhat. 17 The company also understands that for the 18 shorter term, most stakeholders did not want to 19 eliminate the option of including new load connection 20 investment in the regulated pools. 21 As a competitive connection market evolves and 22 it is demonstrated to the Board that a competitive 23 market has been achieved in this area, most stakeholders 24 envisioned a transition to the longer term proposal put 25 forward by our company. 26 I would also like to note that the company's 27 proposal is supported by the stakeholder advisory team. 28 This is an advisory team that was established during the Les Services StenoTran Services Inc. 613-521-0703 1183 1 consultation program for the purpose of providing the 2 company with advice on its preferred transmission cost 3 allocation and rate design proposal. 4 The advisory team prepared a report which has 5 been included in the evidence at Exhibit B, Tab 8, 6 Schedule 2. It is the view of the advisory team that 7 for the short term, OHNC would continue as the default 8 supplier of connection service until it is clear to the 9 Board that a competitive contestable market does indeed 10 exist for this service. 11 MR. ROGERS: Thank you. Do you expect that 12 your company's proposal will assist in facilitating the 13 development of a competitive new load connection market? 14 MR. SCHNEIDER: The company's proposal on this 15 issue will maintain the options currently available to 16 customers in the short term by allowing all parties, 17 including customers, transmission facilities providers 18 like OHNC and the Board to observe the development of a 19 competitive connection market and to learn from it. 20 In this sense, it is our position that the 21 Board would be in a far better position to make 22 decisions on how the competitive new load connection 23 market should evolve. It is Ontario Hydro Network 24 Companies' understanding that most stakeholders' longer 25 term views on this issue are indeed in line with the 26 user pay principle as recommended by the Market Design 27 Committee. 28 However, the company also understands that Les Services StenoTran Services Inc. 613-521-0703 1184 1 most stakeholders wish to proceed with caution in this 2 area, hence the short term proposal we put forward. 3 MR. ROGERS: Mr. Schneider, thank you. Does 4 that summarize the company's position? 5 MR. SCHNEIDER: Yes, it does. 6 MR. ROGERS: And are you now available to 7 answer questions about it? 8 MR. SCHNEIDER: Yes. 9 MR. ROGERS: I think we will move on then. 10 Thank you. 11 THE PRESIDING MEMBER: Mr. Fisher, would you 12 like to start? 13 MR. FISHER: Good morning, Dr. Higgin, and 14 thank you and good morning Panel Members and witnesses. 15 FURTHER CROSS-EXAMINATION 16 MR. FISHER: Good morning. I left with Board 17 staff an extract from Market Design Committee file 18 report, volume 1, January 29, 1999. I apologize for not 19 putting the notation on the top of the copy. It's 20 pages 1-10 and 1-11. 21 MS LEA: Has that been given an exhibit 22 number, sir? 23 MR. FISHER: No. 24 MS LEA: Okay. Then let's now give it 25 Exhibit G7.1, please. 26 EXHIBIT NO. G7.1: Extract from Market 27 Design Committee File Report, Volume 1, 28 January 29, 1999 Les Services StenoTran Services Inc. 613-521-0703 1185 OHNC PANEL 2, cr-ex (Fisher) 1 MR. ROGERS: We don't have copies. 2 MR. FISHER: I left five copies of 1-10 -- 3 MR. ROGERS: It's the other side. I'm sorry. 4 The witnesses haven't seen this, so give them a moment. 5 MR. FISHER: Sure. 6 --- Pause 7 MR. SCHNEIDER: Okay. We are there. 8 MR. FISHER: Thank you. You may remember that 9 last Thursday, February 17, Mr. Vlahos asked you whether 10 a desirable end state was that customers should own 11 parts of their system. You answered that that was a 12 desirable end state. 13 I don't think you need to look it up, but for 14 the record the record is Volume 2, February 17, 15 page 232, lines 10 to 22. 16 The focus of my cross-examination today is 17 whether the proposed rules for the treatment of new load 18 connection investment in combination with the proposed 19 definition of line connections moves us significantly 20 closer to that desirable end state. 21 We believe that the thrust for this change 22 came from the Market Design Committee and that it is 23 important to have some understanding of why they took 24 this route. 25 I want to quote from the MDC Committee File 26 Report, page 1-11 that was just distributed. That's 27 Exhibit G7.1. It's the fifth full paragraph down that 28 reads: Les Services StenoTran Services Inc. 613-521-0703 1186 OHNC PANEL 2, cr-ex (Fisher) 1 "However, we foresee the need to move to 2 a regime where transmission investments 3 are market driven. As mentioned earlier, 4 congestion pricing is a prerequisite for 5 such an entrepreneurial approach. An 6 entrepreneurial approach also requires 7 acceptance of the idea that the 8 beneficiaries of a transmission expansion 9 should pay for it, and have the rights 10 with regard to its future use." 11 End quote. 12 Would you agree then that the move towards 13 having the customer pay for and perhaps own part of 14 their own transmission assets is a part of the thrust of 15 the Market Design Committee's that transmission 16 investment should be more on the basis of the 17 beneficiary paying for the investment than having the 18 rights to the future use of the facilities? 19 MR. SCHNEIDER: I would agree that 20 directionally they wanted to move toward the beneficiary 21 pay system. 22 MR. FISHER: Also, on page 1-11 of 23 Exhibit G7.1, the fourth full paragraph reads: 24 "We recommend that transmission 25 investments continue to be centrally 26 planned during the initial years of the 27 market with a major analytical and 28 assessment role for the IMO and oversight Les Services StenoTran Services Inc. 613-521-0703 1187 OHNC PANEL 2, cr-ex (Fisher) 1 by the OEB. The costs of new investments 2 would be rolled into the costs to be 3 recovered through the transmission 4 tariff." 5 End quote. 6 This quote does not make it clear that it is 7 talking about the network assets. However, on page 4-8 8 in Exhibit G5.8 -- 9 MR. PORAY: What page number? 10 MR. FISHER: Page 4-8, and that is of the MDC 11 Final Report and part of Recommendation 4-6. 12 It deals with connection services and the last 13 part of that section says: 14 "...new load and new generators would pay 15 for the new connections, but not for 16 existing connections." 17 MR. SCHNEIDER: I see that. 18 MR. FISHER: Would you agree that the MDC did 19 not recommend, at least initially, that the principle of 20 beneficiary pay be applied to network assets? 21 MR. SCHNEIDER: I don't see a reference to 22 "network" in that passage. 23 MR. PORAY: I think generally speaking, yes, 24 that was the MDC's direction. 25 When we refer to "network" the equivalent 26 reference in the MDC report is basic use service. 27 MR. FISHER: Yes, thank you. 28 Would you also agree that the MDC recommended Les Services StenoTran Services Inc. 613-521-0703 1188 OHNC PANEL 2, cr-ex (Fisher) 1 that the new load that pays for its connections should 2 not pay for existing connections? 3 MR. SCHNEIDER: Yes. 4 MR. FISHER: My client is well aware that the 5 MDC recommended a definition of connection that is 6 similar to the broad definition that you are proposing. 7 However, one of the reasons for my client not accepting 8 the broad definition is that the investment rules 9 proposed do not meet the MDC requirement that customers 10 who pay for their connection not pay for existing 11 connections. 12 This principle is one of the three that AMPCO 13 considers important that we have discussed when I was 14 cross-examining on the definition of line definition. 15 For the record, that discussion is in 16 Volume 1, February 16, pages 74 and 75. 17 The principles are: 18 Making the customer responsible for its costs 19 helps to encourage economic efficiency. 20 The second is: If the customer is to be 21 responsible for the costs it must have the ability to 22 manage those costs. 23 The third: The customer who has paid for its 24 own connection facilities should not be required to pay 25 for the connection facilities of other customers. 26 You agreed that the current situation 27 regarding customers owning transformation assets met 28 these three principles, but did not agree with me that Les Services StenoTran Services Inc. 613-521-0703 1189 OHNC PANEL 2, cr-ex (Fisher) 1 it is important that these three principles should be 2 applied to customer investment and line connection 3 assets. Nevertheless, AMPCO considers it to be 4 necessary to meet these principles for line connection 5 if we were to start to move towards a desirable end 6 state. 7 MR. ROGERS: Did we move into the argument 8 phase? I must have dozed off there somewhere. 9 --- Laughter 10 MR. ROGERS: I wonder if my friend has a 11 question for the witnesses. 12 MR. FISHER: On February -- yesterday I guess 13 it was, I circulated four sheets with the title "AMPCO 14 Investments Examples". It's Exhibit G6.3. 15 MR. PORAY: Yes, we have it. 16 MR. FISHER: Page 1 shows the most simple 17 connection example. New industrial load four wants to 18 connect to the system. The preferred method of 19 connection is a new line from Network Station A. OHNC's 20 cost estimate is $5 million and the large connection 21 pools can afford to pay $4 million. 22 In this situation I believe the OHNC would 23 give the customer a choice. One of those choices that 24 OHNC will offer the customer is that OHNC will do the 25 work on a pooled basis as long as the customer pays the 26 $1 million difference between the $5 million cost and 27 the $4 million that the pool can afford to pay. 28 Can you confirm this? Les Services StenoTran Services Inc. 613-521-0703 1190 OHNC PANEL 2, cr-ex (Fisher) 1 MR. SCHNEIDER: Yes, that is correct. 2 Can I ask for one clarification? 3 MR. FISHER: Yes. 4 MR. SCHNEIDER: In the last line under the 5 investment estimated amount that the line connection 6 pool can pay is $4 million? 7 MR. FISHER: Yes. 8 MR. SCHNEIDER: Is that your assessment of the 9 expected revenue stream that that connection investment 10 will get over a given revenue horizon and you are 11 comparing that to the total cost of the investment to 12 get the $1 million capital contribution? 13 MR. FISHER: It is whatever is the result of 14 OHNC's evaluation of keeping the pool whole. 15 MR. SCHNEIDER: Thank you. 16 MR. FISHER: Can you also confirm that in this 17 case the customer will still be required to fully pay 18 the line connection rate? 19 MR. SCHNEIDER: Yes, he would be, because he 20 is connected to a network line joining up to a network 21 station. 22 MR. FISHER: What I really want to talk 23 about -- 24 MR. SCHNEIDER: I'm sorry. A line connection 25 asset connected to a network station. 26 MR. FISHER: Yes. Right. 27 What I would also like to talk about is the 28 other choice that the customer has. Les Services StenoTran Services Inc. 613-521-0703 1191 OHNC PANEL 2, cr-ex (Fisher) 1 Am I correct that the other choice available 2 to the customer is that he can build the facility? 3 MR. SCHNEIDER: Yes. 4 MR. FISHER: Would you agree that this is a 5 practical application of the first principle that AMPCO 6 has put forward that the customer can be made 7 responsible for the costs that are incurred to serve it? 8 MR. SCHNEIDER: Yes. 9 MR. FISHER: Let's assume the customer is able 10 to get competitive quotes for doing the work. The 11 customer finds that the best offer that will meet all 12 OHNC's and the IMO's requirements for connection to the 13 system is $3 million. We don't need to speculate as to 14 why the competing quote might be lower than OHNC's 15 estimate. 16 Will you agree with me that the customer, in 17 having the option of choosing the contractor, has the 18 opportunity to manage the cost that it is responsible 19 for and that this is an example of AMPCO's second 20 principle? 21 MR. SCHNEIDER: The second principle being? 22 MR. ROGERS: It sounds like AMPCO's principle 23 has been elevated to the same status as Bonbright by my 24 friend. That remains to be seen I suppose. 25 MR. FISHER: If the customer is to be 26 responsible for the costs it must have the ability to 27 manage those costs. 28 MR. SCHNEIDER: In the example you are Les Services StenoTran Services Inc. 613-521-0703 1192 OHNC PANEL 2, cr-ex (Fisher) 1 describing it seems consistent with that principle. 2 MR. FISHER: Thank you. 3 Do you agree that in this case the customer 4 has fully paid for its line connection and therefore is 5 not required to pay the line connection rate? 6 MR. SCHNEIDER: He has fully paid for the tap, 7 but he hasn't paid for the -- so you are talking about 8 new load number four -- 9 MR. FISHER: Yes. 10 MR. SCHNEIDER: -- connecting to the network 11 station? 12 MR. FISHER: Yes, to Network Station A. 13 MR. SCHNEIDER: Yes. If he has paid for the 14 tap to the Network Station A then he would only be 15 paying network charges. 16 MR. FISHER: Thank you. 17 Again I think you will agree this meets 18 AMPCO's third principle as well as the MDC 19 recommendation that customers who have paid for their 20 own connections should not also have to pay for the 21 existing connections of other customers? 22 MR. SCHNEIDER: That's correct. 23 MR. PORAY: I think perhaps we should add, 24 because they are not using any other Ontario Hydro line 25 connection facilities to connect to the network 26 stations. 27 MR. FISHER: Understood. 28 So in this simple example we have established Les Services StenoTran Services Inc. 613-521-0703 1193 OHNC PANEL 2, cr-ex (Fisher) 1 that all three of AMPCO's principles are met. 2 I have one further question before we get on 3 to some other examples. 4 Can you confirm that the connection 5 arrangement is a complete line connection by either the 6 broad or narrow definition and that the discussion we 7 have just had applies equally to both definitions? 8 MR. SCHNEIDER: Yes, that's correct. 9 MR. FISHER: Okay. 10 Could you please turn now to page 2 of 11 Exhibit G6.3. This is one of the examples from 12 Exhibit G1.3 that we discussed when we were talking 13 about the definition of line connection. 14 This is the system we have discussed as line 15 connection example 1. The line between Network 16 Station A and Network Station B has no open switch and 17 operates in parallel with the network and is classified 18 as a network line. 19 Investment example 2 looks at the situation if 20 the 115 kV line between Network Station A and Network 21 Station B needs completely rebuilding, it has reached 22 the end of life. 23 Can you confirm that since this is a network 24 facility OHNC would rebuild this line and include the 25 $50 million costs in the pool of the network assets to 26 be recovered from all customers via the network tariff? 27 MR. SCHNEIDER: This line, in our view, is a 28 network line that serves two functions. It serves the Les Services StenoTran Services Inc. 613-521-0703 1194 OHNC PANEL 2, cr-ex (Fisher) 1 network function and a line connection function. But we 2 would take the cost of rebuilding that line and pool it 3 into the network pool, because we haven't yet developed 4 a methodology to split the cost between the network 5 function and the line connection function. 6 MR. FISHER: Investment Example 3 looks at the 7 situation if the 115 kV tap line from Tap 2 to 8 Industrial Load 2 needs to be rebuilt. OHNC estimates 9 the cost to be $5 million. Also, OHNC estimates that 10 the Line Connection Pool could afford to absorb $4 11 million of costs and still keep the Line Connection Pool 12 whole. 13 Would you agree that in this circumstances one 14 choice that OHNC will give the customer is to have the 15 work done itself at its own cost? 16 MR. SCHNEIDER: Have the customer do the work 17 at its own cost? 18 MR. FISHER: Yes. 19 MR. SCHNEIDER: Yes, to self-provide the 20 asset. 21 MR. FISHER: Am I right that the other choice 22 you will give the customer is to have OHNC do the work 23 with the customer contributing $1 million? And that is 24 the difference between the $5 million cost and the pool 25 contribution of four. 26 MR. SCHNEIDER: Yes, that is correct. 27 MR. FISHER: I believe that we have 28 established in our previous discussion that even if Les Services StenoTran Services Inc. 613-521-0703 1195 OHNC PANEL 2, cr-ex (Fisher) 1 Industrial Load 2 owns the tap line from Tap 2 to its 2 plant, it will be fully in the line connection pool and 3 pay the full line connection rate. 4 Would you agree that whether or not -- do you 5 agree with that? 6 MR. SCHNEIDER: Yes. 7 MR. FISHER: Would you agree that whether or 8 not the customer chooses to build the line from Tap 2 to 9 its plant itself, the customer will pay almost the same 10 transmission charges, whether or not it chooses to build 11 its own line connection? 12 MR. SCHNEIDER: In either case he will be 13 paying the line connection rate and a network rate. 14 MR. FISHER: Would you agree that it is not in 15 the customer's interest to do the work itself outside 16 the pool and that it will cost the customer $5 million 17 instead of $1 million, and the customer will receive 18 little or no benefit in lower transmission costs? 19 MR. SCHNEIDER: No, I don't think I can agree 20 with that. I think there would be a lot of factors that 21 would go into the decision as to whether or not the 22 plant or the customer would build that facility himself. 23 MR. FISHER: What factors would they be? 24 MR. SCHNEIDER: It would be other 25 considerations as to whether the customer wants to get 26 into the business of owning, and operating and 27 maintaining such a facility versus focusing on the core 28 business, for example. Les Services StenoTran Services Inc. 613-521-0703 1196 OHNC PANEL 2, cr-ex (Fisher) 1 MR. FISHER: Would you agree that this 2 situation, then, would violate AMPCO's third principle 3 that says that if a customer pays for its own connection 4 then the customer should not have to pay for the 5 connections of other customers? 6 MR. SCHNEIDER: You mean if load two 7 industrial pays for the tap? 8 MR. FISHER: Yes. 9 MR. SCHNEIDER: Well, if he pays for the tap 10 he is going to own and be responsible for the operation 11 of that tap. But he is also going to pay for line 12 connection, because he is using a network line that 13 serves a dual function connecting to a network station. 14 So I don't think I would agree. He is paying 15 for a service that he is receiving from that 115 kV line 16 called line connection service. 17 MR. FISHER: Let's now assume that the 18 customer has a quote -- 19 --- Pause 20 MR. FISHER: Just getting back to the question 21 with respect to if the customer has to pay $5 million 22 instead of $1 million, and you said that there could be 23 other factors, how would you get to a $5 million benefit 24 of these other factors if he wanted to pay for it 25 himself? 26 MR. SCHNEIDER: I don't think I am in a 27 position to determine what those factors would be and 28 what value the customer would place on those values. I Les Services StenoTran Services Inc. 613-521-0703 1197 OHNC PANEL 2, cr-ex (Fisher) 1 am just suggesting that there are other things that the 2 customer would consider when making a decision as to 3 whether or not to self-provide the facility. 4 MR. FISHER: There would have to be very 5 substantial to outweigh that expense of $5 million as 6 opposed to $1 million. 7 MR. SCHNEIDER: In your example they would 8 have to be equal to or greater than the cost of that 9 investment. 10 MR. FISHER: For the purpose of the next 11 question, we will have to assume that the factors that 12 you alluded to that the customer might take into 13 consideration are not that substantial and that the 14 customer would choose not to override that $5 million. 15 Let's assume now that the customer has a quote 16 from a competing transmission company that says that the 17 line can be rebuilt for $3 million. The customer is 18 confident that the competing company can meet the OHNC 19 and IMO requirements for a connection to the 20 transmission system. 21 Would you agree that even though the customer 22 has a lower quote, it is still in his interest to have 23 the job done by OHNC at a higher cost and to be partly 24 paid for by the pool because $1 million capital 25 contribution to the pool is still less than the $3 26 million competitive quote -- and once again, making that 27 same assumption that we made for the five. 28 MR. SCHNEIDER: I am not sure I can agree. I Les Services StenoTran Services Inc. 613-521-0703 1198 OHNC PANEL 2, cr-ex (Fisher) 1 am not sure what the customer is going to be considering 2 when he makes that investment decision. It is 3 important, in my view, that the customer makes a 4 decision as to whether or not he wants to own his 5 facility, and then he will look at the factors as to 6 whether he not he wants to pay the $3 million you are 7 suggesting or join the pool with a capital contribution 8 of $1 million and continue to pay line connection 9 charges. 10 MR. FISHER: One moment, please. 11 --- Pause 12 MR. FISHER: Thank you. Could you turn to 13 page 3 of Exhibit G6.3. This system shows an MEU Load 1 14 and an Industrial Load 2 on a purely radial connection 15 facility. 16 The first part of the test on this page gives 17 the breakdown of how the $30 million cost of rebuilding 18 the mainline up to Tap 2 is divided between the line 19 sections. 20 In Investment Example 5, OHNC has determined 21 that the line needs rebuilding from Network Station A to 22 Tap 2, at a cost of $20 million from Network Station A 23 to Tap 1 and $10 million from Tap 1 to Tap 2, giving a 24 total cost of $30 million. 25 Would OHNC give the customers a choice of 26 forming some sort of voluntary partnership to build the 27 lines themselves? 28 MR. SCHNEIDER: Just to clarify, in this Les Services StenoTran Services Inc. 613-521-0703 1199 OHNC PANEL 2, cr-ex (Fisher) 1 situation that the Tap 1 to Load 1 MEU is an OHNC-owned 2 tap? 3 MR. FISHER: Yes. 4 MR. SCHNEIDER: And the tap from Tap 2 to 5 Load 2 Industrial is a customer-owned tap? 6 MR. FISHER: Yes. 7 MR. SCHNEIDER: In this case, I don't believe 8 the option to self-provide the rebuild of the 115 kV 9 line would be given because OHNC also owns the tap to 10 Load 1 MEU? 11 --- Pause 12 MR. FISHER: Excuse me. 13 So self provision is not an option in that 14 case then? 15 MR. SCHNEIDER: No, for the reason I stated. 16 MR. FISHER: Okay. If we could go on now to 17 page 4 of Exhibit G6.3. 18 In this case, the system is the same as we 19 used in Exhibit G1.3 and called "Line Connection 20 Example (2)." You will notice that the system has a 21 normally open switch. 22 Investment Example 6 considers the situation 23 where the line from Network Station B to Tap 3 needs to 24 be rebuilt. The estimated cost is $10 million and the 25 pool can afford to pay $8 million. Therefore, a 26 customer contribution of $2 million is needed if the 27 line is built through the pool route. 28 From our discussion of Wednesday last week we Les Services StenoTran Services Inc. 613-521-0703 1200 OHNC PANEL 2, cr-ex (Fisher) 1 know that the MEU Load 1 and Industrial Load 2 receive 2 the same benefit from this line even though they are not 3 normally supplied through it -- sorry -- some benefit, 4 not the same. We know that MEU Loads 1 and 3 will not 5 join a partnership to build the line because OHNC owns 6 the taps into their stations. 7 So in this case, self provision is not an 8 option. Is that true, because OHNC owns that line, the 9 tap? 10 MR. SCHNEIDER: Can I clarify something or ask 11 for a clarification on what you said earlier? 12 MR. FISHER: Sure. 13 MR. SCHNEIDER: You said that Load 3 MEU and 14 Load 1 MEU share in the same benefits. I am puzzled 15 because I don't think what you mean by that is that 16 there is a common benefit that they are both taking a 17 part of is a sharing. 18 I think what you mean is the 115 kV line that 19 supplies Load 1 MEU, and for that matter Load 2 20 Industrial, is a line connection asset, and because the 21 switch is normally open, the line from Network Station B 22 to Tap 3 is another line connection asset. They both 23 receive line connection service but they are distinct 24 from each other. It is not a common benefit that they 25 are sharing, I believe. 26 MR. FISHER: Yes. What we were saying was 27 that they have some benefit because the line could be 28 closed if the supply was broken between network station Les Services StenoTran Services Inc. 613-521-0703 1201 OHNC PANEL 2, cr-ex (Fisher) 1 A and tap 1. 2 MR. SCHNEIDER: That is true in an 3 emergency-type situation, but I believe that the 4 assignment of the assets based on their functionality is 5 under the condition of normal operations and that would 6 mean the switch would be normally open. 7 MR. FISHER: Right. 8 So self provision is not an option? 9 MR. SCHNEIDER: Can you repeat, maybe 10 rephrase, what self provision you are talking about 11 here? 12 MR. FISHER: For Load 3 the line from Network 13 Station B to Tap 3 to Load 3, based on the answer from 14 the earlier question. 15 MR. SCHNEIDER: Yes, because the Tap 3 to 16 Load 3 MEU is an OHNC-owned asset and the rebuild of the 17 line between Network Station B and Tap 3 would be 18 pooled. 19 --- Pause 20 MR. FISHER: So Investment Example 7 looks at 21 the situation that the line tap between Tap 2 and Tap 3 22 needs to be rebuilt. In this case, load customers are 23 normally supplied through the line. However, the line 24 benefits all three customers because, as we have 25 discussed previously, it provides an alternate source of 26 supply in the event of a major line failure. So this 27 would be charged to the Line Connection Pool then? 28 MR. SCHNEIDER: That investment would be Les Services StenoTran Services Inc. 613-521-0703 1202 OHNC PANEL 2, cr-ex (Fisher) 1 included in the Line Connection Pool, yes. 2 MR. FISHER: If that line needed to be rebuilt 3 how would the amount that the pool could afford to -- 4 how would the amount that the pool can afford to 5 contribute be calculated, given that under normal 6 circumstances this line generates no revenue? 7 --- Pause 8 MR. SCHNEIDER: Because this segment from Tap 9 2 to Tap 3 operates as a normally open switch and has to 10 be rebuilt, I am suggesting that the investment is 11 pooled within the Line Connection Pool. And because I 12 don't believe it would be that easy to determine the 13 split between the beneficiaries of those costs because 14 of the way it operates, that we would pool it as we 15 would a network investment, in the same manner as we 16 would a network investment but within the Line 17 Connection Pool. 18 MR. FISHER: So therefore no customer 19 contribution? 20 MR. SCHNEIDER: I believe so. 21 --- Pause 22 MR. FISHER: Would you agree that the 23 investments in Examples 6 and 7 would be identified as 24 investments in network asset with the narrow definition 25 of line connection because they serve more than one 26 transmission customer? 27 MR. SCHNEIDER: Yes, under the narrow 28 definition of line connection. Les Services StenoTran Services Inc. 613-521-0703 1203 OHNC PANEL 2, cr-ex (Fisher) 1 MR. FISHER: Would you also agree that the 2 investments in Examples 6 and 7 with the narrow 3 definition would be funded through the network pool? 4 MR. PORAY: Can we just hang on for a second? 5 MR. FISHER: Yes. 6 --- Pause 7 MR. SCHNEIDER: Can I ask for a clarification? 8 MR. CURTIS: That is -- 9 MR. SCHNEIDER: Of the 115 line, kV line 10 between Network Station A and Network Station B, under 11 the narrow line connection -- pool definition -- how 12 would those two segments be treated? 13 MR. FISHER: Perhaps -- 14 MR. SNELSON: Could you repeat that there? 15 MR. SCHNEIDER: I think what I am trying to 16 understand from this is that under the narrow Line 17 Connection Pool definition would it be true that 18 network -- the line from Network Station B to the 19 normally open switch would be a line connection asset, 20 but on the other side of the switch it would be viewed 21 as a network asset? 22 MR. SNELSON: One could take that view, but I 23 believe that because of the way in which the normally 24 open switch operates to provide benefits to customers on 25 both side of it that the proper allocation would be to 26 allocate all of it as network -- 27 MR. ROGERS: That is AMPCO principle number 28 four, I think. Les Services StenoTran Services Inc. 613-521-0703 1204 OHNC PANEL 2, cr-ex (Fisher) 1 --- Laughter 2 MR. SCHNEIDER: I see that on the left side -- 3 sorry -- on the side between the Network Station A and 4 the normally open switch, I see more than one customer 5 benefitting, but on the other side I see only the Load 3 6 MEU customer benefitting from that line connection 7 segment. So I don't know if I agree with that. 8 MR. SNELSON: Okay. Our view might be 9 different, but we understand your answer. 10 --- Pause 11 MR. FISHER: It seems to us that with the 12 combination of the broad definition of line connection 13 and the proposed pooling rules, there are only a few 14 situations where a new or old customer can be made 15 responsible for its connection costs. Of the examples 16 we have reviewed, it is only Example (1), the simple 17 connection directly to the network station that allows 18 the customers to assume responsibility for their own 19 connection assets. 20 Would you agree that with the broad definition 21 and the proposed investment rules, in many real-life 22 situations the only practical solution is for the 23 investments to continue to be made through the pool? 24 MR. ROGERS: Can I just interrupt here? I'm 25 sorry, Mr. Fisher. 26 Mr. Chairman, Mr. Fisher has put a hypothesis 27 in his question with which these witnesses have not 28 agreed. Now, I'm quite willing to have them answer the Les Services StenoTran Services Inc. 613-521-0703 1205 OHNC PANEL 2, cr-ex (Fisher) 1 question assuming that his hypothesis is correct, but 2 they have rejected it this morning. 3 THE PRESIDING MEMBER: Yes. I agree. 4 MR. ROGERS: Can you answer the question, 5 Mr. Schneider? Can you help Mr. Fisher without 6 necessarily accepting the hypothesis that he put to you? 7 MR. SCHNEIDER: Can you rephrase it, please? 8 MR. FISHER: Okay. 9 MR. ROGERS: My concern was that the question 10 assumed that these witnesses agreed that only one of 11 these customers would ever build his own line 12 connection, and they didn't agree to that. 13 MR. FISHER: Would you agree that with the 14 broad definition in the proposed investment rules, in 15 many real-life situations the only practical solution is 16 for the investments to continue to be made through the 17 pool? 18 MR. SCHNEIDER: No, I wouldn't agree with 19 that. 20 MR. FISHER: Those are my questions. Thank 21 you. 22 THE PRESIDING MEMBER: Thank you, Mr. Fisher. 23 We will go to Mr. Goldsilver. He has been 24 very patient. it is now his turn. Thank you. 25 MR. GOLDSILVER: Thank you, Mr. Chair. 26 Before I proceed, I would like to just point 27 out to the Board that I am representing two intervenor 28 parties on this issue, the first being the Electrical Les Services StenoTran Services Inc. 613-521-0703 1206 OHNC PANEL 2, cr-ex (Fisher) 1 Contractors Association of Ontario, the second being 2 Collingwood PUC. I propose that I start with the ECAO. 3 MS LEA: The Collingwood PUC? 4 MR. GOLDSILVER: Collingwood Public Utilities 5 Commission. 6 CROSS-EXAMINATION 7 MR. GOLDSILVER: Good morning, gentlemen. 8 MR. CURTIS: Good morning. 9 MR. PORAY: Good morning. 10 MR. SCHNEIDER: Good morning. 11 MR. GOLDSILVER: I would like to start with 12 some questions about the general principles behind the 13 creation of Ontario's newly restructured electricity 14 marketplace. 15 Would you agree that one of the objectives of 16 the newly restructured electricity marketplace is the 17 introduction and development of competition in the 18 non-monopoly segments of Ontario's electricity industry? 19 MR. SCHNEIDER: Yes, I would. 20 MR. GOLDSILVER: Would you also agree that 21 another objective is the introduction of regulation over 22 the monopoly components of the industry? 23 MR. SCHNEIDER: Yes. 24 MR. GOLDSILVER: Would you agree that the 25 monopoly components of the industry are essentially the 26 transmission and distribution wire systems? 27 MR. SCHNEIDER: Certain components of it, yes. 28 MR. GOLDSILVER: In the case of transmission Les Services StenoTran Services Inc. 613-521-0703 1207 OHNC PANEL 2, cr-ex (Goldsilver) 1 it is a monopoly activity because only one company 2 provides for the transmission of electricity, that being 3 OHNC. 4 MR. SCHNEIDER: I believe there is a second, 5 but, yes, we are the primary supplier. 6 MR. GOLDSILVER: In other words, no other 7 entity directly competes with OHNC for the transmission 8 of electricity in Ontario in general. Is that correct? 9 MR. SCHNEIDER: In general, that is correct. 10 MR. GOLDSILVER: Thank you. 11 For the purposes of these questions, because 12 OHNC is the only entity that transmits electricity, the 13 prices charged by OHNC for the transmission of 14 electricity must be regulated by the OEB. Is that 15 correct? 16 MR. SCHNEIDER: Yes, that is. 17 MR. GOLDSILVER: So would it be fair to say, 18 then, that the OEB would regulate the prices charged for 19 services in Ontario's electricity sector when only one 20 entity provides that service? 21 MR. SCHNEIDER: Yes. 22 MR. GOLDSILVER: Thank you. 23 THE PRESIDING MEMBER: Mr. Goldsilver, I think 24 you have to sort of recognize that there are other 25 transmission companies that have licences and there is a 26 requirement for them potentially to get improved rates 27 as well. So that is the fact. 28 MR. GOLDSILVER: I apologize. I agree with Les Services StenoTran Services Inc. 613-521-0703 1208 OHNC PANEL 2, cr-ex (Goldsilver) 1 that fact. 2 I guess what I'm trying to get at is that 3 nobody competes directly with -- 4 THE PRESIDING MEMBER: Within its service 5 territory there is no one else. 6 MR. GOLDSILVER: Thank you. I'm sorry. That 7 is the point that I was trying to get across. 8 Would you also agree that the newly 9 restructured electricity marketplace envisages a 10 separation of non-monopoly or competitive business 11 activities from monopoly or regulated business 12 activities through the use of separate corporations for 13 each type of activity? 14 MR. SCHNEIDER: Yes, directionally I would 15 agree. 16 MR. GOLDSILVER: Would you agree that one of 17 the purposes of this separation is to prevent regulated 18 companies from providing competitive business activities 19 and competing against competitors' businesses? 20 MR. SCHNEIDER: Yes, that would be one of the 21 purposes. 22 MR. GOLDSILVER: Would you also agree that 23 another purpose of this separation is to avoid 24 cross-subsidization between the regulated and 25 non-regulated or competitive businesses and to ensure 26 that all market participants are treated on a level 27 playing field? 28 MR. SCHNEIDER: Yes. Les Services StenoTran Services Inc. 613-521-0703 1209 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. GOLDSILVER: It is for this reason that 2 the old Ontario Hydro has had to separate its 3 competitive and monopoly business activities into 4 separate corporations and affiliates. Is that correct? 5 MR. SCHNEIDER: I believe that to be correct. 6 MR. GOLDSILVER: Therefore, the transmission 7 of electricity, as a regulated business function, would 8 have to be carried out in a company separate from other 9 companies providing competitive business activities. 