2866 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 Tuesday, March 7, 2000, 21 commencing at 0907 22 23 24 25 HEARING 26 27 VOLUME 15 28 Les Services StenoTran Services Inc. 613-521-0703 2867 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 2868 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 TOM ADAMS 13 14 PETER BUDD TransAlta Energy 15 16 MURRAY KLIPPENSTEIN/ Pollution Probe 17 JOANNA BIRENBAUM 18 19 RICHARD STEPHENSON Power Workers Union 20 21 MARK RODGER Toronto Hydro Electric 22 System Ltd. 23 24 PAUL DUMARESQ Ontario Association of Physical 25 Plant Administrators 26 27 SHARON WONG Imperial Oil Ltd. 28 Les Services StenoTran Services Inc. 613-521-0703 2869 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 2870 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 ALECK DADSON Enron Capital Corp. 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 2871 1 Toronto, Ontario 2 --- Upon resuming on Tuesday, March 7, 2000 3 at 0907 4 THE PRESIDING MEMBER: Thank you. Please be 5 seated. 6 Are there any preliminary matters? 7 I can see there is more paper coming. 8 PRELIMINARY MATTERS 9 MR. ROGERS: Yes. May I speak to some of it, 10 Dr. Higgin? 11 We have complied with two more undertakings, 12 this morning. 13 The first would be Exhibit F7.4, where I 14 undertook to respond to Mr. Rattray's request concerning 15 the IMO proposal for the limitation of liability clause. 16 What we have done is simply to provide to the 17 Board a document which outlines the most recent proposed 18 rule in the agreement of the IMO covering this topic. I 19 can tell you it is a very complex clause and I don't 20 wish to tell the Board what I think it means because I 21 think it is subject to interpretation and I thought it 22 best just to file the whole document and you can take 23 your own counsel as to legal significance of the clause. 24 I will be addressing it in argument but it is 25 a complicated legal problem, I can tell you. 26 Now, the second document I am filing is in 27 response to a request from you, Dr. Higgin. 28 You asked us to file a copy of the OHNC/IMO Les Services StenoTran Services Inc. 613-521-0703 2872 Preliminary Matters 1 operating agreement, and I have copies for you, this 2 morning, and we have given copies to those in the room. 3 We will need an exhibit number for that, sir. 4 MS LEA: It was in answer to a Board question 5 that this was brought forward -- 6 MR. ROGERS: I believe it was Dr. Higgin, 7 actually, who requested it. 8 MS LEA: Would it be acceptable to call it 9 F15.1; that is, the first undertaking of today, which is 10 immediately satisfied? 11 MR. ROGERS: That is certainly satisfactory 12 to me. 13 UNDERTAKING NO. F15.1: Mr. Rogers to 14 provide copy of OHNC/IMO operating 15 agreement 16 MR. ROGERS: That completes the filings on my 17 behalf, this morning, sir. 18 MR. FISHER: Dr. Higgin, I would also like to 19 add that AMPCO has responded to Undertaking F13.1 from 20 last Friday, in which I believe it was you asked for a 21 clarification on the contract under which CXY Chemicals 22 was receiving its surplus power. 23 THE PRESIDING MEMBER: That is right. 24 MR. FISHER: It turns out it is an LRER under 25 which they are receiving surplus power -- and my friends 26 at OPG have also advised that it is one of the most 27 complicated contracts that they have in their 28 possession. Les Services StenoTran Services Inc. 613-521-0703 2873 Preliminary Matters 1 THE PRESIDING MEMBER: Okay. So it is not 2 actually a surplus power; it is a specific, rather 3 unique LRER contract? 4 MR. FISHER: Yes. 5 THE PRESIDING MEMBER: Okay. Interesting. 6 You are on the wrong panel, then. Right? 7 --- Laughter 8 MR. BROWN: Dr. Higgin, I would propose to 9 file two documents. 10 There has been examination on Exhibit G2.1, 11 which related to charge determinant. There was a $1.33 12 number relating to replacement backup power -- and 13 Dr. Orans referred to that as the facilities charge in 14 respect of replacement backup power. My friends at OPGI 15 kindly provided to me a copy of the extracts from the 16 1999 Ontario Hydro tariff that dealt with that charge, 17 and I also have a copy of the HR-23 1986 rates for that 18 charge which indicates the component parts of the 19 charge, and I would ask that those be marked as 20 exhibits. 21 MS LEA: I have the one document, which was 22 the extract from the tariff, G15.1, entitled "Backup 23 Power". 24 Is the other one also attached to this 25 package? 26 THE PRESIDING MEMBER: No; we have a copy on 27 the dias, called -- 28 MS LEA: Oh, okay. Thank you. Les Services StenoTran Services Inc. 613-521-0703 2874 Preliminary Matters 1 THE PRESIDING MEMBER: That is it. 2 MS LEA: It is a revised version of 3 Exhibit 3.1. Okay. So it needs an exhibit number in 4 this hearing. 5 So, G15.1 for the document entitled, "1999 6 Tariff Backup Power" and -- there is no exhibit number 7 already for this one, is there? No. Okay. -- G15.2 8 for what is entitled "Exhibit 3.1.1 - Revised", which is 9 the rate document for Part 2 backup power. 10 EXHIBIT NO. G15.1: Document entitled, 11 "1999 Tariff Backup Power" 12 EXHIBIT NO. G15.2: Document entitled 13 "Exhibit 3.1.1 - Revised" 14 THE PRESIDING MEMBER: Thank you very much. 15 Is that all of the preliminary matters 16 right now? 17 Good. Thank you. 18 Now we are going to resume your panel. 19 MR. ROGERS: Yes. 20 PREVIOUSLY SWORN: DAVID CURTIS 21 PREVIOUSLY SWORN: ANDY PORAY 22 THE PRESIDING MEMBER: Are you going to deal 23 with the undertaking response to the export and 24 wheel-through? Or are you going to deal with only the 25 implementation issue? 26 MR. ROGERS: I thought, in the interest of 27 efficiency, we could deal with both at the same time, 28 with this panel. I propose to have each witness prove Les Services StenoTran Services Inc. 613-521-0703 2875 OHNC PANEL 3 1 each of the documents that have been prefiled and 2 then -- I'm in the Board's hands, but I propose, simply, 3 to ask a few questions of Mr. Curtis, really, about 4 implementation; Dr. Poray's explanation of the export 5 and wheel-through proposal, I think, is fairly 6 straightforward now, I hope -- and then present them for 7 cross-examination. 8 Now, we can do it one topic at a time, if you 9 prefer. 10 THE PRESIDING MEMBER: No; I think it would be 11 okay to deal with both of them. I think it is clear who 12 is going to be responsible for each one. 13 MR. ROGERS: Very good. 14 THE PRESIDING MEMBER: So why don't we proceed 15 that way. 16 If you would like to introduce the topics and 17 make sure that we have the two documents and we will 18 deal with each one in sequence. 19 MR. ROGERS: All right. Thank you. 20 EXAMINATION-IN-CHIEF 21 MR. ROGERS: Dr. Poray, did you, at my 22 request, prepare an additional piece of evidence which 23 explains the OHNC proposal on export and wheel-through 24 service? 25 MR. PORAY: I did, yes. 26 MR. ROGERS: This exhibit has now been marked 27 as Exhibit G13.1? 28 MR. PORAY: That is correct. Les Services StenoTran Services Inc. 613-521-0703 2876 OHNC PANEL 3, in-ch (Rogers) 1 MR. ROGERS: Yesterday we filed an amended 2 version to correct a one-word change, in error, which 3 had cropped up before this document was filed? 4 MR. PORAY: That is correct. 5 MR. ROGERS: All right. This, you believe, is 6 an accurate description of the company's proposal for 7 export and wheel-through service? 8 MR. PORAY: That is correct. 9 MR. ROGERS: You will be prepared to answer 10 questions, this morning about, it? 11 MR. PORAY: I will. 12 MR. ROGERS: Thank you very much. 13 Mr. Curtis, did you, sir, in response to a 14 request from the Board, I think -- or at least interest 15 expressed by the Board -- and at my request, prepare a 16 document entitled "Implementation of Transmission 17 Rates"? 18 MR. CURTIS: Yes, I did. 19 MR. ROGERS: I understand that what you have 20 attempted to do there is set out, in one place, a 21 concise summary of the corollary events that are going 22 on with this hearing? 23 MR. CURTIS: Yes. 24 MR. ROGERS: In an attempt to show how they 25 are interrelated? 26 MR. CURTIS: Yes, I have. 27 MR. ROGERS: You have pointed out, in the 28 document, that the foremost task before us all here is Les Services StenoTran Services Inc. 613-521-0703 2877 OHNC PANEL 3, in-ch (Rogers) 1 the examination and approval of Ontario Hydro Networks 2 rate proposal? 3 MR. CURTIS: The rate proposal, yes, it is. 4 MR. ROGERS: Which, hopefully, will result in 5 an approved rate in time for open access? 6 MR. CURTIS: Yes, that is correct. 7 MR. ROGERS: You will be prepared to answer 8 questions about it? 9 MR. CURTIS: I will. 10 MR. ROGERS: Tell me, Mr. Curtis, dealing with 11 your document first -- 12 MR. CURTIS: Yes. 13 MR. ROGERS: -- I understand, from what I have 14 heard in the hearing and from what I have read, that 15 there are a number of interrelated processes that affect 16 the implementation of transmission rates. 17 Could you please provide a short overview 18 for us? 19 MR. CURTIS: Certainly. 20 There are five processes that OHNC views as 21 impacting the implementation of the transmission rates. 22 They are: the transmission rate-setting process; the 23 market rules; the IMO billing and settlement system; the 24 transmission system code; and the IMO -- I'm sorry -- 25 and the distribution rate-setting processes. 26 The transmission rate-setting process sets the 27 transmission rates OHNC will charge going into open 28 access. Les Services StenoTran Services Inc. 613-521-0703 2878 OHNC PANEL 3, in-ch (Rogers) 1 The market rules require the IMO to collect 2 transmission charges. 3 The IMO's billing and settlements process 4 establishes, among other things, the logistical 5 processes for collecting and settling transmission rates 6 under the market rules. 7 The transmission system code will determine to 8 what extent -- among other things, the technical terms 9 and conditions for transmission services and 10 transmission connection. 11 Finally, there is the distribution 12 rate-setting process which will determine, as part of 13 it, how transmission charges are passed through to 14 end-use customers. 15 MR. ROGERS: Thank you. I know that each of 16 these topics is dealt with in your document, but I think 17 it would be useful if we could spend a few moments 18 summarizing the key features of each. First, can you 19 tell us more about what is included in the transmission 20 rate setting process? 21 MR. PORAY: Yes. Open access requires 22 approval of transmission rates. The OEB's decisions on 23 OHNC's application before this Board will result in the 24 final transmission rates being set. These approved 25 rates would then be posted by OHNC to inform 26 transmission customers prior to open access being 27 declared. 28 The decisions required from the OEB to put in Les Services StenoTran Services Inc. 613-521-0703 2879 OHNC PANEL 3, in-ch (Rogers) 1 place transmission rates are set out fully in our 2 application and summarized on Table 1 in the 3 implementation of transmission rate summary we put out 4 yesterday morning as Exhibit G14.3. 5 MR. ROGERS: All right. Thank you very much. 6 Now, assuming these rates are approved, both at the 7 conclusion of this case, some rates anyway that was 8 approved by the Board, can we talk about the timing of 9 these rates? How long are the rates that this Board 10 will approve in this process -- will they likely be in 11 effect? 12 MR. CURTIS: We need to be realistic about 13 what we can expect to achieve and what we can request of 14 our regulator and what we can require of our customers 15 and stakeholders, given the limited time that's 16 available. 17 We have concluded, therefore, that it is 18 simply not practical for us to come back before the OEB 19 this year with another transmission rate application. 20 Consequently, we expect these rates to be in effect for 21 the foreseeable future and will stay in effect until 22 OHNC refiles. 23 Of course, the OEB always has the power to 24 order OHNC to appear for a rate review. However, with 25 all that needs to be put into place to ensure open 26 access happens by November 1 of this year and the need 27 to carefully assess the next steps once open access has 28 happened, OHNC feels it prudent to put off a second Les Services StenoTran Services Inc. 613-521-0703 2880 OHNC PANEL 3, in-ch (Rogers) 1 transmission review. 2 MR. ROGERS: Can you give us the best thinking 3 that you can at the moment as to when that likely will 4 be, when the company likely will be back before the 5 Board. 6 MR. CURTIS: Sure. We can't make a commitment 7 as part of the corporation right now because of the 8 planning that's under way, but the current thinking is 9 that we would be back before the OEB within a year or 10 two. 11 MR. ROGERS: Thank you. Now, can we move on 12 to your document implementation of transmission rates. 13 I see on Table 1 that you have a column headed or 14 labelled "implementation links" on the right hand side 15 of that table. 16 MR. CURTIS: Yes. 17 MR. ROGERS: Could you please tell me what 18 information is contained in this column. 19 MR. CURTIS: Certainly. Just having the Board 20 approve transmission rates is not sufficient to have 21 those rates fully put in place on an operational basis. 22 The implementation links column outlines how many of the 23 decisions required in the transmission rate setting 24 process are linked to other processes I outlined in my 25 overview in terms of full implementation of transmission 26 rates. 27 MR. ROGERS: All right. Thank you. Now, 28 could you please expand on the market rules process for Les Services StenoTran Services Inc. 613-521-0703 2881 OHNC PANEL 3, in-ch (Rogers) 1 us. 2 MR. CURTIS: There are several aspects of 3 market rules that are germane to the implementation of 4 transmission rates. The first is market rules require 5 the IMO to offer transmission services and to collect 6 for those services from customers. This would be done 7 through the IMO's billing and collection process, one of 8 the other processes the transmission rate setting is 9 linked to. 10 The market rules set out three transmission 11 services, basic use, which is the network services 12 component in OHNC's application, line connection and 13 transformation connection, which is consistent with 14 OHNC's cost allocation proposal. 15 If the Board decides on a different pool 16 structure, the market rules probably would have to be 17 amended. In a similar vein, the market rules currently 18 do not envision an export and wheeling through charge to 19 recover embedded transmission costs. If the Board does 20 include an export and wheeling through charge recovering 21 some portion of embedded transmission costs, the market 22 rules may have to be amended. 23 MR. ROGERS: Okay. Can I stop you there, 24 Mr. Curtis. 25 MR. CURTIS: Yes. 26 MR. ROGERS: By an EWT charge that you are 27 talking about here, you are talking about the charge 28 that Dr. Poray will discuss in a moment that is proposed Les Services StenoTran Services Inc. 613-521-0703 2882 OHNC PANEL 3, in-ch (Rogers) 1 by OHNC as a $1 per megawatt hour charge on exports. 2 MR. CURTIS: That is correct. 3 MR. ROGERS: You are not talking about the 4 other charges that are administered by the IMO. 5 MR. CURTIS: No, I'm not. I'm not talking 6 about the connection -- sorry, the congestion or the 7 transmission rights process. 8 MR. ROGERS: Very good. Can you tell us now 9 then, please, about the link to the IMO's billing and 10 settlements process as you see it. 11 MR. CURTIS: Sure. The IMO's billing and 12 settlements process is where the actual billing for 13 transmission services will be done. OHNC has discussed 14 the development of the process for billing for 15 transmission services with the IMO with reference to 16 OHNC's application currently before this Board. 17 The actual development of the billing software 18 for transmission services will begin as soon as the OEB 19 has rendered its decisions on OHNC's application for 20 transmission rates. The software developed would be 21 integrated within the IMO's overall process for market 22 billing and development software both in terms of its 23 development and testing. 24 Also, as part of this process, OHNC would 25 confirm that there would be no additional metering 26 required. As well, OHNC will communicate with 27 transmission customers on the form and process for the 28 billing of transmission services. Les Services StenoTran Services Inc. 613-521-0703 2883 OHNC PANEL 3, in-ch (Rogers) 1 MR. ROGERS: Thank you. Please describe to us 2 now the link to the transmission system code. 3 MR. CURTIS: The transmission system code is 4 under development, lead by the OEB staff at the Board's 5 request. The draft code is to be submitted to the OEB 6 for its review and approval. 7 As part of the transmission system code 8 development will be the approval of technical terms and 9 conditions. These would be a complement to the 10 commercial terms and conditions that are contained in 11 OHNC's application before this Board. 12 MR. ROGERS: Thank you. Finally, I ask you to 13 comment on the link with the distribution rate setting 14 process. 15 MR. CURTIS: The distribution rate setting 16 process will provide the venue for determining how 17 transmission costs will be charged to end use LDC 18 customers. OHNC understands that setting distribution 19 rates will be done later this year in accordance with 20 the OEB's electricity distribution performance based 21 regulation rate handbook. 22 MR. ROGERS: All right. Thank you. Is your 23 company able to carry out what is required of it prior 24 to open access? 25 MR. CURTIS: What it is accountable for, yes, 26 we are able to do that. 27 MR. ROGERS: All right. Thank you very much, 28 Mr. Curtis, Dr. Poray. Les Services StenoTran Services Inc. 613-521-0703 2884 OHNC PANEL 3, in-ch (Rogers) 1 These witnesses are now available for 2 cross-examination or examination. 3 I'm sorry. Dr. Higgin. 4 THE PRESIDING MEMBER: Can I just ask you 5 about how you plan to address the change in the revenue 6 requirements as a result of adjustment to the market 7 based return on equity. You have a letter from the 8 Board. It has approved an adjustment from, I think it 9 is, $11.63 to $11.82. 10 MR. ROGERS: Yes, so I understand. I have not 11 seen the letter myself, Dr. Higgin, but I am aware that 12 the Board received such a letter. 13 THE PRESIDING MEMBER: We understand then that 14 when the Board's decision is out and when the rate order 15 is filed, it will reflect that increase -- 16 MR. ROGERS: Yes. 17 THE PRESIDING MEMBER: -- in the year 2000 as 18 a revenue requirement from $11.63 to $11.82. 19 MR. ROGERS: That's my thinking. Yes, sir. I 20 anticipate that the Board will after the conclusion of 21 the case will issue reasons commenting on the various 22 proposals. After receipt of those, I imagine it will be 23 necessary for the company to recalculate the rate to 24 reflect the Board's reasons. At that time this 25 additional sum would be factored into the revenue 26 requirement and reflected in the rate. 27 THE PRESIDING MEMBER: Right. And we would 28 assume, for the purposes of the decision, and this is Les Services StenoTran Services Inc. 613-521-0703 2885 OHNC PANEL 3, in-ch (Rogers) 1 the Board's question, whether that would be prorated to 2 the three pools. That is the fundamental question that 3 we would need to understand. Right? 4 MR. ROGERS: I think that Mr. Curtis can 5 perhaps answer that question. 6 MR. CURTIS: Yes, it would, Dr. Higgin. This 7 then sets the new base for the revenue requirement for 8 OHNC for transmission services and it would be rolled 9 through in accordance with what we submitted following 10 the cost allocation methodology that we have laid out to 11 allocate those costs to the three pools. 12 THE PRESIDING MEMBER: Sorry. 13 MEMBER VLAHOS: So it may not be prorated, 14 then. We will just have to follow the methodology that 15 has been -- 16 MR. CURTIS: That's right. It would follow 17 the methodology that we used. 18 THE PRESIDING MEMBER: Yes. So I think you 19 would need to address that when you -- probably maybe 20 address it as part of your final argument. Just so 21 people are clear, we would like people, though, to 22 submit argument on the original $11.63 revenue 23 requirement for the purposes of the Board's decision, 24 otherwise it will get too complicated. If the applicant 25 had just addressed that, then we would have a -- 26 MR. ROGERS: We will. 27 THE PRESIDING MEMBER: Closing the loop on 28 that. Les Services StenoTran Services Inc. 613-521-0703 2886 OHNC PANEL 3, in-ch (Rogers) 1 MR. ROGERS: We will have a discrete section 2 to explain how we propose to deal with that. 3 THE PRESIDING MEMBER: All right. 