RP-2000-0023 EP-2001-0016 THE ONTARIO ENERGY BOARD IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.o.15, Schedule B; AND IN THE MATTER OF an Application by Hydro One Networks Inc., for an order or orders approving or fixing just and reasonable rates. Hearing held at 2300 Yonge Street, 25th Floor, West Hearing Room, Toronto, Ontario, on Friday, November 9, 2001, commencing at 9:30 p.m. ---------- Volume 1 ---------- B E F O R E : P. VLAHOS VICE CHAIR & PRESIDING MEMBER F. PETERS MEMBER S. F. ZERKER MEMBER A P P E A R A N C E S HAROLD THIESSEN ) Board Counsel and Staff JENNIFER LEA ) MARTIN DAVIES ) DONALD ROGERS ) Hydro One Networks JIM MALENFANT ) COLIN McLORG ) Toronto Hydro Electric System JIM HUNTINGDON ) Niagara-on-the-Lake Hydro JIM RYAN ) JAMES FISHER ) Ampco ROGER WHITE ) ECMI MAURICE TUCCI ) EDA CHUCK HENNESSEY ) Placer Dome Canada RICHARD RIDLEY ) Placer Dome Canada & Gold Corp. GREG AARSSEN ) Canadian Meter Services MIKE KILBY ) JAMES SIDLOFSKY ) Niagara Falls, Brantford & Guelph Hydro JOHN McGEE ) FOCA ANDREW TAYLOR ) Hydro Mississauga, London Hydro, Oshawa PUC & St. Catherines Hydro RICHARD STEPHENSON ) Power Workers Union I N D E X O F P R O C E E D I N G S Page No. Hydro One Issues Day 1 - 73 ---Upon commencing at 9:35 a.m. THE PRESIDING MEMBER: Please be seated. Good morning everyone. The Board is sitting today pursuant to Procedural Order No. 5 in the RP-2000-0023 EB-2001-0016 proceeding to deal with the determination of the Issues List to govern the upcoming oral hearing. With me today are Board Members Sally Zerker, and Fred Peters. For the transcript, my name is Paul Vlahos. May I have appearances, please, starting with the applicant. MR. ROGERS: Good morning. My name is Donald Rogers. I represent the applicant and I have with me James Malenfant who is Senior Advisor Regulatory Affairs with the applicant company. THE PRESIDING MEMBER: Thank you, Mr. Rogers. Staff? MS. LEA: Thank you. Jennifer Lea appearing for Board Staff, and with me are Martin Davies and Harold Thiessen THE PRESIDING MEMBER: One moment, please we have some technical problems. Okay. Apparently we're not being recorded, so maybe we could just go through the appearances again. Mr. Rogers, I apologize. MR. ROGERS: Yes, sir, I could use the practice. THE PRESIDING MEMBER: Because there are people that are actually listening in to this. I believe that is the case or may be the case. MR. ROGERS: I see. My name Donald Rogers. I represent the applicant in this case. With me is Mr. Jim Malenfant, Senior Advisor Regulatory Affairs of Hydro One Networks. MS. LEA: Thank you. Jennifer Lea for Board Staff, and with me with are Martin Davies and Harold Thiessen. THE PRESIDING MEMBER: Thank you. Next? MR. FISHER: Jim Fisher appearing on behalf of AMPCO. MR. HUNTINGDON: Jim Huntingdon, I'm general manager of Niagara-on-the-Lake Hydro. I have with me Jim Ryan. He's the chair of our board. THE PRESIDING MEMBER: Thank you. Next? MR. McLORG: Good morning, Mr. Vlahos and Panel Members. Colin McLorg for Toronto Hydro Electric System. MR. KILBY: Mike Kilby, president of Canadian Metre Services. THE PRESIDING MEMBER: I'm sorry, Kirby or Kilby. MR. KILBY: Kilby. THE PRESIDING MEMBER: Yes. MR. AARSSEN: Good morning. Greg Aarssen, A-a-r-s-s-e-n, representing Canadian Meter Services. THE PRESIDING MEMBER: Thank you. Next? MR. SIDLOFSKY: Good morning, sir. James Sidlofsky. For the transcript that's S-i-d-l-o-f-s-k-y, Borden Ladner Gervais, representing Niagara Falls Hydro, Brantford Power, Guelph Hydro Electric Services and Wellington Electric Distribution Company. THE PRESIDING MEMBER: Is there a short name for that, Mr. Sidlofsky? Is it a coalition? MR. SIDLOFSKY: There is a coalition, sir. I'm not quite sure what number it's been designated as but there is a coalition. THE PRESIDING MEMBER: All right. MR. McGEE: John McGee, M-c-G-e-e, and I'm representing FOCA which is the Federation of Ontario Cottagers Association Inc.. MR. STEPHENSON: I'm Richard Stephenson. I'm counsel for the Power Works Union. MR. TAYLOR: Andrew Taylor from Power BUD, counsel for Enersource, Hydro Mississauga, Oshawa PUC, St. Catherines Hydro and London Hydro. THE PRESIDING MEMBER: Another coalition, right? Martin, do we have the numbers for those coalitions? Do you happen to know coalition one or two? MR. SIDLOFSKY: I'm sorry, sir, in other proceedings our coalition at various times has gone by the Coalition of Distribution Utilities, if that helps. MR. TAYLOR: In the past our coalition has been referred to as the Power BUD Coalition. THE PRESIDING MEMBER: Next? MR. HENNESSEY: Chuck Hennessey representing Placer Dome CLA. MR. RIDLEY: Richard Ridley representing Placer Dome and Gold Corp.. THE PRESIDING MEMBER: I'm sorry, I didn't get the last name? MR. RIDLEY: Ridley, R-i-d-l-e-y. MR. TUCCI: Maurice Tucci with the Electricity Distributors Association. MR. WHITE: Roger White, ECMI, representing a number of municipal utilities including Peninsula West, Gravenhurst, Brant County, Clinton, Collingwood and Wasaga and others. THE PRESIDING MEMBER: So, Mr. White, just ECMI coalition, is that acceptable for today? MR. WHITE: Quite acceptable. Thank you. THE PRESIDING MEMBER: Thank you. Anybody else? There being no response, any preliminary matters, Ms. Lea? MS. LEA: I'm aware that the Vulnerable Energy Consumers Coalition had originally -- had sent a letter in requesting late intervenor status. I don't see a representative of VECC here this morning, but I understand it is their intention to pursue their application for late intervenor status and they did participate in the Issues Meeting yesterday. I understand further the applicant has no objection to that. Would the Board be willing to grant late intervenor status to VECC on that basis without someone here today? THE PRESIDING MEMBER: The Board will grant so, yes. MS. LEA: Thank you very much. Secondly, Board Staff was made aware of concerns from the City of Elliott Lake. The city had written a letter to us expressing concern about rate disparities within the city. The city is served by Hydro One Networks and they were concerned that their issue might not be on the Issues List. Yesterday, having spoken to the applicant, Board Staff called the City of Elliott Lake and indicated that the issue they were concerned about would fit under No. 2 in the Proposed Agreed to Issues List and I understand the applicant has no objection to that. So I just wanted to put that on the record on their behalf. Thank you. THE PRESIDING MEMBER: Thank you, Ms. Lea. Anyone else have preliminary matters? There being no response, the Board has indeed received the Draft Issues List which contains five agreed upon issues and five contested issues. Is there any reason to give that an exhibit number, Ms. Lea, or can we proceed. I don't anticipate too many documents being filed today. MS. LEA: No. Why don't we just give it a number for identification. We'll call it Exhibit 1 in this Issues Day, please. ---EXHIBIT NO. 1: Draft Issues List. MS. LEA: Thanks. And if anyone needs copies, they're in the back corner there. THE PRESIDING MEMBER: Okay. Thank you. The plan is to proceed as follows: The Board will ask some clarification questions on the uncontested issues and the Board only has one question. Then we will proceed with the contested issues. For each of the contested issues, I will ask one party to take the lead to be followed by other parties to be speaking on that issue and Hydro One will go last. Now I would ask Ms. Lea if she has any questions or any comments, she can jump in anytime but preferably right before the applicant. MS. LEA: Thank you. THE PRESIDING MEMBER: The Board, of course, can ask questions at any time. We'll try to reserve our questions to the end, but if something that's burning, we'll jump in. Okay. With that then, the only question the Board has with respect to the Agreed Upon Issues is the third bullet point under Issue 1 which now reads: Evidence filed in Exhibit F related to PBR for Hydro One Networks. And I guess the Board's question is we would just like a bit of clarification as to what is the nature of the issue. And perhaps I can turn to the applicant or Ms. Lea or anyone else for that matter? MR. ROGERS: I suggest that we ask Ms. Lea. This is one that we mildly opposed yesterday, but we've acquiesced. I think it's important to some parties, but we would be quite content to see it off the list. MS. LEA: Yes, I can tell you why we originally put it in the list and then if there are any parties who are interested in this issue besides Board Staff, they perhaps can speak about it. Hydro One filed, as you know, in Exhibit F some evidence related to the Performance Based Regulation Plan for Hydro One Networks. It was filed according to the evidence as an update on the PBR Plans at Hydro One. And in reading this evidence, Board Staff itself didn't see any issue or dispute or argument with the evidence so much as it was an update that we thought the Board should be informed of. And there may be questions regarding the evidence that has been filed. Again, from our point of view, I don't think that there is a dispute so much as an interest in understanding what the PBR status and plans are at Hydro One, basically a review of that evidence since it has been filed. Now, I don't recollect yesterday that we discussed this issue at the Issues Meeting very thoroughly because I believe Mr. Rogers on that explanation from Staff was not violently opposed to it. So I don't know if there are other parties in the room who may have an interest in retaining this issue on the list. Staff's interest in retaining it is to acknowledge the filing of the evidence and to make sure that any questions that the Board might have or evidence the Board might need with regard to the PBR Plan is provided. It's more of an informational item than disputed item from Staff's point of view. There may be others who think differently. THE PRESIDING MEMBER: I'm searching for a word to put before the word "evidence" here. Elaboration of the evidence, would that be an appropriate words? MS. LEA: Yes, elaboration or clarification, just to make sure that we understand it and give the Board information about the program. THE PRESIDING MEMBER: Would Mr. Rogers be happy with the word "elaboration", "elaboration of"? MR. ROGERS: Yes, that's fine. THE PRESIDING MEMBER: All right. Thank you. Okay. We're ready to move to the disputed issues, and the first one on the list is titled "Service Quality: How broad is this issue?" That's how it reads. I would ask the lead proponent of that issue, please, to identify himself or herself and speak to it to be followed by others. Mr. Rogers? MS. LEA: I think yesterday Mr. Hennessey and Mr. White were interested in the issue and I'm not sure who wishes to go first. I think Mr. Hennessey s concern was fairly specific, Mr. White's more general. MR. WHITE: I think that's fair. THE PRESIDING MEMBER: Mr. Hennessey? MS. LEA: I also have submissions to make on this issue. MR. HENNESSEY: With regards to the service quality issue, I was unhappy with the proposed wording that it would be dealt be with by the OEB giving the applicant the letters that concerns with service quality. The company that I work for has two mines in Northwestern Ontario. Last year due to power outages that weren't related to lightning strikes, we lost $100,000 in revenue. Year to date in 2001, we've lost $1-million in revenue. The last outage lasted fourteen hours and the information come back was poor. Our understanding is that the PBR baseline is currently being set. So that is a concern. I guess building on that, within Schedule 1, Hydro One indicates that it will strive to manage its distribution business on short-term basis within these revenue envelopes that it's talked about previously while upholding service quality. So I would say that service quality is key to the rates as well. Aside from that, within Exhibit F, Hydro One has some concerns with the service quality indicators and they've requested to deal with those off-line. That would be a concern to us. And as well, the historical performance data that's been collected, Hydro One feels there's some qualification needed. So I guess my position is that it needs to be heard more fully. THE PRESIDING MEMBER: Thank you, Mr. Hennessey. Mr. Rogers? MR. WHITE: Sorry, it's Mr. White. THE PRESIDING MEMBER: I'm sorry. I apologize, Mr. White. MR. WHITE: Not that some days I wouldn't mind the opportunity to change places with Mr. Rogers. THE PRESIDING MEMBER: Did I call you Mr. Rogers before as well. I apologize it's Roger White. MR. WHITE: With respect to service quality, Board Staff are seeking the opportunity to examine service quality issues raised by parties in their letters to the Board. ECMI concurs that this opportunity should exist. ECMI seeks the opportunity to pursue unique service quality