10 MR. SCHNEIDER: Can you repeat that? 11 MR. GOLDSILVER: I'm sorry. 12 The transmission of electricity, as a 13 regulated business function, would have to be carried 14 out in a company separate from other companies providing 15 competitive business activities. 16 MR. SCHNEIDER: Yes, delivering the 17 transmission service. You are correct. 18 MR. GOLDSILVER: Thank you. 19 Would you agree that a competitive business 20 activity is an activity where more than one entity 21 provides that activity where a customer has the option 22 of choosing more than one entity to provide that 23 service? 24 MR. SCHNEIDER: Yes. 25 MR. GOLDSILVER: Would you also agree that a 26 transmitter cannot carry on any activities other than 27 transmitting electricity? 28 MR. ROGERS: Mr. Chairman, I'm just going to Les Services StenoTran Services Inc. 613-521-0703 1210 OHNC PANEL 2, cr-ex (Goldsilver) 1 ask my friend to be careful here. These are legal 2 questions now. He may be incorrect in his hypothesis, 3 but it is a legal question. 4 THE PRESIDING MEMBER: Ms Lea, you have a -- 5 MR. GOLDSILVER: I'm not asking for a legal 6 opinion. I'm just asking for what their understanding 7 is. 8 MR. ROGERS: I don't quarrel with a discussion 9 in general terms about what might the witnesses think is 10 the -- 11 THE PRESIDING MEMBER: We are more familiar 12 with what the distribution companies can and cannot do 13 as to affiliates. I have not checked transmission. 14 MS LEA: Yes. There may be some restrictions 15 on the types of businesses the transmission companies 16 can carry on, but I'm not sure that these witnesses 17 would be familiar with all the legal ramifications of 18 the various sections of the Act in that regard. 19 MR. GOLDSILVER: I'm not asking for what the 20 legal ramifications are. I'm just asking if it is their 21 understanding that a transmitter can only carry on 22 transmission activities -- 23 MS LEA: I don't think that was clear. 24 MR. GOLDSILVER: -- and -- I mean, I would have 25 to refer to the Energy Competition Act to point that 26 out. 27 MR. ROGERS: I just don't know, Dr. Higgin, 28 how this answer would help the Board. Les Services StenoTran Services Inc. 613-521-0703 1211 OHNC PANEL 2, cr-ex (Goldsilver) 1 THE PRESIDING MEMBER: I think it is an 2 important question given where we are going, so somehow 3 we would like to get that clarified. 4 I think the words sort of say "except through 5 an affiliate", that is my understanding of it, but I 6 haven't -- perhaps we should just make a note and I will 7 ask Board counsel to check it out and tell us on the 8 record after the break what her finding is with respect 9 to that, if that is okay with you. 10 MR. GOLDSILVER: That is fine. Thank you. 11 THE PRESIDING MEMBER: Thank you. 12 MR. GOLDSILVER: I hope my next question 13 doesn't cause any more concern, but I think it might. 14 Would it be fair to characterize the 15 self-provision of new load connection investments under 16 the current regime where self-provision is permittable? 17 The current regime has no mandate to separate regulated 18 businesses from competitive businesses. Is that 19 correct? 20 MR. CURTIS: Could you clarify that again? 21 The current regime? 22 MR. GOLDSILVER: Under the current regime you 23 permit self-provision of new load connection investment. 24 MR. SCHNEIDER: I guess what we are asking for 25 is clarification of what "current regime" is. 26 MR. GOLDSILVER: Well, the current regime, 27 just currently, before open access. Under the Old 28 Ontario Hydro regime, let's put it that way. Les Services StenoTran Services Inc. 613-521-0703 1212 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. CURTIS: I think that is where our 2 confusion lies in that there was an Ontario Hydro and 3 there was a certain regime in place for that. Ontario 4 Hydro has been unbundled and no longer exists, and we 5 have a number of new entities and we are in a transition 6 period. 7 We are about to enter into an open access 8 period. There are different regimes in all of those. I 9 was wondering if you could help us in terms of which 10 regime -- 11 MR. GOLDSILVER: Under the old Ontario Hydro 12 regime. 13 MR. CURTIS: The old Ontario Hydro regime. 14 MR. GOLDSILVER: Yes. 15 MR. CURTIS: Prior to its breakup. 16 MR. GOLDSILVER: Prior to its breakup. 17 MR. CURTIS: Okay. 18 MR. GOLDSILVER: And self-provision of both 19 connection investments was permitted. 20 MR. CURTIS: Yes, it was. 21 MR. GOLDSILVER: But there was no requirement 22 for the separation of competitive business activities 23 and regulated business activities. Is that correct? 24 MR. CURTIS: That's correct. 25 MR. GOLDSILVER: Thank you. Would you agree 26 that the provision of new load connection investments 27 is a competitive business activity due to the fact that 28 OHNC is not the only company providing this service? Les Services StenoTran Services Inc. 613-521-0703 1213 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. SCHNEIDER: Yes. If there's more than one 2 company providing the service, then it could become more 3 and more competitive as other market players enter the 4 marketplace. 5 MR. GOLDSILVER: So you would consider the 6 provision of new load connection investments a 7 competitive business activity. 8 MR. SCHNEIDER: By the very fact that we have 9 offered that option in the past would suggest that it is 10 competitive activity. 11 MR. GOLDSILVER: But you have agreed that OHNC 12 is a regulated company that carries out only 13 transmission activities. 14 MR. SCHNEIDER: Yes, OHNC is. That's correct. 15 MR. GOLDSILVER: So what you are saying is 16 that OHNC as a regulated company intends to compete in a 17 competitive business activity with other competitors for 18 the provision of new load connection investments. 19 MR. SCHNEIDER: No, I don't think I said that. 20 MR. GOLDSILVER: OHNC is going to provide the 21 service as a regulated company. Is that correct? 22 MR. SCHNEIDER: Let me try and clarify that. 23 What we are talking about is giving a customer an option 24 of either including the asset in the regulated pool to 25 be owned by OHNC -- 26 MR. GOLDSILVER: Right. 27 MR. SCHNEIDER: -- versus self-providing that 28 asset. If the customer decides to self-provide, then Les Services StenoTran Services Inc. 613-521-0703 1214 OHNC PANEL 2, cr-ex (Goldsilver) 1 OHNC would not be in the business of offering the bids, 2 for example. 3 MR. GOLDSILVER: Right. But because that 4 option exists, the customer could either go to OHNC for 5 the provision of those facilities or it could go to a 6 competitive business and ask for those facilities to be 7 built by somebody else. 8 MR. SCHNEIDER: Yes. And that's what we heard 9 through out consultation program, that stakeholders 10 wanted that option to remain. 11 MR. GOLDSILVER: Right. So then based on what 12 you have just said, there is then competition for the 13 provision of new connection facilities, one being OHNC, 14 the other being however many number of other entities 15 who wish to provide that service. 16 MR. SCHNEIDER: No. I don't agree with that. 17 I think the decision is made to either pool or not pool 18 and then if the decision is made to not pool or 19 self-provide the facilities, that's where the 20 competition comes in for other business to come in and 21 offer to build the facility for the customer. That's 22 what I believe is the competition. 23 MR. GOLDSILVER: I won't belabour the point. 24 Suffice it to say that DCA does not agree with that 25 position. 26 Under the old Ontario Hydro regime -- let's go 27 back to that point -- a load customer, as you said, had 28 the option of self-providing new connection facilities. Les Services StenoTran Services Inc. 613-521-0703 1215 OHNC PANEL 2, cr-ex (Goldsilver) 1 Now, when you say self-provision, you mean that the 2 customer may go out and hire somebody else other than 3 OHNC to construct these facilities. 4 MR. SCHNEIDER: Other than Ontario Hydro? 5 MR. GOLDSILVER: I'm sorry. Other than 6 Ontario Hydro. I apologize. 7 MR. SCHNEIDER: Yes. 8 MR. GOLDSILVER: Okay. Actually I'm going to 9 retract that question. Due to the answer from the 10 previous question, I don't think we are going to have a 11 meeting of the minds on this question, so I will retract 12 that. 13 If you could refer to technical conference 14 transcript, page 130. 15 MR. ROGERS: Which technical conference is 16 this? This is the one preceding this particular case? 17 MR. GOLDSILVER: This is the one back in 18 November. 19 MR. ROGERS: That's this case. 20 MR. GOLDSILVER: That's this case, yes. 21 Commencing at line 28. 22 MR. SCHNEIDER: Yes. Page 130. 23 MR. GOLDSILVER: Yes. 24 MR. SCHNEIDER: Line 28? 25 MR. GOLDSILVER: Yes. I believe it commences: 26 "Mr. CURTIS: At the beginning or the 27 outset of the market, I think there is 28 going to be some concern about whether or Les Services StenoTran Services Inc. 613-521-0703 1216 OHNC PANEL 2, cr-ex (Goldsilver) 1 not there actually exists a competitive 2 marketplace to provide new connection 3 facilities." 4 Then he goes on. Is that your reading as 5 well? 6 MR. SCHNEIDER: Yes. I see that. 7 MR. GOLDSILVER: If you would now turn to 8 Exhibit B, Tab 4. 9 MR. SCHNEIDER: Is it D? 10 MR. GOLDSILVER: B. B as in Bob. 11 MR. SCHNEIDER: Okay. 12 MR. GOLDSILVER: Schedule 2, page 6. 13 MR. SCHNEIDER: Yes. 14 MR. GOLDSILVER: Under transformation 15 connection assets, under the second paragraph, in your 16 evidence you have stated that: 17 "...all directly connected customers..." 18 I assume that's what DCC stands for. 19 "...and some LDCs now provide their own 20 transformation stations." 21 Is that correct? 22 MR. SCHNEIDER: Yes, that's correct. 23 MR. GOLDSILVER: And again self-provision in 24 that they can hire somebody else to provide these 25 assets. Is that correct? 26 MR. SCHNEIDER: Yes. 27 MR. GOLDSILVER: In fact, wouldn't it suggest 28 that there is very little concern about whether a Les Services StenoTran Services Inc. 613-521-0703 1217 OHNC PANEL 2, cr-ex (Goldsilver) 1 competitive marketplace exists if all directly connected 2 customers and some LDCs are already self-providing? 3 MR. SCHNEIDER: I don't know if that would be 4 accurate. I believe it might be in the order of about 5 70 direct customers who directly provide their own 6 transformation facilities. On the MEU side, there are 7 very few, if any, who actually do that. 8 When I look at the paragraph you are 9 referencing, what I read from this paragraph is that 10 what was envisaged is a transition to a more competitive 11 marketplace for the connection facilities. 12 When you asked me earlier whether or not I 13 felt that there was competition in the marketplace 14 because some people already self-provide, I answered 15 yes. It's the degree to which competition exists in the 16 marketplace that is important here. 17 MR. GOLDSILVER: But I am referring 18 specifically to Mr. Curtis' comment that there might be 19 initial concern upon access that a competitive 20 marketplace may not exist. In fact, if you have all 21 these numbers of directly connected customers and LDCs 22 actually self-providing, that would suggest that, or 23 would it not suggest that that concern is not evident? 24 MR. CURTIS: I think just to be clear, when I 25 stated this concern about connection facilities, I'm 26 talking in the broad sense of what connection facilities 27 are. In your reference here, you are talking about just 28 the transformation component. It gets back to what Les Services StenoTran Services Inc. 613-521-0703 1218 OHNC PANEL 2, cr-ex (Goldsilver) 1 Mr. Schneider was just talking about, it's the concern 2 about the degree of competitiveness and various 3 components of the overall connection business. 4 That's the distinction I think between the 5 quote that you are referring to from the technical 6 conference and what's in our evidence under this 7 section B. 8 MR. GOLDSILVER: But the provision of 9 transformer connections is a part of new load 10 connections -- a part of load connections. 11 MR. CURTIS: This is the transformation 12 component of the connection service, the overall 13 connection service, so it's one component of overall 14 connection services. 15 As Mr. Schneider was talking about, there is 16 obviously a difference in the competitiveness in various 17 segments of the connection business. 18 MR. GOLDSILVER: Okay. Thank you. I would 19 now like to refer you to Exhibit A, Tab 2, Schedule 1, 20 at page 10, which I believe is your summary of 21 application. 22 MR. SCHNEIDER: Okay. We are there. 23 MR. GOLDSILVER: There you have stated that 24 the transition to a competitive and commercial state for 25 the provision of new load connection investments would 26 require a demonstration that a competitive contestable 27 market exists for providing a new connection. Is this 28 correct? Les Services StenoTran Services Inc. 613-521-0703 1219 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. SCHNEIDER: Yes. That's what it says. 2 MR. GOLDSILVER: In your opinion, what 3 circumstances would have to exist in the marketplace in 4 order for this demonstration of a competitive 5 contestable marketplace? 6 MR. SCHNEIDER: I guess the most important 7 thing that would have to happen is that proponents of 8 new connection customers who want new connections 9 self-provided would demonstrate this to the OEB and it 10 would be up to the Board to make the decision as to 11 whether or not a healthy competitive market exists. 12 It's a matter of demonstration. In fact, there is a 13 competitive market for this service. 14 Also, various aspects of the transmission 15 system code would have to be in place and market rules 16 to address the treatment provided. 17 MR. GOLDSILVER: Thank you. Let's suppose now 18 under your short term proposal a load customer decides 19 that it wants OHNC to provide the new connection 20 facilities. Now presumably OHNC would have to give the 21 customer -- I'm presuming and you can correct me if I'm 22 wrong, but presumably OHNC would have to give the 23 customer a quote on the job in order to determine 24 whether the cost of the project would be above or below 25 the average customer costs. 26 MR. SCHNEIDER: That's correct. The Ontario 27 Hydro Networks Company would spec the job out and get a 28 quote on it, yes. Les Services StenoTran Services Inc. 613-521-0703 1220 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. GOLDSILVER: What happens if the actual 2 cost of constructing and providing those facilities is 3 greater than the quoted cost? Who would bear the loss? 4 MR. SCHNEIDER: I'm assuming if it's embedded 5 in a connection agreement with the customer and the 6 costs came in over what was agreed upon, the pool would 7 bear the costs. 8 MR. GOLDSILVER: The pool would bear the 9 costs, as opposed to if the customer went to a 10 competitive business and they quoted a price and the 11 actual price went over, then it would be the company 12 that bears the loss? 13 MR. SCHNEIDER: I guess it depends on the 14 terms and conditions in the contract. 15 I don't know if I can answer that. 16 MR. GOLDSILVER: Wouldn't that be evidence of 17 cross-subsidization? You're asking the pool to bear the 18 loss of OHNC for a competitive business activity. 19 MR. CURTIS: I guess just to clarify that, the 20 pool may not be the ultimate entity that bears that 21 over-estimate, if you will, or overrun. That would have 22 to be brought back before the Ontario Energy Board and 23 the Board may deem that it should be the company OHNC 24 that bears that cost, but conceptually it's part of the 25 pool. 26 MR. GOLDSILVER: Okay. Then what happens if 27 not only is there a cost overrun but the cost exceeds 28 the actual price of the pool, pool cost? Then who would Les Services StenoTran Services Inc. 613-521-0703 1221 OHNC PANEL 2, cr-ex (Goldsilver) 1 make up that difference? 2 MR. SCHNEIDER: I think just to follow up on 3 Mr. Curtis' comments, that would be something that would 4 be brought to the Board to decide how to treat it I 5 would expect. 6 MR. GOLDSILVER: I'm not sure I quite 7 understand. 8 You are saying that if you quote a job and the 9 price goes over, the pool is going to pay for -- 10 conceptually the pool is going to pay for the cost 11 overrun, and then if the price also goes over the 12 average cost for similar projects in the pool then the 13 Board is going to have to determine who pays for that 14 as well? 15 MR. SCHNEIDER: I guess conceptually what we 16 are saying is that you will have some jobs that come in 17 over the cost and some that come in under the cost and 18 when you put that all together you will see how it 19 affects the average cost to the pool. 20 I'm suggesting, and I think Mr. Curtis was 21 suggesting, if there is an issue with that, if there was 22 a significant cost overrun across all of the projects 23 done in a given year, then that is something we would 24 have to take to the Board. 25 MR. GOLDSILVER: So it wouldn't be the 26 customer as you propose, necessarily in that case, 27 paying the financial contribution to keep the pool whole 28 in that sort of situation? Les Services StenoTran Services Inc. 613-521-0703 1222 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. SCHNEIDER: Yes. I think things are being 2 mixed up between capital contribution and what you are 3 suggesting as cost overruns. 4 MR. GOLDSILVER: Well, I'm asking in a certain 5 situation what happens if both are the case. 6 MR. CURTIS: I guess we wanted to try to 7 clarify what you are getting at here in terms of a cost 8 going over what would be deemed by the pool as the 9 appropriate cost. 10 I think what we have tried to explain is that 11 when the job came forward there would be an estimate 12 that OHNC, on behalf of the pool, would give the 13 customer in terms of what it would cost and whether or 14 not a capital contribution would be required in order to 15 save the pool harmless. 16 So all of that is part of the initial specing 17 of the job. 18 We thought what you were referring to is that 19 once the construction is done and it turned out that 20 there was an overrun as far as the cost of doing the job 21 the amount as to whether or not it is over the contract 22 price we had originally given the customer, whether that 23 took it above what would have been the average cost 24 within the pool, I'm not sure that that is applicable in 25 the situation. 26 Because what we are explaining is that in a 27 situation like that it would be put back into the pool 28 and it would be managed with all of the different jobs Les Services StenoTran Services Inc. 613-521-0703 1223 OHNC PANEL 2, cr-ex (Goldsilver) 1 that would happen at that time and then the approval of 2 the Ontario Energy Board would be required in order to 3 have all of those costs remain within their pool as part 4 of the rate base. That would be the process overall. 5 MR. GOLDSILVER: So then in the end the pool 6 would be responsible for those extra costs? 7 MR. CURTIS: Well, it is ultimately up to the 8 Board whether or not it stays in or not. 9 MR. GOLDSILVER: Okay. Okay. 10 MR. ROGERS: If the Board approves it it is 11 part of the rate base; if it doesn't, the shareholder 12 takes the loss I guess. 13 MR. GOLDSILVER: I have one final question. 14 In your direct this morning you stated that 15 OHNC would be considered the default supplier for the 16 provision of the new connection facilities. 17 MR. SCHNEIDER: I believe I stated that that 18 was a quote from the Stakeholder Advisory Team Report, 19 that the Stakeholder Advisory Team viewed OHNC as the 20 default supplier of connection service. 21 MR. GOLDSILVER: Do you view yourself as the 22 default supplier? 23 MR. SCHNEIDER: Yes. 24 MR. GOLDSILVER: Can you tell me where in 25 the -- this is a legal question but I'm going to ask it 26 and if someone wants to object they can object -- but 27 where in the Competition Act there is a mandate for OHNC 28 to act as default supplier for the provision of new load Les Services StenoTran Services Inc. 613-521-0703 1224 OHNC PANEL 2, cr-ex (Goldsilver) 1 connection facilities? 2 What I'm getting at is, if you look under all 3 the distribution side, the legislation sets out a 4 default supplier for standard service supply. It's a 5 competitive activity. Retailers can sell electricity, 6 but the government has mandated that there be a default 7 supplier. I'm assuming one of the reasons for that is 8 because not enough competition exists. 9 Where in the Energy Competition Act does it 10 state that OHNC should be the default supplier of new 11 load connection facilities? 12 MR. SCHNEIDER: As you said, we are not 13 lawyers and I'm not sure I can answer that question. 14 I can say that in our consultation program 15 stakeholders did emphasize that they did want the option 16 of pooling those investments to continue, in the short 17 term at least. 18 MR. GOLDSILVER: Well, going back to my -- I 19 will rephrase my original question. 20 Are you aware of any provision in the Energy 21 Competition Act that would provide for OHNC to be the 22 default supplier? 23 MR. SCHNEIDER: No, I'm not. 24 MR. GOLDSILVER: Okay. Thank you very much. 25 THE PRESIDING MEMBER: Thank you, 26 Mr. Goldsilver. 27 We will go to Mr. Mattson now. 28 MR. GOLDSILVER: I still have questions for Les Services StenoTran Services Inc. 613-521-0703 1225 OHNC PANEL 2, cr-ex (Goldsilver) 1 Collingwood Public Utilities Commission -- 2 THE PRESIDING MEMBER: All right. Oh, 3 I'm sorry. 4 MR. GOLDSILVER: -- if that's okay. Unless 5 you want to skip to somebody else and come back? 6 THE PRESIDING MEMBER: No. I thought you had 7 acted for both, I'm sorry. 8 --- Pause 9 MR. GOLDSILVER: I'm now turning to the 10 Collingwood PUC, if that's okay. 11 MR. SCHNEIDER: Okay. 12 MR. GOLDSILVER: Are you familiar with what is 13 known as a Local Integrated Resource Plan or LIRP? 14 MR. SCHNEIDER: Yes, I am. 15 MR. GOLDSILVER: If you could turn to 16 Exhibit G6.4 -- 17 MR. SCHNEIDER: Okay. 18 MR. GOLDSILVER: -- and to page 7. I believe 19 that the number for page 7 is missing, but it starts 20 with subheading No. 3, "The Integrated Planning 21 Approach". 22 MR. SCHNEIDER: Okay. 23 MR. GOLDSILVER: On page 7 -- 24 MR. ROGERS: Could you just tell us, what is 25 this document? 26 MR. GOLDSILVER: This is a document prepared 27 by two people by the name of R.F. Chow and P.S. Owens -- 28 I don't know whether they are male or female -- from Les Services StenoTran Services Inc. 613-521-0703 1226 OHNC PANEL 2, cr-ex (Goldsilver) 1 Ontario Hydro. 2 MR. ROGERS: Oh, okay. 3 MR. GOLDSILVER: It is entitled "Collingwood 4 Targeted DSM Project - Inception to Program Design" and 5 it was written on September 27, 1994. 6 MR. ROGERS: I assume the witnesses know what 7 it is, but no one else may. It might be helpful just 8 to -- 9 MR. GOLDSILVER: I apologize. 10 This report deals with the LIRP for the 11 Collingwood or Georgian Bay region. Thank you. 12 MR. PORAY: I think it's actually a paper that 13 was presented at a conference, at a CEA conference. 14 MR. GOLDSILVER: That's correct. 15 MS LEA: Just to interrupt, I'm sorry. 16 Mr. Rogers, this was given an exhibit number 17 yesterday for some reason, although it hadn't yet been 18 brought forward to the witnesses. Is there an objection 19 to it being filed as an exhibit at this time? I didn't 20 hear that from you but I wanted to be clear about that. 21 MR. ROGERS: No, that's fine. I just thought 22 it would be helpful if people knew -- 23 MR. GOLDSILVER: I apologize. 24 MR. ROGERS: That's fine. 25 MS LEA: Thank you. 26 MR. ROGERS: What page are we on and then we 27 can proceed? 28 MR. GOLDSILVER: We are back on page 7 under Les Services StenoTran Services Inc. 613-521-0703 1227 OHNC PANEL 2, cr-ex (Goldsilver) 1 subheading "The Integrated Planning Approach". 2 Under that heading Ontario Hydro has assigned 3 an LIRP as: 4 "...a planning and decision making 5 process which considers, assesses and 6 incorporates all viable and demand and 7 supply side resource options on an 8 unbiased basis to meet the electrical 9 service needs of customers in a defined 10 geographic area." 11 Would you agree with this definition? 12 MR. SCHNEIDER: Yes, I would. 13 MR. GOLDSILVER: Would you also agree that one 14 of the general purposes of an LIRP is to provide system 15 load release and to defer or avoid increased supply side 16 costs? 17 MR. SCHNEIDER: I don't think I would agree 18 with that as a general purpose. I think that could be a 19 result of an LIRP. 20 As stated in the definition, what an LIRP 21 intended to do was assess all available options, be they 22 generation options, local generation options, 23 transmission or distribution options, or in fact demand 24 side management options to best serve the local 25 electrical needs of a specific area. 26 MR. GOLDSILVER: Would you agree that it is 27 one purpose; that system load relief and deferring or 28 avoiding increased supply costs is one purpose of an Les Services StenoTran Services Inc. 613-521-0703 1228 OHNC PANEL 2, cr-ex (Goldsilver) 1 LIRP? 2 MR. SCHNEIDER: I am struggling with the word 3 "purpose". I see it as a potential result. 4 MR. GOLDSILVER: Thank you. Would you agree 5 that one possible method of deferring supply side costs 6 would be to defer the construction and upgrading of 7 major facilities in a local area, such as the 8 construction of a transformer station or the upgrading 9 of a transmission line? 10 MR. SCHNEIDER: That is potentially one, yes. 11 MR. GOLDSILVER: During cross-examination 12 yesterday by Mr. Janigan, you stated that there are a 13 dozen or so LIRPs in existence in Ontario. Is that 14 correct? 15 MR. SCHNEIDER: No. I think what I said is 16 that during the early to mid-1990s there were about a 17 dozen LIRPs that were conducted. Now, whether they 18 are -- I think you were saying are they still ongoing 19 now. I am not sure. 20 MR. GOLDSILVER: But there were -- 21 MR. SCHNEIDER: There were about a dozen local 22 integrated resource planning studies conducted in the 23 early to mid-1990s. 24 MR. GOLDSILVER: Thank you. Would you agree 25 that Ontario Hydro was responsible for proposing, 26 designing and implementing these LIRPs? 27 MR. SCHNEIDER: If what I understand you to 28 mean by that is that Ontario Hydro initiated a local Les Services StenoTran Services Inc. 613-521-0703 1229 OHNC PANEL 2, cr-ex (Goldsilver) 1 planning study with customers and utilities in a local 2 area, I would agree with that. 3 MR. GOLDSILVER: Thank you. Would you agree 4 that local and municipal electric utilities were asked 5 to participate and co-operate with such programs? 6 MR. SCHNEIDER: Yes, they were invited to 7 participate. 8 MR. GOLDSILVER: To put it another way, MEUs 9 would not have been the initial entity proposing such a 10 program to Ontario Hydro; rather, Ontario Hydro would 11 have made the initial proposal to the MEUs. 12 MR. SCHNEIDER: I am not sure what you are 13 asking. Do you mean the utilities in the area would not 14 have approached Ontario Hydro with a load constraint? 15 MR. GOLDSILVER: With a plan to defer demand 16 side system relief. 17 MR. SCHNEIDER: No. I think it is no 18 different under an LIRP than under the previous way of 19 planning. A utility and Ontario Hydro would have gotten 20 together to discuss a local constraint and would have 21 developed a plan to deal with it. It just so happens 22 that in the early 1990s local integrated resource 23 planning was the tool used to do the same thing that 24 might have been done previously under a different 25 approach. 26 But I don't think I would suggest that it was 27 always Ontario Hydro initiating the study. We would be 28 looking at it from our perspective. But if a local Les Services StenoTran Services Inc. 613-521-0703 1230 OHNC PANEL 2, cr-ex (Goldsilver) 1 utility had a local concern about electrical supply, 2 they could very well approach Ontario Hydro and a 3 similar study could be commenced. 4 MR. GOLDSILVER: I have been advised by my 5 client, Collingwood PUC, that an LIRP was designed and 6 proposed by the Systems Planning Department of Ontario 7 Hydro and approved by senior management of Ontario Hydro 8 for the Collingwood region in 1993 in order to defer 9 construction of a 230-44 kV transformer station and the 10 upgrading of a 34-kilometre stretch of a 115 kV pole 11 line to a 230 kV tower line. 12 Are you aware of the existence of this LIRP? 13 MR. SCHNEIDER: I am aware of the existence of 14 the LIRP. I am a little uncomfortable with your 15 characterization of it as purely a tool to defer this 16 investment that you described. 17 What happened, from my recollection, is that 18 there was a plan being considered in terms of what you 19 have described. But the point of the local integrated 20 resource planning process was to look at all options to 21 solve the local constraint on the system. 22 I think the plan was initiated to solve the 23 local constraint, not necessarily starting off with the 24 option. 25 MR. GOLDSILVER: But one of the results was 26 the deferral of the construction of this transformer 27 station. 28 MR. SCHNEIDER: I would say that the result of Les Services StenoTran Services Inc. 613-521-0703 1231 OHNC PANEL 2, cr-ex (Goldsilver) 1 the plan was to come up with the best approach to serve 2 the local needs. A number of options were deferred or 3 discarded, and one of them was the one that you 4 suggested. 5 MR. GOLDSILVER: Then it would be fair to say 6 that the deferral of this transformer station was one of 7 the results. 8 MR. SCHNEIDER: If that option was seriously 9 considered in the study -- and I am not so sure it 10 was -- then I would agree. 11 MR. CURTIS: I am not sure we would agree that 12 it was deferred, though. There were a number of options 13 that were put forward. A combination of options was 14 selected as a solution to that problem, and one of the 15 options that was not selected was the one that you read. 16 MR. GOLDSILVER: One of the options that was 17 not selected was the construction of this facility? 18 MR. CURTIS: It was not selected. 19 MR. SCHNEIDER: Maybe I can help a little bit. 20 The preferred plan that came out of the Collingwood 21 local integrated resource planning study was made up of 22 options that solved the local constraint at that time. 23 I think that is where Mr. Curtis is stumbling a little 24 bit over the word "deferment". There was a local 25 constraint in the area. Ontario Hydro worked with 26 affected customers and utilities in the area to come up 27 with a plan that alleviated that local constraint. 28 That is how we understand the planning process Les Services StenoTran Services Inc. 613-521-0703 1232 OHNC PANEL 2, cr-ex (Goldsilver) 1 to work, rather than a deferment. 2 MR. GOLDSILVER: If I can turn you to what 3 would be page 2 of Exhibit G6.4 -- it is the letter 4 dated June 3, 1993 written G.F. d'Entremont, who is the 5 Manager of Customer Energy Services, Georgian Bay 6 Central Region for Ontario Hydro. 7 MR. SCHNEIDER: Okay. 8 MR. GOLDSILVER: In two circumstances they 9 talk about the deferral of constructing transmission 10 facilities. 11 MR. CURTIS: I am not sure we see that in 12 their reference. You say it is on page 2 of that 13 letter? 14 MR. GOLDSILVER: Yes. It is in the third 15 paragraph -- 16 MR. CURTIS: We are only seeing two 17 paragraphs. 18 MR. ROGERS: Is it page 1 or page 2? 19 MR. GOLDSILVER: Page 2 of the fax. 20 MR. ROGERS: Page 1 of the letter, page 2 of 21 the fax. 22 MR. GOLDSILVER: Page 1 of the letter, right; 23 I apologize. There was no numbering on these documents 24 from Ontario Hydro. 25 I will read the paragraph. It says: 26 "One important element under 27 consideration for effective 28 implementation of the above strategy is a Les Services StenoTran Services Inc. 613-521-0703 1233 OHNC PANEL 2, cr-ex (Goldsilver) 1 targeted demand side management program, 2 and we have very recently been offered 3 the opportunity from Regional Supply 4 Planning Department to consider the 5 feasibility of targeted DSM as a way of 6 deferring new transmission facilities in 7 the Collingwood area." 8 And then in the next paragraph: 9 "By the end of June we hope to complete 10 our initial assessment upon which the 11 decision will be made to make a proposal 12 to Regional Supply Planning using demand 13 side management to defer the need for new 14 transmission facilities." 15 Would it not be correct in saying, then, that 16 the deferral of transmission facilities was an option 17 and was proposed by Ontario Hydro? 18 MR. SCHNEIDER: I am not so sure I can agree 19 with that. When I read the letter it sounds to me, just 20 from a read of the letter, that there was a notion that 21 demand side management could be something that could be 22 implemented in the area to solve the local constraint. 23 As I mentioned earlier, as a result of that 24 you would not have to spend money on transmissions. But 25 the purpose of the study wasn't the deferral that you 26 are talking about; that just happened as a result of 27 implementing the demand side management -- 28 MR. GOLDSILVER: What I am talking about -- Les Services StenoTran Services Inc. 613-521-0703 1234 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. ROGERS: Let him finish the answer, 2 please. 3 MR. SCHNEIDER: That was the result of 4 implementing the options that the parties involved in 5 the study chose as the preferred plan. 6 MR. GOLDSILVER: I am not asking what the 7 purpose was. I am asking what the result was. Was the 8 result the deferral of the transmission facilities? 9 MR. SCHNEIDER: If the plan had not been 10 implemented as proposed, then there may have been a need 11 to construct transmission facilities to serve the area. 12 MR. GOLDSILVER: If I could turn you back to 13 page 7 of the -- I will call it page 3 of the report. I 14 apologize for the numbering. 15 MR. SCHNEIDER: It is the page with Section 3, 16 the Integrated Planning Approach? 17 MR. GOLDSILVER: Yes. According to the first 18 two paragraphs, by 1990 Ontario Hydro recognized and 19 determined that there was a great urgency to provide new 20 capacity by the mid 1990s to meet current demand in the 21 Collingwood region; and that even with a lower growth 22 load rate there was still a need for additional supply 23 capacity by 1999. 24 Is that your reading of those first two 25 paragraphs? 26 MR. SCHNEIDER: Yes, with the qualification 27 that the need for additional supply capacity by 1999, 28 given the new information on load growth, it would Les Services StenoTran Services Inc. 613-521-0703 1235 OHNC PANEL 2, cr-ex (Goldsilver) 1 likely have been significantly lower than the investment 2 quoted in the first paragraph. 3 MR. GOLDSILVER: But you would agree that 4 there would be need for additional supply capacity by 5 1999. 6 MR. SCHNEIDER: That is what it says in the 7 second paragraph. 8 MR. GOLDSILVER: Would you therefore agree, 9 then, that if not for the LIRP, the transformer station 10 would have had to have been constructed and the cost 11 fully borne by Ontario Hydro by this time? 12 MR. SCHNEIDER: I don't think that I would 13 agree that the transformer station would have been 14 constructed because of what I just said previously. I 15 am not sure, from the reading of these two paragraphs, 16 that if the LIRP had not been implemented that that 17 option in the first paragraph, the $80 million station, 18 would have in fact have had to be built. 