4 I can give you, Mr. Rogers, my copy of the 5 Letter of Direction. If you haven't got it, you may 6 want to look at it. 7 MR. ROGERS: Thank you. I'm sure it is 8 sitting on my desk in my office. 9 THE PRESIDING MEMBER: I will leave that with 10 you. If you can just have a chance to look at that at 11 your leisure and see if there is anything else that 12 jumps out at you on that. Okay? 13 MR. ROGERS: Very good. Thank you. 14 THE PRESIDING MEMBER: Thank you. 15 So with that we will move on to the 16 cross-examination. No particular order. If Mr. Budd 17 wants to go first he is welcome and we will just carry 18 on. All right? 19 MR. BUDD: Actually, Dr. Higgin, I was unable 20 to talk to my client this morning just before the 21 hearing on a couple of points. I would like to defer, 22 if I can. I see him. He is in the back here now. 23 THE PRESIDING MEMBER: Okay. Right. 24 Who is next? Mr. Brown? 25 After you, Alfonse. 26 --- Laughter 27 MR. FISHER: Perhaps that's it. 28 Thank you, Dr. Higgin. Les Services StenoTran Services Inc. 613-521-0703 2887 OHNC PANEL 3, in-ch (Rogers) 1 I just have a couple of quick questions. 2 CROSS-EXAMINATION 3 MR. FISHER: First off, if I could take you to 4 Interrogatory E-2-44, page 1. 5 --- Pause 6 MR. CURTIS: Yes. 7 MR. FISHER: This has to do with discussions 8 between OHNC and IMO in relation to implementation 9 matters. The response indicates that these discussions 10 were conducted on an informal basis prior to the filing 11 and that there are no notes of meetings or 12 correspondence indicating IMO staff concurrence. 13 Have any formal discussions occurred since 14 this IR was filed? 15 MR. CURTIS: We have had further discussions 16 with the IMO in terms of the implementation. Again, it 17 has been within the context of what we have filed before 18 the Board. We have meetings planned on an ongoing basis 19 with the IMO. As I indicated in my direct, our plan is 20 to get down to developing the appropriate software with 21 the IMO once the Board's decisions on this application 22 are out. 23 MR. FISHER: Are there any notes or minutes 24 from these meetings that could be submitted so we could 25 understand the nature of these suggestions? 26 MR. CURTIS: I don't believe we have any notes 27 of these meetings. No, we don't. 28 MR. FISHER: I guess what we are wondering is Les Services StenoTran Services Inc. 613-521-0703 2888 OHNC PANEL 3, cr-ex (Fisher) 1 how can the Board be assured that OHNC's proposals will 2 be compatible with the IMO requirements? 3 MR. CURTIS: In terms of the discussions that 4 we have had with the IMO, that has actually been the 5 focus of them. We initially, in terms of our 6 conversations with them, got some direction from them in 7 terms of what they would deem to be compatible with what 8 they are developing as far as the billing and 9 settlements process. They wanted, for example, that the 10 process could be set up based on a computer algorithm 11 that would make use of the information that they would 12 be collecting through their normal processes. In terms 13 of what we have filed as far as our proposal is 14 concerned, that would be the case. 15 MR. FISHER: Thank you. 16 In Exhibit G14.3 on the implementation of 17 transmission rates, Appendix B -- 18 MR. CURTIS: Yes? 19 MR. FISHER: -- lines 32 and 33 says that: 20 "To the best of OHNC's current knowledge, 21 there would be no additional meters 22 required at open access arising from its 23 transmission rates proposal." 24 In Interrogatory Exhibit E, Tab 2, 25 Schedule 43 -- 26 MR. CURTIS: Yes? 27 MR. FISHER: -- as well as in the transcript, 28 Volume 2, pages 353 and 354, it says that OHNC will Les Services StenoTran Services Inc. 613-521-0703 2889 OHNC PANEL 3, cr-ex (Fisher) 1 require a meter to be installed for billing of 2 connection and network services. Could you explain the 3 difference between these two, please? 4 MR. CURTIS: Yes. We are talking here in 5 terms of this interrogatory response. I think the other 6 reference that you made is to the metering requirement 7 for an embedded generator being installed, a new 8 embedded generator. What we are talking about here is 9 tha,t to the best of our information, at the moment all 10 the existing generators, all existing embedded 11 generators have the appropriate metering in place now so 12 that at open access what we are anticipating is that 13 there wouldn't be any additional meters that are 14 required to be put in place. 15 Obviously, as the market develops and new 16 embedded generation appears on the system, under our 17 proposal that meter requirement would have to be one of 18 the requirements for new embedded generation to be put 19 in place. 20 --- Pause 21 CROSS-EXAMINATION 22 MR. SNELSON: Maybe I can just finish this 23 off. I'm not trying to make it difficult. 24 What I think I'm understanding is that the 25 additional meter that we discussed in the transcript and 26 in this interrogatory that might be required is not 27 required at open access because existing embedded 28 generators are going to be net load billed. Les Services StenoTran Services Inc. 613-521-0703 2890 OHNC PANEL 3, cr-ex (Snelson) 1 MR. CURTIS: Yes. 2 MR. SNELSON: But a new embedded generator 3 that did not require that meter for energy market 4 purposes, because it had no intention of putting power 5 into the system, net power into the system, may require 6 an additional meter for transmission rate purposes that 7 would not be required for energy market purposes. 8 MR. CURTIS: Yes, that's correct. 9 MR. SNELSON: Thank you. 10 MR. FISHER: Those are my questions. Thank 11 you, Dr. Higgin. 12 THE PRESIDING MEMBER: Okay. Thank you, 13 Mr. Fisher. 14 Mr. Brown. 15 MR. BROWN: Thank you, Dr. Higgin. 16 CROSS-EXAMINATION 17 MR. BROWN: Just picking up on the answer, 18 MR. Curtis, that you gave to the last question, how much 19 do those meters cost? 20 MR. CURTIS: I'm not sure that I would be the 21 best one to provide you with an estimate. It depends in 22 terms of what the size of the unit is that you are 23 talking about. I believe it is in the range of several 24 thousands of dollars, though, but I'm not a metering 25 expert. I'm sorry. 26 MR. BROWN: Coming back, if I could, sir, to 27 some answers that you gave in response to your counsel's 28 examination-in-chief, the rates which emerge from this Les Services StenoTran Services Inc. 613-521-0703 2891 OHNC PANEL 3, cr-ex (Brown) 1 proceeding certainly will be in effect throughout the 2 balance of 2000. As I take your evidence, they will 3 also be in effect during 2001. 4 MR. CURTIS: That is our expectation now, yes. 5 MR. BROWN: Indeed, you went even further and 6 it appears that there is now a likelihood that the rates 7 will be in place during 2002 as well? 8 MR. CURTIS: That is a possibilIty, yes. 9 MR. BROWN: Was it really only 2003 that we 10 would see new rates in place for transmission services 11 on your current timetable? 12 MR. CURTIS: As I said, the company hasn't 13 come out with a final commitment in terms of when it 14 would be able to come back before the Board. It is 15 somewhere in that one to two-year period is our current 16 expectation. 17 MR. BROWN: To the extent that the rates which 18 are set in this proceeding generate revenue in excess of 19 your revenue requirements, how do you propose to deal 20 with those? Conversely, if they don't generate 21 sufficient revenue to meet your revenue requirements, 22 what mechanism have you in place that will deal with 23 those deficits or surpluses? 24 MR. CURTIS: Our expectation would be -- 25 certainly in the latter, if the revenue collections 26 didn't meet what our requirement would be, we would be 27 back before the Board. And if it went the other way, I 28 would expect that the Board may require us to come back. Les Services StenoTran Services Inc. 613-521-0703 2892 OHNC PANEL 3, cr-ex (Brown) 1 MR. BROWN: Do you have as part of your 2 proposal in this hearing, sir, a request to establish a 3 deferral account? Or do you already have a deferral 4 account set up? 5 MR. CURTIS: I don't believe I know that. I 6 don't know if we have a deferral account set up, no. 7 MR. BROWN: Do you know whether in this 8 proceeding you are requesting the Board to authorize the 9 creation by OHNC of a deferral account? 10 MR. CURTIS: Not in this proceeding, no. 11 MR. BROWN: To the extent that the revenues 12 that you generate from the rates which you set in this 13 proceeding exceed your revenue requirements, can you 14 give any indication to the Board, and perhaps to the 15 larger community, of the circumstances under which you 16 would come back before the Board to credit back to your 17 customers the excess revenue? 18 MR. ROGERS: Excuse me, I am interjecting. I 19 don't think there is any commitment to come back and 20 account for any shortfall or excess. The regulatory 21 regime is that the rates go into effect. They are in 22 effect until the Applicant either re-applies or the 23 Board calls the applicant back in. 24 That is done all the time. 25 MR. BROWN: What I was getting at, Mr. Curtis, 26 is that certainly it is a very familiar practice on the 27 gas utility side of the ledger that if revenues exceed 28 those which are forecast, they are tracked in a special Les Services StenoTran Services Inc. 613-521-0703 2893 OHNC PANEL 3, cr-ex (Brown) 1 account; and if the account reaches a certain level of 2 magnitude, the utility will come back before the Board 3 and clear out that account to the credit of the 4 customers. So you are not sitting on a pile of money 5 that, by right, belongs to the customers. 6 My question to you is whether OHNC in this new 7 market is contemplating a similar proposal so that its 8 customers don't have to pay more than what their service 9 is costing. 10 MR. CURTIS: Well, I think, as we said, that 11 would have to happen the next time we came before the 12 Board. 13 MR. BROWN: Are you proposing any mechanism, 14 sir, during the interim to report to the Board and to 15 the intervenors at large the magnitude of any revenue 16 surplus that you might be collecting until you come back 17 for new rates? 18 MR. CURTIS: Not at this stage, no. 19 MR. BROWN: Do you think it would enhance your 20 customer relations with your clients or with your 21 customers to put something like that in place so they 22 would have a fairly good fix on whether their rates are 23 covering your costs or whether your rates are actually 24 contributing to a surplus? 25 MR. CURTIS: I think it might help us, yes. 26 MR. BROWN: Is that something that you are 27 prepared to consider? 28 MR. CURTIS: I think we would consider Les Services StenoTran Services Inc. 613-521-0703 2894 OHNC PANEL 3, cr-ex (Brown) 1 it, yes. 2 MR. BROWN: In terms of capital expenditures, 3 do you foresee OHNC making capital expenditures in 2001 4 and 2002? 5 MR. CURTIS: Yes. 6 MR. BROWN: Do you have any plans afoot to 7 come back before the Board to seek approval for capital 8 budgets for those years? 9 MR. CURTIS: Our understanding is that we 10 would be back before the Board under section 92 of the 11 legislation for approval for any of those. 12 MR. BROWN: So that would be, in essence, 13 project specific? 14 MR. CURTIS: Project-specific 15 applications, yes. 16 MR. BROWN: You had indicated in your evidence 17 two weeks ago, sir, that with respect to the issue of on 18 what basis you calculate the bill, the company envisages 19 moving from this gross load/net load debate through to 20 an end state where you negotiate specific contracts with 21 your customers. 22 Given that it appears that you won't be back 23 before the Board within the next one to two years, are 24 you committing to the Board and to intervenors that when 25 you do come back the next time you will have, as part of 26 your proposal, details on the contracting system that 27 you referred to earlier in this proceeding? 28 MR. CURTIS: I don't know that we would be in Les Services StenoTran Services Inc. 613-521-0703 2895 OHNC PANEL 3, cr-ex (Brown) 1 a position to commit to that, but that is certainly our 2 intention. Our intention, as I think I outlined, would 3 be to do research into the various mechanisms of 4 contracting that had been tried out in other 5 jurisdictions, to develop some proposals, to take them 6 before stakeholders, and to refine that to the point of 7 being able to present a template for the contracts for 8 Board approval prior to any contracting going on with 9 customers. 10 That would still be our intention, yes. 11 MR. BROWN: So at the end of the day, when you 12 come back the next time, we may or may not see a 13 concrete proposal from you regarding specific contracts 14 with customers for billing determinates. 15 MR. CURTIS: Yes, that is correct. 16 MR. BROWN: Could I ask you, gentlemen, to 17 look briefly at Exhibit G14.3, which is the 18 implementation of transmission rates. 19 MR. CURTIS: Yes. 20 MR. BROWN: I have just a few questions on 21 your Table 1, dealing first with the rate design, gross 22 versus net. 23 MR. CURTIS: Yes. 24 MR. BROWN: You have indicated a number of 25 different elements to the rate design that have been the 26 subject matter of this proceeding. 27 Can you tell me, with respect to those five 28 elements that you have listed there under gross versus Les Services StenoTran Services Inc. 613-521-0703 2896 OHNC PANEL 3, cr-ex (Brown) 1 net, whether any changes would have to be made to the 2 market rules as they now stand to accommodate and 3 implement the proposal which OHNC is putting before the 4 Board. 5 MR. CURTIS: We don't see anything in the 6 current market rules that would have to be changed or 7 amended as a result of the gross versus net proposal 8 that we have put forward. 9 MR. BROWN: By the same token, you have heard 10 from two intervenors, AMPCO and IPPSO, that they would 11 propose a net load billing regime. 12 Do I take it that your answer would be the 13 same; that there would be no change required to the 14 market rules, as they are currently drafted, in order to 15 implement the net load billing proposal? 16 MR. CURTIS: That is correct. Market rules 17 just lay out the requirement for the IMO to collect 18 transmission charges based on the rates approved by the 19 Board. 20 MR. BROWN: And with respect to the billing 21 and settlements mechanism that the IMO is in the process 22 of developing, am I correct that what the Board decides 23 here in essence will drive the choices that are made by 24 the IMO in finalizing their billing and settlement 25 software system? 26 MR. CURTIS: Yes, in terms of our joint 27 development work as far as the software is concerned. 28 MR. BROWN: To your knowledge, the IMO could Les Services StenoTran Services Inc. 613-521-0703 2897 OHNC PANEL 3, cr-ex (Brown) 1 accommodate either a gross load billing or a net load 2 billing regime in its billing and settlement software. 3 MR. CURTIS: I think there might be some 4 issues around the relative complexities associated with 5 those alternatives that have been laid out. But I 6 think, overall, our opinion is that the IMO should be 7 able to implement a billing system that would 8 accommodate the decision coming out of the Board as far 9 as the net versus gross issue. 10 MR. BROWN: In terms of relative complexities, 11 I take it that the net load billing system would provide 12 less complexity for billing and settlements, because you 13 are only tracking one stream of use; that is, the energy 14 over the transmission system. 15 MR. CURTIS: Yes, I think that is right. Yes, 16 one might be simpler than the other. 17 MR. BROWN: With gross load you have to track 18 the second stream, which is the embedded generation 19 stream. 20 MR. CURTIS: Well, they will be doing that 21 anyway as part of their own system. The fact that all 22 of this information is collected means that the IMO 23 could implement any one of these alternatives. 24 MR. BROWN: Finally, Mr. Curtis, moving down 25 to the next box, which is Charge Determinants, am I 26 correct that the market rules, as they currently stand, 27 could accommodate either Option XVI or Option XVIII as 28 laid out in your prefiled evidence? Les Services StenoTran Services Inc. 613-521-0703 2898 OHNC PANEL 3, cr-ex (Brown) 1 MR. CURTIS: I think it could. Again, I think 2 we are getting into the area of relative complexity that 3 is associated with them. But yes, that is our 4 understanding, that it could. 5 MR. BROWN: And indeed, as I recall in your 6 prefiled evidence you dealt specifically with that issue 7 of comparative complexity. 8 MR. CURTIS: Yes. 9 MR. BROWN: Thank you, gentlemen. Those are 10 my questions. 11 THE PRESIDING MEMBER: Thank you, Mr. Brown. 12 Are you ready now, Mr. Budd? 13 MR. BUDD: Yes; thank you, sir, for your 14 patience. 15 CROSS-EXAMINATION 16 MR. BUDD: Just to wrap up on that point with 17 respect to meters, I really want to be clear that if the 18 Board goes for a net load billing regime which has been 19 proposed by several parties in this proceeding, there 20 won't be a need for any of these other new meters. Is 21 that right? 22 MR. CURTIS: The meters that are installed on 23 embedded generators. That's correct. 24 MR. BUDD: Just a few things, gentlemen. 25 Mr. Curtis, I believe in your opening remarks 26 you mentioned a November 1 market opening. Do you 27 recall that? 28 MR. CURTIS: That's my understanding, yes, Les Services StenoTran Services Inc. 613-521-0703 2899 OHNC PANEL 3, cr-ex (Budd) 1 that the Minister has declared that. 2 MR. BUDD: Is it your understanding that the 3 Minister has actually already declared that or that 4 that's just a target? 5 MR. PORAY: It's a target planning date. 6 MR. BUDD: And am I right that the Minister 7 will in fact declare a market opening at whatever point 8 the Minister decides to declare that? 9 MR. PORAY: That is correct. 10 MR. BUDD: And in your view, in terms of any 11 impacts that may have on OHNC, what happens if the date 12 slips? Is there anything in particular that the Board 13 should know about if the date slips, from your point of 14 view? 15 MR. CURTIS: I don't believe so. We are 16 obviously on a path to make sure that we are prepared 17 for the November 1 date. If the November 1 date happens 18 to slip, I can't think of anything offhand that would 19 impact what we are planning on doing. 20 MR. BUDD: It would just be business as usual? 21 MR. CURTIS: If the date slips, presumably it 22 would be because the curve process for collecting 23 transmission rates would still be in place and so 24 transmission rates would be collected as they are right 25 as of this moment, and when an open access is declared 26 the switchover would take place to the IMO's billing and 27 settlements process. 28 MR. BUDD: When you talk about open access do Les Services StenoTran Services Inc. 613-521-0703 2900 OHNC PANEL 3, cr-ex (Budd) 1 you refer to that as being the whole market opens, part 2 of the market opens? Have you considered in respect of 3 any of this what if there's a staged market opening? 4 Have you got any contingency plans for those kinds of 5 possibilities? 6 MR. CURTIS: I think the only staged market 7 opening that has been talked about is starting off with 8 a wholesale market opening and then following on with a 9 retail market opening. 10 From a transmission rate perspective, 11 collecting transmission rates, a wholesale market 12 opening basically encompasses most of the requirements 13 that we have put in place in terms of our plans for 14 implementation. So that's the only scenario I think we 15 have looked at. 16 MR. BUDD: Thank you. 17 This morning was the first time I heard from 18 OHNC that there would be no other rates case later this 19 year, for the year 2001 and onward. You indicated, I 20 think the words were in the transcript, you might come 21 back maybe in a year or two. 22 MR. CURTIS: Yes. 23 MR. BUDD: Again, I found that a little vague, 24 maybe in a year or two because I think, would you agree 25 with me, that that's the first time that any intervenors 26 would have heard of your plan to not come back this 27 year. Am I right? 28 MR. CURTIS: I think what we have said earlier Les Services StenoTran Services Inc. 613-521-0703 2901 OHNC PANEL 3, cr-ex (Budd) 1 on, for example within the settlements process, is that 2 we weren't committing to coming back this year, but 3 today in terms of the direct evidence I took the first 4 opportunity to talk explicitly about a one to two 5 year -- before our next appearance, yes. 6 MR. BUDD: So that any major structural issues 7 in terms of the rates or the policies that get set, what 8 I really want to understand from you is your expectation 9 is that what the Board is going to issue in terms of a 10 decision at some point this spring later on or this 11 summer, that's going to be in effect for a couple of 12 years, so we had better have some pretty firm 13 understanding, is that right, of where things are going 14 to be for a while? 