issues created by more than one distributor such as Hydro One in an MEU operating distribution facilities within the same geographic area. It is the apparent that there may be a unique obligation on a distributor who operates an LV facility in another utility's service area. A common situation occurs where none or only a few of Hydro One's own retail customers are connected LV facilities owned by Hydro One. In such cases, the MEU usually receives the trouble calls first, patrols the line, identifies the problem, but then is unable to execute even the simplest of repairs and has to wait in many cases for hours for Hydro One staff to arrive on the scene. From a service quality perspective, this situation degrades the credibility and the reputation of the Ontario power system. If this were not an ongoing and real issue, ECMI would not be suggesting that the Board attempt to deal with this as part of the current hearing. It is ECMI's clients' concern that forces us to bring the issue forward for the consideration of the Board. ECMI has several suggestions on how these outages may be minimized to the benefit of all parties, but their feasibility is largely dependent, although not exclusively dependent on Hydro One's willingness to deal with the situation. One to one approaches to Hydro One between my clients and Hydro One have been unsuccessful to date. The situation described appears to warrant specific monitoring, treatment and consequences under the PBR regime. Thank you. THE PRESIDING MEMBER: Thank you, Mr. White. Anybody else before Ms. Lea? MR. McGEE: Yes, I collaborate fairly closely the Ontario Federation of Agriculture and their representative is not able to be here today so he asked me -- THE PRESIDING MEMBER: I believe Ms. Lea is going to speak. MS. LEA: We'll both do it. MR. McGEE: You were going to pass on his comments. MS. LEA: You go head. MR. McGEE: I may use different words, but there is some significant concern in the farm community that the quality of service has deteriorated significantly in recent times, and in fact to the point where dairy farmers have to carry their own water out of hand-pumped wells to feed their cattle and hand milking of cows and that type of thing. So there is a very significant concern in the farm community about the apparent deterioration of service quality. With respect to our own membership, our demands for service quality are not as high as theirs are but we do -- THE PRESIDING MEMBER: Mr. McGee, we're having a bit of difficulty hearing you here. MR. McGEE: Well, I just wanted to say that within the farm community there's major concern that the quality of service has deteriorated significantly in the last little while to the point where farmers are being put to great cost and inconvenience dealing with these power outages. THE PRESIDING MEMBER: Thank you. I wasn't sure I got fully the FOCA interest in this? MR. McGEE: I was asked by Ted Cowan to present their views here today. THE PRESIDING MEMBER: That's the Ontario Federation of Agriculture. MR. McGEE: That's right. THE PRESIDING MEMBER: About what the FOCA interest. MR. McGEE: Our member concerns are somewhat less. Our demands on service quality are not as high as theirs are. I'm just passing on Ted's concerns and perhaps you would like to add to that. THE PRESIDING MEMBER: Thank you, Mr. McGee. Anybody else? There being no response, Ms. Lea? MS. LEA: Thank you. Yes, I spoke to Mr. Cowan yesterday also, but I guess he figured that two heads are better than one and that's fine. I won't repeat what my friend Mr. McGee has said. For the Ontario Federation of Agriculture, I've been asked to emphasize that it is fundamental to understanding whether electricity rates are reasonable to understand what the quality of service is. That is, you can't know if the rates are reasonable unless you know what you're paying for. And with the reductions in service quality that the Ontario Federation of Agriculture has witnessed over the past couple of years, the OFA does not believe that they are getting what they pay for. They ask that the Board require Hydro One to maintain a high standard of service quality and suggest also that it could better utilize the assets that it has acquired when it has purchased MEUs, it being OFA's observation that they're not being used efficiently for the customer's benefit. To put on another hat then, for Board Staff on this issue, the original issue was listed as service quality with no qualifications or restrictions on that, and I think that the applicant was uncomfortable with the breadth of the issue. Board Staff's concern was that the Board always has some obligation to look at service quality when it is setting rates, the same idea here that for rates to be just and reasonable, you have to understand what quality of service is being paid for by the rate payers. Our concern also was more specific, that is, over the course of time the Board receives letters of concern about every utility it regulate. Hydro One is no exception and we have a significant number of letters of concern that deal with service quality issues related to Hydro One. In some of the responses to those letters, it has been indicated that the letters would be drawn to attention of Staff who participate in this hearing, and we wanted an opportunity to bring those letters forward to Hydro One and to ask questions related to the subject matter raised by those customers in those letters. So our primary concern then was to deal with customer concerns that have been brought to the Board's attention. So that was Staff's concern. I believe my friend's concerns are broader. THE PRESIDING MEMBER: Thank you, Ms. Lea. Mr. Rogers? MR. ROGERS: Thank you, Mr. Vlahos. Before addressing this particular issue, may I just make a few general remarks which will apply to all of the issues in dispute which I hope will assist the Board in deciding what issues ought to be debated in this hearing. Yesterday at the Issues Conference, we had several people from Hydro One give a brief overview of the case for the parties, and you don't have the benefit of that today. You will eventually, but not today. And the purpose of that was to try to explain to people what this case is all about as Hydro One Networks sees it and what the future holds so that some of these issues can be dealt with at a more appropriate time. And I may I just tell you how my client views this case. First of all, this has been a very busy time for all of us. There have been a lot of changes that have taken place since my client was last before this Board. I anticipate there will probably be a lot more changes as we go through this process. The case presently before the Board, I submit, is for the unbundling of distribution rates in accordance with the Distribution Rate Handbook. That's what my client has tried to do, and that is what this case should be about, I would submit. Now, we explained yesterday that the company has followed the guidelines generally. It's departed on a few occasions when the Rate Handbook permits it, when we have better information, but generally this is an application of the Rate Handbook to unbundle distribution rates. My client so far as I know is the only distributor who in applying for this unbundling has had an oral hearing, and the temptation always is when you have an oral hearing there are a lot of other issues is which are important issues and interesting issues that people want to raise because it's their only opportunity to do it in an oral hearing, but I'm hopeful that my client won't be penalized in terms of amount of effort and resources that it has to devote to this case simply by the fact that it's the only one that's here with an oral hearing. We've got to look at resources available to all of us and deploy them most efficiently. In saying that, it might be helpful for the Board if I could just outline for you what the company's future plans are concerning rate applications. As I think the Board knows, in this case the application is based upon 1999 actual costs as provided by the Handbook. Certain alterations have been made in those -- or adjustments have been made to those actual costs as allowed by the Handbook and the witnesses will explain that to you in the fullness of time. The revenue requirement which is generated as a result of that has been scaled down because of the company's rate mitigation proposals. So the absolute revenue requirement that is being asked in this case is less than the Rate Handbook would allow. The focus, therefore, I submit should be on the unbundling exercise in this case. Now, there are some issues as part of that that we recognize are very important, the low voltage issue being one. And we understand why that would be something that people would want to discuss in this hearing. But some of these other issues and the one that we're dealing with now, this quality of service, is one that, while important obviously, must in the interests of efficiency be circumscribed in some way. The danger is we'll have a generic assessment of quality of service, choosing this one utility as the vehicle for doing that, simply because it's the one that has the oral hearing. The Board knows that the Handbook has provision for quality of service, for monitoring. There's some evidence about my client's attempt to comply with that and the need for further information to improve the quality of the information available. But I'm very concerned that we not embark in this case on a broad generic examination of quality of service of electricity utilities. Now, obviously, our customers of my client have some concerns and we don't quarrel with the quality of service being on the Issue List if it's circumscribed in some way. And we had I think proposed or at least agreed with the proposal that if it was restricted to letters of concern received by the Board, that would be satisfactory to my client. Now, the gentleman from the mining company, who was here yesterday and again today, has a concern, obviously an important concern. He hadn't sent in a letter of complaint or of concern to the Board and didn't want to be precluded because of that. So my suggestion is that it be limited to letters of concern but we give the participants another week or so or two weeks to file letters of concern and then we'll deal with those issues in the hearing. THE PRESIDING MEMBER: Thank you, Mr. Rogers. Mr. Hennessey, if I can go back to you and if you have anything to add after what you've heard? MR. HENNESSEY: I guess I'm just uncertain as to how the letter would deal with the issue, whether the letter would go both to the Board, Board Staff and also to the applicant. Is that the way that that would work and would it get considered by the Board? THE PRESIDING MEMBER: Ms. Lea. MS. LEA: I may be able to assist. You would address the letter to the Board Secretary, ask the Board Secretary to draw it to the attention of Mr. Davies probably or myself, and then it would be brought forward in this proceeding and filed on the record in this proceeding along with other letters that we indicated yesterday we would produce for the applicant and for the participants to review. And those letters would be given to the Board as part of the record for their consideration. THE PRESIDING MEMBER: Mr. Hennessey, you're nodding. Do I sense that -- MR. HENNESSEY: Yes, that's fine. THE PRESIDING MEMBER: That would be a satisfactory route for you the take? MR. HENNESSEY: Yes. THE PRESIDING MEMBER: Mr. white. MR. WHITE: I guess I find myself agreeing with the words Mr. Rogers used in that we don't want to -- a huge broad evaluation of service standards. This may be a first that I agree with Mr. Rogers on something so candidly; however, the specific service issue that ECMI wishes to be considered by Board relates to the unique situation that Hydro One has with respect to the operation of LV facilities within another distributors service area and the impact on the end-use customers resulting from that situation and the general PBR measures and guidelines we would suggest may not fully capture this issue and we want the Board to have an opportunity to consider whether this specific issue requires some unique PBR measures and potential remedies going forward. MR. ROGERS: Mr. Vlahos, can I just say one other thing. I apologize. THE PRESIDING MEMBER: One second, Mr. Rogers. Mr. White, the issue of the operational aspect, this is not captured in any of the other disputed issues that can stand alone in your view. MR. WHITE: I'm sorry. THE PRESIDING MEMBER: The other disputed issues today like 3 and 4 that make reference to the those low voltage assets. In your view you consider that's a separate issue. MR. WHITE: Yes, I do. THE PRESIDING MEMBER: Okay, thank you. Mr. Rogers. MR. WHITE: I'm sorry, Mr. Vlahos. Really what I am about to say now doesn't deal with