19 It suggests to me in the second paragraph that 20 there may be a need for additional supply capacity, but 21 not necessarily that option in the first paragraph. 22 MR. GOLDSILVER: Well, according to that 23 second paragraph, the key issue is now whether to 24 proceed with the original transmission distribution 25 plan, which my understanding is the construction of the 26 transmission facility, or look to a deferral -- not a 27 deferral but a demand side management plan in order to 28 defer that construction. Les Services StenoTran Services Inc. 613-521-0703 1236 OHNC PANEL 2, cr-ex (Goldsilver) 1 MR. SCHNEIDER: I think in the way it is 2 written -- I will just read it out: 3 "...whether it is justified to proceed 4 with the original T&D plan considering 5 the uncertain load growth, the high cost 6 of the T&D option..." 7 et cetera. 8 I think that given how it is written there was 9 some reconsideration as to whether or not that $80 10 million station should be the preferred plan, regardless 11 of whether you did the demand side management plan. 12 That is how I read the paragraph. 13 MR. GOLDSILVER: I won't belabour that point 14 either, but I will move on. 15 Can you confirm that Collingwood PUC was not 16 responsible or obligated to make any financial 17 contributions to the construction of the transformer 18 station or to the upgrade of the transmission line? 19 MR. SCHNEIDER: I don't think I can confirm 20 that. 21 MR. GOLDSILVER: Can you undertake to confirm 22 that? 23 MR. CURTIS: Again, we would have to 24 understand what the context of this is. Are you talking 25 about under the old regime, Ontario Hydro, that 26 structure? 27 MR. GOLDSILVER: Under the old regime, in 28 which this LIRP was proposed, was Collingwood required Les Services StenoTran Services Inc. 613-521-0703 1237 OHNC PANEL 2, cr-ex (Goldsilver) 1 to responsible to make any financial contributions? 2 MR. CURTIS: It wasn't typical for utilities 3 to have to make contributions to the construction of 4 facilities like that back under Ontario Hydro. 5 MR. GOLDSILVER: But can you confirm that, 6 specifically, Collingwood PUC was not required to make 7 any plans for contributions? 8 MR. SCHNEIDER: Maybe I can help a little bit. 9 I think, given the point in time in which this 10 letter was written that the transmission and 11 distribution option that was being considered was this 12 $80 million facility. 13 I would suggest that, at that point in time, 14 considerations about capital contributions and who would 15 have paid may not have been conducted because the 16 planning process had just begun in terms of looking at 17 other options that may meet the local needs. I am not 18 so sure they would have gotten that far on the option 19 prior to looking at all of the available options that 20 could be implemented in the area. 21 MR. GOLDSILVER: But in the time since, is 22 there any confirmation, is there any -- you see, my 23 problem is that, as you stated yesterday, there are no 24 agreements on LIRP? I have been advised that 25 Collingwood PUC was not responsible to make any 26 financial contributions, but without any agreements. 27 Because, as I have been advised, this was a 28 Ontario Hydro initiative, I turn to you to confirm that Les Services StenoTran Services Inc. 613-521-0703 1238 OHNC PANEL 2, cr-ex (Goldsilver) 1 Collingwood PUC was not required to make any financial 2 contributions. 3 MR. SCHNEIDER: Let me try again. 4 I think the difficulty I am having is that 5 because the LIRP was conducted, and the preferred plan 6 was selected that didn't involve that station, that 7 there was really no need to determine whether or not 8 capital contributions would have to be made for that 9 specific option because it didn't form a part of the 10 preferred plan. 11 So when you ask, "Has anything been done since 12 the plan", I am not so sure I can confirm it, but I 13 would suggest that nothing would have been done because 14 the preferred plan didn't include that option. 15 MR. GOLDSILVER: Can you then confirm that if 16 and when the transformer station is to be built, that 17 the cost for the construction of this transformer 18 station will be borne by OHNC and wrote under the 19 connection pools without the requirements of the 20 financial contribution from Collingwood PUC? 21 MR. SCHNEIDER: No, I don't think I can 22 confirm that, probably for a couple of reasons. One, I 23 mentioned earlier, that the Collingwood LIRP came up 24 with a preferred plan that was implemented and, in fact, 25 solved the local constraints in the area at the time the 26 study was conducted. 27 Secondly, going forward, as load continues to 28 grow in the area there may in fact be another constraint Les Services StenoTran Services Inc. 613-521-0703 1239 OHNC PANEL 2, cr-ex (Goldsilver) 1 at some point in time. I can't say when that might be. 2 When that local constraint on the transmission system 3 occurs, or is expected to occur in the near future, a 4 planning process will be conducted, I believe, by IMO 5 involvement given the legislation and the market rules. 6 That planning process will be implemented to address a 7 new constraint, a new load constraint to the area, 8 separate from what was addressed through the local IRP 9 back in 1993, I believe. 10 So from that perspective, this is a new load 11 constraint that, as we are proposing in the application, 12 be treated with the new set of rules we have proposed. 13 MR. GOLDSILVER: But if it is determined that 14 the transformer station has to be built in the region, 15 and you also assume that the transformer station is not 16 only going to be benefitting Collingwood PUC but other 17 MEUs in the region as well as Ontario Hydro 18 distribution, if Ontario Hydro or if OHNC decides to 19 build this transformer station on its own, will they 20 then come to Collingwood PUC and/or other MEUs to 21 require customer contributions? 22 MR. SCHNEIDER: If in the future when a 23 planning process is conducted to solve the local 24 constraints that may arise in the future in the area, 25 and if the preferred solution of that process is a 26 solution that involves investment in network assets, 27 then I believe I will say that those investments are 28 pooled. Les Services StenoTran Services Inc. 613-521-0703 1240 OHNC PANEL 2, cr-ex (Goldsilver) 1 If the solution also involves investments in 2 connection assets, then the appropriate rules or 3 application will apply. In other words, the customers 4 in the area, the affected customers, will have a choice 5 to stop providing the assets or having them pooled into 6 the regulated connection pools with potentially a 7 capital contribution to keep the pool full. But I can't 8 comment now whether or not that will be required. 9 MR. GOLDSILVER: My understanding is that your 10 proposals for the short term and long term are based on 11 when a load customer -- let's say it is a short term -- 12 a load customer approaches OHNC to ask them to build or 13 construct the new facilities. What I am talking about 14 is if OHNC decides that they have to build the facility. 15 MR. SCHNEIDER: No, I don't think it is 16 accurate in terms of what our proposal is saying. We 17 are saying that if there is investment in a new load 18 connection facility or a major rebuild of a facility the 19 rules apply. It is not a one-way interaction where the 20 customer necessarily approaches us for a new load 21 connection investment. It can work the other way as 22 well. 23 When a local area constraint needs to be 24 addressed that is where our rules will apply, from a 25 connection perspective. 26 MR. GOLDSILVER: So in this given 27 circumstance, if the transformer station were to be 28 built, and it would benefit not only Collingwood PUC but Les Services StenoTran Services Inc. 613-521-0703 1241 OHNC PANEL 2, cr-ex (Goldsilver) 1 other MEUs and Ontario Hydro distribution, then 2 presumably all those parties would have to contribute if 3 the cost went above the average cost of the pool? 4 MR. SCHNEIDER: For the connection component? 5 MR. GOLDSILVER: Yes. 6 MR. SCHNEIDER: For the connection component 7 then an assessment, as I think Mr. Curtis might have 8 described earlier in this proceeding, that a calculation 9 of a potential capital contribution would be done. If 10 the net present values of the future revenue stream from 11 that new asset does not surpass the total cost of that 12 investment over a given revenue horizon, then yes, the 13 capital contribution would be required from the affected 14 customers in the area. 15 MR. GOLDSILVER: Thank you. 16 Those are my questions. 17 THE PRESIDING MEMBER: Thank you, 18 Mr. Goldsilver. 19 We will take the morning break and we will 20 come back at 10 minutes after eleven. Thank you. 21 --- Upon recessing at 1045 22 --- Upon resuming at 1114 23 THE PRESIDING MEMBER: I see that everybody is 24 giving us more paper. Now, since there isn't room on 25 the dias, they put it on our chair so we can sit on it. 26 --- Laughter 27 THE PRESIDING MEMBER: Did you do any research 28 yet, Ms Lea, or do you need some time? I'm not Les Services StenoTran Services Inc. 613-521-0703 1242 OHNC PANEL 2 1 pressuring you. 2 MS LEA: No. I don't think it was of question 3 to research, thank you very much, Mr. Chairman. I think 4 that the sections that are in the Act that are relevant 5 are fairly self-evident. It was just a question of one 6 can always read what those sections say but that is not 7 necessarily the answer to the question, however. 8 I spoke with Mr. Goldsilver during the break 9 and I think that he was looking at section 71 of the 10 Ontario Energy Board Act and section 50(4) of the 11 Electricity Act. 12 Now, section 71, of course, has not yet been 13 proclaimed in force. However, it can be presumed to 14 manifest the intention of the government, in any event, 15 and that indicates that: 16 "...a transmitter or distributor, other 17 than a public utility commission or a 18 municipal corporation, shall not, except 19 through an affiliate or affiliates, carry 20 on any business activity other than 21 transmitting or distributing 22 electricity." 23 That suggests to my mind that a transmitter 24 can transmit and a transmitter can distribute. In the 25 act of distributing he may become a distributor, which 26 would mean he would need a licence -- well, he would 27 need a licence to distribute in any event under 28 section 57. So subject to the appropriate licences, I Les Services StenoTran Services Inc. 613-521-0703 1243 OHNC PANEL 2 1 think that a transmitter can perform those acts outside 2 of an affiliate. 3 But, as we both agreed, the more pertinent 4 section for this hearing, I think, is section 50(4) 5 which has been proclaimed in force. That is 6 section 50(4) of the Electricity Act which reads: 7 "A subsidiary of the Services 8 Corporation..." 9 And that is Ontario Hydro Services 10 Corporation: 11 "...that owns or operates a transmission 12 system or distribution system in Ontario 13 shall not engage in any activities other 14 than transmitting or distributing 15 electricity." 16 My simple reading of that suggests that OHNC 17 can transmit and distribute electricity but nothing 18 else, engage in any other activities. 19 THE PRESIDING MEMBER: Thank you that is 20 helpful. That is somewhat helpful to others as well 21 during this issue. 22 MS LEA: Of course the difficulty is to try 23 and figure out, particularly not so much for OHNC but 24 for other transmitters/distributors what constitutes 25 transmitting and distributing. Those things are not 26 necessarily as clear as they first appear, and that was 27 my hesitation this morning. 28 THE PRESIDING MEMBER: Thank you, Ms Lea. Les Services StenoTran Services Inc. 613-521-0703 1244 OHNC PANEL 2 1 Okay. We will now move on to Mr. Mattson, 2 please. Thank you. 3 MR. MATTSON: Thank you, Mr. Chairman. 4 FURTHER CROSS-EXAMINATION 5 MR. MATTSON: Gentlemen, just briefly. 6 I know through this process we have spent a 7 great deal of time dealing with some of the individual 8 stakeholders' concerns with respect to this treatment of 9 new investments, but to what extent has OHSC spent time 10 defining and drafting standards of service with respect 11 to treatment of new load connection investment? 12 MR. SCHNEIDER: By "standards of service" you 13 mean -- 14 MR. MATTSON: When they would be replaced 15 based on issues of reliability or safety or age. 16 MR. SCHNEIDER: Yes. The people working on 17 the transmission system code of which we are one of the 18 members, probably a few of us from OHNC, are working on 19 those issues looking at the technical considerations, 20 the investment rules, the contractual arrangements that 21 may exist between customers and transmission services 22 providers. 23 MR. MATTSON: Maybe my understanding is wrong, 24 then. I just wanted to bring it up in the context of 25 this hearing because I understand there really isn't an 26 implementation or timing schedule for that at the 27 present time and in fact it really hasn't been discussed 28 to any great extent at this point anyways, and there is Les Services StenoTran Services Inc. 613-521-0703 1245 OHNC PANEL 2, cr-ex (Mattson) 1 some indication that it may be more properly dealt with 2 in this forum. Can you -- 3 MR. SCHNEIDER: You are talking about the 4 requirements for connection? 5 MR. MATTSON: No, the standards of service and 6 at what point things would be replaced and when you 7 would have to put a new -- 8 MR. SCHNEIDER: Yes. 9 MR. MATTSON: Let's say a customer feels that 10 their line connection isn't reliable, as reliable as it 11 should be, and they wish to see that line be replaced -- 12 MR. SCHNEIDER: I think you are getting into 13 service quality and when things should be reinvested. 14 MR. MATTSON: Yes. 15 MR. SCHNEIDER: I believe that is true that 16 the transmission system code work isn't looking 17 specifically at that. They are looking at the technical 18 considerations and the investment considerations and 19 guidelines that one would consider when connecting new 20 customers. 21 MR. MATTSON: So where, then, does it leave us 22 with that issue in terms of your company setting 23 standards upon which new load connection investment 24 would abide by? 25 MR. SCHNEIDER: I think we may have answered 26 in at least one interrogatory that there aren't set 27 rules in place but that end-of-life considerations would 28 be dealt with on a case-by-case basis with customers. Les Services StenoTran Services Inc. 613-521-0703 1246 OHNC PANEL 2, cr-ex (Mattson) 1 MR. PORAY: Can we just ask for clarification? 2 Are you talking about new customers connecting to the 3 transmission system? 4 MR. MATTSON: I was thinking more in terms of, 5 and I may be off, new load connection investments which 6 may mean that you have already had a line there but it 7 needs to be replaced or upgraded. 8 MR. SCHNEIDER: I was interpreting your 9 question as: If something is reaching the end of its 10 life -- 11 MR. MATTSON: Right. 12 MR. SCHNEIDER: -- what does "end-of-life" 13 mean and when does that occur? 14 MR. MATTSON: Yes. And who defines that and 15 is that regulated by the Board or do you have standards 16 which you use? That is really what I'm -- 17 MR. SCHNEIDER: Yes. Their planning criteria 18 and standards of use was in the business of operating a 19 system. But, again, I think those things would be 20 negotiated on a case-by-case basis because it could be 21 that customers have different needs for the service than 22 what those planning criteria may describe. 23 MR. MATTSON: So you, then, as the regulated 24 utility here -- that case-by-case basis, are you just 25 going to do it on -- you see this as something 26 inherently within your wisdom to decide? There is 27 nothing that sort of -- 28 THE PRESIDING MEMBER: Will you put the Les Services StenoTran Services Inc. 613-521-0703 1247 OHNC PANEL 2, cr-ex (Mattson) 1 microphone closer, Mr. Mattson. I'm having trouble 2 picking you up. 3 MR. MATTSON: I'm sorry, Dr. Higgin. 4 That is something that you are -- at this 5 point anyways in the process, you are just going to 6 determine that on a case-by-case basis based upon your 7 own feel for the situation? 8 MR. SCHNEIDER: I wouldn't characterize it as 9 based on our feel for the situation. There are 10 established criteria for reliability and supply and we 11 would be applying those. As well, we would be looking 12 toward the information coming from the system code, if 13 that could be of any help to us as well in that area. 14 MR. MATTSON: That criteria is the criteria 15 you have applied in the past, the criteria that you 16 would use in order to assess these customers on a 17 case-by-case basis? 18 MR. PORAY: I think, in all fairness, the 19 technical requirements for either connecting to the 20 transmission system or for upgrading existing load and 21 existing connections would be embodied in the 22 transmission system code. That is one of the reasons 23 why you have a transmission system code so that it is 24 transparent to all potential customers what are the 25 requirements. 26 MR. MATTSON: Right. 27 MR. PORAY: The other requirement will be that 28 they will have to abide by the market rules and they Les Services StenoTran Services Inc. 613-521-0703 1248 OHNC PANEL 2, cr-ex (Mattson) 1 will have to provide certain information to the IMO in 2 terms of meeting requirements for connections. 3 So there are a number of areas, but basically 4 they reflect the reliability requirements for connecting 5 to the system, and we and our customers would be 6 following those requirements. 7 MR. MATTSON: Finally, do you have any 8 comment, then, on the role of the Board in its oversight 9 capacity over those requirements? 10 MR. SCHNEIDER: Yes. I think I had stated in 11 my direct that the Board would also be considering the 12 transmission system code once developed and, as 13 Mr. Poray outlined, it would contain a lot of the 14 considerations you are speaking about. 15 MR. MATTSON: All right. 16 So that transmission code, the timing of a 17 report from that body at least, is sometime off in 18 the -- 19 MR. CURTIS: The not-too-distant future. 20 MR. SCHNEIDER: Yes. It would have to be in 21 place obviously before open access. 22 MR. MATTSON: Thank you. Those are my 23 questions. 24 Thank you. 25 THE PRESIDING MEMBER: Thank you, Mr. Mattson. 26 Just as a bit of a follow up on that. What do 27 you see as the respective roles of the IMO with respect 28 to system planning, upgrades and so on versus you as the Les Services StenoTran Services Inc. 613-521-0703 1249 OHNC PANEL 2 1 transmission owner and so on? 2 MR. SCHNEIDER: I see the IMO's role 3 specifically or primarily in the planning for the 4 IMO-administered grid, the high-voltage system. 5 THE PRESIDING MEMBER: So you see that split 6 mainly? 7 MR. SCHNEIDER: Yes, and we -- 8 THE PRESIDING MEMBER: Your focus is 9 connection? 10 MR. SCHNEIDER: Yes. I would say our focus is 11 connection, but we would still be working with the IMO 12 on network issues as well, although the IMO would be 13 responsible -- 14 THE PRESIDING MEMBER: Yes, because we have to 15 look at the impact of connection and -- 16 MR. PORAY: If I may just clarify? 17 THE PRESIDING MEMBER: Yes, please. 18 MR. PORAY: I'm sorry. 19 There is a section in the market rules, I 20 believe it is Chapter 4, which is called the grid 21 connection code, and there are certain obligations 22 placed upon market participants who wish to connect to 23 the system, be they a generator or a load customer or a 24 local distribution company, in terms of ensuring that 25 there is sufficient information which the IMO will have 26 to assess the impact of a new connection or an upgrade 27 to an existing connection from a system liability 28 perspective. Les Services StenoTran Services Inc. 613-521-0703 1250 OHNC PANEL 2 1 Once they have satisfied themselves, then 2 there is also the responsibility upon the transmission 3 owners to work with the customer through the connection 4 agreements and the transmission system code to ensure 5 that whatever is done is done within that. That gives 6 the assurance to the IMO that the standards are met. 7 THE PRESIDING MEMBER: Thank you. Could I 8 please move to Mr. Vogel on this issue, please. 9 Thank you. 10 MR. VOGEL: Thank you, Mr. Chair. 11 CROSS-EXAMINATION 12 MR. VOGEL: Good morning, panel. 13 Mr. Schneider, my name is Paul Vogel. I 14 represent the First Nation interest on this application. 15 As I understand OHNC's proposal with respect to the line 16 connection pool and with respect to charging customers 17 for connection, my understanding is that that proposal 18 would apply to all new connections of load customers and 19 generators, except where the customer chooses to pay for 20 those facilities themselves. Is that correct? 21 MR. SCHNEIDER: Specifically the rules for 22 treatment of new load connection that has been applied 23 to load customers, the rules are slightly different for 24 generators. For generators, our proposal is that any 25 generator, existing or new, requiring new connection 26 facilities should pay for them. There is no pooling 27 option available there. 28 MR. VOGEL: All right. To the extent then Les Services StenoTran Services Inc. 613-521-0703 1251 OHNC PANEL 2, cr-ex (Vogel) 1 that a load customer does not pay for the new connection 2 facility, the facility would be added to the pool and 3 the customer would be required to make a contribution to 4 the cost of that facility to the extent that the cost 5 exceeds the pool, average cost. Is that a correct 6 understanding? 7 MR. SCHNEIDER: Over a given revenue horizon 8 if the net present value of the expected revenue stream 9 doesn't exceed the total cost, then a capital 10 contribution would be required. 11 MR. VOGEL: And that capital contribution is 12 calculated relative to the average pool costs. Is that 13 correct? 14 MR. SCHNEIDER: Correct. 15 MR. VOGEL: All right. So if we take the 16 example of a First Nation who proposes to establish an 17 LDC, that First Nation then would be charged for the 18 full costs of the connection facility to the extent that 19 that cost exceeds the pool average costs. Is that 20 correct? 21 MR. SCHNEIDER: I wouldn't say the full cost. 22 If the new LDC requires a connection to the transmission 23 grid, they would. We would look at the total cost of 24 that investment in the connection facilities compared to 25 the expected revenue stream over a given revenue 26 horizon. From what I know of the work on the 27 transmission system code, for a local distribution 28 company, it might be a longer time horizon that Les Services StenoTran Services Inc. 613-521-0703 1252 OHNC PANEL 2, cr-ex (Vogel) 1 consideration would be made. It's more of a stable 2 load. 3 Over that given revenue horizon, the net 4 present value of the expected revenue stream would be 5 calculated and compared to the total cost of the 6 connection facilities. If the connection cost was 7 higher than that expected revenue stream, then that 8 would make up the capital contribution, the difference 9 between the two. 10 MR. VOGEL: Okay. So to the extent that the 11 MPV calculation gives you a cost in excess of the 12 revenues over the revenue horizon, that will form the 13 basis of the capital contribution required from this 14 First Nation proposing to connect. Is that correct? 15 MR. SCHNEIDER: Yes. I think maybe we can put 16 some numbers on this to make it a little clearer for 17 people in the room. 18 If the cost is $10 million and the expected 19 revenue stream over the given revenue horizon is $9 20 million, then the capital contribution is $1 million. 21 MR. VOGEL: Turning to your prefiled evidence, 22 this is Exhibit D, Tab 7, Schedule 1, on page 4. 23 THE PRESIDING MEMBER: Mr. Vogel, could I 24 interrupt for a second if you don't mind sir. I just 25 want to follow this up to make sure that we all 26 understand it. 27 You described an example of $10 million cost 28 and the stream of revenues from net present value is $9 Les Services StenoTran Services Inc. 613-521-0703 1253 OHNC PANEL 2, cr-ex (Vogel) 1 million. Therefore, there is a deficiency is one and 2 that would be the proposed contribution in aid. 3 Can you make the connection now with the 4 average cost of the pool? That's where I'm not clear. 5 MR. SCHNEIDER: If the net present value is 6 equal to the total cost, then in effect the pool cost 7 stays on average the same. If the net present value of 8 the revenue is lower than the total cost, then in 9 effect, the average cost of the pool would rise if you 10 did the calculation. 11 THE PRESIDING MEMBER: All right. It is based 12 on the given cost of the pool at any point in time. 13 MR. SCHNEIDER: Yes. 14 THE PRESIDING MEMBER: All right. All you are 15 saying is that there should be no cost pressure to the 16 pool. 17 MR. SCHNEIDER: Right. The pool should be 18 held harmless. The pool cost should not go up as a 19 result of the investment. 20 THE PRESIDING MEMBER: All right. Thank you. 21 I'm sorry, just to complete the circle then. The 22 discount value that you would use, is that any 23 relationship to the recovery of costs in the pool 24 itself? 25 MR. SCHNEIDER: I'm sorry. I didn't hear the 26 first part. 27 THE PRESIDING MEMBER: The discount factor 28 that you were using in terms of net present value, does Les Services StenoTran Services Inc. 613-521-0703 1254 OHNC PANEL 2, cr-ex (Vogel) 1 that bear any relationship to the allowed rate of return 2 for the utility? 3 MR. SCHNEIDER: I believe it does. Yes. 4 THE PRESIDING MEMBER: And that's the 5 connection to the cost of the pool then. 6 MR. SCHNEIDER: Yes. 7 THE PRESIDING MEMBER: Because the pool itself 8 has assets. It's a rate base item. Okay. 9 Thank you. Mr. Vogel. 10 MR. VOGEL: Taking you to that reference then, 11 Exhibit D, Tab 7, Schedule 1, page 4, the last paragraph 12 on the page dealing with the historical treatment of new 13 load connection investment. My understanding is that 14 historically the full cost of the facilities, of these 15 connection facilities, were shared by all system 16 customers. Is that correct? To the extent that they 17 weren't paid for by customers themselves. 18 MR. SCHNEIDER: Again, after doing the 19 calculation, if the expected revenue was greater than 20 the total cost of the facility, then you are right, the 21 investment would be pooled. Again, if -- 22 MR. VOGEL: I understand. 23 MR. SCHNEIDER: Okay. 24 MR. VOGEL: I understand. So historically, if 25 you were dealing with an investment where the cost 26 exceeded the revenue stream on a historic basis, that 27 was a cost which would have been shared by all system 28 customers. Les Services StenoTran Services Inc. 613-521-0703 1255 OHNC PANEL 2, cr-ex (Vogel) 1 MR. SCHNEIDER: I'm not sure I understand the 2 question. 3 MR. VOGEL: In terms of the treatment of these 4 costs historically, that is the cost of connection 5 facilities, am I correct that the costs of those 6 connection facilities to the extent that the costs 7 exceeded the revenue stream, that those costs were borne 8 by the system as a whole? 9 MR. SCHNEIDER: No. A capital contribution 10 would have been requested. 11 MR. VOGEL: Is that the same capital 12 contribution as is presently required? 13 MR. SCHNEIDER: I believe so, yes. It's the 14 status quo. 15 MR. VOGEL: Looking at this from a cost 16 causality perspective and the user pay principle, am I 17 correct that the distance from the grid and the length 18 of the proposed connection is a primary determinant of 19 the costs of the connection? 20 MR. SCHNEIDER: I would say that if you assume 21 that if load -- load in two different situations, one 22 shorter from the grid, one more distant from the grid -- 23 if the load characteristics are fairly similar then, 24 yes, the costs would probably be higher for the load 25 located further away from the grid. 26 MR. CURTIS: And it would also have to depend 27 on the geographical considerations in terms of affecting 28 the connection. Les Services StenoTran Services Inc. 613-521-0703 1256 OHNC PANEL 2, cr-ex (Vogel) 1 MR. VOGEL: All right. I think, Mr. Curtis, 2 you have indicated to me earlier in reference to an IR 3 response that the fact that a customer has no control 4 over his distance from the grid is not a factor which 5 has been taken into account by OHNC in putting forth 6 this line connection pool proposal. Is that correct? 7 MR. CURTIS: No, it hasn't. It isn't criteria 8 in terms of the overall investment that we are talking 9 about. 10 MR. VOGEL: If you refer to Exhibit D, Tab 7, 11 Schedule 1, page 5, the second last paragraph on that 12 page there is a discussion about OHNC's anticipation 13 about how customers will address the pool. It 14 appears -- am I correct that OHNC's anticipation is that 15 customers with shorter, less expensive connections are 16 going to choose to pay for those connections themselves 17 and not out of the pool? 18 MR. SCHNEIDER: I guess I would say that 19 customers who have new connections at a lower cost than 20 the average cost for the pool have a higher probability 21 of doing it themselves, self-providing. 22 MR. VOGEL: So they would opt out of the pool. 23 Their facilities wouldn't be part of the pool. That 24 would then leave the higher cost, that is the longer 25 distance higher cost facilities as part of the pool. Is 26 that correct? 27 MR. CURTIS: You made the conclusion from 28 Mr. Schneider's response that they would opt out of the Les Services StenoTran Services Inc. 613-521-0703 1257 OHNC PANEL 2, cr-ex (Vogel) 1 pool. That's not what was -- not our response. 2 There are many reasons that a customer would 3 have in mind in terms of whether or not they wanted to 4 be a pool participant and the cost may be one factor. 5 So the customers may indeed choose to stay in the pool 6 even if the costs of providing it within the pool could 7 be done cheaper outside of the pool. 8 MR. VOGEL: But if customers are driven by 9 cost considerations, and that is a primary -- cost is a 10 primary consideration for a customer. Is that correct? 11 MR. CURTIS: I think we would characterize it 12 as one, not necessarily the primary. 13 MR. VOGEL: It's an important consideration? 14 MR. CURTIS: It's one of the considerations, 15 yes. 16 MR. VOGEL: All right. To the extent that 17 customers base their decision upon cost, I think what 18 you appear to be saying in this prefiled evidence is 19 that those customers with shorter, less expensive 20 connections, that is below average pool cost, those are 21 the customers who may and are anticipated to elect to 22 pay for their facilities for cost-savings reasons. 23 MR. CURTIS: They may do that for the reason 24 that you cited, yes. 25 MR. VOGEL: In the event that that anticipated 26 event happens, am I correct, then, that what will be 27 left in the pool is the longer, more expensive 28 connection facilities? Les Services StenoTran Services Inc. 613-521-0703 1258 OHNC PANEL 2, cr-ex (Vogel) 1 MR. SCHNEIDER: If it's a new customer coming 2 on who decides to self-provide because it's cheaper to 3 him, I don't believe the pool is impacted at all. 4 MR. VOGEL: Let me put this to you, 5 Mr. Schneider: If, as anticipated by OHNC, the 6 customers with the shorter, less expensive connections 7 choose to opt out of the pool or not be part of the 8 pool, that will then leave in the pool those customers 9 with longer, more expensive connections, won't it? 10 MR. SCHNEIDER: So what you are suggesting is 11 that for existing customers with existing connections, 12 when those existing connections come up to an 13 end-of-life decision and a replacement decision there is 14 a higher probability, because they are lower than the 15 average cost of the pool, that they may choose to 16 self-provide those assets. 17 MR. VOGEL: Yes, either an upgrade or a new 18 facility. 19 What I'm suggesting to you is that the result 20 of those new or upgraded facilities not being included 21 in the pool is that therefore what will be included in 22 the pool is the longer, more expensive connection. 23 MR. SCHNEIDER: For an existing connection I 24 would agree that if a customer who has a relatively 25 inexpensive connection that reaches an end-of-life 26 decision, if that customer opts out of the pool then I 27 would agree with you. But if it is a new customer 28 coming along who wants to connect to the system, if he Les Services StenoTran Services Inc. 613-521-0703 1259 OHNC PANEL 2, cr-ex (Vogel) 1 chooses to self-provide his assets, I would suggest that 2 the pool is not affected in that way. 3 MR. VOGEL: All right. So to the extent, 4 then, that the pool is affected by upgrading customers, 5 as it were, removing their assets from the pool and 6 leaving the higher cost connection facilities in the 7 pool, it then leaves the pool participants in the 8 position where they are paying not only the increased 9 cost over pool average for their own facilities, but 10 also a higher cost for transmission service as a result 11 of their membership in the pool? 12 MR. CURTIS: No, that's not the case. The 13 reason it's not the case is that again customers are 14 making contribution to save the pool harmless. So the 15 pool is harmless throughout this process. 16 MR. VOGEL: The pool is harmless, but what 17 Mr. Schneider has indicated to me is that when you 18 remove those shorter, less expensive connections what 19 you are going to end up with is a more expensive pool. 20 MR. CURTIS: No. The customers that remain 21 within the pool -- 22 MR. VOGEL: Yes, will have to -- 23 MR. CURTIS: -- that pool -- no. 24 MR. VOGEL: Will have the longer, more 25 expensive connection. 26 MR. CURTIS: That pool is still held harmless 27 by those customers leaving because there is no impact on 28 the pool. Les Services StenoTran Services Inc. 613-521-0703 1260 OHNC PANEL 2, cr-ex (Vogel) 1 MR. VOGEL: It's held harmless at a higher 2 level, though, because the facilities -- the average 3 cost of facilities in the pool is higher. 4 MR. SCHNEIDER: Just a minute, please. 5 --- Pause 6 MR. SCHNEIDER: If a customer who is reaching 7 an end of life decision on an OHNC-owned asset chooses 8 to self-provide the asset, we would expect that the 9 negotiation on the customer leaving the pool and the 10 purchase of that asset would involve keeping the pool 11 harmless. 12 MR. VOGEL: Let me put it to you this way, 13 then, Mr. Schneider: As I understood your evidence 14 in-chief this morning, OHNC's objective is to eventually 15 move to customers paying for the whole cost of 16 connection facilities. Is that right? 17 MR. SCHNEIDER: Directionally, yes. 18 MR. VOGEL: Okay. As more customers pay for 19 the costs of facilities -- and you have told me that 20 your anticipation is that is likely to be the customers 21 with the shorter, less expensive connections -- what you 22 are going to have in the pool is the customers with the 23 longer, more expensive connections and the average pool 24 cost is going to be increased. 25 MR. SCHNEIDER: I think Mr. Curtis said 26 earlier, we are not sure if that is actually going to be 27 the result, that cost is one consideration. 