15 MR. CURTIS: It may be in effect for that 16 length of time, yes. 17 MR. BUDD: In some of your direct evidence 18 this morning you referred to the IMO and the billing of 19 transmission services. What other computer changes are 20 necessary, in your view, to the software, if any, as a 21 result of your application that are not already planned? 22 In other words, have you told the IMO of all of the 23 software changes that are required or necessary as a 24 result of your application? 25 MR. CURTIS: We have talked to the IMO in 26 terms of the software requirements for transmission 27 billing and settlement that's laid out in our 28 application. Whenever you are talking about software Les Services StenoTran Services Inc. 613-521-0703 2902 OHNC PANEL 3, cr-ex (Budd) 1 development there are various levels of degree of 2 complexity that we are into here and we certainly 3 haven't got down to the actual level of specifying 4 system code that would be put in place. 5 I am not sure that I could necessarily say 6 that we have talked about all of the issues of 7 complexity with the IMO around this because to a certain 8 extent they also have to examine the software structure 9 and systems that they are putting place for the energy 10 marketplace billing and settlements process and talk to 11 us in terms of the compatibility and what we are after 12 for transmission rates. 13 MR. BUDD: My client's interest in this is a 14 matter of ensuring that there is sufficient dialogue, of 15 course, between the IMO and OHNC. They are pretty 16 critical components in it and I am reasonably sure the 17 Board is going to want to know as well that things are 18 going to work and you've said that in your opening 19 statement. Can you describe me please what are the 20 processes that are in place, just at a high level, to 21 give us some comfort that the IMO and yourselves are 22 speaking to one another and will be, in fact, ready in 23 terms of these lead times for software development so 24 there are no surprises and no unnecessary delays? 25 MR. CURTIS: Sure. As I outlined, we have had 26 ongoing meetings and discussions with the IMO staff. We 27 have had meetings with the individuals within the IMO 28 that are developing, or at least are in charge of Les Services StenoTran Services Inc. 613-521-0703 2903 OHNC PANEL 3, cr-ex (Budd) 1 developing the software for the energy marketplace 2 portion of what they are putting in place. We have 3 ongoing meetings scheduled with them. 4 The plan is that once the Board has rendered 5 its decision on this application and we know what the 6 requirements are for transmission billing and settlement 7 that we would develop then the software specifications 8 with the IMO. 9 I think we outlined in terms of what we have 10 submitted as evidence here that that would then be 11 included in the IMO's overall process for developing 12 software that it is putting in place. 13 There would be a period of testing of the 14 software. This would be all up and in place in time for 15 the market test that the IMO currently has slated for 16 August/September of this year. Passing those tests then 17 would have the transmission rates available or put in 18 place as far as the actual processes that the billing 19 and settlements would follow from the IMO. 20 MR. BUDD: Mr. Curtis and Dr. Poray, maybe you 21 could just help me with this last point and that is have 22 you thought or considered at all about applying any 23 undue pressure on this Tribunal as to when you need a 24 decision from them to be sure that your part is in place 25 so that you can talk to the IMO and finalize that their 26 part is place, so that the dry runs can happen, et 27 cetera. Have you got any idea about that complicated 28 task? Les Services StenoTran Services Inc. 613-521-0703 2904 OHNC PANEL 3, cr-ex (Budd) 1 MR. CURTIS: I think we have indicated that 2 hopefully around May that we would have a decision from 3 the Board on this particular application. 4 MR. BUDD: Thank you, Mr. Chair. 5 Good luck. 6 THE PRESIDING MEMBER: You are going to need 7 it with that. 8 Thank you, Mr. Budd. 9 Mr. Campbell. 10 MR. CAMPBELL: Thank you, Mr. Chairman. 11 CROSS-EXAMINATION 12 MR. CAMPBELL: Mr. Curtis, I have one question 13 for you initially and then I will be asking Dr. Poray 14 questions about the export and wheel through matter and 15 Mr. Rattray will be asking you some questions on the 16 implementation matter. 17 My initial question to you just follows up on 18 Mr. Brown's questions and it is this: With respect to 19 the ability to implement the various net gross proposals 20 within the current version of the market rules, would 21 you give the same answer for OPG's proposal that you 22 gave in respect of your own proposal and AMPCO and 23 IPPSO's proposal, that is, it can be implemented within 24 the market rules? 25 MR. CURTIS: Yes, it can. That's our 26 understanding. 27 MR. CAMPBELL: Dr. Poray, if I could turn to 28 you then please. Could you explain for me please why in Les Services StenoTran Services Inc. 613-521-0703 2905 OHNC PANEL 3, cr-ex (Campbell) 1 the case of your proposal for export and wheel through 2 charges the credit that your scheme contemplates with 3 respect to transmission rights is only applicable to 4 generators and is not applicable to other market 5 participants who carry out export transactions? 6 MR. PORAY: I think our thinking was that the 7 generators that are located within the province who 8 would be participating in the export market would be 9 eligible or should be eligible to a credit as opposed to 10 somebody that is just coming through the system or 11 somebody who is just speculating on the transmission 12 rights market. 13 MR. CAMPBELL: But say another market 14 participant like one of the big AMPCO members decided 15 that for whatever reason it wanted to make an export 16 transaction, it was prepared to engage in that market, 17 purchase out of the Ontario market, sell to export, 18 purchase as a transmission right, pays an export fee, I 19 don't understand why they would be treated differently. 20 What's the rationale for that difference? Is it just 21 some sort of judgment about different characteristics of 22 the generator? Where does it arise from? 23 --- Pause 24 MR. CAMPBELL: Mr. Curtis, I don't insist that 25 Dr. Poray answer all of them. If you want to -- we have 26 been very curious about this. We just don't understand 27 the rationale, to be perfectly honest. 28 MR. CURTIS: The example that I think you Les Services StenoTran Services Inc. 613-521-0703 2906 OHNC PANEL 3, cr-ex (Campbell) 1 outlined, my interpretation would be that this AMPCO 2 member had a generator and had decided that it was going 3 to engage in an export transaction and bought a 4 transmission right as part of that transaction. 5 As a generator then participating within the 6 marketplace, it would be entitled to receive the credit 7 back for the transmission right that it proposed under 8 our proposal. 9 MR. CAMPBELL: Assume it doesn't have a 10 generator. It's a market participant. It is concerned 11 about its energy costs. It feels that by engaging in 12 this kind of trading it can help control its costs 13 overall and help its bottom line. I don't understand, 14 given the market structure that we have, and certainly 15 my client doesn't understand, more importantly -- it's 16 kind of irrelevant if I understand it and my client 17 doesn't understand, why the generator should get this 18 credit whereas other market -- it's denied to other 19 market participants who will be subject to the export 20 fee, will they not? 21 MR. CURTIS: If they are actually dealing, if 22 they are actually producing energy for export, yes. 23 MR. CAMPBELL: But what about -- 24 MR. CURTIS: It's only those generators -- 25 like it's a charge for the energy that's exported. 26 MR. CAMPBELL: Is what you are telling me is 27 that a market participant who is not a generator but who 28 engages in the export market would not be subject to the Les Services StenoTran Services Inc. 613-521-0703 2907 OHNC PANEL 3, cr-ex (Campbell) 1 fee on the -- the dollar fee on the other side as well? 2 MR. PORAY: Well, I think anybody who bids 3 into the IMO market for export would be subject to an 4 export and wheel through transaction. I think our 5 thinking was that the credit should go back to an entity 6 that actually physically supplied or put in energy into 7 the IMO market for export. 8 MR. CAMPBELL: But if I say that -- let's take 9 an example where I decide I want to be a market 10 participant. I go to my client, OPG, and say "I want to 11 buy energy from you, but I am going to buy it", and it's 12 none of their business what I'm using it for, I say "I 13 am going to now turn around and engage in export 14 activity". OPG has -- we are not buying on the -- 15 either on a bilateral from OPG or I could just buy off 16 the spot market in which case it could come from 17 anybody. 18 I just don't understand, given the market 19 structure, why a market participant engaging in that 20 type of transaction who is not a generator should be 21 denied the credit if they purchase the transmission 22 rights. 23 MR. PORAY: As I say, we focused our thinking 24 in terms of those entities who actually physically 25 provided energy into the IMO controlled good and bid for 26 the interconnection. 27 MR. CAMPBELL: I understand what you have 28 done. My question is why. What's the rationale for Les Services StenoTran Services Inc. 613-521-0703 2908 OHNC PANEL 3, cr-ex (Campbell) 1 providing it in one case and not in the other? That's 2 my question. 3 MR. CURTIS: Certainly one of the rationales 4 arose out of our last proposal before the Board back in 5 December where we proposed that there be no charge for 6 embedded facilities. The reaction that we heard at that 7 point from stakeholders was that generators who used the 8 transmission system for export transactions should have 9 to pay for a portion of that embedded use of the system. 10 That's what we have built upon. 11 The requirement that was set out for us was 12 that generators should pay. 13 MR. CAMPBELL: That may have been what you 14 heard. If because people only suggested to you that 15 only generators should pay, is that the sole rationale 16 for your proposal? 17 MR. PORAY: I think it certainly is perhaps 18 the main one. Yes. 19 MR. CAMPBELL: What would the other one be? 20 MR. PORAY: I think that's probably it. 21 MR. CAMPBELL: I really need to know this. 22 MR. PORAY: Okay. 23 MR. CAMPBELL: The only rationale is that when 24 people talked to you about this, they said generators 25 should pay for export. That's why. 26 MR. PORAY: That's why we structured it the 27 way it is. Yes. 28 MR. CAMPBELL: In what way is an exporter who Les Services StenoTran Services Inc. 613-521-0703 2909 OHNC PANEL 3, cr-ex (Campbell) 1 is not a generator using the transmission system 2 differently when they buy out of the spot market across 3 the interconnection and export? Are they not drawing 4 out of that big market in exactly the same way that 5 would happen when a generator did such a transaction? 6 MR. PORAY: Yes, they would. 7 MR. CAMPBELL: So to the extent there's some 8 notion which, of course, my client doesn't accept, but 9 to the extent that there's some notion that there is 10 some element of additional cost or some element of 11 embedded cost shall I say that ought to be paid for by 12 exports, you would agree, I take it, that exporters who 13 are simple market participants without generation and 14 exporters who are market participants with generation 15 equally are subject to that notion of paying for some 16 portion of the embedded costs. They both use the 17 transmission system to use the language of the people 18 who make that argument. Is that correct? 19 MR. CURTIS: And as I stated at the beginning, 20 everybody who bids for export will be subject to an EWT 21 charge. Yes. 22 MR. CAMPBELL: In this language that people 23 have adopted around this in terms of trying to justify 24 this charge, there's no difference in the use of the 25 system for export as between a market participant 26 exporter and a generator participant exporter, is there? 27 MR. PORAY: I would say that provided that 28 market participant is actually withdrawing energy rather Les Services StenoTran Services Inc. 613-521-0703 2910 OHNC PANEL 3, cr-ex (Campbell) 1 than just laying -- what's the word I'm looking for -- 2 speculating on the congestion in the interconnected 3 market. 4 MR. CAMPBELL: All right. To make an export, 5 this is why there has to be an actual scheduled 6 transaction carried out in your rules. 7 MR. PORAY: Yes. 8 MR. CAMPBELL: If they actually make an 9 export, it's only then that they are subject to the fee, 10 so your fee by definition covers the situation where the 11 export is scheduled and actually conducted. 12 MR. PORAY: That's correct. 13 MR. CAMPBELL: Would you agree with me that 14 under these circumstances, and I may get lectured by my 15 client when I go back, but wouldn't you agree that it 16 makes more sense to apply the transmission rights credit 17 in the circumstances that we have been discussing to 18 both types of transactions, both the market participant 19 and a generator should get that credit? 20 --- Pause 21 MR. PORAY: I think, as Mr. Curtis indicated, 22 when this was discussed in the stakeholder -- it was 23 focused on the generator. To the extent that our 24 stakeholders would feel that this could be extended to 25 the other market participants, then I guess I would 26 agree, yes. 27 MR. CAMPBELL: I'm asking you two gentlemen 28 for your opinion. Based on the fact that it seems to me Les Services StenoTran Services Inc. 613-521-0703 2911 OHNC PANEL 3, cr-ex (Campbell) 1 the rationale is exactly the same in both cases, would 2 you both agree, in your judgment of opinion, that if you 3 are going to apply it, if you are going to make that 4 credit available for generators, it ought to be 5 available for exporters as well who actually carry 6 through transactions and are subject to the export and 7 wheel-through charge? 8 MR. PORAY: I think it could be, yes. 9 MR. CAMPBELL: So you agree with me that it 10 makes sense that it should be? 11 MR. PORAY: It could be. 12 MR. CAMPBELL: Why do you qualify? I don't 13 understand the qualification. If I get an answer, "It 14 could be", I'm going to be wondering all night long 15 tonight about in what circumstances it wouldn't be. 16 Is there any reason that it should not be 17 applied equally on both sides of the equations we have 18 been talking about, and, in fact, would you agree that 19 it ought to be? 20 --- Pause 21 MR. CURTIS: I think if we talk about -- the 22 long-term objective that we had in terms of export and 23 wheeling through is that these charges would end up 24 being dropped. 25 MR. CAMPBELL: And you are all for that? 26 MR. CURTIS: We are all for that. Yes, I know 27 you are. 28 And furthermore, in terms of how this proposal Les Services StenoTran Services Inc. 613-521-0703 2912 OHNC PANEL 3, cr-ex (Campbell) 1 was developed, it was at the request of the Board in 2 terms of re-examining this issue and through our 3 stakeholdering process, which as we have outlined has 4 focused in on generators as the group of market 5 participants that should be charged for that. What you 6 have outlined is, I think we would agree, the logical 7 extension for this. However the qualification -- 8 MR. CAMPBELL: And would you agree that this 9 Board -- 10 MR. CURTIS: -- the qualification around it is 11 that this proposal was developed, at least in some 12 measure, in response to our stakeholder consultation. 13 If there was general agreement on the part of all of the 14 stakeholders that in fact the extension that you are 15 proposing should be made, then, yes, I think we would 16 agree. 17 MR. CAMPBELL: All right. But just -- 18 MR. CURTIS: That's the reason for the 19 qualification. 20 MR. CAMPBELL: I would like to divide this 21 into two parts. I would like the judgment of both of 22 you, independent of the stakeholders, and we will come 23 back to that, I promise I won't forget the stakeholders, 24 but in your judgment, based on the discussion we have 25 been having this morning, wouldn't you agree that logic 26 drives you to the conclusion that the credit that you 27 propose ought to apply in both circumstances, whether 28 the exporter is a generator or whether the exporter is Les Services StenoTran Services Inc. 613-521-0703 2913 OHNC PANEL 3, cr-ex (Campbell) 1 scheduling through transactions? 2 MR. PORAY: Yes, we would agree to that, just 3 within the context of just ignoring all the 4 stakeholders. 5 MR. CAMPBELL: All right. 6 As I understand your qualification around the 7 stakeholders, it is that because the stakeholders said 8 generators should pay for some part of the embedded 9 costs you have extended your export and wheel-through 10 dollar charge to all exporters, not just generators. 11 You have already told me that. 12 MR. PORAY: That's correct. 13 MR. CAMPBELL: Why doesn't it make sense, 14 given what -- I mean, you have extended your 15 stakeholders' views that far on the charge side. 16 Wouldn't you agree with me that it makes sense to extend 17 your stakeholder's views on the credit side? 18 --- Pause 19 MR. PORAY: I guess subject to the discussions 20 with the stakeholders, yes. 21 MR. CAMPBELL: But, Dr. Poray, Mr. Curtis, you 22 told me that the stakeholder view you were responding to 23 was generators should pay a portion of the embedded cost 24 and you extended that to everyone, and you did that 25 without any further consultation or at least you haven't 26 told me about any further consultation on that. Why 27 would you be prepared to extend it on that side, making 28 them pay without any further consultation, but not on Les Services StenoTran Services Inc. 613-521-0703 2914 OHNC PANEL 3, cr-ex (Campbell) 1 the credit side which I would have thought if you went 2 to them and said, "Wouldn't it be a good idea to give a 3 credit to you?" that most people would stand up and say, 4 "Yes, I think that is a good idea given that you are 5 giving it to someone else"? Would you really need to go 6 out and talk to them in these circumstances? Why can't 7 you just extend it on this side? 8 MR. CURTIS: As you are aware, the export and 9 wheeling-through charge ultimately goes back as a refund 10 to transmission customers. 11 MR. CAMPBELL: Yes. 12 MR. CURTIS: The credit reduces the amount of 13 export and wheeling-through charges that would go back 14 to customers. 15 Talking with stakeholders, we felt that 16 extending the collection of the actual export and 17 wheeling-through charge -- that there wouldn't be a 18 stakeholder that would object to more money being 19 available to go back as a refund to transmission 20 customers. I'm not quite -- 21 MR. CAMPBELL: Did you ask the potential 22 exporters who were not generators whether they were 23 happy with that notion in light of not getting a credit? 24 MR. CURTIS: No. 25 MR. CAMPBELL: No. 26 MR. CURTIS: However, as I was, I guess, 27 trying complete, the export and wheeling-through charge 28 ends up going back to transmission customers. Our Les Services StenoTran Services Inc. 613-521-0703 2915 OHNC PANEL 3, cr-ex (Campbell) 1 hesitation to agree in terms of extending the credit 2 provision to these other participants is that that means 3 that there would be a reduction because it is a credit 4 on the export and wheeling-through, a reduction in the 5 amount of export and wheeling-through that would be 6 available for distribution back to transmission 7 customers. We think that the stakeholders might have a 8 different view in mind as far as that is concerned? 9 MR. CAMPBELL: So we can leave it that your 10 judgment is that it makes sense to balance it out but 11 you have put this little caveat around what the folks 12 out there would say? 13 MR. CURTIS: Yes. 14 MR. CAMPBELL: I take it that, based just on 15 your own judgment about the appropriateness in the 16 circumstances, you would recommend that the Board extend 17 the credit to exporters who are not generators, just 18 based on your own judgment? 19 MR. CURTIS: Just based on our own judgment, 20 yes. 21 MR. CAMPBELL: And you would agree with that, 22 Dr. Poray? 