this particular issue but I promised you that I would tell you about the company's future plans then I quite forgot to do so. So if I could just finish what I should have said earlier it may be some comfort to you and to intervenors to know. We see this case as a transitionary case, the unbundling of distribution rates. It is the company's current plan that it will file an application in 2003 for both transmission and distribution rates and at that time when things are more settled a more detailed examination of some of these issues would be appropriate. This case is about the unbundling of distribution rates in accordance with the handbook. The current thinking is that the company will be back with a full rate case both on distribution and transmission in 2003, the set rates for 2004. THE PRESIDING MEMBER: Thank you. Mr. White, I have to go back to you. Does anything change from -- MR. WHITE: Nothing changes from my earlier comments. I think the unique situation may warrant the Board's consideration at a very minimal level of monitoring the situation so that the measures are there for the second generation of PBR. THE PRESIDING MEMBER: Thank you, Mr. white. Mr. McGee, do you have anything to add after you heard Mr. Rogers? MR. McGEE: Well, I think that the one thing that hasn't been mentioned here is the service quality is part and parcel and it is very clearly laid out in the distribution rates handbook in the setting of distribution rates, service quality is a very key issue. And I believe that the - THE PRESIDING MEMBER: Mr. McGee, I may have to ask you to switch places maybe. Maybe you could just move down a couple of microphones. The reporter has difficulty hearing you and so do we. MR. McGEE: Is that better? THE PRESIDING MEMBER: Well, let's give it a try. MR. McGEE: The distribution rates handbook is very specific on this service quality issue. It's a requirement that all the utilities report the service quality indicators on a regular basis and I believe that February the first of next year which is only about two and a half months away is the time at which these things have to be filed. Now to wait until 2003 I don't think would be appropriate and I don't see -- MR. ROGERS: I'm sorry. Mr. McGee, you have misunderstood me. The applicant will file those rate indicators when required. MR. McGEE: Come February. But they must have some information now that would be of interest to the Board in considering this particular rate application. THE PRESIDING MEMBER: Thank you, Mr. McGee. Ms. Lea, I have to ask you again -- FOCA if anything else to add. MS. LEA: I don't think the OFA has anything further to add. I can tell you that what was proposed yesterday by Board staff was that the issue reads service quality hyphen letters of concern. In other words, it was proposed to be limited in that fashion and I understand from what I've heard that Mr. White and Mr. McGee would not agree with that restriction. THE PRESIDING MEMBER: Thank you. MR. ROGERS: Mr. Vlahos, I'm sorry. I know you have to draw an end to this but I have a suggestion which might be helpful. I wonder whether Mr. White would be prepared to agree to this and write a letter outlining his concern from the specific utilities so that my client knows exactly what we're dealing with and it'll be dealt with that way. THE PRESIDING MEMBER: Outside of this proceeding Mr. Rogers? MR. ROGERS: Even within this proceeding -- if he can write a letter of concern or the constituents that he says have this problem -- wrote a letter of concern over the next week and deal with it that way. MR. WHITE: I would certainly accept that from my perspective providing that it was a consideration associated with this hearing. MR. ROGERS: Now I've suggested this. I'd just like to get some instruction before I agree to it, whether or not my agreement will matter, but -- THE PRESIDING MEMBER: One second, Mr. Rogers. I promise I'll get to you. All right, go ahead. MR. ROGERS: Well that's a suggestion -- my client would prefer that the matter not be on the issues list that the quality of service should be limited to letters of concern as was originally proposed by Board counsel. THE PRESIDING MEMBER: Thank you. The only question the Board has is, and I can turn to the part, is that the proponents of this -- the broadening of the issue and that is what Mr. Rogers put on the table as why should Hydro One be treated differently than the other distributors that have come before the Board for unbundling of rates. Can anybody address that or all of the people have spoken to that issue? Mr. White. MR. WHITE: I'm sorry. I was unable to hear you. THE PRESIDING MEMBER: You were you were unable to hear. The question -- my question is I referred to Mr. Rogers comment earlier that Hydro One is receiving special treatment if you like in a sense that it's the only utility that is seeking an unbundling of rates but it does have an oral hearing and I'd just like you to respond to that one. And therefore there's a lot of opportunity for a lot of those other issues to come forward and sort of get a life of their own. MR. WHITE: The issue that I'm interested in is a relatively narrow issue. It has to do with the operation of LV facilities by Hydro One within another distributor's service area affecting in fact the supply to those customers and I think the situation is unique to Hydro One or almost unique to Hydro One and therefore from that perspective this may be the only opportunity to fully pursue that aspect of service quality. THE PRESIDING MEMBER: Okay. Thank you, Mr. White. Ms. Lea. MS. LEA: Thank you. Two points, Mr. Chairman. I think what is unique here is actually that Hydro One is having an oral hearing. When I have assisted with the processing of distribution rate applications that are done by way of written hearing, in fact if there are letters of complaint, they are brought to the attention of the staff and Board members who are considering those distribution utilities. So, in other words, if we do have letters of complaint about service quality from -- about other utilities we do them bring them forward. As Mr. Rogers points out, Hydro One is having an oral hearing so everybody is hearing about it now. The only thing I can say is because Hydro One is so large or at least perhaps because Hydro One is so large we have a very large pile compared to other utilities. It may simply be the number of customers. I don't know. But we were not willing to --I don't want to say ignore but we wished to have an opportunity to bring the letters that we had received forward. We felt it was important because of the number of them because of the nature of what was in those letters. And I'm not saying that Hydro One is any better of worse, they may just have a lot of customers. That is the situation. THE PRESIDING MEMBER: Okay. Thank you, Ms. Lea. Okay. Thank you. We're going to move on to the next issue titled, Impact of MEU Acquisitions from Hydro One Cost Allocation and Rate Design. So I'm looking for someone to lead on this issue. MR. McLORG: Mr. Vlahos, Toronto Hydro here and I don't think that any of the participants have had a chance to consult as to who would take the lead on the various issues. Perhaps with the Board's leave I could go ahead and start on this one. By way of brief background, one of Toronto Hydro's interests in this hearing, which I'm sure is shared by other participants is the question of the apportionment of Hydro One's overall distribution revenue requirement into the components collected from its own retail customers opposite the LV customers and with respect to this matter specifically, I understand it is Hydro One's evidence that if I may quote briefly in some cases the circuit is not shared by other customers but is defined as shared because it runs through the territory served by Networks or some other LDC. Therefore, in our view, the question of the status of acquired MEUs either as independent customers or as integral parts of Hydro One's distribution system is pertinent to the cost allocation proposals that Hydro One has put forward. Perhaps I could also add for the purpose of clarification that from Toronto Hydro's perspective we are specifically not requesting that there be an examination in this hearing of the acquisition costs that were incurred with respect to the acquired MEUs. We don't believe that that's part of the business of this proceeding. Neither are we requesting the examination of the independent rates of the acquired MEUs which we believe will be properly the subject of other hearings as well. We are requesting the examination as I indicated of the status of the acquired MEUs either as independent customers or as integral parts of the Hydro One retail system, and the consequence impacts of that deemed status on the classification of facilities either as shared or as specific. So, to sum up, in our view the issue is pertinent but it's a narrow issue and frankly I hope that that does help to resolve some of Mr. Roger's concerns about there being too broad a definition of this issue or that inappropriate material will be the subject of examination in this proceeding. THE PRESIDING MEMBER: Thank you, Mr. McLorg. Mr. White. MR. WHITE: Thank you. ECMI is satisfied that the cost allocation system can be satisfactorily dealt with under that item and we accept what we understand to be Toronto Hydro's interest in the potential reclassification of assets between shared and specific lines as a result of the acquisitions. It is important for the Board to consider the issue of acquired MEUs, not from the price paid to acquire the MEUs perspective or the other aspects mentioned by Toronto Hydro, but from our perspective, the interest in the acquired MEUs as a subset of the LV pools is to provide all parties including the Board with an opportunity to quantify any bias intentional or otherwise established by Hydro One in the choice of price determinants for LV facilities. The bias might result in customers of acquired MEUs to experience higher or lower rate increases as a result of the choice of price determinants in the LV pools. And I think there's a benefit for the Board to be able to evaluate the equity resulting from the choice of determinants. That causes dollars to flow between the acquired MEUs and those MEUs which Hydro One was unable to acquire. The comparison of separate cost pools for LV facilities for those LDCs acquired and a separate one for those not acquired will permit that evaluation to occur. Thank you. THE PRESIDING MEMBER: Thank you, Mr. White. Anybody else? MR. TAYLOR: Before I address the issue of the impact of Hydro One's acquisitions of MEUs, I just want to quickly comment on the standard that should be applied by the Board in determining whether or not to add an issue to the issues list. I submit that the applicant really can't be prejudiced by an issue being included to the issues list. It really can only be inconvenienced as can the Board and the intervenors. So we have to weigh that inconvenience with the benefit derived from putting issues before the Board to give an insight into matters that are of importance to the parties. And I submit that the benefit of including issues on the list outweighs the detriment and therefore the Board should adopt a low standard in determining whether to include an issue on the issues list. I submit that the standard that should be adopted by the Board is the standard of relevance. And clearly cost allocation is relevant to this proceeding. Now with regards to the impact of the Hydro One's acquisition of MEUs on its cost allocation, similar to my friend, as a point of clarification, my issue has nothing to do with Hydro One's costs of the acquisition or its acquisitions costs. My issue relates to Hydro One's failure to recognize the 80 plus MEUs it acquired since 1999 and its cost allocation with respect to its LV facilities, low voltage facilities. There are three pools to which the low voltage costs are allocated, LDCs other than Hydro One Networks, Imbedded Directs, and Hydro One Networks. I submit that the cost allocated to the LDC pool is inflated because more than 80 of the LDCs in that pool are essentially impostors. They are Hydro One Networks. Their inclusion in the LDC pool could significantly affect the cost allocated to that pool and as such the issue of whether these LDCs should be included in the Hydro One Network pool for the purpose of cost allocation is relevant and deserves the consideration of the Board. Furthermore, Hydro One and its own materials that have been provided to intervenors yesterday at the Issues Day claimed, and this is in quotes, "Network is compliant with the OEB rate handbook which allows LDCs to employ better information if it is available." I submit that this statement in of itself reflects Hydro One's own recognition that using post 1999 information