28 MR. VOGEL: All right. Fair enough. Les Services StenoTran Services Inc. 613-521-0703 1261 OHNC PANEL 2, cr-ex (Vogel) 1 But to the extent that the customers are 2 driven by costs to make their decisions on that basis, 3 that is the result. You are going to have a higher 4 average cost for the pool, aren't you? 5 MR. PORAY: Well, I think the issue here is 6 how quickly we move towards that cost causality and 7 specificity and in that decision you have to factor the 8 issue of maintaining the other customers harmless if 9 there is any decision by other customers to leave 10 that pool. 11 MR. ROGERS: Can I interrupt, Mr. Vogel? 12 Maybe I can help. I understand the point you are trying 13 to make. 14 MR. VOGEL: Yes. 15 MR. ROGERS: Gentlemen, if a customer opts to 16 leave the pool, let's say he has a shorter connection 17 and the cost is solely distance related in his case and 18 hence his cost of providing his own connection facility, 19 let's say on replacement, is less than the average in 20 the system, right, and because of that he decides to 21 leave the system, is it not your proposal that before he 22 does so he will have to buy certain assets from the 23 company and you will negotiate with him on a basis that 24 ensures that he contributes enough in purchasing those 25 assets to keep the remaining poolholders whole? 26 MR. SCHNEIDER: Yes, that's the position. 27 MR. VOGEL: Will the average cost to the pool 28 remain stable over time? Les Services StenoTran Services Inc. 613-521-0703 1262 OHNC PANEL 2, cr-ex (Vogel) 1 MR. SCHNEIDER: Well, the principle of keeping 2 the pool harmless is intended to do just that. 3 MR. VOGEL: So what you are suggesting to me 4 then, as I understand it, Mr. Schneider, is that the 5 fact that what will be left in the pool is the longer, 6 more expensive assets, you are suggesting to me that 7 that will not over time result in an increase from the 8 commencement of the average pool cost. Is that correct? 9 MR. SCHNEIDER: I am just stumbling a little 10 bit. You are stating this as if it is a fact that this 11 is going to happen, and we are suggesting that there is 12 a probability that some customers may choose to leave 13 the pool. 14 MR. VOGEL: Yes. 15 MR. SCHNEIDER: I am not accepting that point 16 as a fact. That is what I am having trouble 17 understanding. 18 MR. VOGEL: Let me put this to you, then, Mr. 19 Schneider. If you make the assumption, as projected in 20 OHNC's evidence, that it is those customers with the 21 shorter, less expensive connections who choose not to 22 participate in the pool, over time, as you have new 23 facilities, it will be the longer, more expensive new 24 facilities which come into the pool. 25 My question is: Can you, today, commit to us 26 that the average cost to the pool as a result of that 27 dynamic is not going to increase over time? 28 MR. SCHNEIDER: No, I don't think we can -- I Les Services StenoTran Services Inc. 613-521-0703 1263 OHNC PANEL 2, cr-ex (Vogel) 1 think, again, our principle is to keep the pool 2 harmless. There will be a lot of things going on over 3 the next little while in terms of new connections: 4 people coming in to choose the pool, regardless of 5 whether the cost is above or below the average pool 6 cost, those you are suggesting who are currently in the 7 pool choosing to leave the pool, as well as coming up 8 with a transition to a longer term perspective where it 9 is more along the lines of user pay that we are 10 suggesting in our longer term proposal. 11 All of those things are going on. Our 12 intention is to keep the pool harmless throughout that 13 period. But I can't make the commitment you are asking 14 for is I guess what I am saying. 15 MR. VOGEL: I suggest to you, Mr. Schneider, 16 that that is at least in part because of the dynamic 17 follows which you have just outlined -- that is, 18 shorter, less expensive connections going out and 19 longer, more expensive connections coming in -- then 20 over time the average cost to the pool has to increase. 21 MR. SCHNEIDER: I am sorry if I left you with 22 the impression that all the short connections will go 23 out and all the long ones will come in. I am not sure 24 that is what I said. I think there is a probability 25 that those with short connections may consider leaving 26 the pool, but there are other aspects of the pool, I 27 think. 28 MR. VOGEL: But that is the dynamic that I am Les Services StenoTran Services Inc. 613-521-0703 1264 OHNC PANEL 2, cr-ex (Vogel) 1 focusing on. To the extent that that happens -- that 2 is, those with shorter connections, less expensive 3 connections are out, and those with longer, more 4 expensive connections are in -- you would agree with me 5 that that dynamic, over time, will contribute at least 6 to an increase in the average cost to the pool. 7 MR. SCHNEIDER: If all the short connectors 8 leave and all the long connectors remain, and we don't 9 do anything to keep the pool harmless, then I think what 10 you are saying in your example is correct. 11 MR. VOGEL: All right. 12 MR. SCHNEIDER: But I don't agree with the 13 underlying assumptions that underlie your question. 14 THE PRESIDING MEMBER: Mr. Vogel, sorry to 15 interrupt again. Is your question that the cost would 16 increase compared to what would have been the case if 17 shorter distance customers remain in the pool? Is that 18 what your question is? 19 MR. VOGEL: That is correct. 20 THE PRESIDING MEMBER: I don't think that is 21 how they have received the question. They have received 22 the question as: What would happen to the absolute 23 price, if you like, in the pool? And because customers 24 are asked to contribute, then that absolute price 25 remains constant or remains the same. 26 I believe your question is that by having the 27 short distance customers not participate in the pool, 28 then the pool itself does not benefit from those lower Les Services StenoTran Services Inc. 613-521-0703 1265 OHNC PANEL 2, cr-ex (Vogel) 1 cost assets. I believe that is what your question is, 2 is it? 3 MR. VOGEL: That is correct. 4 THE PRESIDING MEMBER: I don't think that is 5 how they received the question. Could you help me? 6 MR. CURTIS: Again, there is this 7 consideration. We have a pool that exists right now 8 today with customers, and the customers have various 9 lengths of line, various facilities. Overall, these 10 customers have contributed to the pool. 11 If we are talking about less expensive 12 components of that pool leaving, then there have to be 13 rules for them to leave. What we are stating as our 14 position is that their leaving the pool would still have 15 to leave the pool harmless. 16 THE PRESIDING MEMBER: Right, Mr. Curtis. 17 Let's talk about a new facility. Let's stick with a new 18 facility and then we can maybe expand to the existing. 19 If the pool grows by the new facilities, those 20 facilities will be because of the longer distance ones. 21 But the price of the pool remains constant because of 22 the contribution in aid of construction. Correct? 23 MR. CURTIS: Yes. 24 THE PRESIDING MEMBER: And I believe 25 Mr. Vogel's question is that if the shorter distance 26 facilities never make it to the pool, because it is not 27 economic to do so, I guess there is a forgone benefit 28 here to the pool; and that is that the pool does not Les Services StenoTran Services Inc. 613-521-0703 1266 OHNC PANEL 2, cr-ex (Vogel) 1 have the benefit of the lower cost facilities entering 2 that pool, thereby reducing the price. 3 MR. PORAY: Am I correct in assuming that you 4 are saying that the lower cost facilities would leave 5 the pool; that they would make a choice to leave the 6 pool? Not new facilities; this is existing facilities. 7 THE PRESIDING MEMBER: No. I believe that the 8 assumption here is that the lower cost facilities are 9 forced to leave the pool because they can do it cheaper 10 themselves. 11 MR. VOGEL: Or not enter the pool in the first 12 place, if we are dealing with new facilities. 13 THE PRESIDING MEMBER: Exactly. 14 MR. SCHNEIDER: Maybe I could help with your 15 example. If you are talking about new, I am suggesting 16 that that is no different, going forward, than it has in 17 the past. Customers have always had the choice to opt 18 out of the pool. And if, given the situation that Mr. 19 Vogel is describing, someone opts out, so be it. 20 That is where I was having trouble 21 understanding why -- 22 THE PRESIDING MEMBER: I understand. By 23 having the option of opting out, it means that the pool 24 itself will never be faced with lower costs. 25 MR. CURTIS: No. I think what we are trying 26 to bring out here is that there is no difference from 27 what it has always been, in terms of new investment. 28 Some customers have decided to become pool participants Les Services StenoTran Services Inc. 613-521-0703 1267 OHNC PANEL 2, cr-ex (Vogel) 1 even though their costs would seem to indicate that they 2 could do it more economically by staying out of the 3 pool. This has happened historically. 4 The reason why this has happened, in our view, 5 is that owning and operating transmission facilities is 6 a complicated technical business. It has many 7 requirements that are associated with it. So even 8 though on a pure comparison basis the customer may have 9 been better off not joining the pool, they have opted to 10 join the pool because they don't want to be bothered 11 with all these other aspects of the transmission 12 business. 13 So the pool has grown historically by having 14 participants enter into the pool. Again, they had the 15 choice all along whether they wanted to join the pool or 16 not, but joining the pool for other reasons. 17 Our expectation, under the proposal that we 18 have put before the Board, is that this would continue 19 to happen. 20 THE PRESIDING MEMBER: I appreciate those 21 answers. I guess I was trying to put the questions of 22 Mr. Vogel in context. Maybe I am reading his questions 23 wrongly, but I believe what he is going after is if the 24 lower cost additions to the pool do not have the option 25 of opting out, then the pool would benefit on average. 26 I believe that is what your question is. 27 MR. VOGEL: That's right. And historically 28 that would have been the case. Those lower cost Les Services StenoTran Services Inc. 613-521-0703 1268 OHNC PANEL 2, cr-ex (Vogel) 1 facilities would have been available to spread the costs 2 as against the higher cost facilities. 3 MR. CURTIS: But they could have opted out as 4 well. 5 MR. ROGERS: I know the answer is very 6 frustrating. That is the first time in this whole case 7 that I think I know the answer. 8 THE PRESIDING MEMBER: In any event, continue. 9 MR. VOGEL: Thank you. 10 Mr. Curtis, I guess the problem I have with 11 that historical analogy and explanation that you have 12 provided is that the connection pool, particularly if it 13 consists largely of the longer, more expensive 14 connections at this point, is a much smaller pool to 15 share the spreading of costs than the historical 16 spreading of costs. 17 Isn't that correct -- historically with the 18 whole system? 19 MR. CURTIS: I think the problem that we are 20 having is that you have gone to a conclusion that we are 21 not accepting; that the pool is going to end up with 22 nothing but long connections in it, as far as a 23 connection pool is concerned. 24 MR. ROGERS: I object. Let me just make sure 25 I do understand something. 26 Gentlemen, could you help us here. 27 MS LEA: Put the microphone on, please. 28 MR. ROGERS: Thank you. Les Services StenoTran Services Inc. 613-521-0703 1269 OHNC PANEL 2, cr-ex (Vogel) 1 Is your proposal with respect to the option 2 the customers have different from past practice? 3 MR. CURTIS: No, it is not. 4 MR. ROGERS: I think that is the 5 misunderstanding that Mr. Vogel maybe has. 6 MR. VOGEL: I don't think I have that as a 7 misunderstanding, but I will say I understood what you 8 said about the historical treatment of new load 9 connection investment. 10 But am I not correct, Mr. Curtis, to the 11 extent that this pool now exists or now consists of 12 longer, more expensive connection facilities, and those 13 with less expensive, shorter facilities are not to be in 14 the pool, as a smaller, higher cost pool to share the 15 cost of facilities, relative to what has occurred 16 historically. Isn't that correct? 17 MR. CURTIS: You started off by saying this 18 pool now contains longer connection facilities and this 19 pool does not now contain longer connection facilities. 20 MR. VOGEL: Looking at your prefiled evidence, 21 Mr. Curtis -- 22 MR. CURTIS: Yes. 23 MR. VOGEL: -- okay. On page 5, OHNC itself 24 has identified, in the paragraph that I have referred 25 you to, that it is those customers with the shorter, 26 less expensive connections who are most likely not to 27 participate in the pool. Isn't that correct? 28 MR. CURTIS: Well, we have identified it as Les Services StenoTran Services Inc. 613-521-0703 1270 OHNC PANEL 2, cr-ex (Vogel) 1 probably. There is a probability associated with 2 whether or not -- 3 MR. VOGEL: That is fair enough and, for the 4 other reasons that you have indicated, that may not 5 occur in all cases but at least that is a dynamic going 6 into this new system, this new pool, that you expect? 7 You expect that dynamic may well result in people with 8 shorter, less expensive connections opting out. 9 MR. CURTIS: However, that dynamic has existed 10 all along and customers always had that option. 11 MR. VOGEL: They did, okay. 12 But if the result of that then is that those 13 with longer, more expensive connections are left in the 14 pool, a) the average cost of the pool will go up, or b) 15 the number of participants in the pool will be less to 16 share the cost of those investments. Isn't that 17 correct? 18 MR. CURTIS: Well, the average cost of the 19 pool would not go up because of what we have defined 20 here in terms of investments would be made within the 21 pool to save the pool harmless. 22 MR. VOGEL: But you can't commit, for the 23 reasons that Mr. Schneider has indicated, that the 24 average cost of the pool is going to remain stable over 25 time? 26 MR. CURTIS: Well, there could be many other 27 factors that come into play that I think Mr. Schneider 28 listed. Les Services StenoTran Services Inc. 613-521-0703 1271 OHNC PANEL 2, cr-ex (Vogel) 1 MR. VOGEL: All right. And one of those 2 factors, I put it to you, Mr. Curtis -- is the fact that 3 if the dynamic plays out in the manner that I am 4 suggesting to you, and you have longer, more expensive 5 connection facilities in the pool, the shorter, less 6 expensive connection facilities out, one of the dynamics 7 is going to lead to an increase in the average cost of 8 the pool over time -- is that dynamic, isn't it? 9 MR. PORAY: I think, just to maybe add another 10 voice into this, that could potentially happen if there 11 were no mitigating measures brought in to maintain the 12 pool harmless. What we are proposing is that the pool 13 should be maintained harmless. 14 MR. VOGEL: You are proposing that it should 15 be maintained harmless, but you can't provide a 16 commitment that it will remain harmless. Is that 17 correct? 18 MR. SCHNEIDER: What we are saying is that 19 there are other things going on like the development of 20 the system code that is going to speak to various 21 investment rules, as well as associated market rules 22 that are going to be in place, as well as a 23 consideration of the transition to a longer term, more 24 user pay, approach. 25 For those reasons, I was hesitant to make the 26 commitment. Our intention is to keep the pool harmless, 27 but I don't think I can commit that, given what I have 28 just mentioned. Les Services StenoTran Services Inc. 613-521-0703 1272 OHNC PANEL 2, cr-ex (Vogel) 1 MR. VOGEL: That is fair enough and I can 2 accept that. 3 I simply put it to you that one of the 4 dynamics that prevents you from making that commitment 5 is this dynamic which we have just been discussing, 6 which was identified, which is over time -- over time, 7 something that may contribute to the increase in the 8 average cost of the pool is the make-up of that pool of 9 longer, more expensive connection investments? 10 MR. SCHNEIDER: I guess we are having 11 difficulties understanding what has changed from the 12 past going forward, with respect to keeping the pool 13 harmless and the rules we have about the treatment of 14 new load connection investment. Mr. Curtis has 15 mentioned that these short taps had the option in the 16 past to opt out. 17 MR. VOGEL: Okay. What you don't have, 18 Mr. Schneider, is the policy direction that you have 19 told me about, which is that you are moving towards 20 customers having to pay for the costs of their 21 connection facilities. I mean, that is your policy 22 direction which hasn't characterized your past policy. 23 MR. SCHNEIDER: That is, I would suggest, that 24 is the government's policy direction to move to a user 25 pay philosophy. What we have done in the past -- 26 MR. VOGEL: That is OHNC's policy direction, 27 isn't it? 28 MR. SCHNEIDER: What we have done with respect Les Services StenoTran Services Inc. 613-521-0703 1273 OHNC PANEL 2, cr-ex (Vogel) 1 to the treatment of new load connection investments is 2 giving customers the choice to either stay within the 3 pool or opt out of the pool. We are holding firm on 4 that position going forward. 5 MR. VOGEL: But your long term objective is to 6 have customers responsible for their own connection 7 facilities. Isn't that correct? 8 MR. SCHNEIDER: We are suggesting moving 9 towards a user pay philosophy, yes. 10 MR. VOGEL: Mr. Curtis, if I can just conclude 11 by asking you this. 12 We have looked at, previously, at the prefiled 13 evidence of The Chiefs of Ontario with respect to 14 possible grid extensions, with respect to possible 15 generation opportunities potentially available to the 16 First Nation. Can we agree that, to the extent that 17 First Nations were exempted from line connection 18 charges, that would improve the financial viability of 19 those projects? 20 MR. CURTIS: You mean to the extent that if 21 there was an exemption provided? 22 MR. VOGEL: To the extent that, subject to 23 Board direction and the other qualifications we have 24 discussed before, yes. 25 MR. CURTIS: It would represent a lower cost 26 for those projects, yes. 27 MR. VOGEL: Thank you. 28 Those are my questions, Mr. Chair. Les Services StenoTran Services Inc. 613-521-0703 1274 OHNC PANEL 2, cr-ex (Vogel) 1 THE PRESIDING MEMBER: Thank you, Mr. Vogel. 2 Mr. Campbell has disappeared. 3 MR. RATTRAY: Yes, he has. 4 It is John Rattray for Ontario Power 5 Generation. We have no questions on this issue. 6 THE PRESIDING MEMBER: Okay. 7 I will move to Mr. White. 8 Mr. White, please? 9 CROSS-EXAMINATION 10 MR. WHITE: Thank you very much. 11 The other day I asked the question if you knew 12 of LDCs in the province which were both transmission 13 customers and customers of -- or connected to as part of 14 their delivery points -- other LDCs. At that time, you 15 said that you were not, if I understand what you said, 16 you were not aware of any. 17 I think this question is significant in terms 18 of its implications of how connection charges are going 19 to be applied. Can I ask the panel to undertake to 20 identify the number of situations, the number of LDCs in 21 the province that are supplied that way? 22 MR. CURTIS: I would just like to seek 23 clarification. You are asking about an LDC that is 24 simultaneously connected, physically connected, to the 25 transmission system and connected to a distribution 26 system like the distribution component of OHNC? 27 MR. WHITE: Or other -- 28 MR. CURTIS: Or other LDCs? Les Services StenoTran Services Inc. 613-521-0703 1275 OHNC Panel 2, cr-ex (White) 1 MR. WHITE: Yes. 2 MR. PORAY: So in effect, what we would have 3 is a parallel path through the distribution system and 4 the transmission system. Is that what you are -- 5 MR. WHITE: Not necessarily a parallel path, 6 but the LDC is itself a customer, okay? If it has 7 multiple supplies, some of which are characterized in 8 this application as transmission facilities, and some 9 other supplies to the municipality which may be 10 classified as distribution facilities, then that is 11 significant? 12 MR. CURTIS: Okay. But I am just wondering, 13 to be clear, you are talking about delivery to the LDC? 14 It gets delivery from both the transmission system and 15 the distribution system? 16 MR. WHITE: Yes, at the same time. 17 MR. CURTIS: At the same time. It is not a 18 situation that we have talked about as far as embedded 19 LDCs where an LDC serves as, in effect, a conduit from 20 the transmission system through itself to service 21 another LDC. 22 I was taking your question as how I stated it 23 just now, that we are talking about an LDC that receives 24 service from both the transmission system and the 25 distribution system simultaneously. 26 MR. WHITE: Exactly. Yes. Is that 27 reasonable? 28 MR. ROGERS: Apparently, so. We will do it. Les Services StenoTran Services Inc. 613-521-0703 1276 OHNC Panel 2, cr-ex (White) 1 THE PRESIDING MEMBER: Thank you. Can we have 2 a number. 3 UNDERTAKING NO. F7.1: OHNC undertakes to 4 identify the number of LDCs in the 5 province which are both transmission 6 customers and customers of other LDCs as 7 part of their delivery points 8 MR. WHITE: If we are able to identify some 9 LDCs that are in that type of situation, then how would 10 the revenue be determined, the incremental revenue be 11 determined if they were looking at an additional 12 connection facility? 13 MR. SCHNEIDER: If the load is growing in that 14 utility and there is a constraint on the delivery points 15 off the transmission system that serves that utility? 16 MR. WHITE: Yes. 17 MR. SCHNEIDER: I think they would be treated 18 in the same way as any other customer who is 19 experiencing a load constraint on the system. 20 MR. WHITE: What consideration would be given, 21 if any, to the load that could be supplied through the 22 distribution connection? 23 MR. SCHNEIDER: If that is an option to 24 alleviate the problem on the transmission system? 25 MR. WHITE: Yes. 26 MR. CURTIS: I think you are talking about the 27 load within the LDC. 28 MR. WHITE: Yes. Les Services StenoTran Services Inc. 613-521-0703 1277 OHNC Panel 2, cr-ex (White) 1 MR. CURTIS: This LDC has an option of taking 2 more of its delivery off the distribution system. Is 3 that -- 4 MR. WHITE: That option may be more or less 5 clear depending upon the specific situation. There may 6 be other technical limitations, such as the distance and 7 the voltage drops and things like that, that might come 8 into play but, yes, let's talk about the two situations, 9 the one where there are no technical limitations and the 10 other where there are. 11 MR. SCHNEIDER: I don't see it as any 12 different from any other load constraint in the province 13 with affected customers involved, that we would be 14 looking at the option of upgrading the capacity, for 15 example, of the transmission system and doing the 16 capital cost contribution calculation to determine 17 whether there is a need to keep the pools whole. 18 MR. WHITE: If an LDC were currently 19 exclusively supplied through other LDCs, i.e. an 20 embedded LDC, would that LDC have the option of coming 21 to the transmission system and asking for a connection 22 at a transmission facility, assuming it could put the 23 licences requisite in place for supply? 24 MR. SCHNEIDER: You have an embedded utility 25 who wants to now connect to the transmission system? 26 MR. WHITE: Yes. 27 MR. PORAY: I believe in the new environment 28 it has the option of coming forward with a proposal to Les Services StenoTran Services Inc. 613-521-0703 1278 OHNC Panel 2, cr-ex (White) 1 connect to the transmission system, however, there would 2 have to be a technical evaluation from the perspective 3 of whether that is acceptable in terms of its location 4 with the host LDC, whether there would have to be some 5 disconnections there in order for this to take place. 6 I think in that sense what is happening -- and 7 I'm having difficulty envisioning your situation where 8 an LDC is supplied both from transmission and 9 distribution, because in my simple engineering picture, 10 that is a parallel path and generally we don't have 11 parallel paths where you could have flows through the 12 distribution system going into the transmission system 13 and vice versa. 14 Anyway, I think an answer to your question is 15 yes, they can come forward and ask for a consideration 16 to be connected to the transmission system but there 17 will be other issues that would have to be addressed. 18 MR. WHITE: Maybe I can help with the 19 technical aspects. 20 What often happens is you have multiple 21 metered delivery points to an LDC with connections 22 within the LDC being open so that there isn't the full 23 parallel path option necessarily available for the 24 supply. Does that -- 25 MR. PORAY: But I don't think there will ever 26 be a situation where it is simultaneously connected to 27 the transmission system and to another LDC to have that 28 LDC supplied from both sources. Les Services StenoTran Services Inc. 613-521-0703 1279 OHNC Panel 2, cr-ex (White) 1 MR. WHITE: If you are talking about an 2 individual load within an LDC I would probably agree 3 with you, but I would suggest the LDC itself might well 4 be supplied, and I know of a number of situations that 5 I'm sure you will uncover with the interrogatory that 6 will identify this as, at the very least, a common 7 situation. 8 MR. CURTIS: We will be checking that, yes. 9 MR. WHITE: Let me go back to the pool as a 10 general concept at the beginning now. 11 The existing pools, the connection pool and 12 the networks pool, they are not currently 100 per cent 13 utilized, is that correct, in all cases, in every 14 location, utilized to maximum capacity? 15 MR. PORAY: When you talk about the pools, are 16 you actually saying that the facilities that are within 17 the pools are not utilized? 18 MR. WHITE: Yes. 19 MR. PORAY: Not the pool itself? 20 MR. WHITE: Okay. Yes. 21 MR. PORAY: Yes, I think that is probably 22 true. 23 MR. WHITE: To the extent that load growth 24 happens and that it is accommodated within the existing 25 capacity of the pool, where does that incremental 26 revenue go? 27 MR. PORAY: I think in setting the rates the 28 load growth will be taken into account looking forward Les Services StenoTran Services Inc. 613-521-0703 1280 OHNC Panel 2, cr-ex (White) 1 over the period over which the regulatory approval is 2 being sought, so that if, for example, we are looking at 3 a five-year period we would be looking at the load 4 growth over the five-year period and taking that into 5 account when calculating the rates. 6 MR. WHITE: That has been done for the purpose 7 of this application? 8 MR. PORAY: That is correct. 9 MR. WHITE: Is this the same approach that was 10 taken with the gas industry in Ontario, to your 11 knowledge? 12 MR. PORAY: I can't speak for the gas 13 industry. I have no experience in that. 14 MR. WHITE: Who will be the ultimate decider 15 of whether or not transmission system -- broadly -- 16 capacity is made available to an applicant? 17 MR. PORAY: I think any potential entity that 18 wishes to connect to the system or to enlarge their 19 existing connection would come forward with a request to 20 the transmission owner and to the IMO. 21 MR. WHITE: And those would be the deciding 22 authorities in the absence of a decision from the Board? 23 MR. PORAY: No. What we are talking about 24 here are the technical evaluations that need to be made 25 in terms of a new customer connected to a system or an 26 existing customer increasing its load take from the 27 system. There are certain rules that have to be 28 followed by that customer. Les Services StenoTran Services Inc. 613-521-0703 1281 OHNC Panel 2, cr-ex (White) 1 They don't have to come in to the OEB. They 2 go to the IMO. The IMO does its evaluations and then 3 they come to the transmission company and the 4 transmission company does its evaluations. Then, 5 through the contractual agreement between that customer 6 and the transmission company, they decide on what option 7 is available. 8 The authority of the standard, effectively, is 9 the Board having ruled on the transmission system code 10 and the transmission system code being a part of the 11 transmitters licence. 12 MR. WHITE: Will the transmission system code 13 be comprehensive enough to provide you with the 14 direction that you are looking for to allow those 15 decisions to be made without coming to the Board? 16 MR. PORAY: I would hope so, yes. 17 MR. WHITE: Thank you. 18 THE PRESIDING MEMBER: Thank you, Mr. White. 19 MR. WHITE: Dr. Higgin, thank you. 20 THE PRESIDING MEMBER: Does anyone else now 21 have questions before Board staff? No. Okay. 22 You are up. 23 EXAMINATION 24 MS LEA: Thank you very much. 25 Gentlemen, I think yesterday Board staff 26 distributed to you an example that had quite a 27 complicated -- well, it looked complicated to me 28 anyway -- diagram of transmission lines and net work Les Services StenoTran Services Inc. 613-521-0703 1282 OHNC PANEL 2, ex (Lea) 1 stations. It was given Exhibit No. G6.2. Do you have 2 that in front of you? 3 MR. PORAY: Yes, we do. 4 MS LEA: Have you had an opportunity to look 5 at it and do you think that you understand what it's 6 representing? 7 MR. SCHNEIDER: Yes. I think so. 8 MS LEA: Okay. Thank you. I need to 9 understand -- of the situations, you will see that we 10 have letters B, A and C in the lower part of the 11 diagram. These are intended to represent customers, 12 that is Customers B, A and C. I was wondering if you 13 could tell me which of these customers would attract 14 line connection charges, presuming that they were new 15 customers connecting at the points indicated here. 16 MR. SCHNEIDER: Okay. Customer A, who is 17 connected to an OHNC DESN station, that's tapped off as 18 an OHNC network transmission line would attract line 19 connection charges. 20 MS LEA: Before you go any further, a DESN 21 station is a D-E-S-N, all in capitals, station. I 22 understand, I have been told this, it's a dual -- you 23 tell me what it is. It's probably better. 24 MR. SCHNEIDER: I will turn it over to my 25 engineering colleague. 26 MR. PORAY: It's a dual element spot network 27 station. 28 MS LEA: Thank you. All right. A dual Les Services StenoTran Services Inc. 613-521-0703 1283 OHNC PANEL 2, ex (Lea) 1 element spot network station. Okay. Thanks. So you 2 said Customer A will pay line connection charges. Yes, 3 please go ahead. 4 MR. SCHNEIDER: Customer B, who owns his own 5 DESN station and the tap to the OHNC transmission line, 6 would also pay line connection charges because of the 7 fact that he is connected to a transmission line that 8 connects to a network station. 9 MS LEA: Yes. 10 MR. SCHNEIDER: Those are the only two 11 customers on this diagram that pay line connection 12 charges. 13 MS LEA: So Customer C, who connects to the 14 DESN station inside the network station X here, does not 15 pay line connection charges. 16 MR. SCHNEIDER: That is correct. 17 MS LEA: Now, Customer B, who owns his own 18 transmission -- transformation, pardon me -- would not 19 pay transformation pool charges. Am I correct? 20 MR. SCHNEIDER: That is correct. 21 MS LEA: Okay. So we have got Customer A 22 paying both transformation and line connection, Customer 23 B paying line connection and Customer C paying no line 24 connection, but he would pay transformation also, would 25 he not? 26 MR. SCHNEIDER: Customer C? 27 MS LEA: Customer C. 28 MR. SCHNEIDER: Yes. Les Services StenoTran Services Inc. 613-521-0703 1284 OHNC PANEL 2, ex (Lea) 1 MS LEA: Okay. Thank you. Now, is there any 2 functional difference between the DESN stations that 3 Customers A and C are attached to? 4 MR. CURTIS: As far as the transformation 5 services? 6 MS LEA: Yes. 7 MR. CURTIS: No. 8 MS LEA: And the same applies to Customer B, 9 presuming he built his transformation facilities to 10 standard. Is that correct? 11 MR. PORAY: That's correct, yes. 12 MS LEA: Okay. The difficulty I'm having then 13 or just what I want to understand clearly is that 14 Customer B, despite the fact that he has paid for his 15 own transformation facility and that he is only 16 attaching to network lines, still pays a line connection 17 charge as a new customer because he uses network lines 18 to get to the network stations. Correct? 19 MR. PORAY: That's correct. 20 MS LEA: Now, the only way then that someone 21 could avoid paying line connection charges in this 22 diagram is to be Customer C and attach directly to the 23 network station? 24 MR. PORAY: No. Alternatively, the Customer B 25 could build its line connection to a network station. 26 MS LEA: Yes. That's what I was trying to 27 express. Perhaps I wasn't clear. Only a customer who 28 connects directly to a network station can avoid paying Les Services StenoTran Services Inc. 613-521-0703 1285 OHNC PANEL 2, ex (Lea) 1 line connection charges. 2 MR. PORAY: That is correct, and the reason 3 for that is that they are not utilizing any Ontario 4 Hydro line facilities. 5 MS LEA: Is it not your view though that this 6 paying of a line connection charge for the use of 7 transmission lines to get to a network station will in 8 fact discourage new generation investment as they have 9 to pay that line connection pool charge? 10 MR. CURTIS: Not generation. 11 MR. PORAY: Not generation. 12 MR. CURTIS: Because generation doesn't pay. 13 MS LEA: No. Sorry. Mode. Pardon me. 14 MR. CURTIS: Could you rephrase your 15 questioning for us, please? I'm sorry. 16 MS LEA: Yes. If you have a long term goal of 17 encouraging new load connection -- I should be more 18 clear -- facilities, do you not believe that your 19 decision to charge a customer who is in Customer B's 20 situation a line connection charge discourages that 21 customer from building his own tap to the network line? 22 He still pays a line connection charge despite the fact 23 he built his own tap. 24 MR. SCHNEIDER: If a new customer comes along 25 and wants to connect, he can connect to the network 26 station and avoid the line connection charges. That's 27 one option he has. 28 We have also mentioned earlier that the cost, Les Services StenoTran Services Inc. 613-521-0703 1286 OHNC PANEL 2, ex (Lea) 1 or paying the line connection charge is one 2 consideration we would expect a customer to have when 3 deciding whether or not to build his own facilities. 4 MS LEA: It would be true though that if there 5 was no line connection charge to be paid by a customer 6 who builds his own tap to network lines that that will 7 be one less cost that that new customer had to bear and, 8 therefore, the lack of that cost might be an 9 encouragement to investment. 10 MR. PORAY: But the issue there would be that 11 other customers who are in a similar situation are 12 paying the line connection and he is not paying the line 13 connection. 14 MS LEA: Customer C, who connects directly to 15 the station, is not paying a line connection charge. 16 MR. PORAY: No, it is not. 17 MS LEA: And that is because he fortuitously 18 or otherwise is connected directly to a station. Is he 19 not in the same position in terms of the function that 20 he gets from OHNC? 21 MR. PORAY: No. He is not utilizing any of 22 Ontario Hydro's lines. 23 MS LEA: I think I understand your position. 