23 MR. PORAY: Yes. 24 MR. CAMPBELL: Would you also agree with me 25 that under your proposal if you didn't do that you could 26 well be setting up a market dynamic whereby one of 27 Mr. Fisher's clients who was not a generator came to OPG 28 and said, "Look, we can get a buck back if we do our Les Services StenoTran Services Inc. 613-521-0703 2916 OHNC PANEL 3, cr-ex (Campbell) 1 transaction through you. Will you front our transaction 2 and we will pay you 25 cents so we can get that buck 3 back?" Isn't that the kind of thing that would go on if 4 you left this anomaly out there? 5 MR. PORAY: I think it's possible. I think 6 the whole issue of this charge, which is aimed at 7 recovering some portion of the embedded costs to credit 8 back to customers, may in fact introduce some distortion 9 into the marketplace for transmission rights and the 10 export. I mean, we are aware of this and that is why in 11 our original proposal in December of 1998 we did not 12 include a specific charge for export and wheel-through 13 transactions to deal with embedded costs. 14 MR. CAMPBELL: It reveals your original 15 wisdom. 16 --- Laughter 17 MR. PORAY: Well, it reveals what our 18 long-term view is, that transactions on -- 19 MR. CAMPBELL: Yes. And as you are aware, my 20 client is absolutely ad idem with that view. 21 I want to discuss a little bit the kind of 22 information flows that are going on in the IMO 23 administration of this market, and I'm leading of course 24 to a discussion of the information flows if the proposal 25 is administered the way you propose it be administered 26 in your Exhibit G13.1. 27 Just to give us some context for those 28 information flows around the IMO, am I correct that the Les Services StenoTran Services Inc. 613-521-0703 2917 OHNC PANEL 3, cr-ex (Campbell) 1 IMO will keep records of all of the market transactions 2 carried out by each market participant? 3 MR. PORAY: That is my understanding. 4 MR. CAMPBELL: And the account for each market 5 participant will keep track of all types of 6 transactions. They will have to do that for each market 7 participant. 8 MR. PORAY: That is my understanding. 9 MR. CAMPBELL: And if we look first, for 10 instance, at purchases of energy, you will have to be 11 keeping track of amounts, in which hours, at what 12 prices, for each participant in the market. 13 MR. PORAY: My understanding is that the 14 settlements process will provide for that, yes. 15 MR. CAMPBELL: But all of that information 16 will have to be gathered up and incorporated into that 17 settlement process. And that is just the energy 18 transaction. 19 MR. PORAY: That is correct. 20 MR. CAMPBELL: And they will be gathering all 21 of that information and calculating charges, as a result 22 of all of that, as part of their normal workload -- the 23 IMO will be. 24 MR. PORAY: That is my understanding. 25 MR. CAMPBELL: And with respect to 26 transmission charges, again it will be gathering the 27 information of how much load, which hours, applying the 28 tariff, doing the calculation, if it is 85 per cent of Les Services StenoTran Services Inc. 613-521-0703 2918 OHNC PANEL 3, cr-ex (Campbell) 1 non-coincident peak that is called for in Option XVIII, 2 or which charge is higher, they will be doing all of 3 those sorts of calculations for each transmission 4 customer. 5 MR. PORAY: That is my understanding. 6 MR. CAMPBELL: And they will be doing that for 7 every hour, gathering all that information, and making 8 up a bill at the end of the day that reflects all of 9 those calculations. 10 MR. PORAY: As far as transmission is 11 concerned, that will be done on a monthly basis. 12 MR. CAMPBELL: And it will be done by the IMO. 13 MR. PORAY: That is correct. 14 MR. CAMPBELL: And similarly, if your proposal 15 for embedded generation is adopted, all of those amounts 16 will be gathered for every hour, all of those 17 calculations will be done. All of those computations 18 will go into the IMO's billing and settlements 19 proposals. 20 MR. PORAY: That is my understanding. 21 MR. CAMPBELL: And we talked earlier about 22 purchases of energy, in terms of sales of energy. 23 Again, for everyone selling energy into the market, they 24 will be gathering amounts, prices, times, et cetera. 25 All of that information will be collected by the IMO. 26 MR. PORAY: That is my understanding, yes. 27 MR. CAMPBELL: And all of that will be part of 28 the billings and settlements process. Les Services StenoTran Services Inc. 613-521-0703 2919 OHNC PANEL 3, cr-ex (Campbell) 1 MR. PORAY: That I understand to be the case. 2 MR. CAMPBELL: And then after all of that, the 3 IMO has to add its uplift to the appropriate 4 transactions, their administration fees, and all of that 5 has to be calculated by the IMO as well on an individual 6 market participant basis. 7 MR. PORAY: That is my understanding. 8 MR. CAMPBELL: They will be calculating an 9 appropriate settlement amount for each market 10 participant at regular intervals, as you point out, 11 monthly. 12 MR. PORAY: For transmission charges, yes. 13 MR. CAMPBELL: And are the intervals different 14 for other aspects of transactions in the market? I 15 suppose they could be. 16 MR. PORAY: Well, for energy it is done on an 17 hourly basis. 18 MR. CAMPBELL: Yes. But what is the 19 settlement period for all of that? 20 MR. PORAY: I think it is on a monthly basis, 21 yes. 22 MR. CAMPBELL: And can we agree that that 23 settlement amount and that settlement account, as it is 24 being calculated for each market participant under the 25 rules, will already reflect export sales information? 26 MR. PORAY: That is correct. 27 MR. CAMPBELL: It will reflect PRs purchased 28 by that market participant. Les Services StenoTran Services Inc. 613-521-0703 2920 OHNC PANEL 3, cr-ex (Campbell) 1 MR. PORAY: That is correct. 2 MR. CAMPBELL: It will reflect congestion 3 amounts paid to that market participant? 4 MR. PORAY: That is correct. 5 MR. CAMPBELL: And it will reflect congestion 6 amounts collected from that market participant. 7 MR. PORAY: That is correct. 8 MR. CAMPBELL: As I understand it, when you 9 talk about the market rules requiring some change for 10 the export and wheel-through charge, that is to include 11 the collection of the dollars in your proposal. 12 MR. PORAY: That is my understanding. 13 MR. CAMPBELL: We will get to some other 14 aspects of it a little later. And similarly if OPG's 15 proposal was adopted, if net congestion is not already 16 greater than $1.00, then under OPG's proposal that $1.00 17 would have to be collected as well. 18 MR. PORAY: That is my understanding, yes. 19 MR. CAMPBELL: Would you agree with me that in 20 either case the calculation and collection of that 21 amount is only a small addition to the settlement 22 process that the IMO will be administering anyway? 23 MR. PORAY: I believe that to be the case. 24 MR. CAMPBELL: All right, then. Let's look at 25 OHNC's proposal here. 26 As matters now stand, as I understand it, OHNC 27 does not have any responsibility for settlements with 28 market participants. Is that fair? That is done by the Les Services StenoTran Services Inc. 613-521-0703 2921 OHNC PANEL 3, cr-ex (Campbell) 1 IMO? 2 MR. PORAY: Done by the IMO, yes. 3 MR. CAMPBELL: And all of the information 4 necessary to calculate transmission fees is collected by 5 the IMO. 6 MR. PORAY: That is correct. 7 MR. CAMPBELL: And all of the settlements in 8 respect of transmission fees are made by the IMO. 9 MR. PORAY: That is correct. 10 MR. CAMPBELL: And OHNC simply receives a 11 payment from the IMO at the end of each settlement 12 cycle. 13 MR. PORAY: That is my understanding. 14 MR. CAMPBELL: In essence, you get a cheque, 15 saying "we collected your tariff, here's your money". 16 MR. PORAY: That is my understanding, yes. 17 MR. CAMPBELL: And with respect to the 18 transmission tariff and its administration by the IMO, 19 it is the IMO that calculates the customer's bill. 20 MR. PORAY: That is correct. 21 MR. CAMPBELL: You don't do that. 22 MR. PORAY: No, we don't do that. 23 MR. CAMPBELL: It is the IMO that does the 24 collections. 25 MR. PORAY: That's correct, from each 26 transmission customer. 27 MR. CAMPBELL: It is the IMO that does the 28 collections from each transmission customer. You don't Les Services StenoTran Services Inc. 613-521-0703 2922 OHNC PANEL 3, cr-ex (Campbell) 1 do collections. 2 MR. PORAY: No, we don't do collections. 3 MR. CAMPBELL: It is the IMO that issues bills 4 or cheques to customers through the settlement process 5 generally. You don't do that. 6 MR. PORAY: That is correct. 7 MR. CAMPBELL: Now, am I not correct that 8 under the additional explanation that you have provided 9 in Exhibit G13.1, you will now have to set up a separate 10 settlements process, will you not? 11 MR. PORAY: Some form of settlement to credit 12 back to the customers, if this export and wheel-through 13 charge is approved, would be necessary, yes. 14 MR. CAMPBELL: But you have outlined in 15 Exhibit G13.1, have you not, the settlement process that 16 you would have to go through? 17 MR. PORAY: Yes. 18 MR. CAMPBELL: Let's take a look at what 19 happens, then. Under that settlement process, you will 20 receive the export and wheel-through charges. 21 MR. PORAY: That is what we propose, yes. 22 MR. CAMPBELL: That is money that comes to you 23 from the IMO. 24 MR. PORAY: That is correct. 25 MR. CAMPBELL: Having been collected there 26 already; correct? 27 MR. PORAY: Yes. 28 MR. CAMPBELL: If you go to page 2 of G13.1, Les Services StenoTran Services Inc. 613-521-0703 2923 OHNC PANEL 3, cr-ex (Campbell) 1 you make the statement in the first paragraph, last 2 sentence, that: 3 "This independence of the two processes, 4 as described below, means that the OHNC 5 proposal in itself requires minimum 6 changes to the Market Rules or to any of 7 the IMO processes." 8 Do you see that? 9 MR. PORAY: Sorry, which paragraph are you at? 10 MR. CAMPBELL: I'm sorry, it is page 1 of 4. 11 I think I directed you to page 2 of 4. It is the first 12 paragraph: 13 "This independence of the two 14 processes...means that the OHNC 15 proposal...requires minimum changes 16 to the Market Rules or to any of the 17 IMO processes." 18 Do you see that? 19 MR. PORAY: Yes, I see that. 20 MR. CAMPBELL: And over on the next page, at 21 page 2, at the end of the second paragraph, you say that 22 once the export and wheel-through charges collected by 23 the IMO, and the money is sent to you, the IMO will not 24 be involved in any further settlements pertaining to the 25 EWT tariff charges; correct? 26 MR. PORAY: That's what we said there, yes. 27 MR. CAMPBELL: All right. But there is other 28 IMO involvement required beyond simply sending you a Les Services StenoTran Services Inc. 613-521-0703 2924 OHNC PANEL 3, cr-ex (Campbell) 1 cheque, is there not? You refer to that, as I 2 understand it, in Part C of your Exhibit G13.1. 3 MR. PORAY: Yes. The IMO will settle the 4 other relevant market. 5 MR. CAMPBELL: Yes. But it also has to do 6 some things for you along the way, does it not, besides 7 just sending you money? 8 MR. PORAY: Yes. 9 MR. CAMPBELL: Okay. Let's just take a look 10 at what those are. 11 You have to get a list from the IMO of who 12 bought transmission rights. Correct? 13 MR. PORAY: Correct. 14 MR. CAMPBELL: That has to be prepared by 15 the IMO? 16 MR. PORAY: The IMO will have that list. 17 MR. CAMPBELL: Yes. But it has to be prepared 18 to be sent to you? 19 MR. PORAY: Yes. 20 MR. CAMPBELL: Apart from your proposal, that 21 is not a list you would ordinary get, is it? 22 MR. PORAY: No, we would not get that list. 23 MR. CAMPBELL: All right. What that list does 24 is, it lists each purchaser of transmissions rights. 25 Correct? 26 MR. PORAY: That is correct. 27 MR. CAMPBELL: It lists the details of each 28 purchase. That is, it lists the price paid for the Les Services StenoTran Services Inc. 613-521-0703 2925 OHNC PANEL 3, cr-ex (Campbell) 1 transmission right and the relevant hour in which that 2 occurred. 3 MR. PORAY: That's correct. 4 MR. CAMPBELL: Again, that has to be prepared 5 by the IMO? 6 MR. PORAY: Yes. 7 MR. CAMPBELL: And it is information that, but 8 for your proposal, you would not get from the IMO? 9 MR. PORAY: That's correct. 10 MR. CAMPBELL: All right. 11 Now, the other things that the IMO has to send 12 you is, they have to show -- have to send you a list of 13 who scheduled export transactions in each hour. Is that 14 correct? Or at least each hour in which a transmission 15 right was sold? 16 MR. PORAY: That's correct. 17 MR. CAMPBELL: That has to be prepared by 18 the IMO? 19 MR. PORAY: Yes. 20 MR. CAMPBELL: And it has to show the amount 21 of that scheduled transfer? 22 MR. PORAY: That's correct. 23 MR. CAMPBELL: Again, that is information that 24 would not be given to you by the IMO in the normal 25 course. It is coming to you because of this proposal 26 for scheduled exports? 27 MR. PORAY: I believe that's correct. 28 MR. CAMPBELL: Now, the IMO already knows who Les Services StenoTran Services Inc. 613-521-0703 2926 OHNC PANEL 3, cr-ex (Campbell) 1 the generators are, do they not? 2 MR. PORAY: They do indeed. 3 MR. CAMPBELL: Under your proposal, if this 4 credit is going to be given, the OHNC has to issue a 5 cheque as part of this settlement process. Correct? 6 MR. PORAY: I think the way we envisaged this, 7 this would be credited -- that this would not involve a 8 cheque, it would actually be credited against the 9 revenue requirement in the following year. 10 MR. CAMPBELL: But the credit for the 11 transmission right -- I thought, at the top of page 4, 12 the credit for the transmission right is going to be 13 paid to the transmission right holder, is it not? 14 MR. PORAY: If it's -- 15 MR. CAMPBELL: Don't you say that there is 16 going to be a refund? 17 MR. PORAY: Yes, we do. If it's a generator, 18 that is correct. 19 MR. CAMPBELL: Okay. I don't want to go 20 through all the generator thing again. 21 MR. PORAY: Okay. 22 MR. CAMPBELL: Let's just say an exporter. 23 But isn't it the case that unlike everything 24 else that we have been talking about, this is a case 25 whereby your own document, as I understand it, OHNC for 26 the first time has to issue a cheque out to these 27 people. Correct? 28 MR. PORAY: I believe that is so. Les Services StenoTran Services Inc. 613-521-0703 2927 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CAMPBELL: Well, doesn't your document say 2 at the bottom of page 3 and going onto page 4 that: 3 "A generator that has purchased and paid 4 for the Transmission Rights will be 5 eligible for a refund from OHNC for 6 amounts equal to the payment that 7 generator made towards the purchase of 8 Transmission Rights -- up to the maximum 9 of the payment that this particular 10 generator made towards the EWT..."? 11 Now, the IMO has already collected the EWT, 12 sent you the money and, as I understand it, what you are 13 going to do is send them a cheque if they have a credit 14 for those transmission rights. Isn't that what it says? 15 MR. PORAY: Yes, we will refund them. 16 MR. CAMPBELL: Okay. Whether it is by a 17 cheque or electronic transfer. 18 MR. PORAY: Right. 19 MR. CAMPBELL: In any event, this is the first 20 occasion under the settlement process that is envisaged 21 that you are actually going to be sending somebody money 22 back? 23 MR. PORAY: That is correct. 24 MR. CAMPBELL: Now, my question to you, I 25 guess, after all this, Dr. Poray, is: If the IMO 26 already has all of the information, it has already set 27 up a settlements process to deal with the much larger 28 volume of overall transactions for all market Les Services StenoTran Services Inc. 613-521-0703 2928 OHNC PANEL 3, cr-ex (Campbell) 1 participants, including those who export, why does it 2 make sense for OHNC to set up its own separate 3 settlements process? Why not just get the IMO to do a 4 few extra calculations and settle this up along with 5 everything else? 6 MR. PORAY: I believe our thinking was that 7 because this particular charge was related to an attempt 8 to recover something towards the embedded costs that we 9 wouldn't -- that it would be simpler if in fact we were 10 to refund that to the customers who were paying for the 11 transmission charges and to the generators that might be 12 eligible. 13 MR. CAMPBELL: But, Dr. Poray, isn't the IMO 14 collecting in the rates it's already collecting all 15 these embedded costs that we have been talking about? 16 What is so different about this that it requires a whole 17 separate settlement process? 18 MR. CURTIS: I think we were also conscious of 19 the burden on the IMO in terms of setting up its own 20 overall billing and settlements process. What you have 21 just taken Dr. Poray through is the fact that there 22 would have to be another calculation that would be done 23 and another determination of amount of money that would 24 have to be refunded back to the customers. 25 Our perspective was that we could take on that 26 responsibility and that would be one element, then, that 27 the IMO wouldn't have to contend with in terms of its 28 development of the billing and settlement system. Les Services StenoTran Services Inc. 613-521-0703 2929 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CAMPBELL: But, Mr. Curtis, we have been 2 through, in general terms, the very large and 3 wide-ranging settlement process that the IMO is going to 4 be developing in any event. 5 You have told us in your testimony that the 6 software to put all this together is going to await the 7 decision of this Board for its implementation. The 8 particulars of how all those algorithms are going to 9 work down through this software, that is all awaiting 10 the decision of this Board. 11 So I come back to my question: Why wouldn't 12 it make sense to just include that extra couple of 13 calculations in what your are going to be putting 14 together with the IMO anyway to settle all this up and 15 just do it that way? 16 MR. CURTIS: Again, from our perspective in 17 terms of the burden that is on the IMO in terms of 18 putting together its overall billing and settlements 19 process, if there is any element that we could take over 20 to do to relieve the IMO of that particular portion of 21 it, we think it might be prudent to at least offer that 22 up to the IMO. 23 MR. CAMPBELL: But at the same time aren't you 24 paying a price for that on the IMO side, because the 25 IMO, having collected this money, now has to gather 26 specific bundles of information together for you and 27 send it over, that it would not otherwise have to send 28 you. Doesn't what -- I would like to look at the Les Services StenoTran Services Inc. 613-521-0703 2930 OHNC PANEL 3, cr-ex (Campbell) 1 overall picture -- 2 MR. CURTIS: Certainly. 3 MR. CAMPBELL: -- the pluses and the minuses. 4 MR. CURTIS: And looking at that, the IMO is 5 going to collect all of that information anyway. 6 We are talking about providing us with 7 information that they already have. 8 MR. CAMPBELL: Yes. And I'm talking about 9 adding a very small amount to a settlements process that 10 they have to add to anyway in order to collect the fee 11 in the first place. We are agreed on that. No matter 12 whose proposal is taken, they have to add on to what is 13 currently contemplated to collect a fee, do they not? 14 MR. CURTIS: Well, I think under your proposal 15 they would have to do that. Under our proposal we are 16 saying that we would take over and do that. 17 MR. CAMPBELL: No, I didn't think you said you 18 were collecting a fee. 19 MR. CURTIS: I'm sorry, I didn't hear you. 20 Did you say "collect a fee"? 21 MR. CAMPBELL: Yes. 22 MR. CURTIS: Oh, okay. No, I was talking 23 about in terms of the additional requirements for their 24 calculation, if you will. 25 MR. CAMPBELL: In both cases they have to 26 collect a fee. 27 MR. CURTIS: Yes. 28 MR. CAMPBELL: In some cases, in fact in your Les Services StenoTran Services Inc. 613-521-0703 2931 OHNC PANEL 3, cr-ex (Campbell) 1 case, they always have to collect a fee. In our case 2 they don't always have to collect a fee, in my client's 3 case. Is that correct? 4 MR. CURTIS: Well, in your client's case they 5 have to figure out whether or not they have to collect a 6 fee, first of all, and then if they do have to collect a 7 fee, then they have to go out and collect it. Yes. 8 MR. CAMPBELL: So on the other side of the 9 equation, to carry on, they do have to prepare this 10 report for you. I'm not suggesting that they have to 11 collect any special information for it, but they have to 12 go to their record, pull it out, organize it and send it 13 to you? 14 MR. CURTIS: I'm wondering if it's fruitful to 15 be debating this with us because essentially what we are 16 talking about here is whether the IMO would find it 17 easier to send us a report on information that they are 18 already collecting, or would they find it easier to 19 incorporate this other aspect into their billings and 20 settlements process and -- 21 MR. CAMPBELL: Well, I'm trying to understand 22 you -- 23 MR. CURTIS: Yes. 24 MR. CAMPBELL: I'm sorry, I don't want to 25 interrupt. 