such as MEU acquisition is an issue that is relevant. Those are my submissions. THE PRESIDING MEMBER: Thank you, Mr. Taylor. Anyone else? MR. McGEE: Yes. THE PRESIDING MEMBER: Mr. McGee MR. McGEE: The concern that I expressed yesterday is that we have nothing other than the verbal assurance that the shared costs between Hydro One Networks and the services to these newly acquired MEUs are not all being paid for by the existing customer, rural customer base; that is, there's no doubt a common billing system that would be used to bill the customers of these newly acquired MEUs and its quite possible that the total cost of that building system is coming back on the rural retail customers and none to the customers that have acquired MEUs. Their application is totally silent on this issue and there has to be some assurance that costs will be fairly allocated between the existing rural customer base and newly acquired MEUs and there is none in this application. THE PRESIDING MEMBER: Sorry, Mr. McGee. Just to be clear, we're talking about the cost of acquired LDCs. You're talking about not the acquisition cost, you're talking about the cost consequences. MR. McGEE: Well, the OMNA cost, the operating cost. It's no doubt that its Ontario -- Hydro One Networks linemen who are going in and maintaining these systems and we have no insurance that their costs are being charged to this those acquired utilities, the common billing system is another example. How is the cost of it allocated between the two? And there is nothing in the application -- THE PRESIDING MEMBER: Mr. McGee. I will have to pause you there. If you could just please move to another chair. We have very difficulty hearing you and it's important for the recorder gets every word down. So would you be kind enough to just move over about two places. Are you done with your submissions, sir? MR. McGEE: Yes. THE PRESIDING MEMBER: Okay. So maybe we can use this -- I'll go to Mr. Rogers. Maybe he can move while Mr. Rogers is speaking. MR. ROGERS: Thank you, Mr. Vlahos. I'll try to deal with all of these submissions at one time, although obviously the nuances and the interests are different from each of the speakers, but let me just deal first of all with the standard. My friend says it should be a very low standard with anything that is relevant should go on the issues list. And all that is at stake here is Ontario Hydro Network's inconvenience. With great respect to him, I submit that that is totally incorrect. This issues list is the Board's issues list; it's not the parties issues list. The purpose of the issues list is to focus the hearing so that the resources of the Board and the participants can be most efficiently deployed and utilized. The issues list is the Board's issues list to allow you to control your own process. If relevance was the only test, it would be very difficult to keep anything off an issues list. I quite agree that this is a relevant issue that we're talking about. But let me explain to you if I can why I submit not to be on the issues list in this case. First of all, my client's case is based upon 1999 actual costs. It's an unbundling of rates based on those costs. There were no acquisitions, acquired utilities in 1999. Hence, none of the acquisition costs are included in the revenue requirement being sought through rates. Secondly, I believe I'm correct in saying that each of those acquired utilities was subject to Board approval and I think I'm also correct in saying that each of those required utilities has had to file or will file its own rate application for its own rates. This case is about Networks unbundling of its distribution rates. Now I do not quarrel with the proposition that the acquisition of these utilities is relevant as we go forward in time to the allocation of costs of Hydro Networks. And the reason that my client is opposed to this being on the issues list now is not one of relevance at all, it's a question of timing as I tried to explain yesterday, my client cannot at the present time, because of the information available, allocate these costs to pools in a thorough way, in a way that would give comfort. We're dealing not only with MEUs that have been acquired by my client but as well there are amalgamations of utilities which are an important factor here and there are amalgamations of municipalities which affect the equation. And my client cannot in the time available in this hearing provide the Board with reliable information about cost allocation of those because of those mergers. My connectivity study is presently underway within the company but it won't be ready by the conclusion of this case. The data, I'm advised, is simply not available for Networks to do a proper job of cost allocation as has been suggested here. My client hopes to be in the position to do that in its filing in 2003. Once this transitionary step is out of the way of unbundling the rates based on 1999 costs my client can get on with the work of completing his cost allocation analysis incorporating the required utilities, the amalgamated utilities and the amalgamated municipalities, but it cannot do so now and hence to embark on this inquiry when we can't provide any better information than is in the evidence is going to be fruitless, I submit. So it's relevant but it should be deferred until the applicant can provide the Board with reliable information on which to base a permanent solution. I'll just say this one other thing if I could, that we're talk about cost allocation here so when costs are allocated differently there are winners and there are losers and my client has a responsibility to those who might lose as well. So a quick fix in an interim basis will result in some losers on an interim basis. I submit that it's preferable to wait until the information is available to do it right once and for all. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Rogers. Would any of the parties that have previously spoken like to add anything? MR. McGEE: Mr. Vlahos and panel members, I'm a little concerned that I enter into the area of argument here and I don't want to do that in this context, but I think that while I appreciate Mr. Rogers' remarks concerning the availability of data that would underpin an exercise that Toronto Hydro is recommending, it nevertheless, I think, is going to be helpful to the Board and participants to hear this issue in order to the assist the Board in determining the proper treatment that should be established for Hydro One's cost allocation methodology, and I think to exclude it altogether from the issues list is really to set in stone, as Mr. Rogers characterized it, the winners and losers in this situation. Again very much as a 'top of mind' comment without having had a chance to consider it thoroughly, one possible option that would be available to the Board upon hearing this issue and the evidence related to it would be to declare approved rates interim so that when the proper information does become available that there could be a writing of the accounts, so to speak, at that time. That's not an option that Toronto Hydro would recommend as the starting point. I think though essentially our view is that the issue is relevant, it is material, and it's regrettable that Hydro One appears to be unable to get a rope around the required information; but nevertheless, I think even a conceptual airing of the issue in the context of this hearing would be helpful to the Board. Thank you. THE PRESIDING MEMBER: Mr. White. MR. WHITE: What I would like to add to the comments of Toronto Hydro, and I concur with them with added concern about an interim -- any idea of an interim rate order which would defer addressing this profound issue. In Mr. Rogers' comments, he points out that they're relying on a 1999 cost allocation without indicating that they are going the follow the policies and the revenues that flow from that cost allocation in that point in time. That is part of the reason why it's crucial to discuss this item now. The second item is the price determinants for these new classes of service are new. They weren't there in 1999. The charges weren't there in '99. They were bundled costs allocated against the network system and the choice of price determinants can have a profound impact on the level of the revenue responsibility the resides with acquired utilities currently acquired by Hydro One versus those that are not. So we're talking about new price determinants, not 1999 price determinants. Thank you. THE PRESIDING MEMBER: Thank you, Mr. white. Mr. White, in order to calculate the new charge determinants, you need the data. I heard Mr. Rogers say that data does not exist today and may not exist for time. Again, I wasn't able to hear you well about your reference to the interim rates, whether you were you like the idea or not? I'm sorry, I couldn't hear you. MR. WHITE: I'm sorry we do not like that particular idea and in terms of not having the data, in the absence of data Hydro One seems to have rolled the dice and selected some price determinants, so maybe -- from my perspective I don't see how the Board with can evaluate a equity or appropriateness of those price determinants without having the opportunity to review this data. THE PRESIDING MEMBER: Just for my own clarification, I heard Mr. Rogers say that each of the acquired LDCs will have its own rates and it will be a different process that will last as I understand for the first generation PBR or two, three years. During that time, how does the costs that may be embedded into those acquired LDCs, how do they impact Toronto Hydro, for example, during that period? I'm just not clear. MR. McLORG: May I address that question, Mr. Vlahos? Again I don't mean to take lot of the Board's time with a thorough stepping-through of the evidence as we I understand it, but essentially if I could resort to a crude analogy, our understanding of Hydro One's allocation methodology and particularly the question of determination or determining in the case of a specific asset, whether its specific to or it's in the specific pool or the shared pool, in part depends on whether or not that asset runs across the property of another LDC. So my crude analogy is that if you consider a donut and the body of the donut to be Hydro One and the hole of the donut to be an independent MEU, if there's a line running across the hole of the donut then that line becomes a shared facility, on our understanding, and if it's a shared facility it goes into the pool of cost that is recovered from all LDCs across the province. And I guess I'm going the limit my comments to the proposal rather than the existing situation, but in any case the situation as we understand it is that line running across the hole of the donut in fact could serve -- just go from one position in Hydro One's service territory to another. So really it basically serves Hydro One but under the present or 1999 arrangement or configuration of MEUs, it would be considered shared because it crosses the property of the -- or the serviced area of the other MEU. We don't like that arrangement as it stands and we'll have submissions about that in the hearing. But if you suppose now that the hole is acquired by Hydro One, then really in our view, despite the fact that the costs and other considerations that bear on this case are from 1999 - which we don't quarrel with basically - it's our view that on an ongoing basis if that hole in the donut, so is speak, the acquired MEU is really integrated within the Hydro One retail system, then it's improper to consider the line to be shared and to transfer the cost or shift the cost from what's the cost pool that should be specific to Hydro One retail to the shared pool, which is borne by all LDCs in the province, I might add, regardless of whether they actually take service, you know, by way of the facilities in question. We think that fundamentally doesn't fit with Board's philosophy as expressed in RP-99-0044. But to answer your question then very briefly, the impact on Toronto Hydro during this period when, prior to Hydro One's next rate case, is that Toronto Hydro and, effectively, its customers, will be asked to shoulder these costs for facilities that it derives no benefit from. THE PRESIDING MEMBER: So Mr. McLorg, you are suggesting that the LV costs are overstated? The costs that have to be attributed now or distributed to the rest of the LDCs, they are overstated by virtue of the fact that the newly-acquired LDCs are not included into the equation? MR. McLORG: Yes, that is Toronto Hydro's position. THE PRESIDING MEMBER: Therefore, if the new acquired LDCs come into the picture, then the rates for Toronto Hydro can only in one direction and that is down. The apportionment to Toronto Hydro can only go in one direction and that is down. MR. McLORG: Well, that is