24 Let's talk about the options that Mr. Schneider 25 mentioned. How many network transformation switching 26 stations of the size that was attempted to be 27 represented here by X, N, Y does OHNC have? I'm 28 thinking of stations the size of Cherrywood or Richview, Les Services StenoTran Services Inc. 613-521-0703 1287 OHNC PANEL 2, ex (Lea) 1 that kind of thing, network transmission switching 2 stations. 3 MR. PORAY: Can you just hang on for a second? 4 MS LEA: Yes. Sure. My next question is 5 going to be how many of them can accommodate the sort of 6 attachment that is indicated by Customer C here. I 7 don't know if you have to look that up at the same time. 8 -- Pause 9 MR. PORAY: We don't have that information. 10 MS LEA: Okay. What I'm trying to understand 11 is: is it a practical option to suggest that customers 12 could connect directly to such stations in order to 13 avoid a line connection charge? We don't understand how 14 many stations could accommodate such a customer's 15 request. 16 MR. PORAY: Yes. It would really have to be 17 done on a case by case basis to examine what the 18 capability of the station is at the particular point in 19 time at which the customer wants to connect to the 20 system. 21 MS LEA: Okay. Let me continue on for just a 22 moment and then I may come back to that. Do you have 23 any idea of what the cost would be to build one's own 24 transformer? 25 MR. PORAY: Transformer station? 26 MS LEA: Yes. Just one moment. Apparently 27 I'm not saying the right thing here. Just a second. 28 -- Pause Les Services StenoTran Services Inc. 613-521-0703 1288 OHNC PANEL 2, ex (Lea) 1 MS LEA: Pardon me. Yes. I was 2 misunderstanding. The sorts of facilities that Customer 3 C would have to have inside that station, do you have 4 any idea of what the cost would be of that? Is that a 5 practical option for customers? It would probably be 6 what is suggested here, a new 115 kilovolt bus extension 7 and two additional breakers. 8 MR. PORAY: Again, it will depend on the type 9 of service that that customer requires but, yes, in 10 general it could involve extension of bus work or there 11 may be space that's existing there that you could 12 connect to the existing bus work. That's why said case 13 by case basis. 14 MS LEA: Okay. Do you have any idea of a 15 rough quantum of those costs? 16 MR. PORAY: Not offhand, no. 17 MS LEA: Can you compare it to what it would 18 cost Customer B in line connection charges to get to 19 that station along the transmission lines? Would it be 20 more or less than that? Would there ever be a payback 21 of the initial investment of doing the work inside the 22 transformer station? 23 MR. CURTIS: Are you talking about the 24 differential cost being the bus work and the additional 25 switching that's required? 26 MS LEA: That's correct. I'm trying to 27 understand whether a customer would be better off to 28 behave as Customer B has done here, that is build a tap Les Services StenoTran Services Inc. 613-521-0703 1289 OHNC PANEL 2, ex (Lea) 1 and a transmission -- a transformer -- I have to get my 2 words straight here -- a transformation device and 3 connect through the transmission lines or to build the 4 facilities that we are talking about within a network 5 station. I'm trying to understand what is the practical 6 alternative here for customers. 7 MR. CURTIS: The investment in bus work and 8 switching isn't going to be so prohibitive that our 9 customer would never do that. 10 I guess without knowing the details in terms 11 of what Customer B faces in terms of length of line and 12 facilities that they would face -- again, you are 13 talking about a break-even analysis that the customer 14 would do, but there wouldn't -- the expenses in terms of 15 buses and switching isn't going to be so prohibitive 16 that that would never happen. 17 MS LEA: Okay. So it is possible that it 18 might be a better deal for the customer to build that 19 type of facility within a station than to pay the line 20 connection charge. It is possible that that would be 21 the case? 22 MR. CURTIS: It is possible, yes. 23 MS LEA: Have customers done that? Do you 24 have customers who have built their own bus work and 25 breakers in stations because it was economical -- in the 26 past? 27 MR. CURTIS: I think we probably have to look 28 at that to find out. Les Services StenoTran Services Inc. 613-521-0703 1290 OHNC PANEL 2, ex (Lea) 1 Typically there is a co-operative effort that 2 is involved here and rather than the customer making all 3 of the investment and doing that -- actually, the 4 complication that comes into place here is that if you 5 have a customer-owned facility on an OHNC facility, then 6 you get into problems in terms of access to the 7 respective facilities. To avoid those sorts of problems 8 there tends to be more of an agreement that is put in 9 place between the company and the customer. 10 MS LEA: Are you saying, then, that even as we 11 move forward there could be co-operation, both financial 12 and technical, in the building of such facilities within 13 an OHNC station for a customer? 14 MR. CURTIS: Certainly on a technical basis 15 there would have to be. There has to be an agreement 16 between the customer and OHNC in terms of how that work 17 would be done. 18 MS LEA: What about economically? Would now 19 the situation be the customer would have to pay for all 20 these facilities since they are dedicated to him and 21 incremental? 22 MR. CURTIS: That is the case, yes. 23 MS LEA: That is the case. 24 MR. CURTIS: Yes. 25 MS LEA: All right. So that is a change. 26 The other thing, of course, that is a change 27 on the other side is that now line connection charges 28 are a factor that the customer takes into account as a Les Services StenoTran Services Inc. 613-521-0703 1291 OHNC PANEL 2, ex (Lea) 1 type of charge he must consider. 2 MR. CURTIS: In the overall investment 3 decision, yes. 4 MS LEA: Yes. In trying to make the 5 investment decision. Thank you. 6 Board Staff is seeking an undertaking from you 7 and because it was kind of difficult to explain in words 8 we gave you a page which listed the undertaking 9 requested. 10 Did you receive that yet? 11 MR. CURTIS: Yes. Yes, we did. 12 MS LEA: All right. 13 For the purposes of the record, then, I will 14 read into the record what we want and if my friend has 15 no objection I'm going to pass the same page up to the 16 Board Panel Members that I gave to OHNC so they 17 understand at least what I'm asking. 18 --- Pause 19 MS LEA: I have a couple of extra copies, 20 about two extra copies if anyone else wants to look at 21 this. 22 Let me try to describe this undertaking. 23 MR. PORAY: I'm sorry, we don't have a copy. 24 MS LEA: You don't have a copy in front of 25 you, I'm sorry. 26 MR. CURTIS: No. 27 MR. ROGERS: I do. 28 MS LEA: Okay. Les Services StenoTran Services Inc. 613-521-0703 1292 OHNC PANEL 2, ex (Lea) 1 MR. ROGERS: That's pretty dangerous -- 2 MS LEA: We have others. 3 --- Pause 4 MR. PORAY: Thank you. 5 MS LEA: I know there is such a lot of paper 6 that passes by us. All right. 7 Now, I don't know whether you have had an 8 opportunity to look at this. I believe you have. 9 The undertaking request -- I will give a more 10 brief description in a moment -- is to fill out the 11 chart that is listed here. I will name the columns. We 12 would need the name of the transformer or switching 13 station that OHNC has. 14 The name of the customer-delivery point. Now, 15 you can code that if you are worried about proprietary 16 concerns. We are not interested in the name so much as 17 an identification of a customer. 18 MR. SCHNEIDER: Okay. 19 MS LEA: The class of the customer. 20 The amount of forecasted delivery in megawatts 21 for the year 2000 at that delivery point. 22 The purpose of this, what we are trying to 23 understand is the number of customer delivery points 24 that will not attract line connection charges and the 25 network transformer station or switching station from 26 which they are supplied and to understand for those 27 customers their class and their forecasted load. 28 So with respect to the first part of that Les Services StenoTran Services Inc. 613-521-0703 1293 OHNC PANEL 2, ex (Lea) 1 undertaking, is that something that is doable for you? 2 MR. SCHNEIDER: Yes. 3 MR. PORAY: I think it's doable, yes. 4 MS LEA: Thank you. 5 The second part of the undertaking which 6 appears on this page is to fill out another chart with 7 three columns. 8 The left-hand column, the name of 9 customer-delivery point. Again, that can be coded. 10 The class of the customer. 11 The amount of forecasted megawatt delivery in 12 the year 2000 at the delivery point. 13 Now, this is a slightly different request. 14 Again, we are trying to figure out the number of 15 customer delivery points that will not attract line 16 connection charges, the idea being that all customer 17 delivery points that have dedicated taps, that is their 18 own taps from a line that is not a line connection 19 asset, will not attract line connection charges 20 regardless of the length of that dedicated tap, the 21 class of those customers, their forecasted load. 22 I think another thing that would be useful for 23 the Board to know is an estimate of the increase in the 24 line connection rate, that is what everybody else would 25 have to pay as a result of the assumptions that we have 26 set out here. 27 Now, the assumption that we would like you to 28 make is not your proposal for this second part of the Les Services StenoTran Services Inc. 613-521-0703 1294 OHNC PANEL 2, ex (Lea) 1 undertaking -- is not your proposal, it is the 2 assumption that only customers who are physically 3 connected to connection line assets attract line 4 connection charges. 5 In other words, if you are attached merely to 6 a network line you don't attract charges. If you are 7 connected to a line connection asset you do attract 8 charges. 9 This is not your proposal and we understand 10 that it is not your proposal, but in terms of the 11 Board's understanding of how these pools work and the 12 effect on customers we are seeking this undertaking, 13 then, from you with that assumption. So that is why 14 number four is necessary. 15 How would that change the rate for everybody 16 else if you changed the way that you assigned line 17 connection pool charges? 18 Do you understand what I'm asking in the 19 second part? 20 MR. CURTIS: Yes, we do. 21 One of the issues that is going to be a 22 complication in this is the issue around taps. 23 MS LEA: Yes. Can you tell me what's the 24 problem there? 25 MR. CURTIS: Taps, broadly speaking, are 26 considered to be short lengths of connection and taps 27 may vary from anything under a few meters to several 28 hundreds of meters. One of the issues for us certainly Les Services StenoTran Services Inc. 613-521-0703 1295 OHNC PANEL 2, ex (Lea) 1 is being able to distinguish whether or not a tap 2 constitutes a connection facility or is it not a 3 connection facility. 4 MS LEA: I'm not sure I understand. 5 MR. CURTIS: Okay. 6 MS LEA: You are saying that a customer's own 7 line -- 8 MR. CURTIS: Right. 9 MS LEA: -- which I have been calling a tap 10 and maybe I shouldn't be using the word -- can be a line 11 connection asset for OHNC? 12 MR. CURTIS: No. 13 MS LEA: No. 14 MR. CURTIS: No, I'm not suggesting that. 15 I guess what I'm asking is: Are we 16 considering all taps whether they are owned by OHNC or 17 not owned by OHNC? 18 I'm sorry, to be clear on this: If the tap is 19 owned by OHNC it is a connection facility. 20 MS LEA: So I understand, yes. 21 MR. CURTIS: Yes. 22 MS LEA: Yes. 23 MR. CURTIS: That is what we will assume as 24 far as -- 25 MS LEA: So if you are using an OHNC tap you 26 are connecting, I would presume, to a line connection 27 asset? 28 MR. CURTIS: No. Les Services StenoTran Services Inc. 613-521-0703 1296 OHNC PANEL 2, ex (Lea) 1 MR. PORAY: That is not what we are trying 2 to -- 3 MR. ROGERS: Excuse me, sir. This is not a 4 very productive use of the Board's time. May I suggest 5 that we take this under advisement over the noon hour? 6 MS LEA: Absolutely. 7 MR. ROGERS: We will straighten this out among 8 ourselves. We have already had some discussions about 9 it. We don't need to trouble you with this. 10 MS LEA: Sorry, I thought the discussions had 11 been had already. My apologies. Certainly we will do 12 it over lunch. 13 MR. ROGERS: You see, with different people. 14 May I suggest that? 15 MS LEA: Thank you. Then we won't assign it 16 an undertaking number at this time. We will wait and 17 see. 18 MR. ROGERS: It won't be a problem. There is 19 a difficulty in providing the information on the second 20 part of the table. It can be done, but it will take 21 some time. We are prepared to do that, I believe, 22 subject to our understanding exactly what you want. 23 MS LEA: Thank you. 24 MR. ROGERS: I am just telling you that it 25 will take some time -- five or six days. 26 MS LEA: Let us consider that over the break, 27 then. Also, the Board can consider whether the second 28 part of the undertaking is of real use to them and Les Services StenoTran Services Inc. 613-521-0703 1297 OHNC PANEL 2, ex (Lea) 1 whether it is worth the time and effort that OHNC may 2 have to put into it. 3 I have just a few more questions for these 4 witnesses on this issue. 5 You discussed at some length with Mr. Vogel 6 the idea of keeping the pool whole with respect to new 7 connection investments. One thing that we didn't 8 understand is that if you are going to keep the pool 9 whole when you assess new connection investments in 10 response to a customer's request to connect, there are 11 certain inputs into that evaluation, I think. 12 Is there not a need to match OHNC's 13 investments attributable to that connection with the 14 revenue from the customer? 15 MR. SCHNEIDER: Yes, based on an expected load 16 growth or load forecast for that customer. 17 MS LEA: What we fail to understand, then, is 18 that if there is a line connection charge and a network 19 line charge for the same piece of line, how do you begin 20 to disaggregate these things when you go to keep one of 21 those two pools whole? 22 In other words, a line is both a network line 23 and also attracts a line connection charge. How do you 24 attribute revenue in that way? 25 MR. PORAY: The cost of the shared lines, 26 which we have identified as being network and line 27 connection, all of that cost is in the network pool. It 28 is not in the line connection pool. Les Services StenoTran Services Inc. 613-521-0703 1298 OHNC PANEL 2, ex (Lea) 1 The reason why that is so, as we tried to 2 explain, is how do you allocate those costs from assets 3 that see different flows of different periods of time? 4 MS LEA: Then maybe I am not understanding the 5 revenue side. You collect revenue from a network charge 6 for a piece of line, and you also collect line 7 connection revenue from that same piece of line. Is 8 that disaggregated in some fashion when you go to 9 attribute revenue to certain assets? 10 MR. PORAY: We collect the revenues based on 11 the functionality of the assets that we have assigned to 12 the pool. The load that is assigned to that pool will 13 determine the charge, and the charge recovers the 14 revenues assigned to that pool. 15 As I mentioned, the cost of those lines is not 16 assigned to both pools. It is only in one pool. 17 MS LEA: Are you telling me, then, as I 18 understand it, that you make the disaggregation or split 19 on the revenue side on the basis of loads borne by those 20 lines rather than by naming them one or the other? 21 MR. PORAY: No. What we do is in the cost 22 allocation methodology where we have functionalized the 23 assets as being network assets and line connection 24 assets, we have also identified a bunch of assets that 25 are really dual function. 26 And because we have not thought of a 27 methodology of splitting those assets, we have assigned 28 all of those assets to the network. And all of the Les Services StenoTran Services Inc. 613-521-0703 1299 OHNC PANEL 2, ex (Lea) 1 costs associated with those assets are assigned to that 2 one pool. They are not spread between the pools. 3 MS LEA: I understand the cost side. Now 4 explain the revenue side to me. 5 MR. PORAY: The revenue side will be based on 6 the fact that we have assigned the capital costs to that 7 pool; we have assigned the depreciation, the interest, 8 all of the other costs that have to be recovered. So 9 that pool has a revenue requirement now. That revenue 10 requirement will be recovered from customers based on 11 the pool charge. 12 MS LEA: If you have a new connection 13 investment, how do you do the evaluation of whether or 14 not you are going to collect enough revenue from that 15 investment to pay for it? 16 Do you understand my problem? 17 MR. PORAY: I think what Mr. Schneider and Mr. 18 Curtis explained is that we would look at the pool, and 19 we know that the pool rate is so many dollars per 20 kilowatt per month. We would look at the investment and 21 we would establish what would be the revenues that would 22 be recovered through the pool at that rate over a period 23 of time, and we would present value that. 24 Then we would do the calculation for the -- we 25 know what the cost of that new facility is, and then you 26 would compare the two. 27 If the pool revenues match, the revenues 28 required to recover the cost of that facility, then the Les Services StenoTran Services Inc. 613-521-0703 1300 OHNC PANEL 2, ex (Lea) 1 pool would be held whole. If the cost of that facility 2 is higher, then that would have to see a capital 3 contribution. 4 MS LEA: I think there is a complication that 5 I am not fully understanding, but I think that also we 6 will leave this for the moment to see if we can sort it 7 out. 8 There were two other questions I had. You 9 indicated in your discussion about keeping the pool 10 whole -- actually, I think it arose out of a slightly 11 different discussion -- the question of whether cost 12 overruns might be recovered from ratepayers and what to 13 do with the over-collection of capital contributions if 14 either of those scenarios occurred. You indicated that 15 it would come to the Board for a decision, and I 16 understand the mechanism by which it would do that. 17 My question is: If we move to a 18 performance-based regulation regime, I am not sure that 19 that oversight would still occur down to that level of 20 detail. 21 Can you assist me as to whether that is also 22 your understanding? 23 MR. CURTIS: You mean how it would work within 24 a PBR regime? 25 MS LEA: Yes. 26 --- Pause 27 MR. CURTIS: Generally speaking, within a PBR 28 regime that level of detail isn't developed. The Les Services StenoTran Services Inc. 613-521-0703 1301 OHNC PANEL 2, ex (Lea) 1 company is put under a PBR scheme with certain 2 expectations in terms of improving productivity, and 3 that drives its overall ability to collect revenues from 4 customers. 5 I think the example that we were talking about 6 earlier on is the case where the company has, on behalf 7 of the pool, made an estimate in terms of what the cost 8 would be in order to put that new asset in place, and 9 then for whatever reason there was a cost overrun, as 10 far as that is concerned. 11 That cost overrun then would still have to be 12 borne by the company under the PBR formula. It would 13 not be collecting additional money to fund that 14 over-expenditure. So it would be a risk that the 15 company would be adopting or accepting under a PBR 16 regime. 17 MS LEA: Yes, unless there was some exogenous 18 circumstance that would lead it to be a Z-factor. 19 MR. CURTIS: And that is the other part of it, 20 exactly. 21 MS LEA: With respect to the over-collection 22 of capital contributions, then, is that something that 23 the company benefits from under a PBR regime, unless 24 again it's an exogenous factor? 25 MR. CURTIS: Can you explain to me what you 26 mean by over-collection of capital contributions? 27 MS LEA: Yes. Perhaps over-collection cannot 28 happen in the scenarios that we are positing here. If Les Services StenoTran Services Inc. 613-521-0703 1302 OHNC PANEL 2, ex (Lea) 1 you say to a customer that it is going to cost us $2 2 million and it ends up costing $175 million, do you give 3 the money back? 4 MR. CURTIS: Yes. 5 MS LEA: My last question relates to something 6 that Mr. Schneider said at the beginning of his 7 examination-in-chief, and that deals with what you are 8 asking the Board to decide on with respect to this 9 issue. 10 You said that the Board's decision with 11 respect to this issue would not affect Ontario Hydro's 12 rates, but it would affect customer choice, if I 13 understood you correctly. Could you give me an example 14 of that. 15 MR. SCHNEIDER: Yes. I think what I said is 16 that it would not affect the structure of the cost 17 allocation rate design. 18 MS LEA: M'hm. 19 MR. SCHNEIDER: But it would affect the 20 choices that customers would have with respect to making 21 investments in the pool or out of the pool. 22 MS LEA: So the sorts of examples of 23 investment decisions that customers would have to make, 24 that we have been discussing so far, would be affected 25 by the Board's ruling in this matter? 26 MR. SCHNEIDER: Yes. If the Board were to 27 rule that we move quickly to the longer term proposal 28 then the pooling option would no longer be available to Les Services StenoTran Services Inc. 613-521-0703 1303 OHNC PANEL 2, ex (Lea) 1 customers. So it would limit that choice. It would 2 take that choice away. 3 If the Board remains silent on the issue then 4 the issue would really come up the next time we may be 5 before the Board. That would be, in my sense, 6 problematic in the sense that we would be conducting or 7 treating new load investments in the way that we felt 8 was appropriate but without any real direction from the 9 Board in that regard, other than what we would get 10 through the transmission system code. 11 MS LEA: Okay. Thank you. 12 Subject to any questions arising out of the 13 undertaking and things we are going to talk about on the 14 break, those are my questions. Thank you. 15 THE PRESIDING MEMBER: Thank you, Ms Lea. 16 Mr. Vlahos. 17 MEMBER VLAHOS: Thank you, Mr. Chairman. 18 Gentlemen, just a couple of areas that I want 19 to follow up. One is the area you just covered with 20 Ms Lea on the PBR regime and the possible outcomes or, I 21 guess, ramifications in terms of the facility expansion 22 and the revenues imposed. You did mention that if the 23 absolute costs are less than forecast for building the 24 facility the customer would be kept whole, the money 25 would be returned? 26 MR. CURTIS: Yes. 27 MEMBER VLAHOS: Now, over contribution may 28 also arise out of an underestimation of forecast sales Les Services StenoTran Services Inc. 613-521-0703 1304 OHNC PANEL 2 1 or volume forecast, if you like. Are you with me? 2 MR. CURTIS: Yes. 3 MEMBER VLAHOS: Okay. So to the extent that 4 you have materially under forecast the loads for that 5 customer then is there a mechanism, a return mechanism 6 or make-up mechanism, that you have in mind? 7 MR. CURTIS: I don't think we have thought it 8 through in that detail. We are, I guess, in the process 9 of trying to develop our PBR proposal, but that would 10 certainly be something that we would have to look at. 11 MEMBER VLAHOS: I am wondering if this is 12 something that is discussed in connection with respect 13 to connections or section 92 of the Act and guidelines 14 with respect to facility expansion. Is that something 15 that has been visited, to your knowledge? 16 MR. CURTIS: In terms of our design of PBR? 17 MEMBER VLAHOS: No, a design of how do you go 18 about adding customers, what are the contribution 19 policies, that kind of thing. 20 MR. CURTIS: I believe it has -- we have 21 always taken the Act as our starting point in terms of 22 developing new policies. 23 MEMBER VLAHOS: Are any of you on the panel 24 involved with any task forces that deal with the 25 expansion guidelines that are under consideration with 26 the Board staff and others? 27 MR. CURTIS: In terms of the transmission 28 system code development? Les Services StenoTran Services Inc. 613-521-0703 1305 OHNC PANEL 2 1 MEMBER VLAHOS: Yes. 2 MR. CURTIS: None of us are directly involved 3 in it, but we, at least I, have connections with the 4 individuals that are on that. 5 MEMBER VLAHOS: Now, does the company -- I am 6 moving on to the building of the connection 7 facilities -- does the company use its own construction 8 crews or does it outsource that activity, or is it a 9 combination? 10 MR. CURTIS: It is done within the company by 11 and large. The way the company is set up there is a 12 common service entity, if you will, that provides 13 services back to OHNC and that is where, typically, the 14 construction and maintenance work is done. That is 15 where the staff are for those activities. 16 MEMBER VLAHOS: I am sorry, you have to help 17 me understand the proper structure now. You said there 18 is a company? 19 MR. CURTIS: No. No, it is part of OHNC. 20 MEMBER VLAHOS: It is part of. Does it 21 provide also services for distribution? 22 MR. CURTIS: Yes, it does. 23 MEMBER VLAHOS: It does. 24 MR. CURTIS: It provides services both to 25 transmission and distribution. 26 MEMBER VLAHOS: Okay. For all the workload, 27 if you like, is that taken care of by the resources 28 internally or does it have to go out to the other Les Services StenoTran Services Inc. 613-521-0703 1306 OHNC PANEL 2 1 providers of services? 2 MR. CURTIS: Typically, it is done within the 3 company. There are occasions, in terms of the resource 4 availability within the company, that it might be 5 outsourced, but it is bound within the labour agreements 6 that OHNC has in terms of how work can be done. 7 MEMBER VLAHOS: Okay. 8 The final area is this saving the pool 9 harmless. A couple of days ago we talked about if a 10 customer wishes to purchase its own facility, connection 11 facility from the pool, that he may do so. You and I 12 had that discussion -- 13 MR. CURTIS: Yes. 14 MEMBER VLAHOS: -- also yesterday or the day 15 before, and there was some discussion about market value 16 or some other value other than book value. 17 MR. CURTIS: Yes. 18 MEMBER VLAHOS: Now, I am just trying to make 19 that connection with saving the pool harmless. The 20 assets in the pool, at any point in time they are book 21 value, are they, in terms of the regulatory books if you 22 like? 23 MR. CURTIS: Yes, that's right. That is how 24 they are recorded, on the rate base calculation. 25 MEMBER VLAHOS: So to the extent that I, as a 26 customer, want to purchase my own connection facilities 27 from the pool -- 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 1307 OHNC PANEL 2 1 MEMBER VLAHOS: -- then if the principle of 2 saving the pool harmless applies here, then it will have 3 it translated to book value, would it not? 4 MR. CURTIS: I think what we were looking at 5 is, in terms of selling the asset, that OHNC would be 6 expected to get the higher of market or book for those 7 assets. That is, I think, what we are envisioning as 8 part of the process of saving the pool harmless. 9 MEMBER VLAHOS: All right, but "harmless" 10 meaning that it will be at least equal to the book 11 value? 12 MR. CURTIS: Yes. 13 MEMBER VLAHOS: Just lastly, and I hate to get 14 into this, the last exchange we had with respect to 15 Mr. Vogel's questions. 16 In every case you are going to have -- if the 17 revenues do not meet costs you are going to have 18 contributions? 19 MR. CURTIS: For new connection investment? 20 MEMBER VLAHOS: For new connections. 21 MR. CURTIS: Yes. 22 MEMBER VLAHOS: So with opting out, is this 23 opting out as you propose it should be, as your 24 proposal, and which continues from the old policies -- 25 well, the old practice -- 26 MR. CURTIS: Yes. 27 MEMBER VLAHOS: -- the pool average price is 28 constant or it remains harmless? Les Services StenoTran Services Inc. 613-521-0703 1308 OHNC PANEL 2 1 MR. CURTIS: We would like to keep it as 2 remaining harmless in terms of -- I think we are a 3 little uneasy about committing to saying that it is 4 going to remain constant. 5 MEMBER VLAHOS: That's fine. I will accept 6 that, yes, in my poor choice of words. 7 If there is no opting out then by definition 8 you are going to have some expensive projects in which 9 you are going to get a contribution anyway, right -- 10 MR. CURTIS: Yes. 11 MEMBER VLAHOS: -- which assist the pool? 12 MR. CURTIS: Yes. 13 MEMBER VLAHOS: And there are some customer 14 connections that the revenues will exceed the costs -- 15 MR. CURTIS: Yes. 16 MEMBER VLAHOS: -- and therefore there is no 17 contribution? You don't bother contributing. So 18 automatically there is a contribution by that customer 19 to the pool. Under that scenario then the average pool 20 cost will be coming down? 21 MR. CURTIS: Yes. 22 MEMBER VLAHOS: If there was no opting out? 23 MR. CURTIS: Yes. 24 MEMBER VLAHOS: Okay. That was the confusion, 25 I guess, in my questions when I turned to you as opposed 26 to Mr. Vogel. When he asserted or suggested that the 27 pool average prices will increase, I think what he had 28 in mind was that they would be higher than they Les Services StenoTran Services Inc. 613-521-0703 1309 OHNC PANEL 2 1 otherwise would be if there was no opting out. You 2 would have no problem with that? 3 MR. CURTIS: No, I don't have any problem with 4 that, no. 5 MEMBER VLAHOS: All right. Now, again, I 6 don't know if that is the intent of his questions or the 7 way I read his questions, but you can come back to it at 8 a later time. 9 MR. CURTIS: Okay. 10 MEMBER VLAHOS: With that, thank you very 11 much, Mr. Chairman. 12 MR. CURTIS: Thank you. 13 THE PRESIDING MEMBER: Thank you. 14 I just have a couple of questions. 15 As to restructuring of the company, Ontario 16 Hydro had the responsibility for all parts of the system 17 except those that were adopted by the municipal 18 electrical utilities, right? 19 MR. CURTIS: Apart from some companies that 20 had their own facilities? 21 THE PRESIDING MEMBER: Yes. 22 MR. CURTIS: That's correct. Yes. 23 THE PRESIDING MEMBER: With that exception. 24 Okay. 25 Now, the question is: How did you deal with 26 the expansion and so on of what is now -- let's make it 27 clear -- Ontario Hydro Distribution, in that regime, and 28 how will it now be treated? Les Services StenoTran Services Inc. 613-521-0703 1310 OHNC PANEL 2 1 MR. CURTIS: It is a hard question for us to 2 answer because we don't deal on the distribution side. 3 I think we know the answer on the transmission side in 4 terms of how transmission system expansion was done, but 5 I know I'm personally not able to help very much in 6 terms of how the distribution system expansion occurred. 7 I'm sorry. 8 THE PRESIDING MEMBER: Okay. I will accept 9 that answer. 10 In terms of the transmission system we will be 11 dealing with in the future, Ontario Hydro has recently 12 set up a competitive and unregulated transmission and 13 distribution venture called Ontario Hydro Delivery. 14 Correct? 15 MR. CURTIS: Yes, that is correct. 16 THE PRESIDING MEMBER: You will use the 17 services of that in order to expand the system, if 18 needed, reinforce the system, everything. In doing so, 19 you are, in essence, self-dealing. That is the issue 20 that I'm coming to. You are doing self-dealing. How 21 will you know whether or not and how will the Board know 22 whether your self-dealings with that affiliate will be 23 "at arm's-length"? 24 MR. CURTIS: It will be governed under the 25 affiliates relationship code and the provisions for that 26 to ensure that the separation occurs. 27 THE PRESIDING MEMBER: Yes. But in a 28 practical way, how will you ensure that the spirit as Les Services StenoTran Services Inc. 613-521-0703 1311 OHNC PANEL 2 1 well as the letter of this code is followed? What 2 practical things are you going to do that you didn't do 3 in the past in terms of expansion of the system? 4 MR. CURTIS: Okay. I'm not sure that I would 5 be able to give you all of the details, but in terms of 6 how it is being established, OHNC would have it -- the 7 Ontario Hydro Distribution -- I'm sorry, I forgot the 8 name of it now -- 9 THE PRESIDING MEMBER: Delivery. 10 MR. CURTIS: -- Delivery -- set up under a 11 separate board of directors with a separate executive 12 and with separate staff. So there is complete 13 separation as far as the structure within the 14 corporation. It is set up as a separate company. 15 The dealings would be done at arm's length. 16 If there are any dealings at all, it would be done on 17 a -- we have termed it a service level agreement. It 18 would be like a contract between two companies. 19 THE PRESIDING MEMBER: An SLA, yes. 20 MR. CURTIS: An SLA. And all of those would 21 be subject to scrutiny by the Board. The affiliates 22 relationship code would govern the operations of both of 23 those entities. There would be a monitoring internally 24 in terms of compliance with the code requirements as 25 well, and presumably the compliance activity would also 26 be subject to monitoring as well by the Board. 27 THE PRESIDING MEMBER: The issue to me I think 28 is this question of the design. The old Ontario Hydro Les Services StenoTran Services Inc. 613-521-0703 1312 OHNC PANEL 2 1 standards were probably, in many people's opinion, gold 2 plated. You may not agree with that. 3 MR. CURTIS: We have heard that, though, sir. 4 THE PRESIDING MEMBER: It is a common 5 perception. It is not a reality. 6 The question, then, is: If you received 7 design services from that affiliate, then implicitly you 8 could carry forward that thing into the requirement even 9 if the procurement was for an outside body or if you 10 were doing the -- if a customer wanted to do their own, 11 then those standards would be implicit in your approval. 12 Right? 13 MR. CURTIS: Our understanding would be under 14 this system code, though the transmission system code 15 would set out what the technical requirements would be 16 for system expansion or system connection. That would 17 be subject to the Board's scrutiny and approval and that 18 would then set what the requirements were across the 19 industry. 20 THE PRESIDING MEMBER: Okay. Moving on to the 21 next question. 22 Are you familiar with the Board's economic 23 feasibility guideline, which is variously known as 24 EBO 188 for gas? Are you familiar with that? 25 MR. CURTIS: Not personally. No, I'm afraid 26 not. 27 THE PRESIDING MEMBER: None of you are? 28 MR. SCHNEIDER: No. Les Services StenoTran Services Inc. 613-521-0703 1313 OHNC PANEL 2 1 THE PRESIDING MEMBER: Basically, it sets out 2 the way and the methodology and also sets out how the 3 result of an economic feasibility analysis should be 4 determined, whether or not the contribution in aid would 5 be, whether the profitability index is one or more or 6 less. Okay. So that is basically it. 7 The question is: Do you really see that the 8 transmission system code is going to provide a detailed 9 methodology such as that or do you think there is a need 10 for a detailed methodology that will be used by you in 11 the future beyond what this system code will do? In 12 other words, that may have some very general parameters 13 but when you get down to the details, such as for 14 certain classes of customer, how much is the revenue 15 horizon, you know, exactly, things like that, the 16 details? 