26 MR. CURTIS: No. We have made a proposal 27 based on our understanding of what the IMO is facing in 28 terms of its establishment or the billing and Les Services StenoTran Services Inc. 613-521-0703 2932 OHNC PANEL 3, cr-ex (Campbell) 1 settlements process. 2 MR. CAMPBELL: I understand that and I am 3 trying to understand what that proposal involved for the 4 IMO. It has to pull out from its records all of this 5 other information, doesn't it, prepare a report for you 6 and then send it to you. 7 MR. CURTIS: Yes, information that it 8 already has. 9 MR. CAMPBELL: But nevertheless there's some 10 work for them in assembling that report and forwarding 11 it to you. 12 MR. CURTIS: Yes. 13 MR. CAMPBELL: Now, what about OHNC's cost of 14 administering this scheme, including necessary audit 15 expenses and so on around this settlement process. Who 16 pays those if OHNC has to set up this separate 17 settlements process? 18 MR. PORAY: OHNC would. 19 MR. CAMPBELL: Now, are you saying that 20 effectively when you say OHNC would, you would make a 21 deduction from that credit to the transmission revenue 22 requirement or are you proposing that these expenses not 23 be eligible to be included in the transmission revenue 24 requirement? 25 MR. CURTIS: It's the latter one. 26 MR. CAMPBELL: So all expenses associated with 27 your administration of this scheme would not be included 28 in your transmission revenue requirements. Les Services StenoTran Services Inc. 613-521-0703 2933 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CURTIS: That wouldn't be included in the 2 revenue requirement, at least in terms of our current 3 envisioning, but it would come out of the export 4 wheeling through charges that were collected. 5 MR. CAMPBELL: So that the credit back to 6 folks on this transmission rights credit, would it be -- 7 is it that part that would be reduced or the credit that 8 goes to all of the transmission customers? 9 MR. CURTIS: The latter. The credit goes to 10 all of them. 11 MR. CAMPBELL: So that to the extent that your 12 scheme is adopted, you are saying that credit would be 13 reduced by the amount of OHNC's additional expenses to 14 set up this settlement process. 15 MR. PORAY: Yes. I think that's what we mean. 16 MR. CAMPBELL: So in effect you view as it is 17 an eligible expense for you to collect through the 18 transmission revenue requirement one way or the other. 19 The mechanism you are using is to take it off the credit 20 that you otherwise are obligated to pay back to the 21 transmission customers. Correct? 22 MR. CURTIS: I'm not sure I follow your 23 distinction between the transmission revenue requirement 24 and the collection of the export wheeling through 25 component. 26 MR. CAMPBELL: I complicated this question. 27 MR. CURTIS: Yes. 28 MR. CAMPBELL: My simple question was assume Les Services StenoTran Services Inc. 613-521-0703 2934 OHNC PANEL 3, cr-ex (Campbell) 1 for the moment that the incremental cost to the IMO if 2 it did the extra fee calculations pushed any excess back 3 into the 418 TR account and let it flow through to the 4 transmission customers that way. Assume that 5 incremental cost is zero. Assumption. Okay? 6 Now, under that circumstance, what I 7 understand you to be telling me is that the amount that 8 flows back under your scheme to the transmission 9 customers would be reduced by the amount that it costs 10 OHNC to set up this separate settlements process and 11 administer those transactions. Correct? 12 MR. CURTIS: Which equally could be zero under 13 your hypothesis. Yes. 14 MR. CAMPBELL: But this is not work that you 15 are doing now, is it? 16 MR. CURTIS: This is not work the IMO is doing 17 now either. 18 MR. CAMPBELL: I understand that. 19 MR. CURTIS: Your hypothesis was that the IMO 20 would have zero. 21 MR. CAMPBELL: I understand it. You have got 22 a settlement process. 23 MR. ROGERS: Let the witness finish the 24 answer. However unsatisfactory you may think they are, 25 let him finish, please. 26 MR. CAMPBELL: Sorry. I didn't realize I was 27 interrupting. 28 MR. CURTIS: The balance in terms of your Les Services StenoTran Services Inc. 613-521-0703 2935 OHNC PANEL 3, cr-ex (Campbell) 1 hypothesis here is all I'm trying to bring out. 2 MR. CAMPBELL: I would suggest to you that on 3 your side of the equation that saying it's zero is not 4 right. You do not have a settlements process now or 5 contemplated, do you? I thought we had been through 6 that. 7 MR. CURTIS: Yes, we have been, but equally on 8 the other side, I could tell in your hypothesis that the 9 IMOs incremental cost for doing what we are asking for 10 is not zero either. 11 MR. CAMPBELL: All right. I understand, and I 12 am sure your counsel will remind you of that in 13 redirect, but for the purposes of my question, isn't it 14 fair to conclude that the extra cost that OHNC is going 15 to bear to set up the settlement process, audit it 16 because it's involving the customer's money going in and 17 out, all those things that are required to do that, 18 that's an extra cost that you are saying will come off 19 the credit for the transmission customer. Correct? 20 MR. CURTIS: What we are saying is that any 21 costs, whether its ours or the IMO for doing this, would 22 come off the credit that goes back to transmission 23 customers. 24 MR. CAMPBELL: I will come back to the IMO's 25 costs. What you are saying is that for OHNC's costs, 26 those will come off the credit that goes to the 27 transmission customers. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 2936 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CAMPBELL: Again then, let me come back to 2 my original question which was don't you think that it's 3 likely to be less costly to add this extra calculation 4 on the IMO side and flow the money through that way than 5 it is for you to set up a separate settlement 6 infrastructure on your side. On balance, don't you 7 think the IMO route would be cheaper? 8 MR. CURTIS: Again, going back to the 9 complexity that the IMO faces in terms of putting in 10 place its billing and settlements process, it may not be 11 cheaper. 12 MR. CAMPBELL: You mean the cost of the 13 software change to reflect those transactions and the 14 software they are going to start -- they have yet to 15 develop. Correct? 16 MR. CURTIS: That's correct. 17 MR. CAMPBELL: So they now are going to 18 develop software that does all the other settlement 19 calculations. Correct? 20 MR. CURTIS: Yes. 21 MR. CAMPBELL: And what you are suggesting is 22 to include these few extra little calculations that we 23 are talking about under, I guess under either your 24 proposal or our proposal, would be more expensive than 25 having you set up a completely separate settlement 26 process. Is that what you are telling me? 27 MR. CURTIS: Without having that detailed 28 conversation with the IMO, that is a possibility, yes. Les Services StenoTran Services Inc. 613-521-0703 2937 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CAMPBELL: It's equally a possibility, you 2 would agree, that it would be cheaper for the IMO to do 3 it. You just don't know. 4 MR. CURTIS: It's a possibility, yes. 5 MR. CAMPBELL: You just don't know. Correct? 6 MR. CURTIS: At this stage. Yes. 7 MR. CAMPBELL: Apart from -- I think we have 8 discussed already that apart from OHNC's EWT proposal, 9 you would not be getting all of the information that the 10 IMO would transfer to you under your proposal. Correct? 11 MR. PORAY: Under normal circumstances, no. 12 MR. CAMPBELL: Would that require an amendment 13 or adjustment to the market rules to permit and require 14 the IMO to provide you with all of that information? 15 MR. PORAY: There may be some adjustment to 16 the market rules in terms of the information that they 17 need to provide to OHNC. Yes. 18 MR. CAMPBELL: All right. And on -- to be 19 fair, on the other side the market rules under 418 might 20 have to be supplemented under the OPG's proposal to 21 capture the minimum one dollar payment. Correct? 22 MR. PORAY: I think the PR clearing account 23 would have to include something to cover the EWT 24 charges. 25 MR. CAMPBELL: Yes. It would have to collect 26 and through that mechanism remit to the transmission 27 customer the minimum $1 payment. 28 MR. PORAY: I believe that to be so. Yes. Les Services StenoTran Services Inc. 613-521-0703 2938 OHNC PANEL 3, cr-ex (Campbell) 1 MR. CAMPBELL: It already captures net 2 congestion. Correct? 3 MR. PORAY: That is correct. 4 MR. CAMPBELL: Now, in all this information 5 flow that is going to OHNC, if all of this information 6 is given to OHNC, is OHNC prepared to commit that OHNC, 7 or perhaps it might be more appropriate to talk in terms 8 of its retail arm or any other OHNC or OHSC related 9 company will not engage in any aspect of the export and 10 import market. 11 MR. PORAY: Well, OHNC is bound by its code of 12 conduct. 13 MR. CAMPBELL: Yes, and my question was 14 broader than that. 15 MR. PORAY: Okay. 16 MR. CAMPBELL: Are you prepared to say that 17 you will not engage in any aspect of the export and 18 import market, and I am talking about the cluster of 19 companies around OHNC and OHSC as well? 20 MR. PORAY: My understanding is that OHNC 21 itself was not, is not -- would not participate in the 22 export market. 23 MR. CAMPBELL: You would agree, would you not, 24 that a lot of this information that you propose to 25 receive is highly commercially sensitive? 26 MR. PORAY: Yes. 27 MR. CAMPBELL: And, for example, it would let 28 OHNC, if it chose to do so, analyze each participant's Les Services StenoTran Services Inc. 613-521-0703 2939 OHNC PANEL 3, cr-ex (Campbell) 1 bidding strategy for TRs, for example? 2 MR. PORAY: It could. 3 MR. CAMPBELL: It would permit that, wouldn't 4 it? You have got all the information about all the 5 transactions? 6 MR. CURTIS: But why would we spend that 7 effort to do it? We are not engaged in that 8 marketplace. 9 MR. CAMPBELL: And I take it then that what is 10 needed here, you would agree, is an assurance that if 11 all of that information went to OHNC that it would be 12 ring fenced and very, very tightly controlled? 13 MR. PORAY: I think I already mentioned that 14 under the code of conduct we are required to do that. 15 MR. CAMPBELL: So that's what you are counting 16 on in terms of managing all of this highly sensitive 17 information? 18 MR. PORAY: And it would be in the same manner 19 that we would have information about customers connected 20 to the transmission system. That would be handled in 21 the same manner. 22 MR. CAMPBELL: And so the assurance that we 23 have because of the various codes and so on is that none 24 of this information would be allowed to leak out to give 25 anyone an advantage in bidding into that export market? 26 That's the assurance that you are holding out here. 27 Correct? 28 MR. PORAY: Under our code of conduct that is Les Services StenoTran Services Inc. 613-521-0703 2940 OHNC PANEL 3, cr-ex (Campbell) 1 what we will do, yes. 2 MR. CAMPBELL: And just to be absolutely 3 clear, that code of conduct would require that you not 4 provide any of that information in any form to any of 5 the other companies in the OHNC/OHSC cluster of 6 companies because they might be actually participants in 7 that export and import market. Correct? 8 MR. PORAY: That is correct. 9 MR. CAMPBELL: I think, gentlemen, my last 10 question is whether OHNC foresees any future 11 circumstance in which it might be incented to maximize 12 export revenue. Is anything being contemplated to 13 develop any proposal that would reward OHNC if export 14 volume increased? 15 MR. CURTIS: We are not aware of any such 16 development, if you will, no. 17 MR. CAMPBELL: Thank you, Mr. Chairman. Those 18 are my questions. 19 THE PRESIDING MEMBER: Does Mr. Rattray have 20 questions on implementation because I think we would 21 like to take the morning break now. 22 MR. RATTRAY: Yes, I do, Dr. Higgin. 23 THE PRESIDING MEMBER: Right. We will come 24 back at 11:15, please. 25 --- Upon recessing at 10:53 a.m. 26 --- Upon resuming at 11:22 a.m. 27 THE PRESIDING MEMBER: Please be seated. 28 We are back. Mr. Rattray, would you like to Les Services StenoTran Services Inc. 613-521-0703 2941 OHNC PANEL 3 1 proceed, sir. Thank you. 2 MR. RATTRAY: Thank you, Dr. Higgin. 3 CROSS-EXAMINATION 4 MR. RATTRAY: Gentlemen, previously you have 5 testified that there is hierarchy of decisions to be 6 taken to implement the new market. 7 MR. CURTIS: Yes. 8 MR. RATTRAY: Would I be correct if the 9 decisions which are higher up this hierarchy set the 10 stage or govern those decisions that are further down 11 the hierarchy? 12 MR. CURTIS: By and large yes, but as long as 13 you are not talking about in terms of timing. There may 14 be some decisions that are higher up in the hierarchy 15 that are taken later. 16 MR. RATTRAY: All right. 17 MR. CURTIS: Yes. 18 MR. RATTRAY: As such, should the same 19 principles applied by this Board in deciding on an 20 appropriate standard for liability in this application 21 govern the issue of liability in the transmission system 22 code? 23 MR. CURTIS: I think there should be direction 24 to that effect. The Board is in the end approving both 25 this application and the transmission system code. So 26 there is an equivalency in terms of the hierarchy of 27 approval here. 28 MR. RATTRAY: Yes, but given that we have the Les Services StenoTran Services Inc. 613-521-0703 2942 OHNC PANEL 3, cr-ex (Rattray) 1 application before the Board today and the transmission 2 system code is in development, is it your belief that 3 the Board should establish the principles that will 4 determine an appropriate liability standard for both 5 this application and in effect for the transmission 6 system code? 7 MR. CURTIS: We feel that it is appropriate 8 that the Board establish those standards for liability. 9 MR. RATTRAY: In this application? 10 MR. CURTIS: They certainly could do it in 11 this application, yes. 12 MR. RATTRAY: Are you suggesting, sir, that 13 the Board should do it in this application? 14 MR. CURTIS: Well, we are requesting that 15 within the commercial terms and conditions for the 16 application of this transmission rate. 17 MR. RATTRAY: Similarly, should the same 18 principles as ultimately applied by the Board in 19 deciding on the net and gross issue in this hearing 20 apply to and govern the net and gross issue in the 21 upcoming distribution rate setting? 22 MR. CURTIS: I think we have covered that 23 earlier on in our discussions. How the transmission 24 rates would be applied through the distribution end-use 25 customers will be determined as part of the setting of 26 the distribution rates. 27 MR. RATTRAY: Yes, but I am referring to the 28 underlying principles that the Board will be relying Les Services StenoTran Services Inc. 613-521-0703 2943 OHNC PANEL 3, cr-ex (Rattray) 1 upon in deciding this application and the issue of net 2 and gross, and should those same principles be applied 3 by the Board in deciding that issue in the distribution 4 rate setting. 5 MR. CURTIS: Again, my understanding is that 6 the Board at this point is going to render a decision on 7 the transmission rate application and the application 8 includes a decision on net versus gross. 9 My understanding is that that does not 10 necessarily bind future boards in terms of their 11 decisions on distribution rates to apply the same 12 principles or the same decision that comes out of this 13 proceeding. 14 MR. RATTRAY: I am aware that the Board would 15 not be binding itself, but is it your position that the 16 Board should establish the principles and apply them in 17 the distribution rate setting? 18 MR. CURTIS: I don't think we have a position 19 in terms of how the principles on net versus gross would 20 necessarily apply on the distribution side. Our 21 position that we put forward has been as far as 22 transmission rates are concerned. 23 MR. RATTRAY: So are you suggesting, sir, that 24 as far as you are concerned in the distribution rate 25 setting we are starting at square one and we are not 26 going to refer back to the principles established by the 27 Board in this application? 28 MR. CURTIS: I think the Board and the Les Services StenoTran Services Inc. 613-521-0703 2944 OHNC PANEL 3, cr-ex (Rattray) 1 intervenors in the distribution proceedings certainly 2 have that as an option, to refer back to the decisions 3 that would come out of this proceeding and the 4 principles that have been developed as part of this 5 proceeding. 6 MR. RATTRAY: If you return now to your 7 implementation Exhibit G14.3 -- 8 MR. CURTIS: Yes. 9 MR. RATTRAY: -- I take it this exhibit does 10 not amend or revise the proposed commercial terms and 11 conditions as set out in Exhibit D, tab 12, Schedule 2? 12 MR. CURTIS: That's correct. 13 MR. RATTRAY: And that you continue to seek 14 approval of those proposed terms and conditions as part 15 of this application? 16 MR. CURTIS: That is correct. I think we have 17 indicated that in our Table 1, that a decision on the 18 commercial terms and conditions is being requested. 19 MR. RATTRAY: By way of summary, your proposal 20 on the terms and conditions would exclude all liability 21 for OHNC? 22 MR. PORAY: That is what we have submitted. 23 MR. RATTRAY: And it would provide for 24 transmission system customer liability to OHNC? 25 MR. ROGERS: Sorry, could you repeat that, Mr. 26 Rattray. I'm sorry, I didn't catch it. 27 MR. RATTRAY: That the OHNC proposal provides 28 for a potential transmission system customer liability Les Services StenoTran Services Inc. 613-521-0703 2945 OHNC PANEL 3, cr-ex (Rattray) 1 to OHNC. 2 MR. PORAY: I am not a lawyer. I don't know 3 the ins and outs of the interpretation of that. My 4 understanding is that it is a complex process. 5 MR. RATTRAY: Well, sir, do you recall my 6 asking you a similar question, at an earlier date, to 7 that effect? 8 MR. PORAY: Yes, I recall you asked that 9 question. 10 MR. RATTRAY: To assist you, at page 1379 of 11 the transcript, at line 9, I enquired as to whether you 12 would agree with me that it is a term of OHNC's 13 proposal, regarding liability, that transmission 14 customers could be liable to OHNC. I then referred you 15 to an interrogatory response. 16 Do you have it before you, sir? 17 MR. PORAY: Page 1379, yes. 18 MR. RATTRAY: Yes. And my question started at 19 line 9, and our discussion carries on. 20 MR. PORAY: Okay. 21 MR. RATTRAY: And based on the review of the 22 interrogatory and your response that you agreed that, 23 pursuant to the contract between transmission customer 24 and OHNC, the customer's breach could result in 25 liability to OHNC? 26 MR. PORAY: Yes. 27 MR. RATTRAY: Furthermore, I take it that you 28 will agree that the proposed commercial terms and Les Services StenoTran Services Inc. 613-521-0703 2946 OHNC PANEL 3, cr-ex (Rattray) 1 conditions do not define what would constitute 2 reasonable efforts, as set out in Section 3.6 of the 3 proposed commercial terms, to maintain a resource 4 service? 5 MR. PORAY: And the reason why we didn't do 6 that is so that would be part of the Transmission System 7 Code development. 8 MR. RATTRAY: Now, does this represent an 9 inversion of the hierarchy to which you have previously 10 referred, in that the details of the proposed terms and 11 conditions of commercial service, for which you are 12 seeking approval, will, in effect, be set by subsequent 13 proceedings? 14 MR. CURTIS: I am not sure we are following 15 this conclusion that you are drawing. Can you -- 16 MR. RATTRAY: Well, you told me -- 17 MR. CURTIS: -- that. 18 MR. RATTRAY: I'm sorry. Are you finished, 19 sir? 20 MR. CURTIS: Yes. 21 MR. RATTRAY: I understood that you had 22 described this as being a hierarchy of decisions that 23 will need to be made by the Board? 24 MR. CURTIS: Yes. 25 MR. RATTRAY: And that we have the present 26 application before the Board? 27 MR. CURTIS: Yes. 28 MR. RATTRAY: And that a subsequent decision Les Services StenoTran Services Inc. 613-521-0703 2947 OHNC PANEL 3, cr-ex (Rattray) 1 to be made is with respect to the Transmission System 2 Code? 3 MR. CURTIS: Yes. 4 MR. RATTRAY: And I'm confused because what 5 you have suggested, if I understand your answer, is that 6 the proposed terms and conditions of commercial service 7 will be set, in effect, by a subsequent proceeding which 8 is lower down the hierarchy. 