our expectation, Mr. Vlahos, but I guess in principle we are concerned that the costs be properly directed and I don't think that Toronto Hydro would quarrel if it were satisfied that the allocation, the identification and allocation of the costs of the system required to provide service to Toronto Hydro were properly borne by it. THE PRESIDING MEMBER: Okay. Thank you, Mr. McLorg, I think I understand the implications. Mr. Taylor? MR. TAYLOR: A couple points. Firstly, with regards to my friend comments on the issue of amalgamation versus acquisition, I submit that it really makes no difference whether or not an MEU is acquired or it's amalgamated with Hydro One. In either case it's still a Hydro One MEU and should be treated as such and, if I'm wrong, if Hydro One disagrees and I presume it does, it can offer an explanation at hearing that can be challenged through the formal hearing procedures that have been established by the Board. This isn't the appropriate forum to deal with the merits of these issues. Secondly, with regards to the availability of information and Hydro One's ability to process information, I simply don't believe that Hydro One can't make the requisite calculations to account for its acquisitions of MEUs. In its own evidence at Exhibit E, tab 2, schedule 2, page 10, table 3, Hydro One provides that the monthly non-coincident peak for LDCs is 16,289 megawatts. Well, how could Hydro One derive the total amount without knowing the numbers that make up that amount. And in fact, at table 5, a couple of pages ahead on the white copy, Hydro One provides that the monthly non-coincident peak for the smaller pool of LDCs, in other words, only those LDCs that use the LV system, is 2,507 megawatts. Well, if it could determine a users-only pool using 1999 data, why can it not determine an LDC pool that consists of LDCs not owned by Hydro One? And in any event, even if it is true that Hydro One does not have the relevant data or can't process it - and I don't concede that it is - it's all the more reason why this issue should be included on the Issues List. We should be permitted to raise the argument that since Hydro One is lacking the necessary data to reflect these acquisitions of MEUs, perhaps a deferral account should be established and exist until Hydro One has the necessary data. We've heard today that it will be conducting a detailed cost allocation study, so I submit that the Board should at least entertain the prospect of a deferral account until the completion of that study, rather than accept cost allocation that we know does not reflect reality. I submit that these are relevant issues that we should be permitted to address through the Board's hearing process. THE PRESIDING MEMBER: Mr. Taylor, I don't mean to get technical but what would a deferral account capture? I mean, what's the benchmark, what would it capture? MR. TAYLOR: The deferral account would capture the costs that would have been allocated to or that should be allocated to the shared low-voltage facilities. Clearly there are costs that are associated -- THE PRESIDING MEMBER: -- are accounting mechanisms that every month I have to do something with them, I have to book something, what do I book this month... MR. TAYLOR: You know, that's a good point, and perhaps a deferral account isn't the appropriate mechanism but perhaps a rebate mechanism would address it. THE PRESIDING MEMBER: So again it goes back to something like the interim rates? MR. TAYLOR: Exactly. THE PRESIDING MEMBER: Okay. Thank you, Mr. Taylor Mr. Rogers, before we get to you -- MS. ZERKER: Mr. McGee, would you be so kind as to repeat your last statement because I didn't hear it at all. MR. McGEE: This was with respect to the OM&A costs that are in this application. The concern we had was that some portion of those OM&As costs are actually being used to service the newly-acquired MEUs, in short that the rural retail customers are burdening a significant portion of the costs that should more properly be allocated to the newly-acquired MEUs. The example I gave was the billing system, there was going to be a shared billing system that will bill all customer, both the network's retail customers and the customers of the acquired MEUs and the cost of that billing system should obviously be split between those customers who use it. Does that...? MS. ZERKER: Thank you very much. THE PRESIDING MEMBER: Mr. McGee, do you have anything to add after Mr. Rogers' comments? Only if you have to add, not to re-argue. MR. McGEE: No, no I don't. THE PRESIDING MEMBER: All right, thank you. Mr. Rogers, you have the last word on this. Again, if there's something new. MR. ROGERS: It will be very short, I just -- it will be very short. I don't have very much to add. But I would like to respond to what Mr. Taylor said. The amalgamation that I'm talking about aren't my client amalgamating with another utility, there are utilities that have amalgamated and my client won't have access to all of that cost data immediately. There are also utilities -- I'm sorry, there are municipalities which have amalgamated which affect this issue, this allocation issue. My only concern about this issue, which I acknowledge is very relevant, it's a very important issue for everybody, is that I'm questioning whether this is the right time to deal with it. We do have proposals in the material as to how to open cope with it in the interim basis, which essentially is reflecting the status quo. It's a cost allocation problem. If Toronto Hydro succeeds in shifting costs it'll go to some other utility, perhaps one of Mr. Taylor's clients, I don't know. But my client has to be concerned about that. So that's my only real objection to this issue is the timing of it. We'd like to see it -- for sure, I think I can speak for my client, we're not anxious to see deferral accounts complicating this, we'd like the Board to approve a rate proposal in this case to be in place until the next rate case. THE PRESIDING MEMBER: Thank you. We're going to move on to the next issue. And it's titled: Transmission company relationship with the distribution company (including the issue of any transmission assets in the distribution rate base). Would someone like to start off on that please? MR. RYAN: May I start off? THE PRESIDING MEMBER: Yes, sir. MR. RYAN: The issue to Niagara-on-the-Lake is how Hydro One uses the relationship between it's transmission company and its distribution company to raise revenue as an expense to the customer and both those companies are monopolies. Why we need to discuss it at this time is because when the approval was given to move, in the case of our operation, our transformer station over to the network, the Board said -- the Board, and I quote here: "The Board notes stakeholder concerns regarding the application of the 50 kV criteria and the transfer of transmission assets to distribution. The Board expects OHSC to file evidence concerning the appropriateness of the asset assignment in OHSC's next rate application." That was the 1999 ruling and we're now there. And what has happened since then is that in our case a transformer station was transferred over to network. I don't mean to get into the details, but it was a very simplistic situation where we have a transformer station that serviced only Niagara-on-the-Lake yet serviced -- it had one direct line in from the 115 kV line and just serviced Niagara-on-the-Lake, no other interconnection. Nothing has changed since then. There has been no capital added, the service hasn't changed, the monitoring hasn't changed. I could spend some time on service but I won't. The total impact of what they're proposing is the following in Niagara-on-the-Lake. The first piece is there would be a rate increase that would move from 1.43 a kilowatt to, we thought, 2.72, and found out yesterday 3.35 a kilowatt, that's a 134 per cent increase on our customers. Yesterday I was told that won't be the case, we'll pay 1.43. I asked for clarification, whether that was the 27.16/27.6 lines. I was told yes, that was the case. This morning we found out no, they've withdrawn that request. So right now that little decision is going the cost our customers over $600,000. Second, by recommending the DS, an embedded DS - and there was no discussion of this yesterday - the loss factor goes to 2.8 per cent versus .6 as TS. That issue is worth about $200,000 to our customers. And then there are other allocated costs. The issue to us is how Hydro One transfers assets. We're dealing with a very specific date that erases these costs. We think that will really be the appropriate time to discuss it. THE PRESIDING MEMBER: Mr. Huntingdon, I'm reading the issue again and I guess your comments, they pertain more to what's in the brackets, right, as opposed to the relationship which, you know, I read that as a relationship -- MR. RYAN: They have the ability subject to your approval to move assets between the transmission company and the distribution company, and that has serious impacts on customers. At the time because rate applications weren't filed, we didn't know what those were, but now we do and they're significant. We don't know another venue, another time to discuss it. THE PRESIDING MEMBER: Okay. Thank you, Mr. Huntingdon. Anyone else? MR. WHITE: The question is -- Sorry. THE PRESIDING MEMBER: I apologize. I've been calling Mr. Ryan Mr. Huntingdon. Sorry, Mr. Ryan. I did not put your name down, I put Mr. Huntingdon as the only representative from Niagara. I apologize. MR. RYAN: No problem. MR. WHITE: The item in question deals with two categories: it deals with the high-voltage DS's and it deals with the LV lines. My primary comments will focus on the high- voltage distribution station aspect of the issue, but there are parallel issues that should be examined with respect to LV line facilities. The question as to whether high-voltage distribution stations belong as a distribution asset needs to be thoroughly examined at this time. This item has been deferred starting with the initial hearing on asset disposition. ECMI has raised the issue dating back to the original asset distribution hearing. Again in the transmission system hearing, Hydro One argued that consideration of this item should be deferred until the distribution hearing. We're now at distribution hearing. The impact on end-use customers of deferring this issue further could result in customer bankruptcies or uneconomic use of the power system by establishing inappropriate price signals which will be utilized by customers in making new plant or expansion facilities decisions. A combination of the phantom losses, referred to my friend in Niagara-on-the-Lake, and the inappropriate allocation of shared DS charges resulting from the misclassification of the assets, substantially distorts the real opportunities for appropriate economic signals in the marketplace. Hydro One's witness yesterday - and I'm sorry, I guess I shouldn't refer to him as a witness because it wasn't a formal hearing - stated in the morning that 27.6 and 44 kV three-wire supplies from high-voltage DSs would attract only 1.48, not the 3.35 charge. In the afternoon, in a discussion with Niagara-on-the-Lake representatives, he indicated that their 27.6/16 kV supply would likewise attract only the $1.48 charge, and not the 3.35 charge. As a result of the overnight review, he has withdrawn the afternoon's comments and indicates that he still doesn't know what rates will apply, so how can he possibly know what the revenue impact is on the bottom line of Hydro One networks? It is apparent from yesterday's discussion involving Hydro One's own witness representative and Niagara-on-the-Lake's representative, that this issue of classification of these assets contributes to a misunderstanding of both the asset function and correct application of the charges even within Hydro One's own senior staff level. It is appropriate to deal with this issue now. And on the line side, there may be similar and parallel issues that the Board should examine and bring forward as a result of, I understand, letters to the Board relating to some of these issues. Thank you. THE PRESIDING MEMBER: Thank you, Mr. White. Anyone else Ms. Lea? MS. LEA: Thank you. Very briefly, this issue was put on the Issues List in part because of the concern my friends have expressed, but Staff's issue was really more having to do the with the affiliate relationship. The question we wanted to assure ourselves we had an answer to, was: Are the rates of distribution customers affected by Hydro One, by the distribution company's relationship with the transmission company? We are not saying that they are. We didn't know if there might be an advantage or a disadvantage. So that was the fundamental question: Are the rates of customers affected by the relationship of the distribution company with the