17 MR. SCHNEIDER: From what I know of the work 18 on the system code, you are quite correct that from a 19 principle basis they are looking at things as to whether 20 the pool should be kept whole and how it should be kept 21 whole. 22 With respect to revenue horizons, they are 23 also looking at various time periods for different types 24 of investments ranging from those that are viewed as 25 being risky versus those viewed as being less risky or 26 more stable. Again, I can't say what the result will 27 be, but I have seen some numbers coming out of the work 28 in terms of revenue horizons. Les Services StenoTran Services Inc. 613-521-0703 1314 OHNC PANEL 2 1 When it gets down to further detail than that 2 in terms of what the discount rate should be and, you 3 know, a more detailed assessment, I would agree that 4 maybe we could learn from the decision in the gas 5 industry or borrow from that. 6 THE PRESIDING MEMBER: Right. 7 MR. SCHNEIDER: I'm not sure the system code 8 would go that far, but I can't be clear on that. 9 THE PRESIDING MEMBER: Does the system code 10 also deal with this perennial problem of customer 11 connection, which means what are the standard length or 12 equivalent in pipe terms, so much pipe and so much 13 electricity for connection? Does it deal with those 14 issues? 15 MR. SCHNEIDER: From my knowledge of what is 16 happening, they are looking at differences in 17 connections, "differences" meaning in terms of length, 18 geographic areas, types of customers connecting, but I 19 couldn't say at this point where that is headed. 20 THE PRESIDING MEMBER: So all these things, 21 then, will come out either in the distribution access 22 code or in some guidelines that then have to be 23 developed and approved by the Board. That is the bottom 24 line? 25 MR. SCHNEIDER: Did you mean the transmission 26 system code? 27 THE PRESIDING MEMBER: Transmission. I'm 28 sorry. I'm thinking of the distribution access code Les Services StenoTran Services Inc. 613-521-0703 1315 OHNC PANEL 2 1 because it is going on. 2 MR. SCHNEIDER: Yes. I would agree. 3 THE PRESIDING MEMBER: Yes. Okay. Thank you. 4 Yes, just a question. 5 Is it the delivery company which will -- now 6 we will make sure we get the name right here. Ontario 7 Hydro Delivery. Is that the same company of Ontario 8 Hydro or how is it structured? I was given to 9 understand that you said that it was a separate 10 incorporated company. 11 MR. CURTIS: Yes, it is. 12 THE PRESIDING MEMBER: Right. I'm aware that 13 you may have a common Board of Directors or the 14 individuals, should we say, on the Board of Directors 15 initially are Miss Eleanor Clitheroe and Rod Taylor, who 16 also fill similar functions for you as well and for your 17 parent company, Ontario Services Corporation. 18 MR. CURTIS: Our understanding is that Rod 19 Taylor is not a member of the Board of OHNC. 20 THE PRESIDING MEMBER: Okay. 21 MR. CURTIS: My understanding is that the 22 Board structure was set up so that it would be in 23 compliance with the affiliates relationship code in 24 terms of what was set out in that. I believe there 25 isn't any conflict. 26 THE PRESIDING MEMBER: Okay. You are saying 27 that, to your knowledge, the structure is appropriate as 28 allowed under the affiliates code. Les Services StenoTran Services Inc. 613-521-0703 1316 OHNC PANEL 2 1 MR. CURTIS: Yes, sir. 2 MR. PORAY: Yes. 3 MEMBER VLAHOS: This delivery company, that's 4 the company that also contracts the line connections 5 now? 6 MR. CURTIS: No. 7 MR. PORAY: No, it is not. 8 MR. CURTIS: That belongs to OHNC, the 9 network. 10 MEMBER VLAHOS: I just wanted to make sure of 11 the answer reported to me, that it still stood. 12 MR. CURTIS: Yes. 13 MEMBER VLAHOS: That's fine. 14 THE PRESIDING MEMBER: Thank you. Those are 15 our questions. 16 We have run late. We will try and come back 17 at 20 minutes after two, please. Then we will see where 18 we go next. 19 --- Upon recessing at 1308 20 --- Upon resuming at 1429 21 THE PRESIDING MEMBER: Thank you. Please be 22 seated. 23 I think there is just one preliminary matter. 24 I understand that there was discussion between Board 25 staff and the applicant regarding the undertakings. 26 MS LEA: That's right. 27 THE PRESIDING MEMBER: As a result of that, 28 there has been a proposal to redraft the undertaking. Les Services StenoTran Services Inc. 613-521-0703 1317 OHNC PANEL 2 1 Is that correct, Ms Lea? 2 MS LEA: That's right. I think it was just a 3 minor wording clarification in the second part of the 4 undertaking. Ontario Hydro has provided us with that. 5 I gave copies to the Board Panel Members. 6 The only difference, and I will read it into 7 the record, is in Part (b) of the undertaking. It now 8 reads: 9 "The purpose of this is to establish the 10 following:" 11 And this is the second part of the 12 undertaking: 13 "the number of Customer-Delivery points 14 that will not attract Line Connection 15 Charges under the assumption that only 16 Customers who are physically Connected to 17 Connection Line Assets attract Line 18 Connection Charges. In other words all 19 Customer Delivery Points tapped ... from 20 a line that is not a `Line Connection 21 Asset' will not attract Line Connection 22 Charges regardless of the length of that 23 `Dedicated Line Tap' which for the 24 purpose of this undertaking, [that 25 Dedicated Line Tap] should not be part of 26 the `Line Connection Pool'." 27 In addition to the number of customer delivery 28 points, the class of each transmission customer, the Les Services StenoTran Services Inc. 613-521-0703 1318 OHNC PANEL 2 1 amount of forecasted load in megawatts at each of the 2 delivery points and an estimate of the increase in the 3 line connection rate as a result of the stated 4 assumptions. 5 That was the second part of the undertaking 6 that was amended. I gather that now Hydro is content to 7 provide an answer to both parts of the undertaking. 8 MR. ROGERS: Yes. 9 THE PRESIDING MEMBER: Just a question with 10 respect to the amount of work involved. That is the 11 only concern we have. 12 MR. ROGERS: The first part, Dr. Higgin, is 13 not very onerous and they can do that quite easily. 14 It's the second part, it's Part B, that requires a fair 15 bit of amount of work. I'm told it will probably take 16 four or five days to compile that information. 17 THE PRESIDING MEMBER: Okay. The Board will 18 just consider this a little further and just be sure 19 that it is going to be very helpful to us before you do 20 that work. 21 MR. ROGERS: Thank you. We can do the first 22 part fairly easily. 23 THE PRESIDING MEMBER: So proceed as if the 24 first part is coming and we will consider whether it 25 will be helpful and we will let you know. 26 MR. ROGERS: Thank you very much. 27 MS LEA: Let's make that Undertaking F7.2. At 28 present that is only to undertake to answer the first Les Services StenoTran Services Inc. 613-521-0703 1319 OHNC PANEL 2 1 part of the undertaking. Then the Board Panel Members 2 will let us know if the second part is deemed to be 3 useful by them in their decision-making. 4 Thank you. 5 THE PRESIDING MEMBER: My colleague was just 6 asking. I think the first part does more or less stand 7 alone. 8 MR. ROGERS: Yes, I think so. 9 MS LEA: It certainly can be completed 10 independently, I believe. 11 MR. ROGERS: Yes. 12 UNDERTAKING NO. F7.2: OHNC undertakes to 13 answer the first part of Board Staff's 14 undertaking request dated February 23, 15 2000 16 THE PRESIDING MEMBER: So we will leave that 17 one there. 18 Are there any other preliminary matters? 19 That's it. 20 All right. Let's decide whether we are going 21 to deal discretely with the First Nations special 22 transmission rate or whether we are going to, as you 23 suggested, allow questions on the remaining part of 24 implementation. Do you have a view? 25 MR. ROGERS: It may be academic because -- I 26 may be wrong with this, but I know, of course, we will 27 have some questions from counsel for First Nations. I 28 don't know -- oh, we do have some other questions. Les Services StenoTran Services Inc. 613-521-0703 1320 OHNC PANEL 2 1 MS LEA: A few questions, yes, depending on 2 what these questions are. 3 MR. ROGERS: All right. I know that there is 4 one party that wishes to examine on the terms and 5 conditions of service. That's OPG. AMPCO does too. 6 Perhaps we should do them issue by issue then. 7 THE PRESIDING MEMBER: Yes. I think maybe 8 just to be clear that might be -- we don't want to get 9 the two things mixed up. With that, we will try and 10 deal with Issue No. 9.0. As I understand it, Mr. Vogel, 11 you also wish to ask questions about the consultation 12 process and so on as well as Issue No.9.0. 13 MS LEA: I think it's 10.0, isn't it? 14 THE PRESIDING MEMBER: Ten, sorry. Issue 15 No. 10.0. 16 MR. VOGEL: That's correct, Mr. Chair. I have 17 a few questions relating to the special consideration 18 for the First Nations. My associate, Ms Godby, has some 19 questions dealing with consultation. 20 THE PRESIDING MEMBER: All right. So why 21 don't we start -- whichever one would like to lead off, 22 MR. ROGERS: Thanks, Dr. Higgin. If I could 23 just ask a few questions just so the Board understands 24 the company's position on this issue. 25 THE PRESIDING MEMBER: Okay. 26 RE-EXAMINATION 27 MR. ROGERS: First of all, Mr. Schneider, I 28 think that you are the one that has volunteered to Les Services StenoTran Services Inc. 613-521-0703 1321 OHNC PANEL 2, re-ex (Rogers) 1 answer these questions or would be the principal 2 witness. 3 MR. SCHNEIDER: Yes. 4 MR. ROGERS: The company's proposal I do not 5 believe contains any recommendation for special 6 treatment for First Nation rates. Is that correct? 7 MR. SCHNEIDER: Yes. We don't have special 8 rates at all in the application. 9 MR. ROGERS: Is there anything more that you 10 can tell us about the company's position with respect to 11 this issue of special rates for First Nations? 12 MR. SCHNEIDER: As we have said several times 13 in the proceeding, we feel that all transmission 14 customers should be treated equally whenever possible. 15 MR. ROGERS: Thank you. Were you involved, by 16 the way, in the consultation process that we have heard 17 about? 18 MR. SCHNEIDER: Yes, I was. 19 MR. ROGERS: And did you have some dealing 20 with First Nation concerns during that consultation 21 process? 22 MR. SCHNEIDER: Yes, I did. 23 MR. ROGERS: All right. Thank you. You will 24 now be available for cross-examination, sir. 25 THE PRESIDING MEMBER: Okay. Then, Mr. Vogel, 26 if you would like to lead then, that's fine. 27 FURTHER CROSS-EXAMINATION 28 MR. VOGEL: Thank you, Mr. Chair. Les Services StenoTran Services Inc. 613-521-0703 1322 OHNC PANEL 2, cr-ex (Vogel) 1 Good afternoon, panel. 2 Mr. Curtis, I think I will come back to you. 3 I think that perhaps this is the most expeditious way to 4 deal with it. I think in your evidence to this point 5 you have indicated that subject to appropriate direction 6 being provided by the Board that it might be -- it would 7 be advantageous to the sorts of First Nation potential 8 projects we have looked at if they received special 9 consideration on some of these cost allocation issues. 10 Is that a fair summary? 11 MR. CURTIS: No, it isn't. As Mr. Schneider 12 just outlined, we are not advocating a special treatment 13 for First Nation concerns, but -- 14 MR. VOGEL: I understand, Mr. Curtis, that's 15 not part of the position you put forward, but as I have 16 understood your evidence as it has come out on Panels 17 Nos. 1 and 2 with respect to the questions that I have 18 put to you. 19 As I understood your position, it was if the 20 Board provided appropriate direction for special 21 consideration, then that special consideration might be 22 advantageous in connection with some of the good 23 extension generation type projects we looked at. Is 24 that fair? 25 MR. CURTIS: If the Board provides us with 26 special direction, then we would implement that special 27 direction. Yes. 28 MR. VOGEL: Okay. That's fair enough. I just Les Services StenoTran Services Inc. 613-521-0703 1323 OHNC PANEL 2, cr-ex (Vogel) 1 want to take you briefly, I think, to the Chiefs of 2 Ontario evidence with respect to the special directions 3 being requested as part of the First Nation intervention 4 in this application. It's at Exhibit H, Tab 30. It's 5 the evidence of Dr. Drinkwalter, which is sub-Tab 1 of 6 that evidence at page 32. 7 MR. CURTIS: Yes. We have it. 8 MR. VOGEL: I just want to run through some of 9 this briefly with you, in particular, the aspects of the 10 special direction being requested that relate uniquely 11 to the First Nation position. 12 I think to this point with respect to C, which 13 is elimination of the First Nations from the line 14 connection pool and with respect to H, that is exemption 15 from connection charges, and G, availability of net 16 billing on the new generation or at least increasing the 17 threshold, my understanding to the extent we dealt with 18 these issues was that we agreed that if the special 19 direction were provided by the Board, those things might 20 be advantageous to the First Nation projects we have 21 been looking at. Correct? 22 MR. CURTIS: I don't know if we agreed that it 23 might be advantageous. I think what we agreed is if the 24 Board gave us direction that this should be done that we 25 would implement as per direction of the Board. 26 MR. VOGEL: All right. And that at least to 27 the extent that it would relieve a cost burden on those 28 types of projects it would be advantageous to the Les Services StenoTran Services Inc. 613-521-0703 1324 OHNC PANEL 2, cr-ex (Vogel) 1 financial viability of those projects. 2 MR. CURTIS: Well, we are not party to the 3 actual financial evaluations of First Nations projects. 4 Again, it is our company's position that these 5 changes not be made. 6 MR. VOGEL: I understand that, Mr. Curtis, but 7 can we agree at least that to the extent that special 8 consideration might alleviate certain aspects of the 9 costs of those projects that that, from a financial 10 perspective, would be beneficial? 11 MR. CURTIS: Yes. 12 MR. VOGEL: Thank you. 13 With respect to the remainder of the 14 directions in the first paragraph there at pages 32 15 and 33, (a) relates to the 25-cycle system. 16 I was somewhat confused by a response. If I 17 could just clarify this, perhaps, with you. 18 Could you turn to Tab -- I'm sorry, that's 19 Exhibit E, Tab 30, Schedule 7, page 1. 20 --- Pause 21 MR. CURTIS: Yes, we have it. 22 MR. VOGEL: I would just refer you to 23 subparagraph (e) of your response. 24 My understanding, as a result of reading that 25 interrogatory and the response, was that the 25-cycle 26 system is separate from and does not benefit the 27 60-cycle system. Is that a correct understanding? 28 MR. PORAY: Yes. The 25-hertz system is Les Services StenoTran Services Inc. 613-521-0703 1325 OHNC PANEL 2, cr-ex (Vogel) 1 connected to the 60-hertz system. 2 MR. VOGEL: Is the answer to the interrogatory 3 incorrect? 4 MR. PORAY: It may be operated separately, but 5 physically it is connected. 6 MR. VOGEL: So is it fair to say it operates 7 separately and is of no benefit to the 60-cycle system. 8 Is that correct? 9 MR. PORAY: I think that's what have we stated 10 in the interrogatory. 11 MR. VOGEL: All right. 12 I guess in terms of the direction, then, to 13 the extent that the First Nations receive no benefit 14 from the 25-cycle system, and it was removed from the 15 costs recoverable from First Nations, again, that would 16 be a cost reduction which could be a financial advantage 17 to the types of projects being proposed by the First 18 Nations. 19 Is that fair, Mr. Curtis? 20 MR. CURTIS: Insofar as it might affect the 21 rates, yes. 22 MR. VOGEL: All right. 23 Looking at (b) and (d) of the first 24 subparagraph there, if the charges to First Nations were 25 energy-based and time-related and, as indicated there, 26 reflecting at least peak and off-peak hours, again, to 27 the extent that that effected a cost reduction for the 28 First Nations, would that be of potential advantage or Les Services StenoTran Services Inc. 613-521-0703 1326 OHNC PANEL 2, cr-ex (Vogel) 1 benefit to the financial viability of these projects? 2 MR. CURTIS: Well, first I think we are 3 speculating in terms of whether it would result in lower 4 costs to the First Nations moving to that. 5 MR. VOGEL: Fair enough. But if you made that 6 assumption that it did? 7 MR. CURTIS: If it reduced costs to First 8 Nations, yes. 9 MR. VOGEL: All right. 10 With respect to paragraph 2 on page 33 and the 11 various aspects there, those relate to certain 12 assistance in establishing management systems and 13 training and also financial assistance and concessions 14 to First Nations in acquiring and installation of 15 facilities. Can we agree that, again, subject to 16 appropriate direction being obtained from the Board, 17 that those would be of advantage to the First Nations in 18 pursuing these opportunities? 19 MR. CURTIS: OHNC's position obviously is 20 not -- is that these should not be provided. 21 MR. VOGEL: Yes. 22 MR. CURTIS: But given your question, if they 23 were provided then it would provide some advantage to 24 the First Nations in terms of their projects, yes. 25 MR. VOGEL: Thank you. 26 Those are my questions, Mr. Chair. 27 Ms Godby has some questions. 28 THE PRESIDING MEMBER: Right, thank you. Les Services StenoTran Services Inc. 613-521-0703 1327 OHNC PANEL 2 1 Ms Godby, please proceed. 2 MR. ROGERS: Mr. Chairman, if I could just say 3 it's sort of amicus curiae or maybe it's a carryover of 4 my old role before the Board, but I do recall during 5 Issues Day the Board decided that it didn't want to hear 6 questioning on the process. I believe. 7 Now, I don't object to it, but I just recall 8 that the Board was concerned about, it seems to me, 9 getting into this. 10 I'm quite happy to have the witnesses answer 11 questions, though, about process if the Board is 12 prepared to hear them. 13 THE PRESIDING MEMBER: Yes. I think we need 14 to understand the concerns and so we will spend some 15 time answering questions. 16 Thank you. 17 MS GODBY: Thank you very much, Dr. Higgin. 18 CROSS-EXAMINATION 19 MS GODBY: Panel members, good afternoon. I 20 will promise to try to be as brief as I can. 21 In the evidence on the first day of this 22 proceeding I understood, and correct me if I am wrong, 23 but this hearing is meant to set principles for the 24 future of transmission planning and rate design. Is 25 that correct? 26 MR. CURTIS: Yes, that is correct. 27 MS GODBY: There is no plan -- 28 MR. PORAY: Could I just clarify that? It's Les Services StenoTran Services Inc. 613-521-0703 1328 OHNC PANEL 2, cr-ex (Godby) 1 not transmission planning, it's cost allocation and rate 2 design. 3 MS GODBY: And rate design. 4 MR. PORAY: Yes. 5 MS GODBY: The principles that you have set 6 here are basically the building blocks for the future 7 and there are no plans at present to bring a further 8 rates application before the Board? 9 MR. CURTIS: We only have this -- 10 MS GODBY: This one. 11 MR. CURTIS: -- this one at present before the 12 Board, but obviously the company will in future be 13 bringing cost allocation and rate proposals to the 14 Board. 15 MS GODBY: But you don't know when that 16 will be? 17 MR. CURTIS: That's correct. 18 MS GODBY: As such, then, it is important to 19 you to consult in a meaningful way with those people who 20 may be affected by the decisions made in this 21 proceeding. Correct? 22 MR. CURTIS: That is correct. 23 MS GODBY: So if a party is involved in the 24 development, for instance of transmission lines and in 25 taking over local distribution companies which are going 26 to be connected to the grid, they would potentially be 27 impacted by decisions made in this hearing. Correct? 28 MR. CURTIS: I'm sorry, what was your first Les Services StenoTran Services Inc. 613-521-0703 1329 OHNC PANEL 2, cr-ex (Godby) 1 assumption there? 2 MS GODBY: If a party is involved in 3 developing, constructing transmission lines that are 4 going to be tied into the grid, in taking over local 5 distribution companies, in developing generation 6 projects which are going to be tied into the grid, those 7 parties would potentially be affected by the decisions 8 made in this hearing? 9 MR. CURTIS: That is correct. 10 MS GODBY: You felt, I take it, that it was 11 important that you consult with First Nations in this 12 process? 13 MR. CURTIS: Yes. 14 MS GODBY: If I can refer you gentlemen to the 15 Policy for Aboriginal Relationships, and that is in the 16 Chiefs of Ontario evidence which is at Exhibit H, 17 Tab 30. We have our sub-tabs, but I can tell you it is 18 behind -- it is the first appendix to Chief Bressette's 19 evidence. 20 MR. PORAY: Hang on for a second. We are just 21 getting there. 22 MS GODBY: Sure. Sure. 23 --- Pause 24 MS GODBY: I find it hard to believe, 25 Dr. Poray, that you just don't have that at your 26 fingertips. 27 MR. PORAY: I'm sorry. 28 --- Laughter Les Services StenoTran Services Inc. 613-521-0703 1330 OHNC PANEL 2, cr-ex (Godby) 1 MR. SCHNEIDER: What was the reference again? 2 MS GODBY: It's Exhibit H, Tab 30, and it is 3 the first schedule behind Tom Bressette's evidence, 4 Regional Chief, Thomas Bressette's evidence, which we 5 have it at sub-Tab 3, so it would be 3A. 6 MR. PORAY: Yes. 7 MS GODBY: You have it? 8 MR. PORAY: Yes. 9 MS GODBY: Okay. 10 If I can just turn your attention to the 11 paragraph under "Governing Principle". 12 MR. CURTIS: Okay. 13 MR. SCHNEIDER: Yes. 14 MR. PORAY: We are there. 15 MS GODBY: Okay. We have here: 16 "Ontario Hydro recognizes the distinct 17 legal, historical and cultural status of 18 Aboriginal peoples, including 19 specifically those rights of First 20 Nations described in the Statement of 21 Political Relationship, and will reflect 22 these rights in all its relationships 23 with First Nations, including the 24 resolution of historical grievances 25 against Ontario Hydro, the conduct of 26 current business and planning for the 27 future." 28 Now, I understand from your evidence the other Les Services StenoTran Services Inc. 613-521-0703 1331 OHNC PANEL 2, cr-ex (Godby) 1 day that OHNC as well is guided by this policy. 2 MR. CURTIS: Yes, we have taken these 3 policies. 4 MS GODBY: And is it fair to say that on a 5 reasonable interpretation of this policy the statement 6 recognizes rights in all relationships? That is a 7 fairly broad application of this policy and could in 8 fact, and should in fact, be applied to this 9 transmission rate and cost allocation and rate design 10 application. In fact, this policy should govern your 11 interaction or your relationship with aboriginal people 12 with respect to this application. 13 MR. CURTIS: Yes. And that's what we have 14 tried to do. 15 MS GODBY: If you can flip to the second page 16 of that policy, under the paragraph with the sub-heading 17 "Rationale", it says that: 18 "...Hydro owes the First Nations the 19 consideration and respect due to 20 governments. Among other things this 21 means that Ontario Hydro can not assume 22 that First Nations are to be treated as 23 Special Interest Groups." 24 This suggests to me, at least -- and please 25 confirm this -- that First Nations, given this policy, 26 are different than other stakeholders. 27 MR. CURTIS: Yes, that is correct. 28 MS GODBY: Was this policy part of your Les Services StenoTran Services Inc. 613-521-0703 1332 OHNC PANEL 2, cr-ex (Godby) 1 evidence that was prefiled? 2 MR. CURTIS: No, it wasn't. 3 MS GODBY: Can you tell me why not? 4 MR. CURTIS: We didn't think it was pertinent 5 as far as filing this with our evidence, because our 6 evidence that we filed was making up or reporting on the 7 results of our consultation process that we ran. 8 MS GODBY: But surely your evidence included 9 your methodology for consultation, did it not? 10 MR. CURTIS: Yes, it did. 11 MS GODBY: But this was not included. 12 MR. CURTIS: These policies were not included, 13 but the methodology that we followed in terms of the 14 stakeholdering that we did with First Nations was 15 included in our evidence. 16 MS GODBY: I understand your answer. 17 Can you tell me whether or not you referred to 18 this policy or whether or not you were guided by this 19 policy in undertaking your efforts to consult with First 20 Nations? 21 MR. CURTIS: We were guided by this policy, 22 yes. 23 MS GODBY: Do any of you on the panel have any 24 knowledge with respect to the genesis of this policy 25 which was developed in 1993? Do you know the reason 26 why? 27 MR. CURTIS: Not specifically, no. 28 MS GODBY: Well, generally. Les Services StenoTran Services Inc. 613-521-0703 1333 OHNC PANEL 2, cr-ex (Godby) 1 MR. CURTIS: I think we would be better to say 2 no, we don't. We were not involved in terms of the 3 development of this policy. 4 MS GODBY: But you are aware, then, that this 5 policy was developed in order to secure co-operation, if 6 you will, with First Nations because Hydro did not have 7 a very good track record with them up until -- well, 8 Hydro didn't have a very good track record with them. 9 Therefore, they felt that in order to secure First 10 Nations co-operation with them in developing Hydro 11 facilities on their territories, they had better start 12 looking at a new relationship with aboriginal people. 13 Is it fair to say that in a very broad, 14 general sense? Would you agree with that? 15 MR. CURTIS: I think I am having trouble with 16 your terminology of securing co-operation of First 17 Nations. 18 MS GODBY: Then why don't you give me your 19 understanding of it, Mr. Curtis. 20 MR. CURTIS: It was Ontario Hydro's effort to 21 establish a better relationship with First Nations. 22 MS GODBY: Because they had a poor track 23 record in dealing with aboriginal people in the past? 24 If they had a good relationship with them, 25 they would not have needed to develop a better 26 relationship with them. Would you agree with that? 27 MR. ROGERS: Excuse me. There are two 28 questions there. Perhaps we could do the first one Les Services StenoTran Services Inc. 613-521-0703 1334 OHNC PANEL 2, cr-ex (Godby) 1 first, if you can remember it. 2 MR. CURTIS: No, I can't. 3 MS GODBY: I don't know if I can remember it 4 either. 5 My question originally was whether or not you 6 would agree with me that the reason why they needed to 7 develop this special protocol, or this special 8 relationship with aboriginal people, was because they 9 didn't have a very good relationship with them in the 10 past. 11 And I will qualify that. By that, I mean they 12 did not undertake to consult with aboriginal people in 13 the past. They didn't attempt to involve them, to a 14 great extent, in the past with respect to decisions 15 which may have impacted on their interests. 16 MR. CURTIS: I would disagree with that 17 characterization. The development of a better 18 relationship with all of our customers is one of the 19 company's objectives. The development of these polices 20 that you are citing was an effort to do that with the 21 First Nations communities. 22 On Ontario Hydro's side I believe -- again, I 23 don't know this for a fact, but I believe that the 24 company always felt that it did deal with the First 25 Nations communities on an appropriate basis. But 26 obviously on the First Nations side they did not feel 27 that that was happening. 28 The policy that we are talking about here was Les Services StenoTran Services Inc. 613-521-0703 1335 OHNC PANEL 2, cr-ex (Godby) 1 directed towards an effort to improving that overall 2 relationship between Ontario Hydro and the First 3 Nations. 4 MS GODBY: Is it your evidence, Mr. Curtis, 5 that Hydro had a good relationship with aboriginal 6 people in the past? 7 MR. CURTIS: We haven't filed any evidence on 8 that. 9 MS GODBY: I am not asking if you filed it. I 10 am asking you for your opinion. 11 MR. ROGERS: Mr. Chair, he can't speak for 12 Ontario Hydro. This is not Ontario Hydro any more. 13 THE PRESIDING MEMBER: I think the extent of 14 this is that he recognized the policy was in place and 15 that they were, in their view, guided by the policy in 16 the consultation. That is the evidence. I think that 17 is really -- 18 The relevant question here is: Did they do 19 some things which were, in your view, inappropriate? 20 Did they not follow the policy or did they screw up -- 21 my word -- in some way? That is really what I would 22 like to explore. 23 MS GODBY: Okay, Dr. Higgin; thank you. 24 Could you turn, gentlemen, please, to 25 Exhibit B, Tab 5, page 11. 26 MR. ROGERS: I'm sorry, Ms Godby, could you 27 give me the reference again, please. 28 MS GODBY: Sure, Mr. Rogers. It is Exhibit B, Les Services StenoTran Services Inc. 613-521-0703 1336 OHNC PANEL 2, cr-ex (Godby) 1 Tab 5, page 11. I am looking at a paragraph which is 2 just about at the centre of the page. It starts on 3 line 16. 4 Do you have the reference? 5 MR. CURTIS: Yes, we do. 6 MS GODBY: This is dealing with essentially 7 what we have termed before the methodology behind the 8 consultation process. 9 MR. CURTIS: Yes. 10 MS GODBY: The consultant said that the core 11 feature or second core feature is ensuring that the 12 process addresses the needs of stakeholders whose 13 knowledge levels and consequently information needs 14 differ widely. As a result, different consultation 15 channels were developed for different stakeholder 16 groups, leading to a multi-channel consultation process. 17 What that suggests to me is that where the 18 needs and knowledge levels of different stakeholders 19 were different, you were going to try and respond to 20 that by developing different methods to deal with them. 21 Is that correct? 22 MR. CURTIS: That is correct. 23 MS GODBY: In general -- and I realize that 24 you may not be able to answer this with any 25 particularity. 26 But in general, would you agree with me that 27 the representatives of the First Nations as a whole were 28 less sophisticated than a lot of your other Les Services StenoTran Services Inc. 613-521-0703 1337 OHNC PANEL 2, cr-ex (Godby) 1 stakeholders, in terms of their knowledge of these 2 transmission issues? 3 MR. CURTIS: In fact, we found that some of 4 the First Nation communities that we talked with had a 5 very detailed knowledge of the issues that we are 6 talking about. It varied widely, I would admit that, 7 within the First Nation communities, but some of them 8 did really understand the issues that we were coming to 9 talk with them about. 10 MS GODBY: I am sure that there are exceptions 11 to the rule, but generally, were they as sophisticated, 12 for instance, as your stakeholders that would appear on 13 behalf of AMPCO or IPPSO? 14 MR. CURTIS: I think you are talking about one 15 end of the spectrum of stakeholders in terms of when you 16 refer to AMPCO and IPPSO. No, I would not suggest that 17 the First Nation communities that we talked with met 18 with that level of sophistication. 19 MS GODBY: Thank you. 20 MR. CURTIS: But on the other hand, in terms 21 of AMPCO and IPPSO, we could point to other stakeholder 22 groups apart from the First Nations that had a less 23 sophisticated understanding of the issues. 24 MS GODBY: I understand that you sent material 25 to the stakeholders that were involved in the 26 stakeholdering process, being the Transmission 2000 27 document and things like that? 28 MR. CURTIS: Yes, we did. Les Services StenoTran Services Inc. 613-521-0703 1338 OHNC PANEL 2, cr-ex (Godby) 1 MS GODBY: Is that correct? 2 MR. CURTIS: Yes, we did. 3 MS GODBY: Did you send the same material to 4 all of your stakeholders, or did the material vary 5 stakeholder to stakeholder? 6 MR. CURTIS: There was some variation in it, 7 yes. 8 MS GODBY: What variation -- did the First 9 Nations receive different materials than your other 10 stakeholders? 11 MR. CURTIS: To some extent they did, yes. 12 MS GODBY: Can you tell me what that different 13 material was? 14 MR. SCHNEIDER: Maybe I could help. 15 I would suggest that the First Nations 16 communities who we contacted were receiving virtually 17 all the information in terms of the Transmission 2000 18 document out from OHNC, for consultation purposes. 19 In addition, they received a couple of other 20 pieces of information that were put together by a 21 consultant group specific to the First Nations. I 22 believe it was called an "Issues Analysis" paper. That 23 is referenced in Exhibit B, Tab 6, I believe, in 24 the Centre for Indigenous Sovereignty report by the 25 consulting firm. 26 MS GODBY: Did the Centre for Indigenous 27 Sovereignty, did they have any technical expertise in 28 transmission issues? Les Services StenoTran Services Inc. 613-521-0703 1339 OHNC PANEL 2, cr-ex (Godby) 1 MR. SCHNEIDER: No, we spent some time with 2 them helping them understand what the issues were that 3 we wanted to communicate and consult with First Nations 4 communities. 5 MS GODBY: But they are not -- their area of 6 specialty is their forte, if you will, with First 7 Nations, not with transmission issues. Correct? 8 MR. SCHNEIDER: I would say their forte seems 9 to be that as well as facilitation in getting groups 10 together for consultation purposes. 11 MS GODBY: But not transmission issues? 12 MR. SCHNEIDER: No. 13 MS GODBY: Okay. 14 I understand that with the assistance of the 15 Centre for Indigenous Sovereignty that you set up six 16 sessions with First Nations to consult with them. Is 17 that correct? 18 MR. SCHNEIDER: That is correct, six 19 roundtable sessions. 20 MS GODBY: Between August 17th and 21 August 26th, so that was within a nine-day time frame. 22 Is that correct? 23 MR. SCHNEIDER: That sounds correct, yes. 24 MS GODBY: That was August 17th. When was 25 your application filed? 26 MR. SCHNEIDER: October 1st, 1999. 27 MS GODBY: So we are looking at what, six 28 weeks, six weeks prior to your application being Les Services StenoTran Services Inc. 613-521-0703 1340 OHNC PANEL 2, cr-ex (Godby) 1 filed -- is that correct? Is my math right there -- 2 you consulted with First Nations. 3 MR. SCHNEIDER: Approximately six weeks is 4 when we were up meeting with First Nations. They had 5 the material prior to that. 6 MS GODBY: How much prior? 7 MR. SCHNEIDER: I believe approximately three 8 weeks prior to the first roundtable. 9 MS GODBY: In addition to the information 10 being sent up, did OHNC send up any people to advise 11 them with respect to technical issues? Did you supply 12 them with technical expertise or advice? 13 MR. SCHNEIDER: We provided that expertise at 14 the roundtable sessions themselves. Prior to the 15 roundtable I believe the consulting firm, the Centre for 16 Indigenous Sovereignty, had contacted First Nations and 17 with the material sent to them advised the community 18 that if they had any questions they could contact them 19 or us. 20 MS GODBY: But my question, Mr. Schneider, is 21 this: Did your company provide them with somebody to 22 give them some sort of technical assistance or expertise 23 prior to the roundtables? 24 MR. SCHNEIDER: We provided them with the 25 opportunity to contact us to get that information. 