9 MR. CURTIS: No, I'm -- I guess to try and 10 hopefully clear up this, the commercial terms and 11 conditions are in our current application. The 12 technical terms and conditions are in the Transmission 13 System Code. Maybe it is an unfortunate choice of 14 title, calling them both "terms and conditions", but 15 they are both separate and they are approved, both, by 16 the Ontario Energy Board, in the final analysis. 17 MR. RATTRAY: Yes, but I'm having some 18 difficulty, in particular, in understanding how we are 19 to interpret what constitutes "reasonable efforts". 20 Now, that is the term that is used in 21 Section 3.6 of the proposed commercial terms? 22 MR. CURTIS: Yes. And the context for that 23 would be within the Transmission System Code because 24 "reasonable efforts", in term, defines how -- the 25 technical response that needs to be made in order to 26 address any of these problems that we are talking about 27 here. 28 MR. RATTRAY: I understand that, in terms of Les Services StenoTran Services Inc. 613-521-0703 2948 OHNC PANEL 3, cr-ex (Rattray) 1 the technical requirements, but my question is with 2 respect to how we interpret it and understand what would 3 constitute a reasonable effort to maintain service or 4 restore service. And in that context, there is no 5 definition in the commercial terms and conditions for 6 which you are seeking approval. 7 MR. CURTIS: There probably isn't. I guess 8 what we are getting into here is the legal definition of 9 what "reasonable efforts" would be and you are getting 10 into the area that I don't feel equipped to really be 11 able to address. 12 MR. RATTRAY: All right. Well, in your 13 implementation exhibit, 14.3, at Appendix C, which is 14 found at page 7 -- 15 MR. CURTIS: Yes. 16 MR. RATTRAY: -- the last paragraph indicates 17 that -- at the last sentence -- the Transmission System 18 Code's technical level service terms and conditions for 19 transmission service will be set congruent with these 20 commercial terms and conditions. 21 MR. CURTIS: That is our expectation, yes. 22 MR. RATTRAY: But I'm just having difficulty 23 in terms of what is driving the process. 24 You are establishing an obligation to use 25 reasonable efforts and yet, you now tell me it is to be 26 set in the Transmission System Code but it is going to 27 be congruent with the commercial terms and conditions 28 you are seeking approval of here? Les Services StenoTran Services Inc. 613-521-0703 2949 OHNC PANEL 3, cr-ex (Rattray) 1 MR. CURTIS: Yes, and this is a reality of the 2 evolution of the new marketplace that we are talking 3 about here. We have a number of processes under way 4 that, on a more logical basis, might have a hierarchy, 5 in terms of timing, and we are just faced with the 6 reality that the time that is available between now and 7 open access is not sufficient to conduct the processes 8 in that particular manner. But what we have here are 9 two processes that are both going to be approved by the 10 Ontario Energy Board and there may be argument that they 11 should be done in sequence, and maybe in a different 12 sequence than what is actually taking place, but what we 13 are putting forward here is that these will both happen, 14 they will both be approved by the Ontario Energy Board, 15 and our expectation is that both sets of terms and 16 conditions, the commercial ones that are in our current 17 application and the technical ones that are in the 18 Transmission System Code, would be approved such that 19 they are congruent, in terms of the liability aspects 20 that you are talking about now. 21 MR. RATTRAY: Well, my question actually went 22 beyond liability, to deal with what constituted 23 "reasonable efforts". 24 MR. CURTIS: And I think we were talking about 25 that earlier, that reasonable efforts has some legal 26 connotations to it that I'm certainly not aware of. 27 MR. RATTRAY: Thank you. 28 Would you please turn to your answer to Les Services StenoTran Services Inc. 613-521-0703 2950 OHNC PANEL 3, cr-ex (Rattray) 1 Undertaking F7.4, regarding liability. 2 MR. PORAY: I'm sorry. What was the 3 reference? 4 MR. RATTRAY: F7.4. 5 MR. PORAY: Okay. We have it. 6 MR. RATTRAY: Now, you were asked to confirm 7 my understanding that the most recent IMO staff proposal 8 on liability will impose liability on both the IMO and 9 market participants. 10 MR. PORAY: Yes. 11 MR. RATTRAY: Is my characterization correct? 12 MR. PORAY: That is our understanding of what 13 is in the current version of the market rules. 14 MR. ROGERS: Well, that may be the witness' 15 understanding but I will have something to say about 16 that in the argument, sir. We filed the entire 17 clause -- or series of clauses. They are highly-complex 18 interrelated clauses. I'm not sure how productive this 19 really is, nor helpful to the Board, to have engineers 20 and businessmen commenting on legal interpretations. 21 THE PRESIDING MEMBER: I understand. 22 So, Mr. Rattray, I think the issue is that the 23 text is whatever it is and the applicant and others 24 will, no doubt, give an opinion as to what its 25 implications and significance are to implementation, and 26 I am sure that, probably, the Board will also have to 27 get its own legal interpretation of that, as well. 28 That is what Mr. Rogers is saying to you. Les Services StenoTran Services Inc. 613-521-0703 2951 OHNC PANEL 3, cr-ex (Rattray) 1 MR. RATTRAY: Thank you, Dr. Higgin. I would 2 submit that it is important to understand the intent of 3 the IMO staff in terms of their objective in preparing 4 proposed amendments to the rule. The evidence that we 5 previously adduced indicates that this is an ongoing 6 process and, in fact, the final market rules have not 7 been approved, so I felt it would be of assistance to 8 the Board to understand the intent behind the various 9 proposals that have been brought forward. 10 THE PRESIDING MEMBER: I think the witnesses 11 can only talk about two things: one is any discussions 12 they may have had with the IMO staff on that; and, 13 (b) their own interpretation which may or may not be 14 aided by their own counsel. So I guess, from those 15 points of view, anything else is up for grabs. That is 16 what we are being told. 17 MR. RATTRAY: If I can direct your attention, 18 Dr. Poray, to page 4 of the answer to the undertaking. 19 MR. PORAY: Okay. 20 MR. RATTRAY: Previously we established that 21 you are a member of the IMO technical panel, sir. 22 MR. PORAY: I am. 23 MR. RATTRAY: And this is a document that you 24 or your delegate would have received on your behalf? 25 MR. PORAY: That is correct. 26 MR. RATTRAY: Is this consistent with the 27 normal practice of the IMO in proposing amendments to 28 the market rules that on page 4 they set out, a Les Services StenoTran Services Inc. 613-521-0703 2952 OHNC PANEL 3, cr-ex (Rattray) 1 rationale for the proposed amendment? 2 MR. PORAY: That is the normal practice, yes. 3 MR. RATTRAY: And that they would review the 4 various reasons that have led them to bring forward the 5 proposed amendment? 6 MR. PORAY: That is correct. 7 MR. RATTRAY: As a member of the technical 8 panel, Dr. Poray, I also take it that you are familiar 9 with a Mr. George Laidlaw of the IMO. 10 MR. PORAY: I am. 11 MR. RATTRAY: Can you tell me what his 12 position is with the IMO? 13 MR. PORAY: I understand that he is the 14 corporate secretary of the IMO. 15 MR. RATTRAY: Is he also general counsel to 16 the IMO, sir? 17 MR. PORAY: I believe that is correct. 18 MR. RATTRAY: Previously, I have circulated a 19 document which contains the IMOTP 33-7, which was your 20 answer to the undertaking given to me, along with a 21 covering memorandum identified as IMOTP 24-6, setting 22 out comments of George Laidlaw of the IMO regarding the 23 proposed general rule of liability. 24 MR. PORAY: Yes. 25 MR. LYLE: Are you seeking to have that 26 introduced as an exhibit? 27 MR. RATTRAY: Yes, I would ask for an exhibit 28 number for that. Les Services StenoTran Services Inc. 613-521-0703 2953 OHNC PANEL 3, cr-ex (Rattray) 1 MR. LYLE: We will make that G15.3. 2 MR. RATTRAY: Thank you. 3 EXHIBIT NO. G15.3: Copies of IMOTP 33-7 4 and IMOTP 24-6 5 MR. LYLE: Does the Board have copies of that 6 document? 7 MR. RATTRAY: I have provided them. If they 8 could be handed up? 9 --- Pause 10 THE PRESIDING MEMBER: Okay. We have it now. 11 Thank you, Mr. Rattray. 12 MR. RATTRAY: Thank you. 13 Dr. Poray, as a member of the technical panel, 14 did you receive this document? 15 MR. PORAY: Yes, I did. 16 MR. RATTRAY: Would you read into the record 17 the last paragraph of the first page of Mr. Laidlaw's 18 memorandum to the technical panel? 19 MR. PORAY: This is under the title "The 20 Proposed Rule on IMO Liability and Market Participant 21 Liability"? 22 MR. RATTRAY: Yes. 23 MR. PORAY: 24 "Upon market opening, the IMO would bear 25 responsibility for direct damages 26 suffered by a market participant in cases 27 of bad faith or dispatch error by the 28 IMO, but otherwise would bear no Les Services StenoTran Services Inc. 613-521-0703 2954 OHNC PANEL 3, cr-ex (Rattray) 1 responsibility for a period of 2 eighteen months. After that time, the 3 IMO if negligent or if it acts 4 wrongfully, will be liable for its acts 5 or omissions on an unlimited basis 6 excluding indirect or consequential 7 damages. Liability would be subject to 8 relief for force majeure." 9 MR. RATTRAY: Thank you. 10 If I could direct your attention to page 5 of 11 your answer to the undertaking at 7.4. 12 MR. PORAY: Okay. We are there. 13 MR. RATTRAY: At page 5, this is under the 14 rationale for the amendment, the IMO staff have put 15 forward a number of propositions in support of accepting 16 liability limited to direct damages. I would like to 17 know whether you are in agreement with these 18 propositions. I will break them down so that we can go 19 through them in order. 20 The first proposition is that these liability 21 provisions are consistent with common commercial 22 practice. Are you in agreement with that, sir? 23 MR. ROGERS: Excuse me, Mr. Chair. I object 24 to the form of the questions to these witnesses. I 25 don't even mind if they answer them, but I just want to 26 make it clear that I don't want their answers to bind my 27 client because they aren't competent in this particular 28 area. Les Services StenoTran Services Inc. 613-521-0703 2955 OHNC PANEL 3, cr-ex (Rattray) 1 THE PRESIDING MEMBER: Right. He has a good 2 point, and that is that a general understanding is one 3 thing, but anything that comes towards being a legal 4 opinion as to this matter will not carry any weight even 5 if it is a given. 6 MR. RATTRAY: Thank you, Dr. Higgin. I didn't 7 intend for these gentlemen to endeavour to provide us 8 with a legal opinion but rather to provide us with their 9 opinion as the witnesses put forward on behalf of OHNC 10 regarding implementation issues, and I would assume that 11 that would include the commercial practices that they 12 are endeavouring to bring into effect through the 13 proposed commercial terms. 14 THE PRESIDING MEMBER: That's right. But 15 something like liability is perhaps one of the most 16 complicated issues that they are dealing with, as 17 opposed to other aspects of let's say the connection 18 agreement or other things. That is all we are saying. 19 It is very convoluted, very difficult. 20 So, with that, you may ask the question and if 21 they want to say I don't know or whatever, that is 22 perfectly fine. Thank you. 23 MR. RATTRAY: Gentlemen, do you have a 24 response? 25 MR. PORAY: I'm not an expert on liability. I 26 would make an assumption here that they are perhaps 27 consistent with common commercial practices, but that is 28 just my level of understanding. Les Services StenoTran Services Inc. 613-521-0703 2956 OHNC PANEL 3, cr-ex (Rattray) 1 MR. RATTRAY: Would you agree that providing 2 for liability provides an incentive for self-management 3 of risk? 4 --- Pause 5 MR. PORAY: I think it could, yes. 6 MR. RATTRAY: Thank you. Those are my 7 questions. 8 THE PRESIDING MEMBER: Thank you, Mr. Rattray. 9 There is no one else? Then we will move to 10 Mr. Lyle, please. 11 MR. LYLE: Thank you, Mr. Chair. 12 EXAMINATION 13 MR. LYLE: Dr. Poray, I just want to start by 14 clarifying one response you gave to Mr. Campbell with 15 respect to the transmission rights clearing account. I 16 may have misheard you but I thought you said that the 17 EWT revenues would go into the transmission rights 18 clearing account. Did I understand that? 19 MR. PORAY: If the IMO had the responsibility, 20 yes, they would. 21 MR. LYLE: I see. But under your proposal 22 they wouldn't because they are being flowed -- EWT 23 revenues are being flowed to OHNC for disbursement 24 through either a credit or lower rates in subsequent 25 time periods. Is that correct? 26 MR. PORAY: That's correct. 27 MR. LYLE: Now, a transmission right is a 28 financial hedge, isn't that correct? Les Services StenoTran Services Inc. 613-521-0703 2957 OHNC PANEL 3, ex (Lyle) 1 MR. PORAY: That's correct. 2 MR. LYLE: When someone is buying a 3 transmission right, they are buying that in order to 4 ensure against the price risk for the price differential 5 across the intertie or they are buying it to speculate 6 about that price differential. Isn't that fair? 7 MR. PORAY: That's correct. 8 MR. LYLE: If you then add onto that a rebate 9 mechanism where people get rebated back some portion of 10 the money they paid in respect of transmission rights, 11 isn't that going to bid up the price for transmission 12 rights? 13 MR. PORAY: I think I mentioned earlier on 14 today that adding a charge like the EWT charge could 15 perhaps affect the bidding because it doesn't 16 essentially represent the commodity-type charges. 17 MR. LYLE: And could, in fact, affect the 18 bidding all the way up so that someone is always going 19 to be willing to pay $1 a megawatt hour? 20 MR. PORAY: It could. 21 MR. LYLE: Can you explain to me why someone 22 who is buying a financial hedge and is receiving 23 consideration for that financial hedge should then, in 24 addition, be entitled to some further payment out of the 25 money that would otherwise flow to transmission 26 customers? 27 MR. PORAY: As part of our stakeholdering 28 process we tried to implement something that would give Les Services StenoTran Services Inc. 613-521-0703 2958 OHNC PANEL 3, ex (Lyle) 1 some recognition for the purchases which the generators 2 made towards the market to receive some credit. They 3 may not receive that credit all the time. There may be 4 times when they will not receive that credit, but there 5 may be times when they will receive a credit. 6 MR. LYLE: Given that the price of the 7 transmission right could be bid up to at least $1.00 a 8 megawatt hour, it starts to look like it's a fairly 9 marginal case when transmission customers are actually 10 going to get any revenue back from the EWT charge, 11 doesn't it? 12 MR. PORAY: I guess it would depend on the -- 13 it's possible, yes. 14 MR. LYLE: Okay. Gentlemen, in OPG's evidence 15 they made the statement that, in their view, if you have 16 a preset $1.00-a-megawatt-hour EWT charge, all that is 17 going to do is reduce the amount of congestion payment 18 that someone is going to be willing to pay to get across 19 the intertie by $1.00 a megawatt hour. 20 Do you agree with that statement? 21 MR. PORAY: I'm sorry, could you -- 22 MR. LYLE: Maybe I need to rephrase it for 23 you. 24 What they basically said was: If you have a 25 $1.00-a-megawatt-hour preset EWT charge, that is going 26 to reduce by $1.00 a megawatt hour the amount that is 27 someone is going to be willing to pay in congestion 28 payments to get across the intertie. Les Services StenoTran Services Inc. 613-521-0703 2959 OHNC PANEL 3, ex (Lyle) 1 MR. PORAY: Yes, I think that could be the 2 case. 3 MR. LYLE: Would you also agree that the 4 $1.00-a-megawatt charge is also going to mean that 5 certain marginal transactions where the price 6 differential between Ontario and the export markets is 7 quite small, that some of those marginal transactions 8 are not going to take place? 9 MR. PORAY: It is possible it could distort, 10 yes. 11 MR. LYLE: Gentlemen, you stated in your 12 evidence, G14.3, at Appendix A, on the 15th line, that 13 the Market Rules would require some amendment as there 14 is no current provision for export and wheeling through 15 service and the recovery of associated charges from 16 market participants using this service. 17 I want to refer you to provisions in the 18 Market Rules. I believe I gave you a copy at the break, 19 and I will just wait until we provide a copy to the 20 Board. 21 It is from Chapter 10 of the Market Rules, and 22 it is Section 4. 23 We will make that Exhibit G15.4 24 EXHIBIT NO. G15.4: Excerpt from Market 25 Rules, Chapter 10, Section 4, titled 26 "Export Service" 27 MR. LYLE: I am providing copies to the other 28 intervenors. Les Services StenoTran Services Inc. 613-521-0703 2960 OHNC PANEL 3, ex (Lyle) 1 If I look at Section 4, it is titled "Export 2 Service". And in 4.1.1, the first sentence reads: 3 "The IMO-controlled grid shall be 4 available for the transmission of energy 5 and ancillary services through or out of 6 the IMO control area into a neighbouring 7 transmission system." 8 And then if I refer you gentlemen to 4.5.1, 9 just a couple of pages on, it says that: 10 "The rates and charges, if any, for 11 export service, other than the costs 12 associated with uplift, congestion, and 13 losses on the IMO-controlled grid...shall 14 be established by the OEB from time to 15 time..." 16 These are in fact the current Market Rules in 17 force right now. Is that correct? 18 MR. PORAY: Well, these market rules are not 19 in force. They are still being -- 20 MR. LYLE: I mean that are made. They are not 21 actually operating; you are correct. 22 Can you tell me what, in addition to what is 23 provided for here in these market rules, you need? What 24 amendments do you need to make to these rules? 25 MR. PORAY: I would think there would have to 26 be amendments to take into account that our proposal is 27 a proposal to essentially recover a part of the embedded 28 costs; and as such, that type of service is not in the Les Services StenoTran Services Inc. 613-521-0703 2961 OHNC PANEL 3, ex (Lyle) 1 Market Rules. 2 There may have to be some changes to give 3 direction to the IMO to send the revenues collected from 4 market participants for the EW charges to OHNC. 5 MR. LYLE: Can you tell me where in the Market 6 Rules it says that a service to recover the embedded 7 charges is not provided for? Does it say that 8 explicitly somewhere? 9 MR. PORAY: No, it doesn't say that 10 specifically. 11 MR. LYLE: I will turn you away, gentlemen, 12 from export and wheel-through. You discussed this 13 morning that you don't now anticipate returning to the 14 Board for a further rate proceeding for the next year or 15 two, and you have also said, I believe, that the Board 16 can always order you to come in for a further rate 17 proceeding at some point in time. 18 MR. PORAY: Yes, that is correct. 19 MR. LYLE: What filings are you proposing to 20 be making to the Board to enable the Board to monitor 21 your activities and decide whether or not it is 22 appropriate at any point in time to bring you in for a 23 further proceeding? 24 MR. CURTIS: Well, our thinking really hasn't 25 progressed that far in terms of being able to provide 26 any commitment in terms of what could be provided to the 27 Board. 28 MR. LYLE: Is that something that you are Les Services StenoTran Services Inc. 613-521-0703 2962 OHNC PANEL 3, ex (Lyle) 1 going to be addressing in argument then? 2 MR. CURTIS: I don't know whether we were 3 planning on doing that in argument either. 4 MR. LYLE: Perhaps Mr. Rogers want to answer 5 that. 6 MR. ROGERS: I think we are now, yes. Yes, we 7 will try address that in -- 8 THE PRESIDING MEMBER: You may want to inquire 9 what the current reporting requirements are for the gas 10 companies -- 11 MR. ROGERS: For the gas companies. I thought 12 I would do that at the start. 13 THE PRESIDING MEMBER: -- as being a base to 14 go from. 15 MR. ROGERS: Yes. 16 MR. LYLE: You listed the five activities that 17 are involved in getting us all to implementation of the 18 transmission rates and market opening. 