transmission company? So for us it was more of an affiliate relationship issue as opposed to an asset issue. THE PRESIDING MEMBER: Thank you. Mr. Rogers? MR. ROGERS: Thank you, sir. First, let me deal with Mr. White. It is not appropriate to talk before the Board about off-record discussions that went on yesterday. Mr. White's rendition of events I believe are quite incorrect. And the formal process yesterday was designed to bring information to people on an informal basis and I submit it's quite inappropriate for him to quote what was said by people in conversation attempting to resolve matters, particularly when he gets it wrong. Now, I'd like to, just at this time I'd like, before we proceed much further in these proceedings -- I'm going to ask at the conclusion of today for my friend to purport -- I'll be addressing that at the close today. Let's deal with this issue of the transmission company relationship. First of all, on the point that my friend Ms. Lea raises, the allocation of costs between the distribution and transmission systems were covered by the 1999 Rate Order I do believe. This issue was also however covered by Issue No. 1 where, we would submit, that the reasonableness of the 199 revenue requirement would encompass some inquiry I suppose if there was a specific concern about that revenue requirement, including costs from the transmission system, if it was thought there were some in there that ought not to be. I submit that it would be covered by that issue. And I submit we don't have to deal with it separately under this particular issue. The second aspect of this is what I'll call the actual physical assets as between distribution and transmission and that I think is the basis of the concern of Mr. White and others. I'm not entirely clear as to what the problem is here. It sounds to me as though this is a low voltage-type issue. I would just point out to the Board that Issue No. 2, cost allocation and rate unbundling and design, including LV, does include the allocation of the high voltage distribution station costs. So that's already an issue. But with respect to an attempt in this case to re-allocate the actual physical assets, to move them from distribution to transmission, which I believe is what is being proposed by some, I submit that this causes a real problem for the regulator. The company's intention I think as I said is to come back in 2003 at the moment with a distribution case and a transmission case. The problem with re-allocating costs from distribution to transmission is that it will affect the transmission customers who aren't here in this hearing. This hearing everybody thought was about unbundling Hydro Networks' distribution rates in accordance with the Handbook. If the low voltage transmission facilities or some of them are to be re-allocated or shifted over into the transmission system, then the transmission customers will be the ones who will bear those costs and they aren't here. My proposal is that this issue should be dealt with at the next full-blown rate case which is what is anticipated for 2003 when you'll have both the distribution rates and the transmission rates then based upon more subtle data than is presently available. And the Board can make a judgment then with all the players here as to whether or not these assets should be re-allocated to the transmission system. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Rogers. MS. ZERKER: Mr. Rogers, could you clarify for me just how you see the first issue, the distribution revenue requirement issue you're proposing and how you would explain the concern that Ms. Lea has expressed about the affiliate relationship issue? Could you just elaborate that a bit for me? MR. ROGERS: I'll try. The company's proposal was based upon its 1999 actual costs. One of issues that we have on the list is a comparison of those costs or the reasonableness of those costs relative to the Board's Rate Order in RP-1998. That Rate Order did cover a level of costs which were for the distribution company and consideration would have been given then by the applicant to allocate the costs between distribution and transmission. A certain number of costs were allocated to the distribution company and there was a Rate Order with reference to that. Therefore, an attempt was made then to allocate those costs properly and fairly. If, however, there's some information or some concern that perhaps that wasn't done in light of what's -- new events or some other information that has come out, I think we'd agree that's a relevant inquiry. But we're looking at 1999 costs. MS. LEA: I can indicate, Ms. Zerker, that Staff, having heard from Mr. Rogers, what he just said and what he said a few moments earlier, is content that we can cover the issue that Staff itself has with respect to the disputed issue in Issue No. 1 on the agreed list. Staff's portion of that issue can be covered in the way Mr. Rogers described. MS. ZERKER: Thank you. MR. ROGERS: I'm not sure I've answered your question very well, sorry. MS. ZERKER: I'm not either. I'll think about it. THE PRESIDING MEMBER: Thank God for transcripts. Can I go back then to the first two people who spoke on this issue, if they have anything to add? MR. RYAN: At this point in response to Mr. Rogers' comments, I started off by our trust in the system, and we trusted the system in 1999 relative to the allocation of assets in hopes that we would have an opportunity to review it. And we were comforted when the original submission was made by Hydro One and the design of what they considered were low voltage stations did not include the criteria that I talked about that we have in Niagara-on-the-Lake. Subsequent to that, they revised the diagram and what was said in there. Despite the comment on hearsay yesterday, we were prepared to withdraw our comment thinking that it was resolved. And this morning only by good fortune, we find out. So we're not left with any choices, and we're really -- I mean for the sake of our customers would who would be put in a non-competitive situation, we bring this forward. Niagara-on-the-Lake sits, geography -- I'm pretty sure everyone knows where but it's really an integral part of St. Catherines, Niagara Falls, et cetera. These type of charges if passed through to our customers would create a serious economic disparity between anybody who runs a business in our community. That's really the fundamental issue. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Ryan. Mr. White, anything to add? MR. WHITE: Two items, with respect to yesterday's comments in a Settlement Conference, we rely on the information we get as to whether an issue should be brought before this group. It was not our intention to offend an individual, but just to draw to the Board's attention the confusion that seems to exist even within Hydro One as to the application of the rates and charges in their own evidence. With respect to the filing of who we represent, we're certainly prepared to advise Mr. Rogers orally as to who we currently represent and file a written list next week with the Board Secretary if that meets with the Board's approval. THE PRESIDING MEMBER: Well, we haven't heard from Mr. Rogers on what specifically he wants you to say, so we'll have to wait for that, Mr. White. The Board is ready to move to the next issue. titled "Issue No. 4: Hydro One Ownership of LV Assets Versus Sale of These Assets". I suspect there will be more than one person speaking to this. Who would like to take the lead? Mr. Sidlofsky? MR. SIDLOFSKY: Sir, I'm happy to start. As with many coalitions, the clients that we represent don't necessarily have an identity of interests in all the issues that they're concerned about in this proceeding. The example I'll use for the Board though of this issue is Brantford Power. The Brantford Power has concerns that relate to both the shared lines and the specific lines. Brantford Power owns -- or excuse me, uses specific, both specific and shared lines. Brantford has one line that it shares with Brant County. Brantford Power in particular is interested in acquiring its shared line, first of all, and making arrangements with the other use of that shared line to share the costs of the maintenance of that line. Brantford Power is also interested in acquiring its specific lines that are presently owned by Hydro One. We have never suggested that the Board should be making an order at this time to require Hydro One to convey those lines to Brantford Power individually or to the group of users on the shared line. However, we are seeking similar consideration by the Board as to what was given to a number of parties in the Board's transmission decision. In that decision, the Board was dealing with the question of the conveyance of line connection assets. Specifically AMPCO and the MEA were interested in the acquisition of line connection assets at the transmission level in that proceeding. Now, the Board did not make an order in that proceeding either that Hydro One -- directing Hydro One to convey its lines. However, the Board did indicate that it expected Hydro One to clarify its policy in this regard and to report at its next cost allocation and rate Design proceeding, and presumably that will be the 2003 hearing that Mr. Rogers has referred. The Board went on to say in that decision and that was at page 20, section 2.3.11 of its transmission decision that the Board would be interested in the reasons OHNC would not be willing to encourage customers to take responsibility for their line and/or transformation connections individually, or in the case of shared facilities, as a group. Those of our clients that make use of shared lines or have specific lines would be interested in similar consideration from the Board in this matter. We're not asking, as I've said, we're not asking for a Board order requiring the sale. We're simply asking for an order or for some direction from the Board that Hydro One come back during the course of first generation PBR and it would seem that he most appropriate time would be at the 2003 proceeding and report on the feasibility of conveying shared and specific LD lines to the LDCs that make use of those lines in order that the LDCs which use those lines may bear the costs which are more proportionate to the actual line limits. Among the reasons that Brantford Power in particular and our clients generally are concerned about at least an allowance for the possibility of conveyance of those lines to the LDCs is quite frankly that they're concerned that the costs being allocated to shared lines are greater than their actual maintenance costs and that over time they will pay much more in shared costs than they would have paid had they owned the lines outright. And Brantford Power has a similar concern about specific lines by which it's served. Other issues that our clients have, and I would ask the Board's indulgence in this regard because I had only hoped to speak once, other issues that are our clients have in this matter relate generally to the cost allocation and rate design issues that are already covered in the undisputed areas of the Board's procedural -- excuse me, the Board Issues List. Particularly our clients are concerned with the manner in which the applicant has determined that its historical pooled facility charge is $38.6-million rather than 29.2-million in the face of Hydro One's assertion today that they want to maintain the status quo for the time being. It's not clear that an increase in the allocation of 32 per cent or more is the maintenance of the status quo. But I think those are issues that we can deal with in the context of the Issues List as it's been settled at this point. Those are my comments at this time on this particular issue, the ownership of low voltage assets versus the sale of these assets. As a general matter as well though, if there is to be any shift in cost allocation away from other LDCs and to Hydro One customers as a result of considering acquisitions by Hydro One, we're not taking a specific position on that issue which is why I didn't mention this in the context of the earlier issue. But certainly that would be relevant to any LDC that might be affected by that change. And from the sound of the submissions, it would certainly likely to be a downward shift in the allocation to the LDCs. Those are my comments now on the disputed Issue 4 and I would be happy to come back to those after Mr. Rogers has spoken. THE PRESIDING MEMBER: Thank you, Mr. Sidlofsky. Okay. Mr. Ryan and then Mr. White. And who else wished to speak on this issue? Mr. McLorg. Anybody else? Ms. Lea. Let's go in that order then. MR. RYAN: It may seem a little odd to talk about the sale of assets potentially by Hydro One at this time, but where we sit it's probably the best time because of the changes that are happening. The OEB when it establishes the rate on these assets will actually establish the commercial value of those assets for Hydro One. And in doing so, we'd ask that you consider what the right thing to do for the whole distribution system would be and for our customers. What happens here is -- I can only speak about situations that I know and I'll speak about ours. It is not our desire to want to own a facility but we have assets which we think are not prudently managed and we're not being critical, we're just saying Hydro One is a big operation. In our little community, the transformer sits on 22 acres of land, prime agricultural land. Someone else would sell off the land, pay down the debt and that you would have an interest free -- you would have free, fully paid off facility. We're also sitting on an idle piece of property. If Hydro One gets rate approval on those assets now, whatever that rate approval is, there's ineffective assets, assets that aren't being utilized that a rate of return is being allowed on. It's a complex issue, but I think most of the utilities could work with Hydro One and look at what could be rationalized. And sure there's going to be some where they're trying to take too much from Hydro One or vice versa but I think this thing could be rationalized if a working group got together on it. And it will in the end lower costs for customers. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Ryan. Mr. White? MR. WHITE: My comments on this are limited to support. I support the concept of rationalizing the electrical distribution systems in the Province of Ontario as outlined in the Hogg (phoen) Report in the 1970s and subsequently in the MacDonald Commission Report. I think there are at least -- there are a number of ways to rationalize the system through incentive and monitoring how the process works but many of my clients have approached Hydro One regarding the acquisition of facilities and have found them singularly uninterested in negotiating any of these rationalization items. THE PRESIDING MEMBER: Thank you, Mr. White. Mr. McLorg. MR. McLORG: Thank you, Mr. Vlahos. I will try not to repeat what other participants have mentioned, but very briefly just to indicate to the Board that Toronto Hydro certainly takes the view that there is scope for further rationalization of the physical assets involved in electricity distribution. And again very briefly, in Toronto's case which is as you know an amalgamated city now, there are remnants of assets that were at one time required to be owned by Ontario Hydro because they crossed former municipal boundaries. But the environment having changed, it now is the case that these are, in effect, isolated embedded Hydro One assets within Toronto Hydro's overall distribution system. And we don't mean to claim that this is a hugely material issue, but rather that we can't think of a more conducive time to consider this kind of rationalization than perhaps now. Secondly, the issue of service quality and the operational ability of local LDCs opposite Hydro One to respond to service emergencies within their own service territory is I think an issue that perhaps the Board would care to look at at least briefly. Thirdly, just on the side of economics, of course we have no concrete proposals before us right now with respect to the various options that the LDCs might be able to exercise or negotiate with Hydro One with respect to the acquisition and so on. But it seems to me that the Board has displayed creativity and some innovative thinking in lots of previous circumstances, and I think there may be an opportunity here for the Board, first of all, to express its views on the issue as to whether we should try and rationalize further, and secondly, possibly to propose some innovative rate-making or other options that would be conducive to negotiations or disposition of this issue generally. And I think that more or less covers Toronto Hydro's views on this. Thank you. THE PRESIDING MEMBER: Thank you, Mr. McLorg. Mr. Rogers -- I'm sorry, Ms. Lea. MS. LEA: Thank you, Mr. Chairman. As the Board is aware in its RP-99 0044 Decision with Reasons, that related to the transmission decision. And I just wanted to remind the Board of a finding it made at page 22 of that decision. Now, I did not draw this to my friend's attention until about five minutes ago. I'm sorry for that. If he needs more time to consider this and whether it's in context, that may be something that the Panel should consider. THE PRESIDING MEMBER: Ms. Lea, Mr. Rogers has memorized this decision. He's was throughout this. (Laughter) MS. LEA: I'm sure he has. He probably knows it far better than anyone else but I didn't play by the rules and I just wanted to say I was sorry for that. The Board is considering the buy-out of existing connection assets in the transmission decision, and at page 22 on paragraph 2.3.11, the Board says as follows: 'OHNC states that in its argument that the Board does not have the jurisdiction to order the buy-out option. This may or may not be the case. In any event, it is unclear to the Board from the testimony and argument whether OHNC plans to make the buy-out option available to its transmission customers. The Board expects OHNC to clarify its policy in this regard and to report at its next cost allocation rate design proceeding." Now, the types of assets that were being discussed in that proceeding were obviously not exactly the same ones a we're discussing in this issue. However, the low voltage assets we are discussing are assets that provide what might be considered transmission services, but they are within the distribution system of Hydro One, and so if the Board is to hear about the policy that Hydro One Networks has with respect to these assets, it may be that this is the hearing in which that should be done. Thank you. THE PRESIDING MEMBER: I'm sorry, Ms. Lea, these assets referring to the connection assets? MS. LEA: The low voltage assets. If the Board wants to hear Hydro One's policy with respect to low voltage assets, this would be the hearing in which to do so. THE PRESIDING MEMBER: Thank you. Mr. Rogers? MR. ROGERS: Thank you, Mr. Vlahos. I'll try to be brief. I'll come back to my principal point. This case is about unbundling the distribution rates. The company will be back in 2003 it presently anticipates with a full rate case. This is a step along the way. Now, dealing with this ownership issue, certainly some municipalities would like to buy some facilities I suppose. This is a commercial transaction. I believe my client is prepared to negotiate with those who wish to purchase assets, but it's something that should be dealt with in the commercial marketplace. I mean we did discuss this in transmission. That finding related to the transmission system which is rather unique, but there's all kinds of issues about what is the price. And I won't go back on that case, but you remember that certain of the intervenors wanted to buy certain specific assets at net book value. This issue of selling of assets should be left to the commercial marketplace. The customers, remaining customers of Networks are the ones who will pick up costs if changes are made. There was an opportunity pursuant to some legislation for municipalities -- or utilities rather to buy assets. That window is now closed. It was mandated that they could buy assets under certain circumstances, and now it's been left to the commercial marketplace where it should reside. I can say that it's obviously an important issue. I mean I don't think anyone would quarrel with the proposition that the system -- rationalization of the system is a good thing for all. There are other venues where that can be an addressed. The distribution system code is one area where it can be addressed. But this hearing is not the place to deal with that issue, Mr. Chairman, and, therefore, I submit it ought not to be on your Issues List. THE PRESIDING MEMBER: Thank you, Mr. Rogers. Any of the parties would like to add to their previous comments? Briefly please. Mr. Ryan? MR. RYAN: Quick rebuttal. I would add that I think it's very relevant on rate of return and what you offer which sets the price and I accept commercial rate of return. But it's also very relevant in terms of the quality we're trying to get in the system and those points. It's a good time to discuss it. THE PRESIDING MEMBER: Mr. Ryan, I meant to ask for some clarification on that. You made the same statement in your opening remarks. The rate of return right now it is pegged for Hydro One at whatever level it is, and as I believe I read the evidence is there's no requested change for that rate of return on common equity. So you could you help me as to... MR. RYAN: The first problem is non-productive assets where there's a rate of return allowed on non-productive assets. The example I used was our customers are going to pay for a bunch of land that's not used that has higher value, so that's granting a rate of return on that today. As rates increase, those assets become more valuable. And contrary to what my friend has said, we have been told categorically that nothing is for sale regardless. THE PRESIDING MEMBER: Okay. Thank you, Mr. Ryan. Mr. McLorg? MR. McLORG: Very briefly, Mr. Vlahos. Toronto Hydro would like, by way I suppose of rebuttal, just to indicate that in its view the footings of the utilities opposite Hydro One right now aren't quite square, as we see them. Hydro One does have the option simply to say no and to collect whatever rate the Board awards it for those assets. And from Toronto Hydro's perspective, we'd like to underline or underscore for the Board that obviously as the Board is aware, it's not as though we're trying to make a lot of extra money in this proposition. We are trying to provide or respond to an opportunity to provide better customer service from an operations' point of view. And, as well, we have kind of a duty of care in our view to seek the most economical way to serve our customers, and if, on balance, it turns out that exactly the same service using exactly the same assets can be provided by Toronto Hydro more cheaply were it to own the assets, I think that's a matter of some interest, first of all, to customers, and secondly, to the Board. I can't help -- should I say I can't agree more with Mr. Rogers with respect to the fact that there certainly will be issues of shifts in the burden of costs. I think that's largely what this hearing is about. So Toronto Hydro doesn't pretend for a moment that that won't be the case, but I think that's perfectly within the competence and experience of the Board to rule on. So while I appreciate that from the Board's perspective and Hydro One's perspective it would be valuable to keep this hearing as well defined as possible, I think this is an example of an issue that goes to the eventual rates that end-use customers will pay, and therefore, it shouldn't be ruled out as an issue at this time. Thank you. THE PRESIDING MEMBER: Thank you, Mr. McLorg. Anyone else? Mr. White? MR. WHITE: I'd just like to add one additional comment, and that is, that it's not the intention of ECMI in seeking to have this item examined to cause costs to be transferred from LDCs or others who acquire assets to the rural customers, but if that were the result, that would indicate that Hydro One's rate design process created some inequities on the basis of cost tracking, and that I would agree is within the jurisdiction and expertise of the Board to rule on. Thank you. THE PRESIDING MEMBER: Thank you. Mr. Rogers, anything? MR. ROGERS: No, sir. I would just repeat what I've already said. THE PRESIDING MEMBER: Mr. Rogers, I just want to follow up and I'll read the transcript, but it was something that you said about Hydro One is not going to refuse to talk to anybody that wished to buy assets from Hydro One. And then Mr. Ryan says, well, he was told flatly nothing is for sale. So is there a policy that we're not aware of that -- I don't want you to give evidence, but is there a policy? MR. ROGERS: If there is, you and I are in the same boat because I don't know about it. I don't believe there's any policy, and my understanding of the policy is that we're open to offers or the company is open to offers. THE PRESIDING MEMBER: So that's the policy? MR. ROGERS: Right. That's the policy. I'll correct that -- if I'm mistaken about that, I'll let you know. My understanding is that the company is prepared to discuss the sale of assets when it makes sense for them and the buyer at the right price. THE PRESIDING MEMBER: Mr. Sidlofsky? MR. SIDLOFSKY: I'm sorry, sir, if I might just make a comment that arises out of your question. I think that's exactly why our clients are concerned about having some form of report back to this Board on Hydro One's policy. Mr. Rogers doesn't know of one. We have Mr. Rogers