26 I would also like to add -- I am not sure if 27 it has been raised -- that in the broader stakeholder 28 effort that we conducted beginning back in May, I guess, Les Services StenoTran Services Inc. 613-521-0703 1341 OHNC PANEL 2, cr-ex (Godby) 1 just after we had the rate order from the Board on our 2 past application asking us to develop the rate 3 application, within the broader stakeholder community 4 there were approximately six to eight representative 5 groups of First Nations who were included in the broader 6 consultation process as well, one being The Chiefs of 7 Ontario. So that they had received all of the 8 information that all the stakeholders in the broader 9 community received in a timely way just as if they were 10 another stakeholder. 11 MS GODBY: I am sorry, you said that -- when 12 did this broader stakeholder activity take place? 13 MR. SCHNEIDER: I believe the first -- you are 14 taxing my memory -- but I think the first written 15 communication that went out was probably early June. 16 MS GODBY: And it is -- 17 MR. SCHNEIDER: Four to six weeks after -- 18 sorry -- six to eight weeks after we had gotten the rate 19 order on April 1st. 20 MS GODBY: Was there active participation by 21 First Nations in this activity? 22 MR. SCHNEIDER: They received all of the 23 materials. I don't recall if they had attended any of 24 the sessions. 25 MS GODBY: Thank you. 26 --- Pause 27 MS GODBY: I am just trying to summarize here. 28 We have got six roundtables in about nine days Les Services StenoTran Services Inc. 613-521-0703 1342 OHNC PANEL 2, cr-ex (Godby) 1 with First Nations and these roundtables, if I am not 2 mistaken, took place primarily in the north with one 3 roundtable being held in Toronto. This was to canvass 4 the opinions or the input of 134 First Nations 5 throughout the province, and this took place 6 approximately six weeks before your application was 7 filed? 8 Is that a fair summary? 9 MR. SCHNEIDER: I think with the qualification 10 that they had received the materials prior to the 11 roundtable and had an opportunity to ask questions if 12 they had them. 13 But you are correct in saying that there was 14 six roundtables, five in the north and one in the 15 Toronto area. The locations were selected based on 16 advice from our consulting group in turns of pulling 17 people together from various First Nations across the 18 province. 19 MS GODBY: In September of 1999, 20 Mr. Schneider, I understand that you received a report 21 from the Centre for Indigenous Sovereignty, correct, 22 regarding the First Nation roundtable? 23 MR. SCHNEIDER: We received a draft report 24 that eventually became a final report that was filed in 25 the evidence, yes. 26 MS GODBY: And that report appears at 27 Exhibit B, Tab 6? 28 MR. SCHNEIDER: That's correct. Les Services StenoTran Services Inc. 613-521-0703 1343 OHNC PANEL 2, cr-ex (Godby) 1 MS GODBY: Okay. If you want to just turn to 2 that for a minute. 3 --- Pause 4 MS GODBY: If we turn to page 2, would you 5 agree with me that this report prepared by the Centre 6 for Indigenous Sovereignty raises certain concerns? I 7 will put them to you. 8 The first concern is that there -- if we look 9 down to the first paragraph under the heading "Summary 10 of General Issues Raised", we see that there was a 11 concern noted that there was not sufficient time given 12 to allow the First Nations to effectively participate in 13 the OHNC consultations. That was the first concern. 14 The second concern that was raised by this 15 report, as I read it, is that the information that they 16 received was very technical and difficult for them to 17 understand. 18 The third concern -- I am just outlining the 19 concerns here -- the third concern is that the 20 information did not reach them in a timely fashion. 21 Would you agree with me that those concerns 22 are set out in this paper? 23 MR. SCHNEIDER: Yes, I see those concerns. 24 They are probably concerns raised by a number of 25 stakeholders other than First Nations themselves. 26 MS GODBY: Well, we are not talking about 27 other stakeholders, actually. We are just talking about 28 First Nations. Les Services StenoTran Services Inc. 613-521-0703 1344 OHNC PANEL 2, cr-ex (Godby) 1 In light of this, would you agree with me that 2 the general overall picture is that First Nations are 3 saying, "Look, you know, we don't feel that we were 4 adequately consulted here"? If you take these concerns, 5 you read the general issues raised, would you agree with 6 me that is what they are saying? 7 MR. SCHNEIDER: I think what I am reading here 8 is an accurate reflection of what was heard at the 9 roundtable sessions. The sessions would generally start 10 off with a general discussion about the issues and about 11 the restructuring in the industry and these comments -- 12 at least, my recollection of these comments -- were 13 general comments about the industry itself as well as 14 the application, as well as a lot of things. 15 MS GODBY: Mr. Schneider, if you are a 16 reasonable person rating this report and you see these 17 issues raised, the three that I just pointed out, would 18 you agree with me that what they are saying, what the 19 First Nations are saying in this report is, "We don't 20 feel that we were consulted properly"? A reasonable 21 interpretation? 22 MR. SCHNEIDER: I think there is a difference 23 between being consulted properly and just not having 24 enough time to absorb the material. I don't think I 25 could agree with you. 26 MS GODBY: Mr. Schneider, I understand that 27 the OHNC, yes, received this report in or about 28 September of '99. Is that correct, the draft report? Les Services StenoTran Services Inc. 613-521-0703 1345 OHNC PANEL 2, cr-ex (Godby) 1 MR. SCHNEIDER: It was during the month of 2 September. 3 MS GODBY: During the month of September. 4 MR. SCHNEIDER: Yes. 5 MS GODBY: Can you tell me what if any steps 6 you took to rectify or remedy some of these concerns 7 that were addressed here by the First Nations? 8 --- Pause 9 MR. SCHNEIDER: Can you rephrase that or 10 clarify it? I'm not sure what you are asking. 11 MS GODBY: I'm just asking you what if 12 anything did you do to help them out here, to address 13 the concerns that they raised in this report? Did you 14 do anything? 15 MR. SCHNEIDER: Well, we incorporated the 16 inputs that they provided to the issues of cost 17 allocation and rate design into our considerations for 18 our proposal. If you are talking about the specific 19 concern about -- 20 MS GODBY: I'm talking about the three issues 21 that I just raised. 22 MR. SCHNEIDER: In an effort to keep them 23 informed, we continued to send the materials out to 24 them, as we would with all of the stakeholders. 25 MS GODBY: But nothing specific was done. 26 Like, you didn't call them up or call up a 27 representative? Did you attend any community meetings 28 to try and provide some more technical advice to them? Les Services StenoTran Services Inc. 613-521-0703 1346 OHNC PANEL 2, cr-ex (Godby) 1 Did you attend any chief -- well, answer that first. 2 Did you attend any community meetings? 3 MR. SCHNEIDER: I didn't personally, but we do 4 have another function within the company to deal with 5 aboriginal relations and a person from that function 6 within the company attended all of the roundtables as 7 well. It was her responsibility, as part of her job, to 8 continue on with building relationships with First 9 Nations people. 10 MS GODBY: But this company, subsequent to 11 receiving this report on transmission, cost allocation 12 and rate design -- what if anything did you do to 13 address these concerns? Did you attend community 14 meetings? Did anyone from your company attend community 15 meetings? 16 MR. CURTIS: Yes. Yes, I did. 17 MS GODBY: Subsequent to receiving this 18 report? 19 MR. CURTIS: Subsequent to receiving the 20 report. 21 MS GODBY: And you provided technical advice? 22 MR. CURTIS: I was there to answer questions 23 and to try and help out, yes. 24 MS GODBY: Is there any report that you 25 prepared as a result of your attendance at these 26 meetings, Mr. Curtis? 27 MR. CURTIS: Not that we have filed, no. 28 MS GODBY: Is there any evidence at all of -- Les Services StenoTran Services Inc. 613-521-0703 1347 OHNC PANEL 2, cr-ex (Godby) 1 I mean, how many meetings. Sorry. Sorry. 2 How many meetings did you attend? 3 MR. CURTIS: I think there were two. 4 MS GODBY: Did they specifically address the 5 concerns that were raised in this paper? 6 MR. CURTIS: They referenced this issue that 7 we are talking about in terms of transmission rate 8 design. 9 MS GODBY: Who can you tell me was present at 10 the meetings? 11 MR. CURTIS: I'm not sure I could do that 12 right now, but if you are interested we could bring back 13 a list. 14 MS GODBY: Perhaps we could ask for an 15 undertaking, if that is appropriate. 16 MR. CURTIS: And you are just interested in 17 the people that attended at these meetings? 18 MS GODBY: And where. 19 MR. CURTIS: And where the meetings took 20 place? 21 MS GODBY: Yes. That's correct. 22 THE PRESIDING MEMBER: These are the meetings 23 that were held subsequently to the report and after the 24 application was filed? 25 MR. CURTIS: I think I would like to do the 26 whole time spectrum, if that is appropriate. 27 THE PRESIDING MEMBER: Between when and when? 28 MR. CURTIS: It's between when we completed Les Services StenoTran Services Inc. 613-521-0703 1348 OHNC PANEL 2, cr-ex (Godby) 1 the initial stakeholdering with First Nations -- 2 THE PRESIDING MEMBER: That was finished at 3 the end of August, yes. 4 MR. CURTIS: Yes -- through to maybe the end 5 of October. 6 THE PRESIDING MEMBER: All right. That would 7 be fine. 8 MS GODBY: If I could just clarify my 9 understanding of the undertaking, Dr. Higgin. As I 10 understand it, Mr. Curtis will provide us with where the 11 meetings took place, who was present and the subject 12 matter of the meeting. 13 MR. CURTIS: Yes. To the best of our ability, 14 yes. 15 MS GODBY: Okay. And certainly, Mr. Curtis, 16 if there are any minutes that were taken at those 17 meetings that are available, we would like to see those 18 as well. 19 MR. CURTIS: Yes. I don't think there were 20 minutes taken, but if there were we will -- 21 MR. ROGERS: We will take that under 22 advisement. I would like to see what is involved before 23 I make the undertaking, but we will certainly provide 24 the information that has been requested other than the 25 minutes. I will look and see whether there are any 26 minutes and if I don't produce them I will tell you why. 27 THE PRESIDING MEMBER: Yes. We will take the 28 undertaking, and it is on a best efforts to provide Les Services StenoTran Services Inc. 613-521-0703 1349 OHNC PANEL 2, cr-ex (Godby) 1 information on meetings held between the end of August 2 and we will say the end of October 1999 with First 3 Nations representatives. 4 MR. CURTIS: Yes. 5 MS LEA: F7.3 6 UNDERTAKING NO. F7.3: Mr. Curtis 7 undertakes on a best efforts basis to 8 provide information relating to meetings 9 held with First Nations representatives 10 between August and October 1999 11 THE PRESIDING MEMBER: My colleague has a 12 question. 13 MEMBER VLAHOS: Ms Godby, could I clarify 14 something? 15 On a number of occasions you asked the company 16 whether they provided any expert advice. 17 MS GODBY: Yes. 18 MEMBER VLAHOS: Could you clarify that for us? 19 Are you referring to people knowledgeable about the cost 20 allocation and rate design matters or are your referring 21 to the company perhaps assisting in hiring a consultant 22 to assist the First Nations? I'm not sure which one you 23 mean. 24 MS GODBY: It is the former, sir. 25 MEMBER VLAHOS: The former. 26 MS GODBY: Yes. What I was talking about was 27 advice, technical expertise, to assist First Nations in 28 understanding the very technical issues involved in Les Services StenoTran Services Inc. 613-521-0703 1350 OHNC PANEL 2, cr-ex (Godby) 1 transmission, rate design and cost allocation, things 2 like charge determinants and peak and off-peak and 3 coincident peak that I have been trying to grapple with 4 for the last several months. 5 THE PRESIDING MEMBER: We too have been 6 grappling with them. 7 MEMBER VLAHOS: So you are looking for if 8 there were people, apart from the people that actually 9 organize the meetings -- say, the people, for example, 10 on this panel -- if any of those people were in those 11 meetings? 12 MS GODBY: That's correct. 13 MEMBER VLAHOS: That would constitute, in your 14 opinion, expert -- 15 MS GODBY: Technical expertise, yes. 16 MEMBER VLAHOS: Technical expertise. 17 MS GODBY: Yes. 18 MEMBER VLAHOS: Okay. Thank you. 19 THE PRESIDING MEMBER: Okay. Thank you. 20 MS GODBY: Finally, gentlemen, just one other 21 question. I see at Exhibit B, Tab 8, Schedule 2, you 22 have filed what is called a "Stakeholder Advisory Team 23 Report". Were the First Nations involved in that? 24 MR. SCHNEIDER: No, they were not. 25 MS GODBY: In Schedule A, actually, there are 26 members of the advisory team that are listed. 27 Can you tell me whether or not any of those 28 members of the advisory team are not transmission Les Services StenoTran Services Inc. 613-521-0703 1351 OHNC PANEL 2, cr-ex (Godby) 1 customers? 2 MR. CURTIS: Do you mean not specifically 3 transmission customers? 4 MS GODBY: Yes. Which ones aren't. 5 --- Pause 6 MR. SCHNEIDER: Maybe I can ask for a 7 clarification. Do you mean directly a customer or they 8 are representing a transmission customer? For example, 9 AMPCO was on the team. Now, they are not a customer, 10 but they are representing transmission -- 11 MS GODBY: Sure. No, no. I mean, I 12 understand that AMPCO represents a large number of 13 consumers and, you know, many of those are transmission 14 customers. I am asking you, of those associations 15 which -- for instance, the Ontario Federation of 16 Agriculture and the people that they represent, are they 17 transmission customers? They are not, are they? 18 MR. CURTIS: I'm not sure I could speak on 19 behalf of them. They have made an appearance several 20 times here. They are certainly a stakeholder in the 21 process. 22 MS GODBY: Sure. I'm asking you, though, if 23 they are transmission customers. 24 MR. CURTIS: You mean are any farms directly 25 connected to the transmission system? 26 MS GODBY: Yes. 27 MR. CURTIS: No. Not to the best of my 28 knowledge. Les Services StenoTran Services Inc. 613-521-0703 1352 OHNC PANEL 2, cr-ex (Godby) 1 MS GODBY: What about Green Energy Coalition? 2 MR. CURTIS: I don't think any of their 3 particular members would be directly connected to the 4 transmission system. 5 MS GODBY: Energy Probe? 6 MR. CURTIS: Again, they are not directly 7 connected to the transmission system. 8 MS GODBY: Thank you. Those are my questions. 9 THE PRESIDING MEMBER: Thank you. 10 Just to clarify that, if you look at the 11 Board's cost award guidelines that clearly identifies 12 groups which are not directly customers as public 13 interest groups. 14 All right. Thank you. 15 We will now go on to Issue No. 11.0. 16 MS LEA: Actually, sir, I do have a few 17 questions, if it is possible. 18 THE PRESIDING MEMBER: You have some 19 questions? 20 MS LEA: Yes. 21 THE PRESIDING MEMBER: All right. 22 FURTHER EXAMINATION 23 MS LEA: Thank you. 24 Gentlemen, you mentioned that there was 25 another department or division that deals with 26 aboriginal relations or issues. Is that a division 27 within Ontario Hydro Networks Company? 28 MR. CURTIS: Yes, it is. Les Services StenoTran Services Inc. 613-521-0703 1353 OHNC PANEL 2, ex (Lea) 1 MS LEA: What is the name of that division? 2 MR. SCHNEIDER: I believe it is Aboriginal 3 Relations but I'm not absolutely sure. 4 MS LEA: Okay. 5 The protocol which is requested in the 6 evidence of the Chiefs of Ontario, would that be 7 developed by your part of the business or by the 8 Aboriginal Relations area? 9 MR. SCHNEIDER: Do you mean the policy that 10 was referred to? 11 MS LEA: Yes. 12 MR. SCHNEIDER: That policy, I believe, was 13 developed, as was mentioned in 1993 by Ontario Hydro. 14 MS LEA: No. Sorry. I'm not talking about 15 the policy. 16 MR. SCHNEIDER: Sorry. 17 MS LEA: The Chiefs of Ontario in their 18 evidence request that the Board direct OHNC to develop a 19 protocol in consultation with the First Nations which 20 provides a framework for the negotiation of contracts. 21 Who would deal with that in OHNC? 22 MR. SCHNEIDER: I would suspect that it would 23 be through our aboriginal relations group. 24 MS LEA: Now, the evidence also suggest that 25 the First Nations' interest should be represented in 26 such consultation, as I understand the evidence, and 27 they may have further clarification on this when the 28 panel takes the stand, that the First Nations' interests Les Services StenoTran Services Inc. 613-521-0703 1354 OHNC PANEL 2, ex (Lea) 1 should be represented by the Chiefs of Ontario. 2 In your experience, does anyone else 3 representing a First Nations group need to be included 4 or do you have that knowledge? 5 MR. SCHNEIDER: I guess I can offer that we 6 did have about six to eight aboriginal representative 7 groups on our broader consultation -- on our 8 distribution list in the broader consultation program. 9 Whether I can say that they ought to be representing 10 First Nations in place of Chiefs of Ontario, I don't 11 think I am in a position to say that. 12 MS LEA: No. That wasn't my question. Are 13 there groups besides the Chiefs of Ontario that were on 14 your list? 15 MR. SCHNEIDER: Yes. 16 MS LEA: Okay. Thank you. Now, at page 29 of 17 their evidence, the Chiefs of Ontario talk about the 18 establishment of an assistance and establishment and 19 management system. Page 29 of the Chiefs of Ontario 20 evidence. That's after Tab 1, page 29 after Tab 1. 21 MR. SCHNEIDER: Yes, we have it. 22 MS LEA: You have that. Okay. The section is 23 entitled "Assistance in establishing a management 24 system". Do you have any comment as to whether this is 25 a practical or desirable way for Ontario Hydro Networks 26 Company to render assistance? 27 MR. CURTIS: It's certainly a possible way, 28 but I don't know that it would necessarily be the most Les Services StenoTran Services Inc. 613-521-0703 1355 OHNC PANEL 2, ex (Lea) 1 efficient way for us to offer assistance. Many of the 2 items on here appear to be at an administrative level in 3 terms of things like copying and -- 4 MS LEA: Who would the Chiefs of Ontario go to 5 if they wanted to start discussions about such a system? 6 MR. CURTIS: It would start off with our 7 aboriginal affairs group that we have talked about. 8 MS LEA: Okay. 9 MR. CURTIS: And they would make contacts 10 within the company to provide the various services that 11 they have listed here. 12 MS LEA: Is that kind of assistance -- does it 13 need to be reinforced by an order of this Board? 14 MR. CURTIS: Yes, because we are not 15 advocating -- 16 MS LEA: I'm sorry. Does the Board need to 17 make an order in order that the First Nations have an 18 opportunity to contact and have discussions regarding 19 this assistance? 20 MR. CURTIS: Oh, no, no. In terms of actually 21 coming and talking with us, no. We have ongoing 22 relationships with First Nations. 23 MS LEA: On page 30 of the Chiefs of Ontario 24 evidence, over the page there is a section entitled 25 "Reducing the barriers for new organizations". If these 26 actions were undertaken by Ontario Hydro Networks 27 Company, would there be any economic impact on other 28 transmission customers? Les Services StenoTran Services Inc. 613-521-0703 1356 OHNC PANEL 2, ex (Lea) 1 MR. CURTIS: All of these would represent a 2 cost to OHNC and that would be recovered through the 3 rates charged to all customers, so implicitly it would. 4 MS LEA: Would any particular group of 5 customers suffer more than another or would all other 6 transmission customers -- it would be divided among 7 them. 8 MR. CURTIS: It would appear that it would be 9 divided among all of the customers within Ontario. 10 MS LEA: At page 31 there is a discussion at 11 number three, right at the bottom of the page, of 12 commercial contracts entered into between OHNC and First 13 Nations. Then it reads -- it talks about these 14 contracts being assessed by the Board in considering 15 approval of the contracts, rather the extent to which 16 the possible actions are implemented would be assessed 17 by the Board in considering approval of these contracts. 18 Do you know what type of commercial contracts 19 are being discussed here and whether in fact they 20 require Board approval? 21 MR. CURTIS: There wasn't enough detail under 22 this particular item to inform us of the extent of that. 23 We are aware of, for example, some commercial activities 24 that the First Nations -- some First Nations are 25 engaging in in terms of transmission investment 26 themselves which would require, for example, connection 27 with the Ontario OHNC's transmission network. 28 Insofar as we know about those, they would Les Services StenoTran Services Inc. 613-521-0703 1357 OHNC PANEL 2, ex (Lea) 1 have to be brought at some point before the Board in 2 terms of approving transmission rates, for example. 3 MS LEA: In approving what? Sorry. 4 MR. CURTIS: Transmission rates. 5 MS LEA: Rates, yes. I see. So it might be 6 part of a rates case if those contracts affected the 7 rate to be charged. 8 MR. CURTIS: Yes. 9 MS LEA: I wonder if you could turn for a 10 moment to page 17 of Tab 1 of the Chiefs of Ontario 11 evidence. Page 17 of Tab 1. 12 MR. CURTIS: Yes. 13 MS LEA: There is a mention, I think in the 14 third paragraph, beginning with the word "Acceptance". 15 It states: 16 "Acceptance of OHNC's proposals for both 17 the power district concept and the charge 18 determinants imposes higher costs of $18 19 million annually on all other, 20 non-Direct, customers of 21 OHNC-Distribution." 22 The next paragraph states: 23 "This represents an increase to these 24 customers of 11.77%." 25 Can you state whether or not that is accurate? 26 MR. CURTIS: I think if we go to the exhibit 27 that they reference in Tab D -- sorry, Exhibit D, on 28 that table, I believe that's a percentage that's shown Les Services StenoTran Services Inc. 613-521-0703 1358 OHNC PANEL 2, ex (Lea) 1 as far as the impact of moving away from the power 2 district concept and its impact on the rates that would 3 be charged to the distribution portion of OHNC. 4 MS LEA: How can you justify -- 5 MR. CURTIS: Maybe we can consult that if you 6 want. 7 MS LEA: No. I will believe you if you say 8 it's there. I didn't doubt it's accuracy. How can you 9 justify such a large percentage increase when, as the 10 Chiefs of Ontario point out in their evidence, 5 per 11 cent was considered to be a significant impact in your 12 opinion. 13 MR. CURTIS: Yes. It is a significant impact. 14 MS LEA: Why should the Board accept it? 15 MR. CURTIS: I think Dr. Poray talked about it 16 in one of the previous panels in terms of the 17 requirement to unbundle the power district as part of 18 the restructuring and to ensure that OHNC Distribution 19 is treated equivalently to other MEUs. It's an aspect, 20 if you will, of the restructuring of the electricity 21 marketplace. Indeed, it exceeds the 5 per cent that we 22 have talked about, but it's a requirement in terms of 23 the unbundling. 24 MR. PORAY: I think, if I may just add to 25 that, the unbundling of the power district is not really 26 a transmission rate design issue. It comes about as a 27 result of the restructuring. 28 MS LEA: And do you feel that OHNC could Les Services StenoTran Services Inc. 613-521-0703 1359 OHNC PANEL 2, ex (Lea) 1 change or alter then this requirement? 2 MR. CURTIS: To unbundle the power district? 3 MS LEA: Well, yes, and to thereby reduce this 4 rate impact. 5 MR. PORAY: Well, I think it hinges on the 6 fact that OHNC-D as a distribution entity has to be 7 treated in the same way as all the other distribution 8 entities in the province. 9 MS LEA: One moment, please. 10 Thank you very much for your answers, 11 gentlemen. 12 Thank you, Mr. Chairman. 13 THE PRESIDING MEMBER: Thank you 14 Mr. Smith has a question. 15 MEMBER SMITH: A slightly different tack for a 16 second. On the old hydro rural rate assistance, can you 17 tell me briefly what has happened to that and are you 18 involved or any part of your organization involved in 19 the continuation of that program? 20 MR. CURTIS: Yes. That still continues on. 21 Basically I am assuming that you are aware the rural 22 rate assistance was a way of trying to equalize, if you 23 will, rates across the province in terms of what was 24 being delivered to the rural customers versus the urban 25 customers. 26 This was again a bundled rate regulation that 27 the government had passed. We understand that this rate 28 is going to be redrafted because it is a bundled rate Les Services StenoTran Services Inc. 613-521-0703 1360 OHNC PANEL 2, ex (Lea) 1 and it couldn't continue on in terms of when open access 2 is declared. I don't know personally how the government 3 is going to be redrafting this regulation, but I would 4 assume that there would still be some provisions for 5 assistance to rural customers through a continuing 6 regulation. 7 MEMBER SMITH: This is speculative, but if 8 that proves to be the case and you have a role to play 9 in this, would that be characterized as giving a special 10 rate or special consideration to a particular group? 11 MR. PORAY: I don't think that's necessarily 12 the case. 13 I think where this comes about is the 14 different customer classes in the distribution rates. 15 Their rates are compared to the average rates of the 16 municipal electrical utilities and that is where the 17 rural rate assistance comes in to level those rates to 18 within 15 per cent of the average. 19 I believe that that is the way it is going to 20 continue. At least that is our understanding at this 21 point in time. 22 MEMBER SMITH: Okay. If I could just briefly, 23 then, turn to the evidence that has already been 24 referred to on pages 32 and following of the Chief's 25 prefiled evidence. 26 As I see it, in simple terms, it breaks into 27 two parts. The first part concerns substantive issues 28 in reallocation and the cost allocation rate design on Les Services StenoTran Services Inc. 613-521-0703 1361 OHNC PANEL 2, ex (Lea) 1 pages 32 and 33. Then from 33 on I would roughly 2 characterize as the process issue, and then it lumps a 3 lot of things in under the process. 4 Can I just ask at the beginning, I know this 5 is a semi-legal question, but are there any 6 impediments -- we have talked about policy of the Board 7 as contained in your application, but are there any 8 impediments, legal or otherwise, to implementing any of 9 this? Is there any absolute legal reason why it can't 10 be done or is it a matter of policy choice and 11 direction? 12 I know it's a legal question and -- 13 MR. CURTIS: Could we refer -- you did a 14 categorization of kind of (a) and (b) in this. 15 MEMBER SMITH: Yes. 16 MR. CURTIS: Our understanding would be that 17 as far as (a) is concerned in terms of what they are 18 requesting, there don't appear to us to be any legal 19 impediments within the Act that would prevent this Board 20 from supporting them, if you will. 21 There may be some issues in the second part. 22 Some of these issues pertain -- what would impact us, 23 for example, in terms of our labour agreements that we 24 have, there are requests in here to train Aboriginals, 25 First Nations people, to do maintenance work, for 26 example. Presumably that would be on our facilities. 27 At least that is the interpretation we are taking. So 28 that might be one aspect. Les Services StenoTran Services Inc. 613-521-0703 1362 OHNC PANEL 2, ex (Lea) 1 They talk in terms of selling physical assets 2 at a specific rate and at least it is our understanding 3 that within the Act there aren't any provisions to 4 compel, if you will, or force OHNC to sell assets and 5 it's not willing sell necessarily. 6 So I think there are a few aspects within that 7 second grouping that would run into some legal issues. 8 But again, I apologize, I'm not a lawyer and I 9 don't -- 10 MEMBER SMITH: I understand. 11 The qualifications or observations you refer 12 to refer to some of the specific points listed (a), (b), 13 (c), (d), and so on and so forth. 14 MR. CURTIS: Yes. 15 MEMBER SMITH: But independently of what would 16 be in a protocol, the existence of a protocol itself, 17 you are not aware of any impediment -- 18 MR. CURTIS: No. 19 MEMBER SMITH: -- to that? 20 MR. CURTIS: No. 21 MEMBER SMITH: Just one final -- going back to 22 the first part, not to put words in your mouth, but I 23 take it that your response to the points (a) to (i) is 24 that they would all entitle some sort of special 25 treatment and you are not in favour of special 26 treatment? 27 MR. CURTIS: That's exactly it. We are not in 28 favour of special treatment of any customer group. Les Services StenoTran Services Inc. 613-521-0703 1363 OHNC PANEL 2, ex (Lea) 1 MEMBER SMITH: Thank you. 2 THE PRESIDING MEMBER: Thank you, Mr. Smith. 3 Mr. Vlahos. 4 We have no other questions on this topic. 5 Thank you. 6 All right. 7 MR. ROGERS: I have no re-examination on this 8 topic so I think we can move to the last, I hope, topic. 9 Did you want to take a break now or do you 10 want to plough through? 11 THE PRESIDING MEMBER: I'm just trying to 12 think what's the best strategy. 13 Why don't we just get started. If you want to 14 introduce it and go for about 10 minutes and see how 15 we go. 16 MR. ROGERS: That's fine. 17 RE-EXAMINATION 18 MR. ROGERS: Gentlemen, I understand that some 19 of the intervenors have some questions about the rate 20 schedule and the terms and conditions. I believe those 21 are found at Tab 12 of Exhibit D. 22 MR. PORAY: That is correct. 23 MR. ROGERS: Before we begin here, Dr. Poray, 24 can you help me. 25 In preparing for today did you discover that 26 there is a correction that needs to be made in the 27 conditions of service found at that tab? 28 MR. PORAY: That is correct. Les Services StenoTran Services Inc. 613-521-0703 1364 OHNC PANEL 2, re-ex (Rogers) 1 MR. ROGERS: Would you take us to it, please? 2 This is Exhibit D, Tab 12. I believe it's at 3 page -- 4 MR. PORAY: It is Schedule 2, page 22 of 39. 5 MR. ROGERS: These are the "Proposed 6 Commercial Terms and Conditions for Transmission 7 Facility Services". 8 MR. PORAY: That is correct. 9 The specific issue that is being addressed on 10 that page is the network charges on network billing 11 demand. 12 MR. ROGERS: Just refresh our memory. This is 13 a point that Mr. Curtis mentioned the other day and made 14 a clarification of the company's position in this 15 respect? 16 MR. PORAY: That is correct, yes. 17 MR. ROGERS: Can you tell us, then, what 18 change needs to be made in these terms to be consistent 19 with the company's position as enunciated by Mr. Curtis 20 and as set out in the rate schedule itself? 21 MR. PORAY: Yes, I would be glad to. 22 What Mr. Curtis referred to at the outset of 23 this hearing in his direct evidence was that in the 24 example that was given in calculating the rates we 25 showed that for the case where there was net outflow 26 from the load to the network as a result of a generator 27 being connected to that load that in fact there would be 28 a zero network transmission charge and we said that that Les Services StenoTran Services Inc. 613-521-0703 1365 OHNC PANEL 2, re-ex (Rogers) 1 was not consistent with our application and therefore it 2 needs to be corrected. 3 I came upon some text yesterday which needs to 4 be corrected as well because it isn't consistent with 5 our submission and with that direct evidence. 6 Specifically what I am referring to can be 7 found on lines 9 and 10 of page 22 of Exhibit D, Tab 12, 8 Schedule 2. 9 Currently what is -- 10 MR. ROGERS: Page 22? 11 MR. PORAY: Page 22, yes. 12 Currently the words that are there just now 13 are that "50 per cent of the metered hourly output of 14 the billable embedded generation". That is inconsistent 15 with what is in our schedule of rates, which is that it 16 is 50 per cent of the demand supplied by the embedded 17 generator, which is classified as an efficient embedded 18 generator. 19 So we propose to change that to make that 20 consistent with the rest of the application. 21 Also, as a result of that, there is no need 22 for the last paragraph on that page found between 23 lines 19 and 23. 24 THE PRESIDING MEMBER: Can we just ask for the 25 precise wording, because it is a key point. 26 MR. ROGERS: We will do that. 27 Just to put your mind at ease, I propose to 28 file a fresh page for you with the correct wording. Les Services StenoTran Services Inc. 613-521-0703 1366 OHNC PANEL 2, re-ex (Rogers) 1 THE PRESIDING MEMBER: Okay, then. It's fine, 2 then, if you are going to do that. We will wait for a 3 blue page, or whatever colour we are working now. 4 MR. ROGERS: Yes. I apologize for that. That 5 was just discovered last night I believe. 6 MR. PORAY: Yes, it was. 7 Thank you. 8 THE PRESIDING MEMBER: The other piece of text 9 that you wanted to point out that we needed to change as 10 well? 11 MR. PORAY: That was the lines 19 to 23 on 12 that same page -- 13 THE PRESIDING MEMBER: All right. Okay. 14 MR. PORAY: -- are no longer required, so that 15 will be deleted. 16 MR. ROGERS: Thank you very much. 17 Those are the questions that I had. 18 This panel is available to answer any 19 reasonable questions on this section. 20 THE PRESIDING MEMBER: I think we will take a 21 break and come back at four o'clock, if that is 22 appropriate, and try to get another hour in today. 23 Thank you. 24 --- Upon recessing at 1540 25 --- Upon resuming at 1605 26 THE PRESIDING MEMBER: Please be seated. Are 27 we ready to resume? 28 Mr. Fisher. Les Services StenoTran Services Inc. 613-521-0703 1367 OHNC PANEL 2, re-ex (Rogers) 1 MR. FISHER: Thank you, Dr. Higgin. 2 Are we finished with Tab 12, then? 3 MR. ROGERS: Well, we are dealing with Tab 12 4 now, but I understand that my friend has some questions 5 about the Draft Connection Agreement at Tab 13, and the 6 witnesses can answer questions about that now too. 7 THE PRESIDING MEMBER: I think right now we 8 are dealing with either Tab 12 or Tab 13. Maybe some 9 others have questions relating to Tab 12. 10 MR. FISHER: Thank you. 11 FURTHER CROSS-EXAMINATION 12 MR. FISHER: Can I take you to Exhibit D, 13 Tab 13, Schedule 3, page 3 of 19. This document is the 14 Preliminary Summary of the Terms and Conditions of the 15 Transmission Customer Connection Agreement. Section 5.4 16 or clause 5.4 is titled "Authorized Demand". 17 I take it this is the section that specifies 18 the authorized demand for a customer? 19 MR. CURTIS: Yes, it is. 20 MR. FISHER: At the top of page 4, on the 21 second line down, line 2, there is a sentence that 22 begins with "OHNC will use due and reasonable diligence 23 in providing a regular and uninterrupted supply of 24 electricity". 25 Does this specify OHNC's obligations to 26 maintain this level of supply? 27 MR. CURTIS: You are getting into the realm of 28 legal opinion here, and I am not sure that we are all Les Services StenoTran Services Inc. 613-521-0703 1368 OHNC PANEL 2, cr-ex (Fisher) 1 that well equipped to address it. But broadly speaking, 2 yes. 3 MR. FISHER: That is fine, thank you. 4 Does the customer have any obligation to take 5 a proportion of the authorized demand? 6 MR. CURTIS: To take a portion of the 7 authorized demand? 8 MR. FISHER: Yes. Well, maybe the next 9 question would help. 10 MR. CURTIS: Okay. 11 MR. FISHER: For example, would OHNC allow a 12 customer to have an authorized demand of 100 megawatts 13 but have a normal monthly maximum demand of 10 14 megawatts? 