19 MR. CURTIS: Yes. 20 MR. LYLE: And one activity you mentioned 21 explicitly was with respect to connection agreements. I 22 think it is referenced in your material with regard to 23 the transmission system code. 24 MR. CURTIS: Yes. 25 MR. LYLE: But as I understand it, you are 26 going to have to enter into connection agreements with 27 all of your transmission customers. Is that correct? 28 MR. CURTIS: Our understanding under the Les Services StenoTran Services Inc. 613-521-0703 2963 OHNC PANEL 3, ex (Lyle) 1 Market Rules is that a transmission connected customer, 2 in order to participate in the marketplace, requires a 3 connection agreement with their transmission provider. 4 So to that extent, yes. 5 MR. LYLE: And that applies to existing 6 transmission customers as well as new connections, I 7 take it. 8 MR. CURTIS: That is our understanding in 9 terms of requirements of the requirements of the Market 10 Rules, yes. 11 MR. LYLE: I just want to refer you back to 12 the first page of Exhibit G14.3. 13 MR. CURTIS: Yes. 14 MR. LYLE: It is in Table 1. If you look in 15 the column under "Decisions Required", down at the 16 bottom of Gross versus Net there is a reference to 17 efficiency standard. 18 MR. CURTIS: Yes. 19 MR. LYLE: I believe we had some discussion 20 during the course of the proceeding with respect to how 21 it would be determined whether a particular generation 22 facility met the efficiency standard, or not. 23 I understood at that time that you thought 24 that the Board would be making a decision on that on a 25 case by case basis. Have you had any further thoughts 26 on that particular issue since that time? 27 MR. CURTIS: I must admit, no, we haven't had 28 time to further consider that. Les Services StenoTran Services Inc. 613-521-0703 2964 OHNC PANEL 3, ex (Lyle) 1 MR. LYLE: Now, just one other query on 2 implementation. If in fact the Board determines that a 3 network transmission backup service is appropriate, what 4 issues of implementation would that provoke? 5 MR. CURTIS: I think that would cause us some 6 problems unless the Board was very explicit in terms of 7 how that rate would be determined and set. What we have 8 been talking about here this morning in terms of 9 implementation has been focused around what we brought 10 forward in terms of our application as well as what had 11 been considered through the stakeholdering process and 12 by other intervenors. 13 There really wasn't much of a discussion 14 around a backup charge and how that would be 15 established. If the Board were to recommend -- the 16 Board in terms of its decision were to decide that a 17 backup service provision should be made available, it 18 would take us some period of time in order to do that. 19 MR. LYLE: Does that delay or cause any 20 concerns with respect to the billing and settlement 21 mechanisms? 22 MR. CURTIS: Yes, it does. 23 MR. LYLE: Just one moment. 24 --- Pause 25 MR. LYLE: I take it also the transmission 26 backup service would also require further amendments to 27 the market rules as well as that. 28 MR. PORAY: That is correct. Les Services StenoTran Services Inc. 613-521-0703 2965 OHNC PANEL 3, ex (Lyle) 1 MR. LYLE: Would it require any changes to the 2 proposed connection agreement or transmission system 3 code? To the best of your knowledge. 4 MR. CURTIS: I don't think so to the best of 5 my knowledge right now. No. 6 MR. LYLE: Thank you. Just, finally, moving 7 to the issue of liability. I will try not to ask you 8 for any legal opinions. I understand that the technical 9 panel, at least the proposal that's before the technical 10 panel of the IMO, would mean that OHNC would be liable 11 in negligence to other market participants. 12 I'm not asking you to confirm or deny that, 13 but if we just accept that assumption as being correct 14 for now, and if we also accept then that your proposal 15 in the transmission to rate order is that OHNC would not 16 be liable in negligence to any of its transmission 17 customers, there are some transmission customers in your 18 proposal who would be market participants. Is that 19 correct? 20 MR. PORAY: There could be. Yes. 21 MR. LYLE: And there's some transmission 22 customers who would not be market participants 23 potentially, the embedded LDCs for instance. 24 MR. PORAY: It's possible that there may not 25 be. No. 26 MR. LYLE: So it's possible then that you 27 could have different liability rules applying to 28 different classes of transmission customers. Is that Les Services StenoTran Services Inc. 613-521-0703 2966 OHNC PANEL 3, ex (Lyle) 1 possible? 2 MR. PORAY: Well, I think it's possible within 3 the market structure to have the overall liability in 4 terms of the market rules, how they govern the market 5 participants, but it's also possible to have different 6 liability provisions through contractual agreements 7 between, say, the transmission provider and its 8 customers. 9 MR. LYLE: But the rate order is not 10 contractual. 11 MR. PORAY: No, but -- 12 MR. LYLE: It's a condition that is being 13 imposed by the Board. Take it or leave it, if you want 14 transmission service, this is the terms. 15 --- Pause 16 MR. PORAY: Yes, sir. That's true. 17 MR. LYLE: Just finally, gentlemen. Is there 18 any equivalent liability provision in the rate orders of 19 this Board with respect to gas distributors that you are 20 aware of? 21 MR. PORAY: I can speak. I have no knowledge. 22 MR. LYLE: Thank you, gentlemen. Those are 23 all my questions. 24 THE PRESIDING MEMBER: Thank you, Mr. Lyle. 25 The Board has some questions. Mr. Vlahos, 26 please. 27 MEMBER VLAHOS: Gentlemen, I did have a number 28 of questions, but not in any particular order. It's a Les Services StenoTran Services Inc. 613-521-0703 2967 OHNC PANEL 3 1 pot pourri. I want to start with the EWT charge. Let 2 me see if I understand this, gentlemen. 3 We are starting off with the -- moving to the 4 IMO, we are starting off with the conventional revenue. 5 We had a transmission rights revenue with some 6 cross-transmission rightholder charges. Okay? That 7 gives us a net congestion revenue. 8 MR. PORAY: The subtraction would be for those 9 transmission rightholders who have paid for congestion. 10 They would have the congestion payments returned to them 11 either in full or in proportion to the transmission 12 right they purchased. 13 MEMBER VLAHOS: All right. 14 MR. PORAY: That would then constitute the net 15 congestion payment. Yes. 16 MEMBER VLAHOS: Okay. And that net amount 17 would be distributed to the transmission customers and 18 that will be done directly by the IMO. 19 MR. PORAY: That is correct. If there is 20 anything left in this TR clearing account, it would be 21 credited back to the transmission customers. 22 MEMBER VLAHOS: So, in addition to that now, 23 the IMO will collect the EWT charges. 24 MR. PORAY: That's correct. 25 MEMBER VLAHOS: From the participants and they 26 will remit those amounts to your company. 27 MR. PORAY: To OHNC, yes. 28 MEMBER VLAHOS: Right. Now, okay. The Les Services StenoTran Services Inc. 613-521-0703 2968 OHNC PANEL 3 1 transmission right, the revenue that the IMO will be 2 collecting will be based on some unit, some deep price, 3 and I understand from your exchange with Mr. Lyle it can 4 be up to $1. 5 MR. PORAY: Well, it will depend really what 6 the market participant feels that that transmission 7 right is worth to them, given the congestion that occurs 8 on that interconnection. 9 MEMBER VLAHOS: Can it be more than $1? 10 MR. PORAY: It could be. It could be less 11 than $1. 12 MEMBER VLAHOS: Right. That's why I wasn't 13 sure that I followed your response when you responded to 14 Mr. Lyle that it can be quite close to the dollar, 15 implying that it would not exceed the one dollar. 16 That's not what you meant. 17 MR. PORAY: No. 18 MEMBER VLAHOS: Okay. All right. The amount 19 then, one cheque comes to your company from IMO with 20 respect to the EWT charges and now you will determine 21 whether some funds out of this pool will be returned to 22 the market participants, the export participants. 23 MR. PORAY: Yes. We would need that list from 24 the IMO which would tell us what the transmission rights 25 were. Given that information, we would credit the 26 generators or the market participants with a credit and 27 the remainder would go to load customers who paid for 28 transmission. Les Services StenoTran Services Inc. 613-521-0703 2969 OHNC PANEL 3 1 MEMBER VLAHOS: And I'm sure Mr. Campbell will 2 take issue with the word "generators" -- 3 MR. PORAY: Right. 4 MEMBER VLAHOS: And I am not going to go into 5 that myself. Let's call them export participants for 6 the purpose of this discussion. 7 MR. PORAY: Right. 8 MEMBER VLAHOS: Now, if those export 9 participants had received some recognition for the 10 rights they were holding, why would they receive another 11 credit from your company again? 12 MR. PORAY: I think it was just in response in 13 the stakeholdering process to the generators that they 14 felt this was another charge that was imposed upon them 15 and we were trying to accommodate some sort of a credit 16 mechanism. 17 MEMBER VLAHOS: All right. But at the end of 18 the day, you will have a pool of funds which will 19 reflect a charge of less than one dollar per unit. 20 MR. PORAY: Well, what we received from the 21 IMO would reflect the one dollar. 22 MEMBER VLAHOS: Right. But then by the time 23 you -- whatever amount of money is in the pool, you will 24 recognize that as a revenue requirement. 25 MR. PORAY: No. This is outside the revenue 26 requirement. 27 MEMBER VLAHOS: You are referring to the 28 customers? Okay. Maybe that's why I need some help. Les Services StenoTran Services Inc. 613-521-0703 2970 OHNC PANEL 3 1 You have received a hundred dollars from the IMO and you 2 have credited $40 to the generators for your proposal. 3 MR. PORAY: That's correct. 4 MEMBER VLAHOS: What happened to the $60? 5 MR. PORAY: It goes toward reducing the 6 revenue requirement for transmission for the following 7 period. 8 MEMBER VLAHOS: Right. That's what I said. 9 MR. PORAY: Okay. Yes. 10 MEMBER VLAHOS: So in effect, then, the 11 effective export and wheeling charge is not really $1. 12 It's something less than $1? 13 MR. PORAY: No. I would say it's $1. How 14 that $1 multiplied by the volume, multiplied by the 15 price is then accredited back to customers will depend 16 on how much goes to the generators and how much goes to 17 the load. 18 MEMBER VLAHOS: Right. 19 MR. PORAY: But as far as we are concerned 20 it's always the dollar times the volume that we get back 21 from the IMO. 22 MEMBER VLAHOS: Right. If the volume is 23 100 units and you have received $1 per unit from the 24 IMO, you got $100 in your fund now and you give $40 as a 25 credit to the generators, you have got $60 left, which 26 going forward is going to be reflected in your revenue 27 requirement for the next year? 28 MR. PORAY: That is correct. Les Services StenoTran Services Inc. 613-521-0703 2971 OHNC PANEL 3 1 MEMBER VLAHOS: So I guess $60 divided by 2 100 is not $1. That's my point. It's something less 3 than $1. 4 MR. PORAY: If you wish to look at it that 5 way, yes. 6 MEMBER VLAHOS: All right. Let's look at it 7 that way and then where that leads me is that in all 8 those comparisons we heard about with original 9 transmission organizations, do you recall that there was 10 a range of "x" to "y"? 11 MR. PORAY: Yes. 12 MEMBER VLAHOS: So can I really compare the $1 13 now versus the numbers that we have seen because the 14 dollar is really not a dollar, it's something less, 15 number one. 16 Number two, I have absolutely no idea about 17 the make-up of all those numbers that were presented in 18 evidence, as to whether the equivalent of the $1 is for 19 Ontario or the $1 minus the credit to some generators or 20 market participants. Do you follow my confusion? 21 MR. PORAY: I am not sure as to what crediting 22 goes back, or what crediting is done in the other 23 jurisdictions. 24 As far as the $1 charge is concerned, I think 25 we are still comparing apples with apples because the 26 rate that is actually being charged to the market 27 participant using the interconnection is $1. 28 MEMBER VLAHOS: Right. The final producer, Les Services StenoTran Services Inc. 613-521-0703 2972 OHNC PANEL 3 1 Ontario, versus the producer in New York, it may matter 2 as to what credit they are getting back. 3 MR. PORAY: I don't know what credit they are 4 getting back in having paid an export and wheel 5 through -- or a point-to-point transaction to get to 6 Ontario. 7 MEMBER VLAHOS: Right. But your view still is 8 that comparing the $1, as proposed, with the range of 9 prices we have seen in the evidence from the other 10 jurisdictions is still an apples to apples comparison? 11 MR. PORAY: That is my view, yes. 12 MEMBER VLAHOS: Although the net back, if you 13 like, to the different producers, and the two different 14 producers in the two jurisdictions may be different? 15 MR. PORAY: That's correct. 16 MEMBER VLAHOS: Now, you had some discussion 17 about the monitoring regarding the financial performance 18 of OHNC. I believe, Mr. Curtis, you said that we are 19 not at that stage yet to sort of think of the mechanics 20 of this? 21 MR. CURTIS: That's correct. 22 MEMBER VLAHOS: And that's fair. 23 But we do know something for a fact and that 24 is that to the extent that the EWT pool has some surplus 25 funds they have to be reflected in the next year's 26 revenue requirement? 27 MR. CURTIS: That's correct. 28 MEMBER VLAHOS: So that has to be accommodated Les Services StenoTran Services Inc. 613-521-0703 2973 OHNC PANEL 3 1 somehow now as part of this decision. Wouldn't that be 2 your view? 3 MR. CURTIS: Yes, it would. 4 MEMBER VLAHOS: As to the monitoring in terms 5 of financial performance that's perhaps at a later 6 stage. Is that -- you can see the distinction between 7 those two? 8 MR. CURTIS: Yes, I do see that distinction, 9 yes. 10 MEMBER VLAHOS: I don't know, Mr. Chair, 11 whether I am allowed to ask Mr. Brown a question, but, 12 Mr. Brown, I am not sure that I followed you on the 13 existence of the deferral accounts in the gas industry. 14 You've got me there in terms of the overearnings, if you 15 like. 16 MR. BROWN: I think, Mr. Vlahos, what I was 17 simply trying to explore with the witnesses is to the 18 extent that the rates that are fixed in this proceeding 19 generate a certain amount of revenue over the next one 20 or two years, the period of time in which they are not 21 going to be coming back to the Board, if that revenue 22 that they bring in resulting from those rates is greater 23 than their actual revenue requirements how are they 24 going to track the difference between the two and what 25 mechanism will they put in place to return or disburse 26 that surplus revenue back to customers at some point of 27 time. 28 MEMBER VLAHOS: I just wasn't sure whether you Les Services StenoTran Services Inc. 613-521-0703 2974 OHNC PANEL 3 1 were talking about I guess the principle of the 2 existence of deferral accounts as we know them in the 3 gas industry, or whether the gas industry itself, the 4 gas utilities, have a deferral account that captures 5 that overearnings situation. I took the latter as being 6 your citation to the witnesses. 7 If that's the case, I am not sure that we 8 agree that there is such an account. 9 MR. CURTIS: Then I may have mischaracterized 10 the particular account for the gas utility used, but the 11 general concept I was trying to convey was what do you 12 do if you collect more revenue than you need? 13 MEMBER VLAHOS: All right. 14 Mr. Curtis, there was some discussion about 15 what happens if November comes and goes and there is no 16 market opening. I am trying to connect that with one of 17 the sections, I think section 93 of the Electricity Act, 18 if I am not mistaken, that talks about the provision for 19 income taxes. Is that your understanding? Maybe you 20 can get some assistance from your counsel there. 21 MR. CURTIS: Yes, I think I will need some 22 assistance. 23 MEMBER VLAHOS: My understanding is that in 24 order for you to collect taxes section 93 has to be 25 proclaimed. I wonder that in the event that it is not 26 proclaimed, section 93 is not proclaimed, then what 27 happens? I haven't turned my own mind to it and I don't 28 know if you have. Les Services StenoTran Services Inc. 613-521-0703 2975 OHNC PANEL 3 1 MR. CURTIS: No, I haven't. 2 MEMBER VLAHOS: You haven't. 3 MR. CURTIS: To be honest, if my memory serves 4 me correct, the approval that we received in our 5 application back in December included a collection for 6 taxes and/or proxy taxes and that's -- 7 MEMBER VLAHOS: Right. But that was only to 8 divvy up the total pool funds coming from the bundled 9 billing. 10 MR. CURTIS: Yes. 11 MEMBER VLAHOS: Right? 12 MR. CURTIS: Well, our transmission rate 13 order, though, extended through to the end of 2000 and 14 the assumption when we made that filing was that open 15 access was going to be declared sometime during 2000, 16 and so the tax provisions in our rate application would 17 apply post open access. 18 MEMBER VLAHOS: The reason I am asking is I am 19 not sure whether I should worry about it or not. If it 20 worries you, you may want to cover that in argument. 21 MR. CURTIS: Okay. We should probably have a 22 look at that, yes, sir. 23 MEMBER VLAHOS: I am going to move on to some 24 other implementation issues. Again, they are not in any 25 specific order. I will start with the Table and that's 26 G14.3 by the way. 27 MR. CURTIS: Yes, I have it. 28 MEMBER VLAHOS: Under gross versus net, the Les Services StenoTran Services Inc. 613-521-0703 2976 OHNC PANEL 3 1 third point is existing embedded generation. You said 2 there are no implementation links there? 3 MR. CURTIS: That's correct. 4 MEMBER VLAHOS: I am not sure what the issue 5 is on the existing embedded generation. Wasn't the 6 issue embedded generation? Did I miss something here? 7 MR. CURTIS: As far as the existing embedded 8 generation in our application, our application is that 9 for existing embedded generation that they be treated on 10 a net net basis. 11 We are seeking Board confirmation that that's 12 appropriate. It doesn't appear that it has been a 13 particularly large issue within the course of this 14 proceeding and our sense is that there is general 15 agreement among the participants in this hearing that 16 that should go ahead. 17 But again, we are requesting that the Board in 18 their final decisions make that clear, that that would 19 be the case. 20 MEMBER VLAHOS: Actually, that's helpful 21 because if I were to develop this list I wouldn't have 22 even put that there. It wouldn't come to me because 23 there was no discussion at all. 24 MR. CURTIS: Yes. 25 MEMBER VLAHOS: Are you saying that for the 26 purpose of completeness of the record that we should 27 confirm if there are no counter proposals, counter 28 arguments to that effect? Les Services StenoTran Services Inc. 613-521-0703 2977 OHNC PANEL 3 1 MR. CURTIS: Yes, that is what we are 2 requesting. 3 MEMBER VLAHOS: Moving down that list. The 4 penultimate line, "Treatment of New Generation 5 Connection". The link there, the implementation link, 6 is with the billing and settlements under the IMO? 7 MR. CURTIS: Yes. 8 MEMBER VLAHOS: Now, as I recall that issue, 9 the way we left it was that, in the argument phase, 10 parties will make submissions as to when the issue would 11 be reviewed by the Board? 12 MR. CURTIS: No; I believe the issue was for 13 existing generators and how their connection would be. 14 But what we have put forward here is, for new generators 15 coming forward, they would have to pay their connection 16 facilities in order to have their facilities put in 17 place. 18 MEMBER VLAHOS: Okay. I stand corrected on 19 this. Thank you. 20 Now, on the terms and conditions of service 21 that you show on the fourth line before the end of the 22 table -- and I know there was similar discussion today 23 and I'm sure the record will be quite clear, but I just 24 want to make sure that I understand it now -- your rate 25 schedules would make reference to -- 26 --- Pause 27 MEMBER VLAHOS: So it will be D, Tab 12 28 Schedule 1? Les Services StenoTran Services Inc. 613-521-0703 2978 OHNC PANEL 3 1 MR. CURTIS: Yes, that is correct. 2 MEMBER VLAHOS: Okay. So, in every case, I 3 would have a reference to the terms and conditions of 4 service, and you refer the reader to the commercial 5 terms and conditions, which is in Tab 12, under D? 6 MR. CURTIS: Yes. 7 MEMBER VLAHOS: Okay. And your view is that 8 this has to receive specific approval by the Board? 9 MR. CURTIS: Yes, it does. 10 MEMBER VLAHOS: Okay. And then, can you help 11 me understand the purpose of Exhibit D, Tab 13, which is 12 the terms and conditions of the transmission customer 13 connection agreement -- as to what the Board ought to 14 exactly do with it? I didn't follow you. 15 MR. CURTIS: This particular tab was put in 16 for information purposes to try and fill out for the 17 Board more information in terms of the other processes 18 that are going on. 19 What is contained under Tab 13, when we are 20 talking about the transmission customer agreements, 21 would be part and parcel of the development of the 22 Transmission System Code, and the Transmission System 23 Code is under development, currently, under the Board 24 staff direction, and that would come back, separately, 25 under that development process, for OEB approval. 26 MEMBER VLAHOS: Okay. So it is just for 27 information purposes? There is not more that you are 28 seeking -- you are not seeking any commentary by the Les Services StenoTran Services Inc. 613-521-0703 2979 OHNC PANEL 3 1 Board? 2 MR. CURTIS: Not specifically, no. This was 3 put in to try and -- to attempt to try and complete some 4 of the description around the processes that are 5 involved. 6 MEMBER VLAHOS: Just a last few on this table. 7 Do you recall the discussion about the 8 contractual arrangements that you have to enter into at 9 some point down the road if you are successful in the 10 gross versus net billing proposal? 11 MR. CURTIS: Yes. 12 MEMBER VLAHOS: Now, that is not a specific 13 issue shown here. It would be, I guess, under the gross 14 versus net. 15 Is your expectation that the Board will have 16 to comment on that proposal -- make a finding or 17 comment? Or what is your expectation? 18 MR. CURTIS: I think our expectation on that 19 is that there would be some Board comment as to the 20 appropriateness of what we were proposing; namely, to do 21 a search in terms of what goes on in other jurisdictions 22 with respect to contracting; stakeholding within 23 Ontario; and then coming to the Board with a template 24 for its approval in terms of the contracts that would be 25 put in place at that point. 26 MEMBER VLAHOS: Okay. But if we look at the 27 implementation links, there is nothing there that we 28 should be concerned about, as part of this decision? Les Services StenoTran Services Inc. 613-521-0703 2980 OHNC PANEL 3 1 MR. CURTIS: No; we felt that what we are 2 talking about would -- we would not -- it would take 3 some time to come back before the Board, in terms of 4 getting approval for the contract template, and what we 5 are talking about here, in terms of Table 1, are the 6 links with other processes under way to get us to open 7 access and, specifically, to put in place the 8 transmission rates. 9 MEMBER VLAHOS: Okay. So even if -- 10 eventually, if there is such a contract, such a 11 contractual arrangement, or arrangements, is this 12 something that only affects or impacts the Ontario Hydro 13 Services? Or would it impact IMO, in terms of 14 settlement rules, et cetera? 15 MR. CURTIS: Down the road, it probably would 16 because the contracts, then, would establish how 17 customers with embedded generation would be charged and 18 so, down the road, the IMO's billing and settlements 19 process would probably have to be amended to reflect the 20 outcome of those contracts. 21 MEMBER VLAHOS: Thank you. 22 MR. PORAY: Maybe if I can add, the market 23 rules themselves may have to be changed, in terms of the 24 definition of "transmission services" -- what those 25 constitute. 26 MEMBER VLAHOS: Okay. And if I can take you 27 to the same exhibit, G14.3, Appendix A, which is page 4 28 of the document. Les Services StenoTran Services Inc. 613-521-0703 2981 OHNC PANEL 3 1 MR. CURTIS: Yes. 2 MEMBER VLAHOS: The last paragraph -- no, I'm 3 sorry, the one before last. There you state the three 4 services; that is, basic use, line connection and 5 transformation connection. 6 MR. CURTIS: Yes. 7 MEMBER VLAHOS: And that is what is included 8 in the current set up market rules? 9 MR. CURTIS: Yes, that is correct. 10 MEMBER VLAHOS: I just wonder, if the Board 11 finds that there should be four or two, or different 12 than three, does that upset anything? Does that upset 13 the market rules? 14 MR. CURTIS: Yes, our view is that the market 15 rules would have to be amended to reflect the Board's 16 decision. 17 MEMBER VLAHOS: Okay, but it is just a 18 question of amendment; it is not this -- it is a timing 19 thing and it is nothing else that comes to mind that 20 would preclude the Board ending with two pools or four? 21 MR. CURTIS: Well, not in terms of the market 22 rules because it would, at least in our view, be a 23 fairly straightforward process to have them amended. 24 There may be an issue, in terms of what level 25 of complexity is introduced into the transmission rate 26 calculation that we would have to contend with. 27 MEMBER VLAHOS: Right. But not -- that's a 28 different -- Les Services StenoTran Services Inc. 613-521-0703 2982 OHNC PANEL 3 1 MR. CURTIS: That's a different aspect of it. 2 MEMBER VLAHOS: -- exercise? 3 MR. CURTIS: That's right. 4 As far as the market rules, it should be a 5 fairly straightforward process to amend it. 6 MEMBER VLAHOS: Okay. I just want to finish 7 with -- maybe just to get a bit of clarification, or 8 more specificity, on some of the terms that you used on 9 Exhibit G13.1 -- that's for you, Dr. Poray. 10 MR. PORAY: Can you just hang on for a second? 11 We haven't got G13. 12 MEMBER VLAHOS: Yes. 13 --- Pause 14 MR. PORAY: Okay. I have got it. 15 I should memorize it, I guess. 16 MEMBER VLAHOS: Starting on page 3, the last 17 part just before you begin with Point C. 18 MR. PORAY: Okay. 19 MEMBER VLAHOS: The part beginning, "The 20 aforementioned process". Do you see that? 21 MR. PORAY: Yes, I do. 22 MEMBER VLAHOS: Okay. The second sentence, 23 starting, "As per the market rules". 24 MR. PORAY: Yes. 25 MEMBER VLAHOS: Okay. There is reference 26 there to the load customers in Ontario. It reads: 27 "The IMO will refund the surplus to all 28 the load customers in Les Services StenoTran Services Inc. 613-521-0703 2983 OHNC PANEL 3 1 Ontario." (As read) 2 Just give us your definition of "all load 3 customers in Ontario" -- 4 MR. PORAY: These would be -- 5 MEMBER VLAHOS: -- for the record. 6 MR. PORAY: These would be the customers who 7 have paid for their transmission service in Ontario. 8 MEMBER VLAHOS: Okay. The same page, the last 9 paragraph, second line of the paragraph, you refer to 10 those export participants who are generators. 11 Again, for the record, can you just explain to 12 us who they are? 13 MR. PORAY: The generators would be those who 14 physically put electricity into the IMO control grid. 15 So these would be generators located in the province 16 connected to the transmission system, or putting power 17 into the system. 18 MEMBER VLAHOS: Okay. If I am a customer with 19 excess production capacity and tied into the grid, then 20 I would qualify as a generator? 21 MR. PORAY: Yes. 22 MEMBER VLAHOS: I would. 23 The last page, page 4, the last paragraph, the 24 first line, you say that: 25 "It is forecast that, at the end of each 26 year, OHNC will most likely remain with a 27 surplus from the EWT Tariff Charges." 28 The words "most likely" worries me. It Les Services StenoTran Services Inc. 613-521-0703 2984 OHNC PANEL 3 1 may not? 2 MR. PORAY: I guess what we are saying here is 3 that once we have refunded or credited the generators, 4 the balance of what is left would be credited to the 5 load customers. 6 MEMBER VLAHOS: So most likely that there 7 would be some credit to balance, but it doesn't mean -- 8 it would not be negative. That is a certainty. Right? 9 MR. PORAY: Our expectation is that it would 10 be positive. 11 MEMBER VLAHOS: Okay. 12 MR. CURTIS: And I think there is a certainty 13 that it would not be negative. 14 MR. PORAY: Yes. 15 MEMBER VLAHOS: Okay. 16 But it goes back to, I guess, what I started 17 with and that is there is not really a minimum of $1 per 18 megawatt hour in this case, it would be just some 19 amount, but it would not necessarily correspond to a 20 minimum of $1 per megawatt hour? 21 MR. PORAY: That's correct. The balance 22 wouldn't, no. 23 MEMBER VLAHOS: Thank you, gentlemen. Those 24 are my questions. 25 THE PRESIDING MEMBER: Thank you, Mr. Vlahos. 26 Mr. Smith, please. 27 MEMBER SMITH: Just a couple of things. 28 This may have come up before. The Les Services StenoTran Services Inc. 613-521-0703 2985 OHNC PANEL 3 1 transmission rates, can they be traded to third parties? 2 MR. PORAY: Yes, they can. 3 MEMBER SMITH: So there is an open market in 4 them? 5 MR. PORAY: That is the intent. 6 MEMBER SMITH: My colleague's question about 7 the apparent double counting of the transmission right 8 credit, did I hear that right that it is netted against 9 your congestion payment if you are a generator and also 10 the same payment is netted against your export charge? 11 MR. PORAY: No. The transmission right, there 12 is no actual funds pertaining to the transmission rights 13 involved in crediting back to generators from the EWT 14 charge. What we are proposing to do is to obtain a list 15 from the IMO that will indicate which generators that 16 have participated in the export have bought transmission 17 rights and will use the information about their 18 transmission rights to determine what credit should go 19 from the EWT charge. But there will be no further -- 20 MEMBER SMITH: There is no actual payment. 21 MR. PORAY: No actual payment. 22 MEMBER SMITH: But there is a credit. 23 MR. PORAY: But it is a credit from the EWT 24 charge that depends on what they paid for their 25 transmission right. 26 MEMBER SMITH: Okay. 27 If the Board were to find in favour of your 28 proposal without that credit, just a flat charge, not Les Services StenoTran Services Inc. 613-521-0703 2986 OHNC PANEL 3 1 netted against -- would that create any problems, 2 administrative or otherwise? 3 MR. PORAY: I think it would probably make it 4 simpler. 5 MEMBER SMITH: The proposal that you have put 6 forward, you have said that that wasn't your first 7 choice still on the export charge, but in the 8 stakeholdering process you felt you should compromise 9 and put forward another charge, listen to the 10 stakeholders and put forward a compromise, but yet this 11 issue didn't get resolved at the settlement. Is it fair 12 to say that you are the only ones that compromised and 13 now you are stuck with it? 14 MR. CURTIS: That's probably the case, yes, 15 sir. 16 MEMBER SMITH: One last question. This is 17 again one of these "If the Board were to find" 18 questions. If the Board were to find in favour of the 19 OPGI option, does that create any problems for you, I 20 mean, administrative or otherwise? Would you be opposed 21 to that or would you accept it? 22 MR. CURTIS: It doesn't cause us any problems. 23 I think it was the issue I was trying to raise earlier, 24 though, that the OPGI proposal, in terms of 25 implementation, requires the IMO to further develop, if 26 you will, its billing and settlements process now. We 27 haven't had discussions specifically with the IMO on the 28 OPGI proposal, so we are not in a position to know Les Services StenoTran Services Inc. 613-521-0703 2987 OHNC PANEL 3 1 whether or not that is going to cause them problems or 2 complexities. That is probably the only thing that I 3 would like to signal. 4 I think Mr. Campbell's assertion was that this 5 wouldn't cause the IMO much additional work in terms of 6 implementing it, but I guess in the absence of not 7 having that conversation yet with the IMO, we don't 8 know. 9 MEMBER SMITH: Once the Board makes a finding 10 and the market opens, is it your view that this has 11 pretty well got to be it, we are going to go and that is 12 going to be the policy of the province and the system? 13 Looking at what is going on in the U.S. and our new 14 market, is this going to be kind of a work in progress 15 in terms of how we deal with exports and how we charge 16 them and so on and so forth? 17 MR. CURTIS: I think our view always has been 18 that this is an evolving marketplace. What we are 19 requesting right now are decisions that will essentially 20 get the market up and running, at least as far as 21 transmission rates are concerned. 22 But if you look at any other jurisdiction that 23 has gone through a major restructuring, there has always 24 been changes that have come about at later periods of 25 time, and we would see that happening within Ontario. 26 We are not asking for something here to be set in 27 concrete that can never be changed. We are requesting 28 something to be put in place so that we can get up and Les Services StenoTran Services Inc. 613-521-0703 2988 OHNC PANEL 3 1 running. 2 MEMBER SMITH: Thank you. Those are my 3 questions. 4 THE PRESIDING MEMBER: Thank you, Mr. Smith. 5 I just have a couple of questions left. Most 6 of them have been asked. 7 Just on Table 1 on G14.3, just to complete the 8 picture in the answer that you gave to Mr. Vlahos about 9 the terms and conditions being approved, if you could 10 turn to the rate schedule that applies to export and 11 wheel-through service, the proposed rate schedule -- 12 MR. CURTIS: Yes, sir. 13 THE PRESIDING MEMBER: -- you will notice 14 under "Terms and Conditions of Service" "To be 15 developed". 16 MR. PORAY: I think you must have an earlier 17 version. 18 THE PRESIDING MEMBER: Have I got the early 19 one? Is that why? 20 Where is that? I can see the provincial load 21 service. Is it a blue page? 22 MR. PORAY: It is a blue page, yes, and it is 23 updated November 24, 1999. It makes reference to -- 24 THE PRESIDING MEMBER: That explains a lot 25 because it is not in my binder. I only have the PLS one 26 and I don't have the update to that. 27 MR. PORAY: It was on the back of the PLS 28 page. Les Services StenoTran Services Inc. 613-521-0703 2989 OHNC PANEL 3 1 THE PRESIDING MEMBER: Okay. 2 So the terms and conditions are going to be 3 again as per Exhibit D, Tab 12, Schedule 2. Right? 4 MR. PORAY: Correct. 5 THE PRESIDING MEMBER: So you have identified 6 now between the original filing that those will cover 7 the EWT conditions. Is that right? 8 MR. PORAY: There is a section in the terms 9 and conditions which deals with export and 10 wheel-through. 11 THE PRESIDING MEMBER: That's fine, then. I 12 will take that as completed. 13 The next one would be -- as you may be aware 14 this comes to the question of deferral account issues. 15 My colleague said basically what the Board's practice 16 has been with respect to gas, but you may wish, when it 17 comes out, to look at the Rate Handbook for Electric 18 Distributors. That has a treatment proposed therefor 19 deferral accounts and revenue sharing proposals. 20 MR. CURTIS: Yes, we would have a look at 21 that. 22 THE PRESIDING MEMBER: Whether that should or 23 should not be applicable to this case will probably be a 24 case of leaving that to argument as to whether it should 25 be applied or whether you would make some other proposal 26 in that regard. Just to note that. 27 Those are my questions. Thank you, gentlemen. 28 Thank you very much for coming back and having to wait Les Services StenoTran Services Inc. 613-521-0703 2990 OHNC PANEL 3 1 around to get on the stand again. I'm glad you did. It 2 has been very helpful to us to hear from that. 3 So in case your counsel has any redirect, then 4 there are a couple of closing remarks I will make. 5 Thank you. 6 MR. CURTIS: Thank you very much. 7 MR. PORAY: Thanks you. 8 MR. ROGERS: Thank you, Dr. Higgin. 9 I have no redirect examination. 10 THE PRESIDING MEMBER: Okay. Then you are 11 excused for good -- in a lifetime and two years, we will 12 say, when you will be back. 13 MR. PORAY: Thank you. 14 THE PRESIDING MEMBER: Just one item which I 15 think I should need to consult with my colleagues as to 16 whether or not we need to bring back Mr. Boland to 17 discuss F2.1. 18 I think we would like to see him bright and 19 early on Thursday. Is that right, Mr. Campbell? 20 MR. CAMPBELL: That is fine, Mr. Chairman. 21 MR. ROGERS: I may too want to see him. 22 MEMBER VLAHOS: I took it Mr. Rogers would 23 want him first. 24 THE PRESIDING MEMBER: We will try 25 expeditiously to try and get through that before we 26 bring up the panel for the Chiefs on Thursday. 27 MR. ROGERS: Before you adjourn, sir, I think 28 I have the last of the outstanding undertakings that Les Services StenoTran Services Inc. 613-521-0703 2991 1 could be filed now. 2 We are arranging to file with Board Staff 3 Exhibit F13.2, which is a table providing a comparison 4 of the OPGI proposal for a phased-in net loading billing 5 regime over ten years for new embedded generation as 6 compared to those found in Undertaking F3.1. 7 If I recall, I think maybe Mr. Campbell asked 8 that the witnesses prepare another column on that 9 previous table to show the results of his client's 10 proposal. 11 Also I am filing Exhibit F7.3, which is an 12 undertaking Mr. Curtis made to provide information 13 relating to meetings held with First Nations 14 representative between August and October 1999. It is 15 timely to file this now as we will be seeing them on 16 Thursday. 17 I believe that is it, sir; thank you. 18 THE PRESIDING MEMBER: Thank you. I just have 19 one announcement about the argument schedule. 20 We have obviously had to reconsider it because 21 of the slippage in the hearing schedule. This is now 22 our new proposal. If anybody has any difficulty with 23 it, bring it to our attention as soon as possible. 24 This now will be the proposal: Assuming that 25 the hearing will finish on this Thursday, March 9th, 26 then the argument in-chief by OHNC would be Friday, 27 March 17th. That is one week later. 28 Then intervenor argument will be on Wednesday, Les Services StenoTran Services Inc. 613-521-0703 2992 1 March 29, 2000. That is just over one and a half weeks 2 later. And then finally, the reply argument for OHNC 3 will be on Wednesday, April 19, 2000. 4 That is our proposal. If anybody has specific 5 difficulties, let us know and we will see if we can make 6 some accommodations. But assuming that we can finish on 7 Thursday -- which should be a good assumption at this 8 point -- that will be the argument schedule. 9 Thank you. With that, we will now adjourn, 10 and we will see everybody on Thursday morning at 11 9 o'clock. 12 --- Whereupon the hearing adjourned at 1244, to 13 resume on Thursday, March 9, 2000 at 0900 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 2993 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0907 2871 4 Preliminary Matters 2871 5 6 OHNC PANEL 3 7 PREVIOUSLY SWORN: DAVID CURTIS 2874 8 PREVIOUSLY SWORN: ANDY PORAY 2874 9 Examination-in-Chief by Mr. Rogers 2875 10 Cross-Examination by Mr. Fisher 2887 11 Cross-Examination by Mr. Snelson 2889 12 Cross-Examination by Mr. Brown 2890 13 Cross-Examination by Mr. Budd 2898 14 Cross-Examination by Mr. Campbell 2904 15 Upon recessing at 10:53 a.m. 2940 16 Upon resuming at 11:22 a.m. 2940 17 Cross-Examination by Mr. Rattray 2941 18 Examination by Board Counsel 2956 19 Questions by the Board 2966 20 Upon adjourning at 1244 2992 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 2994 1 EXHIBITS 2 NO. PAGE 3 G15.1 Document entitled, "1999 2874 4 Tariff Backup Power" 5 6 G15.2 Document entitled 2874 7 "Exhibit 3.1.1 - Revised" 8 9 G15.3 Copies of IMOTP 33-7 and 2953 10 IMOTP 24-6 11 12 G15.4 Excerpt from Market Rules, 2959 13 Chapter 10, Section 4, titled 14 "Export Service" 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 2995 1 UNDERTAKINGS 2 NO. PAGE 3 F15.1 Mr. Rogers to provide copy of 2872 4 OHNC/IMO operating agreement 5 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 2996 1 ERRATA/ ADDENDA 2 3 Volume 4, Monday, February 21, 2000 4 PAGE LINE 5 565 10 6 "its presence" s/b 7 "its business." 8 565 28 9 "sort of long-term planning perspective" s/b 10 "sole long-term planning perspective" 11 604 25 12 "MR. PORAY: Do you need this?" s/b 13 "MR. PORAY: Do you mean this?" 14 667 24 15 "those costs, as we have noticed" s/b 16 "those costs, as we have noted" 17 683 15 18 "That's why we will bring it forward" s/b 19 "That's why we bring it forward" 20 714 20 21 "varying in sizes, and he quoted between" s/b 22 "varying in sizes, and we quoted between" 23 24 Volume 12, Thursday, March 2, 2000 25 PAGE LINE 26 2392 19 27 "MR. ROGERS: So you are a traveller" s/b 28 "MR. ROGERS: So you are a trial lawyer" Les Services StenoTran Services Inc. 613-521-0703 2997 1 ERRATA/ ADDENDA 2 PAGE LINE 3 2392 25 4 "that you were an advocate for" s/b 5 "that you are an advocate for"