saying that there can be negotiation on assets. We have Mr. Ryan saying that nothing is for sale. I think this is a perfect example of the opportunity that this Board has to give some direction to the applicant in this proceeding to come back with a report. And as I've said, our clients are not requesting that the Board require Hydro One to dispose of any assets at this point. Ms. Lea quoted from section 2.3.11 of the transmission decision as did I in my initial comments. This is not an issue of the Board's jurisdiction to order buy-out of assets right now. This is simply a request that the Board direct Hydro One to clarify its policy so that all the parties here know where they stand on whether there is any hope of acquiring assets and possibly operating them for a lower rate than Hydro One is looking for in its 17 cents per kilowatt that it's proposing in its application. Thank you, sir. THE PRESIDING MEMBER: Thank you. Okay. I'm just looking at the time. The Board has another commitment right at twelve o'clock for about an hour, so I know we went longer than usual for the morning session. Let's see if we can finish this proceeding in twenty minutes. If not, we have to come back a little bit after one o'clock. So there's only one issue remaining. Mr. Rogers, do you have any notion as to how long you'll be? You had some concluding comments you said? MR. ROGERS: No, no, not really. I can confirm that the company -- no one seems to accept what I say that the company policy is that they will negotiate. THE PRESIDING MEMBER: I'm sorry, Mr. Rogers, I closed that door. I'm in a different room now. MR. ROGERS: Oh, I'm sorry. That's common in my case. THE PRESIDING MEMBER: No, I thought you said you had some concerns you wanted to express about the settlement process? MR. ROGERS: Yes. THE PRESIDING MEMBER: How long would you be on that so that we will be able to be out of here by twelve o'clock? That's my question. MR. ROGERS: Yes. THE PRESIDING MEMBER: Let's go to the last issue then. MR. AARSSEN: Thank you, Mr. Vlahos. THE PRESIDING MEMBER: That's the unbundling of meter service charges. And, Mr. Aarssen, you jumped at it so I take it you take the lead. MR. AARSSEN: Yes, I think it's our issue we raised yesterday. I'll submit that there are three questions that may assist the Board in determining the appropriateness of including the issue of unbundling meter services in this application. They are: Does the issue fit into our rates application? Why should the Board care? What's the urgency for considering this matter now? Regarding the fit into the rate application, as stated in the amended application, the parties affected by this decision are the ratepayers of Networks' distribution business plus LDC and wholesale market participants. The parties affected by this proposed issue are the embedded meter market participants. Unbundling the meter services is a proper issue for consideration since it will affect the rates being sought. Why should the Board care? The application to unbundle distribution rates is a step in the structured and orderly transition toward openly competitive electricity markets. Unlike other service components which I submit may properly wait until the next application to consider related costs of service and unbundling charges, meter service charges, unbundling cannot wait. As provided by the IMO in its market rules, fully competitive meter services are contemplated as a key component at market open as part of this orderly transition. Finally, what's the urgency? Mr. Rogers has suggested and questioned whether this is the appropriate time to consider this issue. And while I understand and appreciate that there are many issues that are best left for two or three years, this is not one of them. Part of the Board's objectives which are duplicated verbatim in the purposes of the Electricity Act are to protect the interests of consumers regarding prices of electricity service and to promote economic efficiency in the distribution of electricity. Every metered market participant must either comply with the obligations of a metered service provider itself or contract for such services during the transition and upon the open of the market. By bundling the market service charges, the applicant continues to impose the charges on all metered market participants and effectively leaves the economic interests of consumers regarding such bundled charges subject to the applicant's charges without testing their reasonableness. It restricts competition as contemplated in the market rules, and by preventing competition does not promote the economic efficiency in the distribution of electricity. The fact that this issue has not been raised before should not preclude its inclusion in this proceeding. This issue is raised now at arguably the largest distribution application before the Board. Some have suggested that a generic hearing on this issue be considered. Given the workload before the Board, it is impractical to think that this could be accomplished any time soon. Today the applicant through its affiliate Hydro One Services, which it has contracted to provide metered services to all default customers is encouraging customers to commit to six-year contracts. Without unbundling the meter service charges, consumers will continue to be left with but one choice unless they wish to pay twice for the same service. If we wait two years to review this matter, the current bundled environment will have resulted in customers being contractually tied without consideration of competitive economic efficiency until the conclusion of their six-year contracts within an affiliate of the applicant. Therefore, we are not referring to a one- or two-year delay. We are dealing with a situation that prevents the contemplated open competition for meter services for up to six years. Major investments have been made by all parties planning to operate under the new market rules. The market is expected to open next spring. As it stands now, this will be an open market for some metered service providers and not others. Failure to unbundle meter service will prevent competition for up to six years and I can assure you that my client and many of the other market meter service providers planning to provide competitive services to the customers of Ontario will not be around. In summary, the inclusion of this narrow issue for your consideration is relevant, timely and important. These are my submissions. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Aarssen. Anyone else? Mr. Fisher. MR. FISHER: Thank you, Mr. Vlahos. I just wanted to add to that that there are potentially 39 AMPCO members who may potentially be metered market participants and as a result it's crucial that they don't -- if they, as Mr. Aarssen had said, if these individual companies want to gain competitive meter service providers, they're going to be paying twice through the distribution rate as well as whatever the charges from MSP. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Fisher. Anybody else? Mr. Rogers? MR. ROGERS: Thank you. I'll be brief again I hope. This case I say again is about unbundling the distribution rates in accordance with the Handbook. The Handbook does not deal with unbundling these meter costs I don't believe. This is a second generation PBR issue. We can only go one step at a time. Let's do in this hearing what the Rate Handbook requires us to do. This is an issue, and it is an important issue I agree, that can be dealt with through the second generation PBR process along with other important issues such as billing and collecting, just to name one of many other aspects of the business which will eventually be unbundled. But this is not the place to do it. Secondly, it's a generic issue that affects all of the utilities, and all of the utilities aren't the applicant here, so it would be inappropriate to deal with it in the context of my client when there are all these other utilities out there who will be affected by it. So I submit it should be left to the second generation PBR deliberations. Thank you. THE PRESIDING MEMBER: Thank you, Mr. Rogers. Mr. Aarssen, anything in response? MR. AARSSEN: Mr. Vlahos, just two things. First, I agree that things like billing and collecting are best left until the next generation of PBR examination. However, this particular issue, the issue of metering and meter services has been dealt with at length in the market rules and is contemplated as a key element to the market opening which we're anticipating in the spring of next year. Secondly, Hydro One Networks through its decision to have their meter service provider be an affiliated company and ostensibly discount other competition from outside parties has restricted parties' abilities to participate in this market opening and to participate in the meter service provider services as contemplated by the market rules. We're simply looking to make sure that the opportunity is there to unbundle these rates to allow for full equal competitive opportunity for all service providers. As it stands now, that's not a possibility and won't be a possibility for three or four years. THE PRESIDING MEMBER: Thank you, Mr. Aarssen. The Board has no questions on this issue. This brings us to the end of the disputed issues. Mr. Rogers, do you want to proceed with what you have to say? MR. ROGERS: Could I for a moment. Thank you, Mr. Chairman. THE PRESIDING MEMBER: Just, please, be mindful that it is important for the Board to adjourn two minutes before twelve. MR. ROGERS: I'll be finished in two minutes. THE PRESIDING MEMBER: Okay. MR. ROGERS: I'm asking now, because it's my first opportunity to do so, that those participants, many of whom have been quite vocal today who represent coalitions or various some utilities and other utilities, I'd like to know who I'm dealing with. And all I ask is that the intervenors provide to the Board and to me a list of those utilities or constituents for whom they speak. I don't mean Mr. McGee, obviously, but I'm talking about the coalitions. I'd like to know which utilities they say they speak for. That's all. THE PRESIDING MEMBER: Mr. Rogers, I just wonder isn't it part of the record when someone asks for intervenor status that automatically they have to include the parties that they represent. Ms. Lea, maybe I'm speaking out of order here... MS. LEA: There are two sources of information that I'm looking at now. One is the sign-up sheet that we generated yesterday. Mr. Rogers does not have this. And I was going to make some corrections to it because it has some misspellings and so on. So I can orally say what's in there. I'm also looking at the intervenor list -- just a moment, they're at the end. Thank you. Yes, for example, intervenor No. 26 represented by Mr. Sidlofsky, the utilities are listed there and they are Niagara Falls Hydro Inc., Brantford Power Inc., Wellington Electric Distribution Company Inc.. Is that the complete coalition that you represent, Mr. Sidlofsky? MR. SIDLOFSKY: Not quite. Although I've been clear in correspondence with Hydro One as to who it is that we represent, the one that's missing that shouldn't be because it's been on our list -- let me give you the entire group. It's Niagara Falls Hydro Inc. -- THE PRESIDING MEMBER: I'm sorry, Mr. Sidlofsky, I'm sure there are other groups as well. I'm not sure that this is the best time to do it. MR. ROGERS: We don't need it today. MR. SIDLOFSKY: There's only one that's missing. MS. LEA: That's Guelph Hydro, right? MR. SIDLOFSKY: That's correct. MS. LEA: What I would suggest then, since this intervenor list may have gaps in it, can people write in as Mr. Rogers suggests? THE PRESIDING MEMBER: Ms. Lea, one way we can do it, thinking out loud, is perhaps in the procedural order, the next one that will set out the next steps, we can ask parties to write to the Board. MS. LEA: Certainly. THE PRESIDING MEMBER: We can name those parties if you like or we can simply ask everyone who is a party to the proceeding -- which would be a bit cumbersome I guess asking someone that represents himself for confirmation. So maybe that can be left with Board Staff? MS. LEA: Yes, why don't you leave it with us. I only count three so... MR. ROGERS: Thank you. THE PRESIDING MEMBER: Thank you very much, everyone. I guess you're not surprised to hear that the Board will reserve its decision on those matters. They are very important matters. We would like a bit of time to turn our minds to them, but we will issue a procedural order which will attach the approved Issues List as soon as possible, hopefully early in the week, Monday being a holiday for the government. Any other matters, Ms. Lea, before we adjourn? MS. LEA: Not that I'm aware of sir. THE PRESIDING MEMBER: Thank you and have a good day. --- Whereupon the hearing adjourned at 11:50 a.m. Hydro One Issues Day 1