15 MR. CURTIS: The authorized demand was 16 intended for the customer to identify what the demand 17 that normally would be placed on the transmission system 18 would be. 19 So if you are talking about asking for 100 20 megawatts of capability, but only taking 10 megawatts, 21 that probably would be outside the realm of what we are 22 getting at here. 23 MR. FISHER: Suppose the customer knew that, 24 on average, it was taking 10 megawatts a month, but they 25 knew that at certain times of the year they were going 26 to take 90. 27 MR. CURTIS: Yes. It would be negotiated 28 under the section to address that. Les Services StenoTran Services Inc. 613-521-0703 1369 OHNC PANEL 2, cr-ex (Fisher) 1 MR. FISHER: So that is what has happened, 2 then. 3 MR. CURTIS: Yes. 4 MR. FISHER: So OHNC would address this 5 through a negotiation situation. 6 MR. CURTIS: Yes. 7 MR. FISHER: Another aspect to this is that 8 this situation could arise for a customer with an 9 embedded generator who is mostly using the system for 10 back-up then; correct? 11 MR. CURTIS: I think, potentially, yes, it 12 could. 13 MR. FISHER: So is it not possible, then, that 14 some of the concerns about customers not paying a 15 sufficient amount for back-up could be addressed through 16 the Connection Agreement? 17 MR. CURTIS: It would have to be augmented by 18 a contract with the customer in terms of the commitment 19 that they are going to be making on the system. It 20 wouldn't just be able to be done through this connection 21 agreement. 22 MR. FISHER: Thank you. Those are my 23 questions. 24 THE PRESIDING MEMBER: Thank you, Mr. Fisher. 25 I believe Mr. Campbell has some questions. 26 MR. RATTRAY: Actually, Dr. Higgin, it will be 27 Mr. Rattray asking for OPG. 28 CROSS-EXAMINATION Les Services StenoTran Services Inc. 613-521-0703 1370 OHNC PANEL 2, cr-ex (Rattray) 1 MR. RATTRAY: During this hearing we have 2 heard a great deal about the stakeholdering process. 3 Could we fairly characterize this process as being 4 extensive and prolonged? 5 MR. CURTIS: I think we would characterize it 6 that way, yes. 7 MR. RATTRAY: Would you turn to Exhibit A, 8 Tab 2 Schedule 1. 9 MR. PORAY: We have that. 10 MR. RATTRAY: Is it correct that this 11 stakeholdering was undertaken pursuant to the Board's 12 direction to OHNC to consult with stakeholders to ensure 13 the provisions of a tariff design that will be mindful 14 of customer impacts while also providing appropriate 15 commercial incentives in the evolving market? 16 MR. CURTIS: In part that is correct, yes. 17 MR. RATTRAY: How would you supplement that, 18 then, sir? 19 MR. CURTIS: We would have been conducting a 20 stakeholder process, I think over and above what 21 recommendation would have come from the Board as far as 22 this is concerned. 23 MR. RATTRAY: Similarly, OHNC's analysis in 24 support of this application follows the Board's 25 direction to take into account customer and potential 26 future customer impacts, as well as stakeholder 27 concerns? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 1371 OHNC PANEL 2, cr-ex (Rattray) 1 MR. RATTRAY: Your stakeholdering efforts are 2 summarized, I take it, in the balance of Exhibit A, 3 Tab 2, Schedule 1, which is the document we were looking 4 at, "Summary of Application". 5 MR. CURTIS: Yes. 6 MR. RATTRAY: On my review of this exhibit and 7 schedule, I did not see any reference to stakeholdering 8 regarding OHNC's implementation proposals, specifically 9 the terms and conditions as set out in Exhibit D, 10 Tabs 12 and 13. 11 Was there any stakeholdering on these issues? 12 MR. CURTIS: No. 13 MR. RATTRAY: Before I go further, I would 14 like to clarify the materials at Exhibit D, Tabs 12 15 and 13. 16 It is my understanding that in this 17 application you are only seeking approval of the 18 transmission infrastructure charges which are reflected 19 in the materials at Tab 12. 20 MR. PORAY: That is correct. 21 MR. RATTRAY: You are not seeking approval of 22 the Connection Agreement principles at Exhibit D, 23 Tab 13. They are for reference only? 24 MR. PORAY: That is correct. 25 MR. RATTRAY: Is it OHNC's position that there 26 are at least four steps to the development of the 27 transmission services in the new market, which would 28 include the present application, the development of the Les Services StenoTran Services Inc. 613-521-0703 1372 OHNC PANEL 2, cr-ex (Rattray) 1 transmission system code, the development of connection 2 agreements, and the development of the market rules? 3 MR. PORAY: That is correct, yes. 4 MR. RATTRAY: Would you agree with me that 5 consistency of approach between these steps is 6 desirable? 7 MR. PORAY: Could you clarify what you mean by 8 consistency? 9 MR. RATTRAY: They should mesh. They should 10 not be inconsistent. 11 MR. PORAY: I think we would broadly agree 12 with that, yes. 13 MR. RATTRAY: Would you also agree with me, 14 sir, that the potential exists for different approaches 15 to be taken with respect to the terms and conditions in 16 these four steps, given that they are proceeding 17 independently? 18 MR. CURTIS: There is coordination amongst 19 them and there is somewhat of a hierarchy in terms of 20 decisions that are being requested under these various 21 forms. The issue I think maybe you are getting at, in 22 terms of consistency, if you have one body or one part 23 of it making a decision in one area that is later either 24 revisited or redone by another group and in our minds 25 there is a hierarchy in terms of how this would work. 26 MR. RATTRAY: What is the hierarchy? 27 MR. CURTIS: You start off with -- one of the 28 areas that you did not mention was the enactment of the Les Services StenoTran Services Inc. 613-521-0703 1373 OHNC PANEL 2, cr-ex (Rattray) 1 rest of the Act and the regulation that would follow 2 from that. 3 Then, also in terms of the decisions that we 4 brought before the Board in terms of this application 5 and, as you have noted, we have made a distinction 6 between what we filed under file tab and what we filed 7 under Tab 13. Tab 13 would be dealt with as part of the 8 transmission system code development. 9 We have talked earlier too in terms of the 10 technical aspects and technical details that would be 11 developed under the transmission system code 12 development. So there is a hierarchy or a stream of 13 activities here. 14 MR. RATTRAY: Is that the entire hierarchy, 15 sir? 16 MR. CURTIS: Oh, and in terms of enacting the 17 market rules, as well. 18 MR. RATTRAY: Now, I had understood your 19 evidence, and I am referring you to Exhibit D, Tab 12, 20 Schedule 1, page 1, the first paragraph at line 8: 21 "Therefore the provisions contained 22 herein may be subject to change when the 23 developments and reviews of the 24 Transmission System Code and the Ontario 25 Market Rules have been completed." 26 Is that correct, sir? 27 MR. PORAY: Yes, I believe that is correct. 28 MR. RATTRAY: So that the proposals should be Les Services StenoTran Services Inc. 613-521-0703 1374 OHNC PANEL 2, cr-ex (Rattray) 1 coordinated with the development of the transmission 2 system code in the Ontario market rules? 3 MR. PORAY: Yes, that's correct. 4 MR. CURTIS: Yes. 5 MR. RATTRAY: Dr. Poray, I understand that you 6 are a member of the IMO technical panel? 7 MR. PORAY: I am. 8 MR. RATTRAY: I take it you are familiar with 9 its operation and issues before it? 10 MR. PORAY: I am sorry, can you state that 11 again? 12 MR. RATTRAY: I understand that you would then 13 be familiar with the operation of the IMO technical 14 panel? 15 MR. PORAY: That is correct. 16 MR. RATTRAY: And the issues that go before 17 it? 18 MR. PORAY: That is correct. 19 MR. RATTRAY: The members of the technical 20 panel represent different stakeholders in the 21 electricity market? 22 MR. PORAY: That is so. 23 MR. RATTRAY: Similarly, the Board of 24 Directors of the IMO has a membership that reflects 25 different stakeholders? 26 MR. PORAY: That is so. 27 MR. RATTRAY: Would you confirm, sir, that the 28 most recent IMO staff proposal on liability, following Les Services StenoTran Services Inc. 613-521-0703 1375 OHNC PANEL 2, cr-ex (Rattray) 1 comments and review by stakeholder technical panel and 2 IMO board members, and which has not yet been formerly 3 adopted by the IMO, would impose liability on both the 4 IMO and market participants? 5 MR. PORAY: I have not been directly involved 6 with the IMO technical panel over these past two weeks, 7 as a result of these hearings. I have, therefore, not 8 seen the material that you are referring to. 9 MR. RATTRAY: Have you arranged for a delegate 10 to attend on your behalf, sir? 11 MR. PORAY: I have indeed, yes. 12 MR. RATTRAY: I would like your undertaking, 13 sir, to confirm my characterization of the most recent 14 IMO staff proposal on liability, namely, that it would 15 impose liability on both the IMO and market 16 participants. 17 MR. PORAY: Okay. 18 MR. ROGERS: We will undertake to do that, 19 sir. 20 THE PRESIDING MEMBER: Mr. Thiessen. 21 MR. THIESSEN: That will be Undertaking F7.4. 22 UNDERTAKING NO. F7.4: Mr. Rogers 23 undertakes to confirm Mr. Rattray's 24 characterization of the most recent IMO 25 staff proposal on IMO, namely, that it 26 will impose liability on both the IMO and 27 market participants 28 MR. RATTRAY: Turning now to Exhibit D, Les Services StenoTran Services Inc. 613-521-0703 1376 OHNC PANEL 2, cr-ex (Rattray) 1 Tab 12, Schedule 2, if you would go to page 17. I 2 direct your attention to section 3.7, "Limitation of 3 Liability." 4 MR. PORAY: Okay. We are there. 5 MR. RATTRAY: Are you familiar with this 6 section, sir? 7 MR. PORAY: In broad terms, yes. 8 MR. RATTRAY: Well, take a moment and review 9 it, if you would, please. 10 --- Pause 11 MR. PORAY: Okay. We have read it. 12 MR. RATTRAY: I understand you are not 13 lawyers, but I think it is fairly straightforward that 14 OHNC's proposal is that it will not be liable for any 15 damages, period. 16 MR. PORAY: That is our proposal. 17 MR. RATTRAY: Now, under this proposal the 18 consequences of negligent actions of OHNC causing direct 19 damage would be borne by transmission customers in those 20 damages? 21 MR. CURTIS: I don't think that we are 22 necessarily aware of that in the legal sense, which I 23 think is what you are quoting. 24 MR. RATTRAY: I will break it down. 25 If OHNC is negligent in some manner and it 26 causes direct damage to a transmission customer, it is 27 your position that OHNC bears no liability? 28 MR. ROGERS: May I interject here? These Les Services StenoTran Services Inc. 613-521-0703 1377 OHNC PANEL 2, cr-ex (Rattray) 1 clauses have certain meanings in law. If my friend is 2 asking the panel whether it is their hope that the 3 clause says that I don't object to them answering. But 4 I can tell you from my own personal experience that 5 there are hundreds of cases interpreting clauses like 6 this in the courts as to whether or not it includes 7 negligence of the party being referred to. 8 MR. RATTRAY: All right. Thank you for that 9 clarification. 10 I will now direct you to Exhibit B, Tab 8 -- 11 MR. ROGERS: No, just before that -- all I am 12 saying is that interpretation of these clauses is a 13 matter of considerable legal controversy as to what they 14 actually mean and what do they actually exculpate. I 15 had hoped to address this in argument from a legal 16 standpoint. 17 MR. RATTRAY: I thank my friend for the 18 clarification. 19 I would ask you to turn to Exhibit E, Tab 8, 20 Schedule 41. 21 My question is directed with respect to the 22 intent of the limitation of liability provisions. I 23 think the response by OHNC to the Interrogatory 41 by 24 OPG may be of assistance. 25 OPG inquired: Would you please define and 26 provide examples of "direct", "indirect" and 27 "consequential" damages? Could you read the response 28 provided by OHNC? Les Services StenoTran Services Inc. 613-521-0703 1378 OHNC PANEL 2, cr-ex (Rattray) 1 MR. PORAY: Certainly. The response we 2 provided is: 3 "The words "direct", "indirect", and 4 "consequential", is standard wording to 5 exclude liability for all damages, 6 whatever their nature. Because it is 7 OHNC's intention to exclude all 8 liability, it is not helpful to define 9 and give examples of what direct, 10 indirect and consequential damages are. 11 Doing so could be helpful only in the 12 context if the contract were to say, [for 13 example], that OHNC would be liable for 14 direct damages but not for indirect or 15 consequential damages." 16 MR. RATTRAY: Does that assist you in terms of 17 answering my questions regarding whether or not OHNC 18 would accept liability for negligent actions causing 19 direct damage to transmission customers? 20 MR. PORAY: As I say, I am not a lawyer, but 21 our intention is to exclude all liability. 22 MR. RATTRAY: This proposal on liability was 23 developed without any study being undertaken of the 24 risks or financial implications for transmission 25 customers in the OHNC? 26 MR. PORAY: This proposal, in fact, the whole 27 of the terms and conditions were developed for OHNC with 28 the assistance of a consultant who is knowledgeable in Les Services StenoTran Services Inc. 613-521-0703 1379 OHNC PANEL 2, cr-ex (Rattray) 1 the field of the terms and conditions as they apply in 2 various other jurisdictions. 3 MR. RATTRAY: Well, that is not responsive to 4 my question, sir. My question was: Were any studies or 5 analyses of the risks and financial implications for 6 transmission customers for OHNC undertaken? 7 MR. PORAY: We did not conduct any risk 8 analysis. 9 MR. RATTRAY: Would you also agree with me 10 that it is a term of OHNC's proposal regarding liability 11 that transmission customers could be liable to OHNC? 12 --- Pause 13 MR. CURTIS: Maybe you could help us out here 14 in terms of providing us with a reference. It is not 15 jumping out at us. 16 MR. RATTRAY: The reference is Exhibit E, 17 Tab 8, Schedule 44, an interrogatory of OPG. We 18 questioned you: 19 "Other than for the payment of authorized 20 fees, would any transmission system users 21 have any liability to OHNC?" 22 The response was, the first paragraph, the 23 first sentence: 24 "Pursuant to the contract between the 25 transmission customer and OHNC, the 26 customer's breach thereof could result in 27 liability to OHNC." 28 Do you adopt that response? Les Services StenoTran Services Inc. 613-521-0703 1380 OHNC PANEL 2, cr-ex (Rattray) 1 --- Pause 2 MR. PORAY: Yes, this is our response. 3 MR. RATTRAY: In the absence of any 4 stakeholdering on liability, I take it you would agree 5 that your proposal on liability does not reflect 6 stakeholder views and concerns but rather those of OHNC? 7 MR. CURTIS: Yes, that would be correct. 8 MR. RATTRAY: Would you also agree that in the 9 absence of any study or analysis of the customer 10 implications of your liability proposal, your 11 application does not take into account customer and 12 potential future customer impacts as well as stakeholder 13 concerns? 14 MR. CURTIS: Could you run through that again? 15 I'm sorry, I have lost track. 16 MR. RATTRAY: In the absence of any study or 17 analysis of the customer impacts on the liability 18 proposal, your application does not take into account 19 customer and potential future customer impacts. Are you 20 with me so far? 21 MR. CURTIS: I'm with you, yes. 22 MR. RATTRAY: Do you agree with me? 23 MR. CURTIS: I think you are making a quote 24 out of our application and, yes, we would agree with 25 that. 26 MR. RATTRAY: Would you also agree that the 27 limitation of liability proposed by OHNC reduces the 28 incentive for OHNC to limit and/or prevent damages to Les Services StenoTran Services Inc. 613-521-0703 1381 OHNC PANEL 2, cr-ex (Rattray) 1 transmission customers? 2 MR. CURTIS: No. I would suggest that there 3 would be other mechanisms that would be in place. 4 MR. RATTRAY: That wasn't my question, sir. I 5 asked whether the limitation of liability would reduce 6 the incentive for OHNC to limit and/or prevent damages. 7 MR. CURTIS: I would say, no, it doesn't 8 because there will be other mechanisms in place to 9 address that. 10 MR. RATTRAY: Could you elaborate on those 11 mechanisms? 12 MR. CURTIS: Certainly. There would be 13 requirements placed on OHNC in terms of performance. 14 Some of those would be included in the transmission 15 system code development. Others we would see being 16 applied in terms of performance, for example, in cost 17 allocation or PBR frameworks. 18 MR. RATTRAY: Thank you. But I understand 19 this application is limited to the transmission 20 infrastructure. 21 MR. CURTIS: I'm not sure I understand that 22 point that you are trying to make. 23 MR. RATTRAY: In your response you referred to 24 the development of the transmission system code. 25 MR. CURTIS: Yes. 26 MR. RATTRAY: And presumably the connection 27 agreement related to that. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 1382 OHNC PANEL 2, cr-ex (Rattray) 1 MR. RATTRAY: Well, I understood that that is 2 being dealt with separately and you are currently 3 seeking approval from the Board of an application 4 dealing with the transmission infrastructure. 5 MR. CURTIS: The cost allocation and rate 6 design, that is what this application is, yes. 7 MR. RATTRAY: So in terms of Schedule 2, 8 Exhibit 2, Tab 12, you are seeking approval of that 9 document? 10 MR. PORAY: Yes, we are. 11 MR. RATTRAY: I direct your attention now to 12 the provisions on page 17 of that document 3.6, 13 "Reliability and Quality of Service". 14 MR. CURTIS: Yes. 15 MR. RATTRAY: As set out in this section, OHNC 16 is proposing to make "reasonable efforts" to maintain 17 service to customers. 18 MR. CURTIS: To deliver service and 19 reliability, yes. 20 MR. RATTRAY: Now, in the event of a service 21 interruption or other problem, OHNC is proposing to make 22 "reasonable efforts" to restore services as soon as 23 practicable. 24 MR. CURTIS: Yes. 25 MR. RATTRAY: You indicate that service to 26 customers could be interrupted by any number of problems 27 including, as a result of operations and maintenance 28 work, and because of things beyond the control of OHNC Les Services StenoTran Services Inc. 613-521-0703 1383 OHNC PANEL 2, cr-ex (Rattray) 1 such as acts of nature. 2 MR. CURTIS: Yes. 3 MR. RATTRAY: Would you agree that there is 4 nothing in these proposed terms and conditions that 5 provides a positive incentive for OHNC to reduce the 6 number and duration of service interruptions? 7 MR. CURTIS: The initial phrase there in terms 8 of reasonable efforts to deliver, we would expect that 9 there would be some quantification of that within the 10 transmission system code, and, as I said before, in 11 terms of the cost of service or PBR application. So 12 that is how it would be further defined, and that would 13 provide the incentive, then, to OHNC. 14 MR. RATTRAY: So the present application and 15 document is incomplete in that it does not incorporate 16 specific PBR mechanisms to incent OHNC to deliver a 17 reasonable standard of service. 18 MR. CURTIS: I don't know whether I would 19 agree with the word "incomplete", but as I was talking 20 about earlier, there is a hierarchy, if you will, or a 21 flow of activities going on in terms of defining the 22 whole framework that we are talking about here. That is 23 how it would be accomplished. 24 MR. RATTRAY: As I understand the hierarchy as 25 you explained it, sir, this present application is 26 further up the hierarchy than the transmission system 27 code. Is that correct? 28 MR. CURTIS: Yes, it is. Les Services StenoTran Services Inc. 613-521-0703 1384 OHNC PANEL 2, cr-ex (Rattray) 1 MR. RATTRAY: Would you agree that a PBR 2 mechanism with quantified performance targets, such as 3 the first generation PBR mechanism for distribution 4 utilities, approved by this Board would provide 5 additional clarity and additional incentives relating to 6 the delivery of reliable and quality service? 7 MR. CURTIS: I think that is what I was 8 stating earlier. Yes. 9 MR. RATTRAY: Thank you. Those are my 10 questions. 11 THE PRESIDING MEMBER: Thank you. 12 Anyone else before Board staff? No? 13 MS LEA: No questions. Thank you. 14 THE PRESIDING MEMBER: No questions. All 15 right. 16 I'm just going to come back to the old 17 question that is still on the table, and that is: What 18 exactly is the applicant asking for approval of in this 19 proceeding; and, what matters now, just to broaden that, 20 would it be more appropriate for a rate application 21 resulting in a rate order? 22 That particular application is for approval of 23 a cost allocation and a rate design. The outcome of 24 this is not going to be a rate order per se. Okay? So 25 there has to be another step here in terms of the rate 26 order set. The applicant has got an approval of his 27 costs of service and is operating under that. 28 To come back to that question, I think Les Services StenoTran Services Inc. 613-521-0703 1385 1 everybody is a little confused, and I know we are, in 2 terms of what are the various steps and how do we get 3 from here to there. 4 That is one of the things I am expecting that 5 you will address. 6 MR. ROGERS: Yes, and I hope we will address, 7 and I hope to your satisfaction, next week. 8 THE PRESIDING MEMBER: Right. Thank you. I 9 think just to everyone that will be an opportunity once 10 that is a little clearer what the applicant is actually 11 requesting as an outcome from this proceeding, where 12 those other things may fit. There will be an 13 opportunity to ask questions at that point. 14 Thanks. 15 With that, we are sort of -- sorry, 16 Mr. Campbell. 17 MR. CAMPBELL: I thought you were going to 18 wish us adieu for the afternoon. If that is the next 19 item on the agenda, there is one matter I would like to 20 raise. 21 THE PRESIDING MEMBER: Okay. I am just going 22 to look forward to next week, so if you would like to do 23 that first, then I will look forward to next week. 24 MR. CAMPBELL: Thank you, Dr. Higgin. You 25 raised this morning the question of schedule for 26 argument. 27 THE PRESIDING MEMBER: That's right. 28 MR. CAMPBELL: There have been discussions Les Services StenoTran Services Inc. 613-521-0703 1386 1 amongst a number of the parties. There are a number of 2 intervenors in this proceeding on that topic. The 3 discussion focused not simply on schedule. In fact, I 4 think it focused primarily on the structure, what 5 structure should be followed for argument. 6 As Mr. Rogers pointed out in his opening to 7 these proceedings, OHNC's financial and commercial 8 interests have already been addressed. That's not 9 what's at issue here. OHNC's position has been 10 throughout that within some limits of acceptability, 11 issues in the case should be resolved in a manner that 12 best responds overall to its stakeholders. 13 Given that, I am speaking this afternoon on 14 behalf of a group that wishes to propose an alternate 15 structure for argument. The group includes ourselves, 16 Mr. Warren for CAC, Mr. Brown for IPPSO, Mr. Mattson for 17 Energy Probe, Mr. Fisher for AMPCO, Mr. Coburn for INCO, 18 Ms Friedman for MEA, Mr. Rogers for Toronto Hydro and 19 the other group of utilities that he represents, Mr. 20 Vogel for the First Nations, Mr. King for Detroit Edison 21 and Five Nations Energy, Mr. Goldsilver for Collingwood 22 and Mr. Poch for the Green Energy Coalition. 23 There have been attempted to be some other 24 calls, but not everybody could be reached in the time 25 available. 26 Speaking for that group, the group proposes 27 that the argument process be structured so that it takes 28 place in two steps as opposed to the usual practice. Les Services StenoTran Services Inc. 613-521-0703 1387 1 The first step would see the applicant and all 2 intervenors file their arguments in chief on a specific 3 date with the same date for everyone. 4 The second step would see the applicant and 5 all intervenors file reply on a specific date. Again, 6 the proposal that was discussed was the same date for 7 everyone. This proposal the group believes would be 8 more helpful to the Board than the normal practice for 9 several reasons. 10 First, in some cases the positions of the 11 parties are not really known at this time and some of 12 them aren't calling witnesses, so their positions will 13 really only be presented in argument. In other cases, 14 positions taken may evolve with the evidence. Everybody 15 is thinking carefully as the case goes through. 16 The process that we propose provides the 17 benefit to the Board of argument that sets out at step 18 one each party's position and at step two provides you, 19 the Board, with a direct response to those positions so 20 that the Board won't need to guess how each proposal 21 from a party might be viewed by the other parties in the 22 proceeding which, in this case, given the stance that 23 the applicant has taken, is, in our submission, 24 absolutely critical to your understanding. 25 My friend has established the dynamic where 26 the parties are really at some level left to sort out 27 the positions between themselves. We believe that it's 28 very important for you to have a direct response from Les Services StenoTran Services Inc. 613-521-0703 1388 1 each party as to what another party proposes. 2 It's really for that reason in a wish to have 3 the argument structured in a way that gives you, the 4 Board, a very direct and focused argument on each of the 5 issues and the proposals before you that we make this 6 proposal for consideration of the Board, as I say, to 7 amend the normal structure of argument as widespread 8 support for that proposal. 9 THE PRESIDING MEMBER: Thank you. We will 10 take that under consideration. I would like to hear 11 from Mr. Rogers if he has any initial comments. 12 MR. ROGERS: Yes. I can tell you quickly, I 13 think, sir, my initial reaction to this. It was just 14 put to me today. All alone out here on this limb all by 15 myself against this formidable task force, I don't agree 16 with -- it will be your decision, of course -- but we 17 are the applicant, after all. 18 I quite agree -- I consent to filing the 19 applicant's argument at the same time as all the other 20 intervenors, say a week or so of the iteration process, 21 our argument in chief. Everyone knows our position and 22 has known it for some time. 23 I would, however, like to have the right to 24 reply to all intervenors after they have made the second 25 iteration. My proposal is that I will file an argument 26 with all intervenors at the same time which will just 27 summarize the company's position. 28 The other intervenors can have an iteration Les Services StenoTran Services Inc. 613-521-0703 1389 1 where they can comment upon each other's arguments, 2 because I quite agree they are at odds and that will be 3 very appropriate. Then I should have the final word as 4 counsel for the applicant. I would like to have a short 5 time after the intervenors have filed their responses 6 inter se to respond. 7 I say that because while it is true that my 8 client is indifferent in a financial sense to the 9 outcome of this case, I would not want my friends nor 10 the Board to mistake an absence of arrogance on their 11 part with indifference. They do have convictions about 12 what should be done in this case and we will make an 13 argument in this case advocating certain resolutions in 14 accordance with the evidence. The applicant should be 15 allowed to go last. 16 I will say one other thing, sir. My client in 17 some sense does speak for all of its customers. In that 18 role alone it should have the right to go last. 19 Thank you. 20 THE PRESIDING MEMBER: Thank you. 21 Mr. Vlahos has a couple of questions to either 22 one of you here. 23 MEMBER VLAHOS: Mr. Rogers, one of the 24 benefits of having the applicant have an argument in 25 chief is that it provides sort of a column base. At 26 least in my experience, during the course of 27 proceedings, there are a number of adjustments that may 28 be made to the evidence or at least some Les Services StenoTran Services Inc. 613-521-0703 1390 1 misunderstandings are put away. 2 That is one of the benefits. I realize what 3 you are suggesting, but if we were to go with argument 4 in chief, I guess what would be compromised is simply 5 timing. Right? 6 MR. ROGERS: Yes. 7 MEMBER VLAHOS: On that, is it a concern about 8 whether earlier or later in terms of the other arguments 9 by the parties? 10 MR. ROGERS: I had no trouble with it. It was 11 my friend's suggestion and I had anticipated the usual 12 order where I would file an argument in-chief, followed 13 by the intervenors, followed by one iteration, followed 14 by reply. 15 MEMBER VLAHOS: Mr. Campbell, cost allocation 16 rate design is usually part and parcel of a typical 17 rates case where you have the revenue requirement and 18 you also have cost allocation or rate design, but that 19 process that you suggested has not been followed before 20 on cost allocation and rate design issues. I'm just 21 wondering what changes now. 22 MR. CAMPBELL: I think the major change now is 23 that it is not -- the dynamic that has been set up in 24 this hearing is that, in effect, each of the parties is 25 putting forward a particular proposal, the Applicant 26 has, in some cases, taken -- has indicated in its 27 testimony that, well, it would have preferred a 28 particular option because of the stakeholders, most of Les Services StenoTran Services Inc. 613-521-0703 1391 1 whom are represented here -- because of what it heard 2 from its stakeholders it adopted a somewhat different 3 position. So you combine that with the situation where 4 many of the intervenors will be developing a position at 5 the first time for argument. 6 That is really the first time we will see a 7 comprehensively argued position from some intervenors. 8 They have not felt the need to call evidence. I'm not 9 being critical of them in saying any of that, it is 10 simply a fact the Board has to deal with. 11 Given that those positions directly affect 12 other parties, the group that I'm speaking for is very 13 strongly of the view that they ought to have the 14 specific right of reply to respond to those other 15 positions. 16 We would have no objection to Mr. Rogers 17 filing an initial argument in-chief, and then an initial 18 filing in-chief from all of the intervenors and then the 19 kind of reply from each of the intervenors and the 20 Applicant that I have spoken of. That would be quite 21 satisfactory. 22 Some of my friends in this group have asked me 23 to be cautious about times not being too tight, given 24 their resources, but I think what we need to do is set 25 up a structure in principle and then kind of work out 26 the times. 27 MEMBER VLAHOS: All right. Thank you for 28 that. Les Services StenoTran Services Inc. 613-521-0703 1392 1 THE PRESIDING MEMBER: Okay. We will have a 2 discussion and we will then advise what we think would 3 be helpful in this case regarding the argument. We will 4 also address the timing schedule issue. 5 Just looking to tomorrow, we have Imperial Oil 6 and Amoco up at 11 o'clock. 7 The Board does have a prior commitment, so we 8 are not available before that, in any event, so we are 9 going to start at 11:00 tomorrow, just so everybody 10 knows. 11 Looking to next week, there is a schedule here 12 for the intervenor evidence and we still have to somehow 13 agree when we are going to slot in a discussion on 14 implementation issues and so on as well. 15 I would ask that Board Staff discuss when we 16 are going to do that so we give some advance. There 17 might be quite a number of people who might be 18 interested in that particular topic. 19 MR. ROGERS: Yes. 20 THE PRESIDING MEMBER: Okay. 21 Yes, Mr. Campbell. 22 MR. CAMPBELL: There is one thing I should 23 add, I neglected to and I should add. 24 In one of the conversations with one member of 25 the group, Mr. Poch, he was quite -- he actually raised 26 Mr. Rogers additional sort of super reply opportunity, 27 having an additional reply opportunity at the end, and I 28 think, to be fair, if I'm speaking for that group there Les Services StenoTran Services Inc. 613-521-0703 1393 1 was one party, Mr. Poch, who raised that and said that 2 he would have no objection to that. 3 I can't say comprehensively. Certainly I know 4 that some would say the exact opposite, but the topic 5 was not discussed in the full round of my discussions so 6 I can't really speak for the group generally on that, 7 but I thought given that Mr. Poch had spoken to me 8 directly about that I didn't want that overlooked. 9 THE PRESIDING MEMBER: Okay. Thank you. 10 MS FRIEDMAN: On behalf of the MEA I would 11 just like to say it is perfectly fair for Mr. Rogers -- 12 THE PRESIDING MEMBER: All right. Thank you. 13 MR. ROGERS: Super reply is conventional 14 reply. 15 --- Laughter 16 THE PRESIDING MEMBER: So everybody has the 17 schedule and we will keep you advised if there are any 18 changes to that and we need to slide them in. 19 So we will see everybody tomorrow morning at 20 11:00 a.m. for Imperial Oil and Amoco. 21 Thank you. 22 --- Whereupon the hearing adjourned at 1650, to 23 resume on Friday, February 25, 2000 at 1100 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 1394 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0905 1173 4 OHNC PANEL 2 5 PREVIOUSLY SWORN: DAVID CURTIS 1173 6 PREVIOUSLY SWORN: ANDY PORAY 1173 7 PREVIOUSLY SWORN: GARY SCHNEIDER 1173 8 Preliminary Matters 1173 9 Further Cross-examination by Mr. Fisher 1184 10 Cross-examination by Mr. Goldsilver 1206 11 Upon recessing at 1045 1241 12 Upon resuming at 1114 1241 13 Further Cross-examination by Mr. Mattson 1244 14 Questions by the Board 1248 15 Cross-examination by Mr. Vogel 1250 16 Cross-examination by Mr. White 1274 17 Examination by Board Counsel 1281 18 Questions by the Board 1303 19 Upon recessing at 1308 1316 20 Upon resuming at 1429 1316 21 Re-examination by Mr. Rogers 1320 22 Further Cross-examination by Mr. Vogel 3121 23 Cross-examination by Ms Godby 1327 24 Further Examination by Board Counsel 1352 25 Questions by the Board 1359 26 Re-examination by Mr. Rogers 1363 27 Upon recessing at 1540 1366 28 Upon resuming at 1605 1366 Les Services StenoTran Services Inc. 613-521-0703 1395 1 INDEX OF PROCEEDING (Cont'd) 2 PAGE 3 Further Cross-examination by Mr. Fisher 1367 4 Cross-examination by Mr. Rattray 1369 5 Upon adjourning at 1650 1393 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 1396 1 EXHIBITS 2 NO. PAGE 3 G7.1 Extract from Market Design 1184 4 Committee File Report, Volume 1, 5 January 29, 1999 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 1397 1 UNDERTAKINGS 2 NO. PAGE 3 F7.1 OHNC undertakes to identify 1276 4 the number of LDCs in the 5 province which are both 6 transmission customers and 7 customers of other LDCs as part 8 of their delivery points 9 10 F7.2 OHNC undertakes to answer the 1319 11 first part of Board Staff's 12 undertaking request dated 13 February 23, 2000 14 15 F7.3 Mr. Curtis undertakes on a 1349 16 best efforts basis to provide 17 information relating to meetings 18 held with First Nations 19 representatives between August 20 and October 1999 21 F7.4 Mr. Rogers undertakes to confirm 1375 22 Mr. Rattray's characterization 23 of the most recent IMO staff 24 proposal on IMO, namely, that 25 